dropping another 50 points. s&p, nasdaq also negative. "power lunch" picks up the ball for the next hour. >> announcer: "power lunch" is back. "halftime's" over. the second half of your trading day begins now. good afternoon, everybody. at a time when washington is wringing its hands and trying to wring every last dollar out of the budget to avoid the fiscal cliff, a new report within the last few hours on the millions the government is wasting. and this one will leave you shaking your head. this hour, the president tours the disaster area from hurricane sandy. first from the air, then on foot. the first numbers are out now on how sandy is already taking a bite out of the economy. and, we move to real estate. how real is the recovery? ben bernanke set to speak about housing and mortgages in just a few minutes and what he says could move the markets. but first, let's head out to

chicago where sue can be found at a major investor summit in the windy city. sue? >> indeed, i am in the beautiful windy city, ty. this is the schwab impact conference. welcome to the biggest convention center in the united states and it is chock-full with some of the top investment advisors out there. we're going to be talking to a number of them. we have a terrific hour planned here from chicago. we're going to talk to the five-star rated portfolio fund manager of the permanent portfolio fund, michael kuggino. he has $17 billion under management. we'll find out how he sleeps at night in this volatile market. plus, liz ann sonders, schwab's chief investment strategist is with us. she's fired up about the fiscal cliff. she says congress has to rise above -- she's wearing one of our pins, ty and simon. we'll talk to her about what the implications are if congress does not rise above. all of that straight ahead. but first, i'll throw it

down to simon hobbs down at the nyse. >> hi, sue. one of the immediate implications of course is the way in which the market is behaving. the dow is at a five-month low, the s&p 500 at a four-month low. we have just begun to cut some of our earlier losses within the last few seconds. we've regained 1.350 quite cover the comfortably. kenny, you are worried here now for the afternoon. why? >> i am worried. we were struggling to hold on to 1,350. you can feel it's testy. if the news coming out of the mideast gets any worse as we proceed through the day, i think you'll see investors taking money off the table as the situation develops. >> it goes on day after day. >> it does, except the situation now in the mideast is all of a sudden really elevated to the top between yesterday and what's happened today so far. i think investors are just waiting to see if we hold. >> i don't want to contradict you, but the analysis earlier on the network was with egypt and

israel you're not going to interrupt the flow of oil, and therefore it isn't an oil event and therefore arguably not a market event. >> it may not be an oil event but i think it is clearly a global event that's going to cause investors to get nervous. what people get nervous, the first thing they want to do is feel safe. they want their money. >> kenny, we'll get back to you in a minute. this one's going to cause a lot of outrage, i promise. the nation heading toward the edge of that fiscal cliff with sky-high deficits. while there's talk of cuts, cuts, cuts, a new report out today on waste in the federal government. eamon javers has details in washington. eamon? >> well, the new report is out from senator tom coburn, a republican from oklahoma up on capitol hill. in the report he accuses the department of defense of really becoming the department of everything. he says the pentagon's wasting a lot of money and he's found examples in the pentagon spending money on things like a study for a question of did

jesus die for cling-ones, too. they've sponsored a discussion series in which they talk about the implications for christianity of the discovery of extraterrestrial life. they also financed studies of a new type of beef jerky that's flat, kind of like a fruit roll-up instead of round like a slim jim. all sorts of other details in this report. but in all seriousness, what coburn has done here is sort of laid out the pentagon's overhead budget just the overhead next to the gdp of several major nations. take a look at where the pentagon's overhead ranks. if you ranked it pass a country, it is just below portugal there and just above the country of israel if you look at dod overhead as a separate country. then coburn has some recommendations here for key areas to make savings, including canceling non-military research and development like that cling-on conference. phasing out dod schools that they run and tuition assistance program and a couple of other things there. can you see it all totals $67.9

billion in savings without affecting, coburn says, america's military fighting strength. back to you. >> eamon javers, thank you very much. let's talk more about this with ben white, chief financial correspondent at politico. ben, welcome back. react to senator coburn's report which i believe, if i'm recalling correctly, he has done in multiple years in the past. it is always extraordinarily provocative. if we were to go after real waste in the government, how much would we really get? >> well, clearly here we'd get $67 billion if you go after ten years. department of defense may have the biggest amount of boondoggle spending. i don't know if anybody else studies cling-on religious beliefs or new ways to get beef jersey flatter, but there is wasted fraud and abuse all over the federal government. we always talk about eliminating them as part of any deficit reduction deal so we don't have to cut spending or raise taxes as much in important areas. we never wind up doing it. that's why coburn comes out every year with a new report

highlighting these things. in addition to that $67 billion over ten years, there are probably hundreds of billions more in spending that could get cut that doesn't get cut that would take some of the edge off of these needs for tax increases and cuts in social programs. >> that famous line, a billion here, a billion there. before you know it, you're talking about real money and not just elmo and big bird kind of money here. let's talk about the fiscal cliff negotiations. do you think in anything you've heard from the president or the gop side that we're moving toward a constructive solution here? >> i do actually think that. i think that on both sides, you've seen the lines not as -- not drawn as hard as they were the last time we went through this. obviously the president has said he's pretty firm on seeing the top rate increase but he's not said it has to go back up to the clinton era 39.6. he's left some wiggle room there for a deal that could see that rate go from 35% to 37%, some other level, but some loophole reductions. republicans have not yet moved on marginal rates but you see

throughout the republican caucus a lot less real intense vigor for holding the line on taxes for the wealthy. i think there is room there. >> very quick thought to the findings of the congressional committee on the culpability of jon corzine, the former u.s. senator with respect to the mf global collapse. >> i think it is no surprise that corzine gets all the blame there from republicans. they want to embarrass a guy who's got democratic connections. he was to blame. he made these big bets. the more interesting thing to me is the extent to which it shows that the s.e.c. and the cftc were completely at odds with one another, not in sync, and makes the argument strongly for merging those two. it does make the case more strongly for merging those two agencies. >> thank you very much, ben. we'll talk more about that congressional report in our next half-hour. simon? tyler, in 53 minutes, a major news conference begins in which we're expecting an announcement that bp, british petroleum, is agreeing flou to pay the u.s. government a record fine for the disastrous oil

spill in the gulf of mexico. what was it? two years ago. bertha coombs has details. bertha. >> that's right, simon. they will admit guilt and pay the largest fine ever by a u.s. corporation -- 2 1/2 years after the deadly 2010 deep water rig explosion that led to the worst oil spill in u.s. history. 11 people died in the blast of the well. in a statement, the bp ceo bob dudley said the company deeply regrets that loss of life adding we apologize for our role in the accident and as today's resolution reflects we have accepted responsibility for our actions. bp agrees to pay a $4.5 billion fine to settle doj and s.e.c. charges. company pleads guilty to 11 felony counts of misconduct or neglect in relation to those 11 people killed. two environmental charges and one charge of obstruction of congress for misleading the investigation led by massachusetts congressman ed markey about the flow rate. he called the fines and penalties appropriate. now this settles the criminal

complaint but bp still faces massive civil claims when it comes to the clean water act. the company's existing $38.1 billion chart against income is going to increase by $3.85 billion in the fourth quarter. that press conference is set to start at the top of the hour with attorney general eric holder. >> we will be watching. bertha, thank you. one reason why the dow is down 47 points is walmart. one of the big stories at the corporate level today. it's $2.67 lower as we speak. the retail giant out with earnings but it's not just the results that investors are worried about. courtney reagan has more on that. courtney? >> well, simon, with the world's largest retail tler is always a lot of moving parts. moments ago groups of walmart warehouse and store workers announce they do plan on going on strike on black friday. these walmart workers have chosen black friday because of its importants and say they are trying to bring an end to walmart's effort to silence them

when they speak up about various issues from hours to pay to what they consider unsafe working conditions. when asked about the strike this morning, the walmart cfo said the retailer is not aware of any significant disruptions for black friday and would not say more. this comes on the day walmart beat the street by a penny. revenues of $113.2 billion fell short of analyst expectations. the retailer notes a neglect bif $1.7 billion currency impact on those sales. walmart posts u.s. comps of 1.5%, shy of the street's estimates but within the retailer's guidance range. since allegations of foreign corrupt practice act violations surfaced surrounding walmart's operations in mexico, the retailer has enhanced its compliance programs globally and now says in its 8-k -- "inquiries or investigations regarding allegations of potential fcpa violations have commenced in a number of foreign markets where they operate including, but not limited to, brazil, china and india." >> courtney, we should mention

walmart's biggest rival target also came through with results today and also missed on the sales estimates i think i'm right in saying. >> that's right. i think what's really going on here is we are talking about a consumer that's still struggling in this economic environment. unemployment has gotten better but it's still around 8%. we've got this fiscal cliff looming. yes, the holidays are around the corner so that's what many retailers are banking on. but beyond that it's been tough. we had super storm sandy hit. that put an impact on a lot of retailers from department stores to big box stores like target and walmart. really what they're saying is the consumer is still under some pressure. that paycheck cycle still an issue for the walmart consumer and they say that jobs, gas prices and rising food prices also an issue for that group of shoppers. >> is housing about to fall off the fiscal cliff? what homeowners and future home buyers need to know right now. mean. time, let's head out to sue at the schwab investor summit.

impact in chicago. what do you got, sue? >> we got a lot coming. up. incidentally, ty, they miss you out here. we're going to talk about how to prevent your portfolio from literally going over the fiscal cliff. michael cuggino will show us. a five-star rated fund manager. $17 billion under management. where is he putting his money next on this special edition of "power lunch" live from chicago. since 2008, u.s. debt has grown at an average pace of 14% each year. music is a universal language. but when i was in an accident... i was worried the health care system spoke a language all its own with unitedhealthcare, i got help that fit my life. information on my phone. connection to doctors who get where i'm from. and tools to estimate what my care may cost. so i never missed a beat. we're more than 78,000 people looking out for

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the 21st annual schwab impact conference taking place in chicago this afternoon. about 1,700 investment advisors -- the men and women who manage your money, trillions of dollars of it. impact is the first gathering of its kind since the presidential election. a lively event every year and especially so this time. sue is there with a special guest. hi, sue. >> indeed, i am, thank you, ty. i'm joined by michael cuggino, senior manager of the permanent portfolio funds. they rank in the top 1% of the morningstar category that they're in on a 5 and 10-year basis. they have more than $17 billion of assets under management. michael, one, it is great to have you here. most of the buzz here that i've been able to hear so far is the worry about going over the fiscal cliff. we're asking congress basically

rise above, get it fixed, how are you basically allocating funds in anticipation of what might occur at the end of the year, and what do you think might occur at the end of the year? >> we're very diversified because we can't figure out what's going to happen right now. i think that means we need to be flexible. we've got an allocation of precious metals, equities an bond. obviously metals for the fear trade. risk of inflation. equities because in the short term we're selling off, i think in part because of negotiations, what's going on with the fiscal cliff or really a lack thereof right now. but longer term attractively priced. the u.s. economy is poised to grow long term if we can get through this. then bonds in the event we have a recession or pullback or some sort of slowdown which is very real given what we're seeing right now. >> you've really hedged your bets in almost every direction. >> yes, we have. >> what kind of volatility are you anticipating in this market, and if you are a longer term investor, it would seem to me

that there's opportunity being created by these pullbacks that we've seen, like yesterday. >> there always is. i mean i think for a longer term investor these are the times that you look at in terms of finding opportunities, revisiting opportunities that you've looked at that were maybe overprized. it is an exciting time to be a portfolio manager. so we're obviously on top of that. >> i'm glad you think of it as exciting. a lot of them said it is a very stressful time to be a portfolio manager because you can't navigate the waters. >> no, you can't. but i think markets can always be volatile and that's a fact of life. if you can't deal with that, then you're in the wrong business. i think really between now and year end, probably even into early next year there could be some volatility in a number of asset classes because of primarily what's going on here. we sorts of ignored europe for a while but there's still some big issues there, possible slowdowns in asia. with respect to the u.s., because we have this uncertainty, people are looking at certain tax increases at some level beginning next year with obama care's health care taxes. and investors are locking in profits that they know at 15% on

dividends and cap gains now in assets that have gained in the last several years versus waiting. we really don't know what's going to happen. >> as we wait for the statement from mr. bernanke in about two minutes now, talk to me about dividend paying stocks. they've really been hit very hard in the last week or so as the election results came out, as we hear the republicans and the democrats and the president trying to hash all of this out. would you avoid dividend paying stocks or do you just have to be very particular about which ones you chose? >> i wouldn't avoid them. dividends are an integral part of total return in equities. that's not going away, the tax efficiency of those returns has been great the last ten years. that may be declining at some level and that may be investors reallocating capital based on after-tax returns which is a smart thing to do. you may see more buybacks an money staying in share prices going forward. if debit and rates go up, taxation of the rates. we still don't know yet. worse case they go to 43.4%.

worst case they'll still go up to 18.3% and possibly somewhere in between depending on the deal that's cut going forward. cap gains similarly, worst case to be 23.8% or worse. they're at least going up to 18.3% with the obama care taxes. so investors -- percentage wise those are big increases. >> they are, absolutely. >> investors and money managers are noting that. all of us at this conference are dealing with our year-end shareholder dristributions and cap gains right now. it is a topic on many of our minds, as well as our clients. >> it is a divide between the fiscal cliff and what to do with your dividend stocks, how you allocate your capital gains. i mean that's not an easy situation. i just wonder how much of a resolution is already baked in to the market and that's why we've been seeing the volatility, or whether or not there's -- the market is really tossing up its hands and saying we really don't know. a lot of it also i think depends on the economy.

so let's take a quick pause here because mr. bernanke, the embargo's lifting on mr. bernanke's comments on housing, which of course will be breaking news because it is an integral part of the economy. the fed chief is speaking. the embargo's lifted. steve leisman, what's he saying? >> fed chairman ben bernanke saying the federal reserve will continue to use policy tools to support the economic recovery and making some positive comments about the housing markets saying for the first time in a number of years the housing sector is improving and adding to jobs and growth in the economy but saying housing is not out of the woods. it still faces significant obstacles. pointing out though the benefits of the housing revival remain quite uneven. saying that strengthening the housing recovery is still a critical challenge for all policymakers. makes a special point here that i haven't seen in at least a while, if ever, talking about the impact of the housing crisis on lower income and minority communities, saying they have been disproportionately affected by the housing bust. i want to spend a little time

talking about this because there is a message to bankers in this. he's pointing out, since 2006 when you look at purchase mortgages to african-americans and hispanics, it is down 65%. down 50% to non-hispanic whites. also home ownership down five points for one group, down only 2% for non-hispanic whites saying some borrowers may face discrimination and saying very pointedly the fed is committed to vigorous enforcement of the nation's fair lending laws. bernanke also saying that it is a problem with qualified borrowers, tight credit from banks is still a factor in the decline in mortgage lending and he talks about this balance the supervisor is trying to strike between urging lenders to ensure qualified borrowers are not turned down but still approving loans. the regular story supervisory and monitor policy he supports. sue, back to you.

>> i wanted to take a moment and ask mike cuggino to react to the fed chief's statements. he still thinks housing is key to the economic recovery. that perhaps is not new. we've known that for some time. you though think that the economy is on the mend and that the consumer is coming back. how key is the housing recovery to your forecast of economic recovery? >> it's definitely big because it is a significant part of the economy. this is cautiously optimistic news. but i still see some negatives with housing as well. obviously prices are low but lending and finance are still difficult to obtain for many people. and what i've noticed is that there is a lot of activity in private finance but that's mostly more institutional based versus something that the average homeowner can get into. until you have sufficient liquidity and we have more clarity on frank dodd, we have more clarity on lending going forward, how banks are going to conduct business, then i think

the housing recovery will be somewhat limited, though it is great that it's improving. >> it is, mike. great to have you here. thanks for joining us. now down to simon. just to repeat that breaking news, the chairman of the federal reserve believes that we're not out of the woods whether it comes to housing. it is, he says, a critical challenge now for all policymakers. so what will the impact to the fiscal cliff be on that housing recovery if the mortgage deduction is taken away. that's ahead on the program. plus, today at 4:00 on "the closing bell," erskine bowles and alan simpson. no one has better insight on the fiscal cliff. that's coming up at 4:00. over the past decade, u.s. debt has grown at an average rate of 10% per year. [ male announcer ] introducing the new dell xps 12.

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housing recovery. short headline -- it's not fully recovered just yet. our real estate correspondent diana olick joins us from washington. what struck you about what bernanke said? >> the thesis statement was very clear. housing is recovering and he said it's adding to growth and jobs. that's how he began. but the whole rest of the speech really went through every part of the housing sector that is recovering and then talked about how far still into the woods it still is. it's all about the data we got today. still on underwater borrowers, still 14 million there. improving but still too many. mortgage delinquencies, still 11.7% of all loans delinquent or in the foreclosure process, improving but still not there yet. that's what chairman bernanke kept hitting on was that we need to do more to get out of the housing problem. he also said that it was up to borrowers and lenders, and it was not just up to the government. he expressed a high level of concern over stubbornly high unemployment. as we all know, this housing recovery is dependent on more robust job growth. we are starting to see more

household formation but we need a lot more jobs to get it going where it needs to go. >> the connection between housing, house prices and job growth is absolutely irrefutable. let's talk about the fiscal cliff which casts some doubt on housing because, as part of the conversation, there's a lot of talk that somehow, some way, the home mortgage interest deduction may vanish for some home buyers. what would that do to housing, what would it do to home prices? >> it's a lot more than some doubt. you have the mortgage interest deduction in play. we don't know what's going to come out in the final workings of it, will it be gone entirely, will it be lowered for certain people. not touched by others. what it's creating right now is a sense of uncertainty and that's worrying a lot of potential buyers. i talk to realtors out there right now who say we don't even know what's going to happen but this is keeping back from potentially buying a home right now. will add to how much money they're going to have to spend, not just today but over time. again, another uncertainty but what's even bigger than that one, in my book, i believe, is

the mortgage forgiveness debt relief act. i know, what is that? what has this housing recovery been based on? it's been based on mortgage modifications where the banks have been writing down loan principal and they've been doing an awful lot of that this year. it's also been on short sales and unfortunately on foreclosures. that's all debt forgiveness which used to be taxable but has not been because of this act which expires at the end of this year. if that act is not extended under the fiscal cliff, your short sales are drying up, your loan principal reductions are drying up on modifications and people in foreclosures could all have to pay taxes on that debt that's relief. again there is a lot at stake here. >> diana olick, thank you very much. we're asking you specifically what your stance is when it comes to the fiscal cliff on mortgage interest deductions. go to finance.yahoo.com and cast your vote.

the results later on "power lunch." meantime, sharon epperson is at the nymex. >> gold prices are down $16 right now, closing around $1,713 an ounce. we are looking at gold prices that are at the lowest levels in more than a week's time. it is the figures that came out from the world gold council about gold demand in the third quarter that really sent prices lower here. they said that demand was down about 11% and demand falling particularly in europe, in germany and in switzerland. even a decline in china. all of these factors are ones that lead a lot of traders to wonder how much demand will be there now in the fourth quarter going into next year. this is definitely pressuring prices. we're seeing sell stops going up here that are bringing prices to these levels. still though above the $1,700 level and still seeing some retail interest in the etf market, though prices are down today. back to you. >> thank you very much, sharon at the new york merc. president obama visiting

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it's private but it gets some public support. >> we have importantly today perhaps had a stabilization. what's going on behind these headlines? >> we're seeing slow deterioration in the market on concerns about the fiscal cliff and a lot of this is related to taxation. i'm glad that mr. bernanke says housing is improving. i think it is. i think the evidence is there but we're certainly concerned with housing stocks. look at the utb. you can own housing stocks through an exchange traded fund, an etf, and this is a one year but since the election this has now rolled over. it is flat today. by and large, it is rolled over. over concerns of the mortgage interest deduction.

utilities, this is a really serious problem. some northeastern utilities have been affected by sandy but look at that. we are now at the lows for the year on the dow utilities. once again this has been true for weeks now, that sector the lowest of the day. telecom stocks the lowest since june. reits also the lowest since june. all these are big dividend payers. >> kenny pulcari is with us. you were telling me middle east is what people are talking about and what's going on in washington is what people are talking about, the dysfunction. >> the dysfunction in washington, whether it's the fiscal cliff or the inability for anyone to come to the table. this whole mortgage deduction thing and whether or not bernanke says housing is improving, maybe because we live in the northeast and so it is different. i'm not really sure where housing is improving. you're certainly not buying an $80,000 condo in new york or anywhere in the tri-state region. if you're talking about phoenix or nevada, that may be true. >> sales are improving. starts bottomed, construction industry is hiring more people.

we're a long way from where we were in 2006 but there's definite signs of bottom coming off the market. >> i don't see it yet. >> the fed chairman said we weren't out of the woods. we'll leave that debate where it is for a moment. rick san tell sli in chicago. thank you very much. if you look at intraday of 10s, we're only a basis point under unchanged but well off our high yields of the day. a lot of this is israel. might not be affecting oil but it is most definitely affecting traders and safe harbor trades. looking at august chart, can you clearly see where two-month low yields on the verge of maybe three. same could be said for the 30-year long bond. now let's switch gears a bit. when it comes to what's going on in the marketplace, maybe we better pay a whole lot of attention to what's going on with the dollar/yen. the dollar's rallied almost 2.5% just in the last two days. you could clearly see these are the best levels in the dollar since april. it isn't all bad news if you're long munis. this is an etf. you could see it didn't take out its highs from february but it's

been going up on fiscal cliff issues. many down here definitely listening to housing and ben bernanke. they wonder if his next speech might be about the fact that fha and gses are still carrying the burden of financing along with those guarantees. back to you, tyler. >> thank you very much, rick santelli. president obama in new york city touring the aftermath of new york sandy right now. meanwhile, the first pieces of data that show the economic impact of the storm are coming out. >> i was on a fishing trip on monday out of long island. i got a tour of some of this damage. it's just unbelievable what's happened out there. the docks are moved and the piers one to the other. there's boats in people's backyards. and in its own way, some of that is beginning to show up in the data. this massive storm that hit this huge area of the country. let's take a look at the data. the first thing you'll notice is the surge in jobless claims. the trouble here, folks, is we don't really know what's happening with the underlying trend. it was very well contained going

in in the 350, 360 area. is some of that weakness in the overall economy or as the labor department suggests, a big chunk of that from the storm. empire state survey, better than expectations. cpi and food energy not affected yet though there does tend to be a pop in prices after big storms like this. it is the philly fed survey that well underperformed where i think we may be seeing a lot of this. there could be some utility output in the year. there could be a whole bunch of businesses shut down and some of it what we don't know is we were accelerating the economy into the election and some of the chain store sales might have dropped off just before sandy came in. and then we seem to be getting an effect certainly in the retail sector, in cars we know. now labor. it's going to be a couple months before this washes out, pardon the pun. >> thank you, steve leisman. simon? it is a busy day, tyler. lawmakers on capitol hill have released their highly anticipated report on the collapse of mf global and jon

corzine's role within that. kayla tausche has the very latest. >> simon, a year in the making that 97-page report authored by the republicans on the house oversight subcommittee hardly minces words in singling out former senator jon corzine, as well as mf global's rating agencies and regulators. this report shines a new light on the relationship specifically between the securities and exchange commission, which regulated the firm's broker dealer, and the cftc which regulated its futures arms. the subcommittee shows the two organizations not communicating and operating only within their specific per view even as a lot of mf global's functions overlap. $220 million was transferred between those two businesses, a move pressured by the cftc and not revealed to the fcc. chairman mary shapiro has called the move unacceptable. there are 7,000 pages of new rules written but they're still unable to carry out their basic

functions. the subcommittee suggested the two regulators merge. other suggestions in the report hint at possible legal action requesting an s.e.c. review on whether mf global executives violated securities laws by misstating the firm's financial health, but where that all important missing money is concerned, the report recommends congress pass a law making company officers liable for transferring funds. that could be indication further that washington hasn't found mr. corzine and other executives at present to actually be liable for those moves. a spokesperson for mr. corzine said the former chief executive did not act in bad faith or engage in intentional wrongdoing. you'll be watching the uncu game tonight. fiscal cliff creeps closer with just 46 days to go. sue is live in chicago at the 21st annual schwab impact conference with what wall street is most concerned about and

where americans should be investing. sue? >> indeed. the talk out here is about the fiscal cliff. liz ann sonders of schwab will join us in a few moments and tell us how to protect your portfolio and what to expect next. having you ship my gifts couldn't be easier.

well, having a ton of locations doesn't hurt. and my daughter loves the santa. oh, ah sir. that is a customer. let's not tell mom. [ male announcer ] break from the holiday stress. fedex office. one of the tax deductions up for debate in the fiscal cliff negotiations is the mortgage tax deduction. we asked you what is your stance? this is fascinating. 43% say keep it. losing it would hurt the housing recovery. but the majority, 57%, would like some modification. 30% keep it for the middle class. kill it for high-income earners. 27% say kill it for everyone. who would have guessed that the

majority would vote that way? let's see what's coming up on "street signs." >> well, lots of things coming up top of the hour, simon. air raid sirens in israel today as rockets are raining down from palestinian militants. we're going to look at this widening conflict in the middle east and what it means for your money. then, we are going to china where the communist nation ushers in a new leader described as kennediesque. will he bring about a new era of opportunity there? and it is man versus machine in the market. an exclusive interview with high-frequency trading powerhouse. but the ceo will make the case for why firms like his are actually good for stock. lots of things at the top of the hour. back to you guys on "power lunch." let's get back to the 21st annual schwab impact conference in chicago. 1,700 advisors managing trillions of dollars all under one roof. sue is racking up another special guest. sue, over to you. >> simon, thanks. i'm here with liz on sonders,

chief investment strategist with charles schwab. nearly $1.9 trillion in client assets under management. we're in the biggest convention center in the united states and you guys have got it filled. you really do! the theme i'm hearing from the people and advisors i've been able to talk to is uncertainty, paralysis, people not knowing what to do with their money because of this fiscal cliff. and they really do feel as though they're being held hostage. they want to be proactive, but they can't. >> i think there are coiled springs. that to me gives me some hope that once we get past this we are in this stand still right now and it is the uncertainty factor. the good news for my perspective on that is that we may have already seen a decent chunk of the economic kit that's likely to come if we have a worst case scenario because i think it is already being reflected in business confidence and cap x. we may have front-end loaded some of the weakness and that may mean the hit is a little bit less severe. >> that would be probably the

best case scenario because the worries range from the gamut. you've got people who say, no, it's already factored in to the market, it's already factored in to the economy as you suggest perhaps or the lion's share of it. and others who say there's no way, they're going to take us right over that fiscal cliff and it is going to be armageddon. if you had to put money to work right now, are you betting that they will resolve this before the 11th hour? >> i wouldn't bet in either direction from an investment perspective, from a portfolio perspective on what washington is going to do. i wouldn't bet a dollar of my own money on what washington is going to do. so our recommendation has been sort of sit tight. not to go purely defensive but don't make a lot of short term tactical moves within asset allocation until we have some clarity on this. i think that's probably -- there's plenty of people that are trading around this as we've seen in the market in the last week or so but i think that can be treacherous. >> talk to me about the economy as a whole. the talk is if we go over the fiscal cliff or the market

senses that they've just kick the can down the road, that the likelihood of recession looms its ugly head once again. do you agree with that assessment? >> i'm not so sure about that. it is a question of how much of the weakness has already been front end loaded. there's also the fact this is more of a slope than a cliff. if you look even at case scenario, you're talking $50 billion a month. it is not this january 1st immediate hit. it is a question of whether we have built in some or enough cushion. we also think that there's some low hanging fruit within the confines of the fiscal cliff like the patch for the amt, like maybe the sequester that likely gets fixed before december 31st. and then you're just dealing with the tax hike. my big problem though with this whole debate is i don't think we're spending enough time talking about growth. and establishing conditions for the economy to grow. because we can argue all we want about what's the right marginal rate, do you do it through deductions or do you it on the rate side. wouldn't it be nice if we actually got another couple percentage points of growth? that would do an extraordinary amount of good in terms of the

revenue side. so -- >> exactly. >> i also don't think we're having enough attendant conversations about the spending side. so i would like to see a little bit more discussion about other aspects of this, how you establish conditions for growth, what you do on the spending side in addition to just this tax debate which seems to be taking all of the energy. >> hopefully they will listen to you. you never know. that may and number those ceos at the white house suggested the same thing. liz ann, thank you. our coverage out of schwab impact 2012 continues online. is it good to invest during uncertain times? we just talked about that a little bit. check out the investorsummit.cnbc.com to find out. maria will be here with "closing bell" and more from the schwab summit as well. back to you. >> thank you very much, sue. christie's had a spectacular auction last night. $412 million. one night! andy warhol's statue of liberty, the priciest piece of the sale. how much it went for.

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we're watching ual, the carrier suffering a massive computer glitch today. the grounded flights across the country. ual saying the problem has now been resolved. that means it could be difficult, sue, i imagine, for you to get back from chicago. >> i'm just wondering about that, simon. although i haven't gotten one of those push flashes that says the flight is delayed, but we shall see. i may be broadcasting from the airport tomorrow. you never know. speaking of the airline industry, the industry's $200 billion jet fuel bill might be a little hard to swallow as airlines struggle with profits. but perhaps a fix is just around the corner. global aviation has been in a world of hurt with profits spented to be down more than 50% this year. one of the main causes for this turbulence -- extreme volatility in jet fuel prices. and as airlines look for ways to get out of this tailspin, they

may want to look at what kendriken ricci has been up to. >> we take an aircraft that might have been made 20 years ago and we update it similar from the original manufactured airplane, most importantly is that it has a much more fuel efficient engine. it saves about 30% to 40% of its fuel burn which gives it more range. >> reporter: the private jet manufacturer is the only one of its kind and through its unique process claims that its jet is -- >> it definitely is a green airplane because of the fuel, because of the lower emissions and because of the quiet standards that it flies by. we absolutely think it would work with a larger aircraft. >> reporter: that could help the struggling airline industry which has been experimenting with biofuels and green measures to cut down on oil dependency. so as you can see, the reality of rising jet fuel prices continues to hit the airline industry and it probably will for the foreseeable future

as well. ty, back to you. >> thank you very much, sue. seems like everyone was at christie's last night, even yankee third baseman alex rod guess. he went 0 for 6 on his bid there last night, too. one of the hundreds cramming in to watch the auction house sell nearly a half million dollars worth of post-war and temporary stuff. warhol statue of liberty, $44 million. the 3-d silkscreen considered one of the finest warhols ever. they couldn't even come up with a title, called untitled. koons "tulips," $33.6 million. the night's big loser, sac capitca capit capital's steve combs failed to

sell his artwork. you were just saying people are saying they've never seen the leap in bidding that has taken place. >> these auctions were really important. it's tempting to just look at this as, well, there go the rich again, buying art for millions of dollars. stuff my kids could have painted. but these prices are a quantum leap. these auctions this week were just a huge new level for art. there are a couple things going on. >> why? >> well, one is that there is some pretty good stuff there and there is a little bit of flipping. in other words, we saw another warhol, a brando piece, that had been purchased in 2003 for $5 million by a new york collector. in 2003. it sold last night for $25 million. >> whoa! >> average of 40% a year. that's one thing we're seeing. seeing a little bit of flipping. secondly, it is overseas investors looking for a place to park their money. art is a good place to do that. >> robert frank, thank you very

much. next hour, how to fiscal cliff proof your portfolio. plus, we do some market globe trotting on "street signs." ♪

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the dow sliding down the fiscal cliff but not as steeply as in prior days. just 3 1/2 points lower right mao. the s&p 500 in positive territory by 1 1/3 points. nasdaq basically down .1% at this hour. simon's in new york. sue is in chicago. very interesting event out there, sue. >> it always is, ty. they were talking early this morning about the fact that the art market might be in bubble formation, contemporary art anyway. they're pointing to the fact that stevie cohen had to pull his painting because it didn't make its underlying bid. i think it was $18 million. it's going to be interesting to see whether or not they're right. >> i was going to say, presumably people are selling now to get their capital gains in lest the taxes rise. >> that's right. thanks very much, sue. we'll see you back here again tomorrow.