welcome to "worldwide exchange." i'm kelly evans. these are your headlines from around the world. moving closer to a deal, reports say president obama makes a new fiscal cliff offer to house speaker john boehner, giving in a little on taxes, but standing

his ground on the debt ceiling. general electric is reportedly on the verge of buying italian space firm avi oi. and india's central bank stands pat despite consistent calls for a rate cut. but the rbi is saying its focus is now normally on boosting growth. well, it's been a rel ofly good year for stocks in europe. adding about .3%. advancers mostly outpacing decliners on the index this morning. if we can zero in on the bourses, it's largely green behind me. the fits fits mib is atting .6%. the ibex in spain, up 0.8%.

and the ftse up about 0.3%. now, some company-specific news this morning, fin mechanica saying shares up 2.4%. this on news they're set to buy sge-avio. safran is also a company considering that change. let's take a quick look at the bond space. we'll get a sense of the kind of trade we're seeing shaping up. it is consistent with flows into the periphery, perhaps out of the core and the risk on move generally that we're seeing this morning. yields up to 4.5 roughly in italy at about 5.4%, respectively. gilt is moving up towards is.9% this morning. the bund yield is still extremely low, so that spread

between gilt and bund is widening. look at the euro/dollar. 1 1.3171. extraordinary. we're almost up at that 1.32 level. the dollar/yen is flat, right about 83.88. there we go. a little bit of movement there. the aussie lsh dollar is weaker. the aussie/dollar has been weakening. maybe the researchers of the yen not doing too much to spur sentiment. in any case, let's get the latest out of singapore. >> good morning. you're right, sill st some danger for the japanese markets. however, the yen-sensitive shinzo abe trade still in place.

we did see the nikkei gain another 5% today. over the last 15 weeks, it has gained 15%. analysts saying it's now in overbought territory. the nikkei 225 keeps gaining. dollar/yen, pretty flat today. although we were sitting on that 84 handle a little bit earlier. all eyes now on the central bank meeting later this week. expectations for some aggressive monetary easing for all of shinzo abe's talk. over in south korea, the kospi managed to gain about .5%. there was a lot of caution in this market today. this is because it will be closed tomorrow for the presidential election. so we have seven points shy of that 7,000 level. this index has been struggling a little bit, particularly exporters on the back of a stronger dollar and the japanese yen. the greater chinese markets, they were very volatile today.

there is optimism a deal will be reached stateside. we have the shanghai comp in and out of the red and dranking the hang seng along the way. there is skepticism in shanghai. up nearly 10% in the month of december. it is still one of the worst performing indexes in asia. keep in mind, it is a government-orchestrated rally. the economic data has been better in china. offer, that hasn't been enough to move stock. the recent rally we've seen, still a lot of questions as to why exactly it's happening and whether the government can put in some reforms to keep that going. hong kong, aia shares resumed trading today. this is not -- the losses for aii were not too heavy, but the hang seng ending with losses. over in australia, the s&p asx

200 gained some ground, abo about .5%. it was the big miners that gained today. and this brings the aussie market to a 17-month high. we have some minutes out from the research bank of australia. we will see monetarying easing in the form of interest rate cuts last year. it's defying expectations because we are seeing some gains of about .6%. this is despite the rbi, the research bank of india putting rates on hold. as well as the cash research ratio, which many were predicting they would cut. kelly, back to you. okay. as the trading year draw toes a close, we're turning our attention to 2013. there are a number of themes to focus on, pressure on the price of oil, indisexposeble incomes

and henry joins us now. 2013, what does pressure on the price of oil mean? >> downward, i think. i think what we see is some significant nonopec finds. we see falling u.s. demand, rising supply. we see miles driven. there's technology at play. probably the biggest thing that could happen to the auto industry and we can come on to that. that's only a few years out. the message from the futures market that we're get sg oil should be some $10 to $15 lower. if we were to get $10 off the oil price, it broadly equate toes about 1% gdp surprising the western world. it's that time of year where we're pending our thoughts to next year. tangible, economic prices to next year. it will be oil related, a chance, good job with raising the tax threshold in the uk.

that means for the first year in five. uk link will be up, not down. and them i also think thattory thing our chancellor did a good job of was she raised taxes by 10 so companies can invest a 215 pounds, not just 200 pounds. >> that's a leverage the other governments have been trying to pull. but your point is interesting. it's not just the uk we were seeing there. and it goes back to the point you were making about oil. u.s. retail gas prices are down 16% since their peak this year. if it weren't for the fiscal cliff, this is actually a big source of stimulus for households. absolutely. i don't want to make too much about it, but the biggest

attacks oeft with the and elevated since the mid '70s, it could be coming to an end. so i think that is something we need to be aware of. the annual fuel rate in the uk is about 15 billion to consumers. you're looking at another percent on income. so as i'm sitting down righting the income for next year, it's not all doom and gloom, the mood is similar to last year where next year it's too horrendous to count. >> and sometimes when i hear the notes of optimism from you and others, it almost makes me nerve was. first, though, president obama has made a new offer to house speaker john boehner as they try to avoid the fiscal cliff. the two met for 45 minutes on

monday and are expected to talk again today. this would cut spending by $1.2 trillion over the next decade. the president is now reportedly seeking to extend the bush era tax cuts for everyone making below $400,000 and that's up from the previous threshold of $250,000. he's proposed to use the chained cpi for social security benefits. and italian lawmakers begin debating next year's proposed budget later today. despite calls for him to stay on, prime minister mario monti has said once the budget is passed, he will resign. 61% of italians are against him running for a second turn. meanwhile, sylvia berlusconi promised yesterday if he's voted back in, he'll reverse some of monti's policies. in tokyo, the newly elected prime minister is meeting with the head of the central bank.

also, we'll head out to frankfurt where do you have ya mark may have dodged another bullet. then it's over to hong kong. aig sells its remaining stake in aia and formally ends a partnership dating back 100 years. all of that straight ahead. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express ecember 22nd for christmas delivery.

the latest numbers out of china, in the first 11 months, foreign investments led. investment from the u.s. did pick up. . on the equity front, the shanghai composite has been powering ahead up over 9% just this month. with external factors impeding economic growth, the long-term pir r picture may not be rosy. china is the only market of the year likely to end the year in the red. how is that going to impact next year?

buying and selling chinese stocks these days requires some spiritual guidance. people are trying to keep calm as the main stock market hovers at a near four-year low. >> i've been investing for around 20 years, he says. compared to new york and london, investments in china are relatively new. the markets he said are dominated by small time chinese investors who bet more on gossip and behavior rather than company profit. trading halls here feel like gambling debs. people in trading rooms like this one with just wiling their time away. most of them are stereo scared to get back into the market. chinese investor res paralyzed by the worst economic growth since the 1990s. historically, the markets here have gone through booms and busts, but have never gained the stad temperature of the economy.

now the world's second largest. the problem is, people don't trust what they're buying. that reality was exposed by a accounting scandals in the u.s., involving new york listed chinese companies currently under scrutiny by the securities and exchange economic oh sec. >> the chinese regulatory authority only do themselves a disfavor by not being more cooperative with other international regulators such as the s.e.c. and then investors back home here will pick up on that as to whether or not that's a concern for their own market. >> chinese authorities have promised to improve regulation, which analysts say could include a crackdown on insider trading and forcing weak firms to delist. sophie wu isn't taking any chances. she put most of her life savings in investments she can trust. >> translator: the property in gold, you see the value rise over the years, she says.

stock market are determined by luck. unless the chinese markets mature, exhausted investors continue resting on the sidelines. ewis yup, beijing. >> henry dixon, fund manager is still with us. henry, china is a story that has disappointed investors for the last essential years. is 2013 going to be data? >> we have been keen to play the mining sector in the uk. i think you combine that with the low price and change of capital, maybe less cap x and a more friendly shareholder approach. that's the way we continue to play it. i think china will continue to play it. i think that would be better, more obvious great stories in the like in the next ten years in china. >> such at?

>> the obvious concern, i'm not concerned about the residential property side, but international property, larger entities, that would be a concern that would continue to rear its head, i think. and i look at the stock pickses of chinese industries. just determined the bank roll losses for that industry and that's slightly concerning, as well. i see china more as a trade market rather than a strategic bet. within that, we are keen to extend ourselves to only the mining sector. >> there's plenty of pessimism for people to come in. in other central bank news, sweden has lowered its key interest rate by 25 basis points to 1%. in a widely expected move. the central bank says it sees the repo rate remaining for the coming year.

riksbank deputy swensen says he is pushing for heavier cuts. in australia, the decision to lower rates at its december policy meeting appears to be a tight one. however, policymaker res more concerned by a quicker than expected slowdown in mining investment and the prospect of rising unemployment at home. and finally, japan's prime minister told the governor of the country's central bank to consider adopting a the% inflation target. shinzo abe made that claim after meeting earlier today with masaki shirakawa. in the meantime, india's central bank has kept interest rates on hold despite government calls for an easing monetary policy. the rbi has indicated that it's likely to cut rates in the january to march period as inflation moderates.

in response to that, the sensex still adding .6% perhaps on the news that more stimulus must be coming and the rupee is up 0.2 almost almost against the dollar. now, we have more details on this live from mumbai. lachsa, it sounds like a bold move by the central bank to hold steady despite calls for it to ease. well, the government has been calling for some time now for rate cuts, but the research bank has been throwing the ball back to the fiscal deficit so inflation would come down and they would be able to cut rates. but that was not the discussion at all at this point in time. the discussion of a rate cut or the resolve ratio rate cut is because inflation has been dipping from its largest levels. it was an 8% in september,

falling to 7.45 in october and further to 7.25 in november is because the trajectory was low. expected to give back something today. but the research bank may not have given a research ratio or a rate cut, but it has clearly changed its stance. it said from this point on, the focus will be on growth, not on inflation. so the reserve bank reiterated that and said rates will start easing by january or by the fourth quarter of the fiscal year. >> i don't think the market has steadily disapoichted. there was a knee jerk reaction lower. but after that, the market still recovered because there was a very clear writing on the wall that the rate cut will indeed come in january. so that's a very clear promise that change in favor of growth and the rate cut will come in january. >> latha, thank you so much.

just a quick news flash here, rebels have taken over a key mining town in central africa, this according to a military source that reuters is quoting. we know we've seen plenty of violence across the region. that's dow jones reporting this news. as soon as we find out more detail on that, we'll bring it to you. continuing with the discussion about india's economy, we're now joined by art wu. art, welcome. what is your take on india holding steady here? >> yeah, i don't think it should be considered too surprising, as noted by the earlier speaker. inflation has been falling. but it still remains quite elevated. inflation expectations remain quite elevated and the currency has been under some pressure. so i think the rbi has decided to err on the side of caution

and wait to see how inflation evolves going forward. but as noted, they have clearly provided some guidance that they want to actually provide more support for their economy going forward. so we could see rate cuts come as early as next month, at the end of january or more likely, perhaps, in march. in the second -- in the fourth quarter of the finish year. >> is that justified, in your view? we're talking about growth rates enviable by western standards, but are a disappoint to india watchers. >> yeah. it's a very tough situation, india is. because one, growth is weak, but at the same time, inflation is elevated. if you look at the wholesale price index, it's at 7% plus. but actually, consumer price inflation nor the last reading in november was 9.9% year on year, basically almost in double digit levels. it's not a comfortable growth inflation picture. and it's an overall concern for the macro, the macro picture

when you're looking at it from a longer term perspective. >> and we come up again for elections that have to be called as late as 2014. is there any concern that during campaign season we might see the use of fiscal stimulus or rhetoric about it as a method to boost opinion about how well the economy is doing? >> i think that's a concern that we have to be mindful of. if you look back to the previous history, as early as 2008, the government had loosened fiscal policy substantially and there's obviously a risk that that may kerr again. but we'll have to wait and see when the next budget is released which will likely take place in february or at the latest in march to see whether the authorities want to support the economy more vigorously or are they going to try to stick to

their fiscal consolidation plans, which they have aligned most recently and outlined previously. but they have so far been unable to achieve any sort of meaningful consolidation yet. >> art, what's the view perhaps at fitch or yours personally as we look to economies across asia, across your region and whether to use fiscal and monetary policy? is there a reference as to which is better? is it a country by country basis or has your view generally evolved over the last couple of years? >> i think it's a country by country basis. that would probably be the obvious answer and it depends on each economy's current economic trajectory and, obviously, where they stand in items of the inflation cycle. i mean, just reverting back to india, i think in terms of fiscal space where they the public debt to gdp level of around 55 to 60%, they don't have a lot of space to use fiscal policy. but at the same time, they don't

have a lot of space to cut interest rates because inflation remains elevated. so that puts them in a tricky situation. >> okay. finally, art, what would you say the prospect is for inflation over the next 12 months in india? >> i think it's a very difficult call, actually. our baseline case is that inflation would fall, but i don't think it's going to fall too much. we are still looking at inflation for the fiscal year '14 at around 7%. but a lot will have to do with commodity prices, oil prices, the feed through impact of that and, obviously, how the economy turns out. we are speting a shallow recovery. we're looking for growth maybe to come in around the 6.5% to 7% range versus 5.5% to 6% for fy '13. >> art, thank you. appreciate your time. quick news, esbury saying it may record a loss for the six

months ending december. we'll show you the information when we can. they're going to focus on overhauling product and rebrand. still to come on the show, will uk inflation put back from october's five-month high? figures are due to hit the tape in just a couple of minutes. we'll have those results with you like when we come back.

you are watching "worldwide exchange." these are your headlines. moving closer to a deal. president obama makes a new fiscal cliff offer to house speaker john boehner, giving in a little on taxes, but standing his ground on the debt ceiling. in corporate news this morning, finn-mechanica shares are rallying on news that general electric may buy italian aerospace gien avio. in india, the central bank stantdz pat despite calls for easing, although it indicates that easing may come at the start of the year. and as promised, we have your inflation figures out of the uk. closely watched because

inflation has been so much higher than the central bank for so long. the latest showing a read of 2.7% from the cpi. it's up 277% on the month. is on forecast is up for .2 on the month and 2.7% on the year. sterling rallying was earlier looking to the highs against the dollar for quite some time. henry dixon is still with us, fund manager at madderly asset management. henry, cpi up .7% on the month. another 1% increase. but the general theme seems to be bang on expectations. >> yeah. i think wa we are seeing within that is i'm afraid food is definitely up at this point in time and that's definitely coming through. and it's scratchingly larger

than pet roll, for example. any good news you might be getting on the side is off set one-on-one with the food side at this point in time. that is the give and the take at the moment. but the new incoming replacement for mark carney, he thinks that's the way out. i'll expect the lessons will continue to be written and will probably stay above target. >> it's interesting, we're seeing perhaps signs of not too much pressure in the pipeline. if you look at the ip output, it's up just 272% on the year. if you see that working its way through the chain, you can understand why the views will moderate. but with some of these inputs, food in particular, it's difficult to get those components down in the same away that perhaps we see other prices

falling. >> yeah, absolutely. on food inflation, i think it's interesting when i talk to maybe some executive teams in the super market, they say consumer behavior is changing. but people are trying to make their money go further rather than go to super market three times a week. so as i say, hopefully there are buying patterns that will continue to insulation with food price inflation, but i'm afraid food price inflation is on the aggregate and going up. >> that is the highest level since late september. turning to germany, regulators are set to hold off on a probe into the deutsche bank. they have no plan to investigate carbon dioxide certificates.

patricia has this story for us. deutsche bank is going to avoid charges on that one? >> that's something we cannot say for certain, but i'm quoting sources in the "wall street journal." at the moment, they do not seem to have a closer look at the wrong doings or right doings. but here, the public prosecutors had that big raid last wednesday. but one thing for sure, it seems that last night in a speech mr. fitch was very much eating humble pie, almost being apologetic about the culture especially during the financial crisis or let's say during the run up to the financial crisis. he's talking about reform, the cue of deutsche bank going forward in a way trying to plead for more information. however, my question is, if you have management that has been with the bank for so many years like fitch himself and like andrew jane himself, it is difficult to convince anybody

that all of a sudden culture is to change. if you look at seeman aes couple of years ago, there was possible wrongdoing from the previous management at seemans. had to leave. then peter losher came in who was the new kid on the block. and that sort of spiel could be applied to deutsche bank. this is going to have consequences, not only for the image of deutsche bank. >> patricia, thank you for that. meredith whitney says it's time to buy. they have upgraded citigroup, bofa and financial services from hole to buy. but speak, cnbc, she said the reasons for her shift in view stem from rises that will follow the fed's stress test in january. henry, there was a little bit of snashg after these comments from meredith. because after all, some of these names she's focusing on are up 90% this year.

is there a reason still you think this rally can run? >> it is still an error, absolutely, definitely, that we think is incredibly interesting. and also, i think the uk in equities is making a transition from being inferior to that whole distraction. but there are the advent of contingent convertible bonds. which in my opinion makes the investments. we still quite like financials. i think what we're seeing in the money markets means that margins will continue to improve at very low levels and the interest margins, not to say that they could double, they could go from 1.5% to 2%. we quite like them, absolutely. but probably some of the easy money can be made.

>> is that for a lot of uk names? i know you have a large holding. or does that extend to the american banks? >> yeah. i mean, i think probably the american banks. if the biggest asset of the american banks we've seen conformation of house price rises. so i can see where there's more and more in the sector. in the uk, we have strong regards to house prices, very flat, small down. the amount of debt, house prices is only a third. if you look at the whole of the uk housing market, there's about 1.2 trillion in debt. in the u.s., we are looking at the housing stock value will rise and, therefore, debt will -- >> which of the two would you prefer, lower debt but a weak price outlook or a higher debt and potentially more

appreciation? >> i would probably rather take the steeper discounts and put value that we have in the uk in an environment where i believe debt is largely serviceable and do that. >> we have barclay's and a specialized lender called paragan. >> what do you think? we want to ask viewers what they make of this story. is it time to buy big banks or is it the sign of a top? e-mail us your thoughts or tweet us. and moving forward, i think we have just mentioned what you can do with the e-mails. and now we want to take a look at the markets. the ftse 100 adding .3%. double that for the xetra dax. the cac 40 up by about .25% and the ibex is snapping up this morning. it's up about 1%.

the bond will reflect this risk on attitude. we're seeing spain and italy yields falling 5.4% or just under that level in spain. gilt in particular, if you look at the 1.92% level, this on the back of the inflation report which showed cpi up 2.7% year on year. forex, the euro/dollar was stronger earlier. we're seeing just a little bit to the up side. not too far off the 1.32 mark which is extraordinary. the sterling moving to a multi month high. 1.62. it's just over that level this morning, up .1%. now, spain will keep a quick look -- take a quick look at the results from italy in this debt auction. we've got basically an offering of short-term bills, three month and six-month bills. the yields on that are still coming through.

looks as though spain has sold about 11.5 billion in the three months and just shy of 2 billion in the six-month paper. the bid to cover ratios for both, let's see, at least the six month moving higher on the three month and more importantly, the yield on the three month. 1.373 versus 1% the last time around. still waiting on the yield for this six month. while we wait for that to come through, let's introduce our guest. head of strategy at ing management. it's 1.68% versus just over 1.7% the last time around. what does this mean for spain? >> well, i think what you can see here, the general story continues to be relatively constructive. despite the fact that we had a bit of concern increasing after

the stepdown of monti in italy. but you have seen that it has proved to be an entry point for people still buying periphery paper. what we're seeing now is institutional investors from other parts of europe are bringing back some of the money to these markets. there is now flows again from italy into spain. we're seeing in portugal yields are falling further. all in all, this is sending a general message that the risk premium are coming down and continue to be gradually reduced. >> and how much more momentum is there? we've been waiting for the forced hand on spain. but frankly, there's little sign of pressure right now. >> i fully agree. as long as this continues, the probability of spain moving into such a program is coming down.

obviously, the big question out there is whether we will see this translate into some sort of better market position. but for a second leg down in substantial lower yields, you would want to see improving economic conditions in these countries and improving deficites and stabilization in debt to gdp ratios. and i think that is still a long way off. so i wouldn't be surprised if sentiment changes in the course of next year. but it doesn't seem to be something that will happen over the next one or two months. >> let's talk about next year. ing does ease systemic risks. back on the table in 2013. commodities have been moved from negative to neutral on the strength of the recovery in china while ing seems to be

underweight in treasuries. do you want to talk about your top call for next year? >> well, actually, it is being allocated in equities. i think on the back of all our fears over systemic risks, all our fears over europe, over the fiscal cliff, over hard lending in china, all kinds of institutional worries that we had, people are strongly overweight into defensive assets. equities are strongly earned their way around and i think if you look at the dynamics in the global business cycle at this point, equities have an opportunity to catch up a little bit with some of the other assets out there. the global cycle is turning up and equities are better positioned to leverage off that improvement. and from a valuation perspective, for example, if you compare equities to a corporate credit, they haven't been in a better position in the last 15

years. so i would argue that the strongest call that we have despite the volatility that we will be seeing surrounding some political event is on equities. so that is the place for us to be in 2013. >> henry, do you agree? >> yeah, it's interesting. i think potentially what we're getting is a slightly more consensual rhetoric over bonds. but i absolutely agree with that. there's absolutely no evidence in the positioning to say that people are positioning in that manner. i look and make sure that depression and surprise in the uk, and the use of cash and not uk equities. and as i say, i do say this is a complicate, as i'm sitting down. >> how long is it going to take to get -- does the individual investor need to get involved in this store for it to work? >> in truth what needs to happen is we need to see a continuation of strong equities. there's nothing that tends to sell an asset class better than

the historic. i always like to buy in weakness rather than strength. in aggregate, that tends to make the allocation shift. i hope this next year cannot be as anti-equity as last year. >> and there may be opportunity for stock picks in that. now, over in japan, the currency markets had a bit of a jolt after japan's central bank chief said he met with the newly elected prime minister shinzo abe. this comes after abe puts more pressure to the boj to ease policy further. hi, tashiko. >> hi, kelly. that's right. the yen after the boj governor said he met abe at his ldp headquarters, but declined to mention if he had spoken about monetary policy with the country's incoming prime minister. the meeting was the official

face-to-face talk between them since the election last weekend. abe later said he had asked the boj chief to consider establishing an acourt with the government and set a 2% inflation target as part of tokyo's vow to battle inflation. this comes ahead of the boj policy meeting which begins tomorrow. members are expected to discuss the pros and cons of raising a price target. but a decision will likely come at the board policy meeting in january. the nikkei is recording that abe will offer the former prime minister an important cap net post. he is likely to become the country's next finance minister or foreign minister. when he was japan's prime minister back in 2008. back to you, kelly. >> thanks. we're seeing the nikkei up about 1% today, clearly respond to go all of these developments.

straight ahead on the program, the hotel industry is shirking the trend and continuing to expand. we'll find out just how and why when we come back. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.

welcome back to the program. it's one of the busiest times of the year for the travel industry. we'll have plenty more on that story straight ahead. first, we want to talk about 2013 with our guests still with us. henry, first to you, we've talked about some of the key themes for 2013. disposable incomes, peak oil prices. but when it comes to specific names, wa do you like? >> yeah. i think the one we all still look at is about two-thirds of the margin, still trading at about two-thirds of the market, sorry, is still looking at good operating margin peps there is, however, about a third of the market trading well below. it's a ten-year average margin. it's slightly struggling with the news at the moment regarding sandy. but what we tend to find is prices tend to firm up next year. the other area i do quite like

is we have consumer cyclical areas. probably had a tough consumer environment and maybe a tough oil input environment, as well. i think carna is a business that we can absolutely replicate. i think that's an interesting area for us to look at. and also, we have to challenge ourselves in general retail. it has had a slight run, but general retail looks slightly depressed. and if they can do anything with the margin, then you have a huge sales line that can flow dramatically. >> and it's interesting. i want to bring valentine in, as well. he's within from ing out of amsterdam. would you agree that we talked about stocks looking generally attractive. is it going to be a stock picker's market for once? >> let's hope so for our industry. i'll not sure about it, however. i think we are still seeing very

much, just remember what happened yesterday in the uk markets. these markets are very sensitive to macro development, macro feeds and political dynamics. and i think it's a bit early to say that next year it will all be over and we'll be just stock picking. so it might be a little bit more than this year. we think that the risks are lower this year than next year. that it will still be a dominant factor. and with respect to the preferences for example equity factors, i think it means there are indeed, and i would agree with the previous speaker, there is an opportunity on the more cyclical side in the equity markets, consumer discretionary on the material side and on the financial sector side still. only because it's not only the global cycle turning in the right direction, but in these sectors, valuations are more generally stronger in sectors of the environment. >> i believe you there.

henry, valentine, thank you so much for your time. and a bit of optimism, some rays of optimism perhaps when it comes to looking into 2013. it's one of the busiest times of year for the travel industry. will hotel rooms in capital cities be full this holiday season? richard sullivan is the president of the capital group. >> post lehmans was something and it was the deepest, longest downturn we've seen in the history of the industry. but we saw certainly in '10, '11 and '12 some pretty good growth and we saw return of business travel. what we did see was leisure travel, even in '09, which is that terrible year, demand for leisure room nights went up in our business. and i think it just shows that travel is part of everybody's life today, whether it's for

business southbound, and we know all about that. but smor in the maslow's hierarchy of needs, travel has become a necessity. we saw significant growth in asia, particularly in china, double digit growth. even though supply was growing fast. what we saw actually in europe and in the u.s., which you don't see a very big market, we saw that supply growth was restrained because there wasn't bank finance and there still isn't, which meant revpar was growing throughout the last few years. rev par has been quite a strong market and total revenue ves grown, as well. the world over, supply has grown. supply has been lower. we've seen a robust business over the last few years and we've grown ahead of the market which is something we try and do. >> i note that you're still

expanding, as one would maybe anticipate now and asia is still a very important market. how much expansion are you doing there? >> well, the u.s. is our biggest market, about 60%. if you take china, it's about 10% of our business, but 30% of our pipeline. so for our companies, we have about 1 1% or 12% of our total pine line in the world. china is now our second biggest market. between '09 and '11, our business doubled from 1 billion to $2 billion a year. so it really is enormous growth in a smaller market compared to the u.s., which is still a very important market to us. we're seeing u.s. continuing to grow, asia continuing to grow, not just china, but other parts of asia. india is a big percentage growth of a very small business and then parts of the middle east very strong. europe is much stronger for obvious reasons. but i think we have nice balance of growth around the world.

>> so just on the middle east, i'm assuming that business in most areas of the middle east has been quite tough here over the past two years especially or are you seeing pockets continuing to grow despite the -- >> yeah. so uae in saudi has been very strong. but clearly egypt and places like syria have been affected. and we've defer natalie seen a reduction in the market. but less growth than we've seen in the past. but i think, again, over time, it's a wealthy part of the world. >> there's speculation that you could be selling somewhere in the region of $2 billion worth of assets in hong kong, london, new york, paris. are you? >> no, no. too much speculation. we have on the market a slight hiccup in that process where we've gone with one party, we're now going to go back out to the markets.

and then we said early next year we'll put our london intercontinental on the market. >> why? >> because we're very clear about that. our business is about creating brands, managing other people's hotels and franchises. owning real estate, we should only help where it owns that business. we've announced a couple of new grounds recently. hold up in china, hotels and even the u.s. in the u.s., you need to put your money where your mouth is. we'll put up to $150,000. tinter continentals we've owned for the particular reason. in london, we've just opened tinter continental in scotland area and now we're on a position to hit what we own and recycle it and reinvest it back into the business. >> good stuff there. now stick around. still to kot on the show, our

next guest says the u.s. economy will outperform next year, but that may not translate into a boost for the dollar.

wouk elcome to "worldwide exchange." i'm kelly evans. moving closer to a deal, reports say president obama makes a new fiscal cliff offer to house speaker john boehner, giving in a little on taxes, but standing

his ground on the debt ceiling. in corporate news, general electric is reportedly on the verge of buying italian aerospace group avio. and india's central bank stands pat despite calls for a rate cut. still, the rbi signals possible easing come january saying its focus is now firmly on boosting growth. we are seeing a rally taking shape for the u.s. market today. futures are up, but the dow jones industrial average trying to add better than 6 of 0 points this morning. the nasdaq and the s&p 500 up, as well. european markets largely show you this theme. they're green pretty much across the board. the ibex 35 was up 1% in spain. the ftse mib adding .4% in

italy. the ftse 100 up about .3% this morning. so the bond market will show you the same kind of environment. spain, italy, spain we just saw a yield of three and six-month debt go off its last fund-raising of the year, even a little bit more than just the last month. the ten-year now below 5.4%. let's check forex. the euro/dollar was a little firmer this morning. the level, we're just shy of 1.32. in light of all this happened, pretty interesting. the dollar/yen, 83.89. the aussie dollar continues to underperform and the sterling is stronger this morning. up at multi month highs after uk inflation figures that were just about as expected, but did show stickiness in food prices. that is what is happening in

europe. let's take a look now on what is happening in asia. deidre has the latest the. >> hey, kelly. hopes that that deal on the fiscal cliff would be reached stateside. green across the board, but a lot of regional factors that play, as well, in japan. the shen zinzo abe trade is stin play. the kospi, a little caution here. the kospi now sitting shy at about seven points from that 2,000 thresholds. grater china markets, these were volatile today.

about .1%. this market has been rallying over the last few weeks. for the month of december, its up nearly 10%. there's skepticism over whether it can last. keep in mind, this is still the worst performing market in asia under water to the tune of less than 2% now. ia is in focus after aig sold its stake for about $6.5 billion. aia fell, but not too much because this was flagged, of course. in australia, the asx 200 at a new three-month high. we had minutes from the reserve bank of australia giving hope to market watchers that we could see some interest rate cuts next year. the sensex up .6% at the moment after a disappointing announcement from the reserve

bank of india. back to you, kelly. >> thank you so much for that. i want to bring you news out of the eu which was taking a look into surplus and deficit countries, basically looking at capital flows within the european union. out with a report summarizing the condition that we've been witnessing here which is that there is balancing happening in the german economy. it's not alone in this, by the way. also mentioned that broadly speaking because of demographic trends, the eurozone may need to run a modest surplus and we know the difficulty a lot of nations are having with that at the time being. we'll summarize more on that report and on the rest of the

developments this afternoon. moving on, president obama has made a new offer to house speaker john boehner as they try to reach a deal to meet the fiscal cliff. the two met on monday and are spec'd to talk again today. reports say the proposals would raise revenues and cut spending by $1.2 trillion over the next decade. the president is now reportedly seeking to extend the bush area tax cuts for everyone making below $400,000 for the year. he's agreed to use the changed consumer price index to calculate more social security benefits. and president obama wants to raise the debt ceiling high enough to take that issue off the table for two years. boehner is expected to brief house republicans later today. joining us now for more, steven englander. fx strategy at citi. steven, hi. good morning. does that suggest to you we're going to get a resolution before, dare i say, weekend? >> i'm not sure about the weekend, but it looks

increasingly as if they're both trying to avoid going over the fiscal cliff, even for a small period on of time. i think the warnings that fed economists and other economists have given is that this isn't something one should do lightly. we've been talking about this for a year and a half now. so i think that the range of differences has narrowed. >> i wonder what that means when we start to look into 2013, if some resolution is likely here. what is the outlook for the u.s. economy and for the dollar? >> obviously, this is a large issue. for markets, they don't need a brilliant resolution to it or a grand scheme plan. what the markets need to know is we're not going to have a disaster going over the cliff at the beginning of january. in terms of the dollar, it's good news for the u.s. economy, but it may be better news for the world. the fed is going to have a very

easy monetary policy making u.s. fixed income unattractive. u.s. equities are likely to rally, but what we've seen in the past is when u.s. equities rally, so do many other global markets and they rally even more. so we don't think it's going to be positive for the dollar this year. there's the very strong correlation that says when rick is positive -- falls. >> well, you mentioned it's good for a lot of these other countries. what we're seeing frankly, as you say, is the dollar weak bing a little bit at a time when other central banks were trying to weaken their currencies. >> i think there's a tremendous overestimation of the short-term and medium term impact. >> they're having structural

factors that are positive for their economies. more over, i think you have to see it as the package. euro that coach the 1.32 now, not because the currency is weak, but because risk has been reduced. there's more confidence that there's -- there could be some sort of end game to this that's more positive than what was spec'd earlier. so taken as a package, it's much better for the economy and much better for financial markets, even if you look at the currency and isolation. >> steven, stay there. selling 1.3 billion euros in three-month t-bills for greece. the bid to cover ratio, 1.73%. this allocation did include a 30% noncompetitive tranche. in other central bank news, it's

been quite a busy day on that front. the central bank says use the repo rate holing at this level in the coming year warning the recovery is taking its toll on the economy. and in australia, the rba eps's decision to lower rates appears to find a close one. central banks included keeping the rates on hold. still, policymakers were more concerned by more than expected slowdown in mining and investment. and japan's prime minister elect has told the country's central bank to consider adopt ago 2% inflation target. shinzo abe made the claim today. the bank is expected to cut borrowing costs at its rate setting meeting this week. steven, in light of all of this news, kind of goes back to the

point that we were just making, that are a lot of central banks trying to use interest rates effectively as a way to depress the value of their currency even though we're seeing better signs in terms of the growth outlook for next engineer? >> i think most central banks are focused on their domestic economy and domestic activity. obviously, the -- i think the risk is looking at its inflation numbers, looking at the economy and interest rates. i doubt that they're explicitly trying to do a bigger thy neighbor policy. although you have to realize that stocks rallies in the course of the year largely for reasons that have nothing to do with the economy. and now with the eurozone looking somewhat better, the save haven is diminishing. >> and talk about the previous that were favorites. what is the policy as we start to look at whether and how china

is going to grow next year? but it continues to be the underperformer. >> with the, it's underperforming and they expected it to be at this level at this time of the year. i think there's tremendous concern about valuation with respect to aussie. but the main drivers of aussie have always been global financial market conditions and increasingly chinese economic conditions. so if expectation res fii think ave is going to rally. i think it is vulnerable on valuation. given the liquidity injection that we're likely to see something year, i think avi is expected to perform quite well. >> and who do you think will be the allergies when it comes to for ex? >> obviously, i think the yen will be a lagger, despite the

fact that the u.s. is trying its best to eliminate the rate differential, keep it as low as possible. i think we're beginning to see a change in japanese economic policy. now, my colleagues in japan tell me that may not manifest itself immediately, but that the trend towards a weaker yen is very much in play. and, again, if you accept the view that the tail rafks are not going to manifest themselves next year, the two major safe haven currencies are the yen and the dollar, one area that i think will do very well is em currencies because they've underperformed last year. i think we're beginning to see a rally there. >> we'll leave it there. steven, thanks. now we're going to take a quick break. first, though, we want to look at what's on the agenda in the u.s. the third quarter current

account figures are out at 8:30 eastern. at 10:00, the nhab puts out its housing market index. dallas fed pretty richard fisher will speak at about 1:15. as for earnings, sampson farms and oracle. and we'll be right back. [ male announcer ] this december, remember -- you can stay in and like something... or you can get out there and actually like something. the lexus december to remember sales event is on. this is the pursuit of perfection.

you are watching "worldwide exchange." president obama gives some ground on taxes after another round of fiscal cliff talks. but he stands firm on the debt ceiling. hopes for a deal in washington are pushing european shares near their highest of the year. and sweeten's bank cuts its key interest rate warning of eurozone woes. a federal judge has denied samsung's injunction for a permanent injunction. it's not a total victory for samsung. the judge rejected the company's motion for a new trial based on the thought that the jury foreman was bias on apple. however, ceo jeff immelt says

the fiscal cliff in washington has hurt demand in recent months. and meredith whitney says it's time to buy bank. the independent research analyst has upgraded citigroup, bofa and discover financial as muches from hold to buy. ms. whitney told cnbc that the outcome of stress tests by the fed is one of the factors behind the move. she's not the only one to upgrade her move. rbc has hiked its price targets from $49 to $50. earlier we asked you if meredith whitney was trite to upgrade to banks or a little later. bac tops $11 and is up 98% year-to-date. and bahad tweets meredith whitney is now bullish at $11? tough talk about. what do you think, has she got it right?

strayed ahead, we take a look at what the economies may look like with and without a fiscal ball for next year. we'll look ahead for 2013 when we come back. i always wait until the last minute. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express by december 22nd for christmas delivery.

welcome back to "worldwide exchange." the u.s. futures are poised for a higher open this morning. about 18 for us nasdaq and nearly 10port s&p 500. this on news that president obama has made a new offer to house speaker john barrier as they try to avoid the fiscal cliff. the president is now reportedly seek to go extend the bush era tax cuts for those making below $400,000 a year, up from his previous threshold of $250,000. for more on how this all might play out, pleased to be joined by greg ipps. hi, greg. so how does this latest news, these talks square in with your baseline view of was going on happen here? >> kelly, i think this is pretty good news. up until last friday, we had seen slow movement towards each other's positions by john

boehner and barack obama. we had not seen any give on either side in their key issues. yet in the last few days, all this has changed. over the weekend, john boehner apparently came back to the white house and said he would be willing to consider higher tax rates on people making over $1 million. the president responded and said why don't we make it $400,000? that was an important concession from both sides. the president wanted to raise rates on everybody making over $250,000. so there's still space between the two, but they are moving towards each other and they have actually sort of erased their previous lines in the sand. the other key thing is that the president has fort first time signaled movement on benefit cuts on entitlement. he has now opened to changing the cost of living formula for social security. now, that had previously been off the table. that's important because republicans, in order to get anything out of these deals and agree with some space saving gesture to the tax race

increases, they need the benefit. >> we'll need to see the package to see what this means for the economy. but some of the worst outcomes are probably not the likeliest outcomes right now. the worst outcome would have been going over the fiscal cliff entirely. that would have been a hit to gdp on the order of 5% through the year. that would have still be worth about 2% to 33% of gdp, probably raising the high risk of a recession. it's still possible we could end up with that deal if mr. boehner and president obama cannot eliminate the remaining gap between their positions. but right now, i think the odds

look like we would get away with 2% gdp. not great, but not essential. will this plan ultimately be regressive in nature? >> no, yopgs. the president has been insistent all along that, tease not go up on those making less than $250,000. you raise a good point. if the payroll tax cut is not extended, then those people will face a decrease in their take home pay as their payroll tax withdraws go up again. but i don't think most people in the negotiations would consider that a regressive move in the sense that nobody was really counting on that being a permanent tax cut. >> okay. i wanted to pivot to talk about the outlook for 2013 generally. where do you, degree, sort of put the u.s. enter into the global context at this point? >> so i think this is an interesting perspective. if you go back a year ago when people were looking at hoe how

the world would do in 2012, you would find that folks like the international monetary fund were expecting moderate growth in almost every region of the world. when you look around, the united states was about the only country that met its forecast. europe went into recession, the uk went into recession. china's hectic growth slowed a little bit. as i look forward to 2013, the thing that i worry about is the united states might actually end up being the weak spot. even if we get the fiscal cliff deal that we've been talking about, even in the best of all words, we had significant tightening baked into the first half of 2019 and not a lot of room for the federal reserve to compensate. >> and i wonder, too, when we talk about the policy response here in the leading economies, toous, whether charlie evans, known now for the evans target that the fed has unofficially adopted and mark carney who has taken the reins over from canada a central banks become the key

figures to watch next year. >> i think that's a very good point. carney has put on the table the possibility that the bank of england will change the framework for how it runs monetary policy. the notion of targeting the nominal level of growth domestic product is now very much in the air. by including a de facto target for both unemployment and inflation in the fed's statement. you have a sense that the federal reserve is going to orient its policy, not just to then flagz side, but to getting output up, as well. the thing that i worry about is they can announce these more aggressive and ambitious targets, but they don't have the tools to achieve them. in the case of both the fed and the bank of england, their balance sheets have ballooned to gargantuan size. they're going to grow through 2013 and the results to date have simply not been impressive. >> that's a great point. greg, u.s. economics editor,

thank you so much this morning. >> thank you, kelly. as u.s. investors gear up for a new trading year, it continues to weigh on sentiment. find out why budgets delays are hold i holding some hostage at cnbc.com. plus, we ask what it means take for the rbi to cut rates. and santa may have a special gift under the tree for americans drivers this year. average gas prices are hitting the lowest levels of the year just shy of $3.25. we look at the prospects for gas prices to go even lower, and, again, log on to cnbc.com to find out more. and straight ahead, with budgets tight and donors nervous about that looming cliff and austerity measures, how are nonprofit groups managing to hold on? we'll talk to one of the head of the art organizations.

welcome back to "worldwide exchange." i'm kelly evans. these are your headlines from around the world. moving closer to a deal, reports say president obama makes a new fiscal cliff offer to house speaker john boehner, giving a little on taxes, though standing his ground on the debt ceiling. hopes for a deal out of washington are sending european stocks near their highs of the year. the ftse 100 is edging closer to

that key 6,000 threshold. it warps overall going weakness across the eurozone. you're watching "worldwide exchange," bringing you business news from around the globe. we can take a look at the trade for u.s. futures as we get closer to the open. dow looking to add better than 60 points, similar rally for the nasdaq and s&p 500. following news of some progress made in fiscal cliff talks out of washington and, indeed, that is boosting stocks in europe. across the board, we're seeing pretty much the same story. the ibex 35 at the very end was up better than 1% earlier now just shy of that threshold. cac 40 has given back its gains a bit. .5% for the xetra dax at a level of 7642. and the ftse 100 adding .4%. 5934 is the level there. the bulk of the headlines in the

fiscal cliff fight in washington are over tax increases, spending cuts and entitlement reform. one of the items that may be getting lost in the mix is the future of charitable donations. the president is seeking to scale back the nearly century old tax deductions on donations, which is something nonprofit groups say is key to their financial well being. one of those is shares girsten luckman. sharon, thank you so much for joining us. it's great to see you. i wonder if you could give our viewers a sense of whether your institution could survive without charitable deductions. >> well, i don't think it's a matter of survival. i'd like to think that alvin ailey dance company is going to survive because it's an important institution that does so much work not only in the arts, not only in america's ambassador to the world but also in the schools with camps, etcetera, etcetera.

it has to survive. and without a tax deduction, the u.s. government is not supporting ailey or any arts in a meaningful way. why would that money come from? where would scholarship money to train the next again ragz of dancers and educators come from? >> i've been there since the mid 1990s. during a period when it seems as though individual giving has replaced government funds as a source of support for these kinds of groups? >> well, you're right. when i first came to ailey, it was in hand to mouth. it probably would not have continued that way. there's no way for an organization to thrive and succeed. hand to mouth. and most of the money came

through government and also ailey is a popular company. so some of it comes just from income from box office and presenter fees. that said, an important part of what i began is to diversify our income where it was coming from. luckily, we did. again, ailey is fortunate in that its popularity, its excellence attracts companies and corporations like like to sponsor our work. they feel good about being connected to ailey and that's helped a lot through the years. >> and you mentioned here some of the reasons why your costs have run high and wide and why this s is so important. the company tours for six and seven months out of the year. you offer full scholarships and you're in new york city which has extremely high rent costs. if there's any change to the nature of charitable giving, just what kind of impact would that have on your day-to-day running of the group?

>> that's a hard thing to answer. i hope it's not going to happen. and i think that if it happens, we just have to hope that there would be enough people who believe in the ailey mission, who are passionate about what they say, who are passionate about our ailey camps across the country, our work in the schools, all that, and they would donate money to us regardless of the tax deduction. that said, it would be symbolic. i think that kind of program stopping a tax deduction says the work you do isn't important. the government is not going to support you and we're not going to help individuals support you. >> and certainly in these times when governments don't seem to have this space for it, this source of support becomes more important. we'll leave it there. sharon, of the alvin ailey dance theater, we appreciate your time

approximat today. now a bit of news to bring you coming out of africa. we know jacob zuma was up for re-election of south africa's anc and south africa's anc has elected him. this is being reported by reuters. now if you're just joining us, here are some of the top stories we're following out of the u.s. knight capital's board is reportedly split from takeover offers. reports say gecko boosted its kap cash value to about $1el 8 billion. both are eyeing knight's market making business, which handles about 10% of u.s. stock trading volume. get-go rescued knight this summer after a trazing glirch nearly left it bankruptcy. take a look at the reaction of knight shares in frankfurt this morning, add background .5% and have lost three quarts of their value over the last six months.

general electric expects sales to be flat next year. it also expects profits to rise. however, jeff immelt is warning the issues in washington have taken a toll on business. ge is reportedly close to a deal to buy avio for as much as $4 billion. ge adding better than 1% in frankfurt trade, well outpacing the market. and mcdonald's is hoping to get a few extra presents over the tree this year. the fast food giant has urged u.s. franchise owner toes be open to christmas day. that goes against the company's tradition of being closed on major holidays. the request was made in a memo to franchises in november. mcdonald's same-store sales did fall for the first time in october, but rebounded last month. the company attributes had part of that to stories that were open thanksgiving.

now, following a year of considerable market shocks, we'll take a look at what's in store for 2013 and find out why our next guest says volatility is at a crossroads, just after this. ♪

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welcome back to the program this morning. we can show you a shot of 10 downing street here in london where queen elizabeth has been attending the uk cabinet meeting for the first time. and her attendance at downing street will mark the first time a monarch has attended the gathering of a cabinet since the reign of queen victoria. ministers are expected to present her with a gift and a lovely wreath to mark the occasional, 10 downing street. president obama gives some ground on taxes after another round of fiscal cliff talks. but stands firm on the debt ceiling. hopes for a deal in washington push european shares near their highs of the year. sweden's rbi bank cuts the interest rate over warnings on interest rate lows. and if you're just joining

us, a look at top stories, apple has requested a permanent injunction against samsung smartphones. it's not a total victory for samsung. the judge rejected the motion for a new trial based on claims the jury foreman was bias in favor of apple. apple and samsung shares responding with am up better than 2% today. samsung closed up by .8%. walmart's mexican unit reportedly used prescribes to open stores in desirable locatio locations. the "new york times" cites nine instances where walmart paid off local officials. walmart stifled an internal probe. last month, regulators say they found no evidence of bribes, but are continue to go into their allegations. walmart says it's looking into a broader probe it began a year ago.

chiason reportedly made more than $50,000 on that information. the verdict raises a number of convictions of the u.s. government's insider trading crackdown to 71. a erberus says it will immediately begin to sell its investments in free do many gom group. cerberus faced added pressure monday after one of the biggest u.s. pension funds said it was reviewing its investments with the firm. we're going to take a short break. meredith whitney has upgrade her

call on big banks. but is it the right call at the right time?

the latest figures out of china suggest cutting back spending. foreign inflow dropped 3.6% to $100 billion. led by falls in vms from the eu and asia's biggest economies. but investment from the u.s. did pick up. in terms of stocks, the shanghai composite has been powering up 9% this month. still, external factors are impeding growth. china is still the only equity market in asia likely to end the year in the red. just how should chinese investors reposition their strategy for next year? eunice heads to the streets of

beijing to find out. >> buying and selling chinese stocks these days requires a little sfeertal guidance. in this trading room in beijing, people are trying to keep calm as the main stock market hovers at a new four-year low. >> i've been investing for around 20 years, he says. yet the markets are still a mystery to me. compared to new york and london, exchanges in china are relatively new. international investors have limited access. the markets, instead, are dominated by small time chinese investors who bet more on gossip and behavior rather than company profit. trading halls here feel like gambling dens. people in trading rooms like this one are whittling their time away. most of them are too scared to get back into the market. chinese investors are paralyzed by the worst economic growth since the 1990s. historically, the markets here have gone through booms and busts but have never gained the

stature of the economy. now the world's second largest. the problem is, people don't trust what they're buying. that reality was exposed by accounting scandals in the u.s., involving new york listed chinese companies. >> the chinese regulatory authorities only do themselves a disfavor by not being more cooperative with other international regulators such as the ftc and then investors back home here will pick up on that as to whether or not, you know, that's a concern for their own markets. >> chinese authorities have promised to improve regulation, which analysts say could include a crackdown on insider trading and forcing weak firms to delist. sophie wu isn't taking any chances. she put most of her life savings in investments she can trust. >> the property in goal, you see the value rise over the years, she says. stock markets are determined by

luck. >> until the chinese markets mature, exhausted investors continue resting on the sidelines. eunice yung, cnbc, beijing. meredith which isny says it's time to buy banks. ms. whitney told cnbc the outcome of the stress move by the fed is not the only view. rbc has hiked its price target this morning from the stock from $49 to $50. not too much of a move there. in any case, this move comes in the wake of some significant rallies in bank shares. we can take a look at what we have seen in bank of america leading the pack up 97% this year. discover up 67%. citigroup up by nearly half. we asked you earlier what you thought. is this too little too late, i

guess we could say? chase hay has said meredith whitney is like many forecasters. if you guess long enough, one day you'll make the right call but developly you'll strike out again. >> what do you think? join the conversation here, tweet us or e-mail us. here is what's happening in european trade this morning. we're seeing mostly green arrows. although the cac 40 is fractionally lower. down by 0.03%. the ibex trying to hold off with .8% there. before we head to break, the third quarter account figures are out at 8:00 a.m. eastern. then at 10:00, the nahb will put out its housing market index. dallas fed president richard fisher will speak at 1:15 p.m.

and for earnings, look for results from oracle, saxson farms. we see the dow looking to at more than 50 point. we're looking at a year without any major vix spikes, down nearly 4% in just the last day. 30% this year. jim is a strategist at mkm partners. jim, we wanted to take a look at the vix this year and maybe pivot. first of all, let's look at this year and ask just what happened? where was the big spike that people were calling for? >> well, we had a little bit of run up in volatility in the fall. that's the seasonal peak for volatility historically. it certainly wasn't of the magnitude that we had expected. and i think that puts us at a bit of a crossroads as far as

the volatility cycle goes. >> and what do you mean by that crossroads? is there something structurally changing here? >> there could be something structurally changing. what's important to note is that volatility cycles going back to the mid 1980s since the data began are about 5 1/2 years in length. this one began in july 2007, which means we're right at that 5 and a half year mark. not just implied volatility lower, but realize volatility of the vix and, for example, in europe, if you look at these stocks, as well, you're talking about lows back to 2007. on the other side of the ledger is the reality of the trauma that we've suffered in the last five years, both from an economic and financial market perspective means that this should be a longer than average high volatility cycle. so those are the two forces at

work right now. >> is it a landscape, this changing, meaning the policy back drop, all the policy action that we've seen in these markets or is it investors changing and looking to express views in different ways? >> well, we think of it as being the aggregate psychology for the metric. so just to put low and high volatility regimes into context, just think of the vix or restock, you're talking about the vix and embedded floor around 15 that has been in place for those five years. if you look at open interests, put call ratios, the market knows this. people tend to buy a lot of calls when the vix is low. and that is what we've been conditioned to believe. at some point, that's going to change. we'll shift into a low volatility regime. that means, believe it or not, vix can be contained for a period of years between 10 and 20. >> and we've seen that typically coincide with periods of strong equity performance. would that also be implied this

time around? >> it certainly could be. so march 1991 was a recession trough. the transition from a high to a low volatility regime was right in time with that. in november 2001, you had another recession trough. the transition in the u.s. from a volatility perspective happened about two years later. we're almost 3 1/2 years post recession trough in the u.s. our firm believes that u.s. real growth will accelerate to around 3% next year. so you certainly could make the argument that this structural change in volatility is beginning to take place. >> and what about the preference that we've seen, for example, the individual investor to get into this market, to get exposure to these kinds of products? is that part of the changing landscape? >> well, i think if you mean product, volatility product, i think what we could see with this structural change is, you know, the landscape of people getting exposure, hedging exposure or convection exposure to volatility via some of these

products could transition. we could see more localized shocks. so, for example, if next year there are geopolitical tensions in the mid east, it might not be the volatility products that people use to gain exposure, but more specific products, for example, sle, oih, energy-related products or uso get long oil itself. so you could see a transition in the landscape away from the volatility specific products into more localized products for people to get exposure. >> and what about, for example, you learned that you can get exposure volatility on individual stock names, whether you want to do that for apple or some or asset classes? is that an area where you're seeing transition on people more willing to take a view on this particular sector than on the broad market? >> i think people are -- as much as these volatilities have exploded in the last couple of years, people still view volatility as a difficult concept. we have not seen a huge amount

of volume come into the volatility single name products. and if we do move into a broad environment of more subdued volatility, i think they're more likely to buy apple itself than to play the volatility of apple. >> jim struger, thank you very much and thanks to everyone for tuning in this morning. "squawk box" is up next. don't go anywhere. i'll be right back here tomorrow. in the meantime, have a great day. [ male announcer ] this december, remember -- what starts with adding a friend... ♪ ...could end with adding a close friend. the lexus december to remember sales event is on. this is the pursuit of perfection. can i still ship a gift in time for christmas? yeah, sure you can. great. where's your gift? uh... whew. [ male announcer ] break from the holiday stress. ship fedex express [ maby december 22nd break from the holiday stress. for christmas delivery.

good morning. a fiscal cliff deal could be getting closer as differences in proposals have narrowed significantly. among the latest offers and counteroffers, president obama is said to have changed the bar on tax hikes for the wealthy. guilty, two