game for about 35 minutes was not apparently a total -- there's joe flacco. he's the mvp and quarterback. wasn't a big surprise that blackout to some. documents obtained by the associated press, super bowl officials warned back in october that the venue's electrical system could suffer a power outage and pushed to replace some of the aging equipment there. the nfl has said that the outage will not prevent the city from hosting a future super bowl as they have a good time and richly deserved one. >> indeed. we wish them all the best. meantime, ty, an old friend of "power lunch" and cnbc is retiring. global management chairman jim o'neal is retiring a bit later this year. the announcement made in a memo from ceo blankfein. he invented the term brics to

highlight economic reform. he's been with us since 1995. he's always a terrific guest, tooe, he has fantastic insights not only on bric countries but currency market. he was always a pleasure to interview, i found, because he always answered the questions, which is refreshing. >> that's always a good thing. he was a delight to talk to. very informed and informative guy, always enjoyed having him on. wish him well, obviously, in future endeavors as the memos say. all right, everybody. that will do it for today's edition of "power lunch." thanks for watching. sue, see you. >> i'll be home in a few minutes. "street signs" begins now. we are back in buy mode, stocks marching higher once again. wait until you hear from a billionaire money manager on how high he thinks we can go. the tale of two chinas for american companies, one good, one most foul.

which one should we believe? plus can we officially blame apple stock dead money. more carmakers may be fibbing just a bit when it comes to your gas mileage. >> if it's a small fib does it count? the third day in a row for triple digit moves for the dow and third day in a row of double digit moves for s&p. why is that notable? because, before this neither the dow or s&p had such moves in over a month. so maybe, just maybe, you could argue this means a little more volatility returns to this market. let's get down to the florida stock exchange to someone that knows a thing or two about that. bob, what is the problem with stocks at new highs. >> i don't think there's a problem particularly. if anything, the question is whether hitting new highs is going to disrau in a substantial number of people still sitting on the sidelines. a lot made about inflows into stock mutual funds, a pretty small number here.

$20 million compared to inflows and outflows. new highs would bring in a greater number of people. we're not far away, folks. take a look here. here is the percent. the dow is 1.2%. we're talking 160 points or so, 150 points new high. s&p further away. 3.4%. i know a lot of people when i got comments about president obama kick the can measure regarding sequestration, it did get a little reaction in the stock market. take a look at the spider. short-term reaction in the stock market where traders come in. here is where the announcement was made, a little blip upward here. volume picked up as well. that announcement asking congress for short-term package that would delay sequestration. see if that goes through. overall, mandy, this could happen tomorrow hitting new highs. i think that would be very important news. back to you. >> indeed it would, bob. thank you very much. much more on these markets ahead. we begin the show with

developing news from washington, the president proposing a new package of cuts and tax changes of he's trying to stave off s s sequester. john harwood, what's new on this matter? >> the president is trying to repeat what was done in january, a two-month delay in sequester. he's proposing one of several months not specified. he didn't specify spending cuts or tax cuts. his overall point was if we can't have a big package right now with the sequester due to take effect march 1st we need to do something smaller and avoid an impact on businesses and federal workers from the reduction in spending and from the broader american economy. here is the president. >> if congress can't act immediately on a bigger package, if they can't get a bigger package done by the time the sequester is scheduled to go into effect, then i believe they should at least pass a smaller package of spending cuts and tax

reforms that would delay the economically damaging effects of the sequester for a few more months until congress finds a way to replace these cuts with a smarter solution. >> what we're seeing here, brian, is a continued transition from a big bang approach to budget negotiations and the potential threat to the economy toward lower stakes, lower pressure negotiations over smaller deals. they did a small deal to avoid the fiscal cliff. congress, the house republicans stepped up and put off the rise in the debt limit or the reaching of the debt limit for a couple of months to mid may. now the president propose to deescalate the fight p by pushing it into the future. if that's successful, keep making progress in increments that could have a positive effect. on the other hand if it ultimately results in avoiding a deal, return to get high-stakes brinksmanship they have been trying to move away from.

>> just a quick question, when they say tax reform, is that just a euphemism for more tax hikes? >> yes but not hikes in tax rates, removing loopholes from the tax koechld the president referred again today and so did jay carney at the briefing i just walked out of for this live shot to the carried interest rate we've talked about on this show that benefit hedge fund managers and private equity managers. that is very much on the leading edge of the president's attempt to insist that we need tax hikes, tax revenue increases as well as more spending cuts. >> okay. thank you very much, john harwood. in the meantime, the other big news this hour, new details in the government's case against standard & poor's. we're going to talk to two players in the ratings game. first of all, scott cohn i believe you have the latest on this case. what have you got? >> mindy, this is a civil lawsuit, the government's burden of proof is considerably lower if they had gone after s&p for criminal fraud. this complaint is full of

e-mails, insider messages and insider testimony the government said proves s&p's desire for increased revenue and market share improperly influenced the agency to downplay and disregard the true credit risks posed by the mortgage backed securities at the heart of the financial crisis. essentially s&p lied about mortgage backed securities from wall street. why not file criminal charges and why not charge any individuals? officials say they are simply using the tools congress provided. the burden in a criminal case is higher though they won't hesitate to bring criminal charges in the right cases. but in this case attorney general eric holder wouldn't even rule out the idea of an out of court settlement. >> we're always open to conversations that anybody wants to engage, but we feel serious enough about the case, concerned enough about the conduct we saw that we took this step to bring this $5 billion case. >> till now, talks to settle

this case went nowhere. david faber reported the government wanted a billion dollars and an admission of guilt to make the case go away. s&p says it's without merit and the government is trying to use 20-20 hindsight to go after good faith conduct. the feds along with six states and the district of columbia say they have plenty of evidence to the contrary and that leaves both sides lokcked in $5 billio test of wills. >> thank you. with well-known and well deserved criticism of ratings firms and the fact we do need pairs of outside eyes to help value debt, this leads to us one very big, very simple question why don't we have a better way. let us bring in rapid ralgts international chairman and ceo. these firms were slaughtered, right, in public opinion, the media, whatever, for five, six years after the crisis but they are still pretty much all we've got. >> business as usual.

despite dodd/frank and regulatory initiatives and legislative initiatives we're finding ourselves in a market familiar and continuing on its merry way. s&p, mood yzerman and fitch, nras, sros, rating agencies, so embedded in the financial system and so many parts of the system that continue to support them. legal efforts like this may be -- this could be a landmark situation. >> let me throw this out. could this be counter-productive to what we want, assuming we want more compositietition. s&p costs will go up moody's even if they aren't attacked now. that will increase regulatory compliance and insurance cost for the entire field which means it could be a barrier to entry to smaller firms. >> no question about it, the unintended consequences of these efforts. the european effort, dodd/frank

increased liability standards for the ratings agencies. that alone increased the costs for anyone who wants to be an nrsro which makes firms like rapid ratings decide we don't want to be an nrsro, frankly costs are far greater than actual benefits of having this designation. >> how do we fix this? >> we need to focus on creating an environment that fosters competition. ultimately until we have new methodologies like rapid ratings and others approaching the market in different ways, new revenue models, not being paid by issuers where there's a potential conflict of interest but paid by subscribers. all these things need to be fostered and we need to make sure we're not creating barriers that makes small firms say i don't want to be in this market. >> there's so many hurdles and barriers that can't be explained in a 4:00 tv segment. >> i don't like them but have to use them legally because pension funds may have rules that say i can't buy anything unless it's rated by one of the two or big

three nrsros. >> really nailed it. >> it's a bizarre circle. >> the public fiduciary and pension funds that have funds that go into the money managers that help prop up the system, you believe the board of trustees of those pension funds or pensioners whose money managed say this does not work anymore and we cannot be relying on these agencies that are alleged fraudsters, nothing is going to change. >> what are the chance that as a result of this that system will be unwound. >> we'll see. this is quite interesting. the first time the doj has gotten involved. if they are successful we could see interesting change. if they are not, it further emboldens and solidifies their place in the market. >> what do you make of the conspiracy theory targeted by doj. of course it was s&p that downgraded america. >> i think it's giving the u.s. government a lot more credit than they deserved to be

organized enough to go after s&p. i don't hold -- >> you kind of escaped the question, james. very elegantly i might add. >> thank you very much. i do not believe -- >> you don't think so? there's a little fish test and something smells a little funny. >> it is strange moody's isn't involved maybe they delete their e-mails better than s&p does. you look at claims and trails there's incendiary information, just the comments being made just look unbelievable callous and certainly cast them in a terrible light. >> we have to leave it there. thank you so much for joining us, james. it's absolutely fascinating and i believe the beginning of another developing story. another developing story and breaking news with scott wapner. what do you have? >> dell's leverage buyout, $13.65 a share is what that deal is going to go down for. i just spoke with a large shareholder, 14.4 million, nearly 1% of the outstanding

shares worth nearly $200 million. he said he will be voting his shares no on the deal. he says the price of the deal is unreasonable. based on dell's own internal projections, that price of the deal should be in the 20s. right now at $13, mr. pzena says it should be in the 20s. much they can't do publicly. the story around that, when you're out of the public spotlight, you can have a little more leeway to do the things you need to do or want to do to turn the company around. some of that may be true. again, in his words, hard to understand what they can do privately that they cannot do publicly. says there's a clear conflict of interest the board is in. he's made an attempt to speak with the board. he's requested a meeting and we'll see what happens with other shareholder support. again, the news to hear is that rich pzena owning nearly 1% of ng no. standing shares is going

>> he's a fighter, too, scott. he may try to enlist other people on his side. thank you for breaking that news and watching dell stock. >> it's incredible, $26 bucks a share less than five years ago. >> how about $56 a share in 1999. >> there you go. >> that's when people used computers. on decca blowout record for stock inflows, will that headline translate into something good for you and your money. >> also, the marketwatcher who says apple is dead money. he's going to tell us what it will take to resuscitate it.

>> as they say in history, 336 years ago it was the end of all bubbles. we're talking about tulips. in fact, on this day tulip mania peaked. prices up. over the next five years, the bulbs lost an average of 76% of their value. >> offensive picture of holland. it's more than windmills and women in wooden shoes but not much more. >> there you go. the cash keeps coming into the market. january saw a record 77.4 billion according to mutual funds and etfs, big number and long overdue. if you ar contrarian it's a

reason to be nervous. joining us market and portfolio analyst kevin. we have money coming in, not from the bond market. literally and figuratively from under the mattress but does it give us a reason to pause. >> it's good to see confidence and some of that money off the sidelines. if you took that number and drew it back over time and looked at flows into equity mutual funds, what you would see is a huge spike in january. it hasn't been sustained for long. if you have a longer perspective you would discount that heavily. still nice to see some burst of enthusiasm wherever it comes from, nice to see investor taking money off the sideline putting it in stocks and helping the market off to a decent start. >> might be too soon to see a sea change or sustainable sea change in the investors mind-set. what's it going to take? i hope it's not record or multi-year highs, does not that mean they are getting in at the

top. >> i think the guy on the street really needs to feel good about their position in life. one of the things so striking to me. when you look at the number of people working in the private sector today, what you'll see is a number that's very similar to the level that existed 12 years ago in 1999 or 2000. so we've had a very slow period of growth here for quite a long time. two 50% corrections in the stock market. home prices under pressure. home owners under water. there's a lot of issues out there. if those issues begin to fade. if we see people feeling more comfortable at their jobs, private sector functioning better, all those issues fade, that would have longer lasting implications in terms of being a catalyst for retail investor coming back to stocks. january is the first step. we need a lot more januarys before that can be a convincing trend. >> the entire history of economic america, kevin, suggests equities are, indeed, the best place to put your money over time. okay. however, we have a generation of

people who not only don't believe that, with they believe stocks are fundamentally a bad bet or at worst, rigged. how do we square those two things? >> most people adopt have an entire history of the united states. people are looking at their own individual circumstances, they are measuring up their own personal experiences with what their time horizon is. most folks i think are willing to make some measured bets. but i think as you look at the aging of the baby boomers, for example, time horizons have compressed somewhat. i think ultimately one of the things that was such a catalyst to the last 100 years was a significant amount of inflation that came through the pipeline. a longer story to go into here. those pressures, under lying conditions are not exactly the same as they were the last 50 years. >> okay. talking of longer term horizons and hopefully making money over those horizons, ron barron on

cnbc earlier today. let's have a listen and then i'd like you to comment. >> sure. >> i'm expecting 7% average growth for an extended period of time, since we're below where stocks normally trade, and the economy is growing about 7% a year, including inflation. how long is that going to take? if you grow 7% a year, that means you double your money every 10 years. that means in the stock market is 14,000 now, it could be 28,000 in 10 years and 50 or 60,000 in 20 years. >> what do you think? number one, is his math right? >> well, the math is right. >> 7%? does that make any sense to you? >> it makes sense in the way he framed it out. he looked at 7% growth, historic growth. if you listen closely, 2% growth in the economy, 5% inflation. if we had 5% inflation, you wouldn't have interest rates of 0% that piece of the math is

missing. it's a little bit silly, if you brought him back on and asked him the question, that long time horizon is not -- he was looking at 50 years at one point. i think most investors look year to year, maybe three, five years in advance. but if you look at that 7% number, 5% of it is inflation by his math. if you're counting on 71% of your growth figure coming from inflation, that's a weaker dollar and not really the best source of return. >> absolutely. thank you very much for joining us today, kevin. let's go back to john howard at the white house. some breaking news. >> breaking news, mandy, is that the president is going to travel to israel, to the west bank and to jordan later this year in the wake of israeli elections. he's got a new secretary of state in john kerry. he's going to try to jump-start the peace process. this was an issue that was a sticking point for some critics of the president during the 2012

campaign because he had not visited israel as president. he has as a candidate. now the white house is confirming he is going to go. we did not get timing on the trip. an israeli newspaper reported it would take plagues in march maybe. >> thank you very much, john harwood. >> get ready, america. do we have mileagegate part two ahead? another report suggests your car may not be getting miles per gallon promised. >> the tale of two chinas, two american companies out with polar opposite headlines on how their business is in the world. we're going to dig in and deep. my mother made the best toffee in the world.

it's delicious. so now we've turned her toffee into a business. my goal was to take an idea and make it happen. i'm janet long and i formed my toffee company through legalzoom. i never really thought i would make money doing what i love. [ robert ] we created legalzoom to help people start their business and launch their dreams. go to legalzoom.com today and make your business dream a reality. at legalzoom.com we put the law on your side.

at a dry cleaner, we replaced people with a machine. what? customers didn't like it. so why do banks do it? hello? hello?! if your bank doesn't let you talk to a real person 24/7, you need an ally. hello? ally bank. your money needs an ally. more "likes." more tweets. so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes."

i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex. in things that make you go hmm, this number shows how competitive the job market is, dell reports they received 44,000 applications for 400 flight attendant jobs. this means the odds of getting a position are like one in 100. >> if you have a paid extra for turbo charge engine instead of a bigger v-8, some of the small

turbos are supposed to get higher mpgs, consumer report says you might have wasted your money. phil lebeau here. is this mileagegate 2. >> we've been talking for some time. we went to boulder, colorado when ford was introducing the ecoboost engine, driving it around, ford flex. people saying the wave of the future. turbo engines underperform, promising better fuel economy. look what they found when they compared their test versus what's on the epa sticker. we've got five models they tested. all together they tested 11. you see there is a difference between what consumer reports got and epa it's two one and four miles per gallon. furthermore, said i think people should think twice before paying extra money for one of these

engines. remember, most are going to cost between 6, 700 and $1,000. ford big pushing turbo chargers responded by saying consumer reports findings not consistent with what we see from internal and external feedback on ecoboost engines. we're seeing people get the performance and fuel economy they want. when you take a look at shares of ford over the last three months, keep this in mind. this company has sold more than half million ecoboost engines. wildly popular, brian. that's one reason why the f series sold so well in the last year or so. a number of people come in and say i want better fuel economy, put an ecoboost inside the f series. this is interesting to see what kind of fallout saying you're not getting the same mileage. >> i know there's questions. i want to ask you how people make decisions. you deal with car companies all the time. we all want to get better gas nileage than worse. if a car is 10 grand more

expensive and gets 5 miles per gallon less, it doesn't make sense unless you hold the car 50 years. >> that's the tradeoff. there's no way to say where you should go with the 10 grand or not go with the 10 grand. it's up to everybody individually. fool economy is selling. how much more do you want to pay to introduce that. >> a trust fund millionaire driving around in a prius, i'm saving the environment. >> if they are comfortable with it, it's there for them. >> i have a question on boeing and dreamliner investigation. i understand boeing wants to do test flights. it wants to go up in the air and try and solve what the problem is up there. >> yeah. they formally have asked faa tore permission to lift for test flights of their planes not with the airlines. i suspect the faa will grant this request because ultimately they need to get these planes in the air to do more battery tests, mandy. when you think about it, they

are always putting these approvals, if you will, for flying test aircraft. boeing does it all the time. faa approves it all the time. i suspect they will go to the faa with enough data to say we need to get to the level of testing these batteries in flight to see if there are certain things that happen in flight that don't happen on the ground. that could have the answer. >> makes perfect sense. i would volunteer to do a test flight if i could do a destination at the same time. >> that would be japan because you want to go back and relearn japanese. a big fat red flag, just when you thought it was safe to get back into housing, an analyst with a huge downgrade for home builders. >> zynga, the epic free fall. it's out ahead of arranges today. what are the three things need to do to get back in the game.

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welcome back, everybody. do take a look at what's happening with the stock of zynga. it got an upgrade at bank of america to buy from underperform. as a result the stock is up by 5.5% today. they said, by the way, their research is proprietary for clients that don't have a whole lot more they can give us on that. as you can see the stock is definitely moving on the back of that "sky sports new." in the meantime, why don't we talk about what you can expect from the earnings of zynga, managing director here. what do we like to hear? >> the third quarter numbers are fine. they set the bar higher. fine in the fourth quarter. the question is what is the guidance going forward. the key question is what will drive the guidance, what other games in the pipeline. one game recently that came out farmville 2, a sequel to their

flagship game. that seems to be hanging in there, and zynga poker, a couple of positives. however, when i'm most worried about, mandy, is the change that's going to happen between the relationship between facebook and zynga effective march. what that change will do is it will no longer give zynga the preferred status it's had forrist entire history. it will be reflected in the cost of acquiring customers going up significantly. i'm not sure if everybody has modelled that yet. it will be interesting to see guidance for 2013. we're modeling top line to be down 20% and earnings to be down 50%. >> okay. you've gotten it currently. what should it do to be more positive, restructuring, head cutting or something much more strategic here? >> i think for them to get investors back into the stock,

what they need it a hit. it's a hit driven business no matter what anybody says. secondly, i think restructuring, head count reduction unfortunately will be needed as well. the level of revenue they are doing right now, mandy, is what they were doing a few years ago with half of the head count they had. so unless they are expecting a big change in the top line, i think restructuring is really needed. but more importantly, a big hit is needed sometime soon. >> thank you very much for joining us. once again we're going to be watching for the report from zynga after the bells today. thank you. >> meantime hostess bankruptcy off the pages for a while, but perhaps not much longer. president of the group, one of the country's leading distress bankers, he represents the bakery union and sale, he's got new developments to share with us. what do you have? >> good afternoon, how are you? yeah, there are developments here. let me set the stage, if i

could. we preach options and optionality to our clients, whether board of directors or company here, the bakery union. we have a lot to offer bidders and buyers of these brands. we're here to preserve jobs, get hostess workers rehired. we bring a lot to the table. we've got a turnkey operation in terms of employee base. highly experienced hands that make these products. skilled workers who have been working for below market wages. we alone, our workforce alone, immediate restart of operations and put the products back on the shelf. we can maximize the return. >> that's what you're trying to do for the bakery union. >> exactly right. >> your job is to try to preserve jobs but also be fair maximize value for bakery union. >> maximizing value for the bakery union is getting jobs back for the hostess employees. we're all about quality control, as i'm sure you well know, brian, if the yeast level is wrong in the dough, you can't just throw out the dough, you've

got to stop the entire line. if you're giving on-the-job training to a nonskilled workforce, you're going to lose as an investor. we're here to work with credible bidders who want to get started right away with a great workforce. on the other hand, if bidders don't want to work with us, the union has asked me to convey today that it is considering asking afl-cio to put on its boycott product list any hostess products acquired by buyers who do not require hostess employees. >> wow. let's pause there. that's pretty big information. what you're saying is the bakers union will ask, not force, but ask afl-cio which has millions of members, family, friends to put hostess products on the boycotted products list. >> considering. >> considering asking. >> if these as and brands are not purchased by buyers who then

rehire hostess employees. >> why? it seems aggressive. it seems in some ways counter-productive. >> they are just considering it. as i said at the beginning, we're here to help. we want to work with bidders, be part of the solution to restart these timeless brands. this process has a long way to do. flowers, the lead bidder for the bread business announced last week by the department of justice, among other things they are taking a look at a potential flowers hostess acquisition for potential anti-competitive effects. there's a lot to go here. i'm simply conveying the union is not going to necessarily sit on the sidelines if somebody buys these brands and these assets and doesn't want to rehire these great hostess workers. >> do you think you can scare off buyers? >> we're not looking to scare off anybody. we're looking to work consensually and happily with good bidders. >> peter, thank you very much for bringing us that new news on hostess.

see you soon. you have a new development, you know where to go. >> thanks, brian. >> thank you. next up, a disaster and sunshine stock coming from china. which headline tells the real story? >> big downgrade, a new side of trouble for housing. [ male announcer ] at his current pace,

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i'm bill griffin coming up on closing bell, the dow trying to close above 14,000. after yesterday's selloff, is it back on track? a team of top strategists ready to take you to the close. also, will strong earnings from disney fuel the next rally. ceo bob iger breaks down the numbers for us moments after they are released. any way president obama's plan to delay massive spending cuts can pass the house? that man there, ways and means committee dave camp will join us to talk about his response to the president's plan. we look forward to seeing you at the top of the hour for the last hour of that trading day. we'll see you then. brian. >> bill, thank you. das disaster brought to you by the great nation of china. young brands blaming bad business for an unexpected earnings miss.

chinese kfc embroiled in a story about, what else, chickens. it's still taking a hit. bring in analyst at morningstar. this is one of those stories came out at first, everyone is kind of like eh, now bigger, now seems to be getting bigger. when does this slow down? >> yeah, that's the ultimate question coming out of the situation. frankly i think it's going to take a lot longer than what maybe the company has outlined. i see at least several quarters before we see things stabilized, 2014 before positive comps out of china for the kfc segment. >> hang on. i don't want to underplay the significance. this is a company no stranger to bad publicity about food quality in the past and it's bounced back. why not this time? >> i think it will bounce back. >> not until 2014. that's some time away. >> the company outlined they expect positive comps in the fourth quarter. i think it will take longer than

that. my reasoning behind that, we're seeing a whole new world in terms of social media cycle and how it plays with chinese consumers. it may have lingering effects. the comparisons to past experiences whether avian flu or sars, comparability here, too. this situation could linger a while and fester as well. you also have a situation, too, where it's a much more mature store base than it was once upon a time. the bounce back may take longer because you're dealing with more diverse and older store base as well. >> r.g., what is china doing to remedy this. do we know? kfc isn't importing it from america but in china. it's under their regulatory control. what are they doing, if anything? >> yeah, i mean, that's the big question, too. how much of the changes in the way poultry suppliers are regulated is ultimately going to fall on the company versus how much is going to fall on the government. considered to be best in class in terms of only supplying its

chicken from the highest quality suppliers in the region. whether it's increased government regulation or whether or not a false in the arms of the company itself that's a big question here. ultimately both here. it still really is a big question. it does kind of lead a lot of the risk you see in these emerging markets where maybe the supply chain isn't quite as regulated as you've seen in the u.s. and other developed markets. >> let's hope that situation fixes itself. thank you very much, r.j., from morningstar. meantime not all doom and gloom from china. check out this headline, gm, general motors posting a record month for sales in china. stock up 2%. let's bring back phil lebeau on "street signs." talk to us more about what drove, excuse the pun, gm to this record moment. >> well, gm has always been strong in china. that's part of it, mandy. the lunar new year which

typically falls in january is in february this year. as a result sales slow down around the lunar new year. that's not happening. this january more people in showrooms in china. not just general motors reporting strong sales in china. honda, nissan, a number of other automakers having positive comments pout what's happening in china. look at the market overall in terms of sales strength. that's what they did in january. nissan, honda, gm up 16%. look at, this guys. everybody says, sales are slowing down in china. no they are not. they are going to be 21 million vehicle sales in china this year. that's the estimate from lmc auto, that's sold around the world. the bottom line, off to a strong start in china service auto industry. it will be interesting to see how much it slows down in february. they are expecting strong growth of 21 million. >> that's actually fraction,

larger than the driving age. what are real estimates on how big china can be. you're going to get to the point where the average chinese worker makes about $5,000 u.s. dollars a year, you can't sell anything that's costs more than a couple bucks. >> the estimate is you will eventually see annual sales between 35 and $38 million. annual sales in china of 35 to $38 million. we're a longways from there. we're talking around 2032, there will be bump in the road but a steady trajectory until then. >> how much are they an aspirational product as opposed to they have a lot of their own home grown products. >> i'm dying -- i drive the dong fang, three cylinders. >> we laughed at toyota a few decades ago. you will drive that. >> the reason the automakers love the chinese market is because it is an aspirational market. they will pay top dollar.

this is why general motors is pushing cadillac so hard in china. when you look at the strength of audi, bmw in china, this is a luxury market. that's why gm is trying to get cadillac in there. they are getting beaten without cadillac there. >> we have to leave it there, phil. thank you very much for joining us. >> you bet. >> enjoy your dong fang. >> is apple dead money? we're going to have a guest that will make that case coming up. >> and break out the confetti cannon because the s&p has now wiped out yesterday's loss. >> what a green and red dong fang. more green.

okay. the dow is also wiping out yesterday's loss. the dow transports are in fact now trading at a new all-time high, folks. sitting up there by 1.3%. as for home prices, well, they jumped more than 8% in december, thanks to low inventory and high demand. good combination. core logic says that's the biggest jump since may of 2006, but, and here is the but, and where is herb when you need him because the home builders aren't feeling the high. in fact, they are taking -- it's

a bit of a mix as you can see on the board there. there was a round of downgrades at barclays so we'll bring in steven kim, home building analyst as barclays. why the downgrade? because you think the fundamentals are getting worse, or is it just because a lot of these names have come a long way since their lows? >> well, there's really two parts to it, mandy. i mean, first of all, clearly evaluation portion of the downgrade, and for that we actually went back to 1990 and '92, believe it or not we had the grave misfortune of actually covered them for that long and that's really remarkable if you look at how these stocks did coming out of last housing downturn which was in 1990, the rally you've seen so far in the group, we've seen it before. in 1990 and '92 the stocks were up 300%. they quadrupled in 15 months and then they went down 35%. you know, a lot of people miss that because if you pull up a 30-year chart you don't see it but that's actually what they did. we went back and saw the valuations on those stocks at that time were event call to

where they are today so there's a valuation component to our downgrade and i'll mention that you can't pull up these forward estimates on bloomberg or any of the data feeds because of the fact that they don't have them, but we actually have our own estimates from that time, and that's actually what we found. other thick that i would tell you is if you look at the stocks on a fundamental basis, there's one very important thing that they are missing. what they are missing is the fact that new home prices have dramatically outpaced existing home prices, and the reason for that is because you have a very constricted mortgage market today. the only people who can buy are people who are very well off. that's grated a makeshift, positive makeshift, but if everybody's hopes and dreams about housing come true, driving valuations on the stocks, guess what happens? you'll get a lower mix of buyers coming into the market which is going to bring new home prices down, even as existing home prices are going up. we don't think people have modeled that correctly and that's another reason we've

drawn attention to the valuations on the stocks. >> okay. thank you so much for explaining that. steven joining us there from barclays. >> shares of apple are off to a rough start. many would say the company is wildly undervalued. not this guy. bill gunderson, president of gunderson capital management. bill, why not? >> well, i wouldn't say that it's not wildly undervalued. i -- i require three characteristics in the stocks that i own. i require performance or momentum. i require valuation, and i require a healthy stock chart and good sentiment. while apple may be undervalued right now, it's missing the other two components, and those are very important components. >> it requires long-term performance, intermediate

performance and short-term performance. i have a momentum grade of f-plus. f-plus, on apple right now. i sold apple at 650, and i've been right all the way down to 450. i don't consider apple regaining that sentiment. i don't see the relative short-term performance coming back, and i don't see the chart getting healthy any time soon. >> so you think it's still searching for a bottom. where, if you had to make a guesstimate, where do you think the bottom is? how much do you think it's going to fall? >> i think apple will pull a netflix, a much further drop than apple. netflix finally found a bottom in the $50 area or falling from 317. they actually found a sideways base. netflix rose up to number one three or four weeks ago and broke out of the base to the upside and now it's up 70% in

the last two or three weeks. apple will eventually find the bottom. it needs to go sideways probably for several weeks or several months and now we'll have to wait for the negative sentiment to once again heel and we'll have to wait for the stock to break out to the upside once again, and think it will take some time. >> before we let you go. can you give us a name meeting all your criteria right now? >> i wrote about a stock for thestreet.com last week or two weeks ago, and it has all the characteristics, breaking out to new heys, ocn, and it's cheaper than apple. >> thanks so much for the name and thanks for your thoughts on apple. next up, a short stack with a nice run. of dollars on their 401(k) to hidden fees. thankfully e-trade has low cost investments and no hidden fees. but, you know, if you're still bent on blowing this fat stack of cash,

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