good morning. welcome to "squawk box" here on cnbc two days before christmas. there's a live shot of the christmas tree in rock center. i'm andrew ross sorkin and joe concern than and steve weise man who's in for becky quick today. investors preparing to wrap up 2013. there are only six trading days left in the year. we'll see how it goes. it looks like it will be ending strong for the bulls. the dow and s&p closing at record levels on friday. there are four government economic reports slated for release this holiday shortened week. today you should look for personal income and spending. that comes at 8:30 eastern time. incomes seen rising .4%. we're keeping the consumer in focus with only two shopping days left before christmas. mixed reviews on the holiday shopping system.

analytics reporting bargain hungry shoppers bought less. sales fell by mid single digit percentage at brick and mortar stores on friday and saturday. that compares to the same days last year. but, here's the important part, it does not include online sales which of course have been the story of the season. well-known industry analyst dana telsey will join us with her thoughts later this morning. in the meantime, steve weissman has the headlines. >> apple announced it has signed a long-awaited agreement with china mobile to sell iphones to the world's mobile phone users. it could add billions of dollars to apple's revenue. it will start january 17th. china mobile will begin preorders on wednesday. eunice yoon will join us. tiffany must pay swatch $449 million in damages over a failed joint venture to produce and market watches.

tiffany is cutting its full year profit outlook. boeing's unionized machinist workers will vote january 3rd on the latest contract. where boeing makes the 777 voted two to one against the company's initial offer. under that deal production of boeing's next jet would have remained in washington state. in the aftermath of that boeing said it would look for other places to build the 777x. >> steve, today's the day. >> what is today? >> the deadline in washington. the day of the day, the deadline for americans to sign up for health care coverage under obamacare. unless you're one of the groups that somehow got some type of exception to the mandate, and it's all very confusing. the white house says the website is going to be able to handle the last-minute demands. we'll see. there's some americans that will get more time. there's a hardship exemption to prevent them from signing up for

it at all without a penalty. catastrophic used to be available to people under 30 and then there are the people who have encountered problems with the website, the interesting statistic is going to be whether there are more people or less people that are going to be covered. >> how do you prove that you tried and failed? >> i think that they know that you were on the website. >> if the website is messed up like they say i can't imagine -- >> anyone who doesn't want the penalty will say i tried. >> i would say i tried and i failed. >> did you see what the journal said about that? >> that's. >> an exemption on oe obamacare. >> new tie and new shirt. >> big day. >> i thought to honor -- >> you were right about the taper and you. >> so wrong. i know. i know. >> you didn't say that last week. you didn't cop to that. >> i know. >> i was bowing to you about -- >> i just let it happen.

i didn't comment but i bu to him. i do bow to him. >> but you -- >> because he was right. >> when you had a chance to back him, you didn't believe him about december. >> i -- i was struggling with it. i was struggling with it. >> it all made sense. >> he was the guy. >> in fact, it even got to the point where his reporting aside he just said here's the three things that needed to be done. i didn't even need him to know that they were going to taper at that point. >> i have to admit, you know, you try to read the sort of tea leaves and what's going on at the fed and then you try to read the tea leaves what's going on inside steve's head which is a separate issue. i thought in my own little way that he was actually backing down a little bit in the days ahead. >> just at the very beginning. >> he looked a little anxious and therefore i got a little anxious. therefore, that's how i got to that result. >> it wasn't his fault. >> i saw something the other day, that was him getting a

bunch of hairspray in makeup. i asked -- >> you thought that was weird. it was like alice in wonderland. >> it was a lifetime supply. >> a large can. they were putting hairspray. >> then i thought that was not hairspray, that was some type of wax. >> no? >> no, it was hairspray, joe, because, yeah, there is hair to spray there, joe. >> okay. >> joe, are you feeling inadequate or insecure this morning, you have to emphasize the differences between us. >> no. no. no. >> that you have this healthy, robust head of hair there and i am folicly challenged? >> that was not enough stimulation i just gave you about -- >> about the other thing. you're right, i should have taken them in context. >> i struggled mightily to come up with a word without, you know, saying something bad. >> steve, always remember. the reason that there isn't hair up there is because he has more testosterone. that is true. do you know about that? >> no. all i know is that somebody left

some rogaine on my desk, three boxes of it. >> no, that won't work. >> no, if you have it, i want it. i still have a shot at saving -- >> i think it might have been steele. >> i have a shot at saving what i have. we have other news this morning. the situation around target and the fallout of that data breach. "the wall street journal" reporting that the retailer suffered reduced customer traffic over one of the busiest shopping weekends of the year. saying that the number of transactions at target fell 3 to 4% compared to last year's final weekend before christmas. meantime, this may be the bigger story actually over the weekend, the nation's bigger banks have been monitoring the situation and responding to consumers' concerns on saturday. here's what's going on, chase, if you're a chase customer, i am a chase customer though i'm not affected by target, they are limiting debit card accounts to cash withdrawals to $100 a day and $300 a day using the card.

the bank calls it a precaution from taking money from customer accounts. >> because of target? >> yes. if you had shopped at target during this period, they're reducing the amount of cash you can take, they're reducing the amount of money you can take. if you're outside of the country with a chase card, you cannot use it at all. i have to say citigroup is not doing this, bank of america is not doing this. nobody else is doing this. this is not for the protection of the individual because guess who's on the hook for that, the bank anyway. this is for the protection of the bank. i know enough people and looking online, whoa, it may make sense in some regard -- >> but you're a customer. >> and to think if this -- >> they're doing it to cover their butts. >> yes. cya situation. and -- which is fine except for the fact that if they're going to react this way to a breach like this, what happens if something really bad happens? what do you think of that, steve? >> i think you make a really interesting point. it hadn't occurred to me that that's really about protecting

the bank and not the individuals. >> this is a much larger issue. >> now we know if someone did do that, you know who has to pay for it. it would have been the banks. >> the banks would always have to pay for it. they guarantee this. >> there's a separate issue which i believe visa or other card issuers, they're setting a new date where they may try to put the retailers and the banks hooked to the retailer on the hook. there's a whole thing going on. >> doesn't american express guarantee everything? >> visa. >> used to be a $50 thing. are they both zero now? >> no, it's now all zero. the other thing you'll see i think over the next two or three years, in europe if you ever look at a credit card, it has a little chip on it. that makes it much more secure. none of the u.s. banks have ever wanted to could it because of the cost of putting the chip there, in all of the retailers having to change out their devices has been so high and the

fraud has been so low that there's not a need to do it. i expect over the next two or three years -- >> what's your thought? are you worried about online fraud? >> i'm worried about online fraud. >> what do you do? do you buy things online? >> i buy things online constantly. >> how do you protect yourself? >> i don't. i have -- we have a chase account is one of our accounts. i don't want to say where all the accounts are. i assume that, you know, if there's a problem, the bank will take care of it. >> i'm hoping to be part of the great wash in terms of there's so many people out there that i never get targeted. >> we talked about this on friday. my atm card was skimmed at one of those -- >> my corporate card was. >> my atm card at bodega and all of the money taken out in israel. over a month they took out a little bit of money every single day. >> i had a guy go and buy a bunch of gas and kids toys with my corporate card.

>> that's like a new york story for you. you're getting cash from bodega out of an atm at bodega. >> that's a business i wish i had been in, by the way. the off premises atm machine. what a business is that? >> we have cars and we have banks and they have like, you know, satellite offices that you can go through. >> right. >> it's all very orderly. >> this is the convenience of every -- >> fruit stands. >> this is the convenience of every single block having an atm machine. >> fairly convenient. let's check on markets this morning. what a great santa claus rally we had last week with the strangest ignition switch. >> you predicted a stronger market. >> 300 points. >> and more the next day. today, more. another 80 points, steve. >> pretty sure the fed was pleased with the market reaction. >> it's almost like -- >> pretty sure the fed was. >> -- the first time around

almost spring loaded the second one. the first time they didn't do it, that friday. initially it was okay on the thursday and then the next day it sold off. it was like, wow, why didn't you taper? talk about glass half full, the fed will do $460 billion of qe. >> no, it's nice. if it goes on a decline every meeting. >> we have that. you have both. >> oil markets this morning looking 98 -- we've been right around 100. it's been kind of like not that interesting to watch. it's been between 90 and 100. the ten year, i'm not stuck. my thing was 2.873 and then by the end of -- by the end of friday i wanted to do the close today. by the end of friday 2.891. that was less than 2 basis points. >> you're very close. >> the spirit of the law was that it didn't move. it was pretty orderly. the dollar which by davos, this

better be lower even though it's -- obviously franks are different than euros. that's .368424. >> are you ready to predict next year the year is the euro will stop. >> if germany didn't keep currencies low they wouldn't be able to sell to all of the countries that they're giving credit to. i don't know how it works over there but it's all legal apparently. now this guy is out, this russian buddy of yours. >> khordofsky? >> yes. >> is he talking? >> i used to run into him at a restaurant on the way outside of moscow. used to be hanging out there by himself. walk up to him, talk to him and say hello. >> you talked to him in russian? >> i did. he was a really nice guy. at one point westerners were arguing to me that he hadless

oil company -- the best oil company in the world with the best audited accounts that was better than exxon, better than bp. >> he became a threat to putin. >> because of the profit motive, he created a westernize the oil company and they took it in one of the biggest charades of a government. >> and how much of putin's $100 billion net worth is -- >> i think a lot of it. now ross nef owns all of those assets and he may have to turn that around if oil production doesn't keep pace in the former soviet union. >> over here you take advantage of someone on a better deal. over there you put the guy in jail and take his stuff which is so much better. >> easier. so much easier. >> so much cleaner. >> they're acting in their own self-interest. >> yeah. yeah.

let's do global news. china's inner bank borrowing costs spiked to a six-month high. equity investors appear to be shrugging off the rise of rates saying liquidity has seasonal factors. we'll talk with eunice. >> eunice is here. she's right there. i'm looking at her over there. >> wow. >> excited to see her. >> eunice is here on the other side of the wall. >> get a camera on her. we have eunice there. she will give us a bit of the global markets. >> that's not eunice. that is time for the global markets. >> that's not eunice. >> carolyn roth standing by in london. >> good morning to you guys. let's take a look at the european markets. modestly high. continuing on the gains we saw last week. in fact, euro penal markets saw their best performance in eight months. stocks are up 2.1%. as we head into the holiday shortened week volumes will be quite a bit lower.

that's why we could see some choppy trading. zet kra dax is close to 9440 points and the ftse 100 seeing some nice gains from around .4%. if we look at the sectors, technology stocks are doing well. one of those is arm holdings in the u.k. you can see here up by 2.6%. one of the best performers on the footsie 100. this company is a major supplier for apple. there's a report out about a really good christmas elf here in the u.k. the stock move you're seeing today, this is closely related to the deal between china mobile that you're going to talk to eunice about. swatch group up by .6%. this is a swatch group winning the battle against tiffanys in the west. tiffanys ordered by a dutch arbitration court to pay swatch $450 million.

this is because of the failed jv, joint venture back in 2007. swatch is saying tiffany moved too slowly to launch and promote the products. tiffanys, as you said, cutting the guidance. back over to you. >> thank you, carolyn. joe? >> yes, steve. >> i wanted to make sure you're paying attention. >> i'm not. >> i'm going to intro eunice. >> yes. not only did we talk about seeing but we said there is eunice and it wasn't you. we mentioned apple is one of the corporate stories. the company has a long way to deal with cnbc. eunice yoon visiting from beijing joins us on set. 700 million people. >> 750 million. >> possible apple customers? >> that's right. that's right. so that's why everyone says it's a really big deal. people are very excited, right? long awaited. everybody is waiting for it. >> apple went up a lot. >> it did. >> people say this might be something. that's the thing, i wonder how much is already in the stock. i don't know. but that is huge. how many customers do have they

now? >> oh, 1 -- for iphone users? >> yes. >> 45 million. those are people that buy the phone unlooked. those are unlocked for china mobile users. >> 23 last year? >> 23 last year but it was 45 million people go to hopping congress, buy an unlocked iphone, then they'll go back and then they'll hook up with -- >> how much does that cost? >> that is something that everyone is wondering about. >> what's your guess? >> same price as the u.s.? cheaper? >> they don't sell to china but china unicom can give away iphones for free but only if you buy about $1,000 worth of minutes so the pricing has to be at least as good as that. >> i know this is a hard question. how many people are on par with u.s. incomes in china such that

they can -- let's say it costs the same in the u.s. how big is that market in china? >> it's pretty big because it costs $850 to buy an iphone there. it's not something you would bias a middle class income person, people see it as a status symbol. they are willing to save up. that's been going on for quite some time. people who buy their phones through china mobile will now have the opportunity to buy iphones. the difference between -- these are their two major carriers. you have china mobile who has a reputation for not so reliable data service but very good voice service. so i7' not sure what will work better. in china people prioritize voice. now they're in this position where a lot of people are

talking about, wow, now i can upgrade to another phone. it doesn't have to be a blackberry. it doesn't have to be an an droitd. it can be an iphone which a lot of people like. the estimates are that it could boost the number of iphones anywhere from 15 to 30 mill next year. >> a nice sam stung is real good but it doesn't hold the same -- >> they're almost 3g. >> no 4g. that is really key. like i said, china has this bad reputation for the service. >> china mobile doesn't have the 4g? >> nobody does. everybody is getting their licenses. the 3g for unicom is better than nor robert. do we believe it's already priced into the stock? for the past six months this was

going to happen. i would assume the stock already moved on that. >> it was interesting. when i was checking online to see what the reaction was, there wasn't as much reaction in china among users as i would think. the last couple of weeks we've been hearing, this is going to happen. no, they denied it. not really. >> joe, do you want to ask? >> i have a question. a bigger question because i'm such a worldly guy. >> i'm afraid. >> yeah. >> be afraid. >> is this shoe guy usurping the other guy's economic role? now he's more powerful? >> yeah, that's what a lot of people are talking about. >> it was the other guy's -- >> cameron. he goes, no, it's going to be my zblaert right. basically everybody has been talking about it. >> really? >> yeah.

>> is that -- >> there's reports about it. you. >> you have to find out about things on posters, what's going on. something's happening here. >> basically. you have to read a lot of tea leaves. what about the rise in interest rates there and how china's going to stomach what's happening here in the united states with tapering? >> well, it's strange because people were really, really creeped out in june when we saw it happen. the level of fear isn't so big. there's something natural about companies coming in. there's a demand for funding, but the central bank did come in and inject liquidity relatively quickly, even though -- so there isn't quite as much fear as there was in june so -- >> is 14 a year when you expect more economic mobilization in china, both with the currency -- >> right. >> -- and there were some moves that were just recently made about foreign companies in china. >> i think 2014 and going

forward just seems as though there are a lot of signals from the top that they do want performed. a lot of that is self-interested. now china is in a position where they actually need the reform in order to really move their economy forward. so it's not as though by changing the valuation, the currency -- >> is the case in russia, too, joe, you were talking about that. russia reformed economically when the economy went down. that was the only time. when the economy's great, the state comes in and grabs everything. there's no reason to move. >> right. >> all of a sudden you have a dip down and that motivates economic reform from the top. >> where do you live? do you live in a high rice or something? >> i do. >> it's really expensive. >> are you fluent in mandarin? >> no. >> over there if you don't speak mandarin and canton, can you get by? >> yeah. yeah. even you could get by. >> really? >> yeah. you should come over. you'll be walking around. >> i'm clueless. you've been there.

>> i have, yeah. >> i'm scared. >> did you go to main land china or hong kong? >> mainland chien nampt shanghai, beijing. >> you understand some? >> yeah. >> what did you think? >> the scale of it was amazing. you could feel it. you could feel it. i was about to say it's in the air. there's something else in the air that's not so great either. >> yeah. >> there's something remarkable that's going on over there. >> i find it so funny because when you're reporting there you're constantly told this factory is in some little town, it's really tiny farm land. you go there and then how many people live in this town? 6 million. >> i never go down. i had never heard of that and the first time i went there, this was eight years ago. you walk in and there are 10 million people. >> how many people understand what you're saying would you say? >> i don't know about percentage. there are a lot of people who understands. >> because it's sort of a language they take? >> yeah. and there's a lot of emphasis on

it for education. >> i'm just wondering -- >> you should come. >> i was recognized in the elevator at the hotel -- >> where. >> -- by three or four people. >> ed asner. did you know mary tyler moore. >> there were several analysts. they're watching us over there, joe. >> they do. >> they think you're ben bernanke. >> that's true. i got stopped. >> yeah. yeah. >> no way. >> way. way. >> did you think of that? >> yeah. but don't say that. >> are you hearing things? >> i'm hearing things. i'm scared. we're in this. >> too big to fill. >> there you go. eunice yoon, thank you for coming in. great to see you live and in person. coming up, we're going to talk about how some companies are tracking every time you sneeze or complain about that nagging cough in flu season plus trouble for investors trying to cash in on the bitcoin craze. a little bit of squawk news. the denver broncos, new england

patriots and cincinnati bengals were crowned afc champs yesterday. all four division championshipships remain up for grabs. the eagles beat the bears 54-11. congrats to peyton manning. he set an nfl record with 51 touchdown passes in a single season reclaiming a record that he set back in 2004. that's a good question. tom brady, before we go to break though we're going to check in on the national weather forecast as many people travel for the holidays. mike seidel joins from -- you're in milwaukee today. good morning. >> reporter: good morning, andrew. well, back east where you are it's still a spring morning. it's 60 in central park. yesterday 70 was a record or 71. that's only the ninth day you've hit 70 in new york city since 1871. now this cold front's going to come through the northeast. we have rain from the northeast. atlanta has had soaking rain since yesterday.

there will be some flight delays again today. out here in the midwest, it's winter as usual. we had a record snowfall yesterday here in milwaukee of 8 inches. all of this area will have a guaranteed white christmas. cold air comes in. temperatures in the big cities will drop into the 40s and a late start for the entire country. the only spot that will stay relatively mild will be south florida for christmas day. few showers in miami. temperatures 75 to 80. amazing highs over the weekend. augusta, georgia, all-time december high of 83. we also had tornadoes, we had flooding and those two combined unfortunately led to at least eight fatalities so thousands without power, guys, in new england from the ice storm. that's a look at your national forecast. more "squawk box" comes back at you after a break. [ male announcer ] for every late night,

every weekend worked, every idea sold... ♪ ...you deserve a cadillac, the fastest growing full-line luxury brand in the united states. including the all new 2014 cadillac cts, motor trend's 2014 car of the year. get the best offers of the season on our award winning products. like a 2014 ats and srx. hurry in, offers end january 2nd.

welcome back to "squawk box." time now for the executive edge. a public relations executive ignited a big online furor over the weekend after posting a message on twitter joking about aids in africa justine saco was fired. she was ashamed of her comments. she made that tweet on her way to south africa. she got on the plane and then got fired when she landed. guys?

>> 12 hours. >> what do you make of that? >> 12 hours. >> we had the lieuy lemon guy. >> he founded that company and said something. >> said it's not the pants, it's the shape of the body. >> you have "duck dynasty." >> i'm afraid in talking about these things i'm afraid i could be insensitive and offend someone. i'm afraid to even talk about it at this point. the one thing i will say is that george will said the newest entitlement in our country, the newest entitlement is you're entitled to live your entire life without ever being offended by anyone. i feel that's mine, i'm entitled to that. watch your butt, sorkin. >> well, i knew her. i know her. she worked with barry dillner for many, many years. >> it used to be that you would become world famous by some of

your comments. she's in every newspaper by something she tweet the. >> this is a new world. a new scary world where there should be career insurance. that might be the next thing that we get. >> you better buy some. >> i better buy some. the opportunities to put your foot in your mouth have gone up tremendous tremendously. >> the fact that you can type it. she also said some other things on twitter that weren't so hot previously. >> i saw that. >> if you're in the pr business, it's a tough thing. >> i had a great experience with her. >> you know, it used to be that lenny bruce was sort of expanding things and it was kind of cool back then to say politically incorrect things. >> now it's come back. >> i will say like jon stewart said something about, i don't know, "duck dynasty." wow, it's gotten really insane. i'm not saying he was defending the "duck dynasty" guy. he was saying it was ignorant and i disagree, but there but for the grace of god go a lot of people that push the envelope on

whether it's "comedy central," "saturday night live", heck -- >> i'm saying heck now. any "seinfeld," if we could discuss the content of the episode, just discuss the episode itself are grounds for firing. >> any number of things. >> anything. i'm wondering, when does there begin to be a push back, andrew. that's what i'm wondering. >> we will see and we will wait. we have a couple of other stories to get to. bitcoin apparently now one of the biggest buzz topics of 2013. a story in today's wall street journal saying lenders are sharing the enthusiasm about the virtual currency less. companies that are trying to cash in on the craze having trouble getting regular bank accounts to start their businesses. does that make sense to you that bitcoins are being used for illicit purposes. >> why do they need bank accounts if they're trading in bitcoins? >> exactly. isn't the bitcoin itself a bank account? >> in some ways.

>> everything is so volatile. >> if you're taking bitcoin as your payment, right, and you want to open a dollar bank account, it kind of makes sense that they would have trouble opening those accounts. i don't see there's a reason why you need them. is bitcoin, andrew, still based on the dollar, in other words, in the sense people value the bitcoin based on the dollar? >> yes, this he do. >> so until it creates its own basket of currency or goods it can buy or things that it can pay for and taxes it can pay, it has no intrinsic value. it's always based on the dollar? >> yes. i don't know how you can run a website and make money. >> that was so interesting, right, because there's an issue -- they were arguing, i read that over the weekend that silk road is arguing because it didn't take money that if it sold illegal things, if it didn't take money, it didn't

violate things. >> like the ebay. >> crooks say they stole 33 point 6 -- >> i didn't see that one. the lawyer was arguing because it didn't take dollars for the illegal things it allegedly sold. big money marketing story having to do with one of the winter's worst enemies. it's the flu. wall street journal says a story today looking at how consumer product makers are tracking everything from who's complaining about coughs on twitter to where the flu is starting to pick up. they'll have commercials and ads on hand and target areas where the bug is just starting to hit. maybe that will work. we will see if that's a good indicator. coming up, santa budweisern. and the bulls are loving it. will the holiday cheer spill over into next year? that's next. carl icahn made his mark on 2013 with huge bets on netflix, apple and herbal life. what can this billionaire do for an oncor in 2013.

that's up next. we're back in just a moment. bny mellon combines investment management & investment servicing, giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon.

afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain,

as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial.

need a cough switch. are you healthy? >> just on the back side of getting healthy. >> all right. we've all been sick in the past month. >> it lingers. >> welcome back to "squawk box." john silvia, wells fargo chief economist. john, i want to start and get some clarity. maybe you can explain. 4% of 1%. is that really going to happen on gdp? >> no, i don't think so. i think this morning you'll see the personal consumption numbers and income numbers really

suggest, as you know, andrew was saying earlier. christmas cheer will survive into the first quarter so we're looking at something like 2% plus in the fourth quarter. yeah, i think the economy really has some wheels here and we're improving going forward. >> to what? >> well, i think you look at year over year and i'm sure steve will explain this to you. about 1.5, 1.7% for 2013. more like 2.5% for 2014. so it's a nice improvement in the economy. >> 2.5? >> yes. >> so with the 4 we only went to 1.7. >> i think it has to be better than that, john, doesn't it? if you do 3 in the back half of the year and i forget what you did in the first half, but we're looking at 3% the last two quarters of the year, right? >> yeah. what bothers me, steve, is the inventories are such a significant part of the -- >> i want to stop you right there. finish this idea and we'll get

to dave in a second. the inventory to sales ratio hasn't spiked up. everybody is concerned about inventories out of whack. the relationship between the two hasn't changed. i'm not on this inventory draw down theory here. >> well, no, not to the extent that you get a 1% number, no, steve. >> okay. >> the initial discussion was are you getting back to 1% and i would say, no. you're right, the interesting point is that the inventory sales numbers are not that far out of line from what you would expect. i would expect, yeah, the economy still has an underlying 2%. 2.25% final sales. i like those numbers and i'll stay with them. >> okay. david joy, what's all this mean for the stock market and were you surprised by the reaction to the taper? >> the reaction to the taper surprised me a little bit, but when you look at the language that the fed contained in their statement by saying that they'll keep the overnight rate at 0 to

25 bases points well past 6.5%, the threshold for unemployment, i think that really calmed any jitters that wall street had and almost gave equity investors a green light well into 2014. i thought there would be some kind of correction in the first quarter as we got a taper as i thought up around march. now i think that's less likely and any sort of adjustment to, you know, higher rates or the expectation of them i think is a second half phenomenon. watch the unemployment rate. 6.5, we could get there faster than i think the street thinks or faster maybe even than the fed thinks. we could be there by the middle of next year and i think that's going to -- >> how is the market going to confound the consensus? people think it's going to be up 5 to 10%. it either goes up 25 or it goes down. which is it going to do? >> well, you know, i think it probably now goes higher than

5%. maybe goes up 10% and then corrects with the anticipation that rates are going to move at some point maybe towards the end of the year, very early part of next year. so i think for at least now you need to be long u.s. equities. then as you get closer to the middle. year, you know, start to get a little bit less confident about that. >> remember that. remember you said that. remember everything silly you said, too. always memorable. anyway, thanks to david joy. thanks john sylvia. >> sure. >> merry christmas. happy holidays. >> all that good stuff. >> andrew, you must have said something. please. coming up next from this high profile battle to apple ceo tim cook, love him or hate him, carl icahn was a difference maker in 2013. (announcer) at scottrade, our clients trade and invest

exactly how they want. with scottrade's online banking, i get one view of my bank and brokerage accounts

with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade-proud to be ranked "best overall client experience." ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy.

welcome back to "squawk box." as we finish up 2013, we're looking back on the year's most important people to business and finance. we're going to start with carl icahn. here's scott wapner. >> reporter: from dueling with. >> dell: -- dell. >> to agitating apple. >> a price conservative to the market. >> no investor has roared louder this year than carl icahn. he's arguing for change at business after the business. >> he's certainly the most vocal. he has a very big microphone and he's taking on the world's richest and most beloved companies. >> reporter: but one of icahn's biggest battles this year wasn't with a corporate heavy weight. >> you know, i've really sort of

had it with this guy akman. >> reporter: but a rival. >> akman is a liar. >> reporter: the billionaires brawled over nutritional company herballife and a decade's worth of animosity poured out. the world watched and trading on the floor of the new york stock exchange stopped. >> i never said i wanted to be friends with you, bill. >> okay, carl. >> you said you'd like to be friends so we can invest together. >> carl, do you think i want to invest with you? >> i wouldn't invest with you if you were the last man on earth. >> reporter: but one of icahn's most memorable moments wasn't about a tiff but a trade. the investor placed a big bet on video streaming service netflix and hit the jackpot, an $800 million profit in just 14 months. >> i wanted to sell it 100 points ago. i really wanted to sell it. my son threatened to leave. >> reporter: a big score for an

investor who even as he ages shows no signs of slowing down. >> i think that he is an extremely persistent and aggressive guy. i wouldn't necessarily want to be on the wrong side of a deal from him, but he's a super smart guy. he's got a lot to say and i hope investors and companies are really listening. >> reporter: and if they aren't yet, they probably should be. scott wapner, cnbc business news. and tomorrow we're going to be profiling marissa meyer, but first when we return, the trends shaping the ad industry. [ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection.

[ male announcer ] what kind of energy is so abundant, it can help provide the power for all this? natural gas. ♪ more than ever before, america's electricity is generated by it.

exxonmobil uses advanced visualization and drilling technologies to produce natural gas... powering our lives... while reducing emissions by up to 60%. energy lives here. ♪ at bny mellon, our business is investments. energy lives here. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon. side-by-side, so you get the same coverage, often for less. that's one smart board -- what else does it do, reverse gravity? [ laughs ] split atoms? [ flo chuckles ] [ whirring ]

hey, how's that atom-splitting thing going? oh! a smarter way to shop around -- now that's progressive. call or click today. [ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection.

welcome back to "squawk box." one of the world's largest media agencies representing big-name clients like american express and jaguar. it stays in the know by conducting an annual survey called the cultured investor which highlights trends shaping the advertising industry. collin is the firm's ceo. good morning to you. >> good morning. >> good morning. thanks for being here. you do do a survey every year. and there's interesting outcomes in this survey that surprised me. you look at different issues around what people are doing. the idea that more people -- actually i found the cooking one more interesting. more people are cooking at home than ever before. why is that? >> there are a lot of people here cooking at home, but they're not entertaining at home as they used to.

the notion of bringing people over and kind of showing off your home is much lower than it used to be. >> and during the commercial break, we were talking about technology. >> yes. >> and this whole realtime issue of how we're all sort of dealing with life. >> so as an agency, we're a media agency. and part of what we do is understand what the consumers are going through and try to help our clients leverage media to be a competitive advantage. so in that way it's how do you get the right message to the right person at the right time. so in that context, understanding the consumer and what they're doing makes a difference. and so it feels to me like -- i'll talk about maybe four or five things. one is that larry was on here last week and you were talking about this notion of, you know, why don't consumers feel better at present time, jobs are doing better, the stock market's doing well, et cetera. and, in fact, they are feeling much better. we call it kind of just like a rise of optimism. it is really sweeping the

country. >> i don't see that on social media, though. on social media, i think if you read what's going on in social media, you'd think the world's falling apart. every day. >> there are different topics, obviously, social media, the big topic is the pr woman who was leading the iac, et cetera. >> right. >> but those are anomalies and kind of what the country's feeling overall. >> when you look at what's trending on twitter, it's never something good. have you ever seen anything good trending on twitter? >> sure. there's a lot of good things trending on twitter. we talk about the negatives but there are more positives, for sure, trending on twitter. we have created a room inside of mine share that we call the loop. it's with our clients watching what's happening within twitter, google feeds, et cetera, to get a sense for what people are talking about and where our brands might be able to have an impact in that conversation. >> okay. so one of the other outcomes of this survey is that the average household size decreased in

2013. >> yes, it's getting smaller. there are a lot of different trends going on with the household size geding smaller. >> therefore, that means what to you as an agency and your clients? >> well, household size getting smaller, the biggest issue there is the usage of products. if families are getting smaller, we have to find ways -- to increase usage of those products. new ways to use existing products. >> and here's another one, 59% of brands are seen bonding, decline in the last five years, what does that mean? >> the connection between consumers and brands is not as strong as it has been in years past. if you look at the amount of advertising there used to be. it's like a 17% decline prerecession to post. >> does that make people more fickle? is that a function of the realtime shift in all? or do we just no longer have any loyalty. >> i think we still have loyalty. but i would determine almost. i would say you could almost

call it brands in crisis. and what the brands need to do is really push their game to be much more experienced-based, much more high-value, innovation to their products so people realize i'm going to go to this brand versus a generic. but the percentage of people willing to buy generics has gone from 55% to 65% over the last several years. >> thank you for coming in. happy holidays. >> thank you very much. and our special guest host jeffrey lacker joins us to talk about last week's decision by the fed. also a special milestone for the federal reserve. "squawk" reserve is next. mine was earned orbiting the moon in 1971.

afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down

from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. (voseeker of the sublime.ro. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro.

today east special guest host jeffrey lacker, the fed insider talks taper reaction, the nation's economic growth, and the celebration. the fed turns 100. plus, the investing edge, predictions for 2014. this hour, the next episode for the media industry. and only two days left to shop. will there be a miracle on 34th street for macy's and the other department stores? "squawk" is the real deal, and it all begins right now. ♪

good morning and welcome back to "squawk box" here on cnbc. becky's got the day off. we're excited to spend the morning, though, with fed president lacker. but before we do that, we've got a round-up of the headlines. the big one being that apple has announced a long-awaited agreement with china mobile to sell iphones through the world's biggest network of mobile phone users. the deal could add billions of dollars to apple's revenue. and what do they say the market size is? 750 million people. smartphones will be available starting on january 17th. china mobile will begin preorders on wednesday. separately, target suffering reduced customer traffic over one of the busiest shopping weekends of the year. "wall street journal" saying the number of transactions at target fell 3% to 4% this weekend compared to last year's final weekend before christmas. the nation's banks have been monitoring the situation, responding to consumers' concerns. on saturday, chase announced it was limiting effective debit

card accounts to only cash withdrawals of $100 a day and $300 a day for purchases using the card. and more on the financial industry's reaction in just a couple of minutes. joe? >> thank you, andrew. in other headlines, the "wall street journal" reports that paulson and company sold the mutual bank bonds last week. and this came after jpmorgan filed a lawsuit against -- against the fdic. >> oh, i see, if i go this way -- >> funny how that works. >> i did not mean to. >> all these cameras and things. >> i would never get in the way of your shot or take your time from while you're reading. i would not take your time. i'm doing that now. >> the lawsuit against the fdic, this is why they're doing it. seeking billions of dollars. so it doesn't seem like a good time to stay in that investment. and billionaire philanthropist, edgar bronthman has died.

he transformed his family's liquor empire to an international conglomerate. also known for fighting for jewish causes, he was 84 years old. let's get to our special guest joining us for the next two hours, jeffrey lacker. good morning, president lacker. >> good morning, steve. >> let's talk about last week's decision. are you happy that the fed did it? >> i am quite happy. i think the time was right, tapering was the right decision. >> would you have thought the fed could've done more, should've done more? >> more what? >> more tapering. >> i was in favor of tapering last october. but i -- i think given the data, given the way the committee positioned itself with the program, it identified labor market conditions as the key criteria. this decision was, you know, kind of a slam dunk. >> were you surprised that the market was quite so surprised by this decision? >> a little bit.

you know, the data swung one way over the summer, looked a little weaker than we thought going into the summer. and then firmed up in the fall pretty notably. i mean, that last report -- employment report should've sealed the case, i thought. >> we have, you know, this running argument here. the debate, discussion about is the fed at fault for the markets not hearing them? or are the markets at fault? where do you put the blame in this case? >> that's a subtle question. we go into a meeting. we retain the discretion to do what we want. you know, if what we're going to do is at variance with what markets expect, you've got to ask the threshold question. is it because the data came in a little bit different lip than the market thought or have we failed to provide them with enough of a road map with how we react to the data. i think there were times over the summer, september where you could have raised that question.

i think we did a good job coming into december. >> it should have been clear. >> the ryan/murray deal, did you think that had anything to do with it? >> well, it wasn't kind of the final straw, i don't think. >> it wasn't? >> but it sets a different tone. >> what about the decision not to? >> decision not to what? >> in september. >> decision in september not to. did that have to do with the upcoming fiscal battle? >> in some people's minds, that was a consideration. >> you mean people in the fed? >> i think so. the chairman alluded to it. it seemed like it was going to be -- >> it really was, right? >> didn't do anything, right. >> how much was the idea that bernanke's leaving have to do with it? >> nothing at all. >> you think zero? >> zero. totally. >> you think yellen would've done it on her own, too. >> yeah. total continuity. >> it's a little different than saying he's probably happy to be going out on these terms.

it's not a secret that he had hoped to end this during his second term and that come -- when he decided in december 2012 that he wanted to -- he was going -- the qe he was not going to achieve that goal. >> that's funny. you get conversation like this near the end of a chairman's term. they want to accomplish this before they go to that, before they go. i think he wants monetary policy to be done the right way. at all the meetings he's at. and this seemed like the natural decision at this time. whether he's leaving next month or not. >> let's talk about next year, jeff. the current assumption in the market. they immediately created spread sheets on this. that there's this smooth glide path. $10 billion gets lopped off, tapered every meeting. and you end up doing about $460 billion of qe next year, no small amount -- >> no small potatoes. >> if you were announcing a $460 billion program from scratch, people would get excited.

is that your assumption of how things go next year? >> the chairman was clear at the press conference, that would be your baseline. but i think you have to consider the door open to us pausing. if the data comes in a little weaker than we thought or, you know, accelerating if the data comes in stronger. for me, if you look back over the last year or for that matter for the last three years, you see all these swings in employment growth. and you see this little bit of jaggedness in how the unemployment rate comes down. you don't want to overreact to the swings because you're going to get them. and for me, it would take a substantial break in the time series to get me to want to -- i think we ought to pause. but different people have different thresholds in mind. >> and the parameters are what. if things are going really hot,

ten being a median point between zero and 20, is that a way to think about it? >> a natural way to think about it. >> that's what i think about it. >> what are the fed going to do this time around? talk about the funds rate, though. there was another really important part of the statement, which was this promise to keep rates lower for longer at 6.5%. how controversial is that in your mind? are you a supporter of that? >> so i've been a bit skeptical about how strongly we've dialed up the forward guidance. but this is an enhancement to what we had before. we had the 6.5% threshold in there. this provides a little bit of information about what's beyond the point in which we get 6 1/2, which could be as early as second quarter at the pace we're going right now. this provides just the gentlest push against what interest rates right push past that. >> that's an interesting point. you could have gone further.

you could have given us another point. said we're not moving until the unemployment rate is 6%. what's the rationale behind that? >> this is a move that ties us down a little bit less than letting out a marker in terms of numerical employment rate. the 6 1/2 is viewed as, you know, something we laid out there. and you don't want to yank it around down or up from meeting to meeting. >> you all decided that if we're going to taper, we need to -- did you sit there and say, listen, let's start emphasizing the fed funds so we can do the taper? everybody had the same message. it was almost like, i thought it was kind of, i don't know, it was so obvious, right, the way you shifted. there's a conscious decision we are going to shift public attention away from taper to prove we're not tightening by going down $10 billion. and it got to the point i

thought, wow, this is kind of embarrassing. i guess i really need to be hit with it again and again to get the right message. >> yeah, there was a lot of concern about the relationship in the spring between tapering talk and pulling the interest rate forward. a lot of people want to push back on that. i think there's limits to how hard we can push. >> it was a concerted pr effort. >> interested in clarity about what -- >> communications is a -- >> one more question, which has to do with communications. are you -- a believer in this promise that the rate will be kept low seems like through 2015. is that your forecast for where the funds rate is? >> yeah, in my submission, i put early 2015 where i think the funds rate will lift off. that's something that could change a lot. >> so you're about 12 months earlier than the median on -- >> yeah, a little earlier. >> i'm guessing you have one of those higher ones in terms of

2015. >> yeah. i'm the third dot from the sun. >> that's what i thought. what's your number? you want to give me your -- explain this -- i can look it up now. now that i know you're the third dot from the sun. they give you this picture of where each fed member believes the fed forecast will be. >> right. >> in each year. and jeff is telling me he's the third highest of all the ones that are there. >> third rock from the sun. >> give me a second there and i'll give you the number. let's go to break and i'll tell you the number afterwards. why at least 2 million chase customers face restrictions. >> 2%. >> there you go. why those chase customers could not withdraw at some atms or spend at stores.

welcome back to "squawk box" this morning. target offering a 10% discount over the weekend to try to lure shoppers into the stores after that massive data breach. some banks also taking some action. and kayla tausche joins us with more on what's happened over the weekend. kayla? >> normally a quiet time for the banks. a lot of the executives are on holiday. a lot of their public relations people are taking their vacation. but banks have snapped into action responding to millions of customers whose credit and debit card data were stolen from devices at target's cash register. some of those customers using target red cards. that activity has fallen over the weekend. according to chase, just under 10% of the customers were at risk. you can see the scale of these institutions and people who were actually affected. most of which sent out statements this weekend, similar to those of citigroup which reiterated this. we want our customers to know they are not liable for any

unauthorized use of their accounts. the key, let your bank know as soon as possible if you spot fraudulent activity. they're combing through purchases looking for things that customers may have missed. target has said it believes very few customers were actually victims of fraud, but website that broke the news last week said the account information is already being sold on the black market. you better believe banks are stepping up security to limit what they'll be on the hook for. they've suggested customers replace any cards that could have been compromised, change your account numbers, get brand new stuff. especially now that information in the magnetic strip like account expiration, security code and possibly even pins, they're not ruling that can be bought. banks haven't ruled that out yet. they're also placing limit on accounts. chase has a $100 cash limit and $300 purchase limit. if you were one of the cards used at target during that time. citigroup has blocked some cards from being used altogether. target has accepted responsibility. they'll ultimately bear the cost of this breach. discount has weakened sales and

the costs, of course, from this will keep rising. lawsuits already coming out. >> when you say that target is going to ultimately bear the cost. if jpmorgan -- if there's fraud on my card at chase, jpmorgan then sues target and target pays? >> it depends on what we find out about this situation. i think there could be lawsuits from some of these banks if there was found to be some internal lapse in security at target. then why should the banks be on the hook for something that was ultimately a security lapse at target? i don't think we've seen the end of this just yet. now, banks right now are trying to stem what they'll actually have to pay. the limits on those cards. i know you're outraged by this. >> i have another question. i always thought with a debit card, unlike a credit card, a debit card, you have to put in your pin number. >> right. >> so how is it they would have the pin? they're now storing the pin number every time you put your card in? >> target has not said anything about the pin numbers. they have said something to the effect of we don't believe those are at risk.

but the banks have told me we have no guarantee they haven't been at risk. they're recommending the customers go for the credit option because it takes a day or so to actually process that payment. so if there is any fraudulent activity you can stop it before it hits your account. >> no, my outrage is the idea i thought the bank was on the hook for whatever's lost on my credit card or debit card to begin with. so if my card gets stolen, they're paying, right? >> they are. >> they are. and so the idea that on mass they are cutting off millions of consumers from being able to use their cards makes -- raises a lot of questions about what happens if there's something worse happens in the world. >> raises the question of what they're aware of and to what extent they have the right information to allow customers to make these purchases. many of the executives i talked to said they found out about this about the same time the public did. for people with millions of customers using these cards and trying to understand the extent to which they will have to pay and working with these

customers, i just don't think they even know the scope of this. how could you possibly say? >> can we ask if this is a regulatory issue? you regulate with some of these issues. is this something you pay attention to? >> i'm not deeply involved in the regulation of the consumer side stuff. i know that banks routinely -- they have fraud detention algorithms. and when something pops up that makes it look like your card was compromised, they'll cut it off. and it's a legitimate risk -- >> it's absolutely legitimate. what's less clear in this case, because they've done it across the board, right? the problem is if i'm traveling within -- if i'm with a chase card and i'm traveling, i can't even get cash anywhere. >> they said you can get cash from a branch, obviously, and more than a third of their branches were open yesterday, actually helped customers -- >> in the united states. >> if you were traveling, you're done with. >> right. >> i'm saying, to me, if the

algorithm spots your card as being a problem card, i totally would be okay with them cutting my card off calling me, telling me there's a problem with my card. but to do it across the board, it makes it complicated. >> if it was just your card, based on information your card got compromised. now the information -- >> not for every single chase customer. granted, it's a large percentage of them that shopped at target during that period. >> they'll be replacing those cards within a week or two. >> they're recommending everyone do it across the board. >> thank you, kayla. appreciate it. coming up, predictions about what to expect in the media business in 2014. "squawk box" will be right back. and this will be your premium right here.

sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. love this guy. okay, does it bother anybody else that the mime is talking? frrreeeeaky! [ male announcer ] bundle home and auto and you could save 760 bucks. alright, mama, let's get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. state farm. the ocean gets warmer. get to a better state. the peruvian anchovy harvest suffers. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist...

who studies the peruvian anchovy. invested in the world. bny mellon. all this week, we're looking ahead to the 2014 and what you need to know to make money in the new year. joe has already just told me during the commercial break, if i say the word -- get a little snap. we're kicking off our series with julia boorstin's predictions for the media sector, how did julia do back in 2013? media giants will invest in web video as marketers look to dvr proof ads.

she was correct as traditional media bet big on digital content this year. new partnerships were made. and hulu kept by the media giant owners. and then there will be distribution awards. she was also correct. netflix stocks soared this year on the original content success. microsoft continuing to invest in that space, as well. finally, the music industry will get its mojo back. this was also true, apple's itunes jumped. i don't know about that, radio jumped into the game to compete with pandora and spodify. what does she have to say about 2014. media companies are heading into a year of massive change, for the cable industry, that means consolidation. facing growing competition from satellite tv and streaming video services, time warner cable comcast and charter are looking

for better negotiating leverage. that'll push mergers. including discovery and amc. media giants and tech titans are headed for massive convergence. the most anticipated show premieres won't just be on tv. amazon and microsoft competing with their originals joining netflix for premium content. media giants will embrace new technology. those who pay for tv can watch whatever wherever whenever. at the box office, get ready for a lot more super heroes and a lot less of everything else. there'll be fewer big-budget movies. but those that do get made, sequels and familiar brands will be bigger than ever. and aimed overseas as china and russia's box office explode. at the other end of the spectrum, smaller films will find new distribution, skipping theaters and going straight to consumers on demand. >> julia boorstin live from los angeles this morning. good morning.

>> good morning, andrew. >> so what do we think the biggest deals will be this year? >> i think it's all about cable. and i think it all comes down to john malone and liberty media. controls 27% of charter. and so i feel like we're going to definitely see some deals. i know he'd like charter to take over time warner cable. whether or not he can make that happen, i think we'll see some john malone-related cable deal this year. >> do we think there's the possibility of a tech company partnering up or merging with an old line media company? >> you know, it's possible, but i think what we saw this year really didn't play -- we saw intel try to move into the sort of tv distribution space. i thought it was interesting intel weren't trying to break up the bundle. and at the end of the day, it didn't work. trying to sell off all of those assets it created to sell pay tv. i'm a little more skeptical about that. certainly google, apple, they

have the resources, but i don't know if it would really go through. >> how about the bezos buying the "washington post" type of deal. are we going to get more of that? where the guys after making all the money go back and now buy the content that's depressed in price because they distributed it for free? >> absolutely. but i don't think bezos is necessarily looking to turn a big profit from that. we have to remember it was bezos that bought "washington post" not amazon. this was a passion play on bezos' part. seems he wanted to save the newspaper and make sure it maintained the journalistic integrity and independence. maybe more billionaires want to help the struggling newspaper business. very possible. >> wanted to do it to deliver it with a drone, the washington post. >> that's an idea. >> it would never happen. >> if anyone gets the paper version, it'll show up at your doorstep by a drone. >> all right. coming up, the stories likely to drive this holiday

shortened week. we're aig. and we're here. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays.

welcome back to "squawk box" this morning. in the headlines, we're about an hour away from the first economic reports of the shortened trading week. november, personal income and spending figures, they're going to be coming out at 8:30 eastern time. economists looking for a jump of .4%, personal income .5% for consumer spending. also, long-time rumored deal between apple and china mobile is now official. world's largest mobile carrier will begin offering iphones to customers. that starts on january 17th. terms of the agreement, though, were not disclosed, and big questions about whether the company's going to be subsidizing those phones. the latest proposed contract on january 3rd. boeing's first offer had been rejected by a 2-1 margin. it was designed to keep production in washington state. when it was rejected, boeing said it would look around for other locations. it is time for the holiday

version of our monday morning trading block. joining us now from new york is boris, bk asset management managing director. and steven shork, editor of the shork report. and that is not a stork as we always say. i thought it was a rating agency. boris, i said i'm waiting until the euro is at parity of the dollar. >> it's really not happening. i think the conventional wisdom here is the euro should've come down off the taper news and it has not. i think part of the reason, end of the year portfolio flows, still a little bit of money chasing invest. and maybe skewing the flows for the time being. when you have fundamentals going one way, you have to trust price action. it has a reasonable chance to go

to 1.40 and surprise a lot of people and squeeze out a lot of shorts before it takes the innatural turn to the downside. too many people leaning -- >> maybe you're right, maybe when it got down under 1.35, we knew there was going to be a taper now predicting improvement in europe eventually. >> that's true. they're also betting on the fact that the euro zone starts to recover and it's going to attract some flows. but i still think longer term euro has to weaken a little bit. if nothing else, if it goes to 1.40, it's going to stifle the recovery. >> and the yen. they're never going to taper, right? >> who? the japanese? >> if i say yen, that's usually who i'm talking about. yen, why yen? the yen's at 103, isn't it? >> almost 1.04. and it got a little bit -- came off a little bit because u.s. yields came off a little bit. i think 1.05 and possibly 1.10.

there's a clear delineation. this seems to be the cleanest trade of all in the currency market for 2014. >> all right. steve, i'm going to talk to you about oil. i hope i don't confuse by -- >> no, no, no. comes from the ground. >> i'll tell you my overriding question about 2014. when do we see per btu, you can get natural gas so cheap and oil still so expensive. when does that -- is that always going to be like that from now on? or will we eventually see something go down or go up and where it gets, un, more equal? >> well, we are killing so much alternative energy towards natural gas. that is, we are killing the coal industry, we're killing nuclear industry. and we are steering a tremendous amount of demand towards natural gas. yes, down the road, no one can tell you realistically it's going to happen, but the significant major rally in natural gas is going to now and

what has been happening over the last two years is that high oil prices are actually bearish for natural gas. because natural gas at $3, $4 which is where it's been trading, no one wants to produce the dry natural gas. the gas that's actually in that gaseous state, the methane. what you do want to do, however, when you have oil prices so high, the liquids within that natural gas stream, the propane, natural gasoline, so far are so expensive that to a point the methane, the actual natural gas price doesn't even matter. so you still get a lot of what's called associated production, taking that natural gas out while you are drilling for a crude oil. so in the near term, no, you are not going to see parity. right now, natural gas is trading at $30, barrel of oil equivalent and below. you will not see that parity. but eventually, down the road, who knows, four, five years down

the road, we're going to get a significant rally because we are steering so much demand towards natural gas and we are killing. when i was managing a book for utility, we had the option to run a unit off of coal, off kero, or natural gas. now the units can only run off of natural gas. so when you steer demand only in one direction, eventually something's going to happen to supply and something's going to happen to demand and it's not going to be a positive if you like buying cheap, natural gas, it's not going to be a positive. >> oil trades on its own dynamics, basically. you can't short oil because natural gas is $4 -- you've got to buy natural gas. how long can you go out to buy natural gas? >> oh, absolutely. i'm telling clients who are hedging there's active markets out in 2016, 2017. if every time natural gas, and it will get back below $4, now we're in a significant rally because of the winter. every time this mark gets below

$4. if you are not hedging your long-term needs down the road and you can do four, or five years out, then you don't belong hedging and do not belong in the position you're in. >> okay. it's complicated. i mean, i would think -- >> well, bottom line -- yeah. bottom line is you should not be trading oil and natural gas as if they work in tandem. they do not. that is the easiest way to lose money. they're completely different animals. oil is a product that you take out of the ground, you refine it. >> if you were like green rabid renewable guy, aren't you worried about all the different stuff with so much natural gas? >> oh, absolutely. and this is why what's called the birkenstock wing of the political parties are so antinatural gas. the environmental movement loved

natural gas because they viewed it as a bridge fuel. >> now it hurts the development of all the stuff they love so much, right? >> absolutely. so now they've turned their focus on it. >> we've got one with us. boris, speaking of birkenstock crowd. do you want to respond? >> i was going to ask you -- >> have you gone to the tesla dealership at garden state mall? >> no, i've seen them around. >> have you just sat -- it is the greatest car ever. >> so what? you use the natural gas to fire up the grid. >> as long as you get the non-self-come combusting model. >> if you sit in that car, you'll become a believer. it is gorgeous. the girl said to me -- >> what's that got to do with wind and solar? >> nothing, nothing. >> it's got to do with using natural gas to fire up the grid to charge your car. >> just has to do with taking us

off gasoline and polluting the world. that's it. >> okay. that's all. >> have you checked out what goes into the batteries? >> i'm sure it's just as bad. i'm not an expert enough to argue on both sides. >> it could be arsenic and uranium as long as it's not co2, that poisonous gas. all right. thank you, boris, and thank you. it's called carbon now. you can't say co-2. you've got to conflate it with carbon. >> it's so warm. 70 degrees. >> you haven't seen any snow this year, andrew? >> i saw snow before that. i don't know. >> how do you explain one warm day? i don't know, it must be the carbon. >> i don't know. >> question is where joe ranks climate scientists relative to economists. >> economists. >> any day. coming up, 100 years ago today joe was born. no, president woodrow wilson

signed the act creating a central bank in the united states for the first time since 1837. up next, we celebrate with the centennial with a special guest. and top of the hour, we're on washington watch a closer look at the issues facing our nation's capital and the economy. "squawk box" coming right back. (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates.

[ male announcer ] if we could see energy... what would we see? ♪ the billions of gallons of fuel that get us to work. ♪ we'd see all the electricity flowing through the devices that connect us and teach us. ♪ we'd see that almost 100% of medical plastics are made from oil and natural gas. ♪ and an industry that supports almost 10 million american jobs. life takes energy. and no one applies more technology to produce american energy and refine it more efficiently than exxonmobil. because using energy responsibly has never been more important. energy lives here. ♪

♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy.

welcome back to "squawk box." there's a new release date for "fast and furious 7." productions were delayed due to paul walker's death. star vin diesel shared this picture and then he wrote, the last scene we filmed together, it was a unique sense of completion of pride that we shared in the film we're now completing. the magic captured and in just how far we've come. "fast and furious 7" will be released april 10th, 2015. p.s., he'd want you to know first. >> other hollywood news.

>> ellipses. >> is that what those were? >> yep. >> "the hobbit" taking the top spot with $33.5 million. will ferrell's sequel made $26.8 million over the three-day weekend and made $40 million since opening on tuesday night. >> okay. the federal reserve is celebrating its 100th birthday today. we don't have any -- what have we learned from the last 100 years. and what might fed policy look like over the next 100 years. i've got a lot of questions. our guest host this morning, jeff lacker. also joining us now is charles kalomarris. he's also the co-author of fragile by design, the political origins of banking crises and scarce credit. and it's scarce credit. and there it is. i have a question, given where we are, and i always like -- i get a royalty every time i say

the word too big to fail on this set. here's my question, for the past five years post this crisis we've lived through, we all talk about an effort, at least in washington to end too big to fail. i have argued that ever since the fed was created, by default, we have acknowledged that, you know what, we need a backstop for system and by default that creates unto itself institutions that may be too big to fail and that trying to somehow make too big to fail the end goal is the wrong goal. >> i think that's a misconception that our creation necessitated too big to fail. one of the misconceptions is what things were like before we were around that financial markets were all unfettered free markets and that -- and that things were inherently fragile and that demonstrated the necessity of the federal reserve as the government backstop.

it was far from a free market back then. there were regulations that messed things up. and the panics we got stand in stark contrast to other countries at the time that did not have panic stricken banking systems. >> but you don't think the moral hazard created by the backstop unto itself creates this sort of larger issue? i'm not saying it's a problem. i'm saying it's the reality. >> it depends, of course, on how you structure the assistance. and it also depends on working backwards politically to ask the question. will the government and the federal reserve allow bank to fail? when the federal reserve was created we didn't have big banks in the u.s. and nobody had in their mind that the federal reserve was in the business of preventing banks from failing. in fact, a lot of banks failed even after the federal reserve in the 1920s. it was very common. and the 1930s, of course, massive numbers of banks failed. the federal reserve conceived of

itself in those early years, certainly, and i would say even today as preventing from failing. >> isn't the big issue right now that what we know is the payment system, the way that money gets around the country is effectively a public utility in a sense that the fed is desperate to make sure that people can go to the atm and get their money out or send money across the country but that public utility is effectively in private hands. and that was not the case when the fed was founded. >> well, the payment system was definitely in private hands when the fed was founded. in fact, checks clearing through the payment system didn't even clear at par across banks within the payment system at the time of the founding of the fed. and the payment system, and still today, there's a part of the payment system that the fed doesn't control, interbank clearing. it is true that the fed is very important as part of the payment system and that the fed's ultimate backstop can be extremely important for preserving that utility. >> right. >> we saw that on 9/11, for

example. but the private markets have been able to create payments through a variety of things. >> the essence of too big to fail. if a large bank went down, what happens to the payment system in that situation. >> it can be a problem. certainly, you know, the committee on banking regulation was actually founded as a result of an international payment system problem. so it's clear -- >> the german war reparations, right? >> no, i don't think it was the german war, maybe i'm missing something. but what was the name of that bank? >> yeah. clearly the payment system is a crucial part of what we mean financial stability. but i would say even during the panics that jeff was talking about earlier, even during the panics that we had in the u.s.

prior to the founding of the fed, when banks had to suspend convertibility of their deposits, the payment system was still functioning. >> is your contention that the fed it's overstepped its bounds here? >> no, i'm not saying that. i'm saying the payment system is more robust than you think. >> in 100 years from now if we were having -- the 200th anniversary. look back at what's happened. not in the past five years, in the last two years in terms of all of the money, the multiple qes, what would the next 100 years look like? >> that's a tough one. let me say this -- three volume history of the fed and tried to assess overall how well has the fed done and what did we learn from that over the next 100 years? the fed's main objectives are price stability and financial stability. and if you look over the next 100 years, there are only about 24 years where it's achieved both. why? well, it's a combination of

unfortunately political pressures exerted on the fed leadership at times and also bad models. the worst thing for the fed has been not just political interference but also errors in thinking, which we now in retro spect -- >> jim grant was on our set last week and said the problems, you've got a bunch of guys sitting around setting interest rates for the economy. why not let the market set the interest rate for the economy? >> well, i'm not sure what he means by that because ultimately, i don't see how you get around that, jeff. you have to set the interest rate because, for example, the interest rate contains inflation expectation. >> that's unavoidable. he'd like to go back to something commodity based like gold for the fed that did take care of things. we know the disadvantages of that system. we know the volatility in parts to the price level that maybe evens out over time. but in the short run can be just much more of a problem.

someone's got to control it. on a uh couple of forms of money we have. someone's got to manage that. and since the '70s, since we went off the gold standard, central banks around the world have struggled to do it. some really strange situations, situations we didn't anticipate. we learned sometimes we've got it right, sometimes we've got it wrong. >> at least the economists see the facts. >> they want to get it right. >> there are people who don't want to get models right. >> but you have the same thing where people get married to the previous ideas and takes a long time. but there's the argument you can go too far in setting the market rate. you are -- >> wage price controls of any

kind. >> we got it wrong in the '70s because of the types of political pressures. got it wrong in the 30s. >> bernanke said he was most proud of not responding to political pressure, right? >> well, have about six minutes, that's good for first 100 years of the fed. >> thanks for joining us. >> charles has written some fabulous papers. >> he's going to cut back 100 years -- >> before that he'll be back. >> very understandable papers. coming up, guys. >> paul volcker among others has gotten behind the single mandate idea and you may see it change. i hope that we get to a single -- >> just price stability? >> right. >> we should talk more about -- >> okay. coming up, much more from joe kernan and jeffrey lacker. and later, automakers coming off a strong 2013. phil lebeau will join us with a look ahead at the auto sector in the new year.

up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break. tdd#: 1-800-345-2550 trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms

tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading.

welcome back. let's take a look at stocks to watch. darden shares are getting a boost this morning. disclosing a 5.6% stake in the chain. says darden is in its words deeply undervalued and

represents an attractive investment opportunity. dardenannounced plans to spinning off red lobster. arguing the plan falls significantly short of actions it thinks are required to maximize shareholder value. and tiffany must pay swatch $449 million in damages over a failed joint venture to produce and market watches. i could have told them, you know, early on tiffany and swatch are not compatible, are they? the order coming from a dutch arbitration court. cutting the full-year profit outlook. where's your watch, dude? >> long story. broke. >> no? >> yes. we can talk about that during the commercial break. it's a long -- >> you look naked over there. >> i don't have a watch on. i'll -- i'm hoping to get it back. >> no. >> i know. that's why it's a longer story. >> the band broke? >> no.

the actual mechanics of the watch. we've got to go to a break. maybe when we come back, we can tell everybody about my watch problem. >> i'm shocked and mortified, andrew. >> it is a good excuse why we keep missing all the tease times. >> we haven't in a week. believe me. coming up, what you can expect from washington in 2014 from the next steps in obama care to the next debt ceiling showdown. we've got all the issues that matter to your money. and then later, when you think of miracle on 34th street, you think of macy's. we take a closer look at the retailing giant. it's all coming up in the next hour of "squawk box." accounts? that's right, no hidden fees. it's just that i'm worried about, you know, "hidden things." ok, why's that? well uhhh... surprise!!! um... well, it's true. at ally there are no hidden fees.

not one. that's nice. no hidden fees, no worries. ally bank. your money needs an ally. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this? natural gas. ♪ more than ever before, america's electricity is generated by it. exxonmobil uses advanced visualization and drilling technologies to produce natural gas... powering our lives... while reducing emissions by up to 60%. energy lives here. ♪

afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families

is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. this hour on "squawk box," the fed insider gives his thoughts on the taper timing. find out what else jeffrey lacker has to say about the nation's economic condition. plus, the investing edge, predictions for 2014. this hour, the road ahead for the automakers. and -- >> santa's coming to town. >> santa! oh, my god! >> do you believe in santa claus? we're searching for the next miracle on 34th street. will macy's provide the retail magic this christmas?

>> if the united states of america believes this man is santa claus, this court will not dispute it. case dismissed. >> "squawk box" begins right now. ♪ >> welcome back to "squawk box" here on cnbc. first in business worldwide. i'm joe kernan along with andrew ross sorkin and steve liesman and richmond fed president. >> it's an awesome town. >> it is. >> it just made -- i've been there, i was at the richmond fed. >> you need to visit -- >> the restaurants. i have good things to say -- >> while you weren't looking, richmond became cool. >> a lot of cool restaurants.

>> great restaurants, great art scene. and we're celebrating the sesquescentenni sesquescentennial. >> that's 150. >> awesome. >> and i saw these big news articles written on jeffrey lacker. and i said, wow, oh, this guy. anyway -- kidding. but we are getting a lot of hits from what people -- >> well, people care about what jeff has to say. >> first, though, before we talk to president lacker. >> apple has signed a long anticipated deal with china mobile to sell iphones on the world's biggest network of mobile phone users. iphones will be available starting january 17th. although the company will begin taking orders on wednesday. the deal gives apple the ability to compete for china mobile's 750 million customers. that's twice the size of the united states. i guess, right?

or more than twice the size of the whole u.s. population. on today's economic agenda. spending data for november, that coming up at 8:30 eastern. income seen rising by .4% while spending is expected to increase by .5%. and we're watching shares of facebook today. the social media company added to the s&p 500 after friday's close of trading. begins trading as part of the index today, andrew. >> we've got another story -- did you see this piece on the "wall street journal." goldman sachs real estate play is said to be skirting the volcker rule. the rule prohibits banks from owning more than 3% to hedge fund or private equity portfolio. the journal reports this. they say goldman sachs told the investors it would contribute up to 20% in a new fund that makes loans backed by office buildings, hotel shopping centers and other properties. that's because regulators excluded real estate loans from the restrictions on investment funds. goldman sachs reportedly raised more than $1 billion for that new fund wants to bring that total to $2 billion. did you find -- are you upset

with that? >> the story is goldman's complying with the volcker rule. is that what you're saying? >> sort of. i didn't understand the piece. >> well, the question is, by providing a fund -- it's a fund of loans effectively. >> so i'm not -- first of all, not close to the matters is the regulartorial issue, but the story made it sound as if they're doing something perfectly legal. >> it is. >> but the way it was read made it sound like they were skirting. >> i was only reading the article. i was reading the article. i was not -- >> get a close-up of the space under andrew's armpits right now for the sweat that is coming out as it -- >> you know what, let's talk some politics. >> capitol hill seems to be starting 2014 on the right foot when it comes to a budget deal. can washington compromise on the debt ceiling by february? joining us now, michael feldman. you work for clinton but you're

a democrat. let's cut to the chase. i'll tell you, michael, i want to talk to you initially about -- for a minute we did feel like pretty good about patty murray. a little bit. we knew it wasn't huge. but we used the word bipartisan which i'd never seen before. i had to learn to pronounce it. is it going to be a little better this year? is it saying it's going to be all executive action? he's a slash and burner that isn't going to compromise at all with congress. >> i think it'll be better and feels like the era of showdown politics is over because both sides were getting singed with that and saw the diminishing returns on rushing up to every deadline and forcing us into a shutdown. but i also agree that one reason why he was brought in. >> if we can't get congress, we're going to -- >> look, he understands how the agency process works. he understands the full value of

executive authority. and he also, there's a lot of people working on health care right now. he's focused on the other portfolios and trying to move things. >> that was going to be the other part of my question, phil. all of this is going to take place the other stuff we do and none of us know we saw manchin. he may switch parties some day, do you get that feeling? >> yes -- >> he's about as close as you can get to being a republican and still be a democrat at this point. but he said this, obama care, he says this -- this is crunch time. about whether it actually, you know, exists as it is or impl e implod implodes. >> he's not alone. there are a lot of isn't the democrats who have the same exact thinking. and you see -- >> not just about their own election. >> politically, manchin is from a state where we're likely to see a switch in the u.s. senate next fall. >> are there liberal democrats worried? >> liberal democrats probably

less worried. and frankly republicans have been beating the drum saying, look, this is going to be the dea thing we hang our hats on. one of the misnomers is that the republicans should beat the democrats on obamacare all yearlong and that will result in success. >> we didn't see much deterioration from november to december. >> a deterioration in what? >> in attitudes about obama care. >> already a 60%. >> it was -- it was -- >> on the bill. >> very little change. >> i saw that poll. i thought it was very interesting. people still believe in the benefit, they're highly skeptical of the plan. >> they don't approve of it. >> the question is over time to phil's point. does it work or not? it's a moot point if it doesn't work. >> you don't know if it's going to work. >> i don't think anybody knows if it's going to work. there's cause for optimism, right. 1 million people have signed up. >> how many have lost?

>> a small percentage have lost and -- >> really? >> yes. >> there'll be more people covered at the beginning of the year than -- >> we showed, joe. >> and if you're one of the 100 million people who now have -- the cost of preventive care is going down, one of the 17.1 million kids who have preexisting condition who are now either covered where they were denied coverage before or their costs are going down, then you support this. and over time as people get it, if they like the benefit, it will rise in popularity. and then taking it away completely repealing it becomes politically dangerous. >> for the flip side, you have a senator like coburn going on shows yesterday and basically encourage people to essentially take the backstop around the system by claiming catastrophic, you know, kind of impact. and then you have the composition of the overall pool ultimately deteriorate and i think this thing will fall apart. my message to republicans i work with 2014 from a political perspective, do no harm here.

we can frankly stand back to some degree and watch this thing deteriorate and watch our tone and rhetoric and don't fall trap to the dumb things we did in 2013. we can get something for the debt ceiling, but we can't do it with rhetoric and tone that's going to impair our ability to connect electorally. they look pretty good for republicans. >> you just signed your name right and you win votes if you're the opposition party. >> president at 41% approval. that's historically, you're seeing massive shift of political real estate. we don't have massive amounts of political real estate in the house and senate available. but we can win the senate in large part, i think, by doing no evil. >> yeah. >> and the real question in terms of electoral success in 2014 is does the tea party candidates in some of these key electoral battleground states have an impact in the general election? or defeat some of these moderate republicans? do we take it to extremes so they lose their seats? >> i agree with phil. that strategy is better than,

you know, go to the barricades, repeal at all costs, make obama care the single issue -- >> i'm going to say that 2014 is the year where the quote, unquote establishments put down the insurrections of the right. you look at a state like mississippi. i think mitch mcconnell makes it through the primary, john cornyn makes it through the primary in texas. some of the messaging that came out of the leadership in the congress was a real clarion call to a lot of us. let's figure out how to grow this party. >> back to where you started, joe, i think the single biggest dynamic, important dynamic to come out of that deal that ryan got was boehner drawing a line in the sand with the tea party right in its own caucus. >> is that a line in the sand to put your hand over and it'll

disappear next time? >> if boehner does not get control of that part of his caucus, they make this an insurrection. >> i don't think -- >> there's no such thing as control of the house. >> can we get predictions from you guys? senate? >> senate. >> for '14. >> yeah, senate in '14, up one short. >> one short. what does that mean? >> 50, 48, 2. it'll stay in democratic hands, and by the way, it doesn't really matter. we're talking about a handful of seats you need to get anything done, democratic majority or republican majority at that gap doesn't really -- >> we're leaving, but the journal opinion page, obama's misguided obsession with inequality, used statistics that ignored tactics. robert grady, why listen to him he's a private equity firm dude for cheyenne capital fund, also

the chief economic adviser to chris christie. >> also, grady was the director of the omb director. and i believe the administration, a key adviser for christie. >> can you promise me i'm not going to have to do another debt ceiling. we're going to pass that thing. no big showdown? >> it'll get done. it'll get done because if the shutdown didn't happen for the same political reasons, right? nobody wants to go through that again. they're not going to put us through that. i don't know, i don't know. i think it's not -- there's not going to be a clean bill. the president starts this off on the wrong foot with the ultimatum. the leadership is saying an exact different thing. steve, i hope you have that luxury. >> if i have to do that story again. >> i think that's likely we're having horse trading around that and it's going to be significant around tax reform, tax extenders. a lot of taxes expiring that matter to a lot of senators. the good news is, i think the budget could probably get done at the beginning here. and after that, who knows.

>> thank you, guys. i've seen -- you do boring stories no matter what. it never bothers you. never turned down a boring story. >> the false drama of the endless fiscal cliff debate. >> you act like you can't do that. >> i will do it. it's just repeating -- it's like bill murray in -- >> "groundhog day." i've got you baby every morning. coming up -- this is not going to be boring. jeffrey lacker on the state of the economy and much more. and later, "miracle on 34th street." joining us to talk holiday retail and macy's in particular. what's ahead for the department store in 2014? should the stock be in your portfolio? and as we head to break, check out the "squawk box" market indicators. clients are always learning more

to make their money do more. (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates.

welcome back, the imf raising the forecast citing positive economic data and signs of compromise in congress. imf managing director on nbc's "meet the press."

>> most people who invest who hire will tell you that they are uncertain. they were uncertain because seeing a budget deal, seeing tapering by the fed, which is a sign of confidence in the real economy should lead them to invest to hire and to be more confident into the future of the u.s. economy. >> also praised the decisions of last week, described scaling back the massive monetary stimulus, andrew. >> let's get back to the guest host, jeff lacker. good morning. here's the thing i wanted to talk to you about. and we've sort of skirted around it. we were talking before the break, before you walked on to the set which is bitcoin. bitcoin. i want to know what you think of bitcoin. >> it's private money. they're going to have trouble gaining market share if its value's going to fluctuate so much. but it'll be interesting to watch. >> but what is the position of

the fed from a policy perspective if there is one? or what do you think the position of the u.s. government should be on bitcoin. or other virtual currencies. >> that's -- for what they're doing, it's a free market and i don't see why they have an interest in stopping it. at this point. >> i want to get to what you always do with fed guys. and you love their forecasts for gdp. >> well, yeah. because it tells you what they think about policy. >> i want to frame it in a different way. okay. so we got this deal. we got two years of budget. that's out of the way. but there are those that say, you know, health care reform was a question mark, tax reform's a question mark. we've had all this uncertainty that supposedly explains to some extent why this has been more tepid than past recoveries. people say it's because of the depth of the problems we have. the demand has not been there. what are we going to be able to

do? what can this economy do knowing that obamacare's still around, regulations not going anywhere any time fast. what are we capable of doing just with the bare minimum. can we do three? >> i do think uncertainty about marginal tax rates and government spending programs to vendors, you know, who supply to the government has been a dampening effect on growth in the last couple of years. and i do think that resolving some of that uncertainty will have a positive effect. but the effect might be minor. when i think about what's holding back growth right now. and we were talking before. i'm looking for 2.25%. if you look back for four years, we've had 2%, 2.25%. >> that's not ratcheting up at all, joe. >> you've got to start with households. they've been through the worst recession since the '80s. before that, they'd seen, you

know, steady growth two really mild recessions, not widespread job loss in those two minor recessions. and growth in their stock portfolios, growth in home equity and alike. now they've learned that the world's a riskier place than they thought. that's going to have a lasting effect on their willingness to spend. plus, you add on top of that the increase from the '80s through the 2000s in the availability of credit. that may be overshot a little. and i think we're in equal librium. >> 2015, 2016, you fed guys can go out years at a time. i've seen you make your fed fund thing. >> really what you're asking is what is the long run potential growth of the economy. sounds to me, jeff, you've brought it down. you don't think three is a natural state, you think 2.25%'s a natural state. >> participation, now i think it's being driven by demographic factors, it's the aging of the baby boom and others --

>> what happened to .75% of growth? >> well, you've just got a lot of things in the way of growth. >> i was planning on fixing all of our entitlement issues with 3% growth. >> no. >> i was hoping income disparity would come down because of 3% growth. none of this is going to get fixed at 2.25%. and they're going to make it worse. >> we've had stretches of time, five, ten years at a run with below par -- >> could be 10 or 15 years. >> not from now. >> we can't wait for this. >> you've already got five in the bank. >> five. so we've got ten more? >> and then you get on top of that, you have regulatory changes that came about over the course of the last five or six years that are still playing out and still -- >> do you think they've done too much, jeff? in terms of -- like -- >> i'm not going to render a judgment on whether they were

good or bad, but the changes take a while to play out. there's litigation. >> are they pressing too much on the banking system such that the economy cannot perform as well because of regulation in the banking system. >> that's a good question. i tend to think the credit finds a way to worthy borrowers, and that seems to be what we're seeing in the banking system. banks are falling all over themselves to lend to the ones that are credit worthy that are good balance sheet and good prospects. i don't see the regulatory burden that's seriously constraining credit availability. but it is incredibly costly. and it is a layer of overhead and it is driving, you know, a wedge in net interest. >> if you leave the fed and we sign you as a cnbc contributor, can we pay you in bitcoin? >> i'll decline. >> that was a great question. >> can i ask you one quick question? i know you've got to go, but you saw the certain banks are not

doing business with bitcoin related companies because they're worried they're being used for an account. >> well, my guess is, you know your customer and the type of, you know, regulations has to do with that. >> he's from the fed. the fed does the dollar. it's like asking a guy at macy's if shops at bloomingdales. >> ben bernanke wrote a letter, i believe to the sec or somebody publicly and said that virtual currencies are the future and we want to look into them. i know he's leaving -- >> okay. coming up, breaking news at 8:30 a.m. eastern, we're going to get personal income spending data. but first a special holiday edition of "squawk" booze news. a way to get home safely if you had a little bit too much eggnog in new york city. coming right back in a sec. g fot spark your curiosity tdd# 1-800-345-2550 can take you in many directions. tdd# 1-800-345-2550 you read this. watch that. tdd# 1-800-345-2550 you look for what's next. tdd# 1-800-345-2550 at schwab, we can help turn inspiration into action

tdd# 1-800-345-2550 boost your trading iq with the help of tdd# 1-800-345-2550 our live online workshops tdd# 1-800-345-2550 like identifying market trends. tdd# 1-800-345-2550 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to schwab.com/trading to learn how. tdd# 1-800-345-2550 sharpen your instincts with market insight from schwab tdd# 1-800-345-2550 experts like liz ann sonders and randy frederick. tdd# 1-800-345-2550 get support and talk through your ideas with our tdd# 1-800-345-2550 trading specialists. tdd# 1-800-345-2550 all with no trade minimum. and only $8.95 a trade. tdd# 1-800-345-2550 open an account and earn 300 commission-free online trades. call 1-888-628-2419 to learn more. so you can take charge of your trading.

and now a special holiday edition of "squawk" booze news. there's a new safe way to get home for those planning on drinking in new york city between now and new year's day. it's called operation red nose. two taxi drivers will pick up passengers who have been drinking. one will drive the passenger's car home, the other will follow in a taxi. to pick up the other driver upon arrival. the service is available

anywhere in the five boroughs. the price is double whatever the normal cab fare would be. the pilot program could be extended beyond january 1st if successful. to participate, here's the number to call, folks, 212-926-1111 and tell them you want to do operation red nose. >> do we have this? >> which is? >> which is rejecting. >> different than your normal daily routine, operation brownnose. >> very clever. >> we've got to go, breaking economic news. ♪

♪ ♪ ♪ [ tires screech ] chewley's finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. get the most extensive charting wherever you are with the mobile trader app from td ameritrade.

welcome back to "squawk box." november income and spending on the income we're up .2%, on the spending, we're up .5%. i bet you the retailers like that one. i would actually rather see the income do better. the spending's close to expectations. the income definitely is, you know, money light. we're looking for pretty much a synonymous read. there isn't any revisions to report. and i can look at the deflators month over month year-over-year. but really, i don't see anything glittering in there that's going to make you the viewer any better of a trader unchanged on

the deflator month to month. .9% on a year-over-year basis. markets, end of the year. let's see, equities are up and rates are firm. wow. lots changed in the last half a year, huh? so i fully suspect we'll see this stencil in place for a while. and, of course, everybody's talking about the representative at the imf on our channel talking over the weekend. you know, there's another organization where you bet the ranch on their forecast, well, you're probably shoveling your neighbor's driveway these days. back to you. >> thanks, rick. we've got -- jeff lacker, you didn't want to do qe-3 at all. so you got -- you want to throw a question at president lacker's way, rick, or no? >> no, no, i'm impressed he looks as good as he does after hitching his wagon to that unique group of individuals. and i totally am impressed with

all his dissension over the years. i think history will treat those dissensions pretty well. >> thanks. >> sort of. >> thank you, sir. >> all right. and let me ask you, while, you know, since we are going to talk to president lacker now. do you think there's any way that when history is written that we look back and we don't know how this is going to work from here on out. and you've heard people about messy exits and you'd have a loss on the balance sheet, et cetera. you think you'll be right in the end? that qe-3 caused more harm than good or more good than harm. >> for me, it's a matter of benefit and costs. and the costs are risks and it's the risk that we move too late and the risk that inflation pressures built more rapidly than they otherwise would if the balance sheet was too small. and -- >> do you still wish -- which makes me wonder if you don't think it help it had housing industry. did it help the housing market? >> qe-3. >> marginally.

but i think the effect on yields. my sense is that, you know, the estimates are bracket of fairly wide range. but my sense is that they're pretty small. >> would we ever know how much of the stock market advance was not based on -- >> would you have a feeling now about how much of it was justified and how much was easy money? >> it's hard to tell. i'd put my first -- since the first low yields is going to help in any event. and whether we're bringing about low yields or low yields are coming about for some other reason. the secular decline in real interest rates is something i think economists are going to be -- >> if we stay at 2%, it's going to continue, too. we're never going to get -- interest rates will never go up again. >> we might need to prevent inflation. >> do you think any of the income disparity has been exacerbated by quantitative

easing? >> it's hard to say. i don't know of any serious evidence. >> these guys think the qe helps the wealthy. >> you think? >> yeah. >> how does that work? >> the people that own assets get benefit from the asset bubble. and the people that don't get left further behind. they got $50,000 to put in cds and get interests on the cds. >> there's going to be distributional effects. >> like the effective interest rates. >> even when facts and data. >> i have to ask -- speaking of facts and data, i've got a question for you. proponents of qe on the committee, .2, interestingly enough, the way the market reacted to being surprised in june by the taper's schedule and then in september by the fact that the market -- that the fed did not taper. these big reaction in stocks and in bonds that said to them, wait a second, qe has been pretty effective at lifting up stock

prices and keeping yields down. how do you respond to that? >> those reactions are way larger than any reasonable estimate of that i've seen given what asset purchases on yield. it might have been at stake in the tapering talk over the summer. it seems outsized. i think something else was going on. yield got ahead of itself first half of the year. and just reverse course. >> moves in the stock market were minuscule and reversed within days. and, you know -- >> they did. but when economists like guys at the fed they look in the first two hours one other thing, inflation came in this morning. 1.1% on the, 0.9 on the headline

pricing index. one of the things you warned about was cost, and it's here. is that a mistake you made in terms of calculating? >> well, if you'd told me in early 2009 about how much we buy. what our balance sheet would look like, they would approach $4 trillion. i would have thought it would have induced some erosion of credibility. >> that the fed still has credibility. >> to convince people we were going to stick with it. and our statement in early 2012 where we said, look, 2% inflation's what we want. if you look, inflation expectation measures has been pretty steady, consistent with 2%. this deflection, this time we

spent below 2% is smaller and shorter than the time we spent above 2% in the middle of 2003. and that time from '03 through '04, '05, '06, you know, through '07, like '04 to '07, we had 3% inflation. and it didn't deflect us. didn't push us off the monetary path. >> would you do it -- would y you -- if you were king, would you make it a single mandate? at this price stability? >> i think there's serious advantages to that. i think the thing to keep in mind, it probably wouldn't make a big difference in the way we set interest rates. you picture a world where inflation's constant at 2%. real interest rates are going to have to change and so no, ma'am gn nominal interest rates. >> in the latest round, if all you were worried about was price stability, you could have justified the action the fed took anyway because there was no

inflation. but just the notion that every single job and every single bit of economic good news is orchestrated by the fed is such a huge burden to put on people that we don't really have -- and it also -- we didn't let a lot of things maybe clear, and maybe they would have cleared quicker if there was a little more pain when it happened instead of bernanke. i saw the look on his face. he just felt every bit of economic pain. and like he had to do something about it. that's too much for you to have to do. >> i think one of the drawbacks of a dual mandate is it detracts attention from the notion. and i think it's pretty well established that our effect on unemployment and labor market is transitory. >> but you still feel guilty when it doesn't work. right? >> there's philosophical economic differences that are out there that you can -- the concept is you can pick an inflation rate and all you can do is nudge the economy back towards the already chosen

unemployment rate. >> you love the fed orchestrates the entire -- >> i think europe has worse outcomes because it followed religiously the price stability mandate. that's what i think -- when i look at the performance of japan, europe versus the united states, i think the outcome was worse because of the single mandate. >> so, now, that's an interesting question, joe. if you go back and if europe has the right inflation forecast, does it come up with a better policy? what do you think about that? >> if who has? >> they were paranoid about inflation, ended up not happening, had they had a better forecast, would they have a better policy? >> in what sense would it have been better? >> ease quicker. >> ease quicker, i think they were tight for too long is my opinion. >> that's hard case to make. i'm not sure i see that -- >> you don't want to talk about europe's monetary policy, is what you're saying? >> i'm not saying that either. >> okay. >> we've gotten a lot out of you. >> yeah, we have.

>> you're still going to be offered that cnbc contributor job i talked about. >> you know, if you're going to pay me bit coins -- >> going to pay you bitcoins. >> we'll have more from jeff in just a moment. >> do you follow him every day? >> probably $400, $500. >> you didn't look? >> not today. we have deal news for you this morning, just happened crossing the wire. joseph a. bank, you're going to like the way you look -- >> no, that's the other one. >> they've rejected the acquisition proposal for mens wearhouse. joseph a a. bank's board said it significantly undervalues the company and the near and long-term potential. but i would suggest to you, don't hold your breath on this one. actually, hold your breath because you will be able to breathe again, these two companies will merge at some point very soon. men's wearhouse tried to buy

joseph a. bank and they're not happy about the price. it's called negotiation. phil lebeau goes under the hood of the auto industry. check out the futures right now. another santa claus is coming again today, up 83 points. >> why? >> why not? in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second trade execution, we route your order to up to 75 market centers to look for the best possible price -- maybe even better than you expected. it's all part of our goal to execute your trade in one second.

i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. at bny mellon, our business is investments. managing them, moving them, making them work. we oversee 20% of the world's financial assets. and that gives us scale and insight no one else has. investment management combined with investment servicing. bringing the power of investments to people's lives. invested in the world. bny mellon.

♪

this year's been a strong one for the auto sector with the s&p auto index up more than 28% to date. we've got phil lebeau with a look under the hood at 2014. >> reporter: 2014 in the airline business will be the year transcontinental flights become a big battleground between carriers. look for more flights to be added between major cities on the east and west coast like los angeles and new york. the planes on those routes will feature more amenities geared toward business travellers. speaking of inflight amenities, look for airlines to push new technology and new services that will let you stay in touch with others while you soar at 30,000 feet. anywhere from a few bucks to perhaps as much as $9 to text or e-mail in flight. what about making phone calls

in-flight, don't look for that to happen in 2014. feenlly, you may hate the fees you're paying when you're flying. whether it's for checking bags or rebooking a flight. next year, they won't go away. but there is a feeling the airlines may be hitting a limit for how much they charge for certain services. so while you will be still paying for certain things in-flight like snack boxes, perhaps at the rate in which they charge you extra fees will slow down in 2014. phil lebeau, cnbc business news chicago. make sure to tune in throughout the week with more predictions and on the web at predictions.cnbc.com. coming up, retailers preparing to close out the holiday season. can macy's pull off a miracle on 34th street? we're going to ask when we return. >> stop that. what do you mean by drinking? it's not allowed? >> a man's got to do something to keep warm. (announcer) scottrade knows our clients trade

and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. afghanistan in 2009.

on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.

welcome back to "squawk box." will there be a miracle on 34th street for department store sales this holiday season? joining us now to talk macy's

and more. also our guru on all things retail, the weather has not been helpful, dana. >> not this weekend. this weekend overall it was very warm. but if you had to have a warm weekend, it's better for it to be this weekend than last weekend when cold weather items like outerwear and boots were selling strong. >> so big winner? can we call it before christmas here? >> i think you could have macy's big a big winner, i think tjx was a big winner. i think the promotions of gap led them to be effective in driving traffic. and these fast fashion companies like h & m were also strong. >> where are you on target? given this breach with the credit cards and the fact that apparently sales were down 3%, 4% over the weekend. >> that's not a good thing. it basically gives the push to walmart who is making everything big and bigger this year with whether it's more opening hours, staying open later or being more competitive on price, had to give walmart an advantage. >> what's the long-term impact

on target? >> i think we've had this happen to tjx back in 2007. so certainly when you see items like this happen, there's a penalty that's paid. there's a time period where you get consultants in there to fix up the security measures of the business and then they'll be okay. but does it measures. they will be okay. does it take a little time and a hit for a little bit? it happens, yes. >> where do you come down on the holiday season when it comes to jcpenney and this effort at coming back? >> i think they are doing better. they are bringing back the brands their customers are familiar with, whether it is st. john's bay or worthington and adjusting the home area where the prices are in sync with the jc penney customer. >> is it the turn-around story? >> it is going to be that keeps sequentially showing signs of improvement. >> you said you liked the gap and thought they were doing a great job on the promotion side. i don't understand the gap.

i don't know who is shopping at the gap anymore? >> i was in there store on 34th street last night right at around 10:30, watching everybody close up. you have the tourist there, the mom there and the daughter there. i think they have the fashion more right today than in the past. >> we'll take that to the back. happy holidays dana. thank you so much. coming up, what janet yellen brings to the table in the new year. more from our guest host. for next year, the 100-year anniversary for the fed and coming up on "squawk on the street," the holiday p shoing season is coming to an end. the retail roundup. the latest on amazon and the tech trade. the energy in one gs is also enough to keep your smartphone running for how long? 30 days? 300 days? 3,000 days? the answer is... 3,000 days. because of gasoline's high energy density, your car doesn't have to carry as much fuel

compared to other energy sources. take the energy quiz. energy lives here. tdd#: 1-800-345-2550 life inspires your trading. take the energy quiz. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities. tdd#: 1-800-345-2550 at schwab, we're here to help tdd#: 1-800-345-2550 turn inspiration into action. tdd#: 1-800-345-2550 we have intuitive platforms tdd#: 1-800-345-2550 to help you discover what's trending. tdd#: 1-800-345-2550 and seasoned market experts to help sharpen your instincts. tdd#: 1-800-345-2550 so you can take charge tdd#: 1-800-345-2550 of your trading. [ female announcer ] what if the next big thing, isn't a thing at all?

it's lots of things. all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here. you'd do that for me? really? yeah, i'd like that. who are you talking to? uh, it's jake from state farm. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm? [ jake ] uh... khakis. she sounds hideous.

well she's a guy, so... [ male announcer ] another reason more people stay with state farm. get to a better state. ♪ let's get back to our special guest host. today is the day. 100 years ago, president woodrow wilson signed the act. >> congress passed it. it was his signature legislation, first year in office. >> you were saying you could kind of divide fed policy or cycles up at the 30-year buckets. >> 30 years, right. there were some definite periods, right. we are sort of feeling our way,

world war ii broke out. we helped finance the war, reception immediately after the war. we learned a lot. 20s, a time of stability, price stability. but the gold standard was sort of coming unglued. the 30s, we really blue it and exacerbated the great c contraction. we sent the economy into a great depression. there was a lot of other stuff going on. we got restructured in the '30s. then, that centralized power in washington took it, pulled it away, tended to pull it away from the reserve. we were under the treasury's thumb through the late 30s and into the 40s. we pegged interest rates. >> because of the war. >> and then we had this conflict that stretched out into the beginning of the korean war to get our independence. >> a fed chairman called president truman a liar. >> kind of. >> not kind of, really, right? >> it was mr. maddox.

it was incredibly tram mack tick. the korean war breaks out. inflation goes up. truman wants to hold the rates down. he repeats his case. f1c says nothing. he writes a memo for files. we talked to the president. we gave him nothing. he said this. next day, truman claims the fed agrees we should keep interest low and maintain the peg. he canals leaks the memo to the "times" and "washington post." we can blow by the '70s. give us your sense of how history looks back on this era,

unprecedented use of powers by the fed? >> the last five years? >> yes, how do we rewrite history? >> it is going to take a while. it took 30 years to figure out where the bodies were buried in the great depression and what we did wrong, 1963, as you know. i think it is going to take a lot of years and scholarship to sort of cause and effect for what we have just been through. >> there are those that will say it was fed policy leading up to the crisis. >> too big to fail and the expectations in credit markets, that creditors were likely to get official sector support had to figure into how that whole episode played out. >> what about monetary policy being too lax in the years leading up to it? >> good question. i don't think you look at the housing market to judge that. i think you look at inflation. as we said earlier, inflation was 3% from '04 to '07. >> were those transitory shots.

are you more rethinking your assumptions going in? >> inflations expectations are well-contained now. it is a matter of risks. when the time comes when loan demand is out there and banks have all these reserves, they have the capability of generating increases in the money supply that generate inflation pressures, very, very rapidly in a short amount of time. that makes the consequences of being behind the curve that much greater. do you think the fed ought to enable that would make better monetary policy? >> i think monetary policy is something we have to keep wrestling with, keep communicating about very clearly. i don't see a silver bullet that's going to help. monetary policy is hard. if you look at the lessons of

the fed's history, what comes shining through, i think, is that we've had to deal with very differe different external circumstances. gold standard, treasury pegs, money going off the gold standard. we have had to learn as we go. we have learned. we have adapted and we have improved. >> it is hard to say it has gotten better, given what we have just been through. >> compared to the depression, yes. >> when is yellen's first day? >> february 1. >> i have a tie. you get a tie? >> i did get a tie. >> you have it? it has janet yellen and a donkey and an elephant fighting. >> those haven't been distributed yet. >> where do you put the safety of banks over the past 100 years, today versus throughout the whole period? >> that's a good question.

so there is inherent fragility and there is have you mitigated the risk. we do a lot to mitigate the risk. the inherent risk is bigger than it would have if we had run a different regime. >> jeffrey lacquer, thker. thanks for joining us on the 100 anniversary. make sure you join us. "squawk on the street" begins right now. good monday morning. welcome to "squawk on the street." i'm carl quintanilla, simon hobbs, sarah eisen, cramer and faber are off today. you might think the news was light. nod today. futures are higher on a flurry of corporate news, including that long awaited apple china mobile deal. ten-year, steady around 2.9. personal spending was the best since june. europe is almost uniformly green coming off of their best week i