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 in eight months.

market stocks set to open at more record highs this morning as we move closer to the end of the year. the deal is finally done. apple signing a landmark agreement with china mobile, the world's largest phone carrier. analysts estimate this could help apple sell as many as 20 million additional iphones in china next year target sales suffering this weekend despite trying to make amends after credit and debit card information was stolen from as many as 40 million people. target's apology missed the market. we are joined by dan greenhaus. stocks are taking aim at history. futures on the ridese. the dow and s&p on the way to rise. the s&p and nasdaq each turning in their best weekly performances since october. as sarah said, dan, when we first came in this morning, we actually have a lot to talk about. we have echos of gdp on friday,

lagarde raising instead of cutting her forecast for the u.s. we are going to see a pile-on this week? >> i couldn't call it a pile-on. there is certainly a lot more news than you might have expected. this comes at an important time for the markets, the last five and seven days of december are traditionally the strongest of the month. we have moved into positive territory, in a seasonally strong period. this could send us to further heights. >> december, as you mentioned, historically, the strong month. how much juice does it have into 2014? we are already up 27% plus on the s&p 500. >> it has been a phenomenally strong year. we have consistently updated our clients with charts of the best in post-era. you are going to go a long way towards increasing uncertainty as you enter 2014. a lot of people are arguing that you have borrowed or stolen from

2014. if you eke out another percent in change, those calls are going to accelerate. >> december, which we know is historically strong, of all the positive months this year, december is the weakest so far. we do have some ground. with he know how poorly the month ticked off. we also point out of the previous record highs in the past year, only about 70% of the s&p above their 50-day, which is not the strongest we have seen. >> there is some internal depreciation, if you will, deterioration, that's raising concerns. regarding the equity weakness, we talked about this in our note to clients last evening, a lot was blamed on concerns about the fed taper. also, something that the wall street journal is doing a lot of good work on this morning. that's liquidity concerns in china. that's an important rate for lending and rates throughout the economy. spiked at 8.9%. the highest since a very

destabilized return of events in the summer. >> on the subject of december, we were in a glass half full. we were tapering an announcement from the fed and didn't fall out of bed. >> they learned to love the taper. >> and all the additional stuff they attached to it. >> is that what it is? >> we have been talking about this for months and months. a lot of people were focused on doing more or less through the prism of how much you bought. something we and other people on the street were arguing, it is not simply 85% versus 75%. they could ease the concern by promising to keep rates lower. let's say they go from 85-0, everybody would accept that was universally a negative but if they kept rates low until unemployment hit minus 2%, it becomes more difficult to as certificate taen. >> the positive news seems to be flowing from the economy, the federal reserve. piling on op of that, the

managing director of the imf was speaking this weekend saying they are going to upgrade their forecast for the u.s. economy. 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 to the future of the u.s. economy. >> i found that interesting, the whole feedback loop, the confidence that you will start to see more investing and more hiring on these double announcements, tapering and announcement the economy was getting better and there was a budget deal, which we have not seen all year long. >> we talk a lot about how much the fed injects into the economy. buybacks this year are just shy of half a trillion u.s. dollars. for every $2 that the fed spe s

spends, another ceo is spending another dollar. does it go into jobs and growth or do they keep buying for the sake of the market? >> bill gross tweeted about the level of stock buybacks. we are optimistic, the s&p will be up next year. the core of the bearish argument is the degree to which eps has been boosted by stock buybacks. that could be a little bit or fully explainable of the entire rally. there is still an extraordinary amount of cash on company balance sheets. if those buybacks slow in an era of weakest revenue and earnings, it becomes more challenged. >> shares of apple are rallying in the pre-market and in reaction to the long-awaited deal with china mobile over the weekend which will carry the

iphone. eunice un. our reporter in beijing happens to be traveling here at the moment. welcome, eunice. this deal was a long time coming? >> it definitely was. i come here from china with very good news for everybody. apple and china mobile have finally tied the knot. am is going to sell the 5s and the 5c through china's vast network. this is a multi-year deal. people will be able to preregister for the phones christmas day. more significant is the sales date, january 17th, only a couple of weeks before chinese new year holiday, a major shopping season and period. >> we don't know the pricing, which could be important specially when you are talking about the chinese market which usually goes for the lower cost smartphone. >> everybody is waiting for the pricing. you have china unicome and china mobile, two major carriers in

china. china unicome certainly sells the iphone. they will give it away from you prepay for $1,000 u.s. of minutes. we're going to have to have some type of competitive pricing along those lines. >> eunice, can you give us an idea of how the market looks through the eyes of local people in china? how do they view apple? what sort of cache does it have? samsung is a more local operator. how much of an uphill battle will this be? >> it is a huge, huge, huge status symbol in china. >> apple? >> people love. >> above samsung. >> above samsung. samsung is not only in the high-end space but they are selling a lot of different phones. you might have your galaxy, very high-end. on the other hand, you have some that may muddy the overall image of samsung. iphone is targeting one group of people.

people love it. i constantly am going into different places where they sell iphones and others. they say they are the best. >> they make really cool cases. i was in hong kong and they have all sorts of glittery, sparkly. >> you get asian-geeked out with all these cute little diamond do-dads. >> it is interesting. we have had this discussion about china mobile once or twice this year. >> a couple times. >> it wasn't entirely priced in. dan was just leading me to the chart which we are looking at there. there is still some left, still some gas in that narrative. >> i would think so. although, it was interesting. this morning, i went online and was checking what people were saying. the response was positive. there is a lot of excitement about it. at the same time, it wasn't -- you didn't see as much excitement because they are having so many leaks. >> there is also a leaks memo overnight as you'll be aware

that says they have some big things planned for next year. >> it would be weird to see 3% move on that blog you are mentioning but you are right. a lot of different things. >> eunice, thanks a lot. we will see you later on. when we come back, hitting the holiday home shopping stretch. we'll explore how retailers are pulling out all the stops. two days to go before christmas. shares of amazon entering the $400 club. how much higher can they go? one more look at futures. an implied open of more than 40 points. a lot more "squawk on the street" live from post 9 when we come back. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions

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is just a couple of days towards christmas. which retail stocks are best for your portfolio? joel feldman is assistant director with the chelsea advisory group, chelsea is here also. good to see both of you. this late stage of the game. given everything we have been talking about for weeks, the shortened calendar, the higher promotions, the margin impact,

who do you like at this point? well, we're still fans of the electronics retailers like best buy, game stop. i think they will have pretty good holiday seasons. there is demand for smart phones, tablets, tvs, everything related to that. it is good category that is driving demand for holiday season. >> stacy, we're going to talk about target a little bit later on. clearly, these reports out of dow jones, the traffic was down 3 to 4 year over year. is that material? can we tie it directly to the breach? >> traffic was already challenging. traffic at target last quarter was down over 100 basis points. this does not help. it makes people nervous going into target if your credit card is at risk. there may be some share shift over the weekend to walmart and potentially, kohl's and macy's. >> there is the discounts and the security concerns. another big theme is the surge in online shopping next to the

somewhat disappointing, we hear, brick-and-mortar sales. is the online shopping enough to save the season for retail? >> i think it depends who you are. i think you want to own names like macy's, who is so far out in front of the competition. if you think about the weather disruption, who is prepared to sell that inventory from the stores or from online? get it out to the consumer and not get stuck with it in the stores at the end of the year. i think with some names, they will make up for it. with others, that have a small online presence and really aren't at the forefront of omnichannel, it is going to be a problem. they will be stuck with extra inventoriries they have to clear. >> can i just take you back to target. we are beginning to get some court cases already. obviously, the security breach is huge at 40 million customers. can you give us some sort of idea as to the tail risk of a big class action suit here.

are you able to -- what can you say to investors about the prospects of that? can you give us an idea of order of magnitude? is it a game-changer or white noise at the edge? >> in the end, it will probably be more white noise. in the immediate situation, right now, it is pressuring spending. at target, i think when we saw t.j.x. in '07, they had to pay $65 million to repair damages. i think it could be a fairly large number. 40 million customers is pretty extensive. i think that thaarget is doing much damage control as they can. they offer 10% off in addition to their customer shopping. traffic seemed light. people are skeptical. it is a really tough time for target to have to deal with this issue. >> stacy, we got personal spending this morning. not bad. the best since june. i see gas prices edging down in

the lundberg survey. are you looking for relative strength to carry into q-1. >> you have to pick your spots. you look at the low end under immense pressure whether that's at walmart or the dollar stores and luxury, and you want to pick your spots. the mid to low-end consumer will remain under pressure. you sort of want to go high-end, stick with a macy's that has hands. retail is up over 30% this wreewreeyear. next year, it is going to be a stock picker's market in this space. >> we want to stick with a theme and get more on the fallout from the massive breach at target. kayla tausche is at headquarters with a look at the reaction the banks are taking. >> that's right, sarah. banks, as well as target, have

been quick to assure customers affected by the breach that they will not be on the hook for any fraudulent charges. the question is, who will be? target has admitted that the security system behind its card readers was compromised, not the banks themselves. target has said there are few reports of actual fraud. you just heard joe mentioned $65 million cost to t.j. max when they suffered a similar reach several years ago. banks are trying to stem any potential to be more fallout on their end, limiting account activity on some 40 million cards caught in this web just as consumers need those cards to finish their holiday shopping. chase has limited to $100 cash wi withdrawal and $300 credit purchases. citigroup taking similar steps in some cases blocking accounts. they are working closely with the retailer to understand more about what happened. the problem is, they have very

little information about the scope of the breach. they say it is a target issue. for people that need access to that money, that's little comfort when they are dealing face to face with these banks. >> what a weekend of statements from all the major banks. our kayla tausche back at hq later on, ohio car dealers have a major bone to pick with tesla. one of them will tell us why they are taking legal action against the electric carmaker. futures look pretty good here, coming off the best week for the dow since october. the dow on track for the best percentage game since 2003. a lot more "squawk on the street" is back in a minute. so ally bank has a raise your rate cd that won't trap me in a rate. that's correct. cause i'm really nervous about getting trapped. why's that? uh, mark? go get help! i have my reasons.

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eight minutes until we start trading on the floor of the new york stock exchange. it does look like a higher open. another record. part of this is the strong economic data. it is strong as we head into 2014. >> i think that is pretty clear. at this point, the wall street journal has a good article how even some of the sceptics of qe and the federal reserve have been buying into the idea that perhaps next year is going to be the first year of what for a lack of a better word we will call a self-sustaining recovery. >> the economic data looks good but we have seen this before. we get these bursts of economic activity and sometimes they

prove temporary. is this time different? >> yes, something sarah and i have talked about. we had the arab spring, the earthquake, the government shutdown. any number of effects that have had an effect on the landscape and psyche. preventing that is the donald rumsfeld unknown/unknown. if that gets in the way, that's going to get in the way. given the budget deal, you have to assume that washington has been sidelined. god forbid, we don't get another earthquake that disrupts the global supply chain and perhaps you get growth that i wouldn't quite call is good but you can certainly characterize as better. >> we also still have the debt ceiling by the way. february 7th. that was not part of this deal? that's going to be perhaps another marketing event. >> i am trying to balance out the enthusiasm. >> it is not enthusiasm but restrained hope. >> getting on board the rally.

you have got enthusiasm. i will meet you halfway and say that obviously, 177% rally in the stock market has convinced a lot of the nay sayers over the last couple of years to buy in. nor rielle roubini and mark farber. any thoughts as to another record high from art cashin? >> i think i hear santa's sleigh bells still ringing. once they broke above 1815, you are out of that rectangular pattern. you have days to go. >> looking to the new year, when people, a lot of people at the moment are having to chase performance whether they like the rally or not. to a certain extent, once those big fund managers are broken free by the calendar, do you think we will have difficulty then or is it plain sailing through january as well? >> well, no the all the way through january.

i do think the santa claus rally will continue. what we're going to have to watch is, will the bond market stay under control? the data this morning has yields not threatening. up above that 2.95 is when you are going to start to get the stock traders attention. >> art, you have been around markets for a long time. when we talk about a ten-year, at south of 3%, given what you have seen in your lifetime, how can anyone find 3% threatening. >> well, it's all relative. that's the problem with the business. i could have made the same argument to you that have mooing fr moving from 1.8% to 3%, historic lows, people tend to -- if you would get spoiled, whatever is working well today, if it changes a bit tomorrow. they get a little apprehensive. does that mean no one is going to apply for a mortgage?

no, i am not saying that. it will be a hindrance. >> is it the speed of the move? you don't want to see that go quickly. >> acceleration is the problem. it is all relative to where it had been. if it is that good, you expect it every day. >> i saw an akron nick, f.i.b., the fully invested bear. i wonder if you are seeing guys throw up their hands. >> you can see, as he just mentioned, several prominent names. you are seeing people still concerned about the market. it is a time to hold your nose and buy them. you are not in the business of collecting money. you are in the business of managing money. >> art, we'll see you a little bit later. >> art cashin here at post 9. we will get that opening bell in just a minute.

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not giving back too much here at the open. futures look pretty good under the flurry of big-time corporate news. upgrades from the u.s. economy from the imf and consumer spending from june. here is the bell. i'm down here at the new york stock exchange. leading the nasdaq and the alumni association of in india. >> is it all like this or just holidays? >> that's it, the opening bell. >> sarah, this is your first time on. >> very exciting. >> it is great having you. you bring so much to the party. >> thank you very much. an interesting markets here as we clothes out the year, record highs. the s&p 500 on track for its best year since 1997. >> dan and i were just talking during the break, if you strip out some of those excess years of the late '90s, you have to go back to the mid '70s.

>> if you take out '95 and '97, you have got to go back to 1975 to find an s&p 500 that was better than this one. that's quite a long period of time. >> the dow recently hit a benchmark, went over its inflation adjusted high, which is significant as well. >> again, the arguments that are being ascribed, consumers have regained some losses. we don't have to bore our viewers with the concept of money and how people don't operate on that. the market has gone up 170% over the last couple of years. that's better than going down. >> the market will be driven largely by apple. finally, signing that deal with china unicom. china mobile, i should say. the biggest wireless provider, 700 plus million potential

subscribers. could add 300 to the revenue. number two is going to be darden. now, starboard value wants a more drastic breakup than the one that was posed last week. >> regarding darden, you have a lot getting closer to push the company to spin off some assets. i don't have any particular insights into this. given what some of the competitors have done, like a starbucks, there is obviously considerable pressure on darden to do something. >> what's interesting, the starboard stakes will be 5.6%. they built that as the shares fell thursday in response to a lack of action. they perceive there is a battle still to be won further down the line. >> talking about the price action, the s&p has gone up considerably. darden is relatively speaking unchanged. so from an activist investor standpoint, it is perfect.

>> i wonder if this tells us that next year, the weave of activist is going to continue. we have seen so many high-profile cases proving stocks like this. wonder if this environment is right for the activists to come back in 2014. >> facebook is going to get some attention. after last week, 70 billion shares at 55.05. they said it was a brilliantly timed secondary. they were then added to the s&p the following day. up 1% back to 5576. >> full disclosure. my company has a buy back. a lot of these stocks, whether it is twitter or facebook, you see these instances where insiders divest themselves of some of their holdings. it ends up being a short-term disruption to the market. in some cases, in other cases, it it is irrelevant. the secular trends that are going to drive the stocks higher or lower.

>> kbh did get an upgrade out of city to a neutral. talking about some potential earnings recovering. it has underperformed the s&p so far this year. it will be interesting, though, to see, guys, how housing plays fair in a moderately moving mortgage environment. >> the big question for 2014 is interest rates for the market in general and clearly mortgage rates for the house can sector in particular. so far, so good. you have that taper announcement. you haven't broken substantially higher on the ten-year. that is the big question according to many for next year. >> not just mortgage trades. the consumer is healthy. if you're seeing the jobs market improve, which we have, that should bode well for housing on this upward momentum. you see housing as a bright spot? >> i am hesitant to call it a bright spot. i think the greatest fears of some market participants that there will be some spike in interest rates, which is the

boogeyman for every market. >> es whwhat's the breaking poir mortgage rates where it starts to get worrisome? >> i was asking about why a 3% level would be scary. it is about speed. as you saw in the selloff earlier this year, it gave the housing market a little bit of trouble. existing home sales at 4.9 million are a bit off their high. we think they are going higher. generally speaking for the economy more generally. housing should continue to contribute. it may not be what it was in 2006. we don't see the death mill in 2014. >> the danger is affordability falls more rapidly. you already have huge gains in prices like san francisco over the period of time as interest rates arise. >> to put this into something of a perspective, because the housing bubble is as popular as equity bubble. only two of the major markets are above the pre-crisis peak, denver and dallas.

they can sort of confirm what's going on in the market. for a lot of the markets like las vegas, there is still 40%, 30% below the pre-crisis peak. whether you agree they should be there or not, there is still plenty of room to go on the up-side. my kron did get a downgrade, merrill lynch to underperform. >> we are seeing some random retail names among the losers. nike having some problems. michael kors, we know what a winner that has been this year. target, no surprise after traffic did fall 3%-4% year over year over last year's pre-christmas weekend. target is down about less than 1%. you worried at all, dan, about, as they call it, just weak in the market right now. the year, largely being carried on the shoulders of a few specific companies. >> i actually disagree with that. i don't think we have the chart. i tend to disagree with everything. i don't think we have the chart

here. what's going on right now, if you take a look at the s&p 500 gains for the year, it is the top 20 names, which is an arbitrary number. the top 20 names explain somewhere around 20% of the gains. somewhere around 20% of the gains. that compares to 99 where the top 20% accounted for virtually all. somewhere around 90% of the index is gain. i would argue akin to '95, that this is a much broader rally. a couple of names get the spotlight, so to speak. the index as a whole is higher. that, all else equal, is a good thing. >> what does it tell you? >> it tells me the breadth is bitter. the smoke is correct. there is some deterioration. the internals are not as strong as they may have been a week or a month ago. when you see this many stocks higher, it speaks to broader confidence. it does not mean stocks can go down. it is more healthy. >> it is the whole question of the fed driving everything. investment stores were so

obsessed by taper on, taper off. is this going to be a higher market driven by more economic reports and earnings. >> the higher volatility trade, something the options desk has been dealing with for two years, the higher volatility trade has been a fail for 18 months, no matter how many times investors say that. i met with a client the other day that thought the vix was too high. that's another story. the taper is obviously front and center on investors concerns. the initial move is obviously in the books. this now becomes a way of life for us with each successive meeting. is it $10 billion. steve liesman got out of jeff lacker that the range should be 0-20. this is something we are going to have to deal with month after month. this is just a terrible way to run monetary policy. that's a much larger -- >> the fed has been an exercise in frustration for years essentially. that's a topic for a different

time. >> 100 years today. >> the s&p is now almost 400 points higher for the year. let's get to pisani and see what's moving on the floor. hello, everybody. happy monday. i want to put up something a little bit unusual. the russell 2000 by my look here is up 5% this morning. i'm trying to figure out why that's happening. we did have some rebalancing of some of the indexes on friday. the s&p, up 500. the s&p 500 was rebalanced. the nasdaq, not the russell 2000. some of the components of the nasdaq are in the russ. . we better check on that and get you some more information. stock futures have been up most of the night. we have the imf growth. can i point out to everybody, everybody is terrible at economic forecasting. everybody is terrible at stock forecasting. last year, at this time, most of the people i talked to, most of the analysts had 8%, 10%. the aggressive ones were at 12%.

the s&p is up 20%. people aren't very good at forecasting this. tech stocks leading the way. apple and all of its producers. apple is near a new high for the year. you see arms holdings trading down. broadcom up a bit. i would say not a lot of effect here so far on that china mobile deal. trying to figure out some numbers here on what's going to be happening, how many they might sell. there is not a lot of estimates. they will put up the full screen. china mobile could sell 20 million iphones. there guess is out there. we use the current levels of pricing of other competitors. they estimate it could add $4 to $8. have you been in an apple store recently? i went over the weekend. i went yesterday to buy an ipad

air for my wife. the store was overflowing. the sales clerk said business was booming. the biggest item was the ipad mini. they were flying out of the stores. the santa claus rally starts tomorrow, the propensity for stocks to rise the last five days. a lot are concerned the rally last week will take way from the santa claus rally. it has more propensity on years it doesn't work than when it does in terms of figuring out what's going on in the future. the macros environment is very strong right now. the fed taper has gun. the senate has passed a two-year budget deal. they are about to take the fed rank with a con continuity of leadership. i would look at, guys, right no you, the personal spending and income numbers. spending was strong but income really lagged. that was the big thing for q-3. i think it is a little bit concerning. it is hard to argue for an improvement in the economy when people are borrowing from their savings, which is what happened

with the numbers this morning. we want to keep an eye on that development. right now, dow is up 80 points. >> back to you. >> thank you very much. >> let's send it over to sheila. a very strong day at the nasdaq. the composite opening at a high. the story is all about apple. that stock by far having the biggest influence here at the nasdaq, now up about 3.5%. want to quickly talk about facebook. that's being very closely watched today. there are a lot of questions about what impact the secondary share offering would have on the stock. we saw a little bit of weakness last week. today, all those worries seem to be gone. facebook hitting a new 52-week high. a lot of technical trainers tell me, if you can stay above this $54, $55 mark, really good signs going forward. speaking of biotech, another big winner today. the stock actually added about

16% on friday. another 8% today. it is all about the fact that the fda is including its leukemia drug back in the market. a nice push for that stock. both rbc and jeffries upping their price target on the stock. do want to end on one of the big losers. that is micron technologys. falling today after a big down grade from bank of america, merrill lynch. a lot of talk about competition. their big concern is about memory pricing. we are seeing the stock down about 4% at the open. >> new highs for the nasdaq. let's go to my personal favorite now. bonds and the dollar. rick santelli with the move vermovers in chicago. as i look at the ten-year on the two-day, a couple of basis points elevated and i can also see about 2:30 a.m. eastern there seemed to have been a very fat finger hit that popped yields down a bit in an

exaggerated fashion. let's take a step back. let's look at some year to date charts. let's first start out, you've all heard about the rabbit and the heare and the tortoise. here is the hare. the yields that are going up at an aggressive fashion. it is the five-year. many of us thought we would see a lot more trade at 3% after the last fed meeting. a funny thing happened on the way to 3%, it is called the yield curve. many were short set tens and set 30s. they were very long in the five-year. is this more than a reversal? a logistics reversal in large positions? too early to tell. many are looking at selling, moving closer and closer to the short and reading a lot into it. let's look at these spreads. you saw the 5 and the 10s outright. look at 5s versus 10s, flattening. let's look at 5s versus 30s,

also dramatic flattening. let's switch gears. when i thisnk of foreign exchane for 2013, the dollar had periods that did much better than many expected. it is hard not to think about what a weak year it has been for the yen. look at a 20-year chart. you won't find a worse level for the yen. the dollar/yen hovering at the worst levels since early yar qur of 2008, october. it is still the trade to pay attention to, if you are an exporter in japan, your celebrating. back to you, carl. when we come back, walt mossburg of all things "d." with his list of top products in reviewing tech. coffee commodity prices have cooled off in a big way. why haven't you been paying less for a cup of coffee? the answer on that after the break. # [ male announcer ] the new new york is open.

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happy holidays. welcome back. i'm sharon epperson at the nymex. take a look at gold. gold prices are right around the 1200 level. just below that, ma. we saw a six-month low for gold las week. the fed confirming it will be tapering its bond-buying program, an upward division of gdp for the third quarter. all of that is something that has put pressure on the gold market. we are looking at oil prices. brent crude is holding up a little bit better than the wti market. that has a lot to do with traders focusing on africa and southern sudan and concerns about what that will mean for oil output with the third largest reserves on the african continent. we are also watching natural gas. we are seeing natural gas prices continuing to climb. that rise has been sharp and severe over the last couple of

weeks. back to you, sarah. >> share on, we are going to stick with commodities. coffee futures have plummeted this year. you may have noticed ta that th cup of your java has barely moved. simon bought me my coffee this morning but not looking at cheaper prices. >> exactly. i am holding a cup of dunkin and standing in front of a starbucks. if you were short coffee commodities, you did very well. it is one of the worst performing alongside precious metals as well as some of the ags. retail coffee is down only about 7%, 8% in u.s. cities. that's where they track it. beans and freeze dried coffee down only slightly as well. why is that? we asked mike nugent to give us some background on why. >> that assumes that the coffee in your cup was purchased the day before yesterday.

it wasn't. it may have been contracted two to three years ago at a higher price. a very serious question that the roasters have to answer themselves to be competitive with each other in the retail market. >> i asked starbucks what's going on in terms of their coffee prices. they said the plummeted bean prices have accounted for an expansion to the tune of 24%. they said they don't comment generally on pricing decisions. i heard from the chief supply officer at dunkin brands who says somewhat mysteriously we have established prices for 2014 that will offer stability to our u.s. franchisees, not clear what that means for the buyers of this cup. >> i'm sure the franchisees are happy but we will see if it bleeds down to the coop consumer. how the mood of the american consumer is holding up.

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monday morning. the dow up 63. we are not giving anything back. we are going to get a lot of data tomorrow, including some durables. in the meantime, we're looking for consumer sentiment which is happening right about now. let's get to rick santelli in chicago. rick? >> we are looking at it also. december final, 82.5 is what we are hearing. now, if that's correct, 82.5 is exactly the read that we had in the mid month. this is december final. the range was a six-year high going back to july of '07. low read for 73.2 for october. this slips into the upper end of

the range. yields in the five-year continue to forge ahead a whisker under 170. in may, they were in the 60-basis point range. back to you. >> rick santelli in chicago. we have dan greenhaus with us for most of the morning, which is our treat, in part because you are very good, very adept at looking at data, set points that people might not automatically pair together. >> i have very low self-esteem. so i appreciate that. >> that's a big lie. >> this is something that's a huge topic on the street. the degree to which the fed has boosted stocks. as we see on the screen here, you have overlaid the s&p against the fed's balance sheet. the correlation is somewhere around .9. it is quite high in terms of spl explaining one or the other. sarah and i are going to have a big fight about this. no one is going to disagree the

fed has been accommodative towards higher stocks. the overwhelmingly dominant reason is the one it misses headlines. >> it shows that it was. >> let me ask you a question. what if we had that chart, conveniently, for the five years prior? you would see almost no relationship. it moves higher from 2003 through 2007. the fed timed it just right. somehow the only reason the stock market was higher, i disagree. the fed is supposed to be accommodative in weak, economic environments. >> dan, we are going to et will you go for now. coming up, hear what one apple shareholder has to say about the china mobile deal that's giving a boost to the iphone maker's stock this morning. a lot at stake for toys "r" us. many say this is a make or break for the toy retailer. keep it here. [ male announcer ] the new new york is open.

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welcome back to "squawk on the street." the markets opening higher. will the momentum continue into the new year. >> they are now a member of the $400 club. find out if there are more gains to come for the stock. parents, listen up, one of the hottest toys for the holiday season. the crazy cart is hitting store shelves and making big money. we will get an inside look at the crazy cart. it will be right here. >> i want to know who is going to drive it. it spins. i get drizizzy. >> the dow and s&p 500 opening at record highs. doug mckay is the president and cio at bradley partners. principle director and portfolio manager. let's start with you, doug. here we are at record highs. almost the five-year anniversary of this bull market. how much staying power does it have into the new year?

>> i think we still have up-side to go. people are going to be opening up their 401(k) statements come december and they are going to see a five-year return of 100% when a year ago, that was zero percent. there gigs to be continued interest in the markets, particularly in the themes of companies that make the world a smaller place. we have heard a lot of this enthusiasm into the new year. maybe it is getting a little more expensive. i don't see valuation is our problem just yet. if you look at the p.e. ratio of the stocks versus high-year bonds, they are still at a discount, 15 versus 17. historically, they have traded at a ratio higher than bonds. i also think that next year, the earnings growth is pretty healthy expectations. that type of growth, i think the market, you don't have to have

p.e. expansion. i think that type of growth alone should warrant a higher stock market. i'm not worried about valuation at this point. >> you think 2014, ted, is not nest necessarily the year of the multiple? >> no, i don't think so. it think the global bank drop is becoming less hazy, which bodes well for capital markets. there is a huge segment that has remained on the sidelines. we are blind op ttimists. clearly, economic conditions are getting better. that bodes well for equities. >> doug, let me pick up this question of valuation. i think it is interesting that ted is comparing other assets as to whether the stock market is overvalued or not. we could just look up a valuation of 19 times last year's earnings and say on a historical basis, that is quite expensive. the norm would be about 16. if you were worried about the direction of the markets next

year on that basis, who would you rationize it, doug. >> i think to look at p.e.'s only is a mistake. that is kind of a point in time way to invest rather than a flow in time. i think as you look at really long-term, i just returned from a month-long trip to latvia. we are in the process of adopting a 14-year-old boy there who needs a new home. i was amazed by how the new technologies today make the world a smaller place. it was as though i was right next door. whether it is face timing back at the office over an apple device or using google maps to travel by a rental car to latvia or watching the latest episode i missed on amazon, how could you quantify that in a p.e. basis? it is a flow over time versus a point in time. >> the bulk and the wake of the market is not made up with disruptive stocks, surely. >> what one thing has changed,

however, is the risk found, risk off mentality goes away. taper is now off the table. i think people are going to have only to look at earnings rather than what the fed is or is not doing. i think what that causes correlations to fall. instead of every, we'll say every student in the stock market getting a "c" average grade and par it ticipating, th is disruption. >> ir that there is that word s disrupters. >> what about internet and social media, does that sector gain more respect? >> i don't know. i don't own either. i think the big cap tech stocks look pretty good. they are trading at practice multiples that are pretty cheap and they have high free cash flow per share. those factors do matter. i am talking about the apples,

the ibms, the emcs of the world and even oracle. they look good going into the new year but momentum, specially with the euro zone reemerging, the markets having navigated a soft landing. we are in for a synchronized global expansion that's going to help tech stocks. >> doug and ted, thanks for kicking off monday morning record highs on the stock market. we have another pair of op tim mists. >> so far, a jolly holiday season for amazon and its share holders. the online retailer hitting some record highs, now joining the $400 club. how long should you ride that rally? we'll talk about that after a short break. cure 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.

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some big moves on apple. the tech giant has reached the long-awaited deal to bring the iphone to china mobile. they will begin selling the iphone 5-s and 5-c in china. eunice yoon is here with us at post 9. we spoke earlier about the importance of this deal and the fact it was so long awaited. talk us through what the background is here on the networks they are going to can assess. >> everybody is talking about how china is going to have this 4g network. they have been working so it could work with iphones. up until now, they haven't been

able to use the home-grown technology of 3-g. what people are talking about is how china mobile is going to have these phones that will support 2-g, 3-g and 4-g. two and three for voice calls and four for all services. their reputation has been not very good when it comes to data services. people are wondering whether or not chinese people are going to actually want to make a switch to china mobile because the services aren't actually as good as china unicome. >> they have 750 customers. only 715 must on that network. some are picking numbers out of

the air, as low as $10 million. >> 10 million to 30 million. we say 170 million, that's true. they are now migrating to 4-g. >> the government's 4-g. the chinese government bought its own 4-g that they are forcing everybody to take up. >> it is different. that was a 3-g technology that china mobile had. they issued a statement saying customers, don't worry about this anymore. now, we have overcome the technical obstacles for it to work. they are trying to send a message to the customers that this 4-g iphone will work and be worth upgrading to. >> you had a great discussion about pricing. there is going to be a bit of a price war. there will be competition in the country between unicom and mobile. >> there is going to be competition. with unicom, you can get an

iphone. they will give you one for free only if you are willing to spend about $1,000 u.s. dollars paying for these minutes. people do it. you are going to have to see something of that kind with china mobile. >> and samsung has a slice of this market. >> a lot of the chinese rivals. people are talking about the growth area for smoart phones being on the low end. apple does dominate when it comes to the luxury brand. people think it is a status symbol. that has not gone away. there has been so much discussion about apple losing its edge in the china market. maybe that's true in terms of samsung taking some of the market share away. it does carry a lot of weight with people there. >> a luxury aspirational product, which is how they are trying to position themselves. >> it is great to have you here. eunice yoon for the moment, thank you. amazon is down slightly this

morning. it did cross $400 a share for the first time last week. the question is, is there more room for the stock to go from here? michael has the whole grading on amazon, a price target of $365. channing smith is a director. good morning, guys. >> good morning. >> michael, the journal has a hilarious story this morning about doormen in new york city essentially being overwhelmed with packages. fair to say, the holiday season has been good for amazon, right? >> it certainly seems to be going really well for them. not only can you get regular amazon packages that are coming in one and two-day delivery. if you are in the big city, you can get same-day delivery in a lot of cases. the volumes are going very high for amazon, this q-4. >> when is the day of reckoning about multiples, the long leash that investors have afforded. when does that happen. >> that's the golden question. it's part of the reason we are a

little bit cautious on the stock in the short-term. longer term, we are constructive on amazon's growth potential. in the short-term, you have two things to pay attention to. the first is your comment about margins and profitability. we have noticed that nobody who owns the stock currently is focused on that. it sort of doesn't matter until it matters. if you get a little bit of a growth hiccup, you could start to see people more focused on valuation and margins. the second thing is just to call out that eight out of the ten past months of january, the stock has underperformed the s&p on the basis of having a strong run-up into q-4. two things to focus on in the short-term. >> channing, you are in it but you are not making a major commitment. why not? >> just to get a fair return on amazon, you have to make some pretty optimistic assumptions. if you look at the next five

years, what we are going to see is that amazon investors are going to start focusing on profits. over the last 10-12 years, they have been in investment mode. revenue has been the key driver. over the next five years, it will be profits, profits. we assume 20% revenue growth, a 20 multiple and a 5% profit margin after tax on that. you get to $20 a share in 2018. that's $400. that's where the shares are trading right now. keep in mind, target and walmart trade at 4%, 3.5% after tax profit margins. amazon would be trading at a premium to that. just to get an 8%, 10% return in amazon, you have to assume 7%, 8% profit margins after taxing going out to 2018. it's achievable. it could be difficult. you yare looking at an 8%, 10% return. the returns have borrowed a lot from the returns recently.

>> they have had great revenue growth, inclement weather. we think it sets up for a good quarter. long d longer term, we are a little bit more cautious. >> what's the competitive landscape, ebay and other competitive sites? how much are they struggling to keep up with amazon because their scale is so large? >> where amazon is separating themselves from the pack is on fulfillment and distribution. they have been able to invest billions and billions of dollars into their distribution network. it is the type of asset that's going to be hard for another company to gather the capital to deploy and build something that can compete with that. as one and two-day shipping and delivery becomes a really important part of the consumer

value proposition. it makes it tougher for other e-commerce players to keep up. exactly to your point. >> you are, also, an investor in apple. is that correct? what do you think of the deal in china? >> it is a positive. it adds $3 to $5 in earnings in 2014. you see estimates of additional units of 10 million to 20 million. it gives apple one more growth driver. analyst estimates will rise. we have had a $600 price target. that will go up to $650 after the deal. we are very positive on the deal. >> michael, channing, thanks, guys. we will see you later on. >> we move on to target, another mover in today's session. another offering a 10% discount. to try to lure shoppers back into stores after that massive data breach. some big banks are taking action. kayla tausche joins us with more on what the banks are doing. >> if you are a bank, you want

to err on the conservative side. information was swept up by the massive hack on target card readers, because there has been little evidence, according to target of fraudulent buying so far. the industry blog that broke the target news is saying that information on individual accounts is now selling on a black market for anywhere between $20 to $100 per account. what makes it more valuable? number one, if it is a card issued outside the united states or number two, the zip code associated with that account is approximate to the person looking to buy that information so that they could potentially skirt rules. the block spending on certain accounts by distance in those cases. that's one reason that banks are saying, if you got an e-mail saying you were affected, better to replace the cards than let the old information float around the system. any restrictions on these

accounts, this he might not go away any time soon. target's red cards have a strict fraud monitor in place. the retailer is everoffering a credit monitoring program. a heavy time for spending. no light at the end of the tunnel. the banks don't have enough information to figure out at what point they can lift some of these limits. >> i wonder here, kayla, how vulnerable the system is. whether this is an isolated incident. what you are hearing about the risks to the banks, credit card companies and retailers. >> they all say, you never want to say this could never happen to us. everyone is vulnerable, specially given some of the cyber security risks in this case and time. target was a very targeted instance. pun intended there. there is some speculation on behalf of the banks because they know so little. they wonder how it would be even possible for a retailers card system to be hacked without having some internal hack where

the password or the terminal code, anything that would give a green light to access that system wasn't coming from the inside of the company. of course, no one can really know until target gives us that information. we are still all on pins and needles hoping that we can get that very soon. two shopping days left before one of the biggest holidays of the year, guys. >> couldn't have come at a worst time. kayla tau s kayla taushe. a big year for media companies. big changes in terms of internet video services. what's in store for next year? how can you profit from it? more on that after the break. bny mellon combines investment management & investment servicing,

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>> what you need to know to make money in the new year. let's look at the media sector. let's see how julia did in 2013. she predicted they would invest in video as traditional media, went big on digital content. new partnerships were made and hulu was kept by the media giant owners. the second prediction was there would be distribution wars. which was correct. netflix stopped short on its original content success and microsoft continues to invest in the space as well. finally, the prediction was from julia that the music industry will get its mojo back. that proves to be true. apple's itunes jumped in to compete with pandora and spotify. julia boorstin is 2.5, 3 for 3,

not so bad. what does she think for 2014? media companies are heading into a year of massive change. for the cable industry, that means consolidation. facing growing competition from satellite tv, telcos and streaming video services, comcast and charter are looking for economies of scale aat their negotiating leverage. that will push mergers among counterparts, discovery, scripps interactive and amc. media giant tech giants are headed for massive convergence. amazon and microsoft competing with their originals joining netflix as a destination for premium content. media giants will embrace new technology so those that pay for tv can watch whatever, wherever, whenever. to keep cord cutters at bay. at the box office, get ready for

a lot more super heroes and a lot less of everything else. there will be fewer big budget movies but those that do get made, mostly sequels of familiar brands, will be bigger than ever and aimed overseas as china and russia's box office explode. at the other end of the speck fr trum, smaller films will find new distributions, going straight to consumers on demand. >> julia, i am fascinated by beyonce and the release without promotion, without a major music operator behind her on itunes, what that means for the industry overall and whether you would say in the wake of that that the music industry has its mojo back? >> it is interesting. i think that beyonce's massive release directed to consumers on itunes before the album went out in a cd format says more about the future of marketing than it

does about the future of the music industry. what we saw with her, and i think this will continue to be true next year, is that individual artists, if they have that one to one relationship with their fans through facebook, twitter, and instagram, they can do whatever they want. we will see if there is any experimentation similar to this in the movie industry. the overall music industry, still rocky. people just aren't buying cds and those have the higher margins. >> interesting times. thank you very much. julia boorstin joining us with her media predictions for 2014. make sure you tune in throughout the week for more predictions and on the web, of course. when he come back, today is the deadline for most americans that don't have health insurance to sign up for coverage starting on january 1st. will healthcare.gov work for people trying to sign up? "squawk on the street" will be right back. but your erectile dysfunction -

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about an hour into trading, some of the stories we are talking about. 7:30 on the west coast. 10:30 on wall street. showing a final december reading of 82.5. up more than 7 points from november. darden restaurants, the biggest

gainer on the s&p, up more than 5% on the fact that starboard value has taken a 5% increase. joseph a. bank rejecting the takeover offer. the individual significantly underv undervalued. today is the last day for people to sign up. >> jared bernstein is the chief economic officer. republican congressman from georgia, representative phil beginni begin gree.

we were having a conversation as to whether or not people know that today is that very important deadline if they need coverage from january 1st. i see that the traffic on the government's federal website. >> if they don't sign up today and if they don't get through this healthcare.gov or whatever government website that they are try tog get on or maybe even through the states, the state of maryland is having a terrible time. they have their own exchange and people having a horrible time. the governor there, o'malley, is complaining profusely about that. if they don't get signed up and they don't have coverage in january, they can continue to sign up until the end of march. what happens if they get run over by a mack truck between january 1st and march the 30 th

they are not covered. >> jared, if you were still an adviser to the white house, would you have let them effectively break the individual mandate when they suggested that people that have been dumped by their insurers could buy the barebones catastrophic or get some type of hard times insurance. you are really confusing the situation they say. >> 20/20 hindsight. what i might have said is, i think it is okay to implement that kind of a patch as much as you don't like to do so but it is on a very narrow piece of the market. i think what i would have tried to do, though, is try to bring the insurers along. i can't verify this. this move was a surprise so some insurers. one of the reasons that most insurers ultimately backed the affordable care act is because they recognize they will be getting a lot more business. the individual mandate, writ large, still lives on and is an

essential part of the deal. this is a small, transitional changeover. >> congressman, you have an interesting job. you are also a medical doctor. you can look at it from the doctor's perspective. you know about the injury. there is a product out there. consumers want to and understand how to buy. >> my colleague adversary just said it exactly right. i called for kathleen sebelius in a hearing. i said to her, madam secretary, you have to the authority under the affordable care act, whatever section that might be, but you have the authority to grant these hardship wavers. are you going to grant these hardship wavers to these individuals, some 5 million of them, that have been notified by the health insurance company? they had health insurance but they were no longer going to be able to have those policies next year. she said, no, we have no plans

for that. yesterday or the day before, maybe the president gave her a call. because he had received calls from democratic senators in red states and said, hey, wait a minute. you know, as my colleague said just a second ago, it is just asa piece of it. if you are going to do that, for people that already had health insurance, why not do it for the people that don't have, the uninsured? isn't that what the law was all about, to cover 40 million people that didn't have health insurance. give them a full year's waver. let me make one thing very, very, very clear. i am for repealing completely this law. it can never be fixed. this is about -- this repeal, this waver for a year is to help the middle class people that can't afford to pay the $95 fine. >> i think what we're going to find. by the way, these numbers are very hard to come by. specially when you counseled new medicaid recipients, that the number of newly insured people

will swamp the number of uninsured people. there are literally millions, 3 million now, newly insured, low income people under medicaid. that is a great accomplishment of this bill. let's not forget that. the number of insured will almost certainly outnumber the uninsured. secondly, i want to underscore something the representative said. today is the deadline absolutely if you want to get coverage starting in january. open enrollment goes to the end of march. that's important for people to keep in mind, the procrastinators out there to keep in mind. >> a lot covered during that period. >> one last point. they say the whole thing could have a meltdown. the cover at the washington post is all about cgi federal. procurement being from last century in the government. have the optics gotten any better two months in? >> the optics have gotten a lot better because people are

literally looking. they are looking at a website, a portal that is working much, much better. the president is right when he talked about the signup. the procurement problems are huge. they are not just on health care but other issues as well. if this doesn't teach us we have to go back, insource some more work into the government, we haven't learned enough from it. >> one last comment from you, sir. >> let me say, what we're talking about, senator manchin, a democrat and senator mark kurt, a republican, have called for a delay, a one-year delay for the individual mandate, just like obama granted to the big corporations to give them a one-year delay. during this one-year delay, it is not about tweaking around the edges and trying to fix this little thing or that little thing. it is my pledge and what i call for, hopefully as a newly elected member of the united states senate, that if i can't

repeal this law in my first term, by golly, i'll go home. that's my pledge, my accountability pledge to the people of georgia and to the american people. this law is a disaster. >> with due respect, with deep respect, you better buy your ticket. this ain't being repealed. >> thank you very much, for your time. parents, a note for you if you are not finished shopping for your kids yet. clek this out. it is called the crazy cart. one of the best-selling toys this holiday season. we will give you an inside look. perhaps take it for a little spin whether "squawk on the street" returns. 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

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many children across the country will be opening their christmas presents. some lucky ones will find one of the hottest toys. it is called the crazy cart. as you can see here, it looks like a lot of fun. joining us this morning, carlton calvin is the ceo and founder of razor usa. he joins us from los angeles. carlton, great to have you. good morning. >> good morning. you have a great story. you dropped by a high school, chance meeting with the razor guy, you joined product development and now you come up with this. how do you describe the cart to someone that has never seen it. >> it is kind of like a bumper car but it has a drift bar on it so it lifts it up and it spins freel in circles. it is insane fun. >> are you more than sold out for the season? >> we're more than sold out.

we're just as fast as we can, trying to make more. >> toys "r" us has upped their orders. >> how much are vendors coming to you and saying we want to up what we have requested? >> we were exclusively at toys "r" us. they doubled the order and that cleaned us out completely. >> the price, it is a little expensive relative to other toys. >> it delivers so much value and so much fun, people are actually just saying, take my money sometimes online. >> $399, right? >> $399, right. >> is it safe? >> safety is one of our top priorities at razor. kids love it. >> carlton, we are looking at one of the trucks here. explain to us how you make it spin? what do you do? >> you press down on the accelerator and then you pull up on this bar on the right-hand

side. that frees the wheels to spin freely and you turn the handlebar and it spins around in circles. it is ha a motor. >> sorry. i see on the video the kids have got helmets on. does it come with helmets? >> it does not come with a helmet, no. >> they are presumably advised? >> absolutely. >> how much will this compare to razor sales? >> i didn't hear you. >> how is this going to compare to razor sales over time? >> we are probably going to sell more of this product next year than the razor in terms of dollars. >> really? >> yes. >> how many razors have moved. >> 27 million since we started in 2000. >> how much credit to you give to youtube for this? >> youtube has been an enormous factor. that's what actually exploded the product. with such an innovative product, it is hard to explain to consumers what it does. we had a youtube video that went viral in two days and almost 1 million people saw it. we did another video and 1.5

million people saw it. that's been more effective for us than any kind of tv advertising we have ever done. >> you will know this better than i do. the difficulties of small businesses to know the pace at which to expand the investment and the risk to take. in hindsight, do you think it was wise to go exclusive to toys "r" us. could it have been more for you guys? could you have had a bigger partner and a bigger holiday season? >> toys "r" us has been a great partner. they put a lot of energy into their own in terms of advertising it in their circumstance lars. we own the patent. so no one else will be making this item. we are going to make it next year and sell it to a lot of different people. >> people on twitter want to know how it is powered? >> it is a 24-volt electric battery. it is just like a tesla. >> a little bit cheaper than that? >> if that's true. >> think about the value here.

>> carlton, we'll be watching. it is a huge business story with all sorts of ramifications in social media and retail. >> thank you so much. >> carlton calvin is the founder and ceo of razor. >> it is a little dizzy. >> we were going to take it outside. >> were you going to go in it and spin outside? >> i might have. our stage manager, brad, was going to go. >> all this week, we have been looking at ways you can make money in the new year. while pro ball players will make a ton of money, don't expect this year to be one for record-setting pay. expect big contracts but nothing like the $300 million that dodgers are looking to sign clayton kershaw to. owners and managers decide

against paying big sums of money for longer-term contracts and decide to focus on economics and risk versus reward. the nfl is going to embrace next gen media. those that ball the game in 2013, got a free season-long subscription to directv's ticket package. there was a catch. >> on your phone? >> it could only be viewed on a tablet, smartphone or pc. expect the nfl to announce new ways for fans to get content via mobile devices it is no secret that soccer or football, as the rest of the world knows it, has been hot. this near, expect it to go nuclear. it is going to start getting a lot more air time and not just on sports-only networks. with english premier league soccer making serious inroads in america, and the world cup kicking off in the summer, expect more and more fans to pack the stands of places like red bull arena.

>> dominic chew joins us now. dom, i don't know anything about sports industry predictions. when you, how much will second screen interaction with live sports involve in the coming months and years ahead? >> it was a game-changer for me. here is my ipad. i have been using this thing every single week. when i bought that nfl madden 25th edition, i got to watch every single direct ticket game on my ipad this year. here is something i would pay. directv, i hope you are listening. i would pay you sums of money just to be able to watch this on my ipad without having to sign up for a full subscription. maybe the nfl, look for all these type of contact packages. this is going to be big next year, sarah. >> it is all about monetizing the con taetent. >> be sure to tune in for more predictions. >> one of the most suspected tech journalists has written his

last column ever. walt mossberg has outlined the 12 most influential products he has ever covered during his time with the newspaper. he will join us live this monday morning on cnbc. so ally bank really has no hidden fees on savings accounts?

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month morning. rick santelli for the santelli exchange. >> good morning to all of the listeners and viewersen this cool holiday week. we continue to monitor lots of things. an important month in particular. the gdp caught my eye. gdp, 4.1, amazing to see how late in the game third time around the block that revision popped to a four handle. of course, all comps, last time we had a 4 handle, close to a 5 handle, the fourth quarter of 2011. look at what happened in the middle, this goes to the point. it really is not about bursts. it's about sustainability. it's about durability. and in between these two numbers, we had a q2 and 121.2, and a q4 in 2012 that was .1.

you get my point. yes, it looks good. we've been here before. let's be as objective as possible. economy is doing better. no doubt about it. but why it's doing better matters. why does it matter? it matters for every faction of your strategy. think about capital in general. i think the biggest problem that we have, that could hurt the improvinging economy, is the misallocation of capital. it's our own kate kelly talking to retailers a week ago, how sum zombie-type retailers might be clinging on because they have access to capital. there's weaker hands existing because of weak capital. what happens when it gets reallocated? more importantly, what happens with rates? you know, it's not very objective. i hear so many say, 3%, it's not a big deal. mortgages, 4.5, not a big deal. we've been higher. doesn't matter. a huge amount of leverage in the credit market. think about what happened in

may. employment's huge. it's improved, no doubt. pool of people really kind of unemployable is rather large and it doesn't seem to be getting smaller. there's a lack of honesty on the employment front. at fordable care act, it's a disaster. i can't believe that it isn't on every story every minute of the day. all i can think of, with the president, aloha! midterms, the biggest, most important point. why? firsthand experience is a great motivator to get people out and vote. think about what their firsthand experiences are the last couple of months. back to you, carl. >> thanks a lot. rick santelli in chicago. fed is 100 years old today. we'll find out what the richmond fed president had to say and why he thinks the taper decision was a slam dunk. [ male announcer ] this store knows how to handle a saturday crowd.

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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. richmond fed president jeff lacker joined "squawk" for two hours, wide ranging interview on monetary policy and the fed's 100th birthday today. highlights and one story told offcamera, steve liesman. >> it was a great interview this

morningen one of the first comments from a fed official other than chairman, of course, since the central bank announced plans to taper last week. jeff lacker praised the decision. it was an improvement in the labor market. 10 million taper at each meeting is a general rule for the next year. it could be adjusted up or down as data comes in. the bar for him is high for changing that path. >> for me, if you look back over the last year, for that matter for the last three years, you see all of 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 little swings. you're going to get them. for me it would take a substantial break in the time series to get me to want to think we aought to pause. >> 2.2% growth next year, which

he says is potential groout. it's lower now than it had been. 2.2 is what the economy can do. forecasting first rate hike 2015, a 2% funds rate by the end of 2015. one of the more hawkish member. the fed is constantly trying to shift the focus from tapering. it diz not change 6.5% unemployment rate it didn't want to tie itself to a single number. he was here to commemorate president wilson's signing of the federal reserve act 100 years ago today. there's a nice picture from the library. he told a story of the first president of the richmond fed. it rented space in a vault to store the gold. the president would walk across the street with aa six-shooting. i don't know if there's a six-shooting passed on to janet

yellen. >> i wonder, 100 years since the federal reserve, a delicate dance, did you talk about how he feels about fed credibility, reputation as they go through with the experiment of tapering? >> he thinks there's a lot of fed credibility. he pinned the low inflation rig rates now what volcker and greenspan did over the several decades, the fed has credibility and it remains. >> thanks for coming in. >> it was fun. >> if you're joining us, here what happens you missed earlier on. >> welcome to "squawk on the street." here's what's happened so far. >> given the data, given the way the committee positioned itself, with the program that identified labor market conditions, the key criteria, this decision was kind of the slam dunk. >> over time, as people get it, if they like the benefit, it

will rise in popularity. and taking it away completely repealing it, is dangerous. >> the last five days, the last serven day afrz december and th strongest of the month. as of last week we moved into positive territory in front of the seasonally strong period in a seasonally strong period. some of the news, if taken bullishly, could send us to further highs. >> what we're seeing apples's able to sell the iphone through china mobile's vast network, 763 million subscribers. >> i think people are going to be opening up 401(k) statements come december and see a five-year return of 100% when a year ago that return was 0%. >> the procurement problems are huge, and they're not just as you said, they're not just on health care. they're on other issues as well. about this doesn't teach us, go back, insource more work into

the government, but review the procurement process, we haven't learned enough from it. >> the "squawk on the street" countdown to christmas is in full swing. ♪ pull out the holly put up the tree♪ >> good monday morning. live at post 9 with a check on the markets. markets adding to gains from last week. dow having a nice day, up 74. s&p up almost ten. shares of apple rallying in the wake of the deal with china mobile. china mobile will offer iphones january 17th. it could help apple sell 20 million additional iphones in china next year. kb home rallying. citi upgrades home builder to neutral, based on recovering earnings and the underperformance this year. a couple days left until christmas. the winners and losers so far this holiday season. speaking of retail, this season,

one of the most important times of the year for retailers. for one company, could this christmas be a make it or break it holiday? the ohio dealers association, taking its fight with tesla to the court, recommending the license be revoked, it does not meet requirements to be an auto dealer. we'll talk to tesla and the ohio dealer association. the great walt mossberg, writing about the most influential products he's seen over the decade. joining us, first, for the hour, dan greenhouse, chief global strategist at btig. glad to have you back on a day we open up at a certain level, it's going to be static through most of the morning. what does it say we're not coming in and giving back so much of last week's great action? >> i'm always skeptical of these observations. generally speaking, it's a positive. we had a strong move after what

was thought to be a universally negative headline, a reduction in fed asset purchases. that's not been the case. we've continued to build on those gains. again, all else has to be taken positively. >> lagarde, over the weekend, upping the imf forecast. apple, china mobile, we mentioned at the top, we have a budget deal, taper is out. is there any uncertainty going into the year end other than strategists and their views as to whether or not they're overshooting or undershooting? >> yeah. i think that's, among the bears the largest bone of contention, everybody seems to have accepted some level of complacency in the market, the bias is high, and there's no risk on the horizon. everybody agrees there's risk on horizon it can come out of iran, china, people are paying less attention than what they should be paying going on in brazil, mexico and brazil. but again, for now, there don't

appear those risks that we've been dealing with in the immediate future. >> we'll talk more about the market in the next hour. toys "r" us keeping its doors open for 87 hours straight leading up to christmas. moody's analytics thinks it could be a make or break season for the company. bond market conditions for toys "r" us are ominous. will longer hours help? a separate arm from the company that rates the bonds. he joins us at post 9. welcome. >> thanks. >> i know you're not going to comment. that's going make a difference. what is the market. separate from what you told us last time? >> credit markets are bearish on the prospects of toys "r" us. senior unsecured debt traded off since the investor didn't like the quarterly earnings. bonds are at 74, 75 cents on the dollars. what we call the bond implied

rating a c, it's four notches below where moody's rates the senior unsecured debt. in the past, when companies traded like that, they have gone on to default as high as 80% of the time within the next three years. we think that's a very high probability. >> you think this might be a make or break season. is that technically true. do you think they might not make it through 2014? >> well, one positive aspect of toys "r" us now is that liquidity's not an immediate concern. earlier this year, refinanced debt and so the next debt maturity tranche is not due until 2016. now, that seems a long ways away still, but remember, investors are forward looking. and the next big event here is going to be the annual earnings release which will probably be around march, if it's the same as previous years. remember now, march 2014, so

from there on, we're talking two years away, so it's not all that long. >> any seasonality to how the cdss or debt markets behave? do they look upon retailers with more favorer in their fiscal fourth or not? >> >> seasonality's not a factor. retailers are are a seasonal business and bulk come in in the fourth quarter. if i can talk about the business of toys "r" us, kb homes, issues, for toys "r" us in general are they left behind by the shift in consumption patterns among today's teens or something they're doing or in the process of doing that will make outlook brighter? >> one major factor is competition obviously they're facing from big box stores like a walmart, target and online retailers such as amazon. you can argue that those are not challenges that are anything new, but from the other side, those are not something new, yet

the company hasn't been able to find an effective way to deal with those yet. that's probably a big reason why bond markets are trading toys "r" us debt as bearishly as they are. >> why they're open for 87 hours. >> they're not the only ones. >> that's one of the longest stretches among the big boxes. >> absolutely. >> thank you for coming in. moody's analytics. >> we did reach out to toys "r" us, they directed us to an statement, the company has a successful track record of refinancing and, at this time, noose outstanding debt repayments due until 2016, providing a large window to grow, and develop new strategic initiatives. christmas, as we said a couple days away. if you're a procrastinator you spent time in stores and at the mall this weekend. so who were the retail winners and losers on the last shopping weekend before christmas? julia boorstin live in woodland hills, california. good morning.

>> reporter: good morning to you, karl. well, shoppers seem to be holding out for discounts which means losers at the malls this weekend. sales fell by a mid single digit percentage point at brick and mortar stores friday and saturday, compared to last year, while traffic declined 7% according to retail next. now the big question is, how much of a loser target will be after its massive credit card breach. america's research group says target has not been dramatically affected but retail consultancy group customer growth partners says weekend transactions slipped 3% to 4% from last year. where are shoppers going instead? >> 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 comprehensive on price, had to give walmart an advantage. >> retailers are trying to boost spending with extended hours and deep discounts.

gabriel la says shoppers are turning out to take advantage of the deepest mark-downs since 2008. discounts seem to be working at gap stores and l brand stores like victoria's secret. and macy's and kohl's should benefit from unseasonably cold weather. driving winter gear. one winner this holiday season, online retailer. the national retail federation forecast online holiday sales will grow 15%. that benefits amazon and ebay, as well as likes of macy and walmart, making a big online push. now with six fewer shopping days, between thanks giving and christmas, pressure is on, especially because of this holiday season accounts for 40% of some retailers' annual sales. back over to you. >> we know what an important season it is. julia boorstin. after 22 years of covering

technology, walt mossberg has written his last column ever for the "wall street journal." he wrote about the 12 most influential products he's covers during past couple of decades. what do you think made his list? first, rick santelli, talking taper today. >> we are. we're going to talk about the great taper caper. we'll talk about it with andy brenner. why is this important? he's one of these guys who calls it the way he sees it. we'll have a frank conversation and end with leverage. huge leverage. where? on the fed's balance sheet, at the bottom of the hour. mine was earned orbiting the moon in 1971.

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comes any way you like it! [woman]ask me about the lumbar button. [man]she's got her side...and i've got my side. [announcer] tempur-pedic.the most highly recommended bed in america. [woman]don't touch my side! welcome back to cnbc. an update on a story, response to banks to a target breach of three weeks after black friday. chase one of the few banks to impose very strict spending limits for customers who had credit and debit cards affected. chase is going to raise limits it a $250 limit for cash withdrawals and $1,000 limit for credit card purchases in response to customers telling the bank that they wanted to spend that much money ahead of the christmas holiday which is in just two days' time. of course, they were putting those limits in place because if fraud occurred on one of those cards, that would limit what any potential fraudster would be

able to spend on cards. as of today, i'm learning an e-mail will go out to customers of chase that if they had a card that was affected, they will be able to withdraw $250, they will be able to spend $1,000, you can override that if you go it a branch, but as of now, that is certainly a good update for consumers looking to do heavy christmas shopping. >> thank you. take a look at consumer staples. one of the big losers, dow up 72. dom? >> interesting, on a nice bit of upside strength, these are the only stocks down as a group. when we say down, it's not by a lot of sector's led to the downside by walgreens, lower by 2%. whole foods down around a percent and a half. kellogg is lower by a percent in america's second biggest grocery store chain, safeway, rounds out the four worst sector

performers. the bin single best, monster beverage, up a percent. >> when it comes to tech products, there's no one, no one who knows better than our next guest. as he wraps up his career at "wall street journal," walt mossberg decided to take a look back at influential gadgets over the last two decades. co-executive editor for all things "d." walt, first off, congratulations on an unparalleled run. >> thank you, carl. thank you so much. i'm not going to get much time to rest because after the first of the year i'll be launching with my team of great colleagues a new online tech website and series of conferences. but i really appreciate the compliment. >> we know you're not going anywhere. we wouldn't let that happen, walt. you had 12 in last week's piece, a great read. >> right. >> how big was your list when you started? >> it was probably 50.

it was -- there certainly are people can make a reasonable argument. but here's how i tried to filter it, carl. first of all, consumer, it had to be for consumers directly sold to consumers because what i reviewed over 22 years. there could be a brilliant thing that an i.t. would love and a company, and i just wouldn't have included it. and secondly, it had to be influential. even if it was a flop in the market and one of them i listed was a complete flop, it had to have had some cool technology feature in it that influenced everything else. and those are my criteria, and i went ahead with a dozen. >> let me ask you a quick question. list is obviously 12 deep. there's certain products that couldn't make it. i noticed a lack of ereader on there. was there a conscious decision to exclude one since the ipad -- >> it was a really tough call.

i could have obviously -- everybody agrees kindle is a really important product and that's one that i came -- that was my number 13. and i would have put it on. i had the ipad, and i stand by this, i think even more influential than the kindle, continuing to be more influential, having a colossal impact on not just reading but all kinds of activities, plus work. and you can -- you can -- there's a kindle app for the ipad. you can read anything on a kindle on an ipad. amazon is not primarily in the hardware business, they're primarily in the don't selling business. and that was why -- that was why i made that call. >> right. >> obviously, spurred conversations all over the country and all over the world. dan and i were talking about, i think three products from apple, which might be the biggest

number from any particular company. >> five actually. >> what does that say? >> five. >> five? >> five. yeah. what it says, i stated this plainly in the column is, i know some people who are you know not fans of apple will get unhappy with me, but i'm sorry, in the 22 years i wrote that column, particularly last 15 years or so, no company, no company, has introduced as many game-changing, influential products that were then copied or followed by other companies, no company has done as much of that as apple. whether they'll do it in the future, i don't know. certainly during this stretch of time, apple has changed the game again and again and again. >> is it unfair to ask you, walt, if you had to narrow it down to three or one? >> yeah. i'm not going to get into that. i really don't know. it would be really hard. i mean we all live on the web. so is it the web browser?

in the case of the list i did, netscape navigator, the first widely adapted web browser, or google search, an enormous key to unlocking the web, or maybe facebook, turn the web social. if you wanted to go three in hardware, go in a different direction. >> yeah, yeah. >> that's why i did 12. >> that sounds like it was hard enough. walt, thanks for coming on belatedly to talk about it. see you next time. >> thanks for having me. >> walt mossberg joining us washington. car dealers in ohio taking their fight against tesla to the courts. they're suing to prevent electric carmaker from setting up shop in the buckeye state. why do ohio's main car dealers want tesla out? we'll ask the president of the ohio automobile dealers association after a short break. [ male announcer ] the new new york is open.

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country fighting tesla's direct to consumer sales model. the industry disrupting company waged court battles in texas, new york, massachusetts. now they're gearing up for another legal fight. tim dorn the president of the ohio automobile dealership association, one of the six groups suing to block shops in his state. he joins us this morning from columbus. >> happy holidays. >> same to you. we've heard variations on the argument from the dealers in various states. what is specifically happening in ohio? >> obviously, we have a licensing statute in the state of ohio, and anyone that acqu e acquires a new motor vehicle franchise must follow that statute. and i represent 800 -- 830, new car, new truck dealers in the state of ohio who have followed the law, and adhered to the licensing statute. and we believe that a license

was issued to tesla that does not follow the statute. and as such, we have asked the court to take a look at that and see if in fact, our belief is correct. >> yeah. we've heard from other dealers that it's not about whether or not they like the car, some of them would love to carry it in their own inventory, it's about keeping network, so to speak, inta intact. we hear from viewers who say, why should residents' freedom to buy a car be interfeared with because old boy network wants to maintain the quo. >> the 830 dealerships have a dig investment. each of the dealerships is a small business, we have collectively employ a lot of people, over 50,000, we have a payroll of in excess of 2 billion collectively, and we account for 24% of the retail

sales in the state of ohio. and reality is, all of our people complied with the law and provided the necessary documents and statements of contract, and we want to protect the integrity of the statute. i think people get very concerned and skeptical of government when they kind of make the rules up as they go along, or they change the rules for different parties, different rules for different people. >> if i could ask a quick question, we're running out of time, i'm sorry, in theory, to echo carl's point, just to play devil's advocate, there was one point a lot of people employed in the walkman industry, the disc disrupted that, and ipods dlafrt. how is this situation different? how are you not preventing evolution in the car to consumer industry. >> certainly the 830 members of our dealership groups around the

state of ohio provide great consumer care and efficiently deliver our product. so we're not concerned with that particular model. but what we would like to see is they comply, as we did, with the state law that's in place. and that is the essence of our lawsuit. we'll have hopefully a quick decision. and we don't -- we're not anti-tesla. we just want to make sure integrity of the law is upheld. >> tim, thank you for your time. debate is an interesting one, and increasingly going nationwide. we want to bring in tesla. jim chen is tesla's vice president of regulatory affairs and associate general counsel, good to have you back. >> good to be here. >> how many of these fires can you fight individually across states? >> well, unfortunately, we've been fighting quite a number of these, and i find it very

interesting that mr. dornin talked about compliance with the law, and that is exactly what we've done in every state that we have entered. state laws have allowed us, as a manufacturer that has never used a franchise dealer network, to come in and sell our cars directly. we don't cheat. we don't skirtd laws. we go to regulatory authorities, we applied for, and we received, a valid license. and we are doing business in full compliance with the ohio law. that's exactly what our modus onnperandi has been and continu to be. i find it interesting mr. dornin talked about changing the law, special interest. we just came off of a fight where dealers pushed through legislation, tried to push an amendment through legislation that would have made it illegal for us sell in ohio. what is it? it is the current law doesn't allow this or is it a change in law they had to try to do

earlier this year. by the way, this is about their third or fourth attempt to come at us in various ways. >> yeah. >> it's all about protecting their monopolies. when we opened up our service center in columbus, they came at us with an allegation that we weren't meeting current zoning laws. well, we had that open hearing in front of the town council and the town council said, you are complying with the law, tesla, you're good to go. this summer they tried to send in another legislative amendment on a budget rider, an amendment to a budget issue for ohio that would have made it illegal for tesla to sell in the state. we found out about that. we talked to legislators let them know what was going on and legislators said, this is important. we need to have an open and fair hearing about this issue. this should not be a rider to passing the legislation. >> sure. >> the ohio dealer association said, we'll sit down and talk to

you, we'll air out our differences and figure out the solution that works for both of us. we said, great. and they went away. >> has there been any attempt to move toward a deal or model or any area of compromise in between these lawsuits. >> we've have tried to sit down with the dealer organizations and tried to get through a compromised position. at the end of the day, our core mission is all about introducing this tu nehis new technology to educate consumers, make them understand what the advantages of all electric drive are, and how it can be a better way for the united states in the light duty transportation sector. we've tried to work with dealers. in a few states we have reached compromises with dealers. recently we did it in virginia. glad to say my home state where we were able to reach a compromise, where we are opening up a store soon. in every situation, we try to sit down with them. in ohio, we have tried to sit down with them on numerous

occasions. >> right. >> i offered to them to fly out the week of thanksgiving, hammer out differences. never got the phone call. >> we can see where it's gotten you so far. keep us posted. an interesting topic. appreciate your time. >> thank you. >> european markets are closing right about how to. we'll get details on their close and the impact on our afternoon session in a moment. ♪ [ male announcer ] they are a glowing example of what it means to be the best. and at this special time of year, they shine even brighter. come to the winter event and get the mercedes-benz you've always wished for, now for an exceptional price. [ santa ] ho, ho, ho, ho! [ male announcer ] lease the 2014 e350 for $579 a month at your local mercedes-benz dealer.

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europe closed four minutes ago. simon's here to tell us what happened. >> green on the screen, carl. europe following lock step with the united states. a boost at the open, and they were higher as a result of what happened friday. imf comments that the eng ng of the world -- still the united states is economic groat for people -- that appears to be stronger than previously thought. and of course another bounce today as consumer spending jumps at its fastest rate in five months here, and that's benefiting europe. other stocks shifting, semi curbs doing well in europe today. arm holdings of course manufacturers or designs some chips for apple and they've done the china deal. sd microelectronics higher. some of the peripheral banks are bouncing today. amongst those, the portuguese banks here. and in italy, the third largest bank, some talk that the foundation, that bears its name, may offload 20% of the bank as

we move towards the capital increase. i want to draw your attention to carnival which continues to make gains in wake of the results and the interview we had with the ceo exclusively last week. now up 12% on the europe quote. a lot of the longer-term money for that travel play would come from europe with all of the deals that they've done in the past with p&o. most importantly, northern finland, santa is in the process of making final checks. letters are being opened. final wrapping of the gifts taking place. rudolph limbering up before they depart for the epic journey around the world. making a list and checking it twice. >> the question whether you've been naughty or nice. >> we all know the answer. >> simon hobbs joining us with european close. a check on energy and commodities as well. >> let's take a look at what is

not gliser glittttering that is. dipped below 1200 an houns. the 1200-year run is over. but looking at largest yearly loss that we've seen for gold prices. on track for the largest one in 32 years. looking at more weakness in the gold market. seeing some weakness in oil, despite the weakness in the dollar. there's not a lot of risk taken on right now here as on this holiday week. also watching natural gas because natural gas continues on a tear. natural gas futures prices have shot up 60 cents just this month alone. and of course, a lot of that has to do with the heating demand that is required. and natural gas used for that. as we're looking at colder temperatures, geeing out for the next couple of weeks, it's warmer on the northeast today but it's going to get colder. big withdrawals, and that's what traders are banking on. that's why we're seeing a big pop in nat gas. >> thank you. sharon epperson of the nymex.

bob watching what's moving. >> new highs, and the dow transports have joined the party. take a look at major indices. every day it's happening, hitting new highs. it's important to point out that the transports are there, confirming new high that we've had in the industrials. home builders having a great day. see that journal article, page 2 of the journal, talking about sturdier 2014? more predictable 2014 for home builders. there's the numbers up, 3, 4, 5, significant moves for home builders. also nice moves up in building product groups like usg. amasco up, 2, 3, 4%. tech stocks, not just apple, semiconductor groups are piggy backing. ssd, this is a new 2 1/2 year high for the group, led by the broader names, broadcom, put up

semiconductors here. this is piggy backing on apple story. sandis s sandisk, qualcomm. micron had a downgrade. micron's up over 200% for the year. so, that is not a statistically significant move down 4% on a downgrade for them. discussion about next year. i noted last week, a lot of the people i've talked to estimating stocks up mid single to mid double digits. 5 to 15% is a typical range i'm hearing. people have written saying how can you expect the market to go up again after up 27%? i don't know what the market's going to do in 2014. what i see going on, rising divide dividends, i see rising buy backs, modest economic expansion and mid single digit earnings growth, so far the estimate. put four together, i'd have a very hard time arguing that we

should see some kind of drop in the market with those kinds of numbers, those facts, for 2014. so, i don't know whether the market's up 5% or 15%. but i say with those numbers, multiple expansion is unlikely -- a multiple shrinkage is unlikely. >> the key point is everybody cites the market's no longer cheap, it's trading at or around fair value. over any time frame, the average is the average for a reason. half the times you're above, half of the times you're below. we're on our way higher and i think it continues. >> stay with the facts. stay with the multiple that you've got here. stay buy-backs continue, modest economic expansion, and you see dividends increasing, hard to argue the market's going to drop dramatically unless we get an unknown event. >> which has some worried, too. rick santelli in chicago. rick? >> hi, carl. i'd like to welcome andy brenner, happy holidays, merry

christmas. >> good to be here. >> all right. i have three placize want to go with you. first place, looks to me like the fed did a swap. swapped tempered taper for a bigger promise to keep rates low longer. your thoughts? >> well, what you've already seen in the marketplace is you've seen a significant flattening of the yield curve. we think that's going to continue, as well as once people start putting on their strategies for 2014, we're looking for significantly higher interest rates, also in the back end. we think five years will get more towards 2%. you know ten years around 3.75, and long ones well over 4%. we're looking for a significant backup. with the fed tapering, the net, the safety net of treasuries, it's no longer going to be there. >> all right. you already hit my second question. i wanted to talk about how we squeezed the water balloon from that little taper, that still keeps stocks happy for a while, to the flattening curve says

about the long-term, low-rate strategy. you hit on it briefly. i wand to expand on it. are we seeing a logistics unwinding of long positions on the curve for the steepening or is it what can we maybe read into it? >> i think what people are looking at, when you have a gdp growth of 4.1, maybe x-inflation, which we don't believe is as low as it is, strengthening of the economy, it's going to be tougher for the fed to keep short rates down as much as they think they will. because all -- if they're going to eliminate taper, they can keep short rates as low as they want. once the five year goes against them, we think you're going to significantly higher rates and the fed compression of rates will be reverses. >> all right. say that last interpretation spot-on. last 20 seconds, tell me how that comingled with the fed's balanced sheet leveraged to the tune of, according to your

research, 71-1. >> the fed is vastly overlevered and a lot of people say that doesn't matter because it's the fed, and they can always go to congress. congress hasn't been the easiest people to get along with recently. when you start showing hundred billion dollar losses, as you go to higher interest rates and you have extension of mortgages from convexity risks the hedge is not hedging anything, that's significant. and you have a lehman-type situation. >> andy, i'm out of time. i wish we could talk about it, because you brought up the right example, lehman. my biggest fear a spike in terms of the flattening, most notably under five years. we'll have to wait and see. thanks for being our guest this mor monday. >> thanks, rick santelli. dreaming of a 3d christmas? 3d printing company stratus hopes so, opening new showrooms, hoping to make printing easier

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getting into the holiday spirit with spirits made by brown foreman's chief officer. made a new cocktail that i think all of you might be interested. straight ahead at the top of the hour. >> 5:00 somewhere. thanks so much. we first introduced you to 3d printing company after bought for $403 million. since that time, adding products and services to make 3d printing easier than ever. so can 3d printing go mainstream this holiday season? seema mody live with more on that. >> reporter: good morning. that's right. that was the goal of stratus, 3d company that bought it, is to make 3d printing act sellable and relevant to the consumer. you can bring an object in, scan it using the digitizer, upload to ipad, and have the 3d printer

print the object. you may be wondering, will this printing experience be a hot gift this season? we spoke to a family, carl, who say they loved the 3d printing experience because it will allow their child to exercise his creative skills. listen in. >> we have a 12-year-old son who is very interested in engineering. so we thought that this would be a perfect introduction for him to kind of to bill something he's dreamt of. >> reporter: personal printing space is a small market, 36,000 units sold in 2012. but that number is expected to double in 2013. and analysts say the retail experience, being able to come in, test out the 3d printing device, that in itself could boost brand awareness which could be a driver to sales. carl, i've been here for a couple of hours, i was able to print out this cool, hot, pink neon bracelet which i'm going to give to you for christmas.

>> what a thoughtful gift, it must be amazing. being a young kid, growing up with technology like this who knows how it will alter the way of what they think is possible down the road. fascinating stuff. >> reporter: absolutely. >> talk about a career change, ceo of the squawk breakthrough went from high finance to high-end fashion starting a men's e-tailer after his finance job disappeared in the wake of the gration eat recession. more in a moment. [ male announcer ] what if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading.

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>> ceo of today's qua squawk breakthrough took an apprenticeship with a london taylor. launched in richmond, virginia, in '09, on track to sell over 40,000 shirts and be profitable this year. the co-founder and ceo joins us from richmond. good morning. >> good morning. thanks for having me. >> what a story you have, getting out of oxford, going to lehman. everything collapses and you're like, now what? what was it like starting a company back when everybody wondered if we were going to be here the next day? >> i think a lot of people told me we should be making shirts out of burlap as opposed to cotton. a crazy time to start a luxury shirt business but also

opportunities. from a cost perspective, it was good time to be entrepreneur, people were doing things at half price, but sentiment changed in the luxury clothing industry, guys spending $300 on a shirt said, why am i doing there is? they wanted luxury, wanted quality, but they were plooking f looking for value. we said we're making shirts from italian fabrics, 20 stitches per inch but we're able to do that at 135. guys would buy one, then three, four, five. it was over 100,000 shirts ago. we've been growing over 2x year on year, and having a blast. >> we talked to a lot of young companies in apparel, we know it's difficult. but not impossible. a lot start out online, a lot are driven to some form of bricks and mortar on a hybrid basis. is that where you're going? >> everything longs for multiple touch points with customers.

we kind of believe that transactionally, there's no better experience, particularly for men, but relationally, starting that one-on-one, the first time you meet a customer, to have them try on something, there's little that beats kind of that one within one relationship that you get in the store. i think what's happening, the next big american brands are all started online and segue into traditional distribution channels. we're doing na in a way, 98% of business is online, but we do one month pop-up stores. we finished one in d.c. they get to try it, fall in love with the product, and hopefully transact 20 years on line. >> when do you anticipate having a physical presence? >> you know, it's probably 24 months out, maybe shy of that, and i think it's our biggest markets, which are new york, d.c., atlanta, chicago, san francisco. what's great is starting a business online you get the

customer base, you get to know what products they're buying, what they're driven by and give them to them from an e-commerce point and bricks and mortars, a powerful proposition. >> interesting story. we'll be watching you guys. thanks for coming on. >> thanks for having me on. >> by the way, i don't know if you've seen this, why would beyonce hit up a walmart? massachusetts to wish 750 shoppers a merry, merry christmas. take a listen to this. >> for everyone in the store, right now, the first $50 of your holiday gifts are on me. >> beyonce also there to promote her new album and while target and amazon are not stocking the self-titled album, walmart is, and just from an optics standpoint, on april within where target was reeling from that breach, that's fairly brilliant pr on the walmart

side. >> i agree. i align myself with the people who think companies are mad at beyonce not releasing the album simultaneously in the stores, have more to gain by standing up to beyonce in the sense that beyonce is big enough to do what she wants but the average person needs direct-to-consumer retailers more than beyonce does. they have more to gain than taking a harder line, not carrying her album. >> coming from a man who knows the music business. are you looking for a stocking stuffer for the superrich person in your life? why not get them a million dollar watch? we'll give you an inside look at some of the craziest million dollar watches and people buying them in a moment. [ male announcer ] this store knows how to handle a saturday crowd.

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looking for last-minute stocking stuffers? if you're superrich a million dollar wristwatch or two might fit the bill. robert frank looks at bling that will brighten up the holidays. >> we're here at the vip room of jacob and company. few clients ever get back here. and they're here for big bling like this. >> these are all one of a kind.

the burma ruby over a million in retail. >> when you say a little over a million. >> 1.50. >> size matters. the grand baguette is one of the most exclusive pieces. >> this is the only one in existence. >> reporter: and one of the biggest, dripping in diamonds, this megawatch tells time in five different cities. >> 1.6 million. >> reporter: 1.6 million. >> this is sole. >> reporter: to what kind of person? >> we don't sell and tell. customerses come from all places over the world, middle east, best watch collectors come from that region. chinese are brand conscious, love quality as well. that's a growing segment for us. >> it's always fun to watch some of these taped packages, but it does make you wonder if we're in a gatsby environment and it's important to note as we get into

a new year. we talk about the long-term unemployed and those receiving federal benefits. >> lost in the debate about the stock market and the fed is the much more important debate about whether or not the fed is worsening the income inequality. >> as if they don't have enough to worry about. >> dan greenhouse. scott wapner and the halftime. >> thanks so much. what we're following today, apple breakout, will the stock's second half surge continue, now that china mobile's officially on board. bourbon boom, holiday cocktails and trading biggest names in the business with an entertainment expert. they have one of those. here's in the house mixing it up. the markets which are coming off their best week in some three months. heading higher today. the dow on track for its best percentage gain since 2003. with 2014 now just a week away, what is your best play to kick off the new year? it's halftime. let's play the action