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tv   Squawk on the Street  CNBC  December 29, 2014 9:00am-11:01am EST

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in a kennel, i have heard dogs getting in a fight or something in the kennel. it has come back missing an eye. it is tough. i was thinking, andrew, what about starting out like this just renting a dog for the kids for the two boys for a week on a holiday and see if it works out. >> you would need a little dog. they are so scared of big dogs still. >> they have little dogs. >> ken rogoff, great seeing you. "squawk on the street" begins right fou. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla. darryl and jim have the day off. final three trading sessions of 2014 as the dow rides a seven-day winning streak.
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a little chop in the market today as we watch political turmoil in greece. oil moving higher, back above 55. some supply concerns bubbling over in libya. in the ten-year, settled back to 222. that is about a one-week low. our road map begins with global fears returning to the market. greece's failure to elect a president has europe in the red and u.s. futures pointing slightly lower. >> forget the movie theater on demand. nearly five times the size of the physical box office. what it means for the future of movie releases. >> move over yuber. chinese market is now the world's most valuable tech start-up. >> equity futures edging lower. global uncertainty returning to the market following seven straight days of gains. european shares back to work
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leading the decline as the greek parliament fails to elect a president. that does set up some nationwide elections in january potentially derailing the country's bailout agreement. greek stocks were down double digits. we are going to talk more about the sarisa party, if they have their way and get through these snap elections will demand renegotiations with lenders. not the kind of note you expected to end 2014 on. >> it is sort of deja vu with the political turmoil. the greek assets are getting beat up. take a look at the euro. already, it had been weakening. about 11% in the second half of this year. it is a good barometer to see whether it is spilling over. >> it is very important to point out here that this doesn't necessarily lead to greece actually exiting the euro. they are leading in the polls but their margin of victory is decreasing over time. they may not have enough mps to form a government. they might win, be the biggest party but they may not be the leaders moving forward.
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they would like to renegotiate the greek debt, particularly the debt that's held by the public institutions, not the private sector. here is the rub. if you expect the european central bank to go through and stop public q.e. buying, can it do that if there is an election pending in greece? there might be a party that may not pay back the money that you are buying in the market. that's a huge issue. demanding a hair cut, to put it more accurately. if you can't buy the greek bonds, can they buy the rest of the bonds around europe given that they have to appear to be systematic in what they are doing. that may be the bigger issue. >> january 22nd is the big meeting they were set to debate it. they have been raising hope going into this. that's one reason why european stocks have been able to rally. it is going to be a big question mark into 2015 whether mario can deliver. >> you have the head of this being the spoiler. if you are hoping for a q.e. in
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europe, that's one reason german bonds are yielding 56 basis points today. 56 basis points on the ten-year boon. that is a record low. >> i would also point out on that story and the int nation storlry, russia's economy officially entering into contraction. the first time we have seen that in several years. the ruble again has been falling against the u.s. dollar. >> three trading days to the end of the year. what can we expect? let's bring in brian belski and francisco blanche. a couple of heavy hitters here this morning. francisco, let me talk about oil. after five weeks, we are higher on oil because of a disruption in libya. i appreciate that libya is not the be all and end all but could it be a psychological turning point for the oil market? >> it depends how long it goes on for. clearly, libya has a lot of issues domestically.
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there are two governments trying to have precise control of the operations at the same time. we'll see how long this disruption goes on for. it could be a turning point. i do think libya is a very important supplier. the return of libya was what started the route downwards in the first place. i think we see libya for the majority of 2016. it could provide a lot of support here. it is one to watch here. >> remind us what the excess supply is that we need to take off the market. it approaches 2 million barrels a day. libya doesn't do that. >> we estimate a little over 1 million barrels today, somewhere in that range. 1 million barrels a day. particularly the big supply surplus is going to come in the second quarter of the year. it is going to come when the man comes out vis-a-vis supply. that's when the market stops. >> brian, besides the equity
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market, we should remind ourselves that we hit a fresh record high on the s&p on friday. for the week overall, 10 of the 12 sectors were positive for the week. it is still the energy sector that clearly lacks. would you be a buyer here? >> no, we would not. we still think three things have to occur within the energy sector. it has to act like technology stocks from a fundamental perspective, goes through massive structural change where the sector, the companies and the ceos themselves actually start to think about underpromising and overdelivering. that's number one. from an apathy and psychological base circumstance with he need to see investors stop try tog bottom fish these stocks, specially given the fact that still we think it remains a supply issue and global demand remains very, very slow. the third thing that needs to occur, we need to have a better feel for what's going to happen
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with respect to global equities and growth overall. we think that message will remain quite cloudy over the next year or two. >> what does that mean for the broader stock market, brian? it has been a swift, steady, persistent rally, specially going into the end of the year here? are stocks fairly valued? are they getting a little expensive, even for you, the bulls? >> happy new year, sarah. what i would say is this. our target is 2050 for year end 2014. that's where we are at. our target for 2015 is 2250. however, we do think 2015 will bring a lot more volatility and periods of volatility like we probably will see the next day or two with respect to a lot of question marks, in terms of global growth, what the fed is going to do, a lot more back and forth trading relative to what we saw in 2014. we are still mildly bullish here on a near-term basis. longer longer term, we are quite bullish on the outlook on u.s.
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stocks on a fundamental perspective. >> francisco, let me ask you about diesel. the front page article of "usa today" is concerned about the fact that diesel prices have not fallin as rapidly as gas prices across the country. i wonder if you could shed any light on that? clearly, there air a lot of people that are making their living through transportation that are not getting the same sort of tax cut others are enjoyed? >> there are two effects. the pass through to the retail market, which is specifically a little lower than the wholesale market. the wholesale market are trading a month and a half forward as opposed to current problems. that's a one to one factor. second factor is that, of course the succession across the market. it depends on which market you are looking at. the third piece perhaps is the
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margins are expanding as crude oil prices fell. we think diesel is going to struggle the next year from a margin perspective. we see a lot of diesel coming into the market over the next 12 months or so. >> francisco, one last question on copper. 4 1/2 year low. a lot is a china play. a lot of the macro guys want to use it as an indicator. your thoughts? >> my thoughts is that growth for next year is going to come out pretty strong. we are actually predicting acceleration in global gdp to 3.7%. i think also that the drop in price is going to act as a catalyst. we saw the ims talking about a .3 to .8% revision globally to growth estimates. if we grow anywhere above 4% next year. that's going to be a pretty good outcome for copper. i think copper is going to do okay. the one thing to think about in
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copper is that supply is going to be pretty healthy in 2015. the rest of the metals, we are pretty constructive on. >> to recap on oil, where do you think we will be on nymex? >> oil probably comes back to around $80 by the end of year. we think we will see a rebound around $20 throughout the course of 2015. >> brian, what's your year-end target on the equity market at about 8% gain? >> yes, we are, 2250 for 2015. a little more volatile but still positive for u.s. stocks. >> good to see you, folks. thanks for your time. >> francisco blanch and brian bimex. the search continues for missing airasia flight enroute to singapore. katy kur joins us. good morning. >> reporter: good morning, carl. it certainly appears to be another tragedy. they are still looking.
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it is still a search and rescue operation. they are looking around an island in the flight path. no official sign of the plane. there was an unconfirmed sign, report of debris earlier today pretty far from the last known location of the plane. there was also a report that an oil slick had been found. this is the java sea, very highly traffic. a lot of oil tankers going through. that was tested and found to be not asoc dwrated with thesociated with the plane. oftentimes, spotting of debris or oil slicks turn out to be nothing. they like to spot everything they can. that way, they can rule out all the potentialalities. weather is an issue. tomorrow it is going to start raining pretty heavily. it is monsoon season in southeast asia. that could potentially mess with the search and rescue. it is suspended as of now.
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it will resume foamtomorrow morning. there air lot of anxious relatives in indonesia hoping the plane somehow crashed on land and there are survivors. indonesian officials say from their calculations it looks like the plane did land, did crash in the sea and right now it is under water in the java sea. they are going to search every inch until they find something. it is better than what the search is for mh-370, searching the indian ocean, a deserted area of body of water. this is much smaller. they are hoping they are going to find something sooner than later, carl. >> katy tur in singapore, what an incredible, unfortunate year it has been for carriers in that part of the world. it made how much? the interview online sales top the theater chains. more on hollywood's blockbuster weekend. apple is celling a lot of
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iphones for the holidays. how their takeaway is coming up. barring a last-minute disaster this week, the s&p will log a third year of double digit gains. we have not done that since the mid 1990s. we're back in just a minute. courage. which is why usaa is honored to help our members with everything from investing for retirement to saving for college. our commitment to current and former military members and their families is without equal. start investing with as little as fifty dollars.
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sony has said it had been purchased or rented online more than 2 million times. that number really surprised people online specially when you compare it to what it did in overall theatres, a fraction of what it cost sony to make. >> hard to make money. 2 million households, three people a household. two people a household would have been a lot more in actual theater tickets. >> sure. >> it could be an $80 million film. >> i did watch it. i liked it a lot. i thought it was hilarious. you have to go in as a seth rogan fan. >> you know it is going to be that stupid. >> someone handed me a bootleg
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copy of it. >> i continue to be amazed at sony shares on the nikkei are not only up 24% this year, they are in the top 10% of all nikkei of the 225 on the nikkei. >> they have had a monster year. >> they have been on a roll thanks to the weakening yen. also, this model releasing simultaneously in physical theaters an online. they have never done that. you have to wonder whether it is a new model. people couldn't find a movie theater. it was an active sign. >> you had a month of worldwide publicity. to pay for that kind of marketing would have been cost prohibitive. >> now, it is on apple. finally saying it is on itunes. >> did you enjoy it? >> i did. i laughed out loud. art cashin with us next as we get ready to ring in a new week. we will take a look at futures on our way out. after seven straight days of
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gains for the dow jones industrials, with he could open negative. not huge moves in the last three trading days of 2014. more "squawk on the street" from the new york stock exchange straight ahead. why do i take metamucil everyday? because it helps me skip the bad stuff. i'm good. that's what i like to call the meta effect. 4-in-1 multi-health metamucil now clinically proven to help you feel less hungry between meals. experience the meta effect with our new multi-health wellness line. ♪ ♪ i love my meta health bars. because when nutritious tastes this delicious i don't miss the other stuff. new meta health bars
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>> less than ten minutes before the opening bell. our captain is here, director of floor operations. >> greece and a little bit of russia. the crb index is like a five-year low. so it is a little tough.
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we've got a great run here, seven days in a row up. the seasonals for next year are exceptional. going back to 1885 a year ending in five has been down only once. >> say that again. >> back to 1885. a year ending in a 5 has been negative once. >> what is it about the five? >> the middle of the decade. before you get overwhelmed with that, if you this i it through, it has only happened 13 times. so it is 1 out of 13. >> good point. >> it is the year before a presidential election. that has almost equally an upward bias, somewhere between 15 and 25%, which would be one heck of a run. so we'll see. the first quarter of business is, if we are down today, we will try and make sure we are not down tomorrow. all year the s&p has not had
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three days in a row to the down side. we have only these three days to make it work. that has never happened before, even back to 1885. >> last january was no good. any reason to think this january might be an echo of that? >> no, but if i would worry about january, my guess would be to start worrying around the time of the expiration, around the middle of the month. last january and the other weak januarys have tended to manifest whatever weakness they have middle of the month. >> most of us are students of the stock market. you spent a lot of time with that. is that something more people should be aware of? most people think the market will go in valueations. >> i believe valuations are critically important.
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if you look at weakness in, for example, september and october, that made great sense when we were an agare yan society. it meant moving money out to buy crops and seeds. we have far more smokestacks than haystacks. the pattern is a historical pattern. it shouldn't be dismissed as being simple. there seems to be a reason for that. >> art, i want to call your attention totten-year note yield. it is just about he low 2.22. persistently low yield. does that give you any caution about your bullish outlook for stocks in 2015? the year in which the market is expecting an interest hike from the feds? >> i am agreed that you wanted to pay attention to that as you and particularly simon know, i have said in the past that i had doubts about whether they would be able to raise rates or not.
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it does indicate there are some pressures. even though it is not a direct cause and effect. the weakness in the crb index and the weakness in copper hints that there may be deflationary pressure out there. >> are we in danger of breaking all the historical norms. we think the european historical bank is going to come in for the first time ever across europe. doesn't it connect the treasury market as well. are we at levels we shouldn't be at but we can stay at. >> certainly, you are at levels that most historical precedents suggest you shouldn't be. people begin to make wrong correlations too. i hear a great many people talk about, whenever the fed has gun to raise rates, the stock market did this. they were in completely different times. you weren't coming off from a prolonged zero. you didn't have the financial crisis that you have. i will keep my eye on my historical patterns ingrained
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in human nature. i will respect the fact that this time, it could actually be different. >> finally, a reminder of how solid q-4s have been. dow has added 1,000 points. the last time we did that was q-4 of last year. >> i have been pounding the desk about seasonals. it looks like the santa claus rally is in motion. what we want to see is it go into at least the first three days of next year. >> that would be the traditional pattern. >> as long as dollar yen continues to march higher. that coralrelation is intact. >> we'll see you tomorrow ringing the opening bell. looking forward to that, art cashin. >> the opening bell is about 4:30 minutes away.
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so ally bank really has no hidden fees on savings accounts? that's right. it's just that i'm worried about you know "hidden things..." ok, why's that? no hidden fees from the bank where no branches equals great rates. you are watching cnbc's "squawk on the street." opening bell in a minute and a half. a lot going on for the holiday week. the s&p is riding a pretty nice
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streak here has officially locked in a year in which it will not fall for four consecutive days. that has never been done. up 13% for the year. the dow is riding seven straight something it has not done since a ten-day streak in march of 2013. >> i'll give you another one. 52 record highs in terms of closing for the s&p 500. we get another one this week it will only add to that more than 20% of the time. a record high #. >> it is scary when it falls. that was scary. >> also on that note we can watch russell, 2000 the small cap index, which also managed to close at a record high on friday. that was one that had been lagging and still for the year is only up a little more than 4%. >> for buying some of those small cap biotech stocks over the weekend. a lot got some more mention. gill yaddead.
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>> with all the political uncertainty across the atlantic. we are talking about greece germany and let's get a look at the s&p at the top of the screen and await the opening bell. deutsche bank securities. a nonprofit improving access to higher education in the u.s. over the nasdaq. things we read. a nonprofit that donates books to veterans and service members. with all of that we'll begin probably by looking at manatawauk the 7.7% stake. you wants to talk about management about separating the crane business. >> when you say it look like that. >> i used to cover them as a
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journalist. fascinating, old school, midwestern hiring company. you would recognize tdhe cranes if you you went past any construction site. they have had such an amazing year so many successes from netflix. >> they attempt to look at the accounting regularity. the industry data is looking quite strong for us. >> i would also point out here that energy is opening as the strongest group in the s&p 500, getting a rebound in the price of oil on the libyan tension. haven't spoken much about that. when you talk about supply concerns over supply perhaps going the other way today. there was some fire escalation of violence in the civil war in libya putting into question that opec number supply is going in. the risk premium has not been there with oil sliding more than 44% in 2014. >> again, it is amazing how
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these names are either at the top or the bottom of the list from day to day. everything from a neighbor to a noble marathon. transocean. they are almost always in the top ten or the bottom ten. as brian belski was saying you have to stop seeing people trying to nibble at these levels. >> it is a way of trading the energy market. simply up and down. what is interesting, they are the top gainer. baron came out with a number of top picks for next year. gilead is at top. general motors bank of america, boeing, american airlines and google, an astounding if you go to 20% gain. it has entered the s&p 500. >> interesting to hear about those kind of returns when you have a stock market trading at a record. it is becoming harder and harder to find bargains out there.
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utilities are stronger again. they are the other group in the green with energy. that is a low rate story. what you're seeing on some of the selloff in the european markets and the risk assets like the overall markets is buying of u.s. treasuries. one of the stories of the year. 222. that makes those utility dividend payers attractive. that has to be one of the top stories of 2014. >> you see the knee-jerk reaction. delta is the top news of today. >> nasdaq has been one of the more interesting avenues, because it has taken so long to get back into the green. a lot was because of a weak performance of biotech. gilead is the best performer. the gainers today at the top of the nasdaq almost all of them have year to date gains of 35%,
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61%, 28%. if you want to show you own some of these names. >> buying what's been working as opposed to buying the lagers. which might be the story into next year. >> three more trading days of the year. also, on the nasdaq, i wanted to bring up apple. cob a mover today. they are finally going to be streaming the interview on itunes and reports that it is going to be entering the u.k. we are going to talk to an analyst a little later on. >> over the weekend, they did say they will carry it. >> i wonder why. 599 to rent. >> which is the same as google. microsoft also on the xbox. interesting that apple came after that. we mentioned walgreen's shareholders voting today on the deal creating the holding company. they have already bought the 45%. now, they are looking for
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permission to buy the other 55%. we are hoping the deal didn't clothes after the end of the year. that would be wednesday. they transformed the company to a holding company. not in chicago but here. over at the nasdaq. there are share holders, particularly those associated with some of the labor unions that believe it is an overvalued purchase on their behalf at a time it is a switch that will come in and run the company which will be unusual as the transaction. they are expected to go through during the course of today's session. >> energy, of course sarah and simon mentioned already what is happening with crude but gas, what a week it had last week. wondering whether nat gas could fall below $2. i saw over the weekend, 20,000 gas stations have gasoline below $2. there has been a lot of discussion among aaa and some of the gasoline watchers we are
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going to see more before the end of the year. >> the big question is how much money is putting in consumer pockets and whether we will see that in retail sales in holiday spending. there has been no conclusive broad number on the holiday season. some will be anecdotal. some of the smaller tracking data suggests it will be strong thanks to last-minute shoppers. you have sentiments at multi-year highs and you have gas prices where they are. 20,000 below $2 a barrel. certainly not bad. >> minimum wages for many states. >> in the meantime dow up 12 points. bob pisani is on the floor. >> good morning, guys happy new year to everybody. 2015, we have a mixed market. you mentioned the energy stock, clear to the up side. the flip side, the commodity names, other commodity names materials are to the down side by and large. sort of an indeterminate open. i was reviews the etfs.
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the winners are biotech and mainland china etf. if you look at the main biotech etfs. there is the three of them. xbi, fbt and ibb. the first two are equal weight indexes, the stocks in them are weighted equally. the nasdaq biotech is a market capitalization weighted index. what's happened is the equal weighted index has done better than the market cap index. a lot of very small biotechs have had phenomenal years phenomenal 2014s. it outperforms the market cap weighted index. it gets them to the politics of index construction we have talked about often. you can't predict this one year to the next. sometimes, one index construction will outperform another one. the other big winner is mainland
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china. we talked about this in november. there was a surge in interest in investing in mainland china shares after the country made it easier for foreigners to invest. there are three etfs that allow you to invest in the mainland shares. they are all up better than 40%. it is a lot easier to invest in mainland china. here is what i don't particularly like. these are very small funds. number two the interest in china china is not reflected in hong kong. if you look at the hang seng index, which is considered a proxy for growth in mainland china. it is only up 2%. people out there looking outside are saying to themselves growth may be very limited but there is a surge of interest in getting into those afrmts"a" shares that no one was able to get into.
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i would caution getting into the "a" shares. as for the worst performance, it is pretty simple. anything with commodities or commodity countries like russia or pra zil. the brazil. 44%. the oil funds down 41% as the steel stocks are down 28%. there is the xop which we have talked about frequently. brazil on the weak side. finally, there was an article in the "new york post" today with the intercontinental exchange may possibly want to spin off or sell the new york stock exchange. this is a per enennial old story. every year the nyse is going to be closed off. while we are working to improve the business are the conclusion in the article is untrue and in conflict with our recent statements about integrating and
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investing in the nyse. when the deal with ice was announced two years ago, i said that this is now a very small part of ice's business the ncse floor operations maybe 6% 7% of overall revenues. a lot of the business is futures business. if that business the business of selling stocks and being in the business of buying and selling stocks didn't improve in a few years, it was quite possible the business could be spun off. these guys have made it clear, they want to grow earnings. but not in 2015. they are making very serious investments in the place and trying to turn things around. i think a sale is possible down the road but not in 2015. guys back to you. >> the gift that keeps on giving. bob, thank you very much. let's get over to the nasdaq and they can in with morgan brennan as to what's moving over there. >> hey, simon. taking a look at the nasdaq we are trading about flat. up just about .10 of a point to
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4,808. one of the biggest movers gilead sciences getting an upgrade. a top 2016 stock pick from baron's over the weekend. that's about 3% higher right now. bob just mentioned biotech stocks in general doing better. the nasdaq biotech is trading higher. a different story for semi conductor stocks. take a look. that's trading lower today and need ham coming out with a handful of downgrades. ambarella is down about 4%. also cavium my codeine vices and skyworks, solutions, down about 2% today after being downgraded. lastly, two tech jinlthsgiants to keep an eye on, google trading flat ever so slightly up after reports that we are getting that its g mail service has been
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further blocked in china. the other name to keep an eye on is apple, up with .25 to .50. apple will roll out apple pay next year. taking one last look at nasdaq composite at 4810. let's check out oil prices. because they are in rebound mode. even natural gas, jackie deangelis. >> we are seeing a little bit of bounce today. don't get too excited. we are only talking about 47 krentz on wti. hanging around 55.97. brent crude slightly under 60. expect to see these levels throughout the end of the year. what's really interesting about this rebound is clashes in libya are spurring it. that's the one wild card to the whole supply demand that's
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geopolitical. we did see an attack on one of the main export terminals in libya, endangering a couple of days of supplies for them. people are worried we could see more conflict in the new year. you would think something like this would send prices up a little bit more. also traders are telling me we are seeing a little short covering here. you did get the reduced growth number for china. the thought of this is that china might inject liquidity. that could move oil prices to the up side in the new year. these are the caveats the changes to the geopolitical climates and the change to the supply demand equation that could move these prices around. you talked about gas prices before. last week, when i recorded we were at 238. now, 229. that gas around $3 is still a boon for the consumer. back to you. >> jackie thank you very much. when we come back another big weekend for holiday sales and discounts. three trading days left in the year. how are retailers fairing right
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now? a full week of "the interview." $15 million in online sales and the help with the american box office.
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is apple pay heading across the snond they are in talks to launch the pay service in the first half of 2015 as we clothes the books on the 2014 holiday seasons, can we expect iphone sales to give apple stocks a boost? shares of apple moving slightly higher. we have raymond james and travis mccord joining us. the story of 2014 was great products none of them big enough to move the needle on a company this larnl. is apple pay going to be any different? >> as a stand-alone product, probably not. yet another service that will drive more market share gain for the phone. in terms of modernization, that's what matters for apple. every 1% increase globally is
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another 5%-10% growth in earnings. >> is there a natural ceiling to how much share the iphone can have? >> we are still in the low teens market share. obviously, they are taking a rather high price strategy. there is a limit. to where they can get to. i don't know that we are anywhere near that limit quite yet. >> how do holiday sales look. it does feel like the new iphone 6 and 6 plus that cycle product upgrade is lasting longer than usual. >> all the data we look at suggests a pretty fantastic quarerquar quarter for cell phones. one of the easiest things to check is the availability of the phones themselves. we are seeing spotty instances of lack of supply here in the states. last two years, mid to late
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november, they were pretty much in supply and demand balance. we are going to see the sale of iphones this holiday season still relatively strong and that will probably persist into the march quarter. >> i was reading there is this dramatic plunge in short interest in apple's stocks. about a third of all shorts were covered in early december. short interest is now at a 2.5 year low. is that a structural change about where apple stock is going in general or do you think that's a seasonal factor that has to do with the market being overly pessimistic and now more fearful of window dressing? >> i think that's probably more of a tactical move folks figuring out there is probably better chance for up side to this quarter in the next quarter than risk even though if you were a longer term bear on apple, probably makes sense to cover your shorts. >> tavis, who is the competition? we have seen samsung, globally, these sort of low-end providers
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around the rest of the world. is anyone there to put up a fight anymore? >> in the states, it is harder to see who the competition is. samsung is still doing okay in the united states. we have a little bit of a skewed view of the world. apple is much less powerful once you get into continental europe and asia and latin america, largely due to price points. in different geographies, we are seeing different competitors do well. shaomay will be using that to expand around the world. there are niche brands a company in france a french brand of android only selling in france and doing quite well. android is a very fragmented market share ecosystem. depending on each market there are real competitors to apple but in the united states specifically and a few other markets around the world, there
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doesn't appear to be any real competition. >> thanks for your time. >> happy new year. >> take a look at juno and gilead. a lot of these winners and losers are coming up in 2014. >> the dow up about 15 points.
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three days to go and 2014 draws to a clothes. cnbc is breaking out the 2014 playbook. our own meg terrell is back at h.q. looking at ways to make money in biotech. meg, take it away. >> a huge year for biotech in 2014. most expect that to continue. eric schmidt told us he expects biotech to outperform the broader market for the sixth straight year. here is what to watch. if you wanted growth in 2014, you almost had to be in biotech and phrma. stocks in the sector continued their run returning more than double the s&p 500. here are three predictions for 2015. first, drug price wars.
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it may be the biggest threat to biopharma evaluation. pressure on escalating drug prices, mostly from health insurers, doctors and patient advocacy group. we could see price wars among dreg drugmakers themselves. they will face new competition. second, inmu know therapy. it was a hot topic through 2014. new cancer drugs that harness the immune system. 2014 will be the year immu know therapy becomes investable in whole new ways. two new companies race to bring another kind of immuneotherapy. drug deals. 2014 was a banner year mostly driven by tax considerations fell through. as cash plus bigger companies continue to look for growth. expect biotech, promising products in cancer and rare
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diseases to be targeted. analysts are watching companies like puma biotech. once like gilead recovering from some pricing pressure concerns, that stock is up and juno which has just been on a tear. >> i was wondering if you think, meg, that we are going to be talking about that express scripts deal six months from now, a year from now. was that a true game changer? >> a lot of people think it might have been. we had a letter from congress asking about the price of that gilead hepatitis "c" drug. this is some real concrete stuff. a lot of folks think that could be a watershed for biotech. >> going out with a bang. thank you so much. our meg it tirrell.
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andy lipton joins us to talk about the complex in a minute.
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good morning. welcome back to "squawk on the street." i'm carl keenquintanilla. the s&p within 8 points from 2100. the energy is getting a bounce. people buying some of these momentum names. chipotle today, if it closed right now would have its all-time highest clothes. >> let's get to the road map stocks as carl just mentioned. the russell 2000 at a new intraday all-time high. we'll dig deeper into the success of small caps. >> find out what it means right now. >> oil prices in 2015. why the commodity could be under further selling pressure for the for seeable future? >> stocks slightly higher in early trading amid some pressure from europe after the greek elections or parliamentary votes perhaps more accurately. we are hitting a fresh all-time high in many of the indices.
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andrew andrew berkley is head at oppenheimer. you are very bullish. you think the market will rise 10% next year. >> next year cob a pretty good year. we are hitting the year on pretty good momentum. talking about new highs. everything from sendmenttiment to consumption. that macro theme, still, largely the case for the first half of next year. it can change in the second half. the first half of next year will be a lot of what we have seen. >> you are squarely on the consensus of what will work. >> financial and consumers, discretionary area to the party. the dig theme is domestic and consumer oriented. i think that's consumer discretionary. >> that theme that you mentioned, it is in stark focus today. we are coming off of a weekend
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where we got weak chinese industrial profit. russia's economy is shrinking for the first time in years. the u.s. market continues to go to record highs. talk about resilience. is that going to continue that resilience in the face of global turmoil. >> you are going to see more money flowing into the u.s. market, certainly with the strong u.s. dollar that's giving you that double benefit there. there are really not a lot of alternatives. if they can get the european economy going, that may stimulate things a little bit. i think that's what sets you up for a more volatile middle year next year as opposed to a linear, strong year. >> i certainly wouldn't want to be the international revenue line at a caterpillar or mcdonald's or a coke. >> with all that i think earnings still will be pretty good. analysts have reset the expectations solo. growth expectations are down about 4% from the beginning in the quarter. a lot has been energy.
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>> what about energy. let's say we stay at this sort of price for what's texas crude. >> i think if you are going to get blow-ups within the market. >> if you stay at this level, the analysts still need to revise the numbers down a little bit but not radically. they are still falling for energy and haven't caught up for the price of oil yet. if you stabilize, that's a good thing. that would be my time looking to get back in. >> forgive me you wouldn't worry about dislocations within credit coming back to bite the market. i don't see that as a systemic risk right now. it is energy related. >> the energy story could help some corporate earnings. we talk about how it is going to weigh on the energy sector. not just consumer names but some of the food companies. a lot of these big production companies that use oil in the process. >> interesting thing about commodities, it hurts the commodity oriented. the benefit is spread out for
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all the consumer and production companies for the next 12 or 18 months. >> why wouldn't you be looking to buy europe as a discount as opposed to buying u.s. at the high. betting low gas prices are going to last forever. it seems like so many things are working here. there are better values somewhere else around the world. >> i thisnk that rotation will come. they have failed to act so many times before that we are betting a lot they are going to come through. >> the boy that cried wolf. it is an opportunity in the first half. you are probably a little bit earlier. >> a lot of international companies quoted in europe that have the same sort of exposure around the world as good companies quoted in this market. >> from the valuation perspective, you can make that case, u.s. cyclicals trading at a big discount. >> a happy medium. >> you are probably describing exactly what you are witnessing now. you are in real time with what
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everybody else is doing. you are matching that with your analysis. >> that's been the case for 18 months to two years. >> that broadens 2013 and 2014. >> every time we have had a 90% down day, that's been the answer. you are back even except for maybe ebola. >> one of the big things we have seen is give
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you a better experience in the store. we think best all of the market metrics that effectively retail stocks act relative to the market interest and gas prices were averse as well. they are all positive as well. with the structure there, that should continue into the first half of the year. i think that retail underperformance that was quite sharp in the first half of the
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year and has sort of flipped around labor day, that shift continues in the first half of next year. it makes it a better environment for retail. beyond that with your last guest, we will have to look at where gas prices are and where interest rate goes. >> we'll see. david shick, thanks for joining us. the search for the missing asian airliner continues today. we are in singapore with that story. >> reporter: day two for the search has concluded. the air search portion has been suspended. tomorrow, the area of the search is going to be broadened, not just sea, the halfway point where the flight originated and
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singapore, where it was supposed to have landed but didn't. now, it is going to include land and area near that area as well. today, day two, many leads, reports unconfirmed of oil slicks, of objects that
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"the interview" is now sony's all-time movie. does this mean "the interview" was a success? good to see you, paul. welcome back. >> great to be here. thank you you. >> people want to argue that $18 million is a success for an $80 million movie. you agree? >> i think sony took lemons and made box office lemon aid. it really was a situation where
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the movie became more about people expressing the right to go see it than about the bottom line box office dollars. the awareness for this movie was through the roof because of its coverage in the mainstream press. not just entertainment press. so people were exercising their right to see a movie that they didn't really think they would be able to see. so they went to the theaters on christmas day. that film took in $1 million in just 331 theaters on christmas day. as you said the online components, $15 million for the weekend. so i think this was a win for sony in the sense of at first we didn't know if they were going to release it or make a penny on this movie, either in theaters or online. this he decided to go forward with this release. it turned out very well for them. in terms of profitability, i don't think we are going to see a huge profit from this bottom
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line number. but it is more about people being able to go see a movie they didn't think they could see. thee at trickily forpeople were able to sit with a group of people. the best way to see a comedy. those that wanted to watch it at home, they were able to do that. it did very well. >> i don't want to overemphasize it, paul. i don't want to break the romanty sichl romanty sichl. they chose to exercise it within the four walls of their own home rather than going elsewhere. that is what the figures show surely. >> certainly. this film was originally going to be released in probably 3,000 theaters. probably would have made just over $20 million in this opening weekend. when this whole situation changed and it became threats against theaters and that kind of thing. sony had to change up its
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playbook. so this is not the normal release pattern for a big budget movie. after an appropriate amount of time being released in the theater, they are released on demand and online. movie--goers that like to go to the theaters also like to do down loads. they are not mutually exclusive. "the interview" was an unusual test case. it is an anomaly. i don't think we are going to see a shift towards this type of release pattern. >> i understand this is different because of the publicity it got and because of the statements you make when you download it or whether you go to the theater. the whole notion you can release something in a theater and online simultaneously and the bulk of numbers come from online, even though we were talking about our theaters you don't think the industry has anything to take out of that. certainly, youtube and itunes probably do. >> certainly there is a lesson
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to be learned here. if anyone thinks the interview is the normal type of release for any kind of movie. they really had to shift this from becoming a major theatrical release to making it a modest theatrical release and a big-time online release. i don't know that any other movie would generate this kind of interest in this exact way. this is a very unique situation. i don't know if we would ever see anything like this again. it does open the door to those possibilities about the online downloads day in and day out. i think that we are going to continue to soo thatee that for the smaller, independent films. >> we are almost out of time. i want to highlight something we are going to pick up later in the program. move movie theaters are at a four to five-year low. why do you think that is? >> the lineup of film this year didn't live up to last year's
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record lineup. in 2015 the biggest box office year ever. we are going to go over the $11 billion mark in north america. rent track is projecting for the first time ever. we have the biggest year on tap in 2015 in movie theaters in that year. help is on the way. the cavalry is about to arrive. >> we work for a movie company. paul thank you. major indices have been on a terror so far this year. how have the small caps done? we'll catch up with that next. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex.
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america's healthiest grocery store. it has been a good run for stocks in the final part of the year. all three gaining. >> it is great because we can talk about a record high for the russell 2000 index. that's one a lot are focusing on as an indicator of what's going to happen in the future. small cap stocks had a rough
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year. the small cap index overall is only up about 4% 5% year to date. just check out this port the last couple of months right here. if you look at the low, it is a massive run for small caps to close out the year. we took a look at the etf that tracks the small cap index. that tracks the russell 2000. all right, 2000 stocks in there. we looked at the 50 stocks that had the highest returns in the russell 2000 index. there was one sector group overall that overwhelmingly dominated that top 50. that was health care. biotechnology, medical specialty companies, also pharmaceutical firms. these type of companies here have really led the way higher. they are led by these three. these companies have at least $500 million in market value and have led the way higher. they are all biotechnology or pharmaceutical related. all the biopharma is up about 147% since the october 15th lows. a massive move higher here.
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also, broom berg bio, since october 15th up 174%. another big biotech winner. up 223% since then. 32 of the top 50 stocks in the russell 2000 with a market cap of at least $500 million are in this pharmaceutical/biotech/health care sector. again, if you look at what's really driving the rally of small caps a lot of these names, the biotechnology names are ones that investors are focusing on for maybe where the gains come from in the future. they are volatile stocks. you have to watch out when it comes to investing in these type of things. >> certainly biotechs have been on fire. in today's actions, we are watching energy one of the strongest groups. oil rebounding a little. still down about 16% in the last month. will prices remain under pressure into the new year? some fresh concerns about libya's production. we'll talk more about that right after the break. and help on and your big idea is
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7:30 on the west coast. 10:30 on wall street. elections in greece set for january 25th. the imf saying greece faces no immediate financing needs. an update on the deadly ferry fire in greece. the death toll rising to seven.
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xiaomi is the world's largest private tech company. crude oil crossing $60 a barrel for a brief period rallying on concerns about disruption to output from libya. oil prices are still down nearly 45% for the year due to concerns about a global supply. joining us now andy lipao. these new concerns about libyan production, are they enough to put a bottom under the price of oil? >> probably not enough to put a bottom unless libyan oil production is completely stopped over the next year. oil prices fall further.
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libya is an oil member. talk about why you don't think it is going to have a big impact on prices. >> libyan oil production is down to about 350,000 barrels a day. it is down from about 800,000 barrels a day. if we look to 2015 the arith ma tick is pretty simple. u.s. oil production is expected to go up 800,000 barrels a day. iraq is expected to go up another 700,000 barrels a day. world oil demand is only expected to go up 900,000 barrels a day, which means we have an evergrowing surplus in 2015. >> don't you think that is already baked in don't you? those aren't new numbers. >> i don't think the market realizes how big the supply is specially when we throw what's going on in russia into the equation with the expectation that more exports are going to come out of russia. we are seeing oil stack up all over the world. >> my only question would be on the demand side of things.
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we are looking at an economy that just grew 5%. china and jap are in stimulus mode where they are pumping liquidity and extra into their economy to pump. all of that should equal higher demand? >> in the u.s. our gasoline is rising a little bit tempered by mileage efficient cars coming on the road. when we look at japan, year on year demand is down. those two areas are counter balancing what we see in the u.s. and china. in china, the demand growth is declining. >> how do i square what you are saying with what francisco blanche said merrill lynch, head of commodity research, if memory serves me correctly, he said we would rebound on the price of oil above 80 to the end of the year. how can i square what he is saying with the analysis you are
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giving? >> this is where we have a disagreement in the market. i think oil price is going to be between $50 and $60 a barrel for most of 20 1w456789 i think15. i think it is a declining rate of growth here in the u.s. i think the world is going to be surprised as to how good the u.s. oil producers are able to get oil out of the ground next year as they increase efficiency. >> interesting. so just give us some color on that. how much supply do you think will be knocked out by how much. do you think they will be able to reduce costs to keep it? >> we've seen from the eia, the demand forecast drop by about 300,000 barrels a day from $9.5 million to 9.2 billion next year. if you look in the gulf of mexico where we have had a huge amount of infrastructure come online, whether it is the
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olympus platform or saint jack we are expecting gulf of mexico prodid you to hit an all-time record of 1.5 million barrels a day. they are not stopping that investment. >> more pain for the producers, with your forecast andy. >> i think there is going to be some pain. when you look at companies like continental, those are examples where they are reducing their budget they are spending but, once again they are expecting their year on oil production to rise 15%-20%. that adds to the oversupply. it keeps pressure on the prices. >> critically if you are right, what do you think the response will be offer the saudis? what will they do? will they pump even more? will they attempt to drive the price further down? it isn't by chance we find ourselves in this situation. it is breaking the mold of how
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it is expected to act to achieve something. if it doesn't achieve that and cut world supply what does it do. >> it is going to cut world supply. it just doesn't happen to be in the shale area yet. we are already seeing it in the arctic areas of alaska as well as in russia. >> oil production is expected to decline. we look at deep water brazil. they are going to be out of money to continue with their investment program. the saudis have to take a much longer time frame, 2 or 3 years to knock out increases in oil production that will be overcome, if you will, as the world oil demand continues to rise through 2017. >> andy thanks for joining us on those prices. crude just below 60 today on this rebound. when we come back one of the busiest times of the year for the travel and leisure industry. casinos and hotels expecting big crowd movementvy production
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hoping for big crowds. we'll find out when squad on the street coming back.
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three days to go until we clothes out 2014. what will work next year.
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rachel rossman joins us now from susquehanna. >> thank you, book early if you plan a vacation for 2015. >> hilton was up 17% this year. marriott has had an amazing outperformance by 60% gain. the lagard continues to be star ward with a lot of questions over its communication to the market. the way it has engineered its stock buyback. at what point will they be able to get the market back on board. >> 2015 should be a much better year if for them if they can deliver on their asset sales
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program and continue to drive strong rate gains. they have less group business than their peers. they have less exposure to the limited service segment which is outperforming. they have stronger square footage growth for 2014. with he would we would think that hilton would outperform starwood. the lodging is a great place to play for 2014. >> a lot of money potentially to be made here. two of the stocks you cover within restaurants are darden and yum. of those two, which is the better investment for 2014. >> we are neutral on both of them. they are both turn around stories as you were properly pointing out. yum is very dependent on the china recovery. that would dependant on your view of oversees and china specifically. darden is going to be more of a
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domestic turn around story, which faces very easy comparisons now, december through march owing to last year's frigid win tir. if you want to go domestic you would want to look at darden. if you are confident in a strong turn in china, you would want to focus on yum. >> darden with a new high. what's going on with win? >> is there a sense they are never coming back? >> there is a view that there is a shift away from the vip business into the mass market and wynne has been historically very vip focused. i wouldn't underestimate their ability to remain flexible. >> are you not worried a stronger u.s. dollar will hurt
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international travel demands here in this country, which has been so strong? at this point specially in japan and europe we have seen some billingg moves in the current? >> new york city is very internationally dependant and las vegas. new york already has been one of the weakest performing lodging markets in 2014. that certainly will be a head wind to 2015 if it remains that way. they are very valid points. when you consider the u.s. lodging industry as a whole and consider the number of msas out there from san antonio to dallas to chicago, obviously, foreign currency and international visitation becomes less of an issue. i would highlight that for vegas and for new york as a critical issue but not for the u.s. as a whole. >> good to see you, rachael. happy holidays. >> thank you. "the interview" raking in
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$18 million. 2 million$2 million coming from movie theaters. did it hurt theater chains that opted not to show the film? chad joins us to talk about the winners an losers. >> you cover a lot of the theater chains. are they kicking themselves? >> 2012 and 2013, record years. '14 has been below those levels. it will be over $11 billion revenue industry with respect to what happened here with "the interview." they want to keep the consumer in mind here in terms of what maybe consumers who aren't interested in seeing the interview but consumers who are interested in seeing other movies at those theaters are thinking there. they have not necessarily lost significant money here. it was a nice move for the industry. >> any sense of if this had gone into broad release, 2000, 3,000
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screens. what would we have been talking about? >> we thought it would be a $20 million to $25 million, which "the hobbit" did twice that. it wasn't a major release. these type of genres aren't going to be the major films that bring in $200 million to $300 million of revenue. >> do you think they are worried there was such a successful download of the online. >> there is a symbiotic relationship of this and further channels down the road. recently, we have seen some more news of day in date releases which would go to the market before the theatres. the big movies generally stay in the movie theater for about four to five months. that has not changed. that's extremely important for the 100, 125 movies each year. >> it is the second time in the hour that somebody predicted
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sales over $11 billion in movie theaters coming. a reminder of what the films are. all the stocks that you cover, it is mainly the regional. can you make serious money? >> the major movies are going to be the next avengers which was a $700 million revenue movie last year. secondly, we have star wars which will come out next holiday season. a despicable movie called dominion and fast and furious and 50 shades of gray. >> the last two by universal films, to tout our own mother ship. >> that is highly anticipate d, not just by me. >> people talk about the sony story and the north korean element. the chinese have bought a fair number of chains or at least a stake in chains. do you think that has anything to do with anything? >> i think they wanted a better megaphone into hollywood. china is going to be the growth market. they are going to allow more
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hollywood films going into that market. currently, pretty tight restrictions there. amc gives them 15% us exposure. down the road if they decide to expand globally and in china, they certainly have more leverage with hollywood. >> you didn't give us a stock pick. which of the movie chains will do best? >> the two we are recommending are cinemark holding and then on the smaller cap side carmike, ckec. that's been high over the last couple of years. cob a potential take-out candidate. they are also acquiring small mom and pop chains. >> good seeing you, chad. when we come back we find out what's ahead for the defense sector in the new year. we're back after a quick break on squad on the street.
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. little bit of drama in the skies above the uk this morning. a virgin atlantic flight 43 was on route from gatwick to las vegas and encountered what they're calling a gear problem, had to turn around circle several times and made its way back to gatwick. it has, in fact landed safely but the last couple weeks have had a little drama. >> scary. >> whether a power outage at
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heathrow or this. >> the landing gear was deployed, that was the issue whether they could get the landing gear down. that has happened in that case. yes, it's not been the greatest year for aviation. >> and with airasia, no trace of that everybody is on high alert with that as well. we can say that it's landed safely, correct? >> all right. let's get a market flash from kate rogers. >> check out caesars entertainment this morning. they gave more details on its restructuring and efforts to improve its balance sheet. caesars shares fell at the open but have rebounded. they're now trading up fractionally after being up as much as 2.5%. back over to you guys. >> thanks, kate. this week we're looking ahead to the new year and how to cash in on 2015. jane wells is here to lay out her predictions for the defense industry. let's see how she fared from her picks with this year. you predicted defense margins will be more resilient than
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expected, right there, with lock head and northrop grum mond landing in 11 to 12% range, comparable to previous years and also said that the navy would see more resources than army and that the navy would buy more combat ships. no dice on that so far. jane also predicted that funding for nasa would start to turn around and right again with the house passing a $435 million million increase to nasa's budget this year. not bad two out of three. we're all wondering what jane is predicting for 2015. here's a look. >> reporter: spending cuts? what spending cuts? the pentagon spending spiked in the third quarter to a five-year high as the islamic state became america's latest threat. in 2015 we'll have a republican controlled congress and new defense secretary. here are three predictions. first hack attack america
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returns on the internet and seems everyone from china to syria is hacking into our computer networks. the pentagon has boosted its cyber security spending but expect more problems than solutions in 2015, more attacks, as defense companies try to figure out what tools are needed and if they even have them. second, drone wars. in 2015 growth in unmanned aircraft will explode on the commercial side and established defense players like boeing lockheed and general atomics will lose ground to a plethora of newcomers like amazon and google. third, substitutes. the russians recently tested a missile from a nuclear submarine but our fleet of subs is old, especially ohio class subs, which are supposed to carry most of our deployed nuclear arsenal. the cost to replace them which could benefit nor thumb grum mond and general dynamics is astronomical and expect the pentagon to propose paying for them outside the regular navy budget in a fight over money that could go nuclear.
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>> and jane wells is with us. jane, one of the big dramas that happened this year that many people were surprised about was chuck hagel was pushed out by the white house. ashton carter expect him to be confirmed some. >> yes. i think he will be confirmed and from what we hear his priorities sort of factor in with what you saw there. i'm told that he's focusing on cyber warfare, on this pivoting towards the pacific, which could bring more money to the navy maybe for the submarines and also space. >> and what happened with sequestration? you sort of made fun of the budget cut idea but do they still have to deal with that? >> absolutely. that's part of the problem that hit -- his previous challenge, perhaps, is dealing with the uncertainty whether in the next fiscal year there will be billions and billions of more in cuts again and how do you plan for that? what programs do you cut? and can he convince congress maybe to do something about more base closings or military pensions and pay to make up for
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that. that is going to be the tough job for him. >> all right. a lot to follow. thanks very much jane. >> you bet. >> we'll hold yous to those predictions on defense. >> i'm excited to be right again, most of the time. >> not bad track record. >> thank you. >> you're not alone. four minutes until we take let's see what's on deck with kayla tausche. >> oh, yes. you're getting me today, simon. by now you know that the interview made 18 million for sony. will on demand releases be a harbinger of things to come or was this a one-hit wonder for sony. the chinese smart phone maker confirming $1.1 billion in new funding but how wall street is getting a piece of what's the largest private company in the world. the milwaukee bucks 15-16 this season but the new hedge fund think improving eq is the way to improve the record.
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they hired a tech expert to get there. coming up next on "squawk alley." you total your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had a liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. and for drivers with accident forgivness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $423.
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. good morning. it is 8:00 a.m. at google headquarters in mountain view, california 11:00 on wall street, "squawk alley" is live.
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♪ an welcome to "squawk alley." joining us for the full hour jon steinberg, the ceo of the daily mail north america, tanned rested and ready. good to have you back. >> kayla tausche. >> john forth out today. dow up only about 11 points, but eight straight days it's higher. if it closes at these records, nasdaq has gone within 5% of its all-time closing high that will take you back to the dotcom boom in


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