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tv   Squawk Box  CNBC  January 5, 2016 6:00am-9:01am EST

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and you want to go back and a decision could be coming soon. it's tuesday, january 5th and squawk box begins right now. ♪ >> live from new york where business never sleeps this is squawk box. ♪ >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick along with joe concerner and andrew ross sorkin. our top stories are the markets in china, dropping more than 2% in early trading today but then the central bank stepped in. pouring about $20 billion into money markets. that's the largest cash injection since september and you can see how that eased some of the panic there. traders also say the central bank was probably using state banks to prop up the yuan. in the meantime t top stock regular you hay to announced
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plans saying it would further restrict sales by major investors enlisted companies. that was part of the concerns yesterday. people thinking that the rules would be loosened and sales would come. it's also the new circuit breaker set up tested severely yesterday. >> it's a good idea for the day but if the market would ever rally on this. slowed it down last time briefly but there was a route 48 hours afterwards. >> but yesterday they closed it and reopened it and closed it again and we didn't know it was 7%. where would it have stopped? if you don't know where the actual price discovery is, the supply and demand, if you don't know that, then the rest of the world has all of these questions. where is it really? and today it's not like down but 20 billion we don't know where the bottom is over there and since we don't set bottoms probably -- >> we have circuit breakers here
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too. >> we're not buying equities. >> and we're not telling people, you know, this sell order is not good today. do you have any buys? we would rather sbries or we won't act on these sales. there's a lot of uncertainty. it's not 6%. it's 2%. >> citigroup is close. >> gdp. >> let's just pretend for the rest of the year -- less than 2% sell off. so let's not get the pallbearers ready yet. >> still the worst day since 2008. >> the worst day since when we started -- so we cut that. we cut 72 years off of that. >> in the meantime let's get
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back and talk about what's going on here at home. no rally in sight for u.s. stocks. take a look at u.s. equity futures. you're looking at the dow looking like it would open under 102 points. s&p 500 opening off about 11.5 points and the nasdaq down as well, about 21 points down. >> but that doesn't get us to the lows of yesterday either. 280 is what we close down plus 100 is 380. you can go down 20 just to test yesterday's low which is normally you don't go straight up after that. but we'll see. >> let's get you through the big stories we're watching this morning. a couple of things to pay attention to. auto makers releasing december sales numbers throughout the morning. a carbon copy of most of the months in 2015 with sales coming in at a blistering pace. analysts estimate that auto makers sold 1.7 million cars last month. of course we now had several guests come on in the past week and say that all of these car sales have been pulled forward
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effectively and are a function of what the fed has been up to. also george soros tapping ted burdick to become the new cio. >> good for him. >> good for him. >> got a promotion. >> give him a little bit of credit. >> also in political news this morning, gop presidential front runner donald trump released the first political ad of his campaign. the 30 second spot highlights his stance on muslims, immigration and terrorism and will begin airing today in iowa and new hampshire. are we going to show the commercial? and get some volume going. >> you saw it yesterday. >> all over the internet. >> right. >> people are -- i think they knew they were using tape from the border. that's it right there. that's morocco and it's very effective. but that's not mexico and then when asked about it they said well, if it was a totally open border this is what can happen. >> this is what it would hook
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like if it were -- and i don't know -- but nothing seems to matter to his supporters. >> it does not matter. >> but other than that, the tone -- and it starts out with something that's pretty compelling and that is that barrack obama and hillary clinton will not use the term radical islam and that was the premise for the beginning. >> it is very provocative in trying to insight. >> totally out of character for donald himself. let's check on the markets this morning. i don't know if anyone really wants to step in at this point. you'll see when we look at europe they don't know what to do over there either. but that's where we are right now. this is free market and we're going to perhaps test some of the lows. it's not going up.
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not going down. it's about 36.67 and more and more people realizing it's in the 30s for awhile. and the plus was like 40 cents more. i was sort of channelling you a little bit. >> thanks. >> in terms of why spend $4 if you don't have to? it it it's $1.80. i felt like i was a senior in high school again. because i act like that. >> you said it. >> sometimes it's good to have youthful energy. >> absolutely. >> and we said many times, you think if you're a man when you're 50, suddenly you become a
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man, you do not. >> thank god. >> really? >> i don't ever want to get old. >> it would be nice to know that sometime you would emerge from boyhood to be a man. >> you should always have -- my grandma still -- >> something about men are good though and boys are bad. there's certain qualities. >> i was talking about myself. >> i don't want you ever to be a man, becky. not that there's anything wrong with it if you choose to do so. >> i hear you. >> okay. for more on the global markets let's get to sri in singapore. they don't know what to do. we don't know what to do here because we're not sure where china is going to finally find an actual price. so europe doesn't know what to do either, sri. >> well, the problem with the china markets is that it's very much still a work in progress. this is a capital market that is developing and evolving and
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policy is evolving as well. here in lies the problem. we're still getting mixed signals. both the regulators. and here and now though we did see a degree of volatility during the day. didn't rival what we saw yesterday in the collapse on monday but volatility nonetheless and then as you pointed out pboc did step in. to try to stabilize the market by injecting the equivalent of short-term equivalent into liquidity. very marginal gains there. shanghai composite off by .3%. i don't think the volatility is over yet. we're not out of the woods by any stretch of the imagination. let me tell you why. on friday january 8th, the 6 month lockup on share sales, that will expire but it's a very
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dice sy situation. we could see pent up selling just ahead of that. that's one thing and then also we have more data in a couple of days time. the trade balance for the month of december. the data has been the catalyst that sparked the sell off. it was the pmi early on this week and could be the china trade balance. you continue to see a sluggish picture expersonality and the weak picture internally as well. we're not out of the woods yet. i want to say this quickly. there's opportunities for patient capital if you do want china exposure and it's related to the rebalancing of the broader economy. it's a multiyear process but it is rebalancing. it is happening toward the consumer so in education for example and in consumer stocks as well. let me leave you on that note.
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there's opportunities for patient capital but short-term remains very volatile. back to you now. >> sri, thank you. might be worth while thinking about that. i don't know. china. let's get more on yesterday's sell off in the year ahead. we're joined by chief market strategist at ameriprize financial. we haven't seen david in awhile. start with you, phil. rates might move up a little u. still nothing else to do with your money. >> right. >> maybe stocks aren't cheap but overtime u.s. business is the greatest thing to invest in long-term if you find that good management and good business. is it still time to pick your spots and put money in the market? >> that's the right answer. investors came back with a little bit of a flash back to the summer. we're down about 4 or 5% here
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over the last week. i think as investors look out over the balance of this week we'll see positives. tomorrow the ism service data. around 56 or so. much better than the manufacturing data we saw. and increase year over year in wage growth. so by the end of the year, they're going to say u.s. isn't so bad the stock market is not going to look that bad. >> isn't the question is china is not going to effect us more. and wondering if they catch us. >> we discussed that at our meeting just yesterday so that chinese manufacturing number yesterday wasn't very good. within that report the chinese service pmi number, 54 and
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change was the best number since august 2014. we're focused on manufacture chg has been decelerating for five years: the consumer is doing good and that transition we think is working. china in our view is not in a recession. it's not doing a waterfall collapse in the session but the market is focused upon that august situation that we saw which was pretty ugly and that's what we're dealing with right now. >> as i said, overtime, snog better than equities to build wealth but no one wants to be -- no one wants to stay in a bear market if they had a -- if someone were to tell you we're going to 14 on the dow it would be better to get out now and buy back then. does that make any sense?
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are we in a bull mark or a bear market here? >> i don't think we're quite ready to put the bull to bed yet here just yet but what seems to be happening is more of the same from last year. weak activity overseas. strong dollar. creating big head winds for our manufacturing sector and that tends to push you back to domestic sectors of the market that are relatively insulated from that. the problem with that is that those are the expensive parts of the market so it's not much comfort to stay in places like, you know, financials, health care, consumer discretionary stocks but that's what the fundamentals are telling you. but we don't believe china is on the verge of a hard landing here. yesterday was the market report but it didn't take it down to the levels we saw in september.
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certainly the next couple of data points will be important but at the same time we also got market manufacturing pmi index reports on the euro zone, the u.s. and japan. all of them were up and all of them were in expansion territory. so it's a mix picture out there. i know the ism number told a different story but when you're comparing methodology across geographies the numbers weren't so bad when you looked outside of china. >> any reason why we should think that the chinese will not be able to manage that situation? how big is the entire chinese stock market and what could they throw at it if they had to? is there anyway it could get out of control and that they can't -- from its own weight it falls so a horrific level or not? >> that's a question we have been asking ourselves. they have foreign currency reserves. >> what's the whole market worth? >> i don't know the number off the top of my head. it's big but the currency reserves are huge and we think the central bank has been and
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will continue to try to utilize that to manage the markets and the economy. now are they doing a great job? they could do a better job. they're not as seasoned or smoothed as we are. >> they did it in the summer. they did it. they managed to -- by whatever means necessary. >> we think they're going to do it again. what's happening right now is people having a voflash back to august and they're saying we're going to be down another 10 or 12% here let's get out now and that sort of capitulation has been happening the last couple of days. >> the shanghai stock market has a 5.5 trillion dollar capitalization. >> that's a lot of money. but i still can't believe 2 billion people can't figure out a way.
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>> and if the consumer is going to start taking over. >> it would be really hard to fight. >> the pboc. >> exactly. >> so you're not very joyous david. this is as least joyful as i have seen you, joy. >> we think the market will be higher come the end of the year. we're looking for 2.4% gdp in the u.s. a little bit of earnings growth. so we're modestly optimistic about things but we need to see that gdp growth come through if we're going to get the earnings that will support even modestly higher prices. >> thank you. see you soon. >> thank you. >> looking good, phil. >> thank you. thank you. >> i don't know. >> it's the tan. >> he has the tan. a good tie.
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>> i got a good tie. >> he has a nice sort of wool heavy suit. >> he's not going to wear that. >> he's making a comment about portfolios. >> i'm channelling you. i want to be like you. >> that's a very nice blue tie and it's sort of thin. >> it is thin. >> gets better fatter at the bo. his doesn't. >> i'm fatter on the bottom too. it's new years and i'm starving. >> you're starving here. >> happy new years. >> why are carbs the only thing that will satisfy my hunger. >> when it's dark out too and it's cold, it's hard not to. >> what vegetable can i eat pounds of just so i can keep eating? spinach? >> any vegetable. >> but you're still not going to feel like you have eaten a carb. it doesn't work. it doesn't work. you got something for me.
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>> portabello mushrooms. they're almost like steak. >> i want carbs. >> all right. problems here and then we have serious problems overseas. tensions still running high in the middle east amid a major rift between saudi arabia and iran. hadley gamble joins us this morning. what can you tell us today? >> good morning, becky. the kingdom striking back again. we saw them cutting diplomatic ties with teheran and now they're going to halt flights to that company and they're also going to halt trade as well and they're even going to take this fight to the united nations. take a listen. >> those attacks were unprovo d unprovoked. very serious violations of regulations and of course a serious violation of the
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convention on the protection of diplomatic and conciliate offices. >> now there have been multiple calls from western leaders including u.s. secretary of state john kerry to the kingdom. they're urging calm and urging the folks here to ease the tensions and interesting to note that the calls were taken by the king's son. he's the man holding the portfolios. not only for the defense of this country but also for the economic future of this country as well and you to look at also if there's any kind of benefit to the kingdom for the current situation. one of course is that it pushes off the front page. the bad news or no news about this conflict going nowhere and if there's any pop in the price of oil it will be good for saw day rab i can't because this economy is based largely on its oil revenue and any pop in the prices will be good news for a country for the first time facing basically what are austerity measures, guys.
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>> thank you very much, again. >> when we come back a rough start to the year for emerging markets but could the pressure create opportunities? stick around to find out and later the dow transports fell 2% yesterday coming off a brutal 2015. transport predictions for the new year coming up at the bottom of the hour.
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. welcome back to squawk box, emerging markets especially those relying on commodity exports are those with close ties to china getting off to a rocky start in 2016. we'll take a closer look at the potential opportunities, if there are any right now. the former chief investment officer at emerging global advisors. good morning to you. we did try to set this up a little bit as if maybe there's a silver lining in the cloud and opportunity but just explain to us given what's taking place in china right now whether you think there is an opportunity to be in the market or whether you would run. >> if hi to choose right now i'd probably say i'd run. the chinese market went down 43% over the summer after triple digit gains. your viewers might be surprised to know that shanghai was up
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9.2% overall last year. given that the s&p was flat that's a good return and given all that's happening now. it's all about government intervention. you may not like what yellen is doing but they don't like what the chinese government is doing. the bartender is saying, you know, party is over. >> do you look at this then, in terms of the intervention and say to yourself there's going to be a continued sell off because it's not going to work? that's what i recall if i remember when i think back to what took place in the summer? >> yeah, so everyone knows that the economy is slowing down. everyone has been talking about the move toward domestic consumption. if that's the plan, fine. then you would see that manufacturing numbers going down. so that's ten months. i don't think that's new. what may have been new is the fact that the government numbers in late december said one thing and the numbers were actually lower so that makes you question the government but for the domestic investor who is seeing it going lower you want to move
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your money outside of the country but it's all psychological right now. if the government is saying they're going to apply this, how long does that last? how long can the government push the market in one direction? >> i don't know if you had an opportunity to hear what phil orlando said but one of the numbers he tease out is the fact that consumers in china seem to be stronger than he expected. >> you have singles day and all of these days and that's great but you still have an economy of two worlds in china. it's like the u.s. a long time ago and what people fear is becoming the new america of two different societies. one in the coast of china that's wealthy and the rest of china that's really, really poor and you can't vote for a new government and the market is in a state of flux right now because they're trying to get much more of that relatively poor economy spending. it's just not happening and you need something different and right now it's not happening. >> to the extent that i would
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tell you that you can't sit on your hands, where would you put your money? >> first of all, for those talking about emerging markets which was the premise of your section here, i can't think of emerging markets as one big buffet and say i'm going to go and eat everything. that's a very simple way of thinking of it so the economist front cover is negative on brazil. russia say mess with two wars they should be in. is india a hopeful spot? that's one place. is the market good? it's close to china so there's drift you have to consider. is africa hot? not with commodities where they are. but you to pick or choose. >> so give me the country then for 2016. if we had this conversation on december 3 1st. >> i'm still thinking india. india is where there's at least hope of a change where when you look at brazil and russia and china you have governments trying to plug holes and i don't
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want to think that ship is sinking but, you know, the investors holly are saying that. >> okay. richard, we appreciate it. we'll talk to you soon. >> thanks. >> thanks. >> when we come back, stories outside the world of business that have you squawking including three nfl teams that want to change cities and a new look for the periodic table of the elements. right now though as we head to a break take a look at yesterday's s&p 500 winners and losers. ♪
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world keeps turning, you know? >> i heard. >> it keeps turning and with everything that we talk about, sports just keeps going on and we're going to talk about a couple of things. number one, three teams might move to l.a. and it's very complicated. san diego has been in san diego since 61 ops or something. st. louis rams and raiders were already in l.a. so they all filed to move. they all have crappy stadiums right now. so the rams want to build a new one in l.a. county and san diego wants to build one in carson, california. and two teams could both move if
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they got -- >> to l.a.? >> to l.a. like the way the giants and jets both play at met life stadium. there's 32 nfl owners. 24 have to okay the move. so nine could block any move. >> right. >> so no one knows. and then extended at the negotiations but sits second biggest tv market. nice weather. you get to go to the games. although i'd rather say home. nothing wrong with watching it at home. andrew, really quickly, when michigan state lost because their best player is out you knew that kansas and oklahoma were going to move into like 1 and 2. so very rarely does a 1-2 team meet. they let overnight. triple overtime before it was settled. kansas finally winning. 9:00 it started. so i didn't even see them arrive
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at the locker rooms but surprise -- the great player on oklahoma who is 0-4 in lawrence playing in lawrence kansas had 46 points when it was all said and done and it is time to start thinking about this now, guys. it's january but it's time. >> march is coming. >> it's time to start thinking about it. my musketeers lost to villanova but beat butler. it's exciting. great teams. virginia lost. >> i'm going to drive you crazy with my bracket. >> you beat me. i'm going to be so -- i'm going to have seen every team play. >> there's so much information. >> i'll finish dead last. >> i have a story for you. i wrote it. but -- >> oh, again. >> no, hold on. this is a seriously important story. i'm not kidding here.
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in the buyout worlds, private equity firms. this is the craziest conflict in forever. it's been happening over three or four years. but if a private equity firm wants to do a deal and get a loan from a bank, used to be the bank giving the loan would hire a law firm to represent it. negotiating with a private equity firm and look over the contract. you'd think you'd want your own representation. now they say j.p. morgan do you want to give us a loan? that's great. we'd love to take your money but you need to go use the law firm that we tell you to use and we're going to pay that law firm. this is the equivalent, if you were having an employment contract, if you were they fwoesh y -- negotiating and they said you can't use your own agent or law firm, you have to use the agent and law firm we tell you too and
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by the way we're paying them. >> this has been going on for years now. >> it's really only started in the last three or four years in a meaningful way. in corporations it comes from something that happened 25 or 30 years ago, corporations, companies that roll paper constantly, they start doing it like 25 or 30 years ago where they started saying we should only have one law firm just to make the whole system more efficient and maybe that made sense in that context but these are really high, the most highly leveraged loans that exist. each deal is different. >> banks are chasing some sort of deals because snb else is doing it in the industry. >> and the bank are so desperate to make the loan they don't fight back. some of these banks are willing to lose -- look they just lost a fortune on that deal. they took the loss knowing they were going to lose money because they wanted to keep carlyle
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happy. >> you're concerned that the next big melt down will happen from a loan like this? >> not necessarily but there's a possibility that it puts banks, to the extent that we're trying to take conflicts out of the system, this is a big one with a bulls eye on it. they don't do their due diligence. >> they're paying you. >> i know. >> but you would expect them. >> they say look these law firms have ethical -- >> i'm trying hard to be interested in this. >> i can't believe that you aren't. >> triple overtime. >> this is the equivalent of the credit rating ayen sis. paying the same guy to rate your stuff. would you negotiate a deal with the agent being paid and selected by our own company. >> does it mean fewer lawyers?
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>> it actually does mean fewer lawyers? >> can't we all use the same? >> here's the distinction. because the private equity firm versus such a grip on this whole thing they can put all sort of bombs inside these documents and do you think that paul hastings, which is a firm successful with this. who ent to lunch with the gc of one of these, do you think they'll be the stickler on every term in the contract? of course not. >> no, they'd rather say the private equity guys can't do this anymore. >> bingo. >> so you're still drumming up too big to fail too? >> this is not -- i'm not saying the world is coming to an end. i'm just saying that one day there will be lawsuits about this and people will be like i can't believe this ian weren't on. >> they do usually drum up a lot of business. somehow they figure out a way. >> you should have been a lawyer. >> thought about it.
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>> i'm sure you did. >> we'll see if this whole tv thing works out. maybe i can -- >> yeah. >> debating. >> coming up renewed fears about china's economy. and out with his top ten surprises for the year and he has a bearish call on china. stick around.
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welcome back. take a look at the u.s. equity
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futures. after a rough start for the first trading session of the year you can see there's red arrows this morning. dow futures are down by 86 points right now. this morning losses of triple digits. if you look at what's been happening with the s&p futures they're down by about 9 points and the nasdaq off by 15. fears of a crash landing in china's economy sending shockwaves through the markets around the world. joining us to give us their insights on what's really happening in the world's second largest economy. also the chief investment strategist and welcome to both of you. what do you think is actually happening? how big of a slow down are we witnessing? >> it's significant. what we saw last month when we released our data is severe weakness. it's the worst data in four years.
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at the same time its a head scratcher. people are reacting off the stock market moving and manufacturing gauge being low. these things should be expected. people happen to be reacting off the wrong data. >> what do you see in terms of the depth of the slow down? we had people tell us yesterday that they think that gdp is actually only 2%. others are saying more like 5%. what's your view of what their actual gdp is right now? >> hard to know how to interrupt the gdp number but i see the same things on the ground. manufacturing is just ugly in china right now. the service sector is actually quite strong. you put them together you get down for the overall economy but i thought the same thing yesterday the pmi report was only down from 48.6 to 48.2. shouldn't have been a surprise to anybody. but there are some pboc things going on. the capital flows are the
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biggest driver. first time below 6.5 on the rnb in a long time. a longer trade dag so london is trading now in their daytime and a huge open market evaluation. >> how much of this is market distortions? how much of this is reality? you did mention there's a slow down. maybe not completely out of touch with what we should have been expecting but there's a lot of market uncertainties and that made people nervous. >> there's huge market uncertainties. people need to separate the stock markets performance from the real economy. anyone that expects otherwise is naive. service weakened for us in the fourth quarter.
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this two tier economy narrative john was talking about and most of the market believes this is not what we saw in the fourth quarter and when that starts to trickle in that's going to be scary. >> that's different from what we heard from john and someone earlier today. you think services is slowing down too? >> we were some of the people that developed this narrative. there's a cap on the -- a floor on the economy because services is strong and manufacturing is weak. fourth quarter we did not see that. services took a major hit. when you look at the monthly gauges you see up down, up down, whatever you might see. fourth quarter would weaken services in our data. >> what does that tell you? >> that we're in for a significant slow down and the chinese government is entering a new phase of the slow down. we saw the lowest levels of capex we've ever seen. profits were the worst we've seen in the history of the survey. so fourth quarter was not
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another weak quarter. it was the weakest quarter we have ever seen in the survey. what's happening now is not the same thing as what's happened in the past. the hast tlast two years are si >> i'm interested in a different aspect of it which is the power of capital flows. capital flows out of the rnb are accelerating and it's not just foreign investors pulling the money out. it's not only the fed raising the rates and bringing the hedge funds out there's chinese money coming out too and some are scheduled to end this week. but all you have to do is take a look at the vancouver real estate market to know that mainland dhie thechinese are mo backward and there's a lot of
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money trying to get out. that could push china and the rest of asia down. corporations and emerging markets now have about a trillion dollars worth of corporate debt and denominated in dollars and euros, that's the stuff that created the asian crisis last time around and it's in playwright now again. >> so you would agree that we're in unchartered territory and we're not sure where we're headed at this point. >> we have been in unchartered territory since the invention of quantitative easing. >> let me rephrase that. it sounds like he is very concerned about a much worse economy than people had been predicting. >> i'm concerned about the economy but i think the big driver is actually that the attitude about capital flows has moved sharply about china as well as other emerging markets and that capital leaving china is hollowing it out, tighteningly quiddity and making the economy even worse right now. >> john, leland, thank you both for joining us. sounds like we'll have plenty
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more to talk to you about in the coming months. >> pleasure. >> coming up when we return, dow transports were down 18% last year and the closely watched sector watched another 2% yesterday. the impact on the broader markets when we return.
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transports off track in
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2015, down double digits for the year. this is in deals and stuff happening. still down. not just rail, though, that are in the transports. joining us now for what this means for the broader markets, jeffrey hersh, and it's good to have a historical perspective on these things, but this is also with huge tax cut of oil prices cut in half and still down 18%. what's it mean? >> it means the economy is not that strong, and as we've been concern with all year, i mean, we looked at the trigger back in may when the transports were going down, the s&p and dow hitting new high, and it's concerning for me. >> and, you know, we don't need to talk about what it mean rs for the overall averages because that's not good when transports do not report new highs, that means a potential bear market.
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>> or warning sign. the russell is not performing, january effect here, and small caps underperforming as well. a lot of heavy currents have been manager concerned. >> maybe we don't lose anymore tenths on the employment rate this friday, but going down another tenth, we're at 4.9%. what the heck are you talking about that it's not a strong economy? >> it's the participation rate. >> because we're told because of baby boomers and people retiring. >> a lot of people there, outside the rome here, new york, the other urban centers where people are struggling out there in the middle america and rest of the country. >> i agree. they are part-time. obamacare's not helping them. with more regulations coming. >> there's a tax increase for you, obamacare. >> and 9,000 pages of regulations. >> that's where the savings from gasoline is going. it's going to pay health care cost increases. >> i thought the middle class was doing well? >> when i did say the middle class was okay?
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>> whenever i said middle class -- >> turns out -- we're talking about everybody these days other than the .01%. this is not -- this has been the worst recovery that maybe i've -- hold on to that -- you hold on to the worst recovery in the history of recoveries. seven years. >> don't you think -- >> so when the party in power's running next year in november, just remember in the worst economy, worst economic -- like, you just admitted, right, or no? >> and anger built up. >> oh, i still think we have big issues. absolutely. >> okay. >> would have. moving faster and easier had things, you know, the if the economy was more rebust. we have to twist their arms to get a quarter pint from them. >> 2% with zero interest rates and all the qe and the best we can do is 2%, but the rest, still the best in the world. that's where the other side comes in. >> well, the people that say, well, we have done a good job
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here, the fed has done what's necessary. >> i'm not saying it's a bad job, but more inphone lined to move faster if the economy was more robust. >> shipments can be down significantly, seeing drops in the transport. that happen this time around? >> i'm thinking the transports being so negative is emblematic system of the economy. things are, even with gas prices and energy prices so low, they are not moving goods across the country. that's another just sign that things are not great. it's okay. i'm not looking necessarily for a bear market to start next year, but it's one of our scenarios. we're looking more single middle digits here, you know, for the dow, s&p, the market, but it's just not looking that robust. bullish last year at this time. >> can we assume it's domestic? how much is international? >> how much is global malaise? we think of the transports as -- >> the prior segment -- >> we think of rails as domestic, but is there component
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of global? >> i think so. i'm not sure the baltic thing is that indicative anymore, but the global malaise is there. i mean, europe's struggling, china's struggling. there's huge economy there. japan's having issues. it's just -- it's not really moving. we're in a -- that's why i think we're in the last stages of the long term secular bear market. most people in the world believe otherwise. i don't think we had -- >> the last recession, they come every eight years, right? >> you know, i mean, not exactly -- >> they never come within, supposedly they never come with interest rates are low and there's no inflation. they come because the fed has t. we're concerned. >> you are? all right. >> most definitely. thanks. when we come back this morning, the most bullish price tacts on wall street, we are here to explain the s&p target of 2300 by the end of year. also, david rosenberg is calling for a flat year for the s&p.
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the bull-bear debate right after this.
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♪ while you're watching this, i'm hacking your company. grabbing your data. stealing your customers' secrets. there's an army of us. relentlessly unpicking your patchwork of security.
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think you'll spot us? ♪ you haven't so far. the next wave of the internet requires the next wave of security. we're ready. are you? market alert, futures heading south again, indicating a second day of selling on wall street. the dow kicking off the year with the worst start since the financial crisis. a classic bull-bear debate on where stocks are headed is on tap this hour. plus, a bold rediction on who wins the white house and why it matters to your money from a wall street sage. byron wien, the surprise list for 2016 straight ahead. talking cars. >> michael, slow down, you're going to crash. >> i can handle it, kid. >> you're approaching a dangerous curve. >> alerting drivers of dangerous
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situations before they happen. >> sorry, michael, that makes it 42-3, my favor. >> the second hour of "squawk box" begins right now. ♪ live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe with andrew and becky, one day away from virtual reality becoming reality, becoming virtual reality. they are taking preorders of the virtual reality headset, rift, starting tomorrow. details on how to get yours is just ahead. first, though, andrew will smoothly present us with this morning's headlines. >> i can't promise it's that smooth, but some of the stories
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investors are talking about this morning. oh, i have to thank you? thank you, joseph. >> says it rights there. >> i know, i was skipping that part. reporting december sales, a strong finish for car and truck sales, general motors has given the ceo the added title of chairman. former ceo dan akerson had both roles, but split when first named executive two years ago. there's the debate between whether you wants same person to have both titles. yahoo! shutting down the on line video portal. it was at the center video strategy, but failed to gain traction. spent a lot of money doing football, they bought community, if you recall, and worth noting, even though she took it on, she dumped start screen. screen was started before she got there, but she did try to make something of it.
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absolutely. >> tried to build it. yesterday was the first trading day of the year, and you know thanks did not get off to a great start. how much does a negative start to the year mean to the bigger become? the direction of trading in january predicts the course of the year 75% of the time. one day doesn't make a month or a year. >> i'm glad that the first trading day is not a bell weather for the whole year historically. it's not been a good indicator. i think we get 8-10% this year. i think it's not going to be as bad as i've seen so much bearishness around right now, and i don't think it's going to be all that bad. >> we'll see. cnbc's worldwide exchange joining us with a look at the global markets this morning, and yesterday was a rough one. what are we seeing this morning? >> absolutely was, becky. very good morning to you and the guys. let's kick off with asia, of course, where all the action has been so far, and despite red,
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there's relative stability compared to yesterday. up one quarter percent, better than yesterday's 7% decline, but hiding the truth of the moves. intraday for shanghai, volatility in the course of the day, and authorities stepped in, injecting $20 billion into the money markets, also, might delay the expiration of the much talked about ban on large stock owners from selling, so these moves late in the day very much managed moves. we don't know where the free market level would have been without them ending just below flat. european markets have seen intraday moves, but straight line decline from open to current opposed to lots of volatility. you can see we're looking at declines to the tune of half a percent for broad europe and opened up by .6% for the broader stocks 50. a couple reasons for that intraday decline, one is baiting
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enthusiasm as asia declined down as well, and eurozone inflation data coming down at .2% of expectations of .3. slightly underrealming there. dax down with vw weighing on it heavily, 5%, because of the litigation claims. quick look at currencies because the euro has weakened today, having been strong yesterday, partly because of inflation data i mentioned. the yen continues to rise and be the safe haven rather than the u.s. dla like yesterday. a big move for the pound from october. big news on david cameron all allowing ministers a free vote. previously, we didn't know if they would get that talk, and it weighs on the pound a little bit. guys, back to you. >> all right. thank you. joining us now, david rosenberg, chief economist, the adding strategist, okay, change my
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approach to you, david. you think the s&p remains flat for 2016. i think of you as an economist, and i wish you were not back in the business of trying to forecast stock prices, but also with us is john, the chief market strategist thinking the s&p hits 2300 by end of the year. did we ask you to take the flat case, david, or did you -- you're back in the business of forecasting stock prices? you didn't learn your lesson last time? >> well, excuse me, but i think going into the crisis, when i was at merrill, i nailed the call. the problem i had was i didn't turn bullish enough, you know, going in. >> missed on the s&p. >> i say i missed about the first half of the bull market. that much is true. >> but i just don't know why economists try to -- >> nobody's -- >> the target's -- >> nobody's perfect including you, but i was asked about my view on the stock market, and i
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think that when i said it's going to be flattish, it's going to be marked with a lot of volatility along the way, and the big impediment is that despite last year's price action, we have not resolved the fundamental hurdle, which is that whether you take a look at trailing or forward p multiples, we're above, and if you have a premium in the target, it's at a time with clarity and certainty surrounding the economic and financial climate. we don't have that. china is a show-me situation that's rebalancing. no visibility on the oil prices. we have a situation now in the middle east with a lot of question marks in front of it, and on top of that, u.s. election this year, there's uncertainty there domestically from a political standpoint, and you have to scratch your head to what the fed is thinking for the first time ever it's hiking interest rates with the success
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of declines in the pmi index. that's never happened beforement come off of sunday symposium in san francisco, and the fed officials are talking hawkishly. wherever you look, you have uncertainty, lack of clarity, and that doesn't usually fit with a market priced two to three points above historical norms. >> for me, if you could just explain the economy, i'd be satisfied. so hard to forecast stocks, but why do you think? >> lack of clarity, uncertainty, we have that all the time, being in the business since 1983, turned bullish in january of 2009 on the markets that have maintained that position throughout. did not think it disappears, and the s&p 500, back to the end of 1965, multiples was 16.4 times,
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s&p 500 trailing 12 is 17.8 or so. the average ten year year since 1965 on the u.s. treasury is 6.4%. current yield on the ten year treasury is less than a deuce on quarter or less than 2.25%. >> see, david, last time you were on, you know, you -- if you had just stuck with the economy, you were absolutely right, it never really did enter into what is a strong recovery, worried about the consumer then, right about the housing market not recovering much. can you explain why the transports are down 20% last year? why at 5% unemployment the economy's still seems so sluggish. is it the consumer? is it the debt overhang from the financial crisis? is it that we're dragged down by the rest of the world? as an economist, what's the problem here with not being able to get above stall speed? >> well, don't forget a good
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part of the transports are related right back to the commodity complex, so, you know, if you're transporting coal or transporting oil, you, obviously, were hit very hard because of that tight linkage. on top of that, we know one of the weak links for the u.s. economy is net exports because the strong dollar impact. you saw that in ism, and the fact that you have wide swaths of the emerging market space in an economic downturn, so -- >> the commodity downturn, that's kicked down -- that's one step removed for why that's so weak, you know, from slow growth, which caused the commodity downturn. once again, we're just kicking the can, you know, just one step removed from why? >> let's just say, joe, that, you know, domestic side of the economy, i mean, it's almost a, you know, a two speed economy. you have the transports, export and oil related in a downturn, and consumer spending in real terms up 3.2% in the past year.
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we saw in the credit bubble -- >> not export related, i guess, or we need to? >> i think we need to, but we also need to look at the commodity complex, and what's happened in commodities is not just global slowing, but it's about technology. i mean, whether it starts with a smart phone, whether you're looking at the ability for a farmer in china to know what wholesalers are paying for it in beiji beijing, what have you, it's turned upside down. oil, for instance, due to technology, you can find more of the stuff in more places, get more of the stuff out of the ground from a particular well, while at the same time your consumer is becoming more efficient, whether it's the household consumer or a business consumer becomes more efficient every year at using the stuff. every drop of oil is squeezed. this happens, has to do with soy, corn, coffee. people thought coffee was going to go sky high forever, and now additional rain in brazil, and
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-- >> okay. you're looking for 2300. >> yep. >> earnings -- no one thinks they're going to be 10% earnings growth. >> no. >> you don't think multiples at this point are that stretched? i mean, we're at zero interest rate effectively. we can handle 20 times multiple. >> on a relative basis, if everyone wants a classic apartment in new york city, the classic six is going to be valued considerably more than if every's moving to the suburbs. >> andrew, what's a classic six? >> it's basically a two bedroom with a maid's room? >> there you go. >> classic seven -- >> for a maid, andrew? >> you need a whole staff. >> for those who study real estate and what happens, but the point is on relative basis, equities are attractive. the boomer generation needs dividends and not buying them in a time where they better get an
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income on their money and compound that. >> okay. all right. david rosenberg, chief economist and strategist, okay. all right. i'm going to start -- i'm going to start following that. i love you as an economist. it's hard to be both. the market strategist, chief market strategist no less. thank you, david. >> thank you. thank you very much. >> thank you. giving joe a lesson in real estate. classic 6. >> classic 12 or 18. >> per wing. >> bingo. coming up, analysts warn isis benefits from the rift in saudi arabia, and a tense situation for global power players, and, later, china front and center this morning after the central bank there pumped liquidity into the markets overnight. we share growth predictions for the country in his list of 2016 surprises. we hope to surprise you. back in a moment.
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welcome back. futures now are down and in large part because of china overnight or yesterday, things have come back a little. dow off a hundred points, and nasdaq off 18 points, and s&p 500 looking to open down at 11 points. watching shares of eli lily this morning, 2016 revenue gieps, and
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the numbers are ahead of analyst conference call to detail the year ahead. tensions build in the middle east. nations in the regions choosing sides with bahrain, the uae, and sudan cutting diplomatic ties with iran. meantime, russia and china calling for calm to avoid steps that could escalate that tension. joining us right now to talk about what it means for the united states and how the growing crisis impacts oil prices, kareem, and also amy, the executive director of energy and stainability at the university california-davis. thank you, both, for being here. i'm hoping you can break this down for us. at this point, it looks like things are shifting on sectarian lines. how do you describe what's happening now? >> three parts to the saudi-iran conflict, it's against persian
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iran, and secretatarian sunni, saudi arabia against shooe unite, and look at the bloodiest conflicts in the region, whether that's syria, yemen, iraq, lebanon, bahrain, palestinian territory, they have this element of iran-saudi proxy war. >> the deal with the iranians last year has people scratching their heads. i guess some of our long time allies in the region wondering whose side we're on. where do you think we are? >> well, i think the obama administration, they are cramming forp policy achievements in their own eyes is the nuclear deal, and they don't want to jeopardize that deal. they are hoping that over a decade this nuclear deal could help transform, and i think it's our long time allies in the
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persian gulf, mainly saudi arabia is concerned that america's turning its back on them. >> i heard a person yesterday say, look, you got the iranians calling for devine retribution to be brought down at this point. are these the people we want with nuclear arms in their hands ten years from you? what do you think? >> this is the argument the obama administration makes. these are not constructive actors in the region, and, therefore, we have to do everything in our power to prevent them from having an advanced nuclear weapons capability, and the reality is that as long as iran's current supreme leader remains alive and in power, supreme leader, iran is going to prioritize revolutionary ideology before its national interest, and that means that the u.s. and iran are going to continue to be in this state of antagonism and cold war. >> amy, an interesting take on
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the front page -- of the "new york times" this morning laying out the idea that the iranian leaders by allowing the protesters to overtake the saudi embassy played into the hands of the saudis because they changed the world's reaction to what happened. is that how you see things? >> well, you know, i think that there's been this conflict between the two countries that's been escalating over the last year with, you know, as mentioned, you know, with increased hostility in the proxy wars. realistically, this conflict has gone on for 1979. you have the iraq-iran war where saudi's financed iraq's military action against iran, and we're seeing sort of playing out, continuation of that struggle, which, as you mentioned, it both ideological, religious, and
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geopolitical. it tangled into oil. you know, the first part of the conflict actually oftentimes back in the '80s and today and into the '90s results in low oil prices because its neighbors put oil in the market to lower the price to deprive the iranians of cash. then they got the united states, we have a joint policy, use sanctions, do these things to bring iranians to the bargaining table on syria and on the nuclear program, and the obama administration was hoping that this whole strategy would really force iran to change its foreign policy, but in the end, we're still seeing this large escalation in conflict between iran and saudi arabia,s nuclear deal really doesn't seem to be doing much. there was a little window in there where it looked like iran
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and saudi arabia might have a joint vision on how to deescalate in syria, and then the russians stepped in with their military, really throwing a monkey wrench, making the relationship so complicated with turkey and so forth that it's really hard to see what would be the path forward diplomatically, and this latest incident, i think, makes the diplomatic course all the more harder to put object. >> amy, i was surprised. we saw wti, crude oil, bounce slightly, but it gave that back and now trading at $36. were you surprised we didn't see more of a premium on oil prices given additional intentions? >> you know, the market went up originally on the news, and i think, you know, people are making this sort of fundamental assessment, which is that neither iran nor saudi arabia nor the russians would dear to have a direct conflict that would affect export
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infrastructure or oil field production in the countries. >> are they making the right bet? >> you know, i'm not sure. i mean, you know, the problem with war is that it escalates and make assumptions and everybody has these, you know, red lines they say they are not going to cross, but, you know, especially with the latest trigger, which was the death sentence for this, you know, very famous saudi-shia cleric. you know, once people get inflamed, once local populations get inflamed, you know, we know from the ooish spriarab spring to put the genie back in the bottle. >> thank you both. >> thank you. ready for the rift? preorders start tomorrow for the virtual reality headset, but how much does it cost you? we'll tell you right after the break. today, we're seeing new technologies make healthcare more personal with patient-centric,
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welcome back, everybody. facebook owned occulious releases tomorrow, but how much does it cost?
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in a blog post monday, oculus reveal little. the company said each headset comes with two free games. executives last year hinted the rift headset and computer needed to run the whole headset costs no more than $1500 all together. >> we got to go. coming up, surprise, surprise, blackstone adviser partners vice chair back with his ten surprises for 2016. joining us in a moment.
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welcome back to "squawk box" issue everybo , everybody, among the stories this morning, global stocks under pressure amid continuing worries about china. this comes despite efforts by the pbo sure up markets in china, pouring $20 bill in markets overnight.
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the markets are down 85 points. ups consumers expected to return more than a million packages to retailers today. by the end of the week, the number is expected to reach 5 million. container traffic dropped .90% in the third quarter, slowest rate since the recession. >> okay. from the winner of the white house presidential race to the far reaching effects of the refugee crisis, byron wein at it again predicting top ten surprises of the year as he's done every year for 31 years. byron is the vice chairman at blackstone, and joining us this morning with ten surprises. how are you? >> good. >> letterman style, junumber te. your top surprise, global growth falls to 2%? much of a surprise at this point? >> oh, yeah. i think the estimate for global growth is 3% right now. >> what's going to be the trigger there? >> i think there's going to be slowdowns everywhere.
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i think the u.s. is going to grow more slowly than people expect. i think china's going to grow probably 5%, maybe lower, and those are the first two big economies, you'll see slowdowns pretty much across the board. >> i think the atlanta fed is now .7%, cut from 1.3 and cut in half again yesterday. >> wow. >> incredible. >> that's the key thing. almost every observer or official cuts estimates rather than raising them. >> okay. number seven. oil languaishes in the 30s. things don't turn up? >> everybody thinks that will happen. there's three crowded trades. everybody thinks the collar's going up, oil as going up, and interest rates are going up.
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those are the three most crowded trades i try to deal with all of them, and in the case of oil, there's more supply coming on, more production in the u.s., supply possibly from iran, and less demand because of slower growth. price of oil is more correlated than any other sector. >> the time three. the federal reserve raises short term interest rates by 25 basis points only once in 2016. >> right. >> arguably, when does it happen? >> okay. i think it probably happens in march. i think they will be sorry it happened. >> already it happened? >> may be. some of them are sorry it already happened. some of the fed. >> based on what we saw happen with the economy since then? >> right, exactly. >> and and they backtrack how? >> by not raising -- right now -- on december 15th, they
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implied they would do it four times. they only do it once, and towards the end of the year, there's active talk, and maybe action to reduce that one time. >> okay. here we go. number two, the united states' equity market has a down year. >> rierght. >> bigger question may be is, how far down? >> well, i don't think it's going to be a bear market, but it could be down 10%. >> 10%? >> right. >> so we are -- >> well, you know, i mean, could be down 10% by the end of the month the way it's going. >> when you look out 12 months from now, provoke surprises more than anything else, but do you -- you believe we'll be down by the end of the year? >> i believe the year will be down. i don't know how much it'll be down. i think the consensus view going into the year was that the s&p 500 would be up 10%. that's what most of the public strategists thought. >> what did you say last year for '15? >> last year, i was bullish. >> bullish?
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>> yeah. >> how much? >> and i was wrong. >> like how much? 10%? >> 15%. >> 15%. >> it was in the surprise. >> okay. >> what went wrong for you? i mean, what do you think you miscalculated then? >> i think the -- i miscalculated the impact of the dollar strengthening, oil coming down, and earnings being down, revenues being disappointing, i mean, all of those factors cause the market to be down. >> okay. final prediction, getting into dangerous territory because we're talking poll sicks. two things. you say hillary clinton is the winner of the presidential race, and i'm not sure that's a surprise, though might be to some, but perhaps more importantly, it's in a race against ted cruz? >> right. >> how do you get there? >> look at momentum. look at which republican candidate has the most momentum. everybody talks about trump, but cruz has momentum. >> talking about rubio. >> well, he would be the conventional choice. he would not be a surprise.
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i don't think the hillary clinton victory is a surprise. i think cruz being the candidate would be a surprise. the other element of that particular one is the democrats take the senate. that would be a surprise. >> i have to say it would be a very big surprise if hillary clinton is elected. in certain -- read the "wall street journal," 43% is obama, only one time has someone else in the party been able to get a fourth term or third term, whatever it would be, only other time it happened was reagan when george h.w. bush won. i don't know whether you think the 43%'s going up between now and november, but -- >> i don't know that i -- you know, i put too much credence in that, but hillary clinton is the candidate particularly if cruz is the republican opponent. >> one more topic. joe's trying to buy a classic
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six. >> i didn't know what it was. >> i don't know if becky's in the market or not. >> no. >> nonetheless, you say high end residential real estate in new york and london has a sharp downturn? >> right. >> how sharp? is this a function how lousy markets were in 2015 and therefore how lousy bonuses are in the finance sector? >> no. it's more a function of chinese, russian, and middle east buyers stepping out of the market. >> we're just -- high end, everything over? >> $10 million. >> comes down by? >> comes down by 15-20%. >> thank you. >> so you got your bedroom for the parents, and then the one bedroom for? >> classic six. >> so then they have one kid or two kids have bunk beds? >> bunks, absolutely. people share rooms. >> why do you need a live-in
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maid? i think the other kids should get the room. >> you can. >> everybody can pick up and -- >> you can do that. >> that's what we do. >> you know, in the city people have the staff. >> they have a staff? >> no, they don't. i don't know. in the old days, you asked -- >> classic six, two bedrooms and a maid's room. >> second kid's room or guest room. you said maid's room. >> that's what a classic six. >> in your world, but not most. >> okay. this is a classic inequality conversation. >> it is. >> there it is right there. >> i know. byron, thank you. lots of surprises. >> thank you for making my point. >> that was not a surprise. >> we hope to see whether the surprises turn out to be right. appreciate you being here. >> okay. great to be here. >> did you get your corn muffin? >> i did. >> all right. great. you're up. >> oh, i'm up. >> sorry. >> i got to look at you. coming up, how much investors
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worry about china. that is the question of the morning. the central bank pumping liquidity into the markets overnight. how much is china going to affect market moves around the globe in the coming months. that's next. markets there overnight, "squawk box" returns in just a moment. equals great rates. it's a fact. kind of like ordering wine equals pretending to know wine. pinot noir, which means peanut of the night.
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at ally bank no branches equals great rates. it's a fact. kind of like reunions equal blatant lying. the company is actually doing really well on, on social media. oh that's interesting. i - i started social media. oh! it was my...baby.
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starting 2016 spooked, shanghai down 7%. worst since the country's currency devaluation from last summer, the senior fellow at yale university institute of global affairs, former chairman of morgan stanley asia, and you always come with two thoughts, being right about that, and no matter -- >> thank you, joe. >> no matter how bad things get in china, it's china, and there's people going to be an economic power house no matter what happens. >> they are. >> it's going to remain. >> can they stay the course? the point on china, joe, is that
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you want to look away from the mix of the economy. can they shift from exports to consumption, and manufacturing to services, and there's a debate on that. the issue on china. >> if it goes lower, tough to be a consumer economy. your standard of living goes down against the rest of the world every day. >> if your currency goes lower. >> seems like it has to. >> a little lower: down, like, 4%. >> because they hold it up, though. where does it deserve to be? >> i think it'll deserve to be where the government wants it to be, a soft landing in the currency rather than a hard landing in the currency or economy. >> the other thing --
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almost called you byron. >> wouldn't be the first guy. >> every time we talk about the stock market or chinese economy, we never know how to -- whether they are marginal related. >> they are not. >> we need both to decide. >> look, the market does its own thing. i mean there was a massive blowout in the first half of the year, the government made a huge mistake in encouraging it. they tried to catch a falling knife on the way down. as we saw on monday, you know, it's pretty painful to catch the falling knife. the economy is performing much more gramgly in terms of deceleration than the markets would lead you to believe. >> we had mark grant on yesterday. he says he thinks real gdp growth in china is closer to 2%. >> how does he know that? >> he doesn't, but how do we know anything? >> i'll tell you how. look at employment growth in china. it's a pretty good and reliable
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indicator. this year, the growth rate in urban employment, first three quarters this year has been north of 14 million jobs. the market is about 10 million per year. they've exceeded targets for now this will be the third year in a row. how do they grow jobs with slower gdp? they shift to services. services requires 30% more jobs. >> nobody gets fired in the factories that are totally overproducing either. >> well, joe, back in the late '90s when they did the first round of massive reforms and state owned companies, they laid off tens of millions of people. they are not averse to doing it. they have not done it this time. >> in this environment, they can't. >> well, we'll see. we'll see. they have to -- they have to take the deadweight out of the state companies. that's where the debt and inefficiencies are.
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>> because they did it before, they do it again? >> well, this is going to, you know, be a very key issue. >> how gradual do they do it? how quickly? >> they did it massively. the former premier, my hero in china, he was the boss. he was the tough guy. >> he did it in the late 1990s. does the new guy, the new leadership have the same vision to do it this time? >> we had a guest here earlier who said he's been measuring the services component in china, has been doing it for a long time and that the services component would pick up, and that that would be the part that carried the economy over. he said in the fourth quarter, though, that really took a dent and there was massive pressure. >> it's possible, but in the first three quarters this year, the services' share rose to north of 51%. >> yeah. >> and the government was targeting at the end of last year a number like 48.
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that's well above target. fourth quarter numbers we don't have. maybe he knows something the rest of us don't. >> they monitor. >> well, there's a lot of sort of mystical ways -- >> he said it change his mind and perception of what's happening there. >> important to be open to new and exciting things to change your mind from time to time. >> did you waiver on the u.s. consumer with oil at 30? finally, we're going to -- it didn't help, which i don't understand. >> consumers, you know, just did not step up, joe. >> why? >> they are dealing with the aftermath of the crisis, trying to pay down debt loans, rebuild savings, the healing after a crisis that we went through, which really hit the consumer takes a long time. we're not done. the consumption growth rate, eight years running, you know, is 1.5% in real terms. never had a period of weak consumption like this despite
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the people that come, you know, on this show and say the consumer's back, and spending with avengeance. >> so, how much longer? i mean, nothing lasts forever, does it? >> no. i'd say we're in the sixth inning -- >> sixth? >> yeah. >> of a softball game in. >> no, this is like a regulation nine innings, maybe extra innings. who knows. >> there's a lot more. >> well, we're more than halfway through. good news. bad news is there's more to go in terms of paying down debt and rebuilding savings. >> that's oddly bullish from markets, no? >> slice and dice however you want, but the economy growing at 2%, that is not terrific for those who want gdp growth and earnings growth to pick up and support stocks. >> we're in the ninth inning? >> other than low rates, but we tried that for seven years, and that only took us so far. >> i agree with that.
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>> only takes you so far. >> talk about central planning -- >> right. >> we have a central bank engaged in central planning. >> right. and what we need is investment and we need companies investing for the long term, and, you know, i -- >> we don't get that, joe, if we don't get savings back in the u.s. economy. >> that's what you say. it takes time. >> yeah. >> maybe it happens. >> we're struggling to save. we don't have a long term view as to why savings is important for the united states. you can't invest without savings. >> and with savings, does that mean just stocking away, or do you need return on savings? >> return is important. >> that's the problem, then. >> with zero interest rates, hard to get returns. >> it's their fault. i knew it. >> not all their fault, but they deserve a greater portion of the blame than they, and most would be willing to admit. >> it's a -- it's an opinion now. some think the fed builds a statue, and others think the way you do. >> i think this has been -- this
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will go down in history as possibly a water shed period for the worst performance of central banking since the depression. >> now, that's a freaking surprise for brothe list. the worst fed ever instead of the greatest st. ben and st. janet. >> well, bernanke writes a book called "courage to act," starting in the depth of the crisis. it doesn't talk about the greenspan and bernanke getting us in the crisis in the first place. >> keeping money easy. that's courageous. >> stepped up in the crisis doing the right thing, but he created the crisis. >> oh, i like you. >> i like you too, yeah. >> all right. looking at you, looking at me. thank you. >> thank you. when we come back this morning, yahoo! closing shop on the online video portal after it flops with users. plus, amazon announced sky high purchases from cyber monday. both stocks moving this morning. caught up on what you need to watch throughout the day when
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"squawk box" comes right back.
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stocks so watch, eli lily in the red, cutting the 2015 guidance and sees 2016 earnings below street consensus as well. indicated market down 2%.
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yahoo! is shutting down its online video portal screen after it failed to gain traction with users. andrew, you've been a lot written in the past week. >> yeah. >> i saw her dressed up as, like -- >> at a gatsby christmas party. >> money being spent. >> yeah. >> the media turned in recent weeks, coverage turned on her in recent weeks. i don't know. >> this is true. >> i don't have an opinion. >> you don't read my column, but, yeah. >> i may have seen in the "new york post," where is it? >> it's not a newspaper. new york based newspaper. >> times still publish? >> every single day. >> wow. >> i know. >> really? >> yeah. >> who reads that? >> millions of people. >> i do. >> okay. amazon says more than 23 million items ordered on cyber money, a more than 40% increase year over year. shares of smith and wesson rising. reported stronger than expected
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gun sales. i think it was a record year. the opposite effect comes from intentions many times. woah! woah! they just took -- all right. you want to smell like vladimir putin? what does that mean, exactly? well, new cologne inspired bit russian president is on sale in mosc moscow. it's called leaders no. 1, coming in a sleek glass black bottle, featuring a profile of the russian leader, sold in luxury department stores in the russian capital. that's, like, an oxy moron over there, going for $95. the vodka scent for men -- no, i put that in. the scent contains hints of vodka -- no, lemon, black currant, and fir cones. he was inspired to create the scent by watching videos of the russian president, and i know
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what christmas is over, andrew, but next year, coming your way, my friend. >> looking forward to that. >> did you smell like a fir cone? >> right now. >> i wondered what that was. >> when we come back this morning, we'll look at how the lone star state handles the downturn in oil prices. boots on the ground, in-house oil and gas man, brian sullivan, is there with update. one of the stock miccers joining us with the first pick of 2016. louis navellier joining us. "squawk box" will be right back. stick around. flr
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markets on alert, volatility on wall street and around the world. is this the new normal, or markets playing catchup to start the new year? >> tumbling crude prices are messing with texas. brian sullivan lands in houston to see how the energy capital of the world is dealing with oil prices in the 30s. real estate boom in the big apple. record breaking prices in manhattan now even topping pre-crisis levels in some cases. who is buying? what's selling? will it last? the final hour of "squawk box"
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starts right now. live from the most powerful city in the world, new york, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe with becky quick and andrew, and less than 90 minutes from the opening bell on wall street. interesting day again, and china, again, dominating headlines. stocks there dropping more than 2% in early trading, and the central bank took option, and pboc pouring in $20 billion in money markets, the largest cash injection since september at the end of the last time there was some problems. we are doing better. here in the u.s., the futures are under pressure, but they have paired that to less than 60 points down in the dow, less than six on the s&p, and nasdaq down just 10 points.
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yesterday's market action could have been a lot worse. it was down 470 points, closed down 270, so we're still ahead of the game, even if we were to open down 60 from yesterday's lows. markets in europe, which were not that sickly early on, and now they have got some green in the ftse and in spain and italy in the dax, and did you see it was on? >> yeah. >> worldwide exchange. >> early bird. >> yeah. >> with leslie. anyway, down less than a quarter point from france, and just a tenth a point in -- what was the other than one? dax, i guess. >> other stories talked about this morning, auto makers release december sales numbers this morning, december expected to be another strong month like the rest of 2015, and analysts estimating auto makers sold 1 million cars last month. also, more trouble for volkswag volkswagen, there's a civil
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lawsuit against the auto maker against alleged cheating on emission tests involving 580,000 vehicles sold in the u.s. the complaint alleges vw violated the clean air act and could face penalties of $32,000 per vehicle potentially totaling over $18 million. there's been no criminal action taken against anybody thus far, though. i imagine that will happen. w we'll see. specifically, no individuals." star wars," breaking records, but starz is buying paid tv rights for "the force awakens," paying $17.5 million. they have dibs under an exclusive distribution deal with disney. that would do a lot for starz and what they are doing. of course -- >> seems relatively cheap. >> it does. i don't know the math on how it
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works, but it does, you know, considering starz is a constant takeover target. conversations whether they tie up with lionsgate. >> stocks to watch this morning as well. allied financial is turning down activists, lion point capital's request for the company to explore strategic alternatives. they said, though, they consider the investment funds two board no, ma'minees. reuters reports that shire's offer includes $20 a share in cash with the balance of the $47 share bid in stock. in the meantime, the journal says tax concerns hold up the deal. they reportedly want to make sure adding cash to the original all share offer does not jeopardize the tax free spinoff from baxter. >> you know what? there was one season of san diego in l.a. >> really? when? >> i don't know. long time ago. '60s or something. i thought i misspoke. i was thinking of the raiders
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and oakland and rams. three nfl teams looking to move to los angeles. two can do it and share 15 stadium. the san diego chargers, raiders, and rams all filed to relocate to l.a. for the 2016 season. the league says it will only support one team, though, and applications considered by the owners, 24 of 34 have to go with it. meet january 12 and 13, and we'll watch that closely. that's the second biggest tv market, and, i don't know, l.a. doesn't have a football team in. >> you think the owners are with that because the tv rights are going to be generously paid for in that market. >> which one? different alliances, and, you know, a block of guys to go with you to block the other team you don't want to move there, so i don't know. >> i don't know. >> yeah. the raiders, i don't know. oakland raiders. what a history. al davidson.
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all those guys in the black and silver, all the tough hard hitting. they need to stay there. st. louis, i don't know. they used to be the cardinals dr. >> oakland is by san francisco with the 49ers. >> yeah. o okayland needs a team, san diego needs a team. sorry, st. louis. the next guest feels good about the economy. joining us now is keith banks, president of u.s. trust where he's responsible for almost $400 billion in assets. keith, a lot of people were shook up yesterday. >> sure. >> the markets did not notice it was a new calendar year, but more of way we saw the week before. >> yeah. it's a continuation. i think a lot of the things that were creating, angst in 2015, we rolled into 2016 in a similar fashion. not to mention the fact, becky, the world was away on vacation, so as we got back, read the newspaper, saw the data, there's a catchup going on as well. >> probably not all that surprising, you know, as you mentioned a week later, people
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catch up. the question is, do huge concerns cant to hang over the market for the rest of the year? look at china, the middle east, and continue to see that really -- that affecting investors like this? >> i think it will. you got to step back and realize that the further you get into the business expansion, the more conflicting signals you get, and we are getting them. we wrote a piece recently, the outlook, the twilight zone, and remember the beginning of the show, and rob, in that ominous voice talked about moving into a land of shadows and substance, and we look at the shadows of being allel risk you covered so well today, china, yuan, oil prices, high yield markets,est, and the substance being the fact that there still are good thing going on or better things going on. we do think the u.s. economy grows this year at least 2.5%, maybe more, the global economy ticks up somewhat. the consumer's in good shape. that drives consumption spending
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at a reasonable level. housing is good. put that all together, we still get growth in earnings this year, about 5%. that's not a bad thing. >> 5%, not terrible, but not great. >> not great. >> and, i guess, if you're going to continue on, this whole idea of this being the twilight zone, is that a scary place for investors or a place for opportunities? >> i think you can get scared some days and other days -- we have to realize there's two sides to the ledger. there's reasons to wring your hands and be nervous about substantive issues, but we think the good fundamentals are there as well, and when you net it out, we do think it's a year of positive returns for the equity markets, certainly in the u.s. >> you're basically saying buy on the tips every time you see something like we saw yesterday? >> look, be careful going in, but if you believe what we believe, that the economy's in decent shape, and that the, you know, earnings drive the day, and we do because value weighs are pretty full right here. we don't think you get much
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expansions in the p eres, so lo at the fundamentals and sec tto that benefit, like health care, financials, et cetera. >> byron surprises for next year, 3%, if he said that, that would be the biggest surprise for anyone, right? that's way out of -- >> gdp. >> yeah, way out of the mainstream. first quarter under 1%, how do we get to 3%? >> well, we think the consumer's a driver of that, joe. >> consumer's still -- >> i saw that. so we're more optimistic on the consumer. we think the consumer drives, spends in a rate between 2-3%. housing is early on. this is the first time in 75 years that housing has nod led the recovery. there's the consumer that's in good shape. you got real wages going up. there's low unemployment. you suggested 4% ticking down. >> doesn't feel like it. >> it doesn't, but jobs have
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been created. we think residential investment grows 10% this year. there, again, are positive forces we think drive the economy. to your point, joe, i was watching this morning, you know, we're seven years in, 2.5, seven years, it's not a huge number. >> i know. classic sixes or building other things? do you know what a classic six is? >> i do not know what a classic six is. >> i don't either. >> where do you live? >> jersey. >> this is why we don't know what it is. >> that explains something. >> new york city people. >> ekts ducate me. >> a dining room, living room, kitchen, bedroom, and maid's room. >> sick. >>. >> so out of touch. a maid's room. >> how's the porch? >> it's good. it's a lease. >> keith, do you say buy into the housing sector, too, if you
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think that's one of the strong points? >> well, we're not looking necessarily in the housing area as a place to invest, but it's a driver of the economy. the sectors we like, we like health care, financials, technology, and longer term play is value on the energy side, but that's longer term, obviously. >> thank you finish coming in. >> great to be here. >> can the maid cook? >> some do. some don't. >> i can see that. >> depends. >> if the cook and cleaning up together, and maybe a little nanny work in there too, right? >> sometimes. >> babysitting? >> sometimes. depends how it's set up. i don't know. >> anyway, the texas economy, one the biggest beneficiaries in the oil boom. with crude below $40, how is the lone star state holding up at this appointment? even down there, brian sullivan, i think that not every city's the same down in texas even, but you're in houston where i would
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imagine you can feel that $30 oil somewhere, can't you? >> reporter: you know, you can, joe. quickly, my uber driver from the hotel this morning laid off e n seven months ago from a printing company, worked with trucking companies, trucking slowed down because of oil, and he was laid off. things slowed down here dramatically. houston, right now, is fine. the question why we're here is what is going to happen with 36.5 plus oil? reality is, whatever you say about houston, it is diversified. medical center is huge, rice university, other things. oil is still the blood that pulses through the vain of this largest city, and in texas, and largest city in the united states. that is why we're here and will be here certainly all day, and we went around yesterday, and we asked just random folks what they think and how much they pay attention to the price of oil. >> when people plan on oil being
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x dollars a barrel, they build buildings, build new apartments, go out east or west, apartment buildings, they stopped building them. >> i had to change jobbed, so i work somewhere else now, and it's fun, but, yeah, i was directly impacted by oil and gas. >> reporter: you know, just guys, a couple quick data points. there's home sales declined two months in a row now, and everything coming off the record. home sales down two months in a row. there's the paycheck small business job index below 100 for the first time since 2010, and there's 214 publicly traded companies in and around the houston area. 17% of them are higher over 12 months. it's an economy that's still fine now, but let's be clear, oil matters a lot to houston. >> hey, sully --
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>> reporter: hi? >> do you see holsters and open carry yet? >> reporter: i did. yesterday at lunch, a guy with a side arm. >> unbelievable. >> wow. >> first weekend, nothing happened. looking at -- >> reporter: it was a very -- listen, i -- i love texas. it was a texas moment. it was at a restaurant, and they had an old texas flag that said come and take it. it said come and take it. there was a cannon and star, and the dude had a side arm with him at lunch. i was eating a taco. that was delicious. guy was carrying a gun. >> more details on that today and thursday. >> yeah. >> on that whole thing. >> yeah. >> on -- >> we'll be here all day, a great show lined up at 2:00 eastern, a bunch of people, should be a good show, urge all your viewers to tune in later. it's cold. i don't want to drag myself out of bed for nothing. >> all right, buddy, thank you,
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sully. also a porsche driver. >> okay. >> all right. >> another 1%. >> new e-mails coming to light showing how bold air bag suppliers were about dressing up testing data part of today's executive edge, plus, trump with a new tv ad, the first since campaigning for president. that's coming up. big city, big prices. the record breaking stats on new york city real estate, all that and more coming up during this hour of "squawk box." back in just a moment.
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december figures in from chrysler, the company registered 13% increase in sales over last year, below the edmonds.com estimate for nearly a 19% increase. right now, time for executive edge. the "new york times," we should tell you, reporting about data tampering in air bags by takata, e-mails suggest manipulation was bold and broad. one titled happy manipulating, coming from a takata engineer.
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documents were unsealed as a personal injury lawsuit against takata obtained by the "new york times," and honda said they would no longer use takata, saying the testing data was misrepresented and manipulated. guys, it's more than just engineers saying, hey, happy manipulated, but suggesting to change the colors of the lines because they thought it looked less -- >> less -- >> yeah, less -- less clear on how damming some of the information was, but it does sound like people were actually going out and trying to -- realizing there was faulty information out there to cover it up. >> these the ones that hurt you when they opened? shrapnel? >> six people died and others seriously injured because air bags explode sending pieces in your face. >> this goes back to the vw issue. >> that's what shocked me. shocked me between vw and these allegations, knowing what was
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going on, we still don't know exactly who knew what. >> and no individual is held accountable. may be, you know, by the way, usually often takes a year to bring a case. go back to think about -- just a year. >> you know -- >> people lives lost in this situation too. >> another piece of news that the media world is gossiping. redstone's lawyers filing a motion to dismiss petition by the media mogul's former girlfriend to have his mental competent valuated. tongues wagging on what happens to both companies, ultimately. in the future. post some redstone world. >> how old is she? >> the girlfriend? >> like 40. >> testing her mental competent? >> think they should? >> i'm not an ageist, but -- i don't know. is there it -- seems like where there's smoke there's fire.
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>> unfortunately, i think -- i think i can say reasonably -- >> i know what you're saying, but what's her deal? i guess i know her deal. >> we know the deal. the wall street journal laid it out. he has to come up with over $100 million in gift taxes. >> funny guy. incredible person, but check this out. faraday unveiling a sleek, sporty concept car in vegas in the annual ces show. the company's 18 months old, and they have been super secretive -- >> i think that was secretive. >> oh, that's a different issue. secretive. >> super secretive is -- >> i've known people that are super secretive, and it's gross. >> really? >> if you don't deal with it. botox works on that. >> paralyzing the sweat -- >> yeah.
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>> is it spelled the same way? >> i think it must be. secretive? secretive? >> interesting. i don't know if secretive -- spelled the same way? you're not super secretive. you're neat. >> thanks, i appropriate that. when we come back, living in the big apple? pay up. the new york real estate market is breaking records. how about the average apartment going for under $2 million? robert frank has the empire statistics after this. so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberry apple scones smell about done.
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ahh, you're good. i like to bake. get expert advice for your small business at att.com/small business.
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new records in the fourth quarter, and robert frank has more. good morning. >> good morning. all the trouble in the world is helping manhattan real estate. the average price of a manhattan apartment hit a record $1.95 million. the average price per square foot hit record $6,000, and median price hit a record, and that's the first time is surpassed the pre-crisis peak. brokers tell my buyers overseas and local remain strong, but manhattan is a tale of two luxury markets.
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you got co-op and condos. condos, including the foreign buyers and new construction, up 25% to the average sale price of 2.7 million, but co-ops, all u.s. buyers enusually older buildings, sell for average of $1.28 million. foreign buyersing the for 15% of all sales in manhattan, but 30% of new development, and next year, more than 6,000 new condo unites expected to be on the market. remains to be seen whether they will be absorbed. most expensive sale, that was a $45 million trade at 15 central park west. what's weird about it is it was purchased a year ago for $48, list the for 65, sold for 45, and now back at rental for $135,000 a month. >> wow. >> byron, i don't know if you saw him, but the surprise, the high end real estate, he thinks it comes down in a big time way,
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is that right? >> i've been expecting that for 18 months because, usually, in my world as i cover this for 13 years, high end real estate is tied to stock markets and the global economy. both are in trouble right now. we're in a bizarre world where capital is flying out of china, so it's kind of the opposite of what we've seen, and the question is how long it's going to last. >> how do you define the market? what price? >> $10 million and up? >> well, i mean, usually, the high end market -- i describe it as million dollars or more. in manhattan, that's almost everything now. >> right. >>, aga so i thought there was w down with everything that's happening in china. >> square foot footage numbers are -- >> new construction is $5,000 a square foot, and all the new stuff next year, that's a small slice of the global population
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that affords that stuff. >> robert, thank you. >> thank you, guys. when we come back, the countdown to friday's job report, and, today, fresh data on small business hiring, and the platinum portfolio returns for the new year with new picks. louis navellier has new names to watch for 2016. right now, though, as we head to break, look at the u.s. equity futures, coming back substantially. futures this morning, dow futures down triple digits, now down by 12 points, and s&p and nasdaq turned positive.
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welcome back to "squawk box." upgrades and downgrades this morning. solar jumping, goldman increased buy from new tral, saying the stop is a top idea for 2016, citing best in class balance sheet and other factors. tyson downgraded from outperform at rbc, pointing to decline in the food segment, and credit card issuer, capital one, cut
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from perform to out perform saying the street estimates for capital one are too optimistic for 2017. >> new data just breaking about small business employment in the united states. the national index closing out 2015 lower, turns out it was the softest year for job growth since 2011. taking us in the report is the ceo of paychex. marty, it's unnerving to hear this, but how bad were the numbers? >> not bad, becky, really, a slight drop from last december and flat from november. seeing consistent job growth in small businesses. it's an index above 100 for four years. we have consistent, good job growth, but it's slowed down a bit. >> why do you think it's slowing? >> well, i think, you know, it reached a pique in april of 2014, coming back up, slow to build up, and then it's just
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slowed down and moderated since then. it's, again, consistently positi positive. that's a good thing. it's just slowed down some. it's interesting to see where it's happen. mountain region, number one in the country, that's the strongest, pacific is strong, and the south is strong. texas, i know you had brian sullivan on earlier, interesting, dallas, number one city in the country for job growth, very strong. houston, down 3%, though, just from last year, so a tale of two cities in texas. >> do you know more specifically why, what industries in dallas versus what industry in houston? >> we don't specifically buy that city, but there's other services as mentioned, you know, discretionary service, personal care, and so forth, has the highest growth right now, year over year, and manufacturing down, and, of course, anything around the oil and gas fracking industry in texas or even up into the dakotas hurt in the
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area. good news is, it's discretionary income spending, which is good. the bad news is, a lot of it is part-time jobs, so i think it's still kind of carefully bringing back jobs to the economy. >> looks like the second biggest gainer is construction jobs. that's good, right? >> yes. >> a lot of times those are jobs that create other jobs to go alongside it. >> that's correct. i think when we're seeing that in the west coast and in the south, a lot around new housing development, you know, new housing starts up over last year still, and so that's good news for construction. you're right. everything around that, restaurants, painters, land scrapers, all that around construction is positive. >> marty, 2015, what were the highlights and low lights seen in the small business index? >> started good. first quarter was positive uptick in the index, and next two down, and fourth quarter was
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flat. it's a slight drop in the index. big news probably being where it is happening. you know, with energy costs going down, that was a real drop in the small business jobs around texas and houston in particular and fracking in the south dakota and south dakotas, and other services, though, a real positive in the fact that people are spending discretionary income now, feeling better as a consumer, and that's good news. >> marty, thank you, happy new year. >> okay, thank you, same to you. "squawk box" platinum portfolio has two new twists this year. each investor picks four stocks in the portfolio and now manage a cash position who louis navellier ever had a penny of cash. chief investment officer at navellier investments, many money you manage, do you have a dollar in the investment? >> top one last year was 50% cash. >> come on. >> yeah. >> how many different ones do
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you have? >> oh, gosh, probably 16 or so. >> that's the only one? >> yes. dividends up, growth up. good year already. top 2%. >> four new ones today? >> yeah. total system services, making the government cards, fraud protection, announcing earnings soon. we have acuity brands, that's a lighting company, ayi, they announce friday. constellation, that's booze, corona beer, good results thursday, and public storage, psa, that's a defensive stock, decent yield, we go in recession, that'll do well. >> you have a defensive stock. that's a read or something almost, isn't it? >> yeah, yeah. they have good sales and earnings and good dividend yield. when you do dividends, you have to have dividend growth, and so you have to have companies increasing dividends.
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>> you're a momo guy 90% of the time. defensive issues indicative of you thinking the overall market -- >> absolutely. this is going to be the fourth quarter in a row of negative sales and could be the second quarter of negative earnings. buybacks are no longer upsetting that. i go in earnings season with positive sales and earnings, and as long as money is shuffled, i feel good. we were happy yesterday because the stocks exhibited strength, but we warned they would prick that amazon and netflix bubble. that happened yesterday. with all those analyst downgrades, and there's more, and as long as the money is shuffled my way, i'm a happy guy. >> give me a normal stock to watch. it's going to go up, like, 15 times in three years? >> well, i have stern ruger. >> you do? >> yes. >> why would that go up? >> mr. obama's the best gun salesman on the planet. >> do you think he realizes that, or -- >> hard to explain the gun
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culture. >> he's not -- >> i have a home out west and shoots range in my house. i have an rv garage. i don't want a shooting range or rv, but it comes with the house. i use the shooting range as a wine cellar, and walking the neighborhood, people are having fun in their basements. we have bears in the neighborhood, stuff like that. we're not going to shoot the bear, he just wants the garbage. >> you think the stock's up what percent? three times? >> i wouldn't bet on that. what happened to the gun companies? you know, the universities, everybody divest of them. okay. >> by the way, that's -- >> nobody everybody that sold is sold, and now there's record sales. i'm not selling the guns, but president obama is selling guns. >> do you have pressure from your own investors? >> absolutely not. >> no? >> no. they just want us to make money. >> there are people who don't want to be in there. who live around here.
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>> well, people can give us accounts with restriction, and we abide by that. we have regulators saying you can't buy stocks in the industry we're regulating, but, yes, there's social restrictions. >> when is louis navellier launching his socially responsible fund? next year? >> actually, i left a company last year to do that. rockefeller, who's up the street, uses my record to sell their stuff, but, so, yeah, look at rockefeller, there's a five star rating. that's any 17 year record. morningstar has not changed it yet, but i think they appreciate my record, and they do social responsibility. east coast social responsible is different from west coast, and i'm from the west coast. we have to get the two to figure out what they want. like, you get in trouble for having, like, southwest airlines because it's nonunion. >> right. >> it's totally different standard here than out west. >> hydrocarbons. i like the guys with their own jets that fly to the conferences
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about the hydrocarbons. >> al gore chartered a plane. >> i know. the president likes to go to hawaii in a 747. >> yes, yeah, yeah, yeah. >> talking your own book. louis navellier, thank you. >> thank you. >> okay, a thursday alert right now, bill ackman's hedge fund ended 2015 with a 20.5% loss according to reuters citing an investor update. we knew it was around 20%, but now we have the tally. when we come back, a milestone putting tv in second place. digital media taking the top advertising spot with billions after stake with potential winners and losers next, and political ad spending ramping up this month ahead, and donald trump is in the act. we'll show you what we're talking about when we return.
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gop presidential front runner, trump, released the first political ad of his campaign, highlighting his stance on muslims, terrorism, and begins airing in iowa and new hampshire today. doiigital media on track to take tv as the number one media category. digital media reaching $68 billion in advertising revenue
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in 2016. joining us now to say who he thinks are the winners and losers in the media world is the associate portfolio manager of the multimedia trust. good morning, larry. >> hi, andrew. >> thank you for joining us. when you look at who we're going to be the winners and losers of this, aassume it's the facebooks and googles, but you like twitter in this sort of grab bag of media companies? >> yeah. i think the consumer electronics show, it's all hanging out there for everyone to see. i was in a sports bar last night, andrew, and there was a youtube video along with the games, so the digital world is catching up with the real world, and i think we're looking at $3 billion of incremental political this year. i think every congressman has a facebook operation, and i think facebook, google, and twitter
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are going to capture a very, very surprising amount of the incremental political dollars that are spent. tv is going to do just fine, but there's a new guest in the neighborhood. the political dollars are high revenue. the other thing here that's obvious out at the show, it's really an automobile show, and everyone manufacturer among the top ten other than one is exhibiting. they have 200,000 square feet of space. cars are basically become iing technology devices so if you go on facebook to tell your friends that you're going to look at a chevrol chevrolet, you are deluged with chevrolet ads, and the people deluging you with the ads know there's a strong efficacy for selling. between the growth of sensors in
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automobile products and other products, you can -- it just see -- the facebooks, twitters, and googles of the world winning very, very big in the advertising area, and the question is really how fast the transition takes place. >> so talk about the transition. one of the other companies you like is a traditional media company, which is disney. disney is under pressure recently. we've had a couple analysts, richard greenfeld said the stock is overvalued begin the challenges they face in the cable world in the future around espn. you don't think so? >> no. i think world's eyes are off that in the quarter. i think they vastly underestimate the profitability of "star wars," will be. the box office has a bigger share to disney than the market's estimating, and i think
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the error factor in the analysts' estimates is in well excess of $100 million. in addition, in a few mornths, the company is opening up a park in shanghai. you had people on the show earlier today saying that the chinese need the consumer sector to growth. the chinese government's a partner in the park. it's pretty of one of the gays they get the consumer sector to go is by promoting the disney park and disney products. "star wars" opens in china this weekend. i think it's going to be enormously successful. i think the "star wars" film will be by the time it's finished $2 billion in profit, almost all of this will be free cash flow. i think that we got a temptest in a teapot with sports. people watch sports. people want bigger tvs. they want the experience of watching things in a communal
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environment whether it's a sports bar or big base mement a you'll see espn's problems erode slowly over time, and, meanwhile, the marks, particularly with the increment in shanghai and "star wars," basically a 10-20 year project, you are going to propel the stock, and, basically, when you look at the price of the stock, andrew, it's not selling at a whole much higher multiple than other major media companies do don't have anywhere near the brand power this company has. >> i saw a cartoon, and maybe someone that, i don't know, like me, that -- about digital advertising, and there were advertising executives, talking to a guy stark naked, looking in the mirror, a beautiful emperor's outfit, and, i mean, is there any way that results come in, and you don't get the
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bang for your buck in digital advertising other than search that people are thinking right now? i've never acted on a digital ad, so i mean, maybe it builds brand, but it's not -- it's just -- maybe it's just me, doesn't work on me. >> well, i think there are two things, one, there's the really interested buyer, and if you're interested in buying a car and talk about it on facebook, the advertisers find you. the advertising is efficacious. the other is the observer. one of the rules in advertising, andrew, joe, becky, is that eyeballs -- dollars follow eyeballs, and the eyeballs right now are on you two. i was amazed by watching youtube in the bar that it was competing against kansas-oklahoma, the no. 1 and no. 2 basketball teams, and more people were watching the youtube than were watching the basketball game, which i thought was -- >> what was on the youtube?
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>> well, it was a bunch of tasteless comedy. >> yeah. >> that wouldn't make it on the network. >> oh, wow. >> larry, before you go, yahoo! what do you do about it? >> i think the directors have a responsibility, andrew, to consider all strategic alternatives, and i think the urgency of the directors acting is increasing exponentially. >> you think what happens? >> i think that the directors need to decide what to do. i think that's the way american corporations run. >> you don't have a solution for the company? you want it to be sold? what's your answer? >> you any, i think the assets are better served combined with another entity, whether that's facebook, google, or twitter, and i'd like to see the other assets in the past and tech issues settled. the uncertainty of what's
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happening is very deleterious, and it's damaged shareholder assets. >> okay. larry, thank you for joining us from vegas this morning. appreciate thanks a lot, andrew when we return, more market turbulence ahead of the opening bell. we have had a good improvement. we'll talk to jim cramer who will tell us what's on his radar this morning. let's check out the futures. at one point they looked like they were going to go positive. nasdaq is positive. dow down nine. s&p down less than a half point.
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go down to the new york stock exchange, jim cramer joins us now with a market that came back yesterday quite a bit yesterday, jim. this morning it was testing lows, now acting better. i said cramer's coming on, it's up 20 points on the dow. did you make a big buy before we came on? >> we all want to say the chinese communists are corrupt, and they're mixing the market.
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yeah, no kidding. that's what they do. it's a dictatorship. if the dictatorship wants higher prices, they'll mandate higher prices. we can say nobody's that big. give me a break, it's a lawless country. they do what they want. let's stop looking at them and how companies are doing. it's 11 degrees out if you've been sitting on inventory and you're a retailer, it's the promise land. that group killed this market. killed it. i think this could be a positive. >> and the windchill was like below zero in certain places overnight. >> under armour needed this so badly. needed it. jcpenney needed it badly. everybody needed it badly, and it's important to recognize that weather is important for retail. i see you have harmon coming up.
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i know cars are a major focus, you got to have mobility, security, that's why i like har. >> we were talking about disney. 170 billion, comcast 140. 300 billion for facebook. is it worth 300 billion? is it going to be worth 300 billion? >> it has the advantage of you making the content versus disney making its own content or paying money for content. disney has to go pay the nba. facebook, you pay them what a great model. the best model i've seen. you do all the work, they make all the money. why couldn't yahoo! figure this out? facebook does no work, they make a lot of money. good model. >> all right. thanks, jim. >> imagine the nba paying disney? that's the way you do it.
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>> yeah. that almost happened with hockey and nbc, remember? nbc paid a dollar -- >> after they went into the lockout. >> almost been done. >> truth. love you guys. >> see you, jim. listen up, viewers, right now you can go to the room in your house where you keep your periodic table of elements, rip it off the wall and throw it in the garbage. there's a new periodic table coming with four new elements.
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welcome back. gopro trading higher. jpmorgan says q4 results could come in better than feared. and chrysler's december u.s. sales rising 12.6%, short of estimates. jeep sales jumping 42%. >> before we head to break, it's time to throw out your old periodic tables, four new elements were added this week. the seventh row is now finally filled and now most high school chemistry books are out of date. the elements will be officially named by the teams that discovered them in coming
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months. you know how i used to study chemistry? >> no. >> periodically. >> that was a joke i heard yesterday. i said that's the nerdiest science joke. >> and you love it. all right, everybody. have a great day. join us tomorrow. right now time for "squawk on the street." good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. premarkets struggling again. the dow futures have recovered from being down 100 points earlier this morning. shanghai, another more modest loss overnight as the chinese inject liquidity and firm up ute within

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