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tv   Squawk Box  CNBC  January 14, 2016 6:00am-9:01am EST

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i don't know what happened. i was sure you were going to win. it's thursday, january 14th and squawk box begins right now. >> live from new york where business never sleeps, this is squawk box. >> good morning, everyone. welcome to squawk box here on cnbc. i'm becky quick with joe kernen. sitting in with us is mike santoli. cnbc senior market commentator. our top story the major u.s. indices falling into correction territory or worse. most of them at this point looking down in double digits from the most recent 52 week highs. the dow is down about 12% from the most recent high. the 52 week high. s&p off 11.5% and the nasdaq down 13.5%. the russell 2000 below it's june
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intraday high. that's bear market territory. check out this morning after such a huge decline you might expect a big bounce back today but not at least at this hour. the futures are flat with the dow futures up by 4.5 points. s&p futures off by over a point and the nasdaq down by close to 5. a mixed session overnight. the nikkei down by 2.7%. it was off the session lows. stocks actually dropped more than 4% at one point during the trading session. china bucking the trend. stocks there turning higher in the afternoon with the shanghai composite closing higher by about 2%. take a look at the early trade this hour you'll see that right now things are pretty weak across the board. the cac in france is down by about 3%. the dax in germany down by 2.75%. and take a look at the price of crude oil that's been a huge reason behind the weak numbers
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that we have seen in equities. you can see wti up by 31 cents. still at $30.79. >> i don't know how much of that was. >> propped up by the government. >> and it's interesting because every day now the journal has enough trading before the final print to actually talk about shanghai and today the journal says the sell off continued early thursday in shanghai when that index had breeched it's lows it saw in the summer. by lunchtime and they paused. >> that's a good idea. >> take a break. >> an hour and a half. but it was still down 1.2% and then closed up almost 2% but that didn't help asia which seemed -- i'm sure, europe, which is down significantly sort of reflecting what happened here yesterday which was horrific and disappointing after being up triple digits and the slow
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decline almost down 400 points at one time yesterday as oil, i think, brent and wti have both been under 30 at this point. a few stocks to watch today, what was the high on gopro. >> $98. >> you're kidding me? for sticking a camera on your head. warning -- who else would ever come up with that? like the little clamps that you need to put on the helmet or whatever it is you're wearing. >> it's an all time here but it did trade, i looked yesterday at a price target of 89 or $90. >> the barriers to entry are so big. >> they were saying maybe the value here is the patents and not even the products because there was a little bit of amos trap. the stock got crazy. >> it's not like buying 400 boeing jets or something to get into the market. you just get better clamps to
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stick it on your helmet. and fourth quarter revenues will fall below forecast. i love the guy though. is that his name? really? >> nick woodman. >> hey, i'm nick woodman. i star in adult films. >> it is his name. >> those are made -- woodman? heck yeah i'm jealous. saying it sold fewer action cameras than expected. they're also cutting 7% of the work force. the stock getting slammed in extended trading. extra space storage being added to the s&p 500. it will replace it required by ace. goldman sachs calls about 5% of the work force. now looking to cut up to 10% of fixed income traders. deep cuts are expected in debt,
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currencies and commodities division but a source tells mary thompson that reports of a 10% cut are speculation at this point. >> on today's watch list, weekly jobless claims are out at 8:30 a.m. eastern time. first time filings are expected to hold near the 275,000 level. also look for december import and export prices. jim bullard speaking about the economy and monetary policy at 9:15 a.m. eastern and earnings season gets underway today. dow come poponent jp morgan to report. intel is out after the close. >> now back to this morning's developing story deadly blasts near a popular shopping mall. martin is covering the story from singapore. good day. >> good morning, joe and beck and mike as well. you know the basic facts of the explosio explosions. the raging gun battle but let me get to the later here. we have reuters as well as the
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dow jones now, two sources reporting that indonesian police say the attackers have links to is, meaning is was behind these attacks. this is only going to increase worries about the threat posed by jihadist. 200 million population. and mostly tolerant and also pleuralist but also asia's number one exporter of jihadists to the middle east and that's 300 as we speak in the middle east they have gone there to fight with, along side, or for is and the worry for months is they could come back and battle hard and train and recruit and train more people at home and potentially carry out more terror attacks like the ones we saw earlier today. now unfortunately walk with me on the wall here indonesia is no stranger to terror. let's take a look at the milestones here. back in 2002 you'll recall the deadly blast at the resort island of bali.
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lower scale attacks after that and in 2009 also in the indonesian capital of jakarta, they attacked and then today the attacks that we have just been talking about confirming this whole fight against is and is itself not confined to the middle east and the deadly attacks in paris and then today and now jakarta. guys back to you. >> they speculated that jakarta could be isis itself. thank you martin. let's get becky now to check on the markets. >> thank you, joe. >> i was rolling right through there. >> i'm going to take over this. let's look at the futures. things are flat right now. they have turned weaker in the last couple of minutes. dow futures down by 17 points below fair value. the year is young. 8 trading sessions in 2016 but already the dow and s&p 500 are down 7% this year. the nasdaq down 9.6% year to
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date and joe how many companies in the s&p 500? >> thousands. >> thousands. maybe 500. of those 500 how many do you think are up? >> it's twice. >> alphabet. >> yeah. >> how many of them do you think are up for the year? mike, joe. >> this career? >> how many. >> s&p 500. >> s&p 500 companies up for the year. >> 10%. >> about 30. >> 35 companies which is about 7%. >> 7%. >> so it's been a very rough year. only 8 trading sessions and that's why people are on edge. take a look at europe this morning and you'll see red arrows there and steep decliens. the dax is down by 2.9% and ftse is down 2% and in spain they're down 2.7%. we showed you what happened in japan with the nikkei down 2.7% and streng down bringing it up 2% but it was very volatile and
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started things off on a very weak foot. wti, crude oil down 18% so far in those 8 trading sessions. you can see it up today by 1% but still trading at $30.77 barrel. take a look at the ten year note. right now yielding below 2.1% at 2.065% for that yield. the dollar looks down against the euro. 10927 for the euro. dollar yen at 11767 and if you want to take a look at gold prices they're up barely. still below $1,100 at $1,091.40 an ounce. >> 2.0 what? >> 2.06. >> is that not unbelievable? >> yeah. >> that's the fed just went ahead and raised rates. >> yeah. >> can't raise that rate. >> no and when you have the idea that they're going to raise more rates it doesn't drive that higher. >> but you're raising rates for a reason that should -- the ten year should be following along
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unless you're wrong about the reason that you're raising them. >> more global pressures as you brought up. >> there's also questions as to whether china is selling it's treasuries to make sure that it continues to prop up the other markets it's so concerned about too. >> 4th quarter gdp might be half a percent at this time. it can't go negative can it? >> there's a rule against that. the s&p 500 has he erased 1.33 trillion of value year to date while the dow lost 517 billion since the beginning of the year. joining us is allison deans. chief economist at chase, we were just talking anthony. what's fourth quarter gdp going to be in your view? >> i think somewhere close to 1% but not much more. there will be a lot of inventory and that will help you in the quarter. there were weather effects which people never like to hear about
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that influenced apparel purchases and things like that that slowed down consumer spending so there's a couple of one offs that you saw in the fourth quarter that won't come back in the first quarter. >> so why do we get such differ motions. >> it's clear, they're telling you they're going to raise rates four times and the market doesn't believe it and i don't think the market should be believing it because in september the federal reserve didn't raise rates because of global market puturbulence and china. i think the federal reserve goes back into september mode and doesn't raise rates by four times and that's one of the reasons why by the end of the year we shown see it exceed 2.5%. >> allison, did you ever send out that automated phone call telling clients to tell everything since last time you were on or anything?
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have you done that? did i miss that? >> you missed it. i forgot. >> have you raised any cash. >> not since the fourth quarter. i have been worried about the valuation in the market and earnings growth but i thought we'd still see it coming out of the s&p 500 so you'd get a low single digit total return. >> do you still think we'll have positive growth or not? >> it depends on where energy prices fall. i did not expect them to get as low as $30 because that does effect the s&p earnings. my feeling was by the second half of the year you start seeing positive comparisons in the multinationals in the energy sector but if the price of oil keeps falling the dollar could get even stronger and you can have tougher comparisons. >> a pretty breasting piece. if we export 1% to china how could it possibly matter but you look at the industrial recession it does. it matters if they're not the
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marginal buyer of commodities, that's one problem and i guess we're close enough to net export andalancing it out. this would not five years ago, you wouldn't think we would have been as effected by a slow down in china as now. >> no, we have become a lot more connected and there's so much growth in energy and commodity industrials based on demand coming out of china. i would clarify though that i think the economy will be doing better than the s&p 500. our economy is very domestic consumption oriented. the s&p 500 is global in it's orientation. more industrial and more reliant on demand from overseas. >> so it's not -- i blamed twitter and the internet for the
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new interconnectedness. that's not -- what's got book? corresponding with each other with facebook and twitter. so that's not why -- mike -- can you postulate. >> you talk about the direct exports t capital that flies around the world to pay for commodities and we used to send a lot of dollars out in the world to buy oil from the rest of the world and dollars made their way back into our markets. all of that is under appreciated and hard to capture and not just about the markets psychologically freaking out. it's about somebody wanting to sell the market at 11:00 a.m. every day for some reason. it's not sinister. just means there's less trade flow and it impacts a low nominal growth economy in a way that seems like a bigger deal than it might be. >> we used to think it was all about our consumer here. is it now that it's not multispeed economies globally? are we really a village? >> i think it's a global
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economy. >> so we go into a global recession and global recovery. >> a lot of people think we decouple from china. china has huge trade relationship with a lot of other emerging economies so if china goes down it hurts the other emerging economies and pretty soon when you add up all the emerging economies it adds up to a significant part of the global economy. when you consider that china was responsible for more than 70% of the growth and global economic growth if they were to collapse, we will see some problems in the financial markets. remember back in 2008 and 2009 we thought the central bank of the united states could not get us out of that financial crisis. guess what, they did and equity prices even though they're depressed thousand they almost triple since 2009. the same thing will happen with the people's bank of china. they will eventually figure it out. they are not going to do it
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overnight. but they will. we'll see the fruits of the labor. >> they were also in sync as has been pointed out we're going one way and they're going the other. >> everybody was sick. the u.s. economy is still on target to grow somewhere in the neighborhood of about 2%. >> do they join us by raising rates and pulling the stimulus or do we join them. >> i think what we do is maybe not raise rates as aggressively to help them in some sense but we still raise rates. >> help us too because we don't want the dollar that much stronger. >> we don't. we raise rates very aggressively. the dollar gets strong. that hurts. the mull national corporations. we think the dollar gets stronger but won't be such a negative head wind this year than last year. >> here's what is driving me crazy. oil price pain starts to spread where they talk about how low oil prices are hurting things like the airline which is is garbage. they're benefitting massively. $18 billion record profit from the first three quarters.
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>> most of the amount of money they spent is on fuel and they are big beneficiaries. >> we're not even recognizing that this is what is keeping it too. >> that's why the u.s. economy is not as vulnerable as people think. we're seeing improved wage growth and continuing to improve job trends and they now pay less money for gas. less money for heat this time of year. all of which makes them spend more and we're still at least 2-thirds of our economy is reliant on consumer spending. >> single digits for the year, the gain will be positive for the year in the averages. >> i think at some point it's time to start looking at the beaten up area and within the energy world you probably need a couple of significant bankruptcies but then things start looking interesting enough to pay attention to. >> so it's never started this bad. so we're in unchartered territory. >> never started this bad and never had two 10% declines
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within four or five months. that's what we had. we're down 10% from the november high. >> long dry stretch. >> so i don't know. there's no such thing as kind of two corrections in six months: if there's still a correction i don't know. >> right. and if we get three then we should sell one. >> the flip side of that is below the surface it's been so weak, so many stock hearsay the bear market what are we saying by saying we're going to call this a bear market today. >> all right. thank you, allison, thank you. it says here thank you, both. coming up, i don't know, maybe it's just me. i can't get enough of this story. the world record ball, record powerball jackpot is over. and as we said condolences to all of you that lost. you just can't believe it, you know? everything seemed to be -- i had it all. >> all my dreams. >> you were sure, right? >> i wasn't coming to work today. >> it's unbelievable that a lot of disappointment. >> maybe that's where andrew is.
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>> i think ray is on today to talk about even he said i know you're supposed to get some pleasure out of the $2 and the pleasure is fantasizing this and i know that there's no i'm going to win. >> he actually came up with a reason as to why. it's very interesting. he figured out why he gave the $2. >> because you should give everything away. >> it's a great investor psychology study. i don't want to blow it. but it's good. >> all right. plus volatility in the oil market and there's more fear factors ahead for crude prices. the warning signs. >> you've heard that a lot have you? >> yeah. ♪ equals great rates. it's a fact. kind of like working from home equals not working.
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♪ >> well, this could be the headline, there's millions of losers out there as we know. but we're talking powerball. but at least there's three winners and how many do we ow? >> do we know who played? everyone i know played except
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for you. >> over a billion tickets. >> we realize that but greg is right you know you're not going to win and you still play. >> kate rogers. >> i came into work without looking at the number ifs that makes you feel any better. >> really? >> yeah. i was going to quit live on air if i won. >> but you got your monies worth. >> i did. i had fun. >> kate rogers joins us now with more. >> right now we have not one but three winners so far in the world's largest ever jackpot. winning tickets were sold in three states leaving at least three people to split the record $1.6 billion jackpot. the odds of winning were 1 in 292 million. the winners identity is not yet known but we'll probably find out eventually as they're not in one of the six states, delaware, kansas, maryland, north
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carolina, ohio, and south dakota where winners are allowed to remain ano, ma' remain anonymous. it could be 48 hours before we know if there's more winners. this particular jackpot and it's huge prospects sparked a frenzy of buying. we're still finding out where the winning tickets were sold but we do know that in california the winning ticket was sold in a store outside of los angeles. the store will also receive a $1 million bonus for just selling the ticket. so the powerball owners aren't the only one that win out here. i never play and i thought for some reason i was going to have some luck guys. >> kate, come on, we all got caught up in it. >> i had big plans becky. i'm very disappointed. i'm getting over it. >> you got up early and came in anyway. you didn't check. >> i went to bed early but i did wake up this morning and checked
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and then checked again but i did tell our bosses i would come in and still do the story. >> did you get a single number? >> i think i got maybe one. >> but you thought you were going to win. >> i'm an optimist joe. >> it was fun for awhile. >> i like to think i'm an optimist. >> or a realist. >> look, greg, i can't wait to talk to him about this. >> you bought one. >> i bought one as part of a group, yeah. i think of it as the psychological hedge. you just don't want to be that one that said no. >> it's the avoidance of pain. >> you know somebody who won or somebody said hey you juan to go in on the group ticket. and you said no to save $2 or $20 or whatever. >> it's like the principle. i can afford $2. >> i think the real -- those
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that say this is bad economically to do that are for people that spend a lot of their income every single week on lottery. it's not like once in awhile. >> you honestly have walk outside, get struck by lightning and attacked by a great white on land to have anywhere -- and that's still more likely than winning this thing. >> but the award of having too fewer dollars. >> but it's really rounded down. essentially zero are your chances. >> the states do well. >> yeah. exactly. >> they're the winners. >> let's spend it on more useless stuff. >> the crude oil collapsed and many fear a major wage of bankruptcies are coming. michelle is here to explain what investors can learn from past price plunges. >> i'm here to do anatomy of a bankruptcy because as people
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wonder boy am i holding an oil stock that could go bankrupt, let's look at a company that's already gone bankrupt and see if there's any clues you could have learned. we're going to do a non-oil company which just filed on monday. if you're new to investing this is what a commodity company chart can look like. >> it's what happened in the coal companies as you know. >> i agree but the underlying commodity they produce has plummeted in price. >> they have also been killed by the obama administration and pensions and everything else. >> they would be bankrupt without that. >> i don't know. >> isn't a third of our energy still coal generated in this country? >> i agree with everything you're saying. i still think this works as an example of what you can learn if you you are a stockholder in any kind of commodity company and oil company.
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can i show you. >> yeah, go ahead. >> so i just showed you the chart. generally speaking though can't you say that commodity companies can look like that repeatedly. >> every oil company is not bankrupt. >> commodity companies. >> yes. >> all right. so what could you as a holder of stock looked at? look at their debt. what you should be doing now slooking is looking at the debt of the companies. so they issued 10 year notes due in 2021 at an interest rate of 7.25%. $1 billion worth and they trade near par for a couple of years until about january 2014 where they fall to 78 cents on the dollar. then move on to september of 2014. >> why did they have to pay 7.25 in 2011. >> so they were already signs. now the unsecured debt trades
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for less than a penny. if you have been an investor for a long time. there's a lot of new investors that have never been through a commodity crash before. when the vast majority of the debt of the company that you're investing in falls between 50 and 70 cents that's a big red warning sign because when a company files, goes into bankru bankruptcy and restructures, the stock is worth zero. so what happens, debt, if you hold the debt they say we can't hold back the debt but we'll make a new company and give you stock in that company so the debt becomes equity and the old equity becomes zero. so those are the lessons. very basic lessons that sometimes people need to get reminded of as we go through this. >> you said 50 to 70 cents. >> did i say percent?
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>> yes. >> how many of the sovereigns in europe went to 50 to 70 cents? >> greece never traded at par. >> they fell to 18 cents. >> none of those went as low. >> i think you're right. greece 100 year bond never traded at par ever. >> equity in greece. >> all right. >> all your points on coal absolutely correct but under the price of coal has also plummeted. >> that was a campaign promise that was fulfilled. >> one of the other major -- i don't want to say outloud but we might have to hold a funeral for coal at this year.
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>> not in china and india. >> they're telling me to wrap. >> coming up -- they're not going to make any money in china -- they told you to okay. but you can't wrap -- i've seen you try. you can't rap. >> i can't sing. >> coming up, the first of the dow component said to report worth picking results from jp morgan. bringing the numbers and the reactions from an analyst and as we head to break here's a look at yesterday's s&p 500 winners and losers. ♪
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welcome back to squawk box. it's time for the executive edge in a quick reversal the world economic forum announced that a north korean minister is no longer welcome at this month's meeting in davos switzerland. >> they only invited him a week or two i thought. >> following the nuclear test last week the test it had in defiance of withdrew nighted nations ban, they must know whether it was an h-bomb at this point. north korea is protesting the decision calling it unjust and irresponsible. when was it? aren't we supposed to know by now? >> no, they said it could take
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weeks or months. in this case you have to prove that it happened rather than not. >> but there's ways. >> just even on the rictor scale. >> that's weird because they invited this person, the north korean minister saying it should all be about dialogue and openness. of course that was like a week before the blast. >> dennis rodman still going? >> the latest star wars movie is such a global phenomenon even the federal reserve is taking notice. the fed's beige book notes very dryly that a boston area company. however the beige book didn't offer details such as whether old favorites or new stars were the ones stoking demand. they have to be talking about hasboro, right?
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>> in the boston fed district. >> next quarter we'll be hearing about powerball sales. >> a little bit of a bulge in demand. >> 1.5 million. >> jackpot. >> that's only 50% of what you sold. >> 1.5 billion, right? >> roughly. a little less. >> when we come back this morning we're expecting quarterly results from dow component jp morgan in the next few minutes. we'll bring you the numbers and the reaction from an analyst. and as we head to break a quick check of what's happening in the european markets right now. a lot of red arrows. you can see the cac is down by over 3.1%. 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.
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welcome back here's the futures now indicated down about 40 points or so. they were up minimally when the show started. big sell off yesterday again. we're not at the lows from last year. >> no. 1867 on the s&p is the number. >> 1867 on the s&p. we waiting for quarterly results but today dow component jp morgan is due out in the next couple of moments our largest
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and most reliable guest host that we have. >> i was going to roll with it. >> it looks like they have something specific. we have a subject to talk to you about. do you know what sit already? let me give this what it deserves for the producers that worked so long and so hard on this. it turns out that the largest and most reliable buyer of equities during the bull market have been corporate america. meaning companies have been buying back lots and lots of stock. our guest host is here to tell us if this trend can help rescue the market. yes or no. can it or not. >> probably not. >> give or take almost every year since 2011. it's been largely absen. one of the reasons maybe that the sell off is worse than
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january the past several years only about 3% of annual buy back volume happens in january. of course companies are locked out of doing their earnings period though it seems as if we're in this period where companies are not back stocking their stock prices. you have to wonder if they'll come to fruition. >> the big bear cases caused companies to borrow all kinds of money because it's free and it's going to come back to hunt them. >> it looks like the company came in with earnings of $1.32 a share. that's better than the street was expecting by about 7 cents. the street was looking for $1.25. revenue came in at $23.7 billion. street was looking for $22.9 billion. jamie dimon, the chairman and ceo making comments on this
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saying we had a good quarter. the business generated strong loan growth and credit quality except for stress in energy. the consumer business continues to gather deposits out pacing the industry. markets were quiter and we saw the impact reflected in the results of our trading and asset manage businesses. of course that's not the case in the first 8 trading sessions of 2016. the firm is getting safer or stronger each year. meeting all requirements. >> there's a lot of numbers that come out here. do you read his comments. >> if you look at the balance sheet, the period end balance sheet was down by about $220 billion in 2015. loan to deposits ratio of 65%. that's up 9% in 2015.
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average core loans up 16%. >> higher revenue of corporate and consumer banking but lower revenue and kmun investment banking and asset management. the provision for credit losses was up 49%, 1.3 billion due to reserve increases in the current quarter versus reserve releases in the prior years quarter. >> that's a big percentage off of a tiny base. that's a tiny number relative to jp morgan. it just tells you that the credit cycle has turned but it's not obviously something that's going to be a big thing that's going to happen any time soon. the stock has been going straight down. a lot of these big banks are basically -- >> tangible book value for share. >> it's up 8%. so it's gathering book value at 8% rate. obviously it's a slight premium book. the stock has gone straight
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down. it seems to me this is a relatively firm steady quarter so it's going to be a text when the market wants to hear that in the big banks. >> card, commerce solutions and auto up 20%. so that's not bad. 20% is 1.2 billion. >> processing volume up 12%. >> we'll continue to look through this and we're going to talk to an analyst in a bit to break down the numbers a bit more. >> a couple of other stocks we'll watch today, sears plans to close a small percentage of its u.s., k-mart and sears stores. it's part of an annual review and fits in it's on going -- to its on going effort to cut cost. boeing's engine union reaching a agreement with a company to extend a labor contract for more than 20,000 workers. union members will vote on the six year extensions.
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chipotle is con fireworks dfide prevent further outbreaks in food poisoning. shares rising on the comment but the stock is still down more than 30% from its pree.coli out break. i would say that too but i would still like to know how the first ones happened before i knew that i could prevent the next ones. >> they talked about a lot of changes in terms of sourcing and trying to centralize things but a lot of these things will take 18 months to 2 years to implemented and that's where as a consumer you have a consumer. >> all of a sudden the consumer amnesia kicks in and traffic trickles back. >> i thought that before the last. >> if you look at customers per day served and how many cases
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there have been, you're talking about powerball getting e.coli and maybe less. >> but at food places it should be zero: you should get 12 errors out of 12 million or something. nobody needs noro virus. >> coming up marty mosby coming up at the top of the hour. but first u.s. stocks lost in value since the start of the year. remember it's still so early in the year it's only january 14th. when we come back we'll talk technicals after this quick break.
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a closer look at technical indicators and charts this morning. the s&p closing down almost 3% and breaking below the key psychological level of 1900 for the first time since september. here to talk technicals is steven, chief equity strategist at bank of america, merrill lynch global research. go over both positive and negative things that encompass the technical landscape. most negative right now. >> sure. >> most negative right now? >> yes. 2012 was the last trading range that we've had, indicators then
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broke out. you had volumes break out in advance of price, everything in advance of the price, a dow theory buy signal in late december 2011. we're on a sell signal now. rolling over last week below zero, momentum indicator for the trend. that's not happened since 2008. we're not looking for a 2008 type of drawdown, but the indicator similarities are there. adjusted high yield spreads look like late 2007-2008 than they did in 2011 and 2012. there's a lot of overhanging here coming from all pockets of the markets. look at breath volume, moe moan t -- momentum, traenends, and yields. the market's not responding to them. that's the problem. so when you have short term over sells that worked, and these have been diminishing over the last six months, leading to
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lower highs, and that's a problem. i think we're at risk here. we're at risk to break supports. >> you're sketching out a story of this is bear market type action, and, i guess, how do you quantify, you know, the risk versus the opportunity on a t h technical side? it's oversold, everyone sees that, obvious for days, at least. >> definitely. >> not responding, right? so what are you looking for to have some of the ingredients in place to get a little bit of a break? >> well, where's the panic, right? where is it? not down 30, 40 points this morning in s&p futures, and a lot times pessimism is born. yesterday, you had the market down, and russell was clobbere . readings indicate panic. we should have. above two or closer to three on that. usually you get a tradeable
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bounce. i'm looking for that, a real panic in the market. i did not see it. i'm not getting calls asking to sell on stocks. i'm not getting the calls. same thing happened in the summer time. i didn't get calling then either. yeah, you got a rally, but look where we are, a lower high back on the lows. if we break, we broke 1900 yesterday, which was important, it's the uptrend line from 2009, what happens if we lose 1867? if we do that, that's a top play over the year, and indicators going to new yearlong lows, we're under distribution, and that is a sign of a top. if that happens, what does it account to? 1600 on the chart. so, you know, for me -- >> if we break 1867, we go to 1600 on the s&p? >> could very well. take the chart pattern there, project it downin, that's the risk. you know what, that suggests a
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cyclical bear. it's not -- it's not a secular trend. i think that is bull i weish. what we are seeing now is a parting shot from the bears as we begin the breakout three years ago in april, so i think if you test 1600, you basically retest where we broke out, 1575. it's like 1982 perhaps, something like that, so i think cyclicly at risk, and secularly, i think we got to stay bullish. we got a lot of support for 1600 on the s&p. >> 666 unlikely? >> i don't think so. >> worse selloff in a generation? >> we view that as a generational low. >> 666? >> yes. we used 2009 low like 1974, just like 1942. >> that's a good number to make a low on.
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get one-touch credit lock, plus your score and report at transunion.com. get in the know. breaking news, six explosions rocked jakarta believed to be suicide attacks, and some gunmen believed to be on the loose. situation rattling markets in the region. a live update straight ahead. bears roaring on wall street, all in correction territory, and oil down over 17% this year, and one time high player, gopro tumbles 40% for the start of the year. what's fuelling the slide? market watcher, tom lee, breaks it down. >> are you holding the winning ticket? three people in three states are and could be more. latest on the big jackpot as the second hour of "squawk box" begins right now.
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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 becky, and andrew is off today. breaking news this morning, explosions and gunfire rock jakarta, at least seven people killed by huge blasts near a popular shopping mall in the indonesian capital. susan lee is joining us from hong kong with more in the situation and market reaction in the region. susan? >> reporter: yeah, this is something, obviously, that investors across asia pacific were not looking for given tensions stemming from china and hong kong, but it was a terrifying day in jakarta, on high alert after the six to seven explosions taking place, a
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running gun battle in the heart of downtown today, outside a popular shopping complex off the commercial buildings. at the end of the it, we have reported six people dead, that includes civilians and police, and initially, there was hesitation from the jakarta and indonesian government to blame is, but tonight, the police chief says the islamic state is definitely, using the word "definitely" behind the attack, and, n., they named a specific indonesian islamic state fighter who is believed to be in syria, by the way, for planning the specific attack, which they said they planned for quite some time. indonesia is home to the world's largest muslim population, mostly moderate, i should point out, but concerns in recent weeks of a terrorist plot, and they have been cracking down on citizens which is meant to say links back to i.s. this is something we are watching, becky, back to you in new york. >> susan, thank you very much.
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news breaking, bank of england leaving the key interest rate unchanged at a half a percent. the decision to raise rates in the united states was not of significance for its own monetary policy. >> here in the united states, the s&p locking the worst eight-day start since 1929 and the dow's worst start since 1987. we have perspective, long time frames, dom. >> for sure, becky. to put it in perspective, the s&p 500, according to howard over at s&p dow jones indexes lost 1.33 trillion dollars in market value, and 517 billion lost for the dow jones, 30 member stocks. it's been a rough start to a year, like you said, massive time frames, historical in perspective, and let's lay it out for you, the s&p 500 lost 7.5% year to date. looking at the chart there, it's 7.5% of the downside now. look at the sectors. these are year to date
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performance numbers, so, perhaps no surprise that the bond-like stocks, ones with high dividends like utilities and consumer staples and telecoms, they are not down as much as the rest of the overall market. downside here, though, you have materials, energies, financials, and health care. those, really, starting to pace the decline so far on a year to date basis. energy, no surprise there, remember, by far, worst performer last year. the market value side of things, again, the momentum names, we talked about fang before, right, facebook, amazon, netflix, and google/alphabet. how much have they lost? facebook lost $26 billion so far year to date. amazon $45 billion. net flex not nearly as large, down $3 billion, and google down $40 billion. all told, losing $114 billion in market value, joe. one more thing, not all negative, two stocks in the s&p 500 posted double digit year to
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date gains so far, macy's, a big loser last year in the retail side, and clear systems, making thermal imaging products, both up north of 10%, joe, back to you guys. >> okay, dom, thank you. turning to bonds now, interest rates have now ticked below levels on the ten year, and, i guess most of them where they were before, and fed boosted, and there's more, and you wouldn't bet your life that we don't go under two again, would you? >> i would not. >> i think you have to get to a place where the worst fears of the market come true and show up in the data. right now, this is all on the comp, right? >> what is the low yield seen in the ten year overnight. >> fair enough. >> the economy -- >> i want to show you, joe, the chart i made, which is where
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rates have been since december 17th. the fed hikes, and you lost nine basis points on the two year, you know, now the further -- the closer you are on terms structure, the more jamatic move is. they don't move a lot, and the five year, most in the belly of the curve right there, and then the ten year, importantly, the 30 year mortgage is unchanged. most importantly, while they came out of the box with the rate hike, forecasting four hikes this year 2016. they have gone from app tis pating two and now down 1.5, and the question is which side blinks first, fed or markets? listen to james bullard, st. louis fed president, speaking at 9:15, among the hawkish fed presidents on rate hikes, and yesterday, a dove, the first to start incorporating trouble
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overseas into the outlook. listen to what he said. >> despite weakness seen over the last week or two, monetary policy shouldn't over react, and the downside risks to the forecast, and we have to take quite seriously what's happening elsewhere in the world. >> my read is it changes outlook and forecast if you end up seeing this show up into the real economy. you could imagine, for example, a 10%, a 15% market plunge which the fed thinks is an economic indicator, but if you're still printing 2% gdp growth, on the way back towards 2% inflation, in other words, oil bottoms out, you still could get three rate hikes this year. >> you said something that if oil bottoms out and the market's down, oil drives down equities. >> absolutely. >> every time it falls. it's almost as if there's no way that that scenario would play
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out. >> well, you know, i mean -- >> market's down, oil's down, oil's down, you welcome at oil as the indicator that inflation is not coming? >> six wishes on this, and their forecast is very plainly that oil finds a bottom and the dollar finds a top. those two things do not go on forever, and once that happens, they believe the underlying inflation of the economy will creep back up to 2%. that's the forecast. you can't fault the fed. >> sure you can. >> just like the fed to panic in august and not do it, and then -- >> not panic. >> you know, joe, all of this, you know, put yourself in the shoes of the policymaker, right? you have all this -- >> no. >> we'd all be in philly in that case, right? in this case, they pay attention to the market pappnic in august and now here they are trying to keep their cool, and the market
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is pressing them. you keep your cool with this? how about this? how about 350 points. >> keeping cool, but in the mode of speaking the way that justifies what they did in december, and them you still have a long way until march, right, so they are not in a hurry there. what's interesting is that i wonder if the fed essentially is self-with the market. truly, if the market is data depend, they should dial out harate hikes automatically. shouldn't have to be told that. i don't know. people told me yesterday, why doesn't the fed come forward and say two rate hikes fewer, as if it needs to. i don't think it needs to. i think even stan fischer says if the bad stuff happens, i'm not going to hike. >> when it comes down to the moment of it, they don't do something dramatic. >> does the market believe that? >> we know they are nervous nel
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lirks nellies. we've seen that. >> especially on the upside. >> you don't want me to read that? someone wrote it. i'm going to read it. we worked hard on this. you did? okay. with markets in correction territory as wall street, setting up for a strong market rally? tom lee, managing partner and head of research at funds direct global advisers is here, and mike is here as well, so i just ask you a specific question so you just need to answer yes or no. the are markets setting themselves up for a strong rally, tom, yes or no? yes or no. yes or no. >> short answer, yes. >> yes, thank you, tom. >> but you didn't ask on timing. >> i didn't. >> i'll ask in another way because, obviously, we need intros. do you think at this point you heard a technical guy come on -- >> i did. >> you think 1867 -- >> yeah, which is not far from here.
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>> test that. >> you have to see what's uncertain, and people are stepping back and risk is coming out, and we are deflating, right, and we could see 1867, would i be a buyer there? i would think it's a great time to be long equities, and i think your guest mentioned it. it's the front end of a longer bull market, not the end of the existing bull market. >> in 1982, we had been, you know, we have been stuck at the levels since 1969, right? hit a thousand in 1969, and them hit it again in 1983. that was a really long period to be at 800 and 780.
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why is it like 1982? >> well, that's what your guest said. i think this might, in my opinion, quarterly earnings we go through in the next couple weeks is a chance to -- for markets to reassess, and you can be bullish how markets behave because, one, we can calibrate where fears are versus expectations. i think the dollar head winds are fading, and buybacks we soup aft resume after earnings, but i would be surprised if it's the end of the bull market. >> that's only 23 points on the s&p. we do that -- >> that's a rally. >> that's why i think 1867 -- >> break down at 1600. that you would notice. >> that would be really painful because that would be, you know, taking us back to 2012 prices. you'd roll back three years. >> and, you know, it's not just
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the a straight line, talking about the 2013 low before that, and you reassess a long way. i wonder, tom, where within the market do you think stock prices have most severely kind of discounted what we deliver in terms of earnings at this point. >> i think the very simple way to think about where you find opportunities is stocks are the new bonds right now, meaning there's a lot of enough companies where dif depd yields are above bond yields. i think bonds are great, investment held up well, look at stocks where dividends are higher. that's the ciscos, caterpillar, walmart, a lot of names out there. not one where they are spring loaded to run away to the upside for you, but on a risk-reward basis within the capital structure of the company, they offer you a better deal? >> that's right. because at the end of the day, you're -- if you want to know what you'd rather own, own a
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bond paying you less than the same stock, the same company paying the higher dividend yield? it makes sense from the corporate perspective because buybacks or investor to own the equity. >> yesterday, two buyers for every bond of anheuser busch inbev. >> that's right. >> do you know now whether the commodity plunge, oil plunge, all the plunges, is it really more supply generated than a demand problem, or we is that our excuse for not paying attention to when it's telling us? >> well, you know, we, obviously, have to pay attention to the breathless decline in commodities, right? it's, you know, it's going to have a lot of ripple effects. >> many are wrong, finding better ways to get copper, oil, and better ways to do these things, but that does not explain the whole thing?
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missing a global slow down that spreads here? >> it's polssible. we looked at previous commodity declines, and i think one of the things the market is looking at is how demand eventually responds to demand in commodity price. >> should pick up. >> it's always accelerated. it's a year to watch whether people ramp up oil demand. >> you and your people have not outlawed the free market forces completely yet, have you? still some things holding true based on normal supply and demand? >> me and my people are supporters of the free market, as you know. >> mistaking you for someone else. >> you are. >> anyway, thanks. -- >> when we come back, financials in focus today, jpmorgan reporting a short time ago, results, and how banks handle a rising rate environment. and them the latest on where the winning tickets were sold for last night's big powerball drawing. "squawk box" will be right back.
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turning positive on the dow, and, again, the nasdaq is much weaker since the first of the year on a relative basis, and some of the selloffs that we saw yesterday in biotech and the other high fliers was, again,
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amazon and just kind of almost takes your breath away. >> sell what you can. >> we are watching the shares of best buy, the retailers just out with holiday sales figure, and best buy is a better buy than it was this morning. looks like it's a new low. same store sales down, and mobile phone category saw through the expected, but adds in other categories like home theater and aplielliances stron but that looks like it's going to create a new 52-week low. look at bed bath & beyond and the others. >> buying back debt to get stock at higher levels, bed bath & beyond is just right there. perception too slow to respond. >> caterpillar. >> totally different category. >> bought back stock, though. >> oh, yeah, absolutely. >> down on mining. nobody could have foreseen this. >> and others. >> yeah.
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>> look, i think when your sales people saying chinese can't buy enough of the machines, what do you do? not respond? that's why cycles happen. people do crazy things near the top. >> jpmorgan beat forecasts on the top and bottom lines. let's get more on the numbers. joining us now in the squawk newsline with reaction is marty mosby, director of bank and equity strategies, and, marty, what do you think of the numbers? >> well, we did see jpmorgan come in 7 cents better than expected, most related to a settlement of a legal issue that they actually got to recover a little bit. that was about an 8 cents positive, representing the difference between what the street had. lock at where they have been running over the last year, 1 prepondera .thirty, the difference between this quarter has been two things. one, the drop off in trading activity and capital market seeing disruptions related to the events happening in the back
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half of 2015, and, also, what you saw was an increase in loss provisioning that also took the earnings to a lower level than what we saw over the last year. >> i mean, i hear what you're saying about a one time settlement where they can get back more than reserved for, but these banks get punished when they set reserves aside. shouldn't they be rewarded when they were conservative on the issues? >> sure. so what we're seeing is that there are still resolutions, and now what we're getting to is the fact, like we've been saying, these are extraordinary items creating noise. you want to back that out and look at the core operating, you know, earnings are doing. you know, one of the things that we came into this quarter worried about was provisioning, which we did see jump up quite significantly off a very low base, but what you saw was nonperforming loans actually still going down double digits year over year. so this provisioning is just on, you know, the fear in anticipation of possible losses.
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right now, the core asset quality is continuing to improve, not deteriorate at this point. >> what does this tell us about the general environment right now? just in terms of consumers when you look at credit cards and some of the loans out there? >> well, when you looked at the loan growth, 5% year growth, is stronger than what we've seen, and, also, look at net interest margin going up ten points in the management team, you know, forecasting that they are going to be able to keep the benefit and maybe increase on it a little bit into the first quarter, what you're seeing is the general traditional banking is doing relatively well, and that reflects the consumer coming back into the market and showing a little of momentum at this point. >> what are you doing in the stock now? >> well, when you look at it, dividends right now represent a 3% yield. when you lock at what we think we can do in the middle of the year and increase their dividend another double digit amount, that puts dividend up to 3
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prepondera.5%. it's tangible book value. staying at the press levels, 5% to 6% growth in value plus dividend, that's 8% for you see any return improvement in capital markets coming back in the first half of next year. we think these are good buying opportunities in the group as a whole. >> great, marty, thank you. >> thank you, thanks for having me. coming up, here we go. powerball mania. sweeping the nation. there are at least three lucky winners and maybe more. we'll tell you if your state is on the list next. "squawk box" will be right back. time now for today's aflac trivia question. what was henry ford's mass produced car called? the answer when cnbc's "squawk box" continues. ohh ah ah aflac!
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now the answer to the trivia question, what was henry ford's first mass produced called? the answer? model t. >> lottery officials saying three winning tickets were sold at wednesday's power ball in three states, california,
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florida, and tennessee, and one came from this 7-e levin where the winner picked the matching balls, 8, 27 -- despite the odds, it does not despite the people from lining up. stores were selling more than 1.2 million in tickets every second. hopefuls who lived in the states that do not offer the lottery crossed state lines. the current round began november 7, rolling over 19 times with no winners. three winners that we know split the billion dollar prize after federal taxes, that would be about $737 million if they take the lump sum payment. when we come back, oil prices reflecting the concern over china's growth prospects, will the world's second largest economy downturn in 2016?
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welcome back to "squawk box" here on cnbc, first in business worldwide, and among the stories front and center, news from overnight, explosions and gunfire rock jakarta, seven killed in attacks near a popular shopping mall in the indonesian capital. business news says there's no defeat mechanism on the cars, and shares of the company dropped on reports that fraud investigators searched its offices. three of financials top shareholders call the new ceo to quit. reuters reports thenvestors claim he's. too slow in settling $4 billion in insurance claims, in which two have app interest.
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they join "power lunch" at 1:00 p.m. eastern time today. >> when you say, that's getting around -- >> same with vw. >> looking at renault, right? >> that's the rumor. they say, no, they didn't do it. >> okay. all right. fears from china weigh on the markets, and some worry they are slows growth, calling the recession here at home, and joining us now for more on this, john, rutledge, chief investment strategist, and andy shia joining us from hong kong, a former chief asia pacific economy at morgan stanley, and now an independent economist. the journal today, john, just i blame twitter and the internet because we're much more interconnected and always now, but that's probably, i guess, i'm kidding, but it does seem like for a place where we only export 1% or whatever, that's how we always take solis in this does not hurt us.
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seems like there's maybe three to four degrees where it can't hurt us, commodities, emerging markets, something. is that what's happening? has the world got smaller? >> well, temporary insanity might be the word for it. there's all this information, people are driven by emotions, scared, and they don't know about china because people have not actually been there, and so a story like this pops up, and people get nuts, which is why you have prices today where they are. >> could be the internet, then. it could be that we just know more, affecting market psychology, and that becomes self-fulfilling. the fundamentals don't have to change where it affects us. >> some change in those, too, but, yeah, the acceleration of information if you want to sound fancy about it, but people have a hard time digesting information they are not conferralble with. there's a thing called cognitive dissonan dissonance, and that's going on. it's not happening in the way it's typically represented. it's the reverse. >> and andy, looking at the
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effects of this commodity crash and when you -- some of it is supply, obviously, with oil, maybe it is with copper, maybe we built too many plants, but a lot seems to be that china on the margin made a big difference. and, i mean, that is sort of what caused this, isn't it? they no longer -- there's too much capacity over there, and they built enough -- they made enough cement for an entire century of growth in the united states, and in the last year or something. that's coming home to roostin, isn't it? >> that increase about 300%, in solid terms, $20 trillion u.s. dollars. that's the source for global economy in the last seven years or so. now, directly, they have become very dependent on china for profits, even though china's
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effect on the u.s. economy direct and may be limited, but it will cause a popular recession for the multinational companies for a couple of years. >> so, all you got to think about, andy is, you know, apple, immediately, and that's where the growth, additional growth on iphones were dependent on a certain level of growth on china. even if it is a margin, it affects actual results as well as the psychology. >> well, look at it the actual companies like dow chemical, look, they make, like, about a 20% in china, so i think the effect is big. it takes time to understand the market, does not understand china well, and there's a panic involved. the real effect is significant. look at a german car company, half of the -- and the u.s. auto
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companies also, they are a big chunk with china has an effect. >> john, we know that a couple years ago, they -- the stimulus there may have been misdirected, right? didn't they go on a boom? you're always a china bull user. >> they drove it into infrastructure, like, built a lot of steel, subways, things like that. that stuff's good for productivity so it is better than just handing out checks the way we typically do it here, but there's a lot of ways they can affect us. one way, when the dollar gets strong, when people are scared, that lowers reported profits for the s&p. now, that's a temporary effect, a one-time effect, but it's true. and the service sector is better, and so income growth in china is actually still 7%. and strong, that is the guy who buy the apple watches.
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consumer sector in china is better than the industrial sector. the real story is not the growth dropping hurting the world, but the capital flight from china hitting both the currency and the stock markets in the world. that capital flight, we tell the story that the fed raised rates, everybody's pulling their money out. that's the foreign invester. the real money coming out of china now is an internal chinese investor who's noticed this government is getting more repressive, and it is moving money outside. it's buying the houses in vancouver and new york and so forth. yesterday, the treasury put new rules on for cash real estate transactions to capture some of the chinese buyers coming out, so capital flight is the big story, and that's what hits the markets. it's not the gdp or the exports, so we're not going to have a recession, but we are going to have a big currency issue here. >> can they just say you're not allowed to do that anymore? >> of course they can. the more they do that, the more people find other ways to sneak around the rules. there was a report of a big increase in china and hong kong
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trade. there's. no increase in china hong kong trade, but it's what we talked about a couple weeks ago. it's when you want to move money out of china, you fake an export, report it as an export, and there your buddy on the other side writing it down in your account so that the trade numbers are not reliable right now, and that's part of uncertainty that's scaring people. you don't quite know, but china definitely is slowing, but the capital leaving china is much bigger than the slowdown in the gdp, and currency falling is not the government pushing down to sell exports. it's real investors selling the rnb, excuse me, driving the currency down, and the people's bank is trying to stop it. they can only do what they did in the last few days for a very short while, raising rates because they got slow growth, so everybody knows, so, right now, get out of there is the word. >> how long does the trend continue and how does it stop or
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reverse? >> well, i think the currency issue is a very foreign because people see that. it has to end in close or china flowins to the currency. that's the end game. how long to get there? i don't know. 12 months? 18 months? before that, it's going to be chaotic. the issue is the government is not beating the real issue, but over investment, over capacity. right now it's 7 trillion u.s. dollars of over investment, half in manufacturing, half in something else, and you to deal with bad loans over capacity, so the government is unwilling to deal with that and stoking up a new financial babbles to support these investments with no returns. now, the money leaving china is because you cannot make money by
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staying in china. everything is in over supply. how do you make money, right? people are rational. they want to leave. the government has to deal with the fundamental issue. we talk about the stock market, the currency, those are all symptoms. the issue is, you need to change the system. the future cannot invest so much, you're half of gdp. for china, 5%, maximum you invest is 30% on gdp. adjusting the economy to reach their target in the foreseeable future. the market is very -- the reasons for the market to panic. >> that's not optimistic, thank you. >> pleasure. >> we always think, you know, you hit the one-child thing is gone, 1.4 billion people, soak in the over capacity? never short china. >> problem is you can't soak up
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the capital that wants out of there. >> a bigger bust coming? >> we're seeing it, and the currency's going to drop 10-15%, something like that. >> we can't get out of our way. >> come to the ballpark, nobody's stops them. they can leave. >> not 20 years? >> i don't think so. when we come back, head winds in china slow down the rate for the fed raising rates here? we'll talk about how a market downturn could sway action next. in the meantime, check out the futures this morning after a huge down day yesterday. futures are finally picking up a little of steam with the dow futures up by 60 points. "squawk box" will be right back.
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actions. they speak louder. we like that. not just because we're doers. because we're changing. big things. small things. spur of the moment things. changes you'll notice. wherever you are in the world. sheraton.
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we're back. guys, we're on air. talking about this in a second. but, before, today's watch list, jobless claims out today, first time filings for unemployment are expected to hold near 275,000 level, and look for december import and export prices. st. louis fed president speaks out about the economy and monetary policy at 9:15 a.m. eastern. also, earnings season truly gets
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underway today. jpmorgan already out with earnings beating by quite a big margin, 7 cents better than the street expected. the stock is trading higher now. intel could be out after the close. as we noticed before, china fears royaling global markets. how does that impact the fed's thinking, and could investors be in for a ruder awakening than they thought? greg joining us, chief economics commentator at "the wall street journal," out with an op-ed on china this week. you say it's tough for the fed not to raise rates in march? that's not necessarily everybody's thinking. why do you think that? >> well, if you listen to what everything they have. saying, it's domestic, domestic, domestic, so the rest of the world is in trouble, but they bring it back to what does it mean for the united states? that december employment number was a blowout positive news story, very hard, given the centrality of employment to
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their whole story not to go ahead with march because the basic story is that tact. against that, that's what happensing with oil plays havoc with theirs and everybody's expectations for inflation. weigh that against each other. right now, if the real economic data continues to support the positive story, i don't see how they can't. >> enough evidence by the march meeting we're not in another first quarter economic fade? >> yes. because they'll have two more employment reports, which seem to be the main thing. the funny thing now is 40 quarter was terrible, and so you have jobs going like this and gdp going like that. >> which is the right number? >> well, they are both right, but what you see with the gdp number is the impact of the commodities and manufacturing from overseas, baa manufacturing is high for person. if that is just the temporary transition points, a shakeout, no reason why you don't think the income gains from the jobs
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shouldn't show through, but, obviously, given what you see in the markets, that's a ten ewous assumption. >> you got to assume they are reluctant to raise rates begin the chaos seen, and as you mentioned, the gdp numbers, too, doesn't that put a huge bit of pause on the shoulders for this? >> one thing that's really going to e reinforce the skepticism will be what's happening to the inflation numbers. they got an expectation in inflation, core inflation, slowly moves back to 1.6% this year. we can probably guess it just given the pass-through pressure what happened to oil, down on core inflation, they miss that number. headline inflation, of course, very low. begin that, they told us that continuing normalization process depends on progress on expected and annual inflation. the fact it's not moving up to the 2% target strength ps the doves. >> lead story in "usa today" oil
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price pain spreads. that's been bothering all morning long. i get it in texas or north dakota. i realize there are areas of the economy that are certainly hurt by this, but overall, low oil prices are good, right? >> hasn't happened yet though. >> we don't think, but consumers are the strongest part of the economy. >> that's a relative statement, right? >> right. >> so it aspeppears to be consus saved what they got from fuel, and what we've seen is a rapid and pronounced impact on capital spending. i have stats quoted in the article today that show two-thirds of increase in industrial capacity since the recession has been all in energy. now, i think what's happened, it's not just been the fact that there's a lot of building there, but the assumption high oil prices persist for years to come. we saw with the housing crisis, right, housing prices never go down. when assumptions are embedded, people take out a lot of debt, make investments that don't make sense when the price changes. >> we're looking at debts washed away? >> look at financial markets.
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not just seeing high yield melt down, but high energy yield is selling as well because of the contagious effect. loan obligations filling up with this stuff no longer will. it's not just -- you can't look at the energy thing in isolation, but how it can spread. >> one thing consumers are definitely willing to spend on is the powerball. >> yes. >> a lot of people coming out. >> a lot of journalists here spending money. >> including you. >> yeah. not proud of it, not proud of it. >> what happened? >> i'm a rationally economist type. i know i'm not going to win and the expected value is lower than what i pay for it, but, you know, everyone in the office was rushing to the pool, and i couldn't get out of my head that on thursday morning, that would be celebrating their riches, and, me, the stubborn economist would be sitting there, saying, i couldn't win. >> can't even guess the right
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state that much less someone in the office wins. that never happens. same as you not winning. talk to me next time. >> joe, the odds of being a shark falling on you from a tornado are higher than winning. i made that up, but -- >> not a sharknado, although they occur according to nbc, but a lightning attack and a great white attack have to occur for you to win. moving the great white from seaworld from somewhere, there's an accident, the aquarium breaks, there's a storm, you are walking, the shark bites, that's what you need. >> normally, i'm on the lookout for the shark, but i was fa fantasizing about the win. >> rational, for a price for $2, i ensured i won't have regret? >> exactly what it is. it's loss aversion. pain feels more acute than pleasure. i was not spending time wondering what to do, but spending time worries about how
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awful i would feel if i was the only guy not sharing in it. >> at the wall street journal by yourself. >> empty the next morning. >> you have to round down to 0. i don't care if someone wins. for me, effectively, no one wins. there is no winner. real quickly, allen rickman, 69 years old, just died, a shocker. he had cancer and suffering from it. he was hans, when he came to the united states, two days after he came here, cast in "day hard," and he was in a lot of other movies, but he was a great actor, and that's the second guy at 69 dying of cancer in the week. who will be the third? i don't know. 69. anyway, -- when we come back, a tidal wave crashing on gopro this morning, down 20%. the reasons when we come right back. it's hard to find time to keep up on my shows.
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that's why i switched from u-verse to xfinity. now i can download my dvr recordings
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and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. stocks this morning, go pro shares crushed, giving a weaker than expected fourth quarter outlook as holiday season sales fell short, the company is cutting its work force by 7%. shares of gopro, a supplier, creating sharply lower in the pre-market. down 10%. pfizer may sell infusion pump
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business it acquired when it bought back in september, and bloomberg reports that a deal could fetch $2 billion, and jpmorgan announced stocks that beat the street on the top and bottom lines, and vas a result, up 1.33%. >> mike, thank you for being with us this morning. >> where are you going? >> they have other plans for me for an hour. >> are you a cnbc person now? senior correspondent now? >> that's what they call me. >> but you're young. >> there's a lot of junior commentators around. i get to boss around. >> you're not over 59. you can't be yet. >> no way. no way. >> okay. >> what do you think about the market action quickly? >> everyone's looking at how oversold it is. the trader playbook doesn't want to see a bounce in the morning, knocking that down, but see if the pattern changes today. >> okay, see you later this morning. >> all right, good.
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when we come back with the dow, s&p, and nasdaq in correction territory, should you be buying the market? jack of the private bank joining us to talk about that. plus, could leonardo dicaprio end the "force's" run at the box office? the buzz from hollywood straight ahead. "squawk box" will be right back.
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bears roar, and dow, s&p, and nasdaq in correction territory, china slowing down, and oil crushed. what else should be added to the wall of worry? >> getting ready to buy a home in 2016? we have a real estate reality check. find out if another crisis is coming to the market. >> hollywood's time to shine, nominations on the way. is it leo's year? will the force awakens dominate the academy? >> it's true. final hour of "squawk box" begins right now.
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>> 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 along with becky quick, and mike santolli, he left. he's gone. >> leaving us here by ourselves, abandon. >> he was here. it's just the two of hus, less than 90 minutes from opening bell, and futures now, hey, hey, good riddance, mike, look at that, up 53 points now. >> up 60 points before he left. >> oh, really? okay. it was partly him. >> good grief. >> earlier, we got in, it went down. this was just like the regular trading session with what we saw yesterday, up over 100, and closed down 360, but we are gaining a little back today, but people worry that, you know, when we're up a little in the morning, that's certainly doesn't mean we're going to be up by the end of the session. >> looks like this by the end of the session.
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>> could, but it looks like us because of yesterday. that's i think the response to the 360 point loss, the forces are, that we had yesterday, so maybe we stand today, but who knows. and another day, another deadly, what looks to be a terrorist attack. this was in jakarta this morning. terrorist launched attacked in the indonesian capital. police say at this point that there are links to isis. the -- i guess they are not afraid to say that over there. did you see the mayor in the latest thing? the fbi's investigating this as terrorist, no link whatever so to that, but, anyway, first time i heard of the mayor of philadelphia anyway, but now he's famous. reported suicide bombers exploded devices. where? near a starbucks cafe. as many as six explosions apparently and a gunfight leaves five of the attackers dead and
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two others, so that is not usually the way it works. you want to take any -- you know, no good part of the story, but five attackers, just killed two innocent people in this particular attack. >> focusing on business, earnings season underway, and jpmorgan rolled out results this morning. the banking giant earning 1.32 a share, 7 cents better than expected 6. revenue came in ahead of the street's expectations. we'll hear more from jpmorgan when the conference call begins at 8:30 a.m. eastern time, but as you can see, the stock up 2%. let's get to the headlines this hour. weekly jobless claims out at 8:30 eastern time, and first time filings for unemployment expected to hold near the 275,000 level. gopro diving, warning the revenue falls below forecast saying it sold fewer action cameras than expected over the
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holidays. gopro is cut iting 7% of the wo force. the stock was halted yesterday when the stock started trading again, fell precipitously. you can see it's down 26% this morning. and there are three winners in last night's record breaking powerball drawing. right now, someone from california, florida, and tennessee will be splitting a 1.6 billion dollar prize. >> all three major averages are in correction territory again, and the dow down 12% from its high, and s&p 500 more than 11%, and the nasdaq down more than 13%. the s&p also erasing 1.33 trillion dollars was value year to date. jack has more on the markets, the cio of the private bank, and we try to have you, jack, and technicians on, and try to figure out something that might work. i don't know what works all the time. nothing, i guess, but some technicians think we have to go
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lower in the s&p and make a little bit of a base down at the 1860 or so level. do you have -- does that jive with you? >> i agree. i look at the momentum, and look at the price to sales of the s&p, it's still trading probably around 10% or so above its median level, expensive, but at the pique and middle of last year, was as much as 26% above, so it widdled a lot of the premi premium, but we have more to go downside, we think. >> you know, the bear and bull markets, usually the bull market goes on until gets to a period of -- it seems even, you know, things maybe got overvalued, and we had the fed at zero, tripled from the lows, but it didn't seem to get absolutely insane and euphoric or pockets of what you see at the end of bull
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markets. is it going to be where we don't need to get there this time for us to take a 20% pause or pull back? it doesn't seem like the bull really was getting that last sort of stage that usually you see, so are we still on a bull? >> yeah. i think that, you know, i call it a correction, although, you know, if you are looking at close to 20%, a downturn, that's a big correction, somewhere between a correction in a bull market, and i think we are part of the upfriend, but there's implications. the last time the market was priced was the first quarter of 2014, and i will say that investors, you know, definitely feasted on easy money policies in this notion that the central banks had our banks, and middle of -- beginning of last year, credits started to deteriorate, and spreads widened. you know, a lot of people pointed to oil, and, certainly, that may have been a catalyst,
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and i will say credit deteriorated in a lot of other sectors too, and then towards -- after the middle of the year, breath started an era, really only the nifty fifty, if you will, powered the market. last year, the average stock under performed the market in general by nearly 6%, so, you know, there were some indications that this bull market was weakening, and the underpinnings were not there. i'm hopeful we get a correction that we can just reset back to fundamental values, and we'll move up from here. >> sooner or later, it seems like the world usually doesn't end, usually doesn't stop, and people need a return on money, and valuations shrink as interest rates go up, but, you know, it's a stretch to say we even go it 1% next year. just seems 17 times earnings, if we have not seen the end of the
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bull market, we get to 20 or 21, don't we? interest rates won't necessarily strangle the multiple expansions, so, i don't know, does that make sense? >> well, i tend not to look at p.e. because they are often predicated on margin, and, you know, if you believe, as we do in general, that margins are piquing, rolling over, one of the reasons we saw trouble last year, and, you know, that could be a concern, so to have stabilization -- >> so that could be a problem. the denominator is always the problem with that, isn't it? assume the e. is a given, but you don't know what it'll be, so you don't know what the multiple is. >> right, and we don't have revenue growth. i'm looking, so i like to look at the organic revenue growth. i think it's the simplest way to do it just because everybody's revenue is pretty much positive, and you don't hire accountants and attorneys to manufacture your revenue. you know, it's a pretty organic
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way of looking at it. >> okay. have commodities at this point seen the worse levels? they don't need to come roaring back, but are there new lows across the board in those? >> commodity's behaved reasonably well yesterday as well as emerging marketing stocks, so, perhaps, if it is a correction, if this is just revisiting, you know, fair value again, then i would say the worst for commodities, the worst for emerging markets, even small caps, i mean, they have gotten hammered now back to what i call fair value, so i would say, you know, we probably need to get the nifty fifty from last year, reset to fair value, and have, like, a decent base to move higher. >> okay. all right. thank you. >> all right. thanks, joe. >> okay. see you around. large public pension and mutual funds shelter holdings in
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cash more than they have in years, nearly $200 billion yanked from the markets since the middle of 2014, leaving them with the highest level of cash as a percentage of assets since all the way back to 2004 according it a recent analysis compiled by the "wall street journal," and joining us with more is the chief investment officer for the public employees retirement association of new mexico, otherwise known as para. para manages $14 billion in assets under management across 31 retirement plans, and thank you for joining us today. >> good morning, becky. >> are you in that camp of pensions that has actually been pulling money out of the markets? >> becky, we have not. we, you know, be it motivated by fear or greed, but we do not subscribe to the view of tilting or market timing assets broadly in the market environment and
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view that hording cash is market timing, and if you look at statistics, it's impossible to tie markets. we view, and portioned portfolio between risk seeking assets and risk reducing assets, and in this environment, core fixed income, government treasuries and bonds provide balance to the portfolio. >> your way of hedging things? >> that is correct. we do it at the portfolio level. we try to look through the various positions of our underlying money managers, tightly control those guidelines, but make sure the ultimate positions that we take, the hedges, are at the portfolio level. >> have you shifted any of those hedges, maybe making things a little bit more risk averse in the last year or so? >> we typically do not try to time markets as i mentioned
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before. >> keep the same levels all the time? >> well, we think it's very important to maybe lean into the wind and it's important to consistently rebalance in a variety of different market environments. with that said, we're not indifferent to the market environment. we don't put our head in the sand. we constantly look at capital market assumptions. we remodel, remodel, and remodel our portfolio, and, in fact, we are right now in the midst of an asset allocation study looking at the long term capital market assumptions or rate of return just to ensure we make good on retirement promises of today and into the future. >> does that suggest that you've been thinking about lowering what you expect to get returns over the long haul? that's something that a lot of pension funds have done in recent years. >> becky, that's correct. it's currently our return assumption is 7.75, and the
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balance i mentioned, core fixed income is earning, call it 2%, and that's 26% or so of the portfolio, it's very difficult for us to get to 7.75 consistently with that core at 2% or so. we've taken actions within the portfol portfolio, not just at the asset allocation level, but we are tightening guidelines for the managers, and we are really trying to event managers from straying into different zip codes from introducing different types of datas into their portfolios because that has unintended consequences across our portfolio. >> how difficult is it to be trying to get these long term gains and have support for hundreds of thousands of employees that you're looking at in a low rate environment? i know that insurance companies have struggled with that. is that difficult for the pension funds too?
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>> it certainly very challenging, and markets certainly are cyclical. we go through years like our junior end, so fiscal year '14, our portfolio returned over 17%. last year, it was 2%, so it certainly is very challenging in this market environment, and we certainly look at a portioning assets appropriately to earn long term returns, but we not only do we manage assets, but we have to do that in the context of liabilities, and one thing that new mexico has done a great job of is pension reform. in 2013, our pension system went through comprehensive pension reform to address long-term lien liables to have more reasonable assumptions with respect to vesting demographics as well as the multiplier on those whatever salaries assumptions there are.
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>> sure. you're an investor in bill ackman's persing square, and last year, though, he was down more than 20%. are you staying? >> we have no plans at the point in time to change out of persing square. i focus more of my time at strategy level, the asset category level, and it is providing what they are supposed to do in our portfolio. they have a concentrated portfolio, significant conviction in their positions, and as we model the performance of any other type of hedged equity portfolio, it really is receivering the purpose, so to the extent that they were to change and become real estate focused fund or something else, then i might have bigger issues than if they stick to what they
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their knitting it. >> okay, thank you so much for joining us today. >> thank you, becky. coming up, is the housing market in danger of another crisis? we'll get a -- i don't like doing this, getting a reality check on real estate in america because, you know, people say realtors, and it's not a realtor. it's a retrealtor. reality reenforces it. it's nuclear. remember? look what happened to that. >> just get a check. >> huh? >> a check. >> a check, okay. as we head to break, check out the price of crude. it's now up, and that's one reason maybe where the markets are more stable today. "squawk box" returns in a moment.
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affordability the biggest driver, and mosaic real estate investors with us, like, comparing eastern kentucky real estate to manhattan real estate. there's a bubble one place, but you have to be specific whether there's a bubble, don't you? >> i agree with that, yes. >> is there a bubble in new york, in manhattan?
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>> well, i would say that on the ultrahigh end, the statistics indicate there is a bubble, and there should be cause for concern. i don't think that affects most people in kentucky or probably most of your viewers. >> probably not. in general, then, is there a way to look at it as a monolithic -- i guess you could at least say that the conditions that led to the housing crisis in 2008, that usually we -- the crisis is that we get the second time around, you usually have -- we don't do the same thing twice, rhymes, but never the same. not where it's going to be this time, is it? >> i think that's exactly right. i think that, you know, we're seeing the beginnings of what feels like trouble for the financial markets, but i completely agree that when people try to make comparisons to 2008 or even other past down
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difficult times or downturns, they are not exactly the same, and i think the causes today are or the situation's vastly different and the cause for the problems that perhaps are percolating in the financial market are nothing like the ones in 2008. >> and, i mean, you accredited with one of the creators of the market, when you were at -- it's still, obviously, and you said it's like any other derivative, can be a force for good or a force for evil. would you say at this point it's a force for good in allowing, you know, people that want to borrow and have the capacity to put, you know, a down payment in, at least, i mean, those people should be able to get mortgages, right? still helps? >> there's no question that securization, which really just means having a bond market finance borrowers.
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it keeps rates from borrowing lower, an unmitigated good, actually. >> we just had a bullet point that confirms you most, and what's your take on what's happening in rental? >> well, you know, the parent market has been on fire since the crisis, right? you know, both partly because in the wake of the crisis, people either couldn't afford a home, lost a home, lost their credit, and they couldn't get a mortgage and ended up being renters, and then there's a whole kind of class of young people that have put off home buying after watching the pain that was suffered by people in their family or close to them, and so we've seen an amazing boom in the represent and demand for apartments, and, ok, booms beget
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construction cycles, and supply, and we see in many parts of the country, supply that is growing and promises to grow quite quickly, and i think that will probably stem the recent growth in recents and probably cause a little of a, you know, mild indigestion for apartment owners and companies that own apartments. >> we said many times in other context that big banks deal with dodd-frank regulations, but smaller banks might not. are people -- are there fewer opportunities for the average american to get a mortgage because of too much regulation for small banks? does that need to change? >> i really think that the main issues or a main issue for the economy is access to credit, and we are definitely, since the
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crisis, living in a more restricted world, just compliance with oversight, dealing with regulatory changes imposed upon them, which, as a taxpayer, we should be reasonably happy about, but access to credit is going to be a key issue going forward for our economy. >> have you decided whether you're going to be a rams fan, chargers, fan, raiders, fan, the trojans, bruins? it's confusing out there. you got all the traffic and smog. i mean, do you have any idea who to root for at this point in. >> well, that's pretty complicated. that's something i spend a lot of time thinking about. >> that makes the markets seem simple. >> correct. >> all right. thanks. >> thank you. >> see you later. >> bye. when we come back, move over burgers, a new item on the shake shack menu. flr every dollar count. making that's why i have the spark cash card from capital one.
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when we o come back, jobless claims and import prices after the break. look at u.s. equity futures, trending higher and now up by, oil prices quickly, a lot because oil prices picked up, as you can see, up 45 citizen to $30, "squawk box" welcome back right.
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♪ we are just a few seconds away from initial jobless claims in import and export prices, we have been watching futures, because, remember, after a huge decline yesterday for the markets, the dow down by over 300 points at the end of the session. you can see things have been picking up throughout the course of the morning, and it's not
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been a straight, steady march higher, but looking at things flat essentially this morning, but right now, dow up by 7 it 2 points above fair value, and s&p up by 7, and nasdaq up by 9. rick santelli is standing by the cme in chicago. take it away. >> all right. the capstone on the series for 2015, close to expectations month over month, down 1 prepondera.2, a little lighter than expected, but the extra tenth we expected showed up in the revision, down .40 turns into down .50, and down 8.2, we were looking for down 8.5, but we saw 9.4 last month, turning into minus 9.5, and what's interesting, of course, is that is nowhere near
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the smallest negative of the year, because that happened in the first month of 2015, minus 3.2, and in august, minus 1.8 for context there. initial claims moved from unrevised 277 up to 284,000, so, of course, that's a jump up of 7,000, if i use the word "jump" for any of the numbers, so far below 300. 2.6 million on continuous claims, following another timeline, following revision from last week's stand. you know, as i look at the landscape, a couple things jump out at me. the shanghai composite index, of course, recovered last night, one close in the last couple sessions under 3,000. i believe last year, the low was around 29 and change, 2925, and anybody that's really looking at easy benchmark for the chinese stock market, any kind of a weekly close below that level, i think, is a technical negative of grand proportions, but it seems to be holding this
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psychological 3,000 or less. when it comes to interest rates, well, everybody continues to be amazed at the notion of how the markets and investors view the path of the fed. i personally agree with the new things being written like the on-ed written today in the journal, thought it was a great on-ed because more coming over to the side that the normalization is occurring for different reasons than advertised, and i'll let you know the reasons, you'll get the path of future increases wrong. back to you at the desk. >> all right, rick. let's bring in steve now with the re action to the numbers. i can't read his reaction just from -- you look okay. >> i'm okay. i like a number like this. it really gives you a summary of what's happening in the u.s. economy. >> what happened? >> well, import price number is a great, great summary here. where is the u.s. economy weak?
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it's weak when it comes to exports in manufacturing. let's talk about the import side of the equation. plus, what's nice here, december numbers, year over year rate, and petroleum import prices, becky, take a guess like a lottery type thing, what do you think they were down year over year? >> on a percentage basis? >> yes. >> 47%. >> so close, 41.3, but what's really interesting here is it's not just petroleum, right? other prices fall on import basis, and when it comes to the consumer and parts of the u.s. economy, the other prices are equally significant, so nonpetroleum down 3.7%, and industrial supplies, commodities, down 25%, and capital goods down 2 prepondera.5%, and exautos, down, and now to the export side of the equation, and we ask, why are s&p earnings so challenged? because 40% of the earnings come from overseas. what's happening to the prices?
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the prices other than the export are falling. import and export prices down 6 preponderate 5%, and things like consumer goods down 2.4%. the challenged side of the economy, yet, look at things like hiring, and that 284 number, which you take with a grain of salt because this time of year there's weather issues issue and, in this case, warmer than expected weather, that could lead to some employment that wouldn't otherwise be there, but, also, the seasonal hiring going on, and the government does not adjust for this in month to month or week to week, but overtime shores up the numbers, but there's a strong service sector and challenged export sector. i don't think it's a recession in the making, but it's, certainly, a hard recession when it comes to what's happening with earnings because of overseas, but domestically, thanks are okay now. >> if profits continue to struggle, exports under pressure, does that eventually lead to layoffs and affect the jobs picture? >> you know, i think it does, by
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i talked for a very long time, you know, whatever joe thinks i think which is just not true here, you know, one the great things about the u.s. economy is its openness to capital markets, openness in labor markets, and you look at the strugglings happening and deep severe problems happening now in the oil patch, which was a great growth sector of the economy, and, yet, in december, we still did 292,000 jobs. yes, we can't escape unharmed, but the u.s. economy seems at the moment to overcome that. >> i have -- >> talking about the jobs stuff? >> a lot of people say that, and this time, they are saying that there is a season -- there's always a seasonal, right, but this time, maybe, you didn't need to have it because the weather had not changed as much. . >> they said get rid of it in january. the notion the way they write it, a conspiracy by the government to prop up the numbers. they will take it away in january. >> maybe they shouldn't have
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added as much, maybe it's not a true reflection of what happened. >> tell me why october and november were revised up, and that's the weather as well? look, first to say december numbers are squirrely because of seasonal hiring and the winter thing. i did it last year where you haves negative numbers. i was the first guy to say, well -- >> saying seasonal adjustments -- >> i was the first guy to say, joe, watch for the december numbers because they could be seasonally up. let let's say it's not 290 -- >> you had the worst pick of all analysts that day saying 175. >> it was not me doing the picking, but the model, joe. >> that you created. >> that i created, but my point -- [ laughter ] but my point is that i was the first guy to say it could be -- what if it's 200 or 175? those are still good and solid jobs numbers. >> with all the thanks as we've seen in the market and rest of the world and commodities, there's no reason to think that
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we -- that they may have been the best jobs number, trending lower, and could see an uptick? >> not an uptick in unemployment, but, look, talked about this for a long time. the number of jobs the u.s. economy can and should be creating is somewhere between 100 and 150,000 jobs a month, which is equal to -- way down from what it is -- it won't be absorbing labor slack, butt egood enough. that's a normal number. the idea we're running, i don't know, triple that? that's extraordinary. >> because so many people don't want into the work force because life is so good with all the stuff that you get with the new expanded safety net where no one checks where you are trying to get a job. >> well, that's -- that begins the debate as to why people are in the in the work force. >> in ceo lathe u.k., there was where you had to show you are trying to get work. 25-54-year-old people up 3% in the participation rate, here,
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down 3% based on difference -- 25-54. these are people that don't find it pal letble to sit at home and not look. >> i could leave that comment on the mark or respond. the safety net is not big enough, many people believe, to keep people out of the work force, okay. it's not that lucrative a safety net in the united states. >> double food stamps, right? how much longer is unemployment insurance policy? how much easier is it to do to not have to show -- >> insurance claims are stagnant. >> not claims. >> houpg yw long you can have i. this is a conversation for another day, but jpmorgan posting better than expected results this morning, and we have a conference call with the executives joining us now from the nyse. >> key take aways from
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jpmorgan's quarter, deep and continued cost cutting, and a drastic redestruction in the company's balance sheets and also a little of an increase in the provisions for credit losses, which is last twopoints that really got a lot of focus on the call with the cfo. start with the provision, 12% of that covered other sec sore and how much they have to provide for potential losses, looking at the portfolio an a name by name basis, and the firm does not have local exposure to mortgages, to the consumer in the oil patch, but consumers reiterated that consumers will sit still eventually and see a tax cut from lower oil prices. the balance sheet, perhaps one of the most drastic things jpmorgan has done to reshape the company this year, reducing the balance sheet by $220 billion. to give you a perspective, in
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july, when some of the capital rules were finalized, the fed and intergnarl regular laters put jp morgan in a class of its own in terms of risk and have been able to reduce that, significantly reducing the amount of capital needed to support the bank, and that is going to be much less of a drag on earnings going forward. finally, on the rate hike, we expected to get a sense of whether the increase in interest rates would have affected them this quarter, and the ceo said that will show up in the first quarter earnings. guys, back to you. >> all right, thank you very much. a programming note, we'll take to jamie dimon next week in davos live on wednesday at 10:30 eastern time. when we return, oil showing signs of life, but supplies are gushing. how long until there's a balance of supply and demand? that discussion is next. also, tomorrow on "squawk box," an exclusive with blackrock chairman and ceo, larry fink, largest money manager bringing
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quarterly results talking to us first starting at 6:00 a.m. eastern time. "squawk box" will be right back.
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welcome back, everybody. crude dipping below $30 a barrel for the first time in over ten years after the wti group took a similar fall. for the latest on oil slide prices, the head of research at klr group, and, john, we are looking at potentially stabilization in oil prices, at
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least in the early going this morning. does that suggest to you there's a bottom or too difficult to call any of this? >> becky, in the near term, it's too difficult to call any of this. we are seeing the conditions set in motion, though, to suggest there is seasonally normalized convergence back to balance, but, no, we do think with a reasonab reasonable probability the effect happens here in the first of the year. >> you are looking at oil prices rebounding significantly from here, the course of this year and next year, and closer to $47 a barrel for the balance of 2016? >> that's correct, and, ultimately, a mid cycle number to your reference, ultimately, in this cycle reference out at 18 at 80-85. >> what gets us to those levels and why $30 now? >> the interesting thing about the theory or economics behind the oil is we're in a global over supply condition. essentially, what happens in that scenario is the market
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supply makes no difference, and now what the market has dope a radically move beyond the marginally cost supply, which is rationally at $60 in the u.s. and $70 in the global context. we had a fairly sustained oversupply condition, and it's lower to drive activity out of this, but ultimately, what this industry will need it more than 80 plus environment to drive modest degree of return, and mechanisms will be set in motion now with the lower levels of activity to suggest that the supply adjustment should progre progress. >> with the lower activity and rig count drawn down and people refusing to did after new projects, you're talking about a situation where it's easy enough to turn the spigots back on in a lot of places, sunlight suggesting over supply for a long time. is there a massive shakeup you see coming? >> becky, the dynamic here, we have to be sensitive to it as
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well, and that is these supply adjustments take many, many quarters, taking years, and we have we have many processes, and as far as turning things back on, what's interesting on the other side of the cycle is that it's not that easy. when you read a point capital, that lag effect is in place going the other direction, and it has to do with these supply adjustments taking a couple years to play through and be absorbed by the market. we see 2016 as a high period in terms of fundamentals observed by folks moving throughout the year. >> when the pendulum swings, it swings hard. once capital is deployed elsewhere, losing the work force trained in the area, that suggests it swings back hard the other direction, and you think it moves back to $100 quickly after that or not? >> well, again, i mean, our view right now based on bottom-up
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economi economics is 80 generates modest return on capital, but if you want, not to suggest we do, if we want the kind of conditions that put us back to $100 wti, exactly what we doing right now is the drivers that will put us over correct the system going the other direction. in simple terms, the u.s. industry is effectively uneconomic at roughly sub-60, and we are sitting at 30. the implications is that, that oil rig count eroding draws lower in the second quarter, which sets in motion the possibility of a very high velocity, very strong upcycle as price mo formation moving out through '17 and '18. >> all right, thank you, john, good talking to you. >> you too, becky. >> shaking things up at shake shack. i think. >> yeah. >> unless there's a shack shack. jim cramer on the market correction. he'll join us from the new york stock exchange.
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here's the futures right now, up about 80 points. we'll be right back.
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♪ light piano today i saw a giant. it had no arms, but it welcomed me. (crow cawing)
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it had no heart, but it was alive. (train wheels on tracks) it had no mouth, but it spoke to me. it said, "rocky mountaineer: all aboard amazing".
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. . the ceo, randy garutti, will join "squawk on the street" a little later. >> let's get down to the new york stock exchange. jim cramer joins us now. he could rerun our conversations. oil starts okay. the market looks okay. oil turns down and all hell breaks loose. >> there really isn't more to it. china came in and did some nice buying. the government used the charts and came in at the right level. i think the government is getting better than it used to. they are using good levels. they are hitting the averages and they have reversed. they focused on industry in
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china it would be better. oil, if it goes back to 29, than everything you see on your screen is positive, and it goes down and we all look like oprah. >> if oil goes down to 29, remind you of the old days where people sell the futures and people need to sell whatever it is. >> yeah. >> the more things change, the more they stay the same. honestly, it is algorhythmic now. if oil goes to 29.39, it is down to .5, maybe 3%. >> you look at the s&p 500 and we are not allowed to own many or any stocks. i will check one that we are allowed to own. i look for news. there is never any news. >> the airline stocks. it raised numbers in the airlines. it doesn't matter. they raise numbers, i cut the value of the stock.
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it really is like that. it is stupid is as stupid does. it really completely controls it. if we try to ignore it, we end up hurting people. we are the most oversold we have been in a long time. the sentiment as negative as it was in 2011. you need something to spark tender. you have to have something. we have the fed not doing the right thipg by obviously that rate increase. i will say it on air. that rate increase didn't help. that was bad. can we admit it is bad? not for the stock market but for the real economy, which is bad. it is like, wow, we need three more. no. that lost one was bad. they recognize that. we did that. we have to wait. that would help. china, the government was not just only one buying. maybe like real people buying. oil goes to $31.28. we get some good earnings, more like jpmorgan, then we have a rally. you have to have earnings or china or the fed saying something good. wells has to go to $31.28.
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that will be fine. it is so ridiculous. in the end, it is the way it is. >> i thought i heard you say kinder. >> tinder like match. >> all right, all right. so you weren't talking about kinder. >> what is it like that when you go like that? >> to the right or the left. hot or not hot. >> someone told me yesterday, i am learning about all sorts of things. you and i would hook up and go to the movies or go to roots. that's not the same thing anymore, roots. we don't hook up and go to roots. that's a different thing entirely. >> you know how i learned that. barry diller told me that. >> we missed out on a lot of things, jim, i get the feeling. just saying. >> or you saved your life and you can thank your wives for that. when we come back, you had better odds to win an oscar than the powerball jackpot. the nominations are out.
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find out which movies are rising to the top. "squawk box" will be right back. enthusiast. mmm, a perfect 177-degrees. and that's why this road warrior rents from national. i can bypass the counter and go straight to my car. and i don't have to talk to any humans, unless i want to. and i don't. and national lets me choose any car in the aisle. control. it's so, what's the word?... sexy. go national. go like a pro. the market.redict... but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions... you can feel confident... ...in our experience. call a t. rowe price retirement specialist or your advisor ...to see how we can help make the most of your retirement savings. t. rowe price. invest with confidence.
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the oscar nominations are out. let's find out which movies and stars are getting the most love from the academy. julia boorstin joins us from los
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angeles. good morning. >> good morning. the race is on. fox is in the lead for the oscars on the hills of the studio sweeping the golden globes on sunday. the biggest winner in terms of nominations it fox's "the revenant" best picture, actor and director. warner brother's request"mad ma in second and other award winners include "the martial" and indy film "spotlight" which has six. rounding out the list are paramount's "big short" with five and fox's "brooklyn" and indy distributed "room." star wars was the best film that brought home five nominations but did not earn any for the top categories, director or best picture. there were no nominations for
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netflix first feature film "beast of no nation." this is the first time they have qualified. there was some talk that there would be a best actor for netflix. not this time around. back over to you. >> supporting actor for the bear in revenant. >> i don't know if bears can qualify. i believe the revenant did get best actor and supporting actor. >> my son thought "spotlight" was going to sweep. he didn't like ""birdman."" >> "spotlight" is a critical favorite for best picture. >> he won't see remnant, because he was bad at the director for "birdman." revenant, it is outdoors, it is really cool. there is violence. he says, he wants to see
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"carol." i said, we'll see "carol" too. he said, yeah, but relationships matter, dad. >> very mature. >> i ask why the bear didn't get nominated. >> thank you, julia boorstin. i don't really like the oscars very much. >> powerballs. make sure you join us tomorrow. "squawk on the street" is next. ♪ good thursday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber. it gets interesting. the dow, s&p and nasdaq join one another in correction territory. europe's actions no good after japan sells off overnight. we are watching the ten-year once again which got a few basis points away from a one

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