tv Squawk on the Street CNBC January 19, 2016 9:00am-11:01am EST
isn't it? he waits for this moment. >> a lot of other smart people are look at these hard assets, where soon you can buy the asset, not too far from scrap value, so you have collateral protection as well as the upside. >> join the squawk team in davos tomorrow. "squawk on the street" right now. ♪ good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. u.s. markets catching up after the long weekend. futures making up for some of friday's big losses. bank earnings are out in force. seven dow stocks with earnings. china did post a gain overnight, gdp for the year at 68 is the slowest in a quarter century. and iran is officially able to start adding supply. the parade of bank earnings continues today with morgan stanley and bank of america.
we'll tell you what those storks are on the move. carl icahn sent a strongly word letter, yet another, to aig's board. we'll look at what it means and what is next. shares of tiffany falling hard in the premarket. the company reported softened holiday sales and did lower guidance. first stocks are poised to kick off the shortened market week with a rally. china gdp up 6.8 for the quarter, 6.9 for the year. the slowest growth in a quarter century raising hopes once again for more stimulus from beijing. oil on the rise despite the iea saying the oil market may drown in oversupply this year. the nasdaq down 10% year to date. the dow with an 8.25% drop. jim, friday was eventful. was it capitulatory? >> i don't think so. oil will go back down. no reason for oil to rally in this. none.
i think the bogus sometitimulus tired of it china is slowing industrially. not on the consumer basis. they have the 300 million middle class, going 600 million over the next decade. the fed has not come out and said i think we have to wait and see. the last comments were dudley. this is a nice snap back rally but based on nothing at all. >> china is doing what they seem to want do, which is encouraging the growth of the service sector. >> right. >> the industrial side of the economy is certainly slowing. >> yes. >> why can't we say they're kind of doing what they've said they would do, and so what is the b hub bub? >> the emerging markets that sell into china will have a tough time. >> haven't they figured that out? >> yes, they have, but how long
can they do it without having real problems. rio cut back on iron production. but they're still growing. still growing at 7%. it's crazy. look, i don't want to be a downer on an up day. if it's a down day, i try to find good things. i wish something had happened this weekend that was positive other than china is terrible and they'll do something. china has been terrible for so long maybe they'll do something has been a constant theme. i'm tired of the theme. i would like to see the chinese market not be manipulated, which no one says it's not, almost universally manipulated. >> referring to reports of big state buying? >> yes. you know, chinese government wants to prop stock up, that's fine. i like -- they seem to not be able to get the right narrative. they should say, listen, we don't need to build as much as we have. we have a lot of zombie companies. we should be closing these companies. in the interim the u.s. needs the federal reserve to say
spending is slowing. the banks showed good consumer spending. if you're dr. fischer, stanley fischer, you're looking to say maybe five hikes. maybe we need five hikes. it's like the narrative of the hikes, it's the narrative of china going down. the fact that oil was such a great short this morning was painful. what was it doing up? i wished i owned a tanker and i could blow it out at 30 bucks. sold. >> you would have offloaded all your cargo? >> 30 bucks for what? do you think they'll only do 500,000 barrels? >> even if non-opec production is cut, iran will offset that in a not short time period. >> i'm seeing numbers from my associates at rbn which indicates oil is unchanged in terms of how much we'll produced. >> we be --
>> the united states. almost unchanged. give me something. give me something that says that oil should be up. >> we still do consume another 1.3 million barrels every year more than the year previous. >> but we should be producing less. >> not us -- there i meant the world. >> no. i think that china, you want them to be using more energy. you want us to be using more energy. you want less oil produced. i'm saying it would be terrific if the market were unchanged today. you could say, maybe this is an opportunity. but when you open up 2% after nothing has really happened other than, wow, china is so horrible, maybe it will be good. i want a better story. >> all right. the bank earnings are good. >> 6 billion in equity floats out. you have bulls at 18%. you have the vix at the highest close since september. the only thing that you're looking for is for the fed to reverse course? >> yes. i want them to say, hey, listen, maybe we have to wait a little.
i want oil to bounce above 30. i want china to do better, not china might do better with stimulus. they don't want to do it. the baltic freight, which is 340. i went back ten years in time. not a lot being shipped there. i'll give you a positive. >> please do. >> iran, 77 million people. >> yes. >> a lot of spending. germany going to spend. these are positive stories. >> now what about looking at our old s&p 500 and the multiple that has to have compressed over the last -- >> 16.8. i want it to compress more. >> more. where am i thinking? 15? >> yes. >> as we get deeper into earnings season. >> 15, and i went through and saw 50 stocks that had solid -- >> 15 is how much more down from here? >> 5, 8. >> 5 to 8, then we get more support on earnings? >> then you have maybe the dollar won't be as strong. you have year over year
comparisons that are not that bad, you have something to hang your hat on. >> deutsche says you got to swing when you see it, they think the next 5% move is higher. in their words, the challenges, the reason for the downturn are understood and flagged and are now punishing sectors that have nothing to do with it. >> that's the apple thesis which goldman offers. look, march to the trough. i see prominent stocks like boeing at 3%. that's interesting, why couldn't boeing fall 5%? procter 3.5%, interesting. unilever had a good quarter. gm at 5%, that's interesting. interesting. verizon at plus five. >> plus five. >> but those are conservative. i went through bank of america's quarter closely, that's a good quarter. >> the last i looked, verizon and the ability of customers to pay their buiills is not impact
by china or by the fall in oil prices i think verizon should be up 5% now. >> bank of america, better than expected profit helped by lower expenses. morgan stanley beats, the cfo once again, markets are going to do what markets are going to do. >> morgan stanley i heard bad things about trading. they weren't true. the stock could go back to 30 without a problem. baltic freight, 3.63, still very low. in a really good market, bank of america would never have gotten to below its $15.68 book value. in a really good market, morgan stanley would have never fallen back to these 2013 levels. it's such a vastly improved bank. a great wealth management business. but i struggle to say you need rate hikes for those to go higher. if you get rate hikes, people will sell these stocks.
cummings inc, 4% yield. engines down, trucks down, china down. all i'm doing recommending stuff where numbers have to be cut. i don't want to do that. i don't want. i could boost bank of america numbers now. i like that. >> you did like that quarter? we're getting some decent quarters. important to mention on morgan stanley, only a week or two away from that big change at the top with greg fleming leaving, and mr. gorman will stay in the ceo position for at least another five to seven years. >> doing a good job. wealth management doing a good job. instead i see layoffs. i'm worried about layoffs now. not recession, i'm worried about a slowdown. when j & j lays off people -- >> 3,000 people. >> when potash lays off people. bank of america is hiring people. bank of america no longer looks
like the old bank of america. i could argue it's cheap. i'm saying that cheap is not a catalyst. looking at csx this weekend and norfolk southern. norfolk southern, there was a bid, maybe it was -- it was at 93. have you seen where norfolk southern is, it's 71. >> have you seen where canadian pacific is? the proposed bidder. >> we'll get unp this week. >> that's not pretty. the rails have been in a recession. >> this has been bear market. delta reported a number today that was a good quarter. they do say that revenue, the average seat mile will be down. huge windfall in oil. i like delta. delta will earn -- it's selling at 8, 9 times earnings. buying back stock, cleaning its balance sheet. i feel like i'm alone when i say
this. futures come down, and people say why did he tell us to buy delta? delta's another 43 what kind of joker is he? i'm reading these quarters, i'm saying delta good, bank of america good. morgan stanley good united health good. they won't go down as much. after the futures finish their activity, those stocks, i'll look -- they will not get hit as hard as they should. given the futures when they turn. >> you are negative. n >> no i'm just saying -- >> not that i'm taking -- >> we're the most oversold we've been since we had a big rally in 2011 off italy. tremendous negativity. i'm seeing very good quarters. >> if you were running the old hedge fund -- >> i'd be buying. >> what? >> after all that? >> i'd have a good cash position but i'd find stocks that i like. i would not be shorting. i need a reason to short. >> 5% to 8% down side from here is not enough reason to short?
>> no. okay. okay. i think there are stocks overvalued. i want do both. he want long positions, i want to have some cash. but i just -- i want the market to rally so that i can do some selling. how about that? >> okay. >> if i say it's going to be down 5% and it's up 2% today, the average person will say what is he talking about? i'm saying let it come up. maybe make some sales. because i don't think the selloff is coming. there. there. >> that's good. >> i don't think the selloff is done. >> got it. >> no waffling there. don't think the selloff is done. but let it rally. >> people can understand that. >> we know life on wall street can be dramatic. show time's new show "billions" premiered this weekend and takes it to the next level it depicts a federal prosecutor's pursuit of a hedge fund billionaire. if you saw the preview, you saw a familiar face. >> how do you respond to the criticism that hedge funds are the scavengers of the financial
sector? any public statement you make or position you take can send a stock soaring or falling. >> we're not skcavengerscavenge. >> i was at that conference, you were stalwart. >> hopefully he gave us a better idea than our alpha delivers in the past. >> macy's worked out. >> maybe not. >> i remember -- >> axe would be all over macy's right now. he wouldn't stand for that our colleague, andrew sorkin was one of the executive producers. fun show. great actors. great plot. >> everyone said david faber was the star. >> i think i carried t sure. that minute carried the whole thing. took years of training to play myse myself. >> i was in "big short" for three seconds. >> your best was "iron man."
>> i got a hat from iron man. everyone else got $50,000. i thought it would be a bomb. >> you should still be getting checks about that. >> this is about billions, you were fabulous. if you could stand up to hedge fund managers the way you did then -- >> i do. >> yes. that's exactly what you do. when we come back, an unhappy holiday for tiffany and macy's ceo terry lundgren. look at the premarket. big earnings week stuffed into four trading sessions. some 30 s&p names and seven dow components. more "squawk on the street" in a minute.
it said, "rocky mountaineer: all aboard amazing". tiffany shares down in the premarket. the luxury retailer saying holiday comps down 5% worldwide, including an 8% drop in the americas region. lower tourism spending, the weaker dollar and sales calling it to cut guidance for the next year. >> i was blown away. remember the last time they talked, everyone got excited. they said some positives. i was on this show, i say why do they do that? why do they set themselves up?
do they know something about the dollar? this is one where literally it's rich people coming to america and they buy tiffany's, but they're not because the dollar is too strong. this dollar, down 10% comp. that's terrible. that's a terrible number. the retailers have been the worst stocks in the last five days. they were terrific coming in. we got excited. this is the kind of thing where the company set us up to believe it would be better. that was just a really bad call. it was based on nothing. this is what i worry about. based on nothing positive call. give us something that tells us if the dollar goes down we can do the numbers. but forget it. it was based on nothing their bullishness. >> they've done that to us before. >> and it's been the theme. thank you. it's time for management to get a little more conservative. some of these other retailers
have been excellent in forecasting that things are not great. not tiffany. they keep saying this is it. >> then there's terry lundgren trying to transition macy's to a brave new world. >> weather is getting cooler, that's going to be fine, too. is there one more thing? i think there is. the consumer behavior and the way they're shopping is different today than it was a year ago and two years ago. that's a fact, and i think we're in position probably more than others to take advantage of that because of our investments long-term. >> is he right? >> he has to spend more than he's spending, because amazon keeps stepping up -- i was at bloomingdale's this weekend, there's huge sales. sak's, huge sales. trying to clear it out. >> don't you feel as though we're in the midst of one of those seminal change, is that occur in an industry?
>> yes. >> we'll look back on this period and call it '14, '15, '16 the change? buying habits changed forever? >> we are returning a burberry's coat to sak's, didn't fit. we should have googled amazon burberry. i'm wearing shoes that i saved $12 on. i bought them at $12 less than i bought them at macy's last time, had them delivered to my house because of prime. he has to spend a lot of money on omni channel. a lot of people do that thing you can order and pick it up. i don't want to go! great. i can order it, and i have go somewhere? it comes to me, that's why it's a secular change. >> urban areas in particular. there are many places in the country where you still can't get the thing dropped outside your door, you don't have a doorman or any number of things, it's worth going to the store.
exactly. financials so far have been terrific. we have chubb ringing the bell. >> huge quarter. >> we have to talk about aig, carl "chesapeake freeport" icahn unhappy. >> unhappy as he approaches his 80th birthday. >> oh. >> we'll walk you through carl's letter to aig. we'll get cramer's mad dash, count down to the opening bell. more "squawk on the street" after the break. ♪ there's no one road out there. no one surface... no one speed... no one way of driving on each and every road. but there is one car that can conquer them all. the mercedes-benz c-class. five driving modes let you customize the steering, shift points, and suspension to fit the mood you're in... and the road you're on.
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we're talking about what we'll do, which is going to be -- i'll leave it to him. where are we headed? >> i'm continuing to highlight positives, when we wash out sellers, we will come back to stocks like unilever. pullman is extraordinary, he did 4.9% organic growth. that's like a heyday number. when i saw it, i said he is such a good manager. i am begging him to come on any of our shows. this is an example of what i'm talking about. this is a company that should be about here. that's how good this quarter is emerging growth amazingly strong. really doing everything right. getting rid of people who may not be doing as much as they should. this is the kind of stock i want you to buy. you could argue this is exactly what's going to happen. it's really good, but at the same time it's been here forever. the really good ones don't go down to be cheap enough, the bad ones just keep going down.
and there's a handful of companies that are good. and many companies that aren't. but i have seen my ratio of better quarters to worse quarters is so high for the better. intel was bad. pcs were bad. but i would argue that almost everybody else fits the morgan stanley bank of america mold. i did not think alcoa was that bad. that stock is at 6 bucks. >> yeah. >> commodity. >> commodity. >> this company is a taker of commodities. they are a beneficiary. i bet you coca-cola does a good number. >> we'll see. we'll see how things open for trading. this is the first trading session after that difficult day on friday. "squawk on the street" coming right back.
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and i saw that oil was up. you know, i say to myself, okay, what the heck is that about? the answer is maybe -- maybe people think that iran is overly discounted. i don't see it that way. they have a lot of oil in tankers, still many tankers available, if they want to use them. i see bank of america fading. this is the kind of thing. i went out hard this morning saying bank of america is great. my travel trust owns it. i've done a lot of work on bank of america. surprised by every single line. doesn't matter. oil is down. look, this has to end. >> but you're also saying you believe the broader market has a ways to go. everything gets wrapped up in that instead of judged on their own merits. >> i looked at the charts this weekend. tears that the good ones go down as much as the big ones. the yield stocks, 3.5 is not enough. general motors was so fabulous
last weekend, it was below where it said great things. below! what am i supposed to do say that's wrong? it's the market, not me. >> buy and wait for the market to change. >> yeah. >> there's the opening bell. the s&p at the bottom of your screen. at the big board, insurance company chubb celebrating ace's acquisition of the company. at the nasdaq, spi energy, a provider of photoalteacs. we have not lacked for upgrades this week, this past week. today it's mcdonald's and procter. >> i thought that mcdonald's could have a great quarter. i just think he's taking share. talking about easterbrook. any of white house have been at mcdonald's, you know it's a different pace, simpler menu. we had shake shack on last week, upgrade of shake shack, too. that makes sense to me. i know the restaurant brands, burger king, they're doing well.
raw costs down for all of these xhaen companies. i would buy mcdonald's in a second, 3% yield as of friday. i would say buy, the market would say i'm wrong midday. >> blair says a 24 multiple is better than 560 for shake shock. >> that stock has come down a lot. i could not get my wife go there yesterday. desperate for that chicken sandwich. >> that chicken sandwich was delicious. >> how good was my kale, spinach and apple smoothie. >> you guys were too virtuous that day. >> they're underrated. the beet smoothie is underrated. they do not taste horrible. i was so grateful. the whole thing with quinoa last night was fabulous. >> jpmorgan upping campbells today.
as they cut mccormick. >> i bought the campbells new product in. >> you brought that in the other day. >> i consumed it. campbells is a good stock, good yield, doing everything right. i keep talking about stocks that are good, what happens? campbell's is up a dollar, and by midday, the s&p futures will wash it down. >> you're throwing the towel in already on today before the day has begun. i'm only throwing in an oil tap. if oil stays up, then all the companies that are actually beneficiaries of lower oil go higher. it's crazy. look at delta. will look at delta? buying back stock, an amazing quarter, but it's at 1.49. when does it give it up? i don't know. delta should be bought. i like delta. >> do we have any demonstrable data on how much of this market is run by algorithms? >> thank you. >> funds that dominate and
therefore have some trades on versus oil? and we're at their mercy. >> i'm saying we will get to a level where we are not hostage, then you have to remember all these great quarters and come back to those quarters. they shouldn't be hostage. i thought that goldman had an excellent call today about how apple is now discounting very big cuts. i like that call. i think that's a terrific call. i look at a lot of the companies that are yielding 5%. do i want to own at&t at a 5.6% yield? absolutely. but do i know that apple and at&t and verizon are part of the vast oil complex where we go down because of oil? i don't know. it's so silly. i feel like it's ridiculous to talk about it. >> yeah. >> i don't know what to do about it. today is the day that we break the linkage. what do i know? i'm just the guy who does the work on the companies, the companies are reporting good
numbers. >> netflix will do that tonight. it's up about 3%. there have been calls for them to disappoint. blair thinks u.s. subs will miss. but then there's india and reports today that hastings continues to be patient with china. >> i just think that you go back to his raw costs, his raw costs what are they? he just does -- he does it iteration, "narcos," and then "narcos" sequel. jessica jones, jessica jones sequel. murderer are the only other show i'm talking about other than david faber's appearance in "billions." i come back and say let it come in. maybe people will buy it. i think that netflix is part of f.a.n.g., and f.a.n.g. -- over the weekend i was having a back and forth. my daughter will not let me argue anymore on twitter. dad, just give them a smiley face, cute cat. i was saying google, now amazon -- now alphabet is cheap.
facebook is not cheap, but if it comes down it's good. so you hate facebook? no. no. i'm respectful of what seems to happen when a stock goes up. which is that oil goes down midday and we say why did we buy mcdonald's up 1.80? i don't have a good answer for that. >> netflix getting heat from some of its competitors about its continued unwillingness to release ratings. it won't. it doesn't have interest in doing that. others at the networks, including our own, nbc, they say you keep making these huge statements, but you have nothing to back them up. >> i remember talking to costco, they said it's outrageous what amazon does, they lose money and do great. then one day they made a lot of money. >> walmart playing on a different field, really. what did you think of wall street closing the stores? >> interesting move.
>> walmart did not do great. >> no but netflix and amazon are similar in that way. as long as they have the growth, subscription growth in netflix, the market will be kind. >> yes. i just want people to remember who did well. jpmorgan's quarter, wow. but that seems like years ago. the stock is doing nothing. >> they spent 6 billion this year. they'll spend 6 billion on programming at netflix. a stunning number. >> but everything is watchable. it's watchable. >> couple other upgrades to watch, michael kors up 42 cents. piper takes it to neutral. speaking of retail, morgan stanley cuts best buy to equal weight. >> that best buy quarter, that was terrible. just a bad quarter. that was surprising. people feel, terry lundgren talking about car sales are up, that's taking away from retail. best buy, i don't know if it was terrible execution, how much was
gopro or cell phones, but just a bad quarter. that was, along with intel, the two big disappointments last week. it was bad. >> twitter got some commentary this morning for being out in several countries. you might have noticed some slow action earlier in the morning. we'll see if that gets fixed and remains fixed for the course of the day. back below 18. >> yeah. wow. bad. no growth. no real growth. >> too early? >> too early for twitter? >> too early to buy? >> in the gopro -- >> too early. >> too early. i was doing work on twitter last week. i wish i could tell you thicks are robust there, but they're not. not robust. >> by the way, getting news this morning from the supreme court regarding immigration reform. let's get to eamon javers in washington. >> the supreme court today is agreeing to hear the obama
administration's bid to resurrect the plan to shield more than 4 million illegal immigrants from deportation. this fight goes back to last fall when the obama administration asked the court to consider weighing in on the case. the obama administration tried to make things easier for illegal immigrants in this country, that, of course, was a controversial decision. a number of states challenged it. now the supreme court itself will weigh in here. >> eamon javers, thank you very much for that. >> you bet. mean time, watching the dow, up 170. bob pisani is on the floor. >> you know what's nice? it's nice to see the financials on the upside leading the way. so financials are up here. in fact, broad rally, we have tech stocks, consumer discretionary, healthcare doing well. let me point out what's going on in china. though the numbers on the gdp number, 6.8%, some people read it as fairly disappointing.
markets there were up. this is mostly due to stimulus hopes and the peoples bank of china did a big liquidity injection. that boosted market sentiment. i want to point out, there's concern about the china slowdown. if you look at the numbers, it's the tale of two economies in china. the consumer side is not bad. retail sales up 11%. that's a respectable number. the manufacturing side, industrial production numbers were not great, up 5.9%. you can see here the emphases on the consumer. one broker report estimated consumption in china was 65% of gdp growth. so t consumer is contributing more and moree to the chinese gdp. in europe, a very good morning. ill having a good morning session. german confidence numbers, sanofi in the pharma group,
total up, deutsche bank is up. airbus is up. some italian banks are down. jpmorgan said italian banks are having trouble because low interest rates will put pressure on their revenue. in the u.s., over the weekend the whole complaint was we can't figure out what the market is doing, bob. wednesday we're down 4006789 thursday, up 300. friday down 400. today almost 250, not quite. haven't gotten there yet. a lot of people unable to figure out how to hedge themselves in the market. i heard a lot of talk that i'm staying on the sidelines until i see a trend. commodities are volatile, stocks are volatile, bonds are volatile. the bulls were shell-shocked over the weekend. oversold. we're not in recession, bob. a great story about the growth of the new chicken littles out there. everybody predicting the end of the world, but nice to see
financials. bank of america good report, morgan stanley decent report. most of the banks are fractionally on the upside. bank of america fractional yeah down now. overall good numbers here. bank of america, still trade beg low book value, below one on tangible book value, 0.9. due for a bounce there. tiffany is at a two-year low. guiding to the low end of the full-year guidance range. minimal growth for 2016, that's the big problem. if you notice their competitors not down nearly as much. we talk about the impact of currency on tiffany's and on the retailers. a quarter of tiffany's u.s. sales come from foreign tourists. even if you x out the dollar impact, americas were down 8%. asia pacific down 9%, europe down 2%. a bit of a gain in japan and some growth in china. overall the conclusion is tourism spending is weakening.
and time finally in the tar sar sands. s suncor energy and canadian oil sands. the price off eariering was rai about 10%. given the price of oil, you think people would walk away from the deal, but somebody sees value in the canadian tar sands. very interesting deal. back to you. >> thank you very much, bob pisani. another foray from carl icahn and his continuing dispute with the management and board of directors at this point of aig, a letter released this morning from mr. icahn goes into more details again as to why he believes the company will benefit from being broken up. this battle began back towards the end of october, october 28th
when mr. icahn issued the first of a number of letters. the first letter to aig and to its shareholders asking it to essentially de-sifi, get itself out from under the financial designation as a systemically important financial institution, he believes that would enable it to pursue various lines of business separately that would benefit all share holders as a whole. in this he is joined, you might remember, by paulson and company, which has a significant stake and also by josh sterling over at bernstein who has been saying similar or same things about a breakup. the latest letter, let me give you a few takes. management has been either purposely misleading in public disclosures or is negligently uninformed regarding the feasibility of a dec deconglomeration plan, in conversations with management, i
learned that disclosures provided on the third quarter earnings call regarding obstacles to de-conglomerating aig. improve underwriting and cost productio reductions within, and he wants to abandon the credit default spreads levels. bernstein weighed in with a survey in which it said -- again, remember the source, they have beening ati ing a tiing i saying that paulson and icahn are right in this. when given the chance to affirmatively support the management and only 4% of investors said they support management's current skrtrategys it is. but management needs to better
communicate and pick up the pace. and when given the likely choices in a contested election for board control of only 9%, respondents will support management's most likely approach. there are a lot of things that will be said about tax loss carry forwards, the value that the company has in them, about the fact that it would not benefit from being de-sifi'd. the scale economy is coming from the 200 regulators this have. that would not change. there are scale economies that come from dealing with that regulatory regime. they also point out that when you want to compare it to a metlife, for example, the business is very different. very different. they have variable annuities at metlife, a much bigger part of their book. that's a worry for regulators. also the life business with international very different at metlife. and they're not nearly as levered. interesting to note their leverage ratio at aig has come down 4.3 times off of third
quarter numbers compared to a leverage ratio of 11 times at prudential and 8.3 times at metlife. there are things they will highlight. it appears they are on a very different approach. hancock has pared down his direct reports. he has ten direct reports from what was 15. you may recall that was another announcement that has taken place daughter turing the cours battle. aig this morning simply say we continue to take steps to narrow our focus, improve financial performance and return capital to shareholders. aig maintain answer active dialogue with share holders and reference the 26th where we will be hearing more. this battle continues. we are getting closer to nominating season for directors. >> i think aig can buy back the stock. i don't think hancock is doing a bad job. he has a long-term healthcare business that i don't care for.
the idea that he is just not delivering, i find it not that -- i support him in what he's doing. >> you do. >> yeah he's doing a better job than icahn thinks. the stock is not that bad. he's making a lot of good changes. he's a smart man. there are places far worse. we shall see. a complex situation. one we can only get to a bit of in the back and forth in the statements and trying to explain it we'll have more next week. >> again, not to -- it's funny. i could transition from aig to oil. here's oil. iran cutting the price. if you bought bank of america when it was up a percent -- >> it is. >> this is the world we live in. >> indeed. market gains getting pared as oil is back in the red and below 30. back in a moment. the world 211,
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quickly. let's get over to jackie deangelis. >> oil moving in the opposite direction of equities today. headlines that are causing this move are from dow jones saying that iran will cut oil prices to some parts of europe following the lead of the saudi arabians. the saudis have been cutting prices, not production, to maintain market share. and the iranians will be following suit to maintain their share and stay in the game. there is what everyone is worrying about, that this will create a price war and these two will go head to head. you have more fundamental reasons for oil prices to go down. the iea saying oversupply will last late into 2016 and saying the warmer weather this winter will impact demand. but keeping 2016 demand constant. in terms of the demand picture, we want to see it go up, not flat to down. so oil prices under 29 now,
session low of 28.36. >> jackie makes an excellent point, you can cut supply and stabilize the market, but for crude to rebuild, you need demand to come back. few people see that happening. >> we're driving much more, but the cars use much less gasoline. the country has tried hard to get off of expensive fossil fuels during the period when they went higher. europe has tried very hard. they raised the tax. china has cut the tax on smaller vehicles. so, you know, this is not driving. gasoline is not going to drive more people to drive. other than they already have. maybe they haven't factored it in. bank of america tells me people are spending, but we have to hear from other companies. not retail. it's not -- it's -- right now it's too much of a negative. we just have so much credit stress. there's so much credit stress in the system. >> credit -- >> oil and gas. my question -- guys, how much
oil do you have? fortunately, the tough part, which is the mid-size in america is small. but the credit stress in terms of thain industry -- >> right now we look at the negatives, not the positives. i said if oil went down, it would wipe it away. here it is. >> here it is. >> happened quickly. >> we'll get stop trading with jim. dow up 76 points.
>> time for cramer and stop trading. >> one thing you see in this market, campbells upgraded by jpmorgan. mccormick from hold to sell. analysts don't want to have too many stocks they're recommending. they see what we see. oil goes up a nichkel and the dw jumps 20. caught in a tremendous down draft, and it's a shame. it's minimizing some great efforts by our ceos in the country. >> what's on "mad" tonight. >> i have some yielders that i think you can take a stake in. and i have damymond john, we wil talk about fitbit. in his new book, he talks about
trends and what people want. he is back, and he's great at spotting trends well ahead, maybe fitbit is a buy. >> caution is well warranted today, jim. thank you for that. >> we can bounce back if oil bounces back. >> "mad money" tonight at 6:00 p.m. when we return, breaking news on home builder sentiment. dow is up 99 points. those who define sophistication stand out. those who dare to redefine it stand apart. the all-new lexus rx and rx hybrid. never has luxury been this expressive. this is the pursuit of perfection.
good tuesday morning, i'm carl quintanilla with sara eisen, i'm i'm a simon hobbs an faber. getting breaking news on home builder sentiment. diana olick has that. >> the street was looking for 62, the sentiment came in at 60. we're down from a reading high of 65 in october. we should be seeing sentiment improve given that mortgage rates are low and we're coming into the spring market, though you couldn't tell today. home builders are using words like gradual and modest to
describe the recovery. of the three components of this monthly index, current sales conditions were up two points to 67. that was the only increase. sales expectations over the next six months, down three points, to 63. current buyer traffic down two points to 44. that up with still mired in negative territory. 50 is the line on this index between positive and negative territory. all regions were down. northeast, midwest, west down. southbound two points, the west is still showing the highest in home builder confidence at 75. >> bit disappointing there. china's gdp slowing to a 25-year low, that's raising hopes for more stimulus from beijing. eunice yoon is there live. is that realistic? >> that's the big question mark a lot of people are wondering. we saw a relief rally on the
numbers. gdp numbers came in line with expectations. the focus was really the december figures. industrial output and retail sales came in at lower than expected. and that's led to heightened expectations that the government will come in with stimulus in the form of interest rate cuts or triple r cuts before the start of lunar new year in early february. the fed bank said they would inject $62 billion into the banking system today and 91 billion before the start of the lunar new year. they said they want to avert a liquidity crunch. also some still widespread concern about the validity of the gdp numbers. a lot of economists as well as investors have been feeling that the government still is inflating the numbers in order to try to prop up the growth. at least make things look cleaner. the -- for example, just to give
you a sense, capital economics a research firm that is not particularly bearish said today it believes that the q4 growth was more like 4.5%. so there's quite a big gap. separately today we are hearing more reports about how the authorities here are urging banks to restrict capital outflows, particularly those that do a lot of dealings cross-border and that have corporate accounts and making larger transactions. again another move we're hearing to stem the outflow of capital and stop some speculation we're seeing in the renminbi. >> thank you very much what does this data out of china mean for the markets and oil falling well below 30? joining us is asset management strategist phil campariali, and the chief market strategist and co-head of multi asset solutions
at a.b. a lot of people believe china is the biggest judgment call they'll have to make this year. we seem to have gotten through those figures okay overnight. >> not sure this is the most critical issue. look, we have gone to a period where we are continuing to see slowing industrial production, a lot of it is tied to the overoptimism we saw last year which led to a build up of inventory. the end demand looks reasonable, but the question is how long does it take to get through the inventory correction and that will determine the duration of the uncertainty. >> would you agree with david bianco at deutsche bank that we could get a 5% bounce in the s&p from here quite soon? >> given the level of volatility, that wouldn't surprise me at all. that would be almost a nonevent given how high volatility has become. the issue is are we going get anchored to some sort of growth
expectations because at this point the market is acting as a disinflation and low nominal growth is here to persist and the risk of recession has risen significantly. >> i don't think people would look at a 5% bounce in the s&p and negate it. the track for the two weeks is clear. it's not that volatile, it's a line that goes straight down a 5% bounce from that loss might indicate we bottomed on the market. i'm asking whether you think the markets will go down and down. >> the substantial part of the decline is driven by the fact that a lot of the money at this point are driven by risk management as opposed to a long-term perspective on economic growth. and as we see rising uncertainty, as we see negative data, we do see a significant selloff. it is very difficult to be precise about the point at which that stops and outflows subside.
i think if we get a week or so of stabilization in oil prices a 5% bounce is not unreasonable. >> phil, i'm sorry to push the point, i want to -- does the market keep falling for three months, six months or are we not in that environment? can you give me a sense of where the landscape is here? >> i think we could see a little further downside over the next couple weeks. if you have a horizon of 6 to 12 months, believe markets will be higher relative to where we are today in europe, japan and the u.s. >> what do you think, phil? this market is pricing in way too much of a recession risk. the s&p about 1900. usually in a recession you get a 30% decline from the high, which would put the recession at 1500 we are right in the middle,
about 50% recession risk. but i'm not sure that's the context we've come from. the context is that recession is an idea blew out from nowhere over two weeks. that's the second degree. >> there are no excesses in the economy, whether it's inflation, household debt, companies overextending. companies are afraid of their own shadow knonow. you won't get a 10% higher treasury rate this year in our opinion with the pace that the fed is going. personally i think companies afraid of their own shadow is a dangerous situation. >> germany, you like it, it's attractive, but the dax has gotten hit harder than the s&p. >> there's more data in europe, but when you come from a sentiment standpoint who is the most important country in europe from a sentiment standpoint?
germany. lower oil prices and they are a manufacturing behemoth, they make more than just cars. there is an unbelievable weakness in the euro. if they sell a mercedes in the united states for $50,000, they are getting more you'euro. >> don't you have to be concerned about china? they have been more exposed. thefrm >> they are also exposed to the eurozone in general. for us, china has the tools to stimulate. you're hearing that today. they have the tools to stimulate. positive interest rates. the fed wishes they had positive interest rates. china is a risk. which is why we have no em in the portfolio, and high yield is more of our fist pounding view. high yield spreads now, double bs and single bs, have never been wider in a non-recession period. that's the view we're trying to
take. lower risk, add high yield. >> i guess the problem becomes what happens to energy further down the line. ubs put out a report last week suggesting if oil stays at this level, business models are unsustainable, even those within energy would have to fall further. you have to assume there's no general further fallout in credit or the recession gets greater, both of which are big question marks. let's pencil in 10% defaults given where oil prices are now. in order for us to sustain a $10, $15, $20 oil price, you need a major pull back in global growth, which we don't necessarily agree with. we're in the view that if you can be really careful with your credit picking which is what we're doing, double bss and triple bs make sense. >> where should we be in your thought in the market? where is the opportunity here,
vadim? >> i think the opportunity is in energy if you're taking a 12-month view. i believe oil prices will be significantly higher, 12, 18 months. if you want to be conservative you should own tips, if you're a more risk taker, integrated oil. if you're willing to take a lot of risk, mlp in some of the make he emerging currencies. >> thank you both. when we come back, morgan stanley and b of a both higher today after their fourth quarter results. but the stocks are both down more than 10% in the last two weeks. we'll talk about that when "squawk on the street" continues.
morgan stanley beating expectations for the fourth quarter. mary thompson is back at hq with more details. s&p financials are the best performing group. >> part of that you have to think morgan stanley whose fourth quarter results beat expectations thanks to strength in its equity training unit and a slight uptick in fees from advising mergers and acquisitions. beat estimates b s by a dime. revenues beat expectations. margins in wealth management or its brokerage business declined slightly. the firm did hold the line on compensation, that helped the
bottom line. cost controls will continue in the coming year via a program called project streamline between this and cuts in compensation the firm is targeting $1 billion plus of cost cuts by 2017. all of this is part of an effort to get the firm's return on equity and measure of profitable to a targeted range of 9% to 11% in two years. on the call, james gorman saying the way they plan to do that is through capital efficiencies as well as return to share holders and the cost cuts and reducing the firm's risk weighted assets. morgan stanley's stock as mentioned earlier rallies on the news. outperformer over three years, it's been the worst performing stocks among big banks the last year. the firm undertaking a restructuring of the unit in the fourth quarter cutting 25% of the unit's work force as it is working and continuing to work on right-sizing it. it's an ongoing story, carl that we continue to watch. >> we're not done by a long shot. for more on the banks, let's
bring in larry mcdonald, cnbc contributor. welcome back. >> hi, carl. >> highest net income for b of a in almost a decade. is the market not appreciating what they're getting? >> it's amazing the difference between this market in 2011 and 2008. the credit standing of the banks, the credit risk is substantially less than 2011 in the united states. the global economy is what is driving the bus. that's what we've been telling clients since early last year. the global credit metrics are driving u.s. economic risk much more so than bank risk. >> and when you have jpmorgan and today again b of a saying we're going through our book bit by bit, 2% is energy related. have they hedged risks or not. >> i feel better about the u.s. banks today than any period in the last five years, but you
have to look at the credit default swaps on south africa, on brazil, petthese are moving fast levels, that's driving the bank price risk in terms of the stocks of the banks. >> that's what you think, that the banks have not only done poorly this year, but they've underperformed the broader market because of sovereign credit risk? >> it's sovereign plus oil, it's all the side effects. so it's not just oil, but all the side effects of lower oil. it's trade with canada. it's their counterparty risk around the world. we're much better off in terms of banks here. i don't see a situation like 2008 where it is credit driven in the banks. it's going to be much more internationally driven. that puts us in a better place here than in years past. >> here's the added wrinkle of as we turn the corner on the year, the thinking was, oh, this
is the year to watch the banks because that spread will come around. now we're starting to worry about the fed having second thoughts. has that put a limit on the enthusiasm for the sector? >> that's a big thing. two weeks ago we were look at four hikes, four, five hikes over the next two years, 2016 and 2017. now we're looking at one hike in 2016. one hike in 2017. that takes out all the upside of the net interest margin that everybody was talking about in december for the banks. so going into this year everybody was saying steeper yield curve, great for the banks, now that is wiped off the table. that's contributing to the down side in the equity prices. >> larry, just changing the subject slightly. people who read in every day, who read into financial news will keep coming across the name albert edwards. this uber bear you have embedded within the business. the latest i'm reading is that he's calling for stocks to fall
by three quarts over their value, that we'll reap the whirlwind of the fed's qe, global deflation and recession. where does albert edwards fit in to the general view of where markets are going? >> edward lathorn and albert edwards last year were warning about global credit risk from china albert has been right on in terms of the outflows from china the counterparty risk between china and other emerging markets. they have been way out in front of this. i have to tip my hat to them, they've done a good job for our bank. >> as head of u.s. strategy, your title, do you think he's right when he says stocks could lose three quarters of their value? is that a tail risk you're thinking about? >> i will not challenge albert edwards on this program, but i would say that china is going
through something very strange. they're telling the world their gdp is between 6% and 7%, but at the same time trying to control ap c capital outflows. those two things don't match up. if they let the currency deprecate too fast that presents more counterparty risk, currency risk, and it sets up an ugly global economic scenario. >> back to the banks. as we get through the week, we'll get through goldman, fifth third and sun trust. where do your favorites lie? >> i think heading into the 2016 election, it's pretty obvious that one of our friends in washington, acg analytics has been talking about in the next congress, i think they'll be much more supportive of the smaller banks, so you could see legislation over the next 18 months that really tries to even that uneven playing field, so i think you want to look at smaller banks vertss larger
banks over the next 18 months. >> i know you look at high yield. we had a guest on talking about double b, triple b, seeing spreads, saying there's an opportunity there. do you see one? >> short-term i think we're way overdone in terms of high yield. but over the next 4 to 6 months we probably have a substantial rally here in the near-term, and then a retest. the one thing i'm looking at is over the last week investment grade spreads have caught up more with high yields. i would keep an eye on investment grade spreads. if we get a rally here in the u.s. equity market over the next couple weeks, which i think we will, we will want to see those investment grade spreads hold up. if they don't, the equity market rally is suspect. >> larry, good to talk to you again. thank you very much. >> thank you. larry mcdonald, head of u.s. strategy, thanks. tomorrow, jamie dimon will be on "squawk on the street" live from the world economic
forum in davos, switzerland. thursday, don't miss morgan stanley's james gorman, that's ahead of a busy week out of davos. coming up, the retail sector falling about 10% so far this year. macy's after major losses last year has seen a rise of 8% in that time what is macy's doing right now? hear what ceo terry lundgren had to say when we come back.
pharmacy benefit business. the company says the year is off to a strong start and is considerably stronger than 2015. shares up about 6% in the last 12 months. simon? >> thank you very much. clearly retailers or the stock of retailers have been struggling. warm weather late last year causing problems. retailers are gathering in new york today for the national retail federation's annual conference. courtney reagan is with them and amongst them. she joins us live now. hi, courtney. >> good morning to you. there's a lot to talk about here at the national retail federation's annual big show. as the retailers continue to release and talk about their holiday season and their results. this morning tiffany released holiday sales, down 5% year over year. as a result the high-end jeweler is warning earnings will come in at the lower end of the previous forecast. if you look at it by region,
comps dropped just 2% in europe, they did grow in japan thanks in part to higher tourist spending in that region, however pointing to the impact of the strong dollar and lower tourist spending here in the united states, as well as global macro challenges, tiffany warns that 2016 sales in earnings growth will be minimal. before taking the stage here at national retail federation's big show, terry lundgren, macy's ceo, joined me for an interview on "squawk box" whatever he acknowledged the challenges he's seen from lower tourist spending in the united states and what he fears could be one more challenge. >> i think there is one more thing. i think the consumer behavior and the way they're shopping is different today than a year ago than two years ago. so, that is, in fact, a fact. i think we're in position probably more than others to take advantage of that because of our investments long-term
that we've done the last several years in online retailing. >> lundgren acknowledged the holiday season was a tough one for macy's, despite the retailer hit its first billion dollar digital month for december. jcpenney announced they will begin selling kitchen and laundry appliances, at least in 22 of its storing beginning february 1st, hoping to capture some of that millennium spending as the group enters the housing market perhaps for the first time. sara, back to you. >> interesting move, courtney reagan, thank you very much. when we come back, why weakness in overseas economies is raising questions about growth here in the u.s. this jus. why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions
and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card stop taking cialis and get medical help right away. so what else is new? humm..she's doing good. she needs more care though. she wants to stay in her house. i don't know even where to start with that. first, let's take a look at your financial plan and see what we can do. ok, so we've got... we'll listen. we'll talk. we'll plan. baird.
i'm sharon epperson, here is your cnbc news update. 11 people were killed when a suicide bomber riding a motorcycle struck a crowd police checkpoint in pakistan. dozens were wounded. the taliban claiming responsibility for the attack. photos have been released of two of the three americans set free by iran as part of a prisoner swap. the jason rezaian was shown with his wife, mother and brother. a fire broke out on the top
floor of the ritz-carlton hotel in paris. police blocking off the area at the height of the morning rush as firefighters on cranes worked for two hours to control the blaze. and music fans around the world mourning the death of glenn frey, one of the founding members of the eagles rock band. he passed away from multiple illnesses in new york. some of his popular hits were "hotel california" and "take is easy." that's our cnbc news update. back to you, simon. the dow up 171 points. we're making gains. it's not just the u.s. market rallying, markets around the world after heavy losses for the first two weeks of the year are risk gone. michelle caruso-cabrera has a round-up of what's going on. hi. >> it seems to be some kind of positive reaction to the chinese gdp, as you guys have talked about, maybe there's hopes for some kind of stimulus.
let's show you with asia, ha shanghai and shenzhen higher, the nikkei was higher by a half percent as well. to the european markets, at this point, you can see strong moves there, paris higher by 2%, this is a day after francois hollande said there was an economic emergency in the country. all those markets moving higher by at least 1% if not closer to 2%. moving on to the middle eastern markets, even though it is said the world is awash in oil for the remainder of 2016, you saw a rebound for qatar, saudi arabia higher by 4%. saudi arabia in particular down 30% in the last year. deep, deep in bear markets. let's see what's going on in the western hemisphere from canada down to argentina. positive moves there as well. higher by 1%.
so, global risk on as we said earlier. back to you. >> michelle, thank you very much. as michelle said, global markets today in the green, but those worries persist about economic growth. our steve liesman has a look at how much overseas weakness can drag down the u.s. we always talk about whether you can import a recession. that's a big question and it comes in part from this international monetary fund forecast where they cut the global growth outlook for 2016 to 3.4%. that comes on the back of a weaker outlook for developing economies, weaker growth in some developing economies due to the decline in oil and other commodity prices. chief imf economist told sara eisen he thinks global markets are overreacting to lower oil prices and missing the silver lining. >> there are still positive effects on consumers and companies that rely on energy for their production processes
and are benefitting from lower production costs. >> here's the global forecast for the advanced economies. the u.s. ticking down 0.2 to 2.6. europe up 0.1. japan and the uk unchanged. the bigger story, the volatility and movement in the emerging markets. overall down 0.2. big slice in russia, seen contracting this year, down 0.4. china unchanged at 6.3. brazil down 2 1/2 points to 3.5%. saudi arabia, you heard michelle talking about, 1.2%. how much can china matter for the u.s.? here is a forecast, it's not critical. what you want to pay attention to -- the orange line is china it's been declining. the u.s. has been stable to up. the forecast is for chinese
growth to fall further but for the u.s. to remain the same. the imf sees the u.s. maintaining growth level, china weakens. you could argue the u.s. would be higher if china were higher, but weaker chinese growth is not belie believed to lead to weaker u.s. growth. >> thanks for mentioning the interview with the chief economist this morning, but you wonder when we will see the boost to consumption in places like the united states because of what's happening with oil, especially coming off that weak december retail sales report. when does it happen? when does the savings rate stop going up? >> well, that's so interesting. at almost every level you look at, we're looking for the silver lining. you don't necessarily see it in consumption in the united states. you don't see it in the stock market. if the oil companies are losing revenue, somebody should be doing better. you don't see it in the growth forecast. even though he said there is a silver lining, it's hard to find that silver lining in his global
growth forecast. >> absolutely. agree with you. steve liesman, thank you very much. questions about u.s. growth, stocks in the green. the dow is up 162. is the market bloodbath over? that's what people are wondering. jeff rosenberg is chief investment strategist at blackrock. how does that rally feel to you? does this feel like sell the rally in such a fragile environment for stocks? >> we can't take or make too much out of one day. certainly the year started off where last year's themes ended. certainly one-day rally, it is helpful. you guys are talking about it. it doesn't begin to address the issues, the much longer run issues that china and commodity prices and energy prices mean for the outlook for the total of the year. >> let's talk about those issues. global growth downgraded by the international monetary fund. there are some serious questions
about what the global economy is doing. how do those questions get resolved? is the market currently pricing all of that in? >> i think what we're dealing with is really the big issue that for 20 5 years we have bee growing the economy, structuring the economy around one big engine of growth. that's chinese economic growth. particularly emerging market economies have been feeding that economic growth that pattern is changing. today's data is validation of what we all have known, which is the economy and the structure in china is transitioning. the bigger issue for 2016 is whether or not financial markets are fully pricing in the consequences of that transition. the collapse in oil prices, more broadly the collapse in commodity prices is a reflection of that transition, but the lag effect of what it means for financial markets is what we're seeing in the first couple of weeks here in stocks and bonds in particular. >> we're also seeing this
constant hope that central banks will swoop in and fix it. the rally overnight is being attribute to the china number being so week that hopefully they'll come in with stimulus. will we ever break this depe dependance on global banks? we may not break that dependence, but we may break. the last seven years has been the belief in central banks and their ability to mitigate tail risks we are also realizing those actions come with their own set of unintended consequences, their own set of costs. so the potential that central banks don't have the tool kit to deal with what is fundamentally at issue here, can you really have monetary policy address some structural issues, the issue is you can't. moreover there's a negative down side to using such monetary policy in that it is prevented
or postponed some of the necessary structural changes that need to occur. financial markets are going to have to deal with that re-pricing of whether or not monetary policy is going to be the fix that it was and has been over the last couple of years. >> jeff, one of the most interesting things about being a guest in this country is the way in which when markets are moving to the downside, oftentimes it's because the real reason or a main stay reason why they're moving to the down side is the u.s. economy. people tend to fixate still and comment on what's happening abroad. and we were two, three weeks ago talking about how the united states was unique in the type of growth it had, that would be where the stock market would gain. the conversation -- the underlying conversation seems to have changed dramatically during that period of time about where this economy is going. and whether the fed made a huge mistake. >> yeah. as you point out, the u.s. economy in the global setting is unique.
it's the most closed economy, meaning it's the least dependent on the rest of the world. when we talk about financial markets, it's a different conversation. we have to talk about what does it mean for the economy, the rest of the world means less for the u.s. economy than the u.s. economy means for the rest of the world. when it comes to financial markets, the financial market linkages are much greater. the u.s. financial market sensitivity to external events. as you highlighted the beginning of the year has been about the external shock. that's a shock to confidence, confidence effects financial prices. and it's through confidence and financial markets that eventually the global linkages matter to the u.s. economy. not so much the direct economic linkages but more through what the fed will talk about as financial market conditions. that's where the vulnerability to the u.s. economy lies to these global issues rather than the direct economic linkages. finally, jeff what is the upshot? you're a fixed income guy. stocks or bonds right now at a time where everybody expected
stocks over bonds when the fed was tightening. is that the right call? >> no, the upshot for 2016 is it's a bit more balanced view of stocks versus bonds. for the last couple years we favored stocks. this year more balanced view. bonds have re-valued. credit has widened out. stock valuations are extended relative to past years. so, given the significant tail risks that we've seen show up in the beginning of the year, more balanced view this year for stocks versus bonds. >> a balanced view. we'll leave it there, jeff. jeff rosenberg. >> thank you. when we come back, crude oil below $30 a barrel, at least if you're looking -- wti and brent. wti 29.09 after rebounding slightly earlier this morning. can't hold on to the gains. down 20% just this year. we'll talk about that when "squawk on the street" comes right back. when a wildfire raged through elkhorn ranch, the sudden loss of pasture became a serious problem for a family business.
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markets rebounding with financials leading all 10 financial sectors higher, helped by healthy earnings. powering the gains, shares of morgan stanley. profits topped expectations and m & t bank which beat fourth quarter estimates. so far the sector is the second worst performing after materials off by 9%. simon? >> thank you very much. energy is the top losing sector there. we have been all over the place with crude today. currently perched for west texas just above $30 a barrel. let's get to jackie for more at the nymex. >> good morning to you. that's right. we could not hold on to the gains we saw this morning coming out of the china gdp number. crude trading over $29 a barrel now i have jeff grossman. how much of this is based on the notion that the saudis and iran will get into a price war. >> that has come into play here. a lot of talk about the iranian oil coming on the market. that's weighing on this market
above and beyond the normal dynamic we're dealing with now. >> then you have the iea saying oversupply will continue, demand will remain flat. that situation, iran aside, still not working. >> absolutely. again, we're talking about a situation where you can't expect this thing to turn around quickly. so it will be a while before we can consider an upward move. >> but you're one of my favorite contrarians what could take us to the upside? >> one geopolitical blip, serious weather. i went hunting this morning and things, like a couple months out, the $40 calls upside which wouldn't take much to go into the money here are very inexpensive right now. there's a lot of reward possibly on that upside. i will push back, because it hasn't been a cold winter, barring of what we've seen yesterday and today, regarding geopolitics, those headlines don't seem to ralt tttle the ma either. we have discounted that turmoil with no interest whatsoever.
i saw no reaction whatsoever, that gives you the idea of the tenor of that market. how worried are you about the dollar? crude is bucking the trend but the dollar is continuing to rise, with more rate hikes that could continue to strengthen and be bearish. >> it weighs on the market again. everything is working against it right now. the one thing good, it's good for consumers now. >> is gas prices, 1.89 the national average. in terms of how low you think the crude price could go, what's your next level. >> about 27.50 is a number the market could touch. 28.40 was a chart point from about 12 1/2 years ago that we touched on this morning, really overnight. and 27.50 is about the next lev level, if we back off. >> what should investors know that the market is not looking at? is there anything that keeps you up about this trade? >> it does. it's been too easy. this market has gone down without retracement.
markets don't trade like that. they have technical rallies and little blips there that will be commonplace, and no one has had to pay the price on those moves. >> thank you very much. david faber, back to you. wanted to distrirect your attention to viacom after owl creek, came out with a very long report criticizing viacom for many different things. many of these criticisms have been out there for some time. the 100-page report goes into great detail calling the company a creatively bankrupt company. talking about its board and saying they're overpaid, and a lackey board. and going on to talk about a bloated cost structure. in a case like this, of course, given it is a controlled company, sumner redstone controls 80% of national music
which controls viacom and cbs, unlikely you get this public broadside. mr. jackson's firm, by the way -- he doesn't disclose how much viacom he owns -- very small. exceedingly so. a vocal opponent, if you will, of marissa mayer at yahoo! and talked about that many times. he appeared earlier on our air. all of the criticisms, of course, that he mentions -- as many people to a certain extent had in the media sector come back to the underperformance of viacom stock. >> over ten years the stock has done nothing. it's been far outpaced by cbs as well as the s&p 500 as well as all the media peers. even though in the last six months there's been a page six sideshow going on with regards to the state of sumner redstone and the chairman, we think that that vsideshow has taken attention of where the real shareholder focus should be,
which is on the performance of the ceo, felipe dowman. we put forward in this report -- >> how he has failed as a leader of the company, mr. jackson finished that. by the way, specific to vie cam, though, at this point, it is not necessarily the presence of a gentleman like mr. jackson with not a great deal of noen had his fund or the ability to conceivably mount any proxy fight here, but it is perhaps that he is acting on behalf of others who feel similarly or at least may have embolden others that have sat on the sideline. we will keep an eye on it, and that may be one key reason why the stock at this point is up. as for viacom, i think what you will hear from them is they say there's nothing new in the report at this point, and, of course, point out the fact that the fund itself is quite small. they also say that they are invested in revooiing the success over the long-term and not a quick pop of attention
that something like this would -- >> maybe conditioning for the future. >> he is in his early to mid 90s. there's been dispute about his health. governance is a key issue. >> second best performer on the s&p. almost 6%. when we come back, bank of america also beat fourth quarter estimates. ceo brian moynihan speaking on the company's conference call to bring you what you had to say after this short break with bank of america shares actually lower by half a percent.
all right. welcome back to "squawk on the street." scott whopner. david einhorn's green light capital saying he has established a position in macy's. he says the average price was $45.69. principally for the idea that the real estate part of macy's could be separated to unlock value. a thought that we have heard before from another activist investor, jeff smith of starboard, who revealed that position and laid out his thesis at our very own delivering alpha conference in new york city last
july. mr. einhorn laying out in his most recent shareholder letter -- here it is -- that macy's could unlock valuation ain excess of $125 per share. management determined a whole company wouldn't provide the required operational flexibility. now he says with a stock closing in at around -- well, there it is at almost $40. at the time of the letter the stock ended the year shy of $35. that the math to do such a thing would make more sense now, and while he says it's unlikely that management will reverse course on its own because they had come out and declined what mr. smith at starboard had requested, david einhorn says it wouldn't surprise him if a private equity firm teamed up with the reet to buy macy's and unlock that value privately. david, it's interesting. i think you -- i think you did the panel delivering alpha where jeff smith laid this case out and revealed his own position in
macy's. am i correct? >> you are. in fact, it was far higher. the average cost, i would assume, that mr. einhorn at this point, it's been nothing short of a disaster, one would expect, in terms of the values that he saw here. as you know, mr. smith, only a couple of weeks ago, i think, had another letter imploring macy's yet again to revisit the idea of trying to do things with its real estate, trying to get the stock price going. at this point, though, he saw the upside perhaps to as much as 70, which is a lot from here, but a far cry from where it even traded on that day in question, scott. >> it's funny, david. we had terry lundgren on ""squawk box"" this morning, and we were speaking with him about the conversations that he has had with activists. he said that he has met directly with jeff smith. i don't know if he knew about this new position from david einhorn or not or plans to have any conversations with him, but it's just an interesting wrinkle to consider. i should also note in this letter, we all know by now and we're reporting on that's hedge fund managers over the last year that times have been tough,
which david einhorn says straight up in the letter here. >> it was about 20.2% last we're. >> yeah. >> that's not a good year. >> here's what he said. we lost money every quarter. we had six positions at each costing us more than 1%. we were short the top two performing stocks in the s&p. that being netflix and amazon. that's how the story was told for last we're. at least for david einhorn. >> scott, thank you very much. macy's has a market cap of $12 billion. squawk alley is up next. ritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. td ameritrade.
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