tv Squawk on the Street CNBC December 16, 2016 9:00am-11:01am EST
the s&p 500 is indicated up 6 right now, 577, and almost 10 on the nasdaq. crude continues to trade above 50. for a long time we've been sort of in a trading range. finally, i think the ten-year, the yield has moderated. it's 257. thanks for being here. your day is just starting, but thank you. >> what about me? >> thanks for being here. your day is over. no, you've got those other jobs. make sure you join us on monday. but this is the best job you have. "squawk on the street" is next. good friday morning. welcome to "squawk on the street," i'm carl quintanilla and jim cramer. futures improving slightly. green arrows in europe.
ten-year yield coming off the 26 level on thursday. we begin the dance to 20k. will today be the day? milan introducing a new epipen. the inside scoop on this week's meeting between donald trump and tech. first up, the dow moving towards 20k. something we've not done since february and march of this year. >> faith rally. a lot of people are just looking at the tripod, looking at t-regulation and repatriation and saying, we can can ignore current -- whatever is the current tempo and, instead, just extrapolate the things to get better next year. of course, there will come a moment where they better get better or else we'll say, why did we get so excited? there's a lot of ripples to the corporate tax. saying, listen, this is not one size fits all. retail could be hurt by it. it's more complicated.
it's been so far. at the same time, i will admit that things are better. >> there's a lot of people discovering that. there was some joisting to the washington post who finally manages to put on page one that investors are warming to president-elect trump. >> we don't want to see warming. we want to wait until inaugurati inauguration. we'll talk about honeywell. janet yell. did not give trump any credit. on "squawk" saying real growth is going to be remarkable. what you end up having is a split between people who have faith and people who don't. it's not a people who are raising numbers and people who aren't. it's it's an animal spirit regulation. then there was a selloff going into inauguration so we have to be aware of that. >> is that going to be centered around dollar strength which
leads the journal today or -- >> yes. i mean, yes, if you go in and look at the dollar strength situation on adobe's call, this is a fabulous call. it wasn't light. it wasn't light at all. they had to make do with the fact they had dollar headwinds. you don't mention in the brief, it's the dollar there is more emerging markets because they hedged the ncn and europe. yeah, everyone has to deal with the stronger dollar and has to trim numbers. you have to trim numbers first before you can raise numbers off the tripod of deregulation, corporate tax and repatriation. >> 14-year high for those who haven't been paying attention. that's not stopping bernstein from taking ge's, talks about the portfolio reshuffling is for real and does say, listen, the oil and gas used the oil and gas.
they give him credit for, what do you want to call it, a rerating that is deserving. i think the cash flow analysis was good. i k if they can do the $2. >> overall i hear you saying you're comfortable where we are. you're not looking for a big spill. >> i'm not. what happens, if we get finally top line growth in the economy, then the company's that have been starved for top line growth will go to the four. cummins needs top line growth. they have china exposure. we've been saying for years, literally for years, all throughout cnbc saying there's no top-line growth, all buyback. it would have been from f.a.n.g., similar travelers or self-help. this is the first time i'm hearing, listen, top line could be good because of gdp expansion. if we've been waiting for top line and we're going to get it, i can't turn negative. >> that's going to be -- the question is, when evidence of that happens. for example --
>> you don't know. >> -- goldman call on oil. evidence of the cut, they say, will start to show in mid to late january. >> it better because that rate count shows is back to where it was in january. it did a u-turn working its way back. the futures market is indicating oil is not real. the futures market is saying 55 bucks at two years, 57 out five, so don't get too caught up. meantime yesterday the other f.a.n.d., diamondback energy did a remarkable deal at 97. the stock went up 3. gtor is an aggressive company that bought acreage in oklahoma trying to refinance. watch that deal to see if it holds up. >> you mentioned growth and industrials, right? environment where top line can can grow. then honeywell comes along with this guidance. this is david cody talking to jim back in october. take a listen. >> i get a lot of comments from analysts that they don't want me
focusing on pe or saying we're a good deal. keep saying, but that's an important part of the story. we're still a good buy. if you take a look at our long-term earnings, what we've done since 2007 versus our peers and you take a look at our profile going fwashgtsd our peg ratio looks pretty good. >> the current quarter guide is below the midpoint. >> here's the problem. honeywell is the ideal trump stock. they can repatriate, everything is going great. you take this stock up like a bee line. it was down ten points. this is just ridiculous. when i look at this and i notice, guys read the release and listen to what i -- to what cote said. he put out a release, did an analyst meeting and then a reanalyst meeting on "mad money." the organic sales were minus three. here he's guiding for plus one, plus three. cote is giving a handoff.
it's a reset for the new ceo. the cash flow is a tad light, reported sales down one. there's a big reorganization going. those down ten, i mean, i want to be diplomatic and call them moro morons. people selling down three, i get it because the stock had a big run. i thought it should have gone down united technologies. yes, it should go down because it's up on a trump rally but down big because remember what cote did last time. he appears on "mad money" next week and does a redo, you feel like a real sucker. >> you're not -- the less than stellar guidance from oracle and adobe -- >> no, we have to go over that. adobe will be -- adobe will be up two, three bucks within the next couple days. orion delivered on every one. the marketing cloud said it wasn't strong. that's an example of the press not doing any homework because the oracle call was not a great
call. the oracle guys will frame it as a great call. they did have some good new clients but the adobe call f they bothered to read it rather than just issue these ridiculous comments, you'll see that that company's on fire. it is doing -- it is accelerating revenue growth and the cash flow, 500 basis point margin improvement. that was -- other than nvidia. i mean, they've got machine, the artificial intelligence, the automobile. look at gm, it's loaded with nvidia and then gaming. advanced market is second-tier -- advanced microshows, not -- it's not a question of coming in second. it's not placing but advanced microis a company not nearly as good but pus jeffries. nvidia is the umbrella to take the whole group up. nvidia may be the story of our era because they got the chips for machine learning and artificial intelligence and cars. >> yes. i know some guys for whom that
was their biggest position this year and they're buying drinks all holiday season. >> they got horse sense. come by me the o'donnell which is 12 bucks and probably cost me a dollar. sorry. cost me 11 bucks. >> jim mentioned the flash at b your screen, chipotle, getting the dealing with pershing square. four new names added to the board. i'm looking through the release right now. paul capucio, ali namvar this week. >> it's packed with pershing. it's not the directors. can you do whatever you want. a very good cfo there. american memory is 18 months. proven from taco bell, from the horrendous jack in the box. the american people forget, but they -- you have to give them 18 months to forget. it's not 12 months. december '07 norovirus in boston, it's still with us. in another six months people
will say, what was the problem? but they're not there yet. and the american people cannot forget. they have a memory, but the memory is 18 months. >> when i'm looking at these titles, one is general counsel at time warner. other is senior vice president at liberty global. someone a partner at pershing. you don't think any of -- >> do any of those guys know what a burrito is? guys, they're making burritos. >> it's a matter of the public -- >> what we need is a good tool and dye man. how about someone from illinois tool? i mean, come on. the issue is the memory. the memory. because you go to -- i go to one of my three chipotles. not a lot of people there. those are people who say, i don't want to get sick. you're not going to get sick. they have stringent safety rules. you can shuffle the ceos but the problem is people remember. you can is all the board members in the world. you could have ray crock. now, ee not alive so that's facetious. hicklelooper.
that's going to make a difference. now i'm going to have the double bur rou burrito. >> you've been on the 18-month thing, which means this summer -- >> come august i won't be able to get in. it will be like the old days. people will say, was it chipotle or qudoba or benny's burrito. >> that's a dynamic they would love to see. >> it will happen. they can do all these different changes. i wish they hadn't been so aggressive buying back stock. that was a mistake. they tried to call the bottom and they were too soon. had they listened to me, not that anyone would have to do that, including my wife or my two dogs, but they would have waited and they should have waited. my dogs are far more obedient. because you smack them and they come to the table. >> they know like 100 words. >> it's incredible. bed, oh, no. get off my bed. never -- humanization to pets. i had on labs last night.
do you know millenials, 80% of millennial's sleep with their pets. >> guilty right here, i'm afraid. >> me too. >> i'm not even a millennial. >> do you know what liquid gold is? >> a urine test. we call it liquid gold. geez, our mikes are open. a urine test, three seconds they could figure out if your dog has something unusual. >> while we're talking about, will has something. >> good morning. chipotle made me hung but i'm going to be talking about wells fargo. we got the sales update for november. now they're giving monthly update following the scandal. the broad takeaway, this is pretty much what was in line with tim sloan suggested there would be a slight improvement from october. to bring up some numbers, consumer checking account opens down 9% month on month, down 41% year-on-year. that is slightly better than the sales update we got for october. and it relates to the pace of opening of new accounts. so, it's just the pace of
opening that's slowing. 9% month-o month, 41 year-on-year compares to 47% the previous month. slight improvement. if we look at actual closures, that number down slightly year-on-year -- excuse me, up slightly year-on-year but not any much worse than october. similarly for survey resultsle and total branch interactions. overall share price down 3.4% week to date. slightly higher this morning. the move week to date we're focusing on that move in the middle of the week on the living will issue, which they failed and talking to some investors and people at the bank n general, pretty relaxed about that. not too concerned it's a major issue and they should have it tidied up by march. guys? >> it's funny you're following the chipotle conversation because people need to forget about this? >> no. you take the cross-selling and use a word document, scrape that out and put in e. coli. in is an e. coli moment for
wells. three rate hikes make up even for e. coli. we'll forget that one day, too. it's kind of like in your mind right now that maybe you -- you opened a credit card account and you didn't. give it some time. that's what i call a suboptimal situation. >> we have a couple of those. when we come back, who said what in the room where the president-elect held that meeting with tech leaders. kara swisher will provide an inside look. take a look at the premarket. dow shooting for six weeks up. as we said, haven't done that since february and march of this year. we're back in a minute. is is my. this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities- trade confirmed- and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do.
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still a lot of buzz surrounding the president-elect's meeting with the bibiggest tech leaders. kara swisher writes what was discussed, including apple's tim cook. microso microsoft, and amazon talking about doing business in china. one person quoted, we definitely gave up a little stature now for possible benefit later, said one source, noting that it was the price of being nice. it was better to be quiet now and speak up later to save our
powder. we'll talk with kara. bezos called it appropriate but some said it was inappropriate where trump's children took up three seats where you could have put another executive. >> we have to understand this is a different kind of administration where family is very important, in part, because the kids are grown, in part because the kids are very good business -- he's done some things with kids and they're not kids. they're people he trusts. this is not like beth truman singing and a -- this is a different era. people better get used to family members playing a role. personally, i think that trump -- i was afraid it might be one of those meetings like where -- >> it's a lashing. >> yeah. where he starts out, who voted for me? no hands get up. well, get out of here. i'm done. in china, we're done. no. it was kind of the opposite. it was like, all right, well, let's work together. no one really asked -- there were no asks beyond just like i want you to consider this.
so, it seemed like there was respect on both sides, which to some degree is given the fact this is largely a group that did not support him was kind of, let's just say, open-minded, open-heart. something mark could be the case here. >> you have said, you have start thinking about what you're paying for, say, a defense contractor these days. you feel the same way here where there's sort of, perhaps, an un -- a hidden liability long-term? >> i think these people could all be sacrificed in the order of china. i think china is a very real concern. i had western digital on last night. the first thing the ceo said, and he is so, so good was, look, asia is a concern. china is a concern. he's not glossing over it. i think the stock could go north of 100 it's so inexpensive. it's not a hit and risk. it's an actual risk. i think people should recognize the communist party is 100% --
that's a dictatorship. if they decide -- if they wake up tomorrow and they say, we don't want anyone to buy an apple phone, you won't say, forget the government. no, they'll send a tank to your house. they'll make it a white-collar crime. i'm not picking on apple. i could have picked on kfc. i just want people to recognize, china has been in a war against us and we haven't realized that. we have been at war with them but we didn't know. now we know. i have to tell you, it's for real. may i say in terms of the boardroom, having been a judge at "the apprentice," people have to understand, sometimes family are execs. in real estate i have met the sons and daughters of people in real estate. they're not like, hey, man, this is like monopoly for me. no they're being groomed. they're really -- these are not children. they are people -- well, i was not that "the aplenty tis," it was tv, but people should
understand that the idea he relies on family, i don't know about you guys, i rely on family. >> right. >> the wife tells me what to do half the time. i don't say, hey, you're my wife, get the hell out of here. she's a factor. >> points well taken. we'll get the mad dash and opening bell. one more look at the premarket on this friday as we continue to watch out for dow 20k in a moment. [engine revving] ♪ ♪ is it a force of nature? or a sales event? the season of audi sales event is here. audi will cover your first month's lease payment on select models during the season of audi sales event.
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>> six minutes to the bell. let's get cramer's mad dash. a lot of research out today. some on nordstrom. >> there's a piece by matthew boss. he's the king of retail, as far as i'm concerned. he does the most work. he drills down. talk about border tax adjustment in corporate taxes, retailers could be losing sites a&f, abercrombie is losing. there's a hold to sell he does for nordstrom which is, by the way, the finest experience when i go. they know my shirt size. they know i like cuff links. he takes it to a sell because business is so bad. blake nordstrom says in the malls the worst since 1972. '72, for heaven's sake. the winddown of the vietnam war. nixon presidency, very bad inflati inflation. wow. sh a very damning piece about the mall. howard schultz said two years ago the mall would be dead.
we saw some doing better, we started questioning it. this is a death of the mall story. it's a secular decline story. after i read this, i said the boss is the boss. sinatra and springsteen but, secondly, amazon, you've got to buy amazon off this call. >> you look at a chart of store retailers versus nonstore, it's ridiculous. he does say there's no magic bullet. >> is that devastating. >> and i saw mall traffic in december is pacing for the worst -- >> the worst. i was going to go to the mall this weekend. i'm rethinking my plans. >> we'll watch traffic. that's getten even more key. we'll get the opening bell in about 4 1/2 minutes. a lot more with jim. don't go away. i've invested a lot in this game
bulls. a lot of viewers write in this reminds me of nasdaq 5,000. you cross it intraday and then spend years trying to get back to it. >> we go back to nasdaq, those companies were making so little money. you had cisco at 80 terms earnings. the multiples are not outrageous. i did a road map for "mad money" how disney could go back to 110, ge on this $2 number. ibm, that was at 210. nasdaq, when we go back, those companies were, without a doubt, intel, microsoft, you had to believe in a complete different atmosphere we were going to have a total revolution in the economy. it doesn't take that at all to get to where we are. >> even robert schiller in the post today on his ten-year schiller earnings ratio, which
now is 27.9, which is relatively high. it's hard to calculate the trump effect even at these levels. >> if you go 4% gdp, a tech guy, who's very smart, thinks we can do 4% growth. now, that is a game-changer for any ge related company. so, you'll say, why did i sell honeywell down four? now, there are -- let's talk about adobe as an example. stocks down $1.50 immediately. they just go lay out the whole story. if adobe goes to 115, apple could go to 120 on a trump. just on them getting through these days because earnings per share is going to be elevated just by nature of what the plan is. you can look and say, you can sweat dow 20,000. i sweated dow 2,000. i remember when it cost 2,000. i'm like, are you kidding me? then went to dow 2700.
then did visit dow 1500 five months later. dow 2,000 was so -- people just said, that is just ridiculous. it was 1100 just a few years ago. i think that's a better analogy. >> there is the opening bell. at the big board, it's the u.s. air force celebrating its 70th an ver anniversary. big round of applause for the military officials coming in. we'll talk to the ceo later. good points overall about the psychology behind this number. >> you had to have lived through nasdaq 5,000 and recognized the companies that were valued at very big levels, you talk about info space, talking about wanting to be a trillion dollar company and ended up not being -- let's say, a question. there were many companies that were questionable. and i just look back at that period and i say that that was just one of those moments where
everything -- where the animal spirits and individual investor didn't know how to handle the ipos. we're talking about companies that are o-line companies that could be getting an earnings boost. you look at the airlines. they've been playing leap frog. it's at 14 times earning. delta and amr, american, they were at six times earnings, now eight times earning. that expensive? western digital at 11 times -- these are not expensive. you have to go -- you absolutely have to go case by case. some companies that seem absolutely expensive but they end up being companies like coca-cola at 21 times earnings without a lot of growth. i look at the airlines and say, all right, if they're up, if they have decent numbers, then the stocks are a buy. so, let's just get a little serious. these are companies that make real money. nvidia makes -- it's 39 times earnings -- >> it's in the top 15. gainers today. in fact, a lot of this morning's
gainers, micron up 47%, unh, up 20% for the year. is chase going to start on the 16th, is that too soon? >> i don't know. >> for year end? >> they had two guide ups, micron will make an acquisition. i think they made a great flash acquisition, western digital. in every one of those cases because i'm a case by case guy, i can find a reason for them going up. the main reason is there's top line growth. and then the secondary is bottom line growth would go back because of the changes that trump wants to do. do i think it's too far, too fast? i think the rally 8%, 9% rally after election is too much. i think there will a selloff. >> fastest post-election rally on record. >> jim stuart had a common sense piece this morning in the "new york times" talking about how the first five days of the year -- i remember when i went on the "today" show and matt, who's so great was saying, historically, it's a precursor? i said, no, because these inc.
thises are -- it's tough on the bottom. an 8% rally, frankly, is too much. if i look at disney at 105 and bob bowman steps down from m.o.b. and i know bam is their tech division, could be bought by disney, xined with espn and suddenly you have a growth story, and bob -- happy birthday. >> i saw "rogue one" this weekend. it was amazing. the last ten minutes are about as saufing as a star wars film. >> i'll say disney take the stock to 110 price target. we can do that kind of thing. >> a lot of talk about how well he managed expectations in september. he said it would be an experiment in sorts. now we're saying, can it do 300 million this weekend. >> he did keep expectations low for that. i think theme park will be better than expected. a lot of the technology there. have you to watch the billion dollar investment in this mlb,
because they have the best technology. bowman was my classmate. he's a smart fellow. he just stepped down from the day to day two days ago. i thought we should put the two together and begin speculation. will disney become an artificial intelligence powerhouse, therefore, deserving a higher multiple, yes, yes. >> certainly no media company is better leveraged to take that property and convert it into sales of consumer products. that's going to be a big story. >> and you have this tent pole $800 million group of movies of which this is going to be outsized. i think if you listen to aigor on the conference call -- and happy birthday to david. >> you're kidding. >> the journal points out, you mentioned 8% post-election rally. five other times we've had a 5% gain coming out of election day five weeks in. of those five, four had gains of
another ten in six months. >> look. you've got the honeywell versus adobe. honeywell -- okay. here's a good example. honeywell was down ten. now it's down a buck. the guy who sold it down ten, i want to see him after class and he's going to be in detention the rest of his life. this is the kind of stupid thing that happens. honeywell at minus 1% organic growth. they raise the organic growth. these clowns sell it down ten. if we get through and the trump agenda happens, honeywell is the principal beneficiary. do i pay 116 or 10? when you look at a home depot, if we -- with deregulation, therefore, more building, do i really want to pay 136 or take out the 140 high and pay 150? i see things i want to pay more for and i see some things like a jcpenney off the matthew boss note pay more for because if there's a border tax, that's back. i can spin stories that take apple to 125 without a problem.
maybe you do an iphone 8 super cycle. i hate that term. in each case i can come up with an alphabet should be valued more highly. facebook 28 times next year? maybe that's wrong. people, be careful. key bank was downgraded five times. and the stock has gone up every single downgrade. >> indeed. speaking of changes in rating, we got the ge upgrade at bernstein. cowen takes sotheby's to outperform. you think analysts are playing -- >> clorax spent a lot of time in the penalty box and doing things right. when you look at clorax price target increase and you say to yourself, yeah, okay. let's look at oracle. the cloud part is -- stock is only up $1.30. it should have been down. maybe 2 bucks.
then it's an inexpensive stock. not like ibm. they're hiring 20,000 people. air force. >> air force, members of the united states air force coming to the floor of the exchange, celebrating its 70th anniversary and ringing the opening bell. >> fabulous. >> absolutely. macro and permits were a miss after all things we heard about the economy heating up, should we start expecting numbers that are more mean reversion than -- >> i was concerned about the million but each home builder, we'll hear from lanar, but there is a shortage of land, problems with zoning. one of the reasons i like kb homes so much, which is up very big, they have a lot of land to build on. you need 1 million -- when we had 170 million people in this country, i believe we had 1 million housing starts. that's still a depressed number. a lot of that may have to be with millenials still living in
their homes because of the inability. look at the labor figures that came out yesterday. the wage decline we had. i think a lot of people are still living at home. a lot of people can't get downpayment because it's still very tough to get the downpayment. fico score is 730 for the average new buyer. it's very hard. there are constraining reasons. kb is -- book value there -- >> that home builder sentiment yesterday, best sent nment a decade plus. >> we need deregulation. we need banks to make that loan and not feel like they're going to get hurt by the regulators saying why did you make that loan to a 680 fico. i don't want downpayments to where they were in 2006. i'm just saying i it's still hard to get a loan. harder than people realize. >> this facebook story. >> fake news? >> rolling out some rules to help users address or at least recognize what some say could be fake news. the company saying, we don't
want to be arbitrators of what is truth. >> i think facebook is doing a lot of things right. i thought that was a nice preventive. when you look at facebook, they have to figure out how to monetize video. i'm saying that because zuckerberg stressed it in two conference calls. having done facebook live, it's amazing how little money was attached to it they have to figure out how to monetize facebook live. >> did you like your fed day experiment? >> we had a lot of viewers. yes. facebook was kind enough to send us a note saying this is what -- >> what they want. >> yeah. i had had two cups of coffee relatively -- i had skim and only two hours before that extravaganza so there was a bit of a -- it was kind of a dragway kind of thing. >> dow is up 40 points.
19892. we'll keep an eye on that number. bob pisani is on the floor. >> over 400 million shares changing hands. mixed open. take a look. we have kind of an inversion. real estate does well here. telecom does well. energy stocks hold up and banks don't do anything. banks are on the downside. they were one of the big market leaders overall. i think the main theme in the last 24 hours is industrials trying to manage expectations for 2016 and basically telling people, keep a lid on your expectations here. a lot of comments about honeywell but i think the important thing is don't get too excited. they're talking 6.98, consensus at 7.08. by the way, the stock is not expensive. it's only 18 times 2017 earnings. that's not an outrageous price.
still they're trying to keep a lid on expectations. the same with united technology. the consensus is already way at the top. organic revenue growth, 2% to 4%. not bad at all. still keep a lid on expectations. they talk about weakness in pratt and whitney aircraft. caterpillar said the same thing, earnings expectations were too optimistic. they talk about the low oil prices. they still north american construction would be weak despite speculation about the infrastructure. all that's 2018. you have a company where earnings for caterpillar has not been growing for years. analysts are not even taking up the 2017 numbers yet and they're still saying the expectations are too high. you see what i mean? three companies trying to say, guys, don't get too excited. we're still expecting very modest growth overall. here you see the industrials heed.
honeywell is now a little bit here. you remember how it was trading in the preopen. that's notably different. for the week, the industrials have been under some kind of modest pressure. i wouldn't say a lot here. your big names, your flours, cummins, general electrics, boeings are down for the week. some are trying to say, let's figure out where we're be in 2017. finally we have our last ipo of the year. travago, looking to open. look at the haircut. we were at $28.5 million at 13 to 15, so that is quite a haircut. this is very typical of what happened the entire year in 2016. so, here's the bottom line. very, very weak numbers here. ipos in 2016, look at this, 105. boy, is that a terrible number. we're down like 35% from 2015
when there was 170. here's the good news, though. people made money overall here. we had a nice average return of about 26.5%. that's pretty good. so the stuff that came, investors made money. here's your bottom line on 2016 ipos. the pipeline was anemic. ishers took a haircut. we want to know did investors in ipos makemy money? by and large, they did. let's hope there's more. we'll have more comment next week about the ipo in 2017. those that went public this year did fairly well. dow just shy of 20,000. back to you. >> thanks, bobpisani. let's get to rick santelli. >> i'll tell you what, carl, this has been an unbelievable week if you're someone that likes to watch markets, trade markets, study markets. the five-year win is up 18, 18
basis points on the week. five-year bonds just closed at 3.15 and change. they moved up to 3.17. up two on the week. unreal. let's go to the tens to twos scenario. twos up a dozen basis points. tens up 11 basis points on the week. if you look at what's going on in europe, a different story, we talked about this, there's going to be policy issues regarding the direction of the fed even if you think they're going slow. they're still moving in a tightening direction since december 1st look at tens minus twos and our curve. it's the steep it's been in a year. even though the knee-jerk reaction is flattening. our fed is maybe going too slow in the market size. maybe there's inflation issues on the long end but whatever it
is, i would support if the fed gets more effective, the boone down five basis points from 36 to 31. if you look at a two-year in europe, it's closing a whisker shy of minus 80 basis points. a new all-time forever minus yield in that maturity. the threes are no different. if we look at ten minus bunds, this sums is up. 228 basis points. have you to get 1998, for our practical purposes, that these are historic. december 2002 last time dollar index closed with 103 handles. i continue to point to the notion if you look at long-term dollar charts or long-term euro versus dollar charts, these trades may have room to roam so you want to be careful on how it feeds through to the
♪ mcdonald's is partnering with uber to test out delivery. the test program will be done through uber eats in three cities in florida. customers will be able to order online through the mcdonald's app, your favorite big mac will be delivered by uber eats couriers, program to begin in late january. jim. >> yeah, i know something -- a lot of people -- it's a company that sends things very quickly. i also know there's a whole bunch of others, one that's
owned by groupon. here's what's -- that was owned. here's what's important though, in the nordstrom note uber rushed delivery for nordstrom. the question is does it travel. that's always been the question, does it travel? and i think that's something you really got to think about, coffee travels. but i don't know whether big mac, fries, diet coke travels that well. that's something everyone has to worry about in that delivery mode. having spent a lot of time thinking about this. >> sure. >> if it doesn't arrive crisp, it's not a positive. but steve easterbrook is very, very technologically savvy. i'm sure they've had it. he's a big mac guy. so let's watch. but i don't think this is the magic bullet. the magic bullet is he's making the food bet sgler and minimum wage, i would assume, right? stock's up $10 since election day. >> yeah, and we got a new president coming. i don't think that that's -- let's put it this way, i think it's more capital friendly. don't forget who's going to be the labor secretary, a guy who
owns -- >> kind of knows that business. >> going to own a chain of restaurants. so i do think this is something, you own mcdonald's for same store sales and i think they're going to be pretty good. stock has stalled here, big dollar play and the dollar is on fire. huge business in europe. >> yep, absolutely. france and germany. >> tech's bad today by the way. >> we will get stop trading with jim in a moment. dow's up 33. ways wins.
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then why settle for slow internet? comcast business. built for speed. built for business. breaking news on viacom, sumner redstone according to proxy to step down from the board after annual meeting in february, jim. >> well, i think it's time for new blood there, so to speak. viacom david's area, but management there trying to solidify what the company's really going to do. neither here nor there. i think it's about time. >> yeah. >> about time. >> what are you going to watch? give us stop trading. let's do that. >> well, you know, i have to talk about nike because deutsche bank, piper and canaccord all said this could be a weak quarter. and why that's significant is they're about to report. and so for all these guys to say it's a weak quarter, i have to believe when we report on the 20th we're going to be, you
know, kind of let down. that's important. a lot of the apparel companies yesterday all down very badly. by the way, the rollover in tech today is incredible. i mean, the rotations are amazing. adobe up two, now down. i just warn people the rotations are so vicious, find a stock you like and use the rotation to buy it. don't like, oh, wow, it's my day and then buy it at the top and then sell it because it's been the exact opposite. so just be aware that things are really nuts out there in terms of the rotations. they're way too fast for me. >> yep. going to be a crazy couple of weeks. what's on mad tonight? >> i have my game plan. i think it's going to be important because i don't think people realize next week there's a slew of really important earnings. far more than i thought. when you look at it should be an unimportant week it's going to be the exact opposite. it's going to be exactly what we're talking about which is the gap, the gap between the promised land of the tripod of reorganization -- the deregulation, corporate tax and repatriation, you're stuck with earnings. by the way, one of the just in terms of what can happen, it can happen to you, honeywell up now.
so the rotation happened between 8:25 and 9:58. >> yes. jim, we'll see you tonight. good stuff. "mad money" 6:00 p.m. when we come back pulitzer prize winning columnist jim stewart, his unique perspective on this trump rally, which continues today. dow's up 33. ♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be.
♪ good friday morning. welcome back to "squawk on the street." i'm carl quintanilla with sara eisen at post nine of the new york stock exchange. david faber's off today. some whipsaw action in the first 30 minutes of trading. dow's up 54 points. obviously the hunt for 20k continues. s&p up about three points. 100 points away, our road map begins with the trump rally rolling on this morning. dow 20,000 is in sight. what's in store for the rest of the year and into 2017? we'll read the trump tea leaves. plus, drug pricing in focus as mylan launches a $300 generic epipen. will that be enough to calm consumers after this year's big controversy? and president obama is warning that the u.s. will take
action against russia over its alleged hacking of the election. we've got the latest on that story for you. obviously the trump rally continuing. the dow on pace for its sixth straight week of gains. right now at 19,901. for more on this let's bring in chief global strategist at charles scwabb -- jeff, we're in this period where trying to believe in the rally and square that with the promises expected. it's not quite delivery yet. what's your take right now? >> there's a lot of hope we'll see a more business friendly environment in 2017, but the reality is this market has tracked economic data this year. the data has been surprising economist expectations now. and we've seen stocks track that. so i think there's a little bit of reality to this rally. it's not just on the hope for a different environment ushered in by the trump administration. if you take a look quickly at
the global economic surprise index, the citi group economic surprise index, that and the stock market have been moving in lockstep lately. don't expect prices to continue at this pace, but the bull market remains intact firmly grounded in those fundamentals. >> so that means you think it's justified. does that mean we see it carry over into 2017? >> i think we'll see but probably not at the current pace. they may take a breather. pullbacks are likely, but expect these trends to continue in 2017. >> rich, when you look at the five weeks we've had since the election, it's best post election rally on record, right? >> in historic times of over 6.5% since november 8th. >> but the records, i mean, that we have suggest they could be followed by additional gains, if you look at what's happened when post election rallies were this strong. >> i don't think we're going to see the grinch come out next week because i think, you know, lack of selling investors will be anticipating lower tax rates
in 2017. so there's no sense to be selling going guard. i think you look at corporate earnings right now expectations for 2017 are $131 per share for the s&p 500, that's not factoring any tax cuts going down from the statutory rate of 35% to maybe 15%. so, you know, at 131 only about 17.5 times next year's multiple. so reasonable. you know, not super expensive. >> i wonder how much investors have priced in lower corporate tax rates into earnings next year. i was looking at some of the consumer names like e.l.f., the makeup company, domestic focused consumer names paying effective tax rates of 30% to 40%. that should offer some big relief. >> absolutely. but i think the fact there's so many variables to come into play. the fact you have the fed, you know, raising rates this week. the fact is i think you can probably see not another fed rate hike until maybe june meeting because the fed is going to have to wait to see what the stimulus package and tax package
comes out of washington. what will be the first act? repeal and delay of obamacare? will it be the tax cut? infrastructure bill? remains to be seen. >> jeff, you agree? you think the fed's got to take the first part of the year off to just wait see what happens in washington? >> you know, they may. it's not just washington. remember, we've got those french elections in april and may. that's a big geopolitical event worried to see marie le pen take action there. >> what about we keep hearing about border adjustment strategy and the difference between taxing imports and exports. you've got the retailers now, the nrf saying, hey, guys, this might crush some of our members who are reliant on imports here. at what point do some of these policies start to turn into liabilities for various sector sns. >> well, if we start to see them actually move down the path towards becoming reality at this moment, they remain more around campaign rhetoric and maybe a few tweets. it's not as if you go to trump's
website what's actually written on the website about trade policy, it's not actually what you're hearing from any of the appointments he's recently made and certainly not from, hey, maybe larry kudlow who might be chair of the cea, certainly a free trader there. i'm not seeing the market pricing in that fearful reality of what those implications could be across multinational businesses. >> jeff, another call you have here underweight europe, is that still what you're telling investors to do next year? >> yeah, looks like another year of europe maybe lagging the u.s. one thing you've got the dollar rallying, that may continue to act as a drag. >> that helps, doesn't it? european profits will go up with the weaker euro, europe's a lot more inexpensive when you look at a multiple basis. and if the u.s. kbhi does better, that should help europe too. >> yeah, on the margins certainly, but relative economic growth is favoring the u.s. the imf expects the u.s. to go from 1.6 to 2.2% economic growth next year. europe's going to remain about 1.5, 1.6. economic surprises rolling over in the eurozone versus picking
up the u.s. and the currency effect still acts as a drag when you're investing overseas. i think the combination of those factors, plus politics, we're about past our big election here, germany and france's are next year. they'll be watched very closely. i think you may see selling the rumor before markets buy the news of those elections. so given those headwinds we think the u.s. marginally outperforms next year. >> you agree the u.s. is the place to be? >> i think with the dollar, the u.s. dollar index at a 14-year high, we thought with honeywell results today the fact they're maybe concerned about that being a drag whereby -- >> fed ex, nike and general mills. >> precisely. all these exporters going to be very affected whereby the gains we anticipate maybe tax reduction maybe mitigated or offset by the strength of the dollar. >> certainly the lead of "the journal" today. dollar creating global turmoil all over the place. good weekend to you both. >> even if we have king dollar. >> exactly. as larry would say.
>> so far those stocks taking it in stride. president obama meantime is speaking out on russia's alleged hacking during the presidential election. in an interview with npr, the president promised to take action. our john harwood joins us with more. good morning, john. >> good morning, sara. this is a fascinating issue because it involves russian interference in the election this fall that had the effect of helping donald trump's campaign and hurting hillary clinton. now, the president-elect has not publicly accepted the conclusion of american intelligence officials that russia was behind this hack. but it's not going away. you have a bipartisan congressional hearing planned. and you saw from donald trump's tweeting this morning that it bothered him. he sent out this tweet saying, are we talking about the same cyber attack where hillary clinton was giving the -- was given by the dnc the questions before a debate? it was just one question, it wasn't that consequential to the
debate itself, but that's bothering donald trump. president obama's taking a lot more seriously. here's what he told npr about how the united states would respond. >> i think there is no doubt that when any foreign government tries to impact the integrity of our elections, that we need to take action. and we will, at a time and place of our own choosing. some of it may be explicit and publici publicized. some of it may not be. but mr. putin is well aware of my feelings about this because i spoke to him directly about it. >> now, you can expect president obama to discuss this at greater length at a news conference here this afternoon before he leaves on a couple of weeks vacation to hawaii. and we'll be watching after that to see what response we get from his successor, donald trump, guys. >> john, a lot of the president's detractors this morning listening to that tough talk and saying where was it
during russia, where was it during china, where was it during red lines in syria for the past eight years? would you expect his tone to change significantly this afternoon? >> no, not at all. i would expect that he would offer a serial defense of that criticism to each of the circumstances that you just mentioned. but this is one the response in russia that is something that he feels strongly about. he indicated he didn't speak out more pointedly on this or reports have indicated because he didn't want to appear to be injecting himself into the election. that consideration is gone now. so i think he's going to take a tough line on this today. >> we'll see what he says, john, thank you. john harwood in washington. when we come back, we're keeping a close eye on the dow closing in on that 20,000 mark for the first time ever. it's up 41 points right now. it has been soaring since the election. we'll read the trump tea leaves with pulitzer prize winning "new
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you know the old saying on wall street, as goes january so goes the market year. well, the dow fell more than 5% this past january. but now the dow has soared more than 14% for the year including that 9% rally since election day. so should investors remain bullish on the so-called trump rally? our next guest says that investors looking for predicted pattern here the trump tea leaves remain murky. joining us here at post nine as always on a friday, pulitzer prize winning "new york times" columnist jim stewart. good to see you. >> good to see you. >> wow, we've put this trump rally in perspective just thinking about we were talking about dow 10,000 march 1999. >> right. >> how do you sense the exuberance level now versus then? >> i think it's in the kind of moderate territory. you know, can i just say one thing here? we should just put a stake in the heart of all these little catchy sayings and patterns because they're fun and interesting, but they do not work. none of them work.
period. >> what? as goes january so goes -- >> yeah, the january thing. the other day somebody was telling me the market was really hot but couldn't sell because the market goes up like 74% of the time in december or something like that. i said, right, and hillary had a 93% chance of winning the election. >> so everything's wrong. >> we do not know. nobody knows. but let's pause for a moment here because we do know this. this is the second august rally in 85 years. the market is getting stretched on valuations. do i know where it's going tomorrow? no. does anyone? no. but it wouldn't be a bad time to say rebalance. if you're going to need this money and you really can't afford to go through a correction, then maybe take a little off the table. to me there's no reason to recognize the fact that it is quite high. >> if someone has been in love with bonds for 30 years, might be time to focus more on equities than they have been, right? >> well, yes. i mean, i was just thinking now and the thing about bonds is
they've corrected. so you know you're not buying at the bottom. so maybe it is time to rebalance. and going back to trump for a minute, i mean, i get all these calls from people and being in new york especially from people who didn't vote for trump that say i'm getting out of the market. he's going to destroy the economy. and then some people are saying i love trump and pouring money in. everybody's advice there is ignore trump. i mean, what do you know about what trump is going to do that no one else does in the market? >> no edge. >> really? do any of us have an edge other than maybe members of the immediate family? i don't think so. >> but you have heard steve mnuchin on "squawk box" a few weeks ago talk about how one of the top priorities is cutting the corporate tax rate which would have a direct impact on earnings and the market. >> we know some things and we can make some predictions and that's not reflected in the market fully. and i think there is -- it's not irrational that the market has gone up since trump. there's the corporate taxing could be very big. tax reform could be big.
infrastructure spending could provide stimulus. there are solid reasons. but that is now baked in. >> you and "the washington post" point out in the summer he said the market was a big fat ugly bubble. he hasn't really weighed in on valuations since. we do -- he has said he sold his positions in june. >> yeah, no, he sold for conflict reasons. i thought that was very amusing that, you know, he weighed in on this. by the way, i will say this for obama because i vividly remember this, february of 2009 he said the market was really undervalued and it was way too low. i mean, he almost called the bottom to the day. so i give him some credit as chief stock picker in chief. but trump -- >> i don't know, presidents shouldn't be talking about stocks at all. >> my guess about trump is, well, it was overvalued until i was elected. and now it's fully reflecting all the wonderful things i'm going to do. i can't speak for trump but channelling trump that's what i would be saying. >> jim, please stay with us because we want your take on another story we're following
today. some news on viacom, sumner redstone. let's quickly send to julia boorstin for the latest and then we'll get your comment. >> that's right. sumner redstone is stepping down from viacom's board after the company's annual meeting coming up on february 6th. the company's s.e.c. filings says redstone will remain his chairman emeritus title but will participate on the board in a nonvoting role. so he'll participate in those meetings in a nonvoting role. this comes after earlier this week sumner and his daughter shari redstone called off the merger they proposed between cbs and viacom, the two media companies that their national amusements control. and they named bob bakkish as permanent ceo of the company also naming him to the board. back over to you. >> julia, thank you. julia boorstin. jim, end of an era and some big questions about what the future of viacom is. >> right. i think what we're seeing here is the natural progression of something that's been going on now for at least really kind of over a year.
and it's really the solidify kags of the next -- of the hand off here to shari redstone who really clearly is in control here. following on this abrupt change in strategy, you know, to merge, now to keep them separate, which by the way i agree makes some sense particularly if there might be -- i mean -- paramount could be a very attractive asset. we've seen what's happened with time warner. you start to turn that thing around a little bit could probably get a good multiple on that. we'll see what the future holds there. but clearly we are dealing with someone who's really, really old at this point and should not have been in these positions, frankly, everyone as long as he was. >> you feeling good about media stocks overall? stories about the fcc having republican chairman and so forth implications for net neutrality. >> i mean, i'm neutral. again, this is one of those areas that it's hard to guess where this is all going to go. and some of this is not -- it's
not all regulatory. you know, there are a lot of issues there. the courts will have a say in some of this. but i think generally speaking i think the prospects look better for the time warner deal. i think there's going to be a loosening of regulation, i think we'll see more consolidation and combinations and that actually probably would be good. >> why do you think the time warner deal is going to go through? you think he's going to go back on president-elect trump what he said on the campaign trail looks like too much concentration of power? >> well, i noticed -- i thought the reading of the tea leaves out of congress the latest hearings on that was very significant where people who'd been staunchly opposed were now starting to say, well, we're seeing a slightly different way in. and, look, they've got great lobbyists, they have a lot of influence in washington. and i think they will provide a way out for trump to say that, look, i've looked at this landscape and my people have looked at it and we can see a way to approve this. again, he won't just change.
they'll be a good rationale there for if he decides to do it. i mean, i don't know whether he will, but i think there's a better possibility than i would have guessed. >> it's such a new landscape for so many sectors, media, telecom, when it comes to the trump rally, winners and losers based on the policies that he's talked about. and we know republicans are excited about. who do you think are the biggest losers? >> the biggest losers? >> say winners too. >> well, the winners, clearly the banks. they are in the sweet spot because they're already benefitting from the interest rate shift. and then you throw deregulation on top of that and that's the best outlook for the banks. by the way their valuations got so low like back february, march, even into the spring. i think those look very attractive. sort of overvalued, you know, there's been a big runup in the commodities space. i think that's maybe gotten a little ahead on the infrastructure expectations. i mean, infrastructure's a great story and i'm a big backer of it, but that doesn't happen overnight. it's not going to happen in a few months. i mean, that money is going to
slowly sort of move in here. and i think maybe some of the exuberance in the construction areas has gotten a little ahead of reality. >> jim, good to talk to you. on a range of subjects, always. jim stewart, pulitzer prize winning "new york times" columnist as we flirt with the major market milestone. >> yeah. >> thanks, jim. when we come back, mylan announcing it's launching an epipen alternative at half the price, but will a $300 generic be enough to satisfy that outcry from consumers? meanwhile, we're watching the dow up 45 points, just about 103 points from dow 20k. back in a minute. we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person,
mylan announcing it's launching a generic version of its life saving epipen for $300 a pack. our meg tirrell joins us this morning with more on that. good morning, meg. >> good morning, carl. this was pretty much expected mylan announced it planned to authorize its quote/unquote generic version of the epipen, up to more than $600 for a two-pack from less than $100 several years ago. an authorized generic is
identical to the branded version except it doesn't have the brand epipen on it. they are going to be selling it for about half the list price of the branded epipen, or about $300 for a two-pack. this is expected to hit pharmacy shelves next week. now, this was all communicated by the company. folks wondering now of course with the impact to mylan is going to be. they're trying to parse that out in terms of numbers right now. in terms of mylan's perspective, hearing from ceo heather bresch in a statement today taking this as an opportunity to talk about the system. every day escalating out of pocket costs impact a new patient population, however this broader systemic issue will not be solved by our industry's one-off reactive responses. this is something we've been hearing a lot from mylan as they're navigating on this controversy, focusing on the middlemen in the system, the complicated nature of the system saying we need more than these kinds of approaches. this one in particular maybe being a one-off, others we've been seeing from eli lilly giving discounts on insulin.
trying to inspire really a broader conversation about the complicated nature of this system right now. and of course for mylan in particular the key question in the next year's going to be how is this going to affect their bottom line, guys. >> i know you mentioned a lot of the companies are making moves to sort of appease the public and respond to this growing outrage, but i wonder if it will do anything to quiet the politicians who have these stocks and these companies clearly in the cross hairs. >> yeah, i think it's a very popular issue right now. something that we haven't seen any real abatement from with donald trump being elected as was initially hoped for by investors. you know, he said he's going to bring prescription drug prices down, so certainly popular issue to focus on. i think the question is are we going to keep seeing consumers and patients hit hard at the pharmacy? every time we do we're going to hear another outcry until this sort of tipping point is reached where we try to re-examine the system. how that happens is going to be key topic of conversation in the coming year. >> absolutely. should be interesting for you, meg, thank you. >> thanks. as we head to break here, take a quick look at stocks at this hour. watching these levels very
closely with the dow trading over 19,900. less than 100 points from 20,000. s&p 500 is up just two points, nasdaq up six. ge is leading the dow. coming up we'll be joined by ubs director of floor operations art ca cashin. take a look at shares of honeywell going positive after falling more than 10% in the premarket. this comes after honeywell's 2017 forecast, which did fall shy of some estimates and a subsequent conference call with management. we'll be right back in a moment with the dow up 54 points. [pony neighing] what? hey gary. oh. what's with the dog-sized horse? i'm crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal.
i'm scott wapner, here's your cnbc news update this hour. syria says evacuations of civilians and opposition fighters from eastern aleppo have been suspended hours after they were resumed on friday. the government said rebels opened fire at a convoy at one of the crossing points. japanese prime minister
shinzo abe and russian president vladimir putin announcing agreements in economic totalling $2.5 billion under a special agreement. the men concluding two days of talks with the press briefing in tokyo. mcdonlds's will begin te testing delivery service in three florida cities in january. those are orlando, tampa and miami. customers will be able to order off the menu and have their food delivered visa vis uber eats app. bitter cold temperatures blanketing almost every state this morning. a windchill of minus 22, below normal temperatures are expected this weekend across the entire northern half of the country. that's our cnbc news update this hour. back to you. thanks so much, scott wapner back at hq. watching the dow this morning once again gets the lion's share of attention as we are at 19,9d 08. let's bring in director of floor operations at ubs art cashin.
we got 19,966. >> right. >> what is happening at those levels where we're being turned away? >> well, i think what happens is once you stop, the first time we ran into the rate hike. and once you set thaup that kinf resistance -- i know i've gone this far before but i can't seem to get past it, so a lot of it is psychological rather than technical. but that makes it work anyway. >> how long do you expect that to last? i mean, does history give you any clue? >> well, not specifically to those numbers, but let us hope that we don't have as much trouble with dow 20,000 as we did with dow 10,000, because we punched above it and then pulled back and then it took a while to get back above it again. in fact, dow 10,000 was such a struggle that we crossed that line 67 times before we finally got above it and stayed above it. >> march 29, 1999 was the first time, height of the tech boom.
and then of course the bubble. and it's been a bumpy ride in between then. the bubble burst, the financial crisis happened in 2008. where does that leave us in terms of participation in the stock market and lessons learned? >> well, i think a lot of people have been frightened out. and we're not anywhere near back to where we were at the top of the housing bubble and whatever. the other somewhat troublesome part is that people are tending to go passive more and more. and i say that's a troublesome part because for the market to work effectively, you need some people evaluating earnings, looking at specific things. if you're in passively, you just, hey, i own the basket and that's what it is. now, secondarily, as i quoted in my comments this morning, jason over at sentiment trader notes that the amount of money that
rushed into the qqqs and the other indices is the greatest single day rush that we've seen in over five years. and historically that's followed by a week or maybe two weeks of modified trading. also, today is the option expiration. and historically from the december option expiration to the end of the year the santa claus rally tends to fade a little bit. it runs best in the dow and runs least well in the nasdaq. >> yeah, we're going to watch that closely. obviously it's been an issue for to get over that line. are you at all -- i mean, 63 billion of inflows since election day, you've got some of the nonfinancial press front page of "the washington post" today discovering the stocks are on a tear. >> right. >> is retail coming in? or is that a dynamic we should be paying attention to? >> well, i think it's not
stampeding in. it is beginning to come in. and you do want to pay attention. i'm of a mind that i think the post election rally will modify somewhat, but i don't think the correction we'll see go straight down because of all those people who want to buy the dip. you know, the market got away from me, but if i could only get a small selloff, i'll get myself back in. >> what are your expectations, art, in terms of how business friendly this administration is going to be? versus what we've seen in history. and what that means for the stock market. >> well, i think you're seeing that. i mean, we've heard on your air here several commentators talking about even in places like california where trump did not get the vote, measures of public attitude and enthusiasm are picking up. so people are looking forward to it. now, you've got to remember that you get a natural honeymoon period here in that before inauguration he can propose, he can get a little backlash, but he can propose and nobody knows
otherwise. once he is inaugurated and the members of the cabinet come up for approval, then you get to see what's really going on in congress, you get to see what's going on there. it will be interesting some of my sources are telling me that one of the early things they may push for is a ninth supreme court justice. >> yeah, you were telling us that. >> you've been saying it. now it's about priorities, right? and sequencing. >> living up to the optimism. >> exactly. art, have a good weekend. >> you too, sir. >> see you next week. art cashin. sticking with business and politics, it was a political promise that played very well with american voters, ripping up nafta. it remains to be seen though whether that will happen. but if it does, just how much would it hurt the automakers? our phil lebeau is here. he's been running through the numbers on this one. phil, what did you find? >> and this is fresh data, sara, that we have obtained from the center for automotive research. and this data basically looks at what would happen if nafta goes away.
and you're looking at all of these vehicles that are built in mexico and then imported to the u.s. by the way, 1.8 million vehicles were built in mexico at plants in mexico and then imported to the u.s. in 2015. if nafta ends, a lot of people say, well, yeah, you build them here in the united states. huh-uh, that is unlikely to happen. according to the center for automotive research, it's estimating that because of higher costs and because you would see production shift about 450,000 fewer vehicles would be sold annually here in the united states. and the implied loss in terms of jobs at automakers and plants here in the united states, remember plants that supply parts and other things to those vehicles in mexico, would be about 6,700 jobs. again, that's from the center for automotive research. if nafta ends, what happens with that production that is down there, you know, if there's a 35% tariff hit, will they decide, hey, we're not going to bring vehicles back from mexico anymore? what is likely to happen is you would see automakers shift
production from those plants in mexico to other plants around the world, including china, including india, including parts of asia that also have a low cost like mexico. again, most in the auto industry you would see automakers building new plants here in the united states to replace that lost production from mexico. so just some fresh perspective as you take a look at shares of gm and ford. by the way, we always hear people talk about the big three, and their exposure to plants in mexico. keep in mind every major automaker is in mexico. and they are not going to stop production if nafta goes away. they'll keep that production, they'll export to other places around the world. and to fill the void here in the united states, they would likely import from other low cost areas. guys, back to you. >> it's certainly one factor. you just showed the stock market reaction for both of those stocks since the election, pretty positive. what other factors post election are going to influence these companies? is it the idea that consumers are going to feel better, spend
more? >> right. >> that sort of thing? >> absolutely. consumer confidence is the number one driver of auto sales. in fact, if you take a chart of consumer confidence over the last ten years, match it with auto sales, it's pretty darn close. so as consumer confidence goes, so goes auto sales, generally speaking. >> all right. phil lebeau, thank you. >> you bet. >> on the auto beat, as usual. as we go to break, take a look at shares of chipotle naming four new board members including one from bill ackman's pershing square chlts one of those directors the former cfo of mcdonald's, which has not always been close to chipotle as a culture. checking shares of deutsche as we settling to pay $37 million to end some probes into dark pools. a lot more "squawk on the street" continues with the dow up 42.
let's get over to the cme group now, rick santelli with "the santelli exchange," the dow less than 20 points away from 20,000. rick. >> good morning, thank you, sara. like to welcome my special guest this morning, last guest of the week, richard farr. thanks, richard. >> merry christmas, rick. how are you? >> merry christmas. thank you. listen, you've written extensively about china. we all know that after the december rate hike in 2015, january, china were all big stories, capital outflows, fear of higher rates, we saw futures trading and bonds halted in china for the first time yesterday. last night we saw two auctions, three and six-month bill auctions failed to sell full allotment. what's going on? what are your thoughts? and how does this play into what we may be expecting for all markets in 2017? >> sure. so it's pretty obvious to
everyone who's followed china that there is a bubble in housing in china. the question is what pops these things. as we saw in the u.s. it could go on four, five years and it takes something to push it over the top. so in the case of china there's been an event. we have a new administration coming in the united states. and clearly the trade with china is going to be a top priority. he couldn't have said it more, meaning president-elect trump, during the campaign, that he feels there should be a better deal with china. in some sense he's right because there really isn't a deal with china. there's tariff disparities, there's tax rebates and things that go on that put american companies at a disadvantage. so the question is with a new administration coming in that's setting its sights on china, does this finally put a prick to some of that housing market problems that they have in china. and we think the risk is absolutely elevated going into 2017. >> all right.
now, let me stop you there, richard. >> sure. >> let me stop you there. i agree with you that the new administration has issues regarding trade that we're going to have to almost take a wait and see approach to. but this -- a lot of what we're seeing right now may be a blend of that and what's going on with our central bank normalizing rates. the world trying to recalibrate in that environment. and from that perspective, if we continue to embark on and get three interest rate hikes next year, are the markets going to be able to adjust quick enough? are we going to see more of these issues like failed bill auctions? >> you're going to see more of them. and here's the reason without getting too wonky for television. when the dollar strengthens, we get deflation, our dollar buys us more. but what happens is we export inflation. so you have countries like china which have been benefitting from very low interest rates, as has the u.s., except now they're having a problem with their currency, and they're having a problem with inflation starting to pick up.
and when you're in a debt bubble, that's something you don't want. so one of the reasons why we came out with, you know, our call recently after the election that fade emerging markets and favor the u.s. is for this reason, it's because debt bubbles get blown up in this scenario and financing gets harder and harder. >> excellent. richard, thank you for those observations. we're all going to have to continue to take a macro approach to how changing policy will change markets. thank you again. sara, back to you. >> interesting times. rick santelli, thank you. let's send it over to jon fortt now with a look at what's coming up next on "squawk alley." good morning, jon. >> good morning, sara. well, disney's got "rogue one" coming up, the "star wars" franchise extremely important not just to the movie business but also to parks. so what are the prospects? we'll dig into that. also, trivago's got an ipo coming up, travel space. and finally, doctor on demand, wouldn't it be nice if you could get checked out without actually
having to leave home? technology is making that possible. we'll find out more coming up on "squawk alley." i am benedict arnold, the infamous traitor. and i know a thing or two about trading. so i trade with e*trade, where true traders trade on a trademarked trade platform that has all the... get off the computer traitor! i won't. (cannon sound) mobility is very important to me. that's why i use e*trade mobile. it's on all my mobile devices, so it suits my mobile lifestyle and it keeps my investments fully mobile... even when i'm on the move.
months. but one top watch maker is bucking the trend. our robert frank has more on this story. and a special guest. >> good morning, sara. well, swiss watch exports falling more than 10% this year to under $20 billion, mainly due to weakness in hong kong. but you continue to see sales growth, francois, thank you for coming. >> good morning. >> a lot of talk in the u.s. about the trump effect, lower taxes for the wealthy, do you think we're going to see a bump in luxury spending by the wealthy next year? >> i'm not sure it's going to be a yes or no for one specific reason. if you reduce taxes a little bit, 5%, 6%, 10%, the people will get access to money, will keep buying no matter what. if you touch the really emotional part in their brain, no matter what it is for a piece of art, plane, car, they will keep buying exceptional product. >> everyone in the watch industry now is making more watches at a lower price to combat weakness. you're going completely the opposite direction. you're capping at 40,000
worldwide production. why are you doing that? is it working? >> because i do believe -- we do believe that true luxury is exclusivity. you cannot keep pushing volumes left and right. at one point people will buy your watches, your watches will say stop, enough, i want to see the watch, keep doing what you're doing and i'm happy with that. >> this watch is a $510,000 watch. what makes it so valuable? >> so, first of all, the watch has been eight years in the making. advanced technology, you are very, very far. it shines the time, but the very first watches they were making watches that shined except they really put that one on steroids. so before that, you have to put the watch close to your ears to here the chime. that one you can hear it, sara, you're welcome to listen. we're going to tart. it's there. >> i'm going to have to try it on, maybe. [ chiming ]
>> and what's amaze, we were talking about young people don't like watches. a 28-year-old bought this $510,000 watch, a tech guy, right? >> three days ago. so the guy's been looking and heard about the watch already for quite some time. 28 years old. he's starting his third company and he want it and got it. he's the very first client in the u.s. to get one. >> on that question and across the price spectrum, where are you seeing the growth? at the super high end, hundreds of thousands or more in the sort of starter luxury watches? snur average price is in the $40,000 range right now, and we are making only 40,000. so we'll get the growth from wholesale to retail, one, and two, by changing the product mix. 50 watches like that at that price, i'm thinking 50 watches away that are at the same price so the average price goes up and i increase the revenue. >> is cost of production changing dramatically they are way through commodity costs or labor costs? >> no. it's a pretty steady place where
our watch makers have been working for decades for the company so we don't see increasing role of income. >> what sets you apart is you continue to be family owned. you i don't have shareholders telling you we need to grow 20% every quarter. is that one of the reasons that you guys can shrink production and keep prices so high? your family -- just a few companies that are still family owned. >> huge advantage because the board never comes to me and says, francois, next year want 15% more. they say, francois, we want to be in business in hundred years from now. >> you're close to a billion dollar a year brand. where are you going to hit that level? next year, the year after? >> two or three years. but, again, that's not what we are looking for. it's going to come eventually. what we are looking for, making the best possible watch in the world, 40,000 pcs and we'll see where it brings us. >> u.s. still the biggest market for you number one? >> i'm proud of this because i moved to the u.s. in 1999 and i
left the company to run worldwide in 2012. sus number one market in the world and will be and remain the number one market. >> what are you seeing in china right now? what have you seen in terms of growth? has it slowed down a lot? >> it has. but china is an important market, obviously, but still an emerging market. in china, we are not that important, i have to say. so one is u.s., two is hong kong, three, switzerland, four japan, a country very few people talk about but very specialized in high-end watch making. >> are you hating the british pound as a result of brex it? >> no, because everyone wants to buy in london but but we give them fewer watchers to sell and everybody wants them and it brings the volume of the country better. >> in terms of competition classes from art, houses, cars, boats. >> smart watches. >> other watches? >> don't go smart watches because that makes our watches stupid and they're far from being stupid. >> is there something that you keep your eye on more than anything else?
>> i always look at the competition not in our field but in that category in the categories you were mentioning because these purchases are based truly on emotions. it's what i call the true emotion luxury. it's never really thought and say, by the way, three mos, this, no. you get something, you say i want it now. and that appeals to all of us at different levels. i was telling robert before, go see "hamilton." you want to see that? it's $2,500 a seat. if you want to see it tomorrow, is that that expensive? no, because the emotion delivered by the show is a great one. >> it is a great show. >> francois, thanks for your time. >> thank you. >> robert thank, thank you, and francois, thanks to you as well. >> thank you. >> we want to keep our eye on this stock. the hotel search website operator raised a total of $287 million in the offering.
stock's up about 8%. the ceo joins us in the next hour. when we come back, more on this rally, dow close to session highs, up 62. ♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. is happening before our eyes. shift in human history sixty to seventy million people are moving to cities every year.
dom chu, what have you found? >> the corporate world is a target-rich environment for donald trump and his tweets, so here behind me, just perhaps listing, small listing of the types of companies that trump has targeted throughout the course of his campaign and heading towards his presidency and inauguration, you have the likes of ford, lockheed martin. back in the day, amazon, december of last year, going after jeff bezos, the founder there. we looked at more recent examples of some of these companies and their stocks and how they performed. and there's no doubt that trump causes a dip in their stocks. does it last is the question.
when it comes to rex nord, remember that tweet, moving to mexico, viciously firing all of its workers. this is not happening. no more. well, that stock took a deep. in the two or three days following since that tweet, the market did take a dip on the stock, but then it are recovered. it's now lower overall but still one example. second one out there is the big one for boeing after the air force one tweet, the $4 billion in cost overruns, cancel the order. what did boeing's stock do? you look at this. we saw maybe about a 1% dip in boeing's stock on the heels of that. and then five days later, higher stock there, it's given back a little the last couple days but still short lived move for the stock. one more to focus on here, overall, the lockheed martin tweet about the f-35 program, about whether or not they can save money on that. look at the stock for lockheed martin. also one of those are where they kind of move lower and then higher along the way. when it comes to tweets, we'll keep an eye on what happens, but
whether or not we see these tweets have teeth in the future depends on what he does with these tweets today. back to you. >> the mix of computer algorithms and twitter and machine trading, whole new landscape, dom. thank you very much for checking those stocks. and the dow is gaining a little bit of momentum here, a little over 08 points away from 20,000. with that, carl, to you for "squawk alley." >> sara, thank you so much. good morning. 8:00 a.m. at disney headquarters in burbank, california, 11:00 a.m. on wall street and "squawk alley" is live. ♪