Skip to main content

tv   Squawk on the Street  CNBC  December 27, 2013 9:00am-12:01pm EST

9:00 am
together and then he has to watch that a lot and put it together. >> there's a lot of love there. >> how did you feel? >> you carrying on? >> you guys and it the holidays and all. >> i love you guys! >> we'll see each other next week. >> you'll be here friday? >> thursday and friday. >> join us on monday. "squawk on the street" begins right now. how are we supposed to follow the squawk yearender? what a great piece of tape. >> i'm carl quintanilla with simon hobbs and david faber, cramer is off today. >> the 10-year yield hit 3.02,
9:01 am
the highest since may 2011. the breadth in europe is very, very strong. our road map begins with the markets. stocks are set to start at another high since the dow is working on its best years since '96. >> flights were deeply discounted at delta yesterday, including a cross-country trip to hawaii for only $68. delta saying it will honor fares. >> and shares of twitter have been an absolute tear until today. the stocks falling nearly 3% in the premarket. has the blue bird flown too far too fast? >> markets are set to open at another record high, the dow having its strongest six-day streak in three years. the transports, the s&p, the russell also joining the party, logging some more record highs. guys, we had our 50th record on the dow yesterday and the nasdaq is shooting for its 13th friday
9:02 am
higher. so there's just -- if you're a lover of the candy that are market statistics, there's a bunch to play with today. >> there certainly is. >> i find interesting the article in the journal today that says this year the retail investors will have returned 13% of the money taken out of the market in the previous six years the individual investors at home watching this now is still extremely skeptical. that may be because the risk/reward of your own money is different from the professional investors. >> there's a really good look in the journal as to why mom and pop have not joined in. looking at inflows, first year since '05, 50d billion in to equity funds. that's not as much as left the funds last year. >> i just said that. >> i know. >> anecdotally i'm hearing from folks on twitter saying i'm
9:03 am
kicking myself for not jumping in when things were less certain. >> and the potential risk for being in a bond fund, that's something people may be feeling yet again, certainly if they're more on the shorter end of things. i should say the longer end of things with this 10-year. i'll be very curious to see how the adjustment goes in terms of a higher rate environment, breaching 3% again. we did see it once before during the course of the year. when it came in may, though, on the first talk of taper, there was a lot of quick adjustments both in the equities markets, emerging markets got crushed, if you recall. it will be interesting to see if we are now all ready for that as we head into 2014. >> ben greenhouse has a note out today that says higher rates go with a recovery, don't get too worried about it. >> that's the key. is there going to be gdp growth more than
9:04 am
1.5 to 2%? >> i'm old enough to know what recoveries look like. in a country of this size you should be getting 10 or 15 announcement as day. that is what a normal recovery looks like. >> let's get more on the record setting rally. let's bring in david cass and thanks to you both for being here this morning. we breached 3%, we're certainly looking for more as we head into next year and we get more taper. is it going to impact the ability of the equity markets to continue to go higher? >> eventually it will but not the first part. we think rates can move up another 100 basis points before the stock market really would start to worry. if you look at normal recovery, the first 1%, 2% 3% of interest
9:05 am
rates are higher. if rates were to go from 5% to 7%, it would really start to impact starts and would have an adverse effect on the economy and on the stock market. we don't foresee that in the first six to nine months from last year. >> with the s&p up almost 30% right now and say how in the world can we expect to come anywhere near that or should we have a right to expect any kind of a gain next year? >> we do expect a gain next year. this year's rally was at least partly based on the fundamentals. we've seen strong are economic growth and we've seen good earnings growth and we expect both to improve in 2014. that will push the market high person. >> david, how central to your view of where the market goes and what the recovery looks like and the decisions that ceos make, whether they decide not to
9:06 am
buy back their own stock but to actually invets in jobs and growth. at what point will they look at the ten-year and say i'm worried we're not going to get top line growth in this environment. >> ceos have been worried about everything from the government to health care in the last 12 to 18 months. we finally think there's an all-clear sign with the government coming up with a two-year budget deal. we think ceos will start to invest with a more meaningful way and will lead to better labor markets and labor spending. we do think they're going to continue to buy back stock and raise the dividend. having said all those good things, we're looking for an historic average mean-type return of 9% to 11%. it's surely not going to be as good as this last year but it should be a positive year. do expect a lot of volatility. if you're an investor, wait and buy into the weakness rather than chase the fourth quarter
9:07 am
rally. >> copper is at an eight-month high. there's a nice chart today floating around that the number of miles different by merps, the buggest year-to-year bounce since the deception. we know just over the course of developing an average that it will eventually. where is that going to come from? >> it certainly will and nobody knows and that's why investors do need to be prepared for the market. but overall there are fundamental signs of stronger growth and that's why, as david just suggested, you want to buy any of those dips because the underlying trends are actually very positive. >> all right. we'll leave it there of course as we head into the new year, thanks to both of you. >> meantime, lucky flyers took advantage of a computer glitch on thursday that caused some delta flights to sell for mistakenly low prices.
9:08 am
delta says it will honor those fares. carey, good morning. >> reporter: it's the glitch to end all glitches here, carl. folks were online yesterday from 9:30 eastern to around noon. they couldn't believe their eyes. this wasn't just on delta.com, it was on priceline. they saw prices that are actually cheaper than the taxes you usually pay on a ticket. here's an example. flying from jfk to puerto rico, usually $308, somebody snagged a ticket to $77. jfk to vegas, purchased for $81. and amy chee was online looking to go from indianapolis to honolulu. she saw the price of $70 and was like what? she decided for whatever reason to click over to the first class ticket and saw it for $88.
9:09 am
needless to say she booked those tickets as fast as she could. the round trip ubl costs-- usua costs $3,396. she said she feels like she committed grand larceny. this has happened before. the number of people who had the potential to take advantage of this one was much large are. and so everybody was sort of like spreading the word as fast as they could. i asked delta airlines, first of all, how many tickets did you sell? they won't say at these ridiculously low prices. they say they will honor all the tickets. is this some sort of stealth marketing campaign? they assure me this was a costly, unplanned mistake, guys. >> let me just ask you, what is
9:10 am
the trade-off for management here? i believe the department of transpore rules say if a flight is actually confirmed and the computer says in front of you it's confirmed you have to honor that price. what was the decision by management? because they could have said we won't honor them, we'll pay the department of transport fines. do we have any idea what the orders of magnitude might be on that? >> since we don't know how many tickets they sold, we don't know the balance. at the end of the day, you have the pr nightmare that would have been far worse. especially when united made the mistake, they did honor all of those who made the purchases with the glitch. if united did it, it puts the industry in play that everybody now sort of has to go along with the play that if one airline makes the mistake, all the airlines will go along with it. i'm sure there will be an airline that makes a mistake and decide it will not honor the tickets it and will be a big
9:11 am
bruising battle. >> kerry, good to see you. should check the web sites more often. >> interesting how you live and die by technology. target has shown that and delta airline. not the last time we'll see a mistake like this. >> no. the good news is the airline stocks have had a pretty good year. the airline industry has had an incredible year, earning its capital for the first time perhaps ever and not to mention the big deal that got completed with am and u.s.air. many of those who received the stock are extraordinarily happy. >> and we'll see if oil basis itself in 2014. that's going to be one thing to
9:12 am
watch regarding the sector for sure. this pass month has been sweet for the home of the tweet. how should you play that stock if you're playing it at all? that's coming up here. implied open 34. since the taper, the dow has risen every single day. a lot more "squawk on the street" live from post 9 in a moment. [ bagpipes and drums playing over ] transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account. every weekend worked, every idea sold... ♪
9:13 am
...you deserve a cadillac, the fastest growing full-line luxury brand in the united states. including the all new 2014 cadillac cts, motor trend's 2014 car of the year. get the best offers of the season on our award winning products. like a 2014 ats and srx. hurry in, offers end january 2nd.
9:14 am
9:15 am
twitter shares twitter shares are lower after its recent tear. shares of up more than 180%. is it profit taking or has the share seen its peak? he raised his price target to 43. front page. it was the lead yesterday and it's the lead of the party today. >> it's incredible. when you look at twitter, forward earnings multiple 385 times next 12 months earnings. you compare that to facebook, it's at 24, amazon at 28, apple at 8. but any ordinary stretch of rational mathematical thinking,
9:16 am
its valuation doesn't make sense but the market is where it is. >> scott, did you ever waiver at the ride from the 30s? >> no, we haven't wavered. i heard your intro music "tough enough." i was wondering if that referred to me. this has been confounding. you were referencing four 12-month earnings. we don't see earnings until 2015. there are a lot of reasons for why the stock has worked over the last couple of weeks. we see a lot of favorable supply/demand constructs but we expect those to start dissipating pretty notably as the year starts. >> those who own it, why haven't they sold into the strength? there's in notion because high-flying momentum stocks have fallen and come back, there's a
9:17 am
feeling that they're going to be invincib invincible. >> linkedin, there are certain lockups around those shares. to scott's point, the numbers i was talking about were ebidta. that's right. there are no profits expected for this company for some time. >> the difference between the people -- this is a great trade. the difference between those chasing this trade and you is you've got to have some sort of logical construct of what it might be, justify where you are rather than putting your own money into it. is there a possibility further down the line that there will be new revelations that will justify this type of price? or is it out of all orders of magnitude? >> simon, in our opinion and obviously dennis referred to some of the valuation constructs, this is trading -- look, for example, there was an article in the wall street journal yesterday talking about the market capitalization of twitter being in excess of $40
9:18 am
billion. we think that was using a wrong calculation for diluted shares. this is a stock trading at a valuation of well over $50 billion with no earnings. there could be new revenue streams and product enhancements that could make the fundamentals look better, but at the end of the day we have thought and we continue to think that the valuation is just initially stretched, then excessive. it seems like now we're approaching some type of mania. and when that happens, you know, you just got to kind of wait and see what happens. >> stay out of the way. and don't be stupid. doesn't short the stock. for me it's somewhat reminiscent of what i watched every day from my desk on the old "squawk box" with joe kernan in '98 and '99.
9:19 am
it didn't stop for quite some time. it doesn't necessarily mean there isn't going to be a buyer for those shares more than there are sellers today or tomorrow. perhaps it when they actually start earning money, can you ring that bell. it very hard to go into a market like this and say, a, i'm doing well -- i think an interesting thought experiment is to compare it to yahoo!. if you back out the alibaba value inside yahoo! twitter is valued far, far more than yahoo! right now. what would you rather own, twitter or yahoo!? i'd probably say twitter over yahoo! backing out ali baba. >> are we in for a rash of downgrades? a lot of the below the line items like taxes very cloudy. a lot of discrepancy across the street. once they report, that's going to have to sort of solidify to
9:20 am
some degree. >> we've seen this movie before it seems. to your point, once next year begins next week, you're going to see capital gains being harvest harvested, you're going to see performance not as much of an importance for institutional investors and you might even see a secondary. all those are going to contribute additional supply and maybe less demand, we think pulling the stock lower. >> what a story it's been at -- >> when we come back, what is top on ash cart in.
9:21 am
>> and the dow is shooting for its best high. back in a minute. ses. to help you realize a better tomorrow. from the families of aig, happy holidays. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout
9:22 am
so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. [ female announcer ] (announcer) at scottrade, our tcexactly how they want.tg. with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade-proud to be ranked "best overall client experience."
9:23 am
the market the market opens in seven minutes' time. looks like we are going to set another record on the dow. art cashin joins us here. good morning. >> good morning. >> repeatedly you said watch what happens with the ten-year yield.
9:24 am
now we're above 3% and still the market is rising. what does that man? >> it means several things. finally good news is good news after all. maybe the economy is taking hold and people are believing it and that would be a good reason for rates to rise or yields to rise. the other one might be that we're seeing skeleton crews on trading desks and things aren't quite meshing to the as they normally would. we'll know better next week. >> what's your hunch? >> my hunch is that it's a little bit of both and i'm concerned greatly about what impact it may have on mortgage refinancing. that's taken a hit already and a few notches up in mortgage rates may slow things down. >> there's craziness in kiev.
9:25 am
>> but that's the product of qe, isn't it? isn't that what we've seen through last year? that volatility. its the underpinning of the central bank. >> it is the underpinning of the central bank. they were going to have a strike on syria after the chemical raid, it didn't happen. we were going to have problems in iran. now we're in negotiations. so there's kind of a rationality put here. i hope it doesn't work out the other way. >> i wonder if we underestimate the effect loaf raids ha-- low the ability to refinance at extraordinarily low levels and
9:26 am
therefore have very little interest rate payments, interest payments. all of those ways, i don't know whether that's being fully appreciated by investors. >> i think you're absolutely right, there is a great degree of financial engineering. because rates are low, because they can buy back shares very cheaply and some are borrowing to buy back shares. so that can be quite a surprise as we get into next year. but for now let's hope -- there are 52 cards in a deck. let's see if we can do 52 record closes. >> we got 50 under our belt, art. thanks a lot. >> dow's up six straight. will it hit lucky number seven in the opening bell is just minutes away. >> announcer: now access live >> announmine was earned live orbiting the moon in 1971.
9:27 am
9:28 am
afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.
9:29 am
who found a magic seashell. it told him what was happening on the trading floor in real time. ♪ the shell brought him great fame. ♪ but then, one day, he noticed that everybody could have a magic seashell. [ indistinct talking ] [ male announcer ] right there in their trading platform. ♪ [ indistinct talking continues ] [ male announcer ] so the magic shell went back to being a...shell. get live squawks right in your trading platform with think or swim from td ameritrade. we're we're live at the financial capital of the world. we'll get the opening bell in about 30 seconds. wrap up the shortened week. a big one for the markets. the dow going for its best
9:30 am
yearly gain. fridays have been good for the nasdaq in recent weeks. if the nasdaq is up today, that makes it 13 straight fridays higher, all of that with the ten-year hitting .302 this morning. that's the highest since july of 2011. there's the opening bell and a look at the s&p at the top of your screen. down here at the big board, charity navigator, an organization that evaluates charities with ratings on 7,000 nonprofits and over at the nasdaq, operation once in a lifetime, a nonprofit helping wounded soldiers and veterans. a lot of the green you might see today at least in the morning part of the session might be driven by europe, guys, which is playing a bit of catchup having been closed yesterday. you pointed out the advanced decline line over there. >> 95% of top stocks in europe are playing catchup because they are closed yesterday. what's interesting here, they may be buying twitter. in europe they're actually
9:31 am
buying great banks. those are the main gainers so far. a bet on next year but perhaps a desire to window dress at year end. most stocks doing extremely well. >> a little bit of m&a. >> bringing in largely a commercial maker, there's some military there as well. some wondering whether that's a good move. textron overall has been -- i've heard about it in activist circles a bit because it does have -- bell helicopter, has a number of different units and there has been some thought could you conceivably break the company apart and create a lot of value but they do do that deal. the only one to speak of that i've seen on what is going to be a quiet week and what has been a quiet year for mergers and acquisitions. >> retail again going to be in focus today. these statistics out of mastercard are interesting. out of all the negative things
9:32 am
we've seen, mastercard from november 1 to christmas eve is up 3.5. not a barn burner. >> sounds right. remember the shopper track number the other day down 20%, that didn't seem right. >> they're giving you an overall revenue figure. you're talking about bricks and mortar. a lot of money spent on amazon on tvs, not so much money on teen apparel. >> to that point there was a great statistic in the wall street journal today and our story on ups talking about the percentage of last-minute ordering went up three or four fold. >> don't you think it's unfair the shippers are the whipping boy between this game of chicken between the retailers and the shippers? >> they can pull off a masterful movement of goods over 36 hours from -- >> really? when fedex said -- it's not in their economic interest to be
9:33 am
big enough to do a bulge three days like that. they should say last shipping is on this date, ship by this date and you consumers and retailers sort yourselves out. >> ups in louisville, they have all temp workers who come in for peak times during the holiday seasons. so they are flexible and they are prepared to handle the bulge, just not a bulge of the size -- >> fedex has gotten some criticism for being less efficient, having more planes and ups suffering for having not enough plans to deal with the deluge. >> makes you wonder if amazon is going to have to change the price of amazon prime or if in the peak periods they'll have to make it more expensive. >> or maybe the customer has to accept he can't have everything he wants -- >> i don't think that's going to happen.
9:34 am
>> amazon might start regionalizing what it does away from ups and fedex. >> these regional carriers whose names you've never heard of, they are forming alliances and becoming shadow national carriers, passing packages off one another. >> twitter is down 4%. we talked about it in the a block of the show. they cut it to underperform. a great note. they say too far too fast. quote, we expect this to be among the shortest downgrade notes you'll ever read. they launched coverage 15 days ago and in that time the stock is up 40%, the s&p is up 2, which obviously -- they said nothing material has changed other than the stock market. >> if you open the papers, it is in every paper today and you ask yourself what's working now, well, apart from today twitter is working. it's a trade. it's been a great trade. >> don't you think maybe in the recesses of the market, someone knows something about how well
9:35 am
they're performing in the advertising market? it can't just be a momentum stock. someone has to have a view -- >> really? to your point facebook is also down today. >> but if you like twitter, why not buy facebook? it's a much more rational valuation. >> you looked at the rump of yahoo! and say which would you rather own? >> it's an ongoing business. >> twitter will have significant growth. though it's hard to imagine at this point its first quarter of reported earnings is going to be enough to match this incredible move up in the stock price. >> do you remember when we were all quite bearish about linedin? >> there are many who wa say they prefer to own linkedin as well because it has an extraordinarily strong platform rate scale and the ability to do a lot of different things that it sld seemed to be when it first went public. that could be said of twitter burr it's a bit early to know whether that will be the case.
9:36 am
>> you mentioned yahoo!. a good story in the journal about alibaba getting permission to provide telecom services in china. >> this is a real juggernaut. if you take out rump, yahoo! it's not going to be worth much. >> she has stabilized traffic, even though cher continues to -- >> it's not about a lot of traffic. i think the oppositions have masked a lot of stasis in the core business. >> from what i hear, they're still historying to see if they can list over there. it will be quite an ipo. over $100 billion easily, perhaps even more at this point, 22% fully diluted, i believe, is yahoo!'s stake. they're not going to sell all of
9:37 am
it, they're going to sell some of it. >> yahoo! is a unit of alibaba with a kind of middling evening business on top. >> but she's relying on advertising -- >> yahoo! japan has done extraordinarily well and that has also helped yahoo! a great deal. >> let's get to mary thompson, who is on the floor with the dow up 35. >> reporter: hey there. the dow up 34, about ten points below its best levels so far. and of course yesterday when we had the triple digit move, the market is trading at very light volume. a little over 2 billion shares changed hands on the big board compared to a daily average of about 3.2 billion shares.
9:38 am
what could derail the rally today? we're keeping watch on the ten-year treasury. a number of traders i spoke with yesterday say it really doesn't matter what the yield on the ten-year is right now. what happens -- the big reaction when all the traders come but right now they say pretty much the trend is your friend and the trend being an upward one for the markets. also keep watch on oil because we have crude at over $100 a barrel. that, too, could put some pressure on the market's recent rally. bertha coombs will have more on this coming up. up heard the guys mention textron earlier today buying beachcraft for $1.4 million. it should accretive to 2015. also we're keeping watch on
9:39 am
shippers. we've seen a big move in the baltic exchange index, which basically is the measure of the cost of shipping. big costs like iron, et cetera, keep moving higher. right now the dow is up 41 points. simon back to you. >> thank you very much, mary. let's send it over to chicago and see how they're opening in the pits. rick santelli, what are you seeing? good morning. >> today there's no debate. yesterday there was a lot of discussion on the trading floor. cash markets don't always have exactly the same level. now we definitely breached 3%. let's look at yield curves. that's where all the action is at. if you look at 2s to 10s, it's still steepening. and these levels go all the way back really till july of 2011 area. now, as you continue to look at 5s to 10s, you see basically the
9:40 am
same dynamic in reverse. stable at 8 but mostly been flattening. 5s to 30s, same dynamic, that comp at its steepest went back to september. let's look at foreign exchange. continued action, dollar-yen, don't want to jump on an old trade? and it the best level of look at what's going on with the pound. but the home run by far, swiss frank versus the yen, 20-plus year high. back to you. >> let go over to sheila at the nasdaq. >> if we continue to stay in the green, we are talking about the 13th friday in a row that the nasdaq has ended with gains, potentially a 1.5% for the
9:41 am
entire week. a couple movers, ami pharmaceutical. they announced the rights to buy 31 generic drugs from teva pharmaceutical. and also go-go, it makes all the wi wireless in flights possible. got to talk about twitter. that stock getting hit after that required downgrade but it's also having a knock on effect to other social internet names as well. look at facebook, linkedin, all of those stocks are trading lower. and finally want to end up on the three-day printing sector. this is a hot sector. it's a little bit controversial. nonetheless all of those stocks are searching higher today. back to you. >> sheila, thank you so much. when we come back, it's been a pretty busy year for activist
9:42 am
investors. we're going to suggest how activists have changed board rooms and what it all means for companies in the future when we return. ♪ welcome to the new age bny mellon combines investment management & investment servicing,
9:43 am
giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds.
9:44 am
invested in the world. bny mellon. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this? natural gas. ♪ more than ever before, america's electricity is generated by it. exxonmobil uses advanced visualization and drilling technologies to produce natural gas... powering our lives... while reducing emissions by up to 60%. energy lives here. ♪
9:45 am
welcome back welcome back to "squawk on the street." i'm bertha coombs. at the nymex we're awaiting weekly numbers, delayed because of the holidays. we're expecting to see the fourth straight weekly decline of about 2.1, 2.2 million barrels of crude. we are expecting to see a build of about 1.2 million barrels of gasoline. but take a look at wti nymex this morning, following right along with the equity markets, moving higher, topping $100 a barrel for the first time since october 21st. those numbers will be added about 11:00 a.m. new york time. and we'll also be getting the gas numbers at about 10:30 a.m. eastern. there we're expecting to see a drawdown of about 175 billion cubic feet. that would be above average notwithstanding the heat wave last weekend and we're seeing
9:46 am
gas at a two-year high at above $4. >> that hundred dollars is going to get some people's attention. thanks, bertha coombs. >> let's bring in dennis berman. dennis? >> blackberry as we saw went through a terrible year this year. it's remarkable to see the revenues of this company, december 2012, here's my prediction for 2014. the device business largely egets sold off with foxconn. it concentrates on that middlewear, it's not sexy at
9:47 am
all, perhaps it stabilizes and they lay off a bunch of people and it gets bought by a private equity company. so all that happens in 2014? that's a lot. >> that is a lot. >> do you think people will keep buying blackberries? >> the answer is no. >> not even in indonesian markets? >> we're seeing those in foreign markets. for the large corporate customers, the answer is no. the on reason to buy is a security business. it's a boutique business doing highly managed security december vi -- devices for the military and wall street. devices was listed fourth as his priority. i think the device business goes away as we know it. >> it's going to be interesting to know the cash. i wonder if this can happen
9:48 am
before cash gets to alarming levels. >> they do have a bit of a cushion. the auction to sell the company failed. they couldn't find a buyer in large part because of some of those security concerns. >> we've talked a great deal about activism this year. it's i would argue the new m&a. i'm curious about your thoughts as we head into next year. some say it's almost a bubble at this point. >> it's certainly easier to do it than ever before. i'd love to know what you think about this, david. they have internalized the message of the activist. it's not coming from the outside. it's now being organically generated internally and the advisers, lawyers and bankers are telling you to think like an activist. those companies you thought were untouchable, be it p & g, microsoft, i wouldn't be surprised if ibm is next in the
9:49 am
cross hairs. most of them have wilted to the will of the activist. it's whether the play is there because the boards are taking the action themselves that the activists want them to do. >> i think you're correct in that. at least that's what i'm picking up as well, from boards themselves being willing to be more pro active at this point and think like that. as you said, nothing is untouchable. started with p & g but we've seen it with any number of companies, including microsoft. of course carl on apple has not gotten that far. we'll see what happens there. there's no doubt the boards have gotten the message. we'll see how long it lasts or whether it's an enduring trend. your point whether activism will continue be quite as much of a force and a way to invest because there's a lot of people adopting the strategy of the activist. >> over time i think some of the
9:50 am
problems we might see from the sheer number is a bough down to the activist mentality, it working well right now the low interest rate environment but long term is there real growth and organic development of new revenue from company? too many money will go -- >> half a trillion dollars a year. >> and giving voice to the populist of shareholders, interesting to see if that moves the needle in the board room. >> a small change, iss said shareholder recommendations, you have to get the majority of those shares voting. >> the activist shareholder doesn't necessarily represent the shareholders at large. i'm not sure that carl icahn of apple represents the shareholders at home. >> but when the attitude that
9:51 am
you should return. >> the key change has been those activists who have small percentage points of a particularly huge company still seem to be able o to galvanize or the board have them believing they speak for the larger shareholders. >> there's too much cash in apple's balance sheet. his request of $150 billion was absurd but he's got the conversation started. so we're another 50, 6 0rks 70 is not inconceivable. >> dennis, we'll see you a little bit later? >> look forward to it. >> coming up, turning blue chips into green in the new year. a look at the 2014 play book for the dow. we're back after a quick break this friday morning. this country
9:52 am
has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look. isn't it time you discovered the sleep number bed? the only bed clinically proven to relieve back pain and improve sleep quality. and right now, it's our lowest prices of the season. save $300 to $800 on our newest innovations. plus, for one week only, special financing until january 2016. only at a sleep number store, where queen mattresses start at just $699.99. sleep number. comfort individualized. i don't have to leave my desk and get up and go to the post office anymore. [ male announcer ] with stamps.com you can print real u.s. postage for all your letters and packages. i have exactly the amount of postage i need, the instant i need it. can you print only stamps? no... first class. priority mail. certified. international. and the mail man picks it up.
9:53 am
i don't leave the shop anymore. [ male announcer ] get a 4 week trial plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again.
9:54 am
foranother record another record for the dow this morning. in fact, the dow is getting ready to complete the year by posting its fifth consecutive years of gains. house of representativ how does that set us up for the new year in dominic chu has the 2013 play book for the blue chips. >> we wanted to do a deep dive at the end of the year the dow has had a very nice run. 17 stocks of the dow jones
9:55 am
industrial average have made all-time highs. we want to look at how many times the dow has made these nice big winning streaks. this is the fifth year in a row where the dow has posted a positive gain for the year. there have been three or times in history where that's happened. the most recent one is back in the 1990s during the clinton administration. the stock market had a very nice run for the dow. a lot of movement, up side movement there for the 1990s. also during the reagan years, '85 to '89 another big winning streak and the one getting attention here, the five years leading up to the great depression. and then we had of course a massive financial crash. as we look where the star performers might be for the dow in the coming year, we picked up the four that had the biggest price target increase from the analysts out there. price target of $54.60. that's up 11%. this stock is interesting. it's verizon. so a communications company.
9:56 am
analysts are bullish on that is correct they see 11% more up side. also a target of $44.80, implying up side are 11%, coca-cola, that could be a big one in 2014. a target of $20.30, up 9%, that's drug giant pfizer and we'll finish with jpmorgan. if the analysts are right on the stocks. interesting enough, carl, none of these stocks have made all-time highs so they may have some room to run. >> thanks so much, dom. when we come back, markets are up more than 1% in the last week and that 10-year is up three.
9:57 am
plus buzzfeed's jon steinberg tells us the real reason behind the rise when "squawk on the street" comes back. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates.
9:58 am
♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. mine was earned orbiting the moon in 1971.
9:59 am
afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. on,o ♪ go on, take the money and run ♪ welcome back to "squawk on
10:00 am
the street." our road back begins with the markets. another record day for stocks as the dow looks to post its best day since 1996. how long can it last? more in a moment. >> for a lucky few, christmas came late this year. a glitch on delta airlines caused some to see gigantic discounts. >> after the massive data breach in targets, companies will likely start investing in cyber security more than ever. how can you use that knowledge to make some money? >> and stocks of twitter are down today. why does the social network continue to defy many people's expectations and move higher and higher? buzzfeed president jon steinberg will weigh in later this hour. >> and the ten-year treasury yield has reached a two-year high.
10:01 am
let's look at how the bonds and markets are heading into the yield. we want to figure out what fixed income means for stocks. how high does a ten-year yield, hank, have to get before it causes concern for equity investors and for the overall economy? >> well, i think it's not only how high but how quickly it gets there. so if you have a gradual rise, i think the equity markets can die just that pretty successfully. if you have a spike in the ten year, that might pore tend a different reaction in the equity markets. i think equities would be fine in a ten-year that's in a 3.5 to 4% range. >> let's bring in guy. this 10%, what does it signify? is it positive that the economy
10:02 am
is doing better and things are going swimmingly or is it negative and could be a hurdle going forward? >> i think economically speaking, it's a positive. 3% is a psychologically significant level. yesterday of the lowest trading volume day so it's going to take a good week or so before i'm sure we'll be able to sustain it. >> equity mutual funds, this is the first up year since back in 2005 before the financial crisis. is this a trend that you think is going to continue and should help boost the markets in the new year? >> absolutely. in fact, in terms of sentiment, it's only been recently that investors have gotten interested in this bull market. and i think we are a long way away from worrying about greed just based on money flows since we had in the preceding five
10:03 am
years nothing but a persistent outflow into equity funds. so one year isn't going to reverse that. >> and, guy, what about bond funds? we've all been waiting, talking about this great rotation, an overused word, but the idea money is going to flow out of bonds as they get increasingly risky and into stocks, is it going to happen? >> i think it's already happened, particularly in areas like the muni markets, flows have been lower since april. there comes a point, however, where the income produced at these higher levels of interest rates becomes appealing. i don't think we're there yet but there's a good chance we'll see that in a few weeks in 2014. >> hank, let me pick up on the point you made earlier about flows. we have this article in the journal today that the flows
10:04 am
into the mart market today being 13% of what flowed out in the previous six years. you seem to be kind of pooh-poohing that and suggesting that is an irrational thing for people to do. maybe those retailer individual investors see the economy more clearly around the country for what it is and they are more worried about the self-sustaining nature of the recovery and therefore this rahal pe. could that be fair comment? >> i think so. i think this is one of the most hated bull markets in history, in the large part because there's been so much fear of the next big disaster, whether it's europe, china, the united states, the reality is the economy is slowly healing itself and slowly getting better but most people have missed this bull market and only recently gained interest -- >> hank, isn't it the point here that actually most people don't feel better, that actually wages have not risen against this
10:05 am
country. the attitude around the country is not one of animal spirits. you do not see ceos making major announcements about job growth. >> right. simon, that's why we're in the middle innings of this bull market. bull markets end when you have a lot of greed and we're not even close to being there. so while we do expect some more volatility in '14, we do expect the bull market to continue. >> guy, i'll put the final news to you with the better news on the economy, on the international front with the fed, is it enough good news to continue through nut year to keep propelling these markets? >> i think certainly the equity arena has a good reason to see stronger valuations in 2014. our focus obviously is in the fixed income market so i think there's been a sea change in investor sentiment. bonds are about creating a
10:06 am
margin of portfolio protection, so that sea change will dominate individual investor thinking in 2014. >> thank you very much, gentlemen, for the look ahead to 2014. >> a computer glitch caused tickets at delta to be offered for big discounts, including some for under $13. kerry sanders have liis live wi. good morning, kerry. >> this glitch got camplified because of social media. it was all over twitter and they didn't close the problem with the glitch until noon. it really went wild. the folks at delta will not tell us how many people purchased tickets at some of these
10:07 am
incredibly low tickets. jfk to puerto rico, jfk to vegas, usually 741, got it for $88. and my favorite, amy chi, she picked up a ticket for $88 that usually sells for $3,396. delta will be honoring all of the tickets purchased, even though they won't tell us how many they sold. this sort of falls behind united that three months ago had a similar sort of glitch but that window of opportunity was only for about 15 minutes so people were able to get tickets in that 15-minute window. of course being the skeptic, carl, i wondered whether this was some sort of stealth marketing trick but delta
10:08 am
assures me this was a costly, unplanned mistake. >> i'm glad you asked them that question, kerry because we're getting a lot of feedback from twitter saving look at all the free advertising they're getting out of this. they're telling kerry this is not intentional. >> do you know what the most expensive airport is to fly into and out of? cincinnati, ohio, my hometown. they have a hub there -- >> no, they had a hub there. i think you should know -- >> cincinnati, minneapolis $25. i just looked this morning, $400. that's more like it. >> but you should know that if it's your hometown. >> you're right. the airport is a ghost town right now but it's still for some reason monopolized by delta, which is very expensive.
10:09 am
>> nice spot on the "today" show, too, kerry sanders. >> will new mortgage rules in the new year weight on those stocks? we'll have more when "squawk on the street" returns. who studies the peruvian anchovy. invested in the world. bny mellon. [ bagpipes and drums playing over ] [ music transitions to rock ]
10:10 am
make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account.
10:11 am
with the with the new year comes new mortgage rules, as well as new fees. what the new rules mean for the
10:12 am
housing recovery, diana olick has more on that. >> reporter: good morning, simon. for some the rules will make it harder to get a loan, for others more expensive. why are we getting the rules in the first place? during the last housing boom, lenders gave loans to anyone with a pulse and buyers took mortgages they couldn't afford. these rules are designed to protect both borrowers and lenders from all that by making sure the borrower can repay the loan. if lenders follow the new rules, their loan is deemed to be a qualified mortgage and they get protection from lawsuit. so here's what a so-called qm loan looks like. it can into the have an interesting-only feature, negative amortization or balloon paymen
10:13 am
payments, maturity must be 30 years, verified income and assets and the borrow may not pay more than 43% of their income on mortgage debt. lenders can lend outside the rules. >> looks like a nice niche, you're not going to have as much competition. lending outside the qm box a borrower can dispute and basically win and try to foreclose if there's a problem down the road. >> lenders operating outside of qm will factor in the risk. they will likely be jumbo and adjustable rate loans. as overall mortgage rates rise, arms are more expensive and borrowers are turning to them.
10:14 am
>> what do all these new rules mean for the home builders? buck horn is a housing analyst over at raymond james. thanks for being with us. >> thanks for having me. >> it's hard to square the rise in the ten-year with the biggest gainer in the s&p for the week, which is pulte home. how can that co-exist? >> well, remarkably if there's a time to own home builders in the calendar year, this is the time to own them. this is typically the period from the middle of november through super bowl sunday, we call it the hope trade and it's remarkable the track record of outperformance home builders have had in this time period in anticipation of what is expected to be a strong spring selling season. it typically happens this way. interest rates, whether it moves up or down has mattered little to homeowners in this calendar windows. we upgraded several names months
10:15 am
ago believing this trade was going to work again. our top ideas are lennar and toll brothers and we think there's still room to run. just to get back to the valuation levels we saw in may, there could be another 20%, 25% up side. >> on this hope trade. by favoring lennar and toll, i'm guessing this is more a story of home buyers buying up as opposed to first timers? >> that's right. as diana mentioned, qualified mortgage rules are going to be a head wind. higher interest rates are going to be a head wind constraining the pace and slope of recovery in housing, but the recovery is gaining speed. we were encouraged by several things. customer traffic levels in thes has remained pretty strong. there's a lot of buyers kicking the tires. and we've seen the number of completed specks in a lot of communities has remained at
10:16 am
historic lows and valuations remain appealing. it is a trade that over time we think the mortgage rules are going to limit the ability of first-time buyers to get back into the game and we do favor those builders that cater better to the higher end buyer or the luxury buyer. >> is that hough you explain what we've seen in terms of mortgage applications? the number has fallen more than 50% since the peak that it reached back in may. how do you justify that with what we're seeing in, say, the new homes sales data? >> it one of the dayia points that have been a remarkable divergence. we've been at a slight loss to explain hough weak the purchase applications number has been. but it does speak to the fact a larger percentage of buyers are using all cash to avoid some of the mortgage rules and the qualification and documentation requirements out there. so you have a larger percentage of cash buyers out there. if you look at the average loan
10:17 am
size of mortgages being applied for was at an all-time high last week. almost $270,000 was the average mortgage size applied for, which indicates that the buyers that are out there are much more affluent, they have much, much larger home savings and home equity saved up and they're looking for a larger type of house and the first-time buyer remains unfortunately pretty well locked out of the market. >> that's a fascinating statistic. diana walked us through some of these arms and house of representatives they're redeveloping again. is this going to be a year where those who are renting can graduate into a house or not? >> it's going to be a challenge. we think -- we actually think the dynamics and the fundamentals for rentership are still gaining steam. we think we're going to see more single family rental households being formed. over time they may rebuild their credit and some of those
10:18 am
foreclosed out of or short sold may be back in and buy a home but it going to take time for the mortgage history to get comfortable with these new rules and implement a lot of the new rules before they come back. 2014 is not likely to be the year of renters back into the homeownership category. >> that's what we call a value add. buck horne over at rave monde james. >> all right. coming up, will security stock actually get a boost from inv t investors? find out which stocks you might want to buy. we will have an analyst naming names when we come back. ♪ private eyes are watching you ♪
10:19 am
...for the year. hi. sorry. just want to say, i bundled home and auto with state farm, saved 760 bucks. love this guy. so sorry. okay, does it bother anybody else that the mime is talking? frrreeeeaky! [ male announcer ] savings worth talking about. state farm. so ally bank has a that won't trap me in a rate.y!
10:20 am
that's correct. cause i'm really nervous about getting trapped. why's that? uh, mark? go get help! i have my reasons. look, you don't have to feel trapped with our raise your rate cd. if our rate on this cd goes up, yours can too. oh that sounds nice. don't feel trapped with the ally raise your rate cd. ally bank. your money needs an ally. (voseeker of the sublime.ro. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro.
10:21 am
[ male announcer ] this december, experience the gift of true artistry and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection. target is target is just the latest company to be involved in a security breach after 40 million details of credit cards were stolen in the last few weeks. but our next guest says that corporate breaches are at an all-time high and cyber security risks are increasing so security stocks could be a good bet for investors moving forward.
10:22 am
john fishbein recently launched coverage of the security software sector. thank you for joining us. >> good morning. >> before we get involved in the individual stocks that you're recommending, can you cut through and tell us how many of the targets of the world are already using the products of these stocks and what is the cutting edge of what cos need to do and invest in in your view? >> in terms of the past, many of the companies have used legacy technologies such as firewalls and end point protection to protect their infrastructure. and what's happened now is the cyber criminals are smart and can now can exploit those. as we've seen with the target breach, many networks are unprotected. our research tells us roughly about 95% of all institutions
10:23 am
are -- have been breached in some way because they have not employed next generation to security their. >> many of the larger vendors are playing catch up either through internal development or through acquisition acquiring technologies to beef up their portfolio. again, they were more legacy providers. barracuda networks and imperva go from protecting the end point to protecting the data, no matter where it is. that's what corporations need to do, such at target, to defect the data, regardless whether someone can get into the network. that's why these companies are
10:24 am
favorites. >> it isn't obviously just thieves out there trying to make money. we've got huge threats from china, which is constantly testing the networks of many corporations. that go on forever. all you have to do is be right once, right, if you're actually trying to gain access to the fetwofene network. >> i've been covering the space since 2001. it's billions and billions spent trying to protect the network and data. foreign countries have broken in and stolen not only intellectual property but major secrets. so this is an evolving space. the companies that i'm recommending have technologies that can solve today's problems but we don't know what's going to happen in the future.
10:25 am
but i don't know if you saw in the report we wrote, cyber crime has surpassed the drug industry as the number one criminal money maker in the world, and that goes to tell you something. >> joel, it's good to see you. i look forward to seeing you in the future. >> speaking of security, it been quite a year for u.s. attorney ferrara, sometimes called the sheriff of wall street. >> when the u.s. attorney speaks -- >> today we announce three law enforcement actions -- >> the financial world listens. in 2013 he's been busy tackling shady transactions.
10:26 am
>> the largest international money laundering case. >> reporter: dubious deals and insider trading. >> the scope of illegal trading was deep and it was wide. >> reporter: his crackdown on insider trading has completely changed the way information flows on wall street. in that critical phone call, there's no telling anymore whether a federal agent is listening in. 77 people convicted since 2009 and in 2013, the probe peaked with the guilty plea of sac capital. he's not just fighting insider trading. he charged two jpmorgan employees with hiding losses. >> we're as aggressive as any prosecutor's office in the country. >> reporter: but some say not aggressive enough. in a stinging opinion for the
10:27 am
new york review of books, u.s. district judge jed rakoff said the failure to prosecutor individuals involved in the crisis could be one of the most egregious failures of the criminal justice system in many years. reed brodsky, who left for private practice this year, said the lack of perp walks is not from lack of trying. >> i don't think anyone is too big to indict, no one is too big to jail. >> reporter: maybe a signal he's out to make even more of a difference next year. >> when we come back, what a ride it has been for twitter. the stock is down today but still up since the ipo two months ago. why does the stock continue to rally? in fact, as of today it is the biggest u.s. tech company not in the s&p 500.
10:28 am
we'll talk wiabout that with jo steinberg in a moment. i trade like me. that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before.
10:29 am
afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.
10:30 am
welcome welcome back to "squawk on the street." i'm bertha coombs at the nymex. farl gas number well above what is the five-year average of about 125 billion cubic feet withdrawal. despite the fact we have a
10:31 am
slightly warmer forecast right now, we're seeing nat gas prices more or less flat from where they were ahead of the number. a little bit of profit taking coming on the february contract. we have the january futures contract expiring today but nat gas has really been on a tear. it is the best performer in commodities this year, up about 30% since january. really a very different picture from what you see in the rest of the complex. we'll have the oil and products numbers coming up at 11:00 a.m. eastern. back to you. >> thank you, bertha coombs. >> it may be down today but twitter is up 150% since its ipo. let's bring in jonsteinberg, ceo of buzzfeed. good to you have here. >> thank you, good to be here.
10:32 am
>> you called it on the day of the ipo. why aren't the long selling into strength? >> i never think valuation is a reason to short. you have only 10% of the shares outstanding, the float. you have 8%, which are held short, which is roughly two and a half to three times more than what's typically held short in the s&p so you may have covering pressure here as well and i think you have a lot of funds that say they want to own twitter. from a technical perspective and light volume around the holiday, there's all of this stuff. >> how much are you going to watch for downgrades over the coming weeks and as we get into april, the lockup expectations. >> mcquarry downgraded it today. the analysts kept saying it's a high price and upgrading, upgrading and upgrading. but nobody is digging in. i also think going into the new
10:33 am
year weeks have a case where people may sell. the whole entire mark has ripped this year. no has losses to pair gains with. cup see in the new year people saying we want to take our gains, we're sure we'll have losses to put against it. >> it's not just twitter. certainly that shock and volume has been a showstopper. but facebook is also trying higher. the social media stocks have been in favor. what do you hear about why wall street is suddenly enamored with these stocks? >> that is a great point. that's the second -- that was the fundamental thing i wand to pair with the technical aspect. investors are stafford for growth and stafford for a way to own this new media future. when you look at the number of stocks that are these future proof, mobile stocks, it hard to name five. maybe you can stretch it to seven. you've got facebook, you've got twitter, you've got knenetflix then you start getting into very
10:34 am
small stocks like yelp and zillow. that's why we have hedge funds going into these prevent tur stocks because there's no public stocks out there as a way to play the media future. >> i wonder if there's also an increasing skepticism about when wall street becomes skeptical. if you look at the year long chart of facebook, they were down on facebook coming into the summer and suddenly you get the reversal and people double their money coming through the fall. i wonder if they say actually -- it may be an east coast/west coast split, i'm not sure. they say you analysts, you just don't understand what's going on here. if you do understand, you understand too late. >> right. and then there's the questions of all of the revenue estimates are low, that -- these are such small ref newfoundland numbers
10:35 am
and they're so easy to crush that that may be part it have, too. people are sort of afraid of being left out. it like buying a pair of pants that are too big for your kid. you buy the giant pair of pant, you got to wait for the kid to go into them. that's sort of what this is kind of like. >> you mentioned the mr cory downgrade today. which says will there are costs for these guys. we know they're plowing a lot of money back into the business. the fortune 3,500 needs to be covered by a consultive way, almost a pod style, the next set
10:36 am
in the fortune 500 you have a team of five people that will cover those five companies. yes, they're going to have to massively ramp the sales force as well but this is mostly a top line story. we're looking at some little revenue for this company, it has to show it can mainstream the amount of revenue and then it can grow into a price potentially this tie. you don't have to say raise the price, raise the price because you think it's a fantastic company. >> there's a sears that stocks rise above their true value and will continue to do so until they bubble -- >> i don't think eight bubble.
10:37 am
cara swisher had an article yesterday, she speculates that box and drop box and more of these social companies will go public as well and i think that will actually solve them because investors will be able to diversify. >> jon, you in los angeles, that's a dangerous combination. we appreciate you taking time for us. >> i got to work. i'm at a startup. we got a lot of people out here. >> shaeila bair joins us live when "squawk on the street" returns. , how happy are folks who save
10:38 am
hundreds of dollars switching to geico? ronny:i'd say happier than the pillsbury doughboy on his way to a baking convention. get happy. get geico. fifteen minutes could save you fifteen percent or more.
10:39 am
ttdd# 1-800-345-2550 can take you in many directions. searching for trade ideas that spark your curiosity tdd# 1-800-345-2550 you read this. watch that. tdd# 1-800-345-2550 you look for what's next. tdd# 1-800-345-2550 at schwab, we can help turn inspiration into action tdd# 1-800-345-2550 boost your trading iq with the help of tdd# 1-800-345-2550 our live online workshops tdd# 1-800-345-2550 like identifying market trends. tdd# 1-800-345-2550 now, earn 300 commission-free online trades. call 1-888-628-2419 or go to schwab.com/trading to learn how. tdd# 1-800-345-2550 sharpen your instincts with market insight from schwab tdd# 1-800-345-2550 experts like liz ann sonders and randy frederick. tdd# 1-800-345-2550 get support and talk through your ideas with our tdd# 1-800-345-2550 trading specialists. tdd# 1-800-345-2550 all with no trade minimum. and only $8.95 a trade. tdd# 1-800-345-2550 open an account and earn 300 commission-free online trades. call 1-888-628-2419 to learn more.
10:40 am
so you can take charge of your trading. a> it's been it's been a mixed bag in the energy complex this year. nat gas supplies have surged in the united states while retail gasoline prices have fallen. sharon epperson has a look at
10:41 am
commodities in the new year. first let's check the scorecard and see how she did in 2013. sharon said robust u.s. oil production will keep a lid on prices. that did prove to be true as u.s. petroleum supplies had a far greater reach than in years past. more crude oil moving around the u.s. on trucks and barges and trains than in any point since 1981. sharon predicted the end of the bear market is near. correct again. and finally, sharon called an end to $4 gasoline in 2013. also correct. turns out supply and demand fundamentals not only helped keep the natural average from topping the $4 mark this year but have taken prices to their lowest level since back in early 2011. bottom line, sharon epperson nailed it. let's see what she has in store
10:42 am
for commodities in 2014. >> reporter: get ready to fill up for less in 2014 as gas prices fall to a four-year low. refineries are increasing production, causing supplies to swell and demand remains rather muted. we usually have a seasonal price surge in the spring when the east and west coast could see pump prices near the $4 a gallon mark but prices should be below $3 a gallon in the middle of the country for much of the year. prices at the pump depend in part on oil futures traded here he nymex. the ongoing boom in domestic oil production will continue and as we have more output, we'll likely hear more calls for exporting more crude oil. right now you can only export it to canada. but while that debate continues, supplies will likely outstrip demand, dampening oil prices.
10:43 am
but truckers beware. even if oil prices are muted, we could see higher diesel fuel prices. but then prices should fall and steady a bit. >> when we come back, more than a million people are set to lose their unemployment benefits this week. is there any chance those benefits could be extended? i'll talk about that when "squawk on the street" comes back. tomorrow. from the families of aig, happy holidays.
10:44 am
[ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the all-new fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades when you open an account. bny mellon combines investment management & investment giving us unique insights which help us attract the industry's brightest minds who create powerful strategies for a country's investments which are used to build new schools to build more bright minds. invested in the world. bny mellon.
10:45 am
ask me what it's like to get your best night's sleep every night. [announcer] why not talk to someone who's sleeping on the most highly recommended bed in america? ask me about my tempur-pedic. ask me how fast i fall asleep. ask me about staying asleep. [announcer] tempur-pedic owners are more satisfied than owners of any traditional mattress brand. tempur-pedic. the most highly recommended bed in america. now sleep cooler with extra cooling comfort on our bestselling tempur-breeze beds. visit tempurpedic.com to learn more, and find a retailer near you.
10:46 am
to we're now we're now to deal in congress, unemployment benefits are set to expire for initially around 1.3 million people, though that will grow over time. is there any chance for a deal to extend those benefits? our own john harwood is live in washington for more on this. welcome to the program. how does this stack up at the moment? >> reporter: there is some chance of an extension but it's not looking good right now. those benefits, up to 99 weeks of unemployment benefits, which
10:47 am
started under the bush administration do appear they're going to run out for good tomorrow. democrats and their allies are fighting back, in part using the argument that economically it makes sense to extend the benefits. here's someone from the national employment law project. >> having the benefits keeps people in the labor market, keeps them looking for work. i'm not aware of a single employer who has said i'll create more jobs if there are no unemployment benefit. >> reporter: they're also making an emotional argument key to the holiday season that simply the u.s. congress cannot turn away from those in need. here's the emotional argument. >> it's wrong to leave more than a million americans behind. tell republicans restore unemployment benefits now. >> reporter: but, guys, here is the problem. there has been a psychological turn in washington and in much of the country from a recovery from financial crisis mode to
10:48 am
the way of thinking about the economy that is now growing. the labor market is strengthening and once you make that turn, very difficult for democrats in congress and the senate, as well as the house and white house to get the critical mass and will to push through republican opposition. could happen. you could get a temporary extension of a couple of months. full-year extension costs $25 billion. that's hard to come by in this political environment. >> i believe complacency is the word, john. john harwood on the extension or unextension of unemployment benefits. >> josh lipton has been following where fingers have been pointing. seems like ups has been getting the lions share of the blame here. >> a lot of gifts that did not make it to the christmas tree on
10:49 am
time, the question is whose fault was it? amazon said they processed goods on time. not everybody thinks the blame should rest with ups. i just got off the phone with michael pack, he said the blame rests with amazon, that it was their fault for not accurately forecasting demand. he said amazon is a victim of its own success. we all expect the best of amazon. we reached out to amazon for comment but they have not gotten back to us just yet. the question for consumers is whether this will happen again, probably not as amazon will negotiate o with carriers for more capacity. it will likely cost more. as for amazon's reputation, the
10:50 am
he said the hit is variable veritable. don't mistake neutral on valuation concerns. >> both . in the case of fedex, going back to the listing on the big board, and the year-to-date gains, 56% for fedex. 42% for u.p.s. >> if it says one thing, it says they have high volumes. they have a business that's expanding. i don't understand why everybody is so surprised. am i the only person who lives a life where things go wrong? >> and also, people underestimated the amount of shipping that would happen, the amount of online purchases that would contribute to this holiday spending season. all of the ceos we talked to early in the season were optimistic they were getting prepared, just didn't know how giant it was going to be. >> one of the great ironies, from fedex's point of view, is people going from express to ground, right? buying lower-priced shipping options.
10:51 am
maybe next year they don't take a chance and they do -- they go back up to the premium express shipments services. >> certainly, that would be better for the margins. >> if is last-minute shoppers, they won't be doing the expensive mail, are they? >> no, they are, because they want it in time for christmas. >> they waited until the end to get it sheep. >> and that gets back to the amazon promises as well. it's a blame game, but certainly investors don't seem scared off by the reputational damage. for these companies. >> not as of today, unbelievable. let's get to the cme and check in with rick santelli and get the "santelli exchange." hey, rick. >> hi, carl. you know, we've talked about the red-dotted malls or, you know, some of you older listeners and viewers, follow the bouncing red ball. you are here. you see it on mall directories all the time. you are here. why is that key? we've gone over this. in order you need to know where you want to go, you need to know where you are. this is the issue in the marketplace.
10:52 am
i counted at least four times guests today on the best show on tv, cnbc, talking about in a normal recovery, interest rates are supposed to go up and that's why stocks are paying very little attention to it. that may be true. but it may not be true. and that is where the rub lies. if we had no qe, even if the fed's interest rates were still at virtually zero interest rate policy at zero, that wouldn't be the same issue as how many treasuries, agencies, securities, mortgage-backed, the fed is holding on top of what they continue to purchase. that's the unknown. we don't know what's normal, so we can't say if the value and relationships between equities and stocks and earnings and profits and interest rates is all in balance or not. and that is a big risk. but there's also other red dots. think of one of the biggest stories for 2013. the disparity in returns between commodities and equities,
10:53 am
historically why? there was a magnificent article on "wall street journal" online. it was written by tatyana shumsky, called millions of tons of metals stashed in shadow warehouses. aluminum, copper, nickel, zinc, all in nonreported locations. look what she said. five companies operate 75% of the lme's 778 licensed warehouses, and also own shadow facilities as well. according to the article, one facility has reported, nonreported a chain-linked fence, and you see the five names of the entities? now, all of these firms did not comment on the article, but the point is, how can you trade these commodities? maybe the supply gets dumped online, maybe it stays in storage. this is another, you need to know where you are to trade those nonprecious metals, all bouncing ball stories. back to you.
10:54 am
>> all right, rick santelli, always great with the whiteboard, on commodities. and the interest rates, 10-year, at 3%. the markets pulling back after hitting high after high. we'll set things aside and look at things from a technical perspective, what the charts tell us. plus, a trip to hawaii for only $68? we'll have more on that delta price glitch that benefited some very lucky travelers. were you one of them? we'll be right back, "squawk on the street." your car doesn't have to carry as much fuel compared to other energy sources. take the energy quiz. energy lives here.
10:55 am
afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. it's lots of things.
10:56 am
all waking up. connecting to the global phenomenon we call the internet of everything. ♪ it's going to be amazing. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco. tomorrow starts here.
10:57 am
"autotrader" is o the with a list of the most popular 2013 vehicles, and trucks making up nearly half of the top cars. ford's f-150 made up the top spot, meaning more people clicked on an f-150, followed by the jeep wrangler, the ram 1500 and the ford mustang, chevy silverado 1500. among brands, ford was the big winner with six models in the top 20, although i was looking for the weak end of the month, one of the best performers on the s&p for various reasons, maybe the guidance about 2014 and margins. >> in terms of actual sales in this country, it's toyota, gm, vw. this is just people that clicked
10:58 am
on autotrader, maybe why ford is a self-selecting sample. >> yes. >> the trucks is really -- it's the story of the year, the comeback story of the automakers and how americans are buying more cars and they still love their trucks. >> absolutely. it's been said this morning the twitter rally is over. we will see. but clearly it's not behaving the way it has in the past few days, down about 3% earlier in the session, now down five and change. back with a six handle again. and then just chatting off-camera about the airlines, specifically delta, and the glitch. >> top news. >> yeah, actually making it the worst performer in the sector, at least, down almost $1 to 26.94. >> you can't imagine it's material to the business, though. >> hard to imagine they'll honor the tickets. >> a good question, right? we don't know the scope of it. we have heard this went on for two hours. you don't know how many people signed up. >> right. >> and how much of a financial hit delta took. >> if you are just joining us, here's what you missed earlier on. ♪ >> announcer: welcome to "squawk
10:59 am
on the street." here's what's happened so far. >> it's great to have planned discounts, because the suppliers play with you when you're a department store. if you're inside the mall, you don't get any of that help. so as long as you can run planned promotions, it all works for you. >> it's the sense of an accelerating global economy, and also a broadening global economy that's just driving stocks higher here. >> i still think the lean toward the cyclical side makes all of the sense in the world, but you want to be in industrials, technology, consumer cyclicals, financial, or two. they're the stocks that will carry the day. >> if you're a lover of the candy that are market statistics, there's a bunch to play with. >> i'd be very curious to see how the adjustment goes in terms of the higher-rate environment. not a high-rate environment, but nonetheless reaching 3%. >> when you look at twitter right now, its earnings multiple -- forward earnings multiple, 385 times next 12 months' earnings. >> there's a lot of reasons for why the stock has worked over the last couple of weeks.
11:00 am
we see a lot of favorable supply/demand constructs. but we expect those to start dissipating pretty notably within a week as the new year starts. [ bell sounds ] >> there's the opening bell. >> if there's a time to own homebuilders in the calendar year, this is the time. we think there is still room to run. to get back to the valuation levels we saw in may, there could be another 20%, 25% upside. welcome back. crude oil back above $100 a barrel, and bertha has breaking news. >> very surprising number. we had a drawdown of 4.7 million barrels of crude. that was well ahead of all of the expectationing we had seen, and really different from what we had seen from the industry number earlier this week. dissolates down and gasoline
11:01 am
down 614,000 barrels down. the expectation was an increase of 1.1 million. we're holding above $100. we've been above $100 all morning, first time since october 21st. we do have wti nymx crew on crude to be up 9% for the year, which is not something we would have thought of earlier in the year. commodities have taken such a big beating, particularly in the metals, carl. >> all right, bertha, thank you very much. our bertha coombs. we, of course, are live here at post 9 off the new york stock exchange with a check of the markets after the best six-day stretch in about 3 1/2 years, but the dow is giving back a little bit. down about 18 points. the s&p off two to 1,839. textron making cessna planes, making news that it's buying beachcraft. they plan to finance the deal with available cash and $1 billion in new debt.
11:02 am
and gm is in the red after announcing it will recall buick models. >> carl, let's get you the roadmap for the hour. it's another record high for the markets. today, before we started, pulling back. certainly saw the dow and the s&p 500 at records. is the rally in jeopardy? we'll look at the technicals in a few moments. plus, in the wake of the data breach at target, one senator wants the government to hold companies accountable. senator robert menendez will join us live to explain. former fdic chair will join us. first, the markets are lower after being in rally mode for the last six sessions. are we reaching a resistance level? let's consult the charts with katie stockton, the chief strategy specialist. welcome back. >> thank you. >> i keep seeing mentions of the number of stocks above the 50-day, the 200-day.
11:03 am
where are we in terms of be overbought or oversold? >> market breadth, which is what you're referring to, or market participation, has been very, very strong. we've seen it expand over the last six days with the market rally. it's not yet at these extreme levels that tends to be associated with market tops. there is some room in the market breadth. the measures of market sentiment, however, are more bearish, where we have this sort of contrarian reading on the retail side of things where investors seem to be too complacent or too bullish here. if anything is bearish, it's sentiment. and yet, momentum can really overrule the market internal measures like the breadth and sentiment data. for me, i want to refer to the momentum. obviously, the s&p 500 is in unchartered territory, seen a series of breakouts on the individual stock level and that goes for not only the u.s. but overseas where we're seeing breakouts in emerging markets, and one example today would be
11:04 am
taiwan. so we've seen really seen good action on the charts, positive momentum, and there are times at which positive momentum tends to overrule overbought conditions, so i wouldn't get too caught up in how overbought we are at this time. >> interesting. we're looking at a chart of the e intermediate, 1,875. are we going to see a correction in the next three, six months? >> my charts don't say that. but things can change and evolve. right now, i'm looking forring in in the nature of a 4% pullback, january maybe february. so early in the year. however, as it stands, we obviously have the positive seasonality upon us, so i think three year, relatively firm trading for the s&p 500. the last breakout that we saw did yield an intermediate term target of 1,875. that looks like it's very close to current levels. so that would be a natural place for that kind of 4% pullback to occur, of course.
11:05 am
but even the latest breakout that we've received from the s&p 500, you can arrive at a more aggressive upside target of about 1,935, and that's what i would keep in mind with the market in the first quarter. >> everyone is glued to the bond market right now, watching the 10-year treasury yield at 3%. in terms of levels, what levels do you look at in terms of ones that could trip up stocks here? >> right. for me, the 10-year treasury yield had resistance originally around 2.85, and that, of course, has already been exceeded. 3%, of course, has psychological significance, and it is sort of an interim resistance level, if you will. once you clear that 3% more decisively than we already have, that becomes a support level going forward, and really the next resistance for the 10-year treasury yield is up around 3.75, and that goes back to the 2011 high. but big, big picture, of course, is that if you look at the multidecade trend in yields, it still is very much lower. and it would take a move above that 4% to reverse that long
11:06 am
long-term downtrend, and that will mean it won't have such a negative impact on equities as people expect. >> yeah, interesting. finally, copper. we all love dr. copper, eight-month high, the fat finger trade notwithstanding earlier in the week. what do the charts say? >> we've finally seen a lot of breakouts of the commodity front, so copper being one of them. a lot of the base metals, like zinc, look at the others, but copper has completed what i believe to be a basium phase and looks for positive follow-through in the months ahead. so to me, this commodity breakout is real. i do also see signs of exhaustion in the grains and in some of the precious metals. i'm not getting excited about going with countertrend positions there, and yet i do think it will become more of a theme in 2014 where we see firm action out of the commodities, certainly. >> i have a feeling we'll come back to you a lot more often in the weeks to come, katie thank you so much. >> yeah, we didn't get to the nikkei.
11:07 am
a bullish-looking chart. lucky flyers took advantage of a computer glitch on thursday that caused some delta flights to sell for mistakenly low prices. delta is now saying it will honor those fares. nbc's kerry sanders is live in ft. lauderdale with more on that. good morning, kerry. >> reporter: so we're doing a little digging here, sarah, because someti simon asked me, when delta is honoring the tickets, don't they have to? this is the faa rule. it looks like they had no choice, because the faa rule, 3.99, if a consumer purchase as fare, and that consumer receives confirmation, such as confirmation e-mail or the purchase appears on the credit card statement, online account of the purchase, then the seller of air transportation cannot increase the price of that air transportation to that consumer, even when the fare is a mistake. so that seems pretty clear. so now we understand perhaps a little bit -- bigger of why
11:08 am
delta is honoring the tickets that were being sold yesterday online with this sort of glitch in the system. they were selling for around 9:30 eastern time to almost noontime, and the fares that were going out were really unheard of prices. for example, jfk to puerto rico, usually that's $308. sold for $77. jfk to vegas, that's a $741 fare. sold for $81. and then, amy in indianapolis, wanted to go to honolulu, been watching the fares, she saw the ability to fly $70, bumped over to first class and saw it was $88, grabbed that seat. usually that's a $3,396 fare. she said that she felt like she was committing larceny, and i think a lot of people realized they were getting incredible deals. and this problem really spread quickly, because it wasn't only on delta.com, but it was on all of the other websites that you might use to book your, travelocity and the other sites that come together to get you
11:09 am
the flights on delta.com, and then people were boasting and boasting on twitter. look at the deal i got. christmas came early. and so, it sort of compounded very quickly. the one thing delta won't tell us is how many tickets they sold. >> well, that -- >> as you know, they're going to honor the tickets maybe because they have. >> and that's a good question, kerry, because something that investors are trying to figure out is how much damage is this going to do to delta? how many tickets were sold, and how much does this hurt them financially. we don't have a sense of that, do we? >> no, we don't. and, you know, as somebody who travels a lot, the one thing i was sort of thinking is, you buy that ticket for 80 some odd dollars to honolulu and you get the incredible deal plus the miles, so there's an additional cost, because the miles can be redeemed later for discount or free flights. >> where was i during -- what was it, 10:00 a.m. to noon? >> yeah, where was i, too? you know what, carl was all over twitter. i'm surprised carl didn't grab this. >> yeah, i was, i don't know
11:10 am
where i was, following the kids somewhere. but we know if there'd been a flight to panama, kerry, you would have been all over it. >> exactly. >> all right, kerry sanders, thank you very much. and we are seeing a reaction, delta shares are lower today. meantime, apple is chomping up its competition in online sales. ios is five times higher than android with ios users spending an average of $93 per order. and android users spending around $48 per order. interesting new numbers. jon fortt join us with more. what's the explanation here? >> well, this is data from ibm about christmas specifically, how people did their buying, mobile was huge. browsing-wise, 48% of that browsing happened on mobile. and buying for ios specifically, they blew android out of the water. this is something i've been following, a trend for a while now. it's not just in ecommerce.
11:11 am
spencer rascoff over at zillow has said that people who are looking to buy homes, more likely to use ios, renters android. you see that reflected here, too. it looks like perhaps a demographic thing. >> income level thing? >> income level, you know, iphones are more expensive. also, apps, ecommerce apps tend to be tailored more on ios versus android. so all of the things work together. you know, it's interesting, jeff bezos says he wants people to use the devices, not just buy them. it looks like on ios, people are doing both. spending more when they buy the devices, and in cases like this, using them -- >> you talked to app developers and there's the problem on apple that is curation. there's so many apps, you tend to get lost unless apple is willing to -- if they give you attention on itunes. >> and definitely if they're
11:12 am
cure rate curated, like android, people are browsing, an advertising-based marketplace. >> and how much do you think this is big players like samsung taking a step back from android, thinking maybe we're getting too cozy with these guys for the long term? >> i don't think they're taking a step back yet. samsung has -- >> diversifying the portfolio? >> they said they want to be number one tablet-wise in 2014, so they have to use android and everything else. so i think you'll see them push on android in 2014. >> good. i love the gingham, jon. >> you know i like the -- >> he's a tech guy. >> i believe it. >> he's not wearing a hoodie, at least. >> that's after the show. >> all right. when we come back, international economy's played a big part in markets at home. what can we expect in 2014? more on that after the break. but first, rick santelli talking to sheila bear later. hey, rick. >> yeah, a really big guest today.
11:13 am
sheila bair, head of the fdic from '06 to '07. i love her book, bull by the horns, or fighting to save main street from case -- not k street, but wall street. we'll ask her about k street, and talking about indemnification, bank of america, citi, the secret meetings, you don't want to miss this one, truly. ine's high energy density, your car doesn't have to carry as much fuel compared to other energy sources. take the energy quiz. energy lives here.
11:14 am
11:15 am
ask me what it's like to get your best night's sleep takeevery night.quiz. [announcer] why not talk to someone who's sleeping on the most highly recommended bed in america? ask me about my tempur-pedic. ask me how fast i fall asleep. ask me about staying asleep. [announcer] tempur-pedic owners are more satisfied than owners of any traditional mattress brand. tempur-pedic. the most highly recommended bed in america. now sleep cooler with extra cooling comfort on our bestselling tempur-breeze beds. visit tempurpedic.com to learn more, and find a retailer near you.
11:16 am
all this all this week, we're giving you ideas of how to make money in the new year. we turn now to the international sector. michelle has her predictions for 2014, but let's turn to the scorecard to see how she fared in 2013. michelle predicted greece would stay in the euro. that's correct. she also had a primary surplus in 2013. and she said mexico could become the the next hot market. right again. they passed a sweeping reform bill that opened up the oil industry to foreign investors for the first time in 75 years. finally, michelle predicted that africa would disappoint as a global hot spot. turns out thar was wrong. african stock markets ended on highs with nigeria up nearly 35%, zambia outperforming the nasdaq here. what's in store for 2014? here's michelle caruso-cabrera. ♪
11:17 am
>> reporter: the russian olympics in february will have as much political drama as the last time they were held in russia. that was 1980 when the u.s. boycotted the moscow summer games in protest of the soviet union's invasion of afghanistan. now, more than 30 years later, russia is once again resurgent in trying to retain influence and control in eastern europe and the middle east. as we've seen in ukraine and syria. expect russian president vladimir putin to use the olympic games as a way to demonstrate russian might. in the middle east, the u.s. and iran reach a final agreement on the nuclear program, the sanctions will be lifted. foreign oil companies trading firms, hedge funds already getting their visas in anticipation of doing business in iran once again. finally, india will survive any increase in u.s. interest rates better than most expect. monetary and fiscal tightening along with restrictions on gold imports have cooled import demand. the current account deficit is down to only 1.2% of gdp. that's from 5% in the
11:18 am
summertime. michelle caruso-cabrera, cnbc. it's only been long for a couple of weeks, but banks are fighting back in court against the volcker rule. what does this mean for the new rule? we'll talk with sheila bair after a break. [ mawhat if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim.
11:19 am
from td ameritrade. a research tool on thinkorswim. (voseeker of the sublime.ro. you can separate runway ridiculousness... from fashion that flies off the shelves. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. (natalie) ooooh, i like your style. (vo) so do we, business pro. so do we. go national. go like a pro. so ally bank has a that won't trap me in a rate. that's correct. cause i'm really nervous about getting trapped. why's that? uh, mark? go get help! i have my reasons. look, you don't have to feel trapped with our raise your rate cd. if our rate on this cd goes up, yours can too. oh that sounds nice. don't feel trapped with the ally raise your rate cd.
11:20 am
ally bank. your money needs an ally.
11:21 am
the american the american bankers association is threatening legal action if regulators keep the volcker rule requirements in place. regulators did release that information in the hopes to overcome those concerns. let's get to rick santelli in chicago with a very special guest. good morning, rick. >> all right, carl, what are you doing, trying to write questions now? she larks you heard carl. he's right. the volcker rule. you weighed in on it years ago when it was first passed in an article, and basically called it a rubicon, couldn't control it, too many pages, but it's a specific issue.
11:22 am
the bankers association wants to sue i believe trust preferred securities. what are your thoughts? >> i guess a bit of a sideshow. the overall purpose of it is to target the large banks, the huge trading operations, to make sure their done for customer benefit. for the smaller banks, my view, they should have it a de minimis exception for the smaller banks. the ceos aren't clear if they're in or out. you know, we frequently find this, when you have the rule making, targeted for the larger institutions, much higher-risk, but the little banks get caught perhaps in an unintentional way. so i think giving better thought to that going forward would be good. >> you saw what happened to the balance sheets of the five big banks, so they've grown. the dynamic you're discussing is not only alive and well, but it's ongoing. the compliance costs for the smaller banking institutions, is there going to be a great leveller, or is this going to be addressed through legislation?
11:23 am
>> i think it's a problem. i think the regulators do have the authorities to do this. some may disagree with me, but i think they do. it is a problem. there are fixed costs with the rules. taking a much bigger chunk out of the smaller banks, and more complex the rules, the more expensive the compliance costs are. what's frustrating is so many of the rules have nothing to do with the business model of the traditional banks. they have other risks we should be looking at. you know, in treating -- prop trading is certainly not one of them. so i think there is -- we need to have a better strategy about insulating the smaller banks with some of the rules that have nothing to do with them, so they can focus on the risks they do have. >> you talk about picking winners and losers. >> yeah. >> if we look at the exemptions the e to the volcker rules, government securities. >> yeah, i know. >> they're not going to be risking now. >> no, no, not at all. >> one was about goldman, a couple of days in the journal, talking about real estate
11:24 am
investing is going to circum vent the 3% threshold. that sounds risky. but they want to help housing, worried about governments. so they keep this game going. >> yeah. >> your thoughts on that? >> it is. this is the problem with prescriptive rules, and they have the smart lawyers and smart bankers, trying to figure a way around them. that's what i've emphasized the much higher levels. they'll find ways around it. make sure they get a nice thick capital cushion to absorb the losses. >> the dumbest thing of all, i'm sorry, i don't buy into most reasons why people think the credit crisis occurred, the wolf of wall street is a fiction, in the end, anybody who trades has a little wolf in them, it's up to the rule makers to understand that. >> yes, it is. >> so i guess my question to you is, quite simple, fannie, freddie, the gses, they created the entities, for-profit, and they created sausage factories with cheaper capital that output toxic products. >> yeah, yeah.
11:25 am
>> can we ever get rid of them? >> well, i don't know. it would be nice. you know, 90% of the original -- the mortgages being originated are gses or fha -- >> and by the way, it has this much extra capital on hand. >> yeah, that's a scary situation, definitely. so just the inertia in washington, the inability to do anything, they need to transition out. i want to bring the private securitization market back, and do it with risk retention, better disclosure, but the private market should be taking the risks, taxpayers shouldn't be. >> so in the few seconds we have left, and it's about health care, we bring up the examples of europe and what a great idea it was there. but i'm sorry, and we bring up canada didn't have problem with the banks, why can't we talk about that? >> and that's true. and the homeownership rates are higher than ours. we subsidize housing in a lot of different ways with the gses,
11:26 am
with the tax code, the favorable capital treatment, they blinked on that, so we need to rethink this. a housing-driven economy is not sustainable. we found that out in 2007. we need other parts of our economy -- manufacturing, energy, infrastructure -- that's where the resources need to be reallocated but we keep pushing it into housing. >> let's pretend the camera is not here. why can't we get gse reform? are they lazy? >> yeah. >> are they not up to the task? >> yeah. >> they have student loans. >> yeah. >> they have health care. >> right. >> they have housing. >> right. >> what's left? >> and the funny thing is, when you subsidize the sectors, the costs go up and become less accessible to lower-income people. >> i love the title of your book, protecting main street from wall street. is the next book going to be protecting main street from k street? >> it might be.
11:27 am
>> sheila bair, thank you for being our guest. chairman of the fdic and all around nice person, visiting friends in wonderful chi town area. >> all right, rick santelli, thank you very much. coming up on "squawk on the street," coming soon, over-the-counter, a legal rocky mountain high. starting january, over 100 stores in colorado will be legally allowed to sell marijuana to people over the age of 21. so we'll talk to the owner of one of those stores in just a moment. "squawk on the street" will be right back. and exciting. and maybe, most remarkably, not that far away. we're going to wake the world up. and watch, with eyes wide, as it gets to work. cisco.
11:28 am
tomorrow starts here. the ocean gets warmer. cisco. the peruvian anchovy harvest suffers. it raises the price of fishmeal, cattle feed and beef. bny mellon turns insights like these into powerful investment strategies. for a university endowment. it funds a marine biologist... who studies the peruvian anchovy. invested in the world. bny mellon. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space. we repaid every dollar america lent us. and gave america back a profit. we're here to keep our promises. to help you realize a better tomorrow. from the families of aig, happy holidays.
11:29 am
11:30 am
all all right. let's bring back simon hobbs as we count you down to the close here in the u.k. and across continental europe, ending on a high note, simon. >> a very strong session for europe. okay, it doesn't have the volumes, but come back from the two-day christmas break, resumed the rally, six day of a rally, and all top stocks are higher. so a market right away across the board, it's interesting, actually. looking at greece, the bottom right, greece has gained almost 5% so far today. whether it's window dressing or buying on expectations or whatever might happen next year, a clear outperformer. and the blue chips in athens and the way they have rocked ahead. you have upgrades on covered bonds from moody's. the football organization, also surging higher. if you were to look at the markets in europe that have done
11:31 am
the best so far, it's not actually greece, but up there, ireland, a gain of 33%, german 28%, and it's actually a record there that you've got on the german dax, and that's important, because that's where the big blue chips are, the one really people would take most note of in europe. the other thing that's happened, you've seen this expectation of greater growth, the bond markets have been falling, the yields have been rising. the yields of 10-year in london, gone above 3% for the first time, and sterling has gained again. the u.k. pound has had a phenomenal performance. look at that, up 8% against the u.s. dollar. the euro is also higher today against the dollar, at a two-year high, because the head of the bundis bank, quoted in one of the german papers, low inflation was not a justification for having low interest rates, and that it could lead to indiscipline on
11:32 am
reform. so that's a hint the bank doesn't want to ease from here, no qe, if that were possible, and obviously that's not terribly good optics for those worried about that. so $1.33, $1.37.75 is where we trade on the euro-dollar. >> all right. thank you, simon. a remarkable day in the u.s. energy complex. u.s. oil production at a 25-year high. bertha is at the nymx. hey, bertha. >> it's amazing when the think the u.s. energy production is up 18% this year. and yet we are seeing wti and nymx performing very well. we got the weekly inventory numbers and saw a big decline, much bigger than ebs pekted, 4.7 million barrels and part of that we're seeing fewer imports thanks to the better production in places like north dakota and texas, all of the shale oil that we're producing, imports down about 9.5% from a year ago. nymx crude holding in above $100 a barrel here. we saw a decline in cushing, the
11:33 am
delivery hub for nymx crude. a lot of the move has come this month for nymx crude. we've also seen gasoline having a pretty good month, as well. gasoline inventories were also down more than expected, the expectation had been for a build, and we saw 600,000-barrel decline, even as we're producing more gasoline at our refiners, as well, up above 92.5% production capacity. overall, that has brought up the oil and products today with the fairly bullish numbers from the inventory numbers, notwithstanding the fact that we have seen that the french refining strike come to a close, at least one of the major refiners in france, the other maybe soon to see its workers go back to work. we are seeing some production issues in places like south sudan on the verge of a civil war there. but that's not a huge provider. nonetheless, the market is more or less supported and the gas is the outlier, and nat gas has
11:34 am
been the best performer in the sector, hitting 2 1/2-year high earlier. we're seeing profit taking this year as the nat gas futures for january go off the book. we did get a good number in terms of 177 billion cubic foot decline, right where analysts were looking for, and even this month, nat gas continues to be the outperformer. guys, back to you. >> bertha coombs, thank you for the story on energy. let's go to stocks. mary thompson has a look on the floor. looks like stocks turned back into positive territory. >> yes, and you can probably credit exxon mobil, leading the dow higher in response to the gains in crude oil. we're seeing misses in reits as well as retailers, as well as the utilities. we've seen very choppy trading, light-volume session, doing about 60% of the volume that we typically do at this time. as you can see, the dow recovering recently along with the s&p 500. of course, the markets faced a couple of headwinds today. keeping a watch on the yield in
11:35 am
the 10-year, currently below the 3% mark, and crude oil, because it's above $100 a barrel, this is a two-month high for crude oil. this is impacting the transportation average, which touched a record yesterday, but down about 22 points now, the reason being we're seeing weakness in airlines. keep in mind that labor and fuel costs are the two greatest costs, so when you see crowd oil climb, that keeps pressure on the airlines, and, yes, delta is the biggest loser. look at the airlines, though, they are, too, weaker, as the crude oil climbs. looking at the energy stocks. they're benefitting from the move in oil today. as i mentioned, exxon mobil is among the leaders in the dow components. and some of the car stocks. gm is recalling 1.5 million cars in china, but also a report in "usa today" that either gm or ford could buy tesla today, all three of them are down in today's session. the dow up 6 points. back to you. >> thank you for that mary thompson on the floor. as you know by now, colorado
11:36 am
is rolling forward with retail marijuana sales. how are the growing businesses preparing for the january 1 rush of recreational buyers? we want to bring in tony, the owner of river rock, a denver-based medicinal marijuana outfit, that will be adding recreational products in the new year. tony, good to have you. good morning. >> thanks for having me. good morning. >> how hard was it to get the recreational license? >> it's been a -- [ sighs ] -- it's been a long process. [ laughter ] we had to go through the medical licenses pro session, and that took about -- process, and that took about three years and the lawmakers from the state and city level spent a lot of time and carefully detailed the applications respectively for both and put through a process that was pretty rigorous, and at the end of the day, they wanted to ensure that the qualified applicants were able to succeed in such a regulatory guideline and model. >> yeah. you know, when you start an industry from scratch, you
11:37 am
literally have no clue as to what demand is going to be like. we're beginning to see some of this in washington where consumption has doubled what some of the early estimates were. do you know, are you going to have a line out the door on january 1? what's your expectation? >> well, the state's expecting 300% increase, and we're going to do everything in our power to gear up for that. we won't be open for january 1st. we're gearing up more for february 1st, because we're a larger company, it takes us more time to properly gear up for that kind of a transition. but i would expect to see 300% increase in sales the first half and first quarter, going to be very interesting. we don't know what it's going to be like. i think the demand is ghing to exceed the supply in the first half of the year. >> i was going to is ask about supply. with that kind of demand, 300%, great expectations. where do all of the pot come from? is there enough of it grown to supply your audience?
11:38 am
>> well, currently, there's enough centers in place that will be gearing up and expanding for that current supply. i think that in the beginning, it's going to take some time. i don't think it will happen overnight and january 1st. i think it will take until maybe mid-june. but i think were the current market in colorado, you will see these centers like ourselves expanding and trying to meet the demands. after the first year, it's kind of up in the air. we'll have to see where it goes. >> if i'm -- if i'm a medicinal or recreational marijuana grower in colorado, and i want to expand, right, i'm trying to scale up and meet that demand, do i go to bank of america, and what do they tell me if i want a loan? >> yeah, that's part of the problem we have in our industry right now, is the way that our industry's being taxed and the availability in banking. there is none. i would love to see this first quarter or even the first half of the year where the feds maybe grant permission to states like colorado that allow us to go to
11:39 am
banks and go to the conventional loans that we're used to. unfortunately, we've had to self-fund and all behind demand, so we're always seeking private funding at this point, just to keep up with that demand. >> well, a lot of people are looking at your state for this experiment to see how it goes, perhaps testing it. it could happen elsewhere. what are the critics about this issue get wrong, that say marijuana causes health problems and memory lapse and all sorts of accidents that we don't want to see? what do they get wrong? >> well, they have to look at the safety profiles of cannabis. and cannabis is a safety profile of 1 in 10,000, and tylenol is 1 in 100, and oxys are 1 in 10. if you take 100 times the dose of tylenol, you die. the safety profile of cannabis is extremely large, and the
11:40 am
misunderstanding of cannabis, in my opinion, is that everyone has been focused on the one of 100 compounds in the compound, which is thc, and that's the part that gets us high, the other cabbinoids help with pain management, inflammation, and as we've seen, as of late, with seizures in children. >> finally, as sarah points to the supply/demand dislocation in the early part of next year, what happens to pricing? would you argue in the first quarter, the first couple of quarters? >> i think you're going to see extremely high pricing in the first quarter, and as the centers come online, especially centers like ourselves, you know, we're in this for the opportunity to help additional patients. currently, we serve 3% of the 150,000 registered in colorado, and this is an opportunity for us to seek out other patients in the state and outside the state, for those opportunities to help them. so for us, it's a little bit
11:41 am
different in the way we're perceiving the recreational opportunity. >> yeah, people on saturday saying shadow bank weed funding will be big in 2014. we'll see, tony. thank you for your time. >> all right. >> it's a fascinating business story. >> i wonder what it will do to the tourism there. talk about business. not only are they going to have the best ski slopes and now recreational marijuana. >> yeah. >> all right. that is happening in the new year. coming up on "squawk on the street," in the wake of the financial breach of target customers, our next guest wants the government to hold companies accountable when customers' financial information is stolen. we'll be speaking to senator robert menendez after a short break. you but, ah, that would make me a liar. no dude, you're on the jumbotron!
11:42 am
whoa. ah...yeah, pretty much walked into that one. geico anywhere anytime. just a tap away on the geico app. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives,
11:43 am
swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options... evaluate them with our p&l calculator... and execute faster with our more intuitive trade ticket. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account.
11:44 am
coming up coming up on "the half," twitter, tesla, amazon, everyone talks about their valuation, but does it matter? the ceo of a new company tells us how. and you heard of fedex and u.p.s. but what about shippers that rule the seas? the stocks are on a tear and one of our traders will name his favorite. sarah, we'll see you at the top of the hour. >> all right, looking forward to that, scott wapner on the "halftime report." meantime, people are reeling from the news that personal information from about 40 million target customers has been stolen. our next guest is considering holding hearings into the data breach, and wants to make sure that companies are putting
11:45 am
customers' security ahead of profits. senator bob menendez, a democrat from new jersey, joins us with more. good to see you, senator. we know you made the announcement outside of an atlantic city target. what action, exactly, are you calling for from the government and from these companies? >> well, what we've done is written to the federal trade commission chair and asked her, number within, what are they doing about target's breach? and, secondly, do they have the full authorities under the law to enforce ensuring that companies are living to the higher standards in terms of their security systems so, in fact, data breaches are less likely to take place and customers' personal identity information is protected. because in 2006, in another incident with marshal and tjmaxx, they entered into a settlement, but they didn't have fines or penalties, and that may be necessary if they don't have it under the law to provide them with that option so that they
11:46 am
can ultimately send a very clear message to the industry that you have to live up to the highest standards to protect your customers. >> so accountability is one thing, senator, but are you suggesting at all that target was negligent here? >> well, we don't know, and we're going to find out. that's why we wrote to the federal trade commission to find out exactly what happened. that's why there are a couple of attorneys general, and four of them from four different states, looking at the whole issue. that's why i know the justice department is also engaged to find out who are the hackers. but, ultimately, i think we also have to determine what's the standard here, and did target and do other companies, are they reaching the highest standard they can to ensure that millions of customers across the country, that their personal identity information is secured? this is 40 million. that's about 13% of the american population. that's a pretty big breadth of a security breach, and we'll find
11:47 am
out if they lived up to the highest standards, and if they didn't, we need to send a message that they and other companies need to reach that standard. >> no one disputes it's a major breach, the second biggest in the history of retailing. with the doj, with the senate, with the secret service, with private lawsuits, when does it become a pile-on, if at all? >> well, look, first of all, i think the doj and the secret service, they're working with target to figure out who are the hackers. and certainly, you want to bring those people to justice. i'm not quite sure they're looking at target's standard. that's why the federal trade commission, i think, is more appropriate to look at what is the standard that target applied? private suits, those can always be had. but at the end of the day, you want to make sure if target ultimately had the highest standards, then fine, they'll be able to defend themselves against any actions. if they didn't, then we need to have a clear standard set for the industry, not just target,
11:48 am
but for the industry of what is expected of them, and what is the standard that should be applied to ensure the security in this ever-growing dynamic of data information as a form of doing business. we need to make sure that that cyber security is of the highest order. >> and one thing that experts point to in terms of improving security with credit cards is the magnetic strips are antiquated. they're supposed to switch to the chips, which we've seen in a lot of other countries by 2020. how is that acceptable in this era where you have vulnerabilities, like 40 million customers at target? >> well, there's some suggestion by the security experts that that actually is a greater safety against breaches. and one of the things that i hope will happen here is that the senate banking committee, on which i sit on, will hold hearings to derl -- determine what is the standards that should be applied and ultimately
11:49 am
focus a spotlight on this ever growing reality. this is not a rare occasion anymore. we increasingly see data breaches. and they involve millions of americans, millions of consumers, and they affect not only those consumers, they af s affect the economy, as people say, wait, should i be using online purchasing, should i use my credit cards, am i safe at the end of the day, is my credit going to be affected? these are questions that flow from a data breach. >> yeah, more people using online, and using mobile as well. thanks very much for joining us. robert menendez, senator from new jersey. who needs the lottery when you have a wheel? according to some reports, the nba is looking at a proposal that would shake up the draft by assigning picks 30 years in advance. we'll tell you how it works after a short break.
11:50 am
and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve.
11:51 am
11:52 am
well, it's something that nba fans know pretty well. tanking. that is losing on purpose to get a higher draft pick is a major problem in basketball today, and according to reports, the nba is now looking at a radical solution to put a stop to it. our dominic chu explains back at hq. hey, dom. >> hey, carl. pro sports have evolved the drafting process in their own specific ways here. a report published in grantland.com outlines a new way to handle the nba draft. it would script out when a team would draft in each of the next 30 years. something called the wheel. you can see why there. it's a mathematical formula used
11:53 am
to determine the most equitable sequence of picks from year to year. now, proponents of this system say it would prevent teams from tanking, like you said, to get a better draft pick. it would allow team managers to better forecast how to build teams, as opposed to just drafting individuals, because you know exactly where you'll draft in every single year. now, the naysayers claim the system could penalize teams for picking in a draft, just because they have a bust and give them another high-five pick, and then they'd have no way of really making up for it, because it's scripted for the most mediocre teams, and also other teams for the coming years have that same kind of scripting issue. it also allows great teams to get even greater, because the wheel says they may get a higher pick next year, even if they won a championship. in any event, it's something, i guess, thought provoking is the best way to look at this, how to script a team, and you won't use the lottery ping-pong balls to do it. there's no indication this will be put up for proposal anytime
11:54 am
soon. >> no, something the e-con bloggers will have a field day with. one of the great things, jon fortt, is it's brought parity to the league. why hasn't it happened in the nba? >> everybody understands the ping-pong ball, right? the ping-pong ball doesn't discriminate. the numbers on a wheel. it's like a conspiracy to miss off the fans. it just seems did. >> here's one thing, guys. everybody has their own theory. can you see the wheel there. it tells you when you're going to draft. you also have other owners, namely mark cuban, who tweeted out yesterday, this is interesting, because obviously, he's a team owner, owns the mavericks, one way to remedy this is not get the worst two teams the first two picks. that's the simplest way to accommodate that. when he takes to twitter to talk about him as an owner and how he'd fix the draft, that's pretty funny. >> i don't know much about this, but i do know the nba draft lottery, isn't that great
11:55 am
theater? why would they get rid of that? >> it's a good point, dom. marketing. >> i like the lottery ball -- ping-pong ball thing. it makes me feel like the powerball. the nice thing about the draft lottery, just because you're the worst team, it doesn't guarantee you the top pick, not like in the nfl. >> this isn't based on what the nets and knicks have been doing, just to be fair. >> again, is that who we're picking, dom? >> sarah is learning more about basketball in the past five minutes. >> that's okay. she's from ohio, so she has to know more about sports, a big sports state. >> bengals. we're not talking about that sport. got it. >> no, no. >> thanks, dom. a great story. dom chu back at hq. when we come back, won't you be my famous neighbor? find out which celebrity everyone apparently wants to live next door to when "squawk on the street" comes back.
11:56 am
with scottrade's online banking, i get one view of my bank and brokerage accounts with one login... to easily move my money when i need to. plus, when i call my local scottrade office, i can talk to someone who knows how i trade. because i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade-proud to be ranked "best overall client experience."
11:57 am
[ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection. ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track.
11:58 am
the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. so everyone goes home happy. could you if you could pick any celebrity to be your neighbor, whom would you pick? zillow is out with a survey on the most and least desirable neighbors. jimmy fallon voted the most desirable, and the least, kim
11:59 am
kardashian and kanye west. sarah just asked me who would be my pick. i can't think of one. >> i think i would pick ben bernanke or something. >> only in this world. >> we saw what kanye and kim do in their free time so i guess i agree with -- >> yeah, definitely be a neighborhood nuisance. >> how about you? you'd probably want to live next to -- >> i'd go old school. bill cosby. >> that would be great. taking over the fence. yeah, with the cos. >> watching the market, thin tape, and the dow not moving much, 6 points. twitter is down about 7%, which given that decline, is going to take you all the way back to tuesday. >> yesterday? >> yes. >> and probably going down, jon said, for the same reasons it was going up, which was sort of hard to figure out. a lot of momentum and hype behind the social media names. >> of course, the downgrade out of mcquarry, saying nothing has changed since they launched
12:00 pm
coverage 15 days ago. >> maybe the window's already dressed now. >> yeah, a good point. oil is one to watch as we got crude back above 100. the biggest u.s. production since 1998. you have to go back 25 years to see that. we'll see what effect that has on the economy in 2014. guys, see you later on. let's get back to headquarters, scott wapner, and "halftime." ♪ all right, carl, thank you so much. here's what we're following today. against the crowd, which stock has the biggest short interest? we'll trade the biggest name s fantasy football. wait until the end of the season to get paid. one company wants you to cash in daily. its ceo will tell you how. we do begin with the markets. stocks looking to extend the market run. the dow set for the best two-week performance of the year, on track for its best year since 1996. we're watching interest rates, as well, the yield on the 10-year sitting at top

163 Views

info Stream Only

Uploaded by TV Archive on