Skip to main content

tv   Squawk Box  CNBC  December 26, 2018 6:00am-9:00am EST

6:00 am
it's boxing day, "squawk box" begins right now ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" on cnbc. we're live from the nasdaq market site in times square. i'm kelly evans along with andrew ross sorkin and wilfred frost. michelle caruso-cabrera is also joining us >> the gang is all here. this is like a post-christmas party of sorts >> usually it would be jokey, relaxing, memories of christmas. >> not today >> this week did not start that way. >> just now the futures turned
6:01 am
lower. we were down on monday 600 and change >> 2.7% on the s&p after the close, after the terrible week before and the terrible month. >> here's your implied open. we're fluctuating around the flat line. s&p implied lower a half point stock markets in europe are closed this morning. overnight in asia, stocks in japan rose by 1% after tumbling 5% on tuesday's session. china shanghai composite fell by a quarter of a percent >> worth noting for the year to dated we are down more than 20% on shanghai. japan is down about 20% year to date as well big declines around the world for all markets. >> for a while it was just shanghai, now it's everybody >> treasury yields, a lot of change here as well. the ten-year treasury yield, 2.729. we've gone below 2.75.
6:02 am
the 30 year at 2.984 the two-year, 2.583. still yielding higher than the five-year note crude, where we have seen a sharp selloff, brent is at 51. wti is at $43 and change per barrel that should help gasoline prices for people shopping today. let's check on the price of gold this has been a stalwart this year lately fluctuating a bit the three-month rate of change up about a third of a percent. 1,276 an ounce i heard someone suggest that people look to gold as a source of funds when there's margin calls. >> you would have thought bitcoin will do better >> we'll discuss that later as well >> people say bitcoin is more of
6:03 am
a proxy for risk >> back and forth. >> positive figures on christmas spending out this morning. mastercard says total u.s. sales road 5.1% between decembnovembet and december 24th. online sales were up 19% we will talk to steve sadove coming up at 7:30 a.m. president trump's christmas day message, the government shutdown he says will last until congress meets his demand to fund a border wall or else ylan mui joins us this morning from washington. >> good morning. the president made those
6:04 am
comments during the talks with reporters in the oval office after he made calls to members of the military. he also had a last-minute stocking stuffer for the treasury secretary and the fed chairman he told reporters that both of the men have his full support. >> do you have support in secretary mnuchin? >> yes, i do very talented, very smart person >> what about the fed chair. >> we'll see they're raising interest rates too fast that's my opinion. i certainly have confidence. >> president trump acknowledged the fed is raising rates because the economy is strong. he suggested that's a form of "safety. the president has been holed up inside the white house amid the government shutdown. he's frustrated he's not down in florida with his family. he's mad about the market selloff. he doesn't like the stale mmateo
6:05 am
government spending. here's what the democrats put out heading into christmas they said president trump is plunging the country into chaos. the stock market is tanking, and the president is waging a personal war on the federal reserve. it went on to say the president wanted the shutdown but he seems not to know how to get himself out of it. trump may have opened the door to compromise by suggesting a border wall is the same thing as a border fence that will need to be hashed out once lawmakers get back to washington tomorrow. >> a couple things is there any chance there's some kind of compromise that could potentially be reached do you stee anythiyou see anyth horizon? i think eventually a compromise will have to be reached, but the question is how long will it take to get there? i don't think we'll see anything before congress reconvenes on january 3rd. by that point democrats will be able to pass something in order to get the government to reopen,
6:06 am
whether it's just a short cr -- >> so a compromise doesn't have to be really reached >> it still needs to pass the senate, so you need republicans and democrats to do that and the president still needs to sign it one question here is will trump be willing to use his veto power if the house and senate pass a no strings attached, clean spending bill that doesn't include money for the border wall >> and he's saying he will >> at this point he's saying he will but perhaps he might be convinced that a border fence is the same thing as a border wall. perhaps he'd be willing to accept less money for a border wall all of those factors are negotiating and leverage points. >> clearly a vote of confidence for secretary mnuchin in terms of public comments any other reports of something in a different tone behind the scenes
6:07 am
>> were some news reports out after the markets tanked on christmas eve that the president is unhappy with mnuchin that he's skating on thin ice for the moment expressing public confidence in the treasury secretary. there was also a report that suggested that statement that mnuchin put out about his call to the bank ceos, that was directed not at the public but perhaps at president trump, trying to show the president he's on top of this, he's doing his best to calm the markets and assure them that all is fine we'll have to see how that relationship develops and how the possible volatility going forward in the new year affects that >> do we know if there's any fallout from the calls that mnuchin made to the ceos fallout in the markets, no question but in terms of fallout, push back from the president? do we know if the president ultimately directed him to do that
6:08 am
>> sara eisen has reported that the president dictated a tweet to the treasury secretary in order to assure investors and assure the public that he does not intend to fire jay powell. that was a direct quote from president trump. as of now nothing further than he has full confidence >> thank you the markets continue to suffer from what we could be calling the trump tantrum this week. >> were you waiting to use that. >> i will use it that's where we are at this point. >> let's talk about the markets and the shutdown joining us on set is chris retzler and jeff steinberg chris, to andrew's point, is that what's happening with the u.s. stock market? is it because they're upset about trump and the decisions
6:09 am
made out of washington do we go back to october 3rd and say this is all powell's fault >> i think the machines have taken over what you're seeing in the marketplace is the constant draining of liquidity. it's a whole combination of things out there the fed is moving rates higher they're there's taking some of the bonds off their balance sheets you have this double edged sword hitting the markets now. the time to be nervous is past i think maybe investors should be re-evaluating their portfolio, rebalancing it to get into 2019. >> people would suggested when gary cohn was still the chief economist in the white house that he was worth a couple thousand points on the dow he left and that wasn't the case at the time. who do you think -- if you're the president right now, and you want the market to go back up,
6:10 am
what could he do. >> greatest stimulus he has is solving china. if you can bring back confidence that we'll get out of a trade war, we'll resolve some issues that are important to the u.s. economy. theft of intellectual property is a major problem that i don't think we could have continued down if you looked to 2020, the general election, the biggest stimulus he has in his pocket under his control is to resolve china. >> you said draining of liquidity seemed to be the primary reason you thought we were having a selloff here, right? >> at the end of the year going into year-end. also in a time period when losses actually can be realized. people have not done that for the past few years so you balance out the gains you realize in the early part of the year, you're selling so there's a liquidity drain out of the market. it is going to hit a bottom. we may -- >> i'm trying to underline the difference between the turmoil in washington, people being upset with the president and the basic fact that the fed is both
6:11 am
raising interest rates and reducing the size of the balance sheet. >> you have to cut through the noise. as a long-term investor, you have to take out the short-term noise that is causing some concern. look towards the long-term do we get to a point where the fed stops raising rates? i think they'll be on a pause in 2019 >> for the whole year? >> not for the whole year. i think you will see economic growth beginning to lift at the end of the year. >> do you think we're going to have a number of rate hikes next year >> no. i think december will be it for a while and they'll be data dependent. to your guest's point, the liquidity in the short-term run is being driven by algos and other things, we don't think we'll be in a sustained bear market here. valuations are too
6:12 am
investors have to avoid what one of my partners calls the bear market depression syndrome, avoid making bad decisions during this time >> so the "journal" has this article, stock rout fueled by market on auto it says about 28% of the market is algos unto themselves when you add passive and everything else with it, it's like 85% of the market when you talk about where you see the market and the fundamentals -- there are the nu fundamentals and the issue with the fed, but how much of this is exacerbated by computers >> i wondered has the proportion of active to passive changed that much? >> over the last five years? yes. over the last year, no >> mr. market knocks on the door and says here is my price today.
6:13 am
if people out there know what the companies should be worth and they're getting a better price, why is everyone -- i understand if the moves are wider than they might have otherwise been -- >> for active managers, it's a great opportunity. i see value in individual stock names that we have done fundamental research behind. we're really excited about it. with the draining of liquidity, it's hard to fight the fed >> we are conflating a lot of different kinds of liquidity you're talking about selling the fed and rich was talking about liquidity in the markets >> with the algos, when you go from fear to anxiety to panic, as an individual analyst or a portfolio manager, you have to manage that panic, because you start making bad decisions the algos are going to feed into that panic especially without a
6:14 am
downtick rule in place >> you mentioned valuations are starting to look attractive now, but these algo factors, were they not what took things like the f.a.n.g. stocks way above typical valuation earlier in the year and therefore valuations will not support the market whilst the momentum is to the downside >> i think the momentum stocks in the last few years were the majority of that return. the street is at $176 in earnings we're at 171 even if you take a hair cut off of that, we're trading below 15 times earnings the big risk is if the consumer is spooked and feels the economy will slow, it becomes a self-fulfilling prophecy which could put us into recession earlier than we think, which is not 2019
6:15 am
this is classic parts of kind of -- >> can we go back to the holiday shopping issue do you think come january 20th, and i don't know where the market will be a month from now, assuming that we're in the same place or somewhere near this place, do you think that's going to have a real material impact on people's shopping habits? people will look at their statement and go, uh, i deidn't realize that how many christmas table dinners were about people saying what will i do? >> last year it was bitcoin. >> last year it was bitcoin, this year it's the market. >> i've been doing this a long time for retail investors, when you get into the crazy periods in the market, people tend to not open up statements >> everyone checks online, right? >> i think people love to check online when things are good. that's the bull market greed
6:16 am
sense. when you get into these levels of anxiety an fear, people say it's way too stressful for me to go online. i just won't do it today i'll wait until an update. >> do they liquidate their portfolios >> no. >> one thing we've looked at, we have not gotten the gmo calls yet, the get me outs that's when you know you're close to a bottom. we are getting should i get out. that the where there's a lot of coaching our clients are high net worth individuals so we're not getting any of the gmo calls yet that would be a positive sign that we're in a bottoming out >> do you think when people look at their statements, if they're waiting until they're forced to in january that there will be a negative feedback loop >> certainly can be. they overreact at the bottom
6:17 am
i agree with the other guests. we're not facing an economic recession next year. you're facing a wall of worry. we'll have some earnings recession after a great year things will slow if that growth continues in, the fed is not there to help on the multiple expansion. but if growth and tin the econoy continues to happen, the market will live forward. >> i live in the real world more now. >> tell us about it. >> people don't talk about the stock market as much as they did. >> are you saying our world is fake, yours is real? >> no. >> is that michelle? >> that's michelle >> i don't see her >> hi, rich. >> merry christmas >> she used to play a tv anchor on tv. >> now she's having fun. >> guys, thank you appreciate it. coming up, the s&p 500 down 12% year to date if you invested in restaurant
6:18 am
stocks this time last year you would be counting your gains we'll take a closer look at that sector and the restaurant stocks you may want 2in your portfolio for next year. here's a look at the premarket winners and losers in the dow. this isn't just any moving day.
6:19 am
6:20 am
this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments
6:21 am
in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. as we get ready to close the book on 2018, we're looking at the biggest market drivers and asking what might be in store next year? let's focus on restaurants >> reporter: the restaurant industry is serving up growth thanks to diner demand, value and m&a. as 2018 draws to a close, here's what to watch in the year ahead. delivery and mobile remain in focus. more restaurants are pushing further into delivery an mobile ordering and pay as consumers
6:22 am
preferences continue to evolve starbucks just inked a deal with uber eats and chipotle and mcdonald's continue to expand offerings. two, value wars rage on. deep discounting is expected to continue as players compete for consumer dollars promotions will be important in 2019 and investors will be watching to see if inflation pushes companies to push back on offerings and discounts. three, dealmaking will continue analysts say the trend could continue into the new year especially as private equity firms show continued interest in this space >> restaurant stocks have outperformed the broader s&p 500 over the last three months we'll see if that trend continues into the new year. >> frankly, if anyone knew the restaurant sector was the place to hide.
6:23 am
michelle is here we want to understand how much tightening is happening, going back to the piece about how the fed should not be raising interest rates and draining the balance sheet, this has become hugely controversial steve when he talks to the feed people, they say the size of the balance sheet shouldn't manage for whatever reason sales shouldn't matter it's not monetary policy >> i think that statement is weird. the reduction of the balance sheet shouldn't matter if it shouldn't matter, why did you expand the balance sheet in the first place? you expanded it for a reason >> he said it mattered then because the markets were in a panic. i would almost say why buy anything at all? just say we'll do whatever it takes like mario draghi. >> when you put together what is the impact of the stated policy rate that we talk about and then what's going on with what used to be qe and is now qt. some researchers believe the shadow fed funds rate got to
6:24 am
negative 3% in 2014. following that there was an uk economic's research firm thats se that essentially said you almost had 5 percentage rate increases and if you keep adding to it you will have a rate of 5% by the end of 2019. what does that mean for valuations valuations can go to a million when interest rates are at zero. what happens when they're higher >> it's clearly both factors that matter, but you could also say the economy has been incredibly resilient whilst we got through the first half of this tightening. around the rest of the world, and delayi ining along with the rhetoric that they may be
6:25 am
delaying when they will do the first bit of tightening. >> the economy in china already slowed europe already slowed. we were the last stalwarts of growth if you think the stock market is a discounting mechanism or a signaling mechanism, the u.s. stock market could be telling you you have a slowdown in growth coming. >> the interesting thing is you have these egg heads who are putting together the shadow funds rate saying the same thing as president trump is saying his is more ineloquent, he has his on reasons for not wanting growth to slow, they would say the combined effects if there's 5 percentage points of hiking, which is the most you would get. >> you have to be correcting from an extraordinary position in the first place, the loosest policy the world has ever seen >> which makes the move more dramatic >> are you predicting a recession for next year?
6:26 am
>> i don't have a ph.d. in economics. only an undergraduate degree i don't predict a recession one way or the other >> the market is the question is whether that's accurate that's all >> it's predicting a downturn or recession in the next few years. >> pulling it forward, most investors we've been talking to on this program have been saying go in and buy because they don't think that will happen >> right >> there's a strange disconnect going on here. >> you brought up ben graham earlier. the better way to think about t rich was talking about evaluations what should you be paying for earnings right now in a higher interest rate environment? is 15 times cheap enough here? are you comfortable with that as opposed to the 22 we were looking at then as a long-term holder, you know, is that enough of a lower price than what we've been used to that you can live with it >> let me ask you a separate
6:27 am
question there's the fundamental issue of what fed is doing, what powell is doing, all of this. the market moved on that over the past week the market, i would argue, also moved on government shutdown, we have not talked about tariffs -- >> i think shutdown is meaningless. >> we have tariff man, the china piece. >> always been tariff man. >> if you don't put that into the soup now a debate about whether powell will be fired or not. i know you're discounting that >> if he fired powell, that would be extremely market negative >> when i called it a trump tantr tantrum, none of the things that have happened in the last week out of 1600 pennsylvania avenue have done anything to this >> the steven mnuchin thing. >> zero? >> i think the mnuchin thing backfired on him it made people wonder whether or not there was something going on when you salk about the breath
6:28 am
of thee decline we see, remembe the increases. how many times did bob pisani come on and say this market rallied so fast. when it's going up, we're all relaxed. when it goes down as fast, everybody gets nervous >> last january we went through a 1,000 point benchmark every ten days or so >> it was insanity >> we turned the calendar into january. everyone who can contribute to 401(k)s can start contributing again. i'm surprised there hasn't been more front running of that january effect i understand it's a known known and it is priced in, but -- >> on the powell thing, every fed president that hiked rates in modern times, the president has been furious with them
6:29 am
lbj threw his guy against the wall and started screaming at him. >> yes, but not -- >> reagan was furious at volker. >> but not as publicly as this president. >> it was known in the market. >> that may very well be, but my only point is for a period, as you said a year ago, as the market was going up, we would run a little bug on the corner of the screen called the trump rally. you gave him credit for that >> because he was going to cut taxes dramatically and he did. the market had been flat doing nothing until then >> i'm just suggesting to you that we were happy to say this was the trump rally. >> you want the bug back that says the trump tantrum >> let's just acknowledge the obvious. >> if it goes back to october 3rd when powell was the one who started talking about tightening >> i think it's interesting that we have separated out the
6:30 am
president's -- it's interesting. the president appointed powell you can like bernanke, there's the bush presidenpresidency. obama got the credit or the blame. trump gets the credit or the blame. all i'm saying is be consistent about what the message is >> i'm very consistent here's what i'm consistent about. president trump lowered the tax rate dramatically for corporate america. >> don't disagree. >> these are things that believe balance sheets that drive the economy, he's been a positive. obama was a negative his jawboning, everything else, maybe there's a tiny layer there that leads to concerns within the market i believe it's much more about the tightening of credit conditions >> you have to be fair -- equal on credit and blame.
6:31 am
>> 100%. >> there is a much bigger point, which is economic cycles this one has been juiced up and extended interest rates coming into that. >> 100%. >> you take off the artificial support, that's what we're seeing now >> i'm arguing we juiced it as a result of the tax policy on the corporate side and the personal side >> which delayed that cycle. >> that is all coming together >> would be concerned if he now turns more bannon-esque in the advisers and people around him even policy-wise going forward >> i think if he fired powell t would be bad it would make it look like india, argentina >> more from michelle still to come >> always a fun conversation. coming up, mastercard reporting a 5% jump in holiday spending we'll talk about the winners and the losers in the retail sector. as we head to break, a look at monday's s&p 500 winners and
6:32 am
losers on christmas eve. shield℠ annuities from brighthouse financial allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.
6:33 am
6:34 am
6:35 am
♪ ♪ (buzzing) gather new insights, leave your data protected on-site, and put it all to work with ai. the ibm cloud. the cloud for smarter business. ♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning welcome back to "squawk on the
6:36 am
street" here on cnbc among the stories front and center, shoppers delivering for retailers in what seems to be the final stretch before christmas. got some early numbers from mastercard spending pulse. it shows the total u.s. sales excluding autos rose 5.1% between november 1st and december 24th. we'll talk with steve sadove at 7:30 to break those numbers down investors will get the latest read on the housing market today. the case-shiller home price index comes out at 9:00 a.m. prices have risen more slowly in the past six months as higher mortgage rates weigh on sales. they are forecast to have risen 5.3% in october. wall street may be up an running today after christmas, but several markets in europe and asia are taking an extra day off for boxing day the uk, france, germany, hong
6:37 am
kong and australia are closed for the holiday which has become a big day for retailers in those countries. boxing day is when they generate the most revenue >> it's our black friday >> it's our black friday can you give the history of this holiday? for so long as a child i thought boxing day was boxing day like mike tyson kind of boxing day. then i realized it was wrapping up the boxes >> there's some confusion as whether it's do with boxing the things up from the day before. >> so you don't even know why it's called boxing day >> i knew you were going to ask me that. >> i never got an answer either. when i would ask people in london, they don't know. >> it doesn't have a specific reason it's always been the day after christmas. when we're here, thanksgiving always on a thursday i can't believe friday is not a
6:38 am
day off. >> we should make a change >> because of liquidity reasons. you can't have more than three days of closure. you can't have four days in a row. >> is that true? >> yes >> see >> bringing the knowledge. >> on that note, i imagine european markets will open with a bump tomorrow. we have the nikkei down 5% yesterday. >> you mean bump to the upside >> no, down. >> to make up for all that happened while it's been closed? >> it's been closed. we had big moves that's a good point on the liquidity. we'll see. >> okay. >> nissan director greg kelly was released on bail from a tokyo jail late yesterday and examined in a hospital today he spent more than a month in detention after he and carlos ghosn were arrested on charges of underreporting ghosn's income ghosn is still being detained. kelly suffers from spinal
6:39 am
stenosis and he was scheduled for surgery on december 7th in nashville. he is still barred from leaving the country. in a statement kelly said he had not falsified any documents and looks forward to restoring his honor in court this has become so controversial because people think it's about a power struggle with the japanese, targeting these executives greg kelly's wife was furious about this she was a part of the campaign to get him out >> they called him to go over there. told him under completely false presences why he was coming. they knew he was going to have to have the surgery. >> this is happening on the other side of the world. clearly what we have seen just what's been leaked about what's going on with carlos cohn, the apartments, et cetera, it raises a lot of questions about what's happened with his income the rest of it, it's so far
6:40 am
away so hard to know the politics internally there's so many executives from so many different parts of the world because of this joint venture what a mess. >> is it a japanese corporate culture thing that is coming to -- lately they say japanese, the earnings have been better. they had some stability in government now for a while yet this >> i don't pretend to know anything about japanese corporate culture. i interviewed chris flowers once who made a lot of money in japan. he said to me after all these years i still don't understand japan. i don't understand the japanese and japanese corporate culture >> not to say there wasn't some wrongdoing here, but the way it all came about that quote pretty much sums it up >> now back here in the u.s., the holiday shopping season posted the highest jump in retail sales in six years. joining us now to discuss the retail sector and look ahead
6:41 am
into 2019 is a retail analyst from forrester thank you for joining us good morning to you. those numbers we mentioned for mastercard, was that what the market was expecting do you think this will give retail stocks an extra boost as we see how positive this shopping season has been >> this is definitely expected the black friday weekend was really, really positive for retailers. you have the big winners like amazon also a lot of department stores, some of the mass merchants were reporting strong sales and when you see that positivity in november, it's usually a great sign that the rest of the season is going to continue to do well. the other piece to keep in mind is that about 10% of holiday sales actual happens starting now in the days after christmas. consumers do go back to return a lot of transactions, but there's a lot of sales that are
6:42 am
compelling now as retailers look to clear out their inventory the season is not done yet i expect a strong finish through 2018 >> what did you say there in terms of the individual, when it's department stores you single it out? >> i should say some of the department stores. the ones that are doing well right now are companies like macy's, kohl's they have actually had strong momentum some of the ones not doing well are sears and jcpenney in general we're seeing higher-end investment in digital transformati transformation that's where we're seeing more of the positive impact target, walmart should have a decent holiday season as well. the companies that tend not to do as well that we have not heard as much great news about
6:43 am
are some of the specialty big box retailers. those are definitely some of the ones that have seen their share go to either the mass merchants or to amazon >> as we look at overall sentiment for 2019 what do you think will have a bigger effect on consumers, the selloff in the stock market or the cheaper gas prices >> for most americans it's the cheaper gas prices every dollar decrease in gas at the pump per gallon usually about $700 back to the american consumer that money is money that absolutely goes back into discretionary spending usually the biggest beneficiaries will be the mass merchants like a walmart, dollar stores, sometimes convenience stores definitely sectors like grocery do really well when the gas prices go down that's a factor that affects the average consume other certainly
6:44 am
at lower end the stock market will more likely affect the affluent consumer and luxury sectors. we expect some softness at the high end as a result of what you're describing. but at the low end for now it should be okay we'll wait and see what tariffs do because tariffs, that's the big unknown, how much that ultimately affects consumer goods in 2019. >> thank you very much for joining us >> thank you coming up, bitcoin is under pressure the christmas eve selloff wiped out most of the 10% gain from the previous week. we'll look at the cryptocurrency straight ahead. and more than 90% of s&p stocks are in correction territory with some notable exceptions we'll talk about those resisting the selloff next stay tuned, you're watching "squawk box" on cnbc
6:45 am
6:46 am
6:47 am
welcome back to "squawk box. time for our executive edge. 95% of s&p 500 stocks are in correction territory they're down at least 10% from
6:48 am
the 52-week high among the biggest losers on the list, one we talked about so much, general electric ge down 64%. then there's l brands, down 61%. nvidia, such a high flyer, down 56%. halliburton also down 56%. but there are a couple of notable hold-outs. redhat is the best performer as it is being bought by ibm. it's down 3.6% the acquisition price explains a lot of that. >> why should it move? >> exactly >> why should it move at all from the acquisition price >> that is -- i don't remember if it's an all-cash deal was there a stock component? i have to look at it yum brands and 21st century fox are both down 7.5% duke energy and auto zone are down just 8% let's tell you, procter & gamble and coca-cola finished monday down more than 9.5% from their 52-week highs. when we come back, more on
6:49 am
"squawk. it's been a rough year for bitcoin backers. the digital currency dropping more than 70%. if you're in the stock market and upset f you're in bitcoin you're more upset. >> cash. >> all cash. they think ibm can't -- >> it's all cash not sure >> bitcoin as we mentioned, down 70%. we'll talk about what will happen in 2019 as we head to break a look at what's happening in european markets as we speak. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence.
6:50 am
it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...
6:51 am
allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.
6:52 am
6:53 am
welcome back to "squawk box. bitcoin took part in the christmas eve selloff like everything else. dropping below the $4,000 level. joining us now is anthony poplau here's the question. is crypto supposed to follow the markets or is crypto supposed to be this uncorrelated asset because boy, does it seem correlated at least to some degree >> yeah, bitcoin is a non-correlated asset if you look between the digital asset, it's at zero.
6:54 am
compare to the dollar index, it's near zero it's proven it's not correlated. >> can i just make an argument to you i believe that a lot of people who did own crypto or have owned crypto have a lot of money in the faang stocks, technology stocks they're the first movers they watched -- if you look at some of those stocks in the valley right now that have been hit and hit so hard, you know, i don't know if the margin calls are going on i don't know if it means less appetite i think there is a connection between the two. you think i'm wrong? >> look. the data is the data not correlated from that perspective. most people are being intelligent about their portfolio, they're taking 1%, 2% into account you know, equities are going to be a major portion of their portfolio. they're going to get hit much harder on the equity side. it's just the sizing of the portfolio. but i agree there is some psychological components here as
6:55 am
the stock market pulls down. >> i think you're right. i think it's coincident the owner of bitcoin is also the owner of faang stock >> that's what it feels like to me >> there were a number of people that said this that there seemed to be -- bitcoin was leading the market up actually led the market down >> anthony, give me the inflection point you're going to make the bold case, i think, what would take this thing higher? >> yeah. so short-term, i think we've got a lower to go. >> lower to go under $3,000 >> i think so. so i told you -- >> under $3,000, wow >> what, do you own bitcoin? >> no. >> i think andrew is interested in bitcoin >> used to say under $5,000, i'd be interested. >> your sons have one each. >> no. i always thought about it. >> anthony, some people are going to look at all this and
6:56 am
say this proves bitcoin is a fraud. what would you say to them >> you know, look. there's a saying we have in crypto that says long bitcoin, short the bankers. this idea that cryptocurrency is transparent. it's driven by math and software code i think there's a lot more kind of lack of transparency and nefarious activity that goes on in the traditional finance markets. if increased demand comes in, you're going to get an increase in price and we'll kind of see how it plays out. >> okay. anthony, appreciate you coming in day after christmas good luck. >> thanks, guys. still to come, the dow hit its lowest level for the year on the short christmas eve trading session. dropping more than 650 points. we'll talk strategy heading into the new year and later we'll talk big banks, media emergenciers, and a lot more from our guest host, james stewart. 8:00 a.m. eastern.
6:57 am
"squawk box" back in a moment. don't go anywhere. shield℠ annuities from brighthouse financial
6:58 am
allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.
6:59 am
7:00 am
market alert with four trading days left in 2018, we're on track for the worst december ever. president trump is blaming the fed for market volatility saying the fed is raising rates too fast wall street's mentalist has plenty of tricks up his sleeve for us this morning. it will blow your mind as the second hour of "squawk box" begins right now. ♪
7:01 am
live from the beating heart of business, new york, this is "squawk box. >> what happened to the holiday music? good morning welcome back to "squawk box" here on cnbc i'm andrew ross sorkin along with kelly evans and wilfred frost. joining us is senior contributor michelle caruso-cabrera. take a look at the futures a lot of people talking during christmas after a tough day prior to christmas eve or on christmas eve rather looks like the dow would open higher we'll call it 29 points. has the nasdaq looking to open six points higher. and the s&p 500 looking to open four points higher >> there is no bounce. they were down 650 points on monday and we're barely even getting a bounce in the futures? >> and it's been a worrying sign of a lot of the last week or so.
7:02 am
we've had an attempted one we'll get a fresh read on the housing market this morning. out at 9:00 eastern. in september home prices have registered a 5.1% year over year increase two reports usually out on wednesday are not out today due to the christmas holiday the weekly report on mortgage applications, that's postponed with the wednesday report on oil and gas inventories being postponed until friday this year's holiday shopping season was the best in six years according to reports sales up 5.1% from a year ago. we'll have more on that particular report and the holiday shopping season with steve sadove coming up. president trump is lashing out at the fed again yesterday he argued the central
7:03 am
bank is raising rates too quickly. >> we have a normalized interest rate a normalized interest rate means it's good for a lot of people. they have money in the bank, they get interest on their money. for many years, nobody got interest on their money. but i have great confidence in them we have great companies, greatest in the world and they're doing well so i think it's a tremendous opportunity to buy, really a great opportunity to buy >> the question of who he had confidence in also came up >> do you still have confidence in secretary mnuchin >> yes, i do very talented guy. very smart person. >> what about the fed chair? >> well, we'll see they're raising interest rates too fast, that's my opinion. >> meantime, washington still on day five of a government shutdown how long will it last? ylan mui joins us with more.
7:04 am
>> this could go well into the new year president trump vowing he will not back down unless congress passes funding for his border wall >> when the government's going to be open, i can tell you it's not going to be open until we have a wall, a fence, whatever they want to call it i'll call it whatever they want. it's all the same thing. >> this comment did come during a back and forth meeting with reporters in the oval office yesterday. he said he will travel to part of the wall that's under construction in texas next month. he also said federal workers wanted to hold out for wall funding. however, a survey showed that 78% of a union was concerned about covering their basic living expenses while their paychecks are on hold. as you mentioned, trump also talked about the future of the treasury secretary the reporter asked him do you still have confidence in secretary mnuchin. he replied, yes i do he's a having talented guy
7:05 am
a very smart person. own jay powell, he said, they're raising interest rates too fast. that's my opinion. but he says he certainly has confidence in the chairman it looks like a reprieve, of sorts for these two men. >> a reprieve for markets. we'll see if that lasts as well. >> victoria, do you think this situation in the last couple days including mnuchin's statement on christmas eve or just before christmas eve, is that a main factor weighing? >> it's what's been driving the markets lower. the fundamentals don't seem to support this large move we've seen a lot of that has to come from sentiment. yes, when we look at some of the tweets trump has been putting out there when he has a no confidence vote going on with powell and the fed, i think all
7:06 am
of that feeds into it. there's definitely some more issues and uncertainty regarding other aspects of the administration, who's going to be there, who's not going to be there. the trade issues with china. all of that is theying into it a lot of that is being driven by the administration >> your fundamental belief of why markets are pulled back is focused on the fed and rates is that right? >> a lot of it is, but we have these issues we just mentioned coming in. these are fundamental reasons. we have slow and global growth beginning of the year globally, all pmis were in expansion territory. we're not seeing that now. there is some valid fundamental reasons. but on the other hand, unit labor costs are still low. profit margins are still growing even before tax. so it's not all the tax stimulus that's doing that. and we're watching interest expense. that's actually the growth and
7:07 am
interest expense has been flat year over year typically before a recession, you see that go further. the move we have seen seems to be a little exaggerated. >> carrie finestone is also joining us now good morning to you. what's your view in terms of whether the market is missing the strength of the fundamentals or not >> well, i think that the market has reacted to so many things among them just this pressure we've had now for years that perhaps in the tenth year of a bull market, we needed a correction so for years, really since 2016, there's been we're up, we're up, we're up, something has to go wrong. there has to be a recession. there has to be some type of slowdown now we've had this once the pressure started to sell, everyone jumped on the
7:08 am
bandwagon. fear begets more selling now we're here it's almost refreshing you know, trying to put some sort of positive spin on this, you don't have to hear they're ready for correction they're ready for correction now we're in less than 14 times next year's earnings even if those earnings are growing at a moderate streak. 14.5 times last 12 months earnings with a 2.3% yield on the s&p i think there are plenty of places to find opportunities it's just we might not be ready to have people start to buy. they're afraid, they're scared there's been all this downward pressure >> do you think there's an artificial selloff though? is that what you're arguing? there's the underlying issue of the fed and what the fed is doing. then on top of that, there's the headline risk, the trump tantrum whether it comes to china and
7:09 am
whether he's going to fire powell and all the nonsense with the government shutdown. what's going to turn the markets back up in your mind >> that's a very valid question. if the market has been pushed down by either program trades or just a sense that it's too high, we're going to get to a point where we call it the dry heaves. there's nothing left to sell people have sold so much that we're going to find the base and you look around at companies selling for 12 and 13 times earnings that have growth that looks right there ready to see in the first quarter we're going to hear from companies in two weeks and if they say, business is good, look at the retail market. consumers, you're spending money. we don't have the fear of much higher rates which we seem to have had two months ago. if it was bad, the rates were going up so much quickly so fast. and why does it have to be bad that the rates have come down.
7:10 am
i don't know about artificial. anything can be a term in a market like this but i think we're going to see something that will give people confidence to begin buying again. not to be pollyanna, but we're down 20% we have had a correction and many are down much more than 20%. >> victoria, would you be buying in the last few days of the trading year >> you know, we haven't been buying up until now. we're watching very closely some names. it's hard when you're looking for that value in such a down market where you can find that with certain industries, certain sectors. but you have to be careful because not all cheap stocks are a good buy so we're looking to see if there's an opportunity for some of the names that are out there. but we haven't actually pulled the trigger and bought anything at this point in time. we think with all the uncertainty going on out there, there may be a little more downside to this market. so we're watching and waiting. but earnings is a key for us earnings starts in a couple weeks, and i think that's going to be a trigger to whether we have more downside in this
7:11 am
market or whether we actually see a rebound. >> okay, guys. we'll leave it there thank you for joining us >> thanks. >> thank you coming up, "squawk box" hopping behind the wheel predictions on the auto industry and what investors can expect there in the new year. stay tuned you're watching "squawk box" on cnbc
7:12 am
7:13 am
7:14 am
welcome back to "squawk box. futures right now essentially flat we're not seeing much of a bounceback following that selloff on chryistmas eve futures slightly higher. we declined 2.7% on the s&p 500 on christmas eve there's crude. getting a little bit of a bounce up 'tis the season for market predictions. 2019 is expected to be one of big change in the auto industry. from slowing sales to automakers
7:15 am
thinking who they work with and what they build. phil lebeau has what to watch next year. >> 2019 could be a bumpy one for the auto industry. first, expect auto sales to finally hit the brakes after the best four-year skretrh of auto sales in american history, people have bought 50 million new vehicles many believe the market is saturated. that may be, but as of now, buyers cannot get enough trucks, suvs, and crossovers next year, smaller pickup trucks will see bigger demand ford's bringing back the ranger while jeep gets back in the pickup game with the all new gladiat gladiator. with mid-size truck sales up 22%. finally, the headlines will keep coming next year with the must watch executive in the auto world. elon musk.
7:16 am
he's not slowing down. next year he's focused onramping up sales in china and racing to build a plant in shanghai. but he'll make plenty of news for an electric semi and in the race to roll out autonomy cars. they will have their hands full trying to steer through a challenging year in 2019 coming up, it is my favorite segment of the year. wall street's mentalist is here. he's going to show you a trick you cannot believe you've got to come back after the break. super. but today you're building wind turbines. morning sir. chief, the blade isn't passing quality gate. that's why you work with watson. i detect frictional loss on the midspan. it can detect the tiniest defects from just a few images to help production stay on time and on budget. i optimized the fiberglass finish
7:17 am
to reduce frictional loss and maximize airflow. i was also part of the maximizing. for ai that can do more with your data, choose watson. hello. the best ai for the job. allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings. talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife.
7:18 am
7:19 am
welcome back to "squawk box" this morning this is my favorite segment of the year we're joined by wall street mentalist oz pearlman. he used to work on wall street turned mentalist >> go figure >> i would have thought you'd want to stay on the street. >> cut and run sell everything, right right now, buy buy buy >> you got a trick for us. >> i've got a bunch of stuff 'tis the season.
7:20 am
merry christmas, everybody i brought gifts. let's see. i'm giving everybody something wilf, money. put your hand on top of it i thought brow somethi-- broughu something. kelly, this is yours andrew, i'm putting this over your head. don't do anything with your arms it's getting weird >> hey, now. >> we're going to clear this with hr at cnbc. >> it's like a bra >> i think it's an apron >> who knows what it is. and let's see. one more thing this is a family heirloom. hold onto my wallet. hold on to the gift from my father >> watch okay nice >> hold it up like that. >> i'm holding up your watch >> mentalism and marketing power of subliminal questions. christmas colors are red and
7:21 am
green primarily. right? >> right >> this is homemade. i've got to do some showing off. can we get a tight shot on this one. this is who made that gift this is my little guy at home. i want you to think of not green or red and wait can i do one thing i don't think you got the shot the paint brush. can we see the paint brush he painted this himself. i'm leaving this on your phone >> okay. >> close your eyes, kelly. imagine you're dipping in an unusual color doing a sprinkle and then paint again and tell us what is that paint color one or two words >> it's two words. >> two words what is it >> you want me to say it right now? >> it's serullean blue >> this is a christmas ornament.
7:22 am
how blown away would you be if he painted this serullean blue >> nailed away >> he nailed it. >> thiskid nailed it they're not impressed. >> it looks black. >> he painted every shade of every color. he did them all. he's very advanced but i told him cnbc would not buy it so we had to do, on the back we made sure to just let everybody know -- if we could get zoomed in on there. we wanted to make sure that was the last coat on there >> i don't even know what that is >> i don't know either but it was my favorite crayola color. >> wilf, you reported on the metric earlier of how much money people spent time is money. what time on my watch? >> 7:23. >> here's what i want you to do. i want to pull this out. imagine that as i'm turning this
7:23 am
from 7:22, later or earlier that you see the hour hand moving in your mind. at this moment, don't let me voice influence you. i'm going to stop and to a specific minute and i'm done hold out your hand, please open your eyes i'm going to put this right here >> face down >> face down >> done. tell us what was the hour that you saw the hand stop. and you never thought about this before this moment, did you? what was the hour you saw stop >> 10:00 a.m. >> 10:00 what? >> 10:25 >> hold on you said 10:25 a.m. or p.m. >> a.m >> she's like i want to sleep in did i tell you about this or anything >> no. just now >> what is it set to exactly >> it's set to 7:24. >> it just moved what was it on >> it's 10:25.
7:24 am
>> wilf, how much money? i'm inside her head. she's seeing everything move give me the watch back though. i'm keeping that between $200 and $2,000. you've got that wallet there i want you to see money. >> whatever the answer, the contents are mine. >> there's commitment. think $200 to $1,000 andrew, i didn't know what to get you. grab that and that belt please >> hold this >> this is the opening bell and closing bell >> close or open eyes? >> closed, please. >> andrew, you're not peeking are you? >> no. >> i have 15 different gifts michelle you're going to take one and in your mind kind of one mississippi, two mississippi and then throw it away
7:25 am
andrew, you're holding the bell. you don't know what these are. when you feel it, you're going to start ringing the bell. any time in the next 45 seconds is when this should happen michelle, take it away >> count out loud? >> no. i don't want him to know give him time. >> michelle, i've got a game show for you keep going one at a time. i agree. you can't see anything, andrew just keep the flow going any time he feels the urge -- okay just keep going. i don't want my voice to influence you. she's doing really well. stop what did we stop on? what was it? >> wonder woman. >> grab me that, please. >> what is the next one after wonder woman >> pocket flask he would have liked. >> do another one. >> rubik's cube. >> throw them all away get rid of the junk. andrew, stand up >> i want wonder woman i'm married. >> i don't know.
7:26 am
this guy could have done anything at all. i didn't know what to get the guy everything and it was meant to be right here wonder woman, everybody. that is yours. >> that is crazy >> wilf, how much money -- >> that is insane. >> you could have rang that at any time >> wilf, how much money? >> that's insane >> between $200 and $1,000 was your guess how much money be specific to the dollar. how much do you think the average person spent >> $272. >> is there any way in the world i knew you were going to say that you didn't google it or look it up >> no. >> open it up and look it up >> is it all in ones >> no, no. that's the old times square. out loud >> 100 200. 20 40 52 >> do it again you missed one >> we're short 20. >> just one more time.
7:27 am
>> 252 >> you're missing 20 >> you didn't take anything? >> no. >> somebody's messing with me? >> hold on come on in close i was at home. someone was up early this morning. you know, take a look. he painted that ornament let's get in really tight. i want you to see this told you he's advanced i want you to see this because he actually -- i'm pretty sure he stole >> it's a 20 >> one $20 bill right there. this is a huge hedge fund manager right there. keep wonder woman. keep the ornament. keep the watch thank you, everybody merry christmas. >> crazy oz pearlman, very nice more coming up on "squawk box," don't go anywhere.
7:28 am
(john foley) i was there in chicago when bob barnett made the first commercial wireless phone call in 1983. yes, this is bob barnett in chicago. (john) we were both working on that first network that would eventually become verizon's. back then, the idea of a nationwide wireless network was completely unreasonable. but think about how important that first call was to our lives. it opened the door to the billions of mobile calls that we've all made in the last 34 years. sometimes being first means being unreasonable.
7:29 am
i'm proud i was part of that first call, and i'm proud that i'm here now as we build america's first and only 5g ultra wideband network with unprecedented wireless capacity that will not only allow for phones to be connected, but almost everything-- transforming how we all live, once again. (bob barnett) as you know, this call today is the first call that we've made on the cellular system.
7:30 am
7:31 am
good morning welcome back to "squawk box" here on cnbc we're going to do a little magic. the nasdaq market site is where we are right now we're watching three big stories this morning looking for a little bit of magic in the markets because the markets right now would show you what's going on with the futures after a tough day before christmas this follows what was a 653-point plunge on christmas eve. >> now the dow up 146. >> and number two on our list, president trump says u.s. companies are in his words, the greatest in the world. and presents what he calls a tremendous buying opportunity for investors. maybe we should have him on as a market guest for us. then number three, holiday shopping new numbers suggest it was a
7:32 am
strong season for the nation's retailers. we'll have much more on that marriott and expedia are up on paying the online travel site operator hotel operators usually have limited leverage because they can't afford to be left off of these liex expedia and priceline. but marriott may have more clout. chip maker intel is getting a grant from the israeli government it's in connection with the $5 billion expansion of intel's operations in that country intel is expected to hire 250 new workers as a result. and it's been another good year at the movie box office the industry on pace to chock up north american ticket sales of $11.8 billion. that's up from $11.1 billion a year ago rerm when crossed $10 billion it was a big deal $2 billion of that total came
7:33 am
from three walt disney movies. the shippers are a key indicator on the u.s. holiday. we have a look at who's delivering and who's leaving investor out in the cold hey, frank >> a record number of holiday deliveries this season is a test of the three major shippers. this morning we have a report card for last week and christmas eve. the busiest period of this shipping holiday season. the post office with the highest marks, just a few ticks behind anything above 95% is considered excellent. 2.5 billion total e-commerce deliveries were processed. and with 32 days between thanksgiving and christmas this year, the most amount of days possible, we have a month that includes thanksgiving week and
7:34 am
black friday u.p.s. had the best performance. because of the extended holiday season, some included returns and exchanges. forecasting that $37 billion of returns would be made this season more than 27% increase from 2016 overall this year's performance by the three major shippers is the best since 2013. but the investment in the supply chain and performance is not paying dividends u.p.s. is having its worst month so far in nine years fed exhaving its worst in four years. back over to you >> thank you, frank holland. mastercard says total u.s. sales rose 5.1% between november 1 and december 24. that's not including cars. that's the biggest holiday jump in six year. let's welcome former saks ceo steve sadove strong numbers in terms of the
7:35 am
retail sector. what do you think is going on with the consumer? >> you know, i think the consumer was telling us that she's in very good shape during the holiday season if we were looking at 3% growth two years ago, 4% last year, and 5% this year, it's a healthy consumer shopping a lot online with that 19% growth but stores are still performing pretty well. they were up 3% and still represent north of let's call it 87% of shopping is still done in stores >> right so steve, explain to us why the stokd is having a meltdown >> anticipating some tougher times probably in 2019 time will tell whether or not it's correct i can only look at what's actually happening with the consumer and the consumer's doing quite well you're seeing it across a wide range of categories. i saw some blowout performance in areas like home improvement
7:36 am
and hardware and apparel not sure whether the stock market is right or wrong on this but clearly what's happening in the market place today and this is across all sectors of the -- whether it's the lower end or even the higher end performing in a tough stock market. >> steve, sit because of the strength -- so if retailers are now dealing with because of legislation or higher wages because of the shortages of workers. because their costs are going up with the increase in foot traffic and sales. >> clearly you're starting to see some margin pressure on he retailers. labor cost inputs are rising you've got the issue of what's going to happen with the tariffs. so general inflation is at play. so clearly these are issues that the retailers are facing going
7:37 am
into next year and whether or not they have pricing power is going to be an important factor as to what happens to overall margins >> steve, what do you make of the fall in gas prices is that a significant boost for the consumer next year >> i think for next year i don't think it had an effect on the 2018 performance. i think it's a bit of a tax decrease or a tax cut going into 2019 so i think two of the positives are going to be the gas rates are going to affect positively the consumer i also think the tax refunds are going to be bigger than people think. i don't believe that people withheld took the reductions in holding with the tax cuts. they're going to get a little bit more in their pocket coming out of the tax cut as well. >> what about the fall in the stock market as well is it going to spook consumers at certain price points or generally? >> i think that the stock market performance largely affects more than the broad based consumer --
7:38 am
the higher end consumer, the one that holds most of the stocks. there's been a very -- when i ran saks, there was a high correlation between stock market performance and the performance of the business. i would anticipate that you would see a slowdown in the luxury sector. if i looked at the numbers for the holiday season, luxury was flattish versus where it had been growing a bit so it wouldn't surprise me to see luxury get hit a little. i look at the broader base consumer market. i don't believe it's as much driven by the market >> give me one example of a retailer you think will do well in this. >> i think it's going to be the retailers that really do well in the only -- omnichannel performance. it's the analytics to understand what the consumer needs and when they need it it's the companies that made the investments in that kind of capabilities that are going to
7:39 am
be winning so i would look for the major players like those two, others to continue to perform well. and then you're going to have the differentiated, unique, war by parkers of the world. the little internet companies that are now expanding too stores i would expect them to perform well in this emerging markets. because it's all about online and in the stores and having both capabilities. >> all right steve sadove, thank you for your time this morning. appreciate it. >> thanks. coming up, trade war or trade truce? prospects for u.s./china negotiations in the new year bob hormats is going to join us after the break with his take. but look at the biggest premarket winners and losers in the dow. back in just a moment. your brain is an amazing thing. but as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall.
7:40 am
thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. healthier brain. better life.
7:41 am
7:42 am
welcome back to "squawk box. we've seen a jump in futures this morning we were negative about an hour ago. now the dow is implied to open higher 105 points. nasdaq by 35 oil prices as well have shown a slight rebound after getting creamed the last couple of months there's wti now over $43 a
7:43 am
barrel smaller rebound for brent this morning. gn nat gas weaker overnight. the nikkei ended the session higher it was up 1% today the index is well into bear market territory up from its october high also down just shy of 20% for its full year performance. markets in hong kong and australia was down just a quarter of 1%. let's talk about u.s./china relations, the trade tensions, whether there could be a trade truce. i want to welcome bob hormats. also a former undersecretary of state and former deputy, u.s. trade representative spent a lot of time recently in china. so you have some insight on where you think things may or may not be headed. what's your take >> i think the chinese economy is weaking somewhat.
7:44 am
but the chinese also have to understand they need an arrangement with the u.s the question is how many concessions and how extensive the concessions will be. and president xi jingping made it clear they're mot going to change -- >> what do you think is fundamentally on the table >> i think what's on the table essentially the chinese will buy more american goods. they've indicated there are more soybeans and natural gas they'll buy other things as well second, they've begun to open markets further. they'll open their markets more to american goods. >> just to american goods? >> or foreign goods in general but they're going to be focusing on the u.s. at least for the moment for obvious negotiating reasons. and third, the chinese do understand that they have to protect intellectual property. both their own because they're developing a lot domestically. and of course this is one of the big issues with the united states so those are the areas where i think progress actually can --
7:45 am
>> and when do you think that gets made? on intellectual property, they've been talking that game for a decade if not more and have not walked the walk. >> yes this is a long standing -- virtually all we have are long standing issues. they've been discussed for a decade as you point out. but the area is a little bit different. in as much as ten years ago, they didn't develop much of their own. now i went to shenzhen they've got a lot of people who want their intellectual property protected. they've established two courts just for intellectual property and they're moving ahead because -- >> who has more leverage over the other right now? meaning trump or xi. >> i would say at the moment -- >> based on these -- >> if you'd asked me two or three weeks ago, i'd have said the united states have more leverage over china. because their economy was weakening a bit. our economy was looking good and our market was looking good. the decline of the stock market,
7:46 am
which in part is caused by this disruption of relations with china perhaps convinces the chinese they have more lench than they thought they had weeks ago. >> you're not in the camp that think they're turning on the liquidity. and still not supporting the economy. >> it's certainly weaker than it was a week ago or six months ago when they are, in fact, moving from a policy of deleveraging which they were undertaking. because they have a lot of leverage they're not trying to stimulate the economy with more monetary policy and giving the banks more expensive room to make loans particularly to small and medium sized enterprises. so i think they are feeling pressure the question is how much they're going to give in terms of major concessions to alleviate that pressure that's being negotiated right now. >> the policy of deleveraging. they needed reforms within the financial sector there because
7:47 am
there was so much going on in the shadow banking system. you remember the massive protests in august. >> the so called -- >> yeah. that was the necessary but painful thing for them to do, right? are they going to start undoing that because of what's happening? it's this push and pull they constantly have. >> that is one of the problems they have. they don't want the economy to weaken too much. the p&p -- >> peer to peer lending. >> a lot going bankrupt and -- >> there was a lot of fraud, et cetera. >> so on some of their reforms, they're keeping it up. and they've also given the signal that banks should lend more to private sector companies since they are, in fact, big generators of job creation >> we're talking about this debate between u.s. and china as one about these specific items but there's a larger sort of philosophical issue at play. which is, do you think the u.s.
7:48 am
is now look at this relationship as one that used to be of collaboration if you think it was that i don't know if you think it ever was that to now one of containment. and given what president xi has said about what his 2025 plan is and what he plans to do, whether that was made internally or not, it says we want to basically be running the world when this is all done >> this is the fundamental change in the relationship and that is that before it was a relationship between a high-tech economy, u.s., and an economy which was focused on labor intensive production china. now the big difference is that china is advancing dramatically in these new advanced 21st century technologietechnologies and competing with the u.s., the first time we've had an across the board competition of this sort which makes it different in competing with canada on dairy products or other things
7:49 am
very different in washington there are two schools of thoughts. one is the containment school. contain the rise in china's -- >> do you think that's possible? >> no. contain the rise in china's growth particularly its growth in advanced technology "a," makes them more competitive economically and "b," many have strategic elements to them the second is to try to at least get a more level playing field which is to say more level playing field with respected state enterprises. >> how much comes down to xi jingping itself? under other leaders it looked different. the way he's acted in power and consolidated his power and the plans he's made. so does the u.s. just have to wait it out with him and hope there's -- and how much are we talking and how much damage can be done in the meantime? >> he is certainly at the pinnacle of the system but the system is broader than xi jingping. there are a number of people it's a more participatory issue.
7:50 am
but i think the negotiations that are underway are underway with serious people on the chinese side who know the system well and know how to negotiate with the united states he is not going to change his goal of advancing china's technological capability to be more competitive in many areas, ai computing. >> is there somebody who could come into that office and be more liberal, be more open to reform >> they'll be there for a long time we're going to have to work with him and the people around him. but he knows a lot about economic issues. i met with him on numerous occasions. he was actually one of the early proponents on getting foreign investment into china. he understands this. >> is he genuinely strong as well or there have been some rumors that people want to try to oust him domestically >> i've heard those rumors i think they are entirely false.
7:51 am
i think he's in a strong position the nature of the chinese government is -- particularly this president is the key guy and nothing happens without him. he does have a lot of people around him who he works, who he's worked with fora number o years. so i don't think this question of waiting it out is a real one. we're going to have to deal with him. >> okay. but to that point, before we ever see any real change between this relationship, does he have to be gone >> no. he will -- first of all, he's going to stay -- >> that's not what i'm asking. >> and then the answer to your question is change can take place in the relationship under him and under the people who work for him he is going to be a person that understands the reality of the situation. he talks tough and he's not going to make major concessions about the chinese system he's also someone who can negotiate and has credibility to
7:52 am
negotiate changes that will accommodate us to a degree on intellectual property. he can make changes and he is going to be the one we're going to have to deal with we don't have to wait him out. he actually i think is pragmatic enough that at some point we can make a deal. but it's not going to be one sided so that he gives everything and we give nothing it's going to be a negotiation chinese don't negotiate in a lopsided way >> all right bob hormats, thank you still to come, jim stewart u joins us but first, check out the dollar this morning which is up 0.2% earlier. currently up around about that much against the yen but slightly weaker against the euro back in a couple minutes
7:53 am
7:54 am
7:55 am
welcome back to "squawk box. if the recent market selloff caught you by surprise, you may have missed the various red flags out there in the credit market michelle our guest host is still with us. on this point, clearly we haven't seen a spike of credit risks like 2008, but -- >> no, not like 2008 but that's an extreme. >> but there have been some signs people could have looked at >> we've seen a big selloff there. this is high risk loans into clos remember those they started selling off a
7:56 am
couple of months ago there've been other signs besides the credit market. oil probably was sending us a signal there have been a number of things i would think bitcoin was sending us a signal. >> housing market is an interesting one though to me, it doesn't seem like a demand-led weakness. in other words -- >> lack of supply. >> or a macro issue. look at the survey the other day, i think it was the nahb index. home builder sentiment it fell and had this horrible slide. affordability is taking its toll affordability taking its toll is not 2008 we're always looking at the last crisis to predict is the next one. it's going to look like something totally different, isn't it >> i think that's true we talk about the easy money we've seen for so long so housing, back in 2008/2009. when you look at where money and credit has been diverted to
7:57 am
because it was so cheap, i think you would look to the leveraged loan market which is different than the high yield bond market. and that has been an early sign. that there are tightening credit conditions that were a precursor to the sell off. >> you had to have heard the last hour if you wanted to hear about that michelle is sticking around. also coming up, this morning's top stories. and jim stewart from "the new york times." he's ready to talk all things media right after this
7:58 am
7:59 am
8:00 am
happy boxing day investors reeling after the christmas eve selloff. we'll show you where stocks are trading right now. shutdown in washington president trump says it won't end until congress agrees to fund his border wall from comcast and sky to disney and fox, 2018 was a big year for media mergers we'll talk to jim stewart about that the final hour of "squawk box" begins right now ♪
8:01 am
live from the mobusiest city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc i'm andrew ross sorkin along with kelly evans and wilfred frost and michelle caruso-cabrera sitting in with us as well >> good morning. >> she used to play an anchor on tv now she plays finance in real life >> and knows about the opera >> plus joining us for the hour, "new york times" columnist jim stewart. also a cnbc contributor here to talk about all sorts of things we aren't going to talk about les moonves are we >> we don't have to. let's give him a rest. >> take a look at u.s. equity
8:02 am
futures now after what was a heck of a selloff on christmas eve. looks like dow might open over a hundred points higher. nasdaq looking to open 38 points higher take a look at treasury yields as well. big debate on christmas about the fate of jay powell, our fed chair. 10-year note right now 2.747%. president trump says he still likes him. i don't know, actually he says he's still in the job. >> he has also slightly altered his tone he ends it with that's just my view like he realizes he shouldn't be commenting on it it's just my view. >> like he's a private citizen >> slightly softened >> we're also watching crude this morning wti rebounding slightly after monday's big selloff we're looking at a 1.5% gain to over $43 a barrel. gold prices have been firm,
8:03 am
also, the last couple of months. the yellow metal this morning showing a tiny third of a percent gain the tech sector and big cap or faang names helped to lead the markets higher earlier this year now those stocks are among the biggest losers just this month, apple down 18%, amazon 21%, netflix down 19%, and alphabet down 11%. want to get to jim stewart, "new york times" columnist and cnbc contributor good morning >> good morning. >> i called it the trump tantrum to explain the last week of behavior what do you call it? >> well, it was a trump tantrum. i don't know how much of it is related to the market. some of it, certainly, but my own view tends to be that political things get exaggerated by, frankly, people like us. it's certainly very interesting. and it's fun to kind of draw that along but i find the stock market in particular is paying much more
8:04 am
attention to fundamental issues that are going to effect the earnings and economic performance. so you have to parse what he has to say see is it really going to affect the economy? >> you used to do a column before the end of every year i don't know if you got unup your sleeve this year where you would talk to all of these different investors and sort of prognosticate about what was going to happen. and you didn't it this year. >> because you learned they were not worth much >> yeah. nobody forsaw this nobody foresaw the stock market behaving that way this year. nobody saw the bond market behaving this way. i mean, let's take the bond market everybody was looking at, well, are interest rates going to go up or down short-term rates have gone up.
8:05 am
but the 10-year has been going down lately. >> the last few weeks, yeah. >> in the last few weeks so it's been a bifurcated market absolutely nobody intervud last year saw any of this >> it's a relief to see treasuries has served as a buffer and counterweight to stocks there was a time we were watching both stocks and bonds falling at the same time and you had to worry, you know, we saw them go up together for 30, 40 years, right? why can't they go down together? so this regaining of what i consider the typical relationship of stocks sell off so people buy treasuries, it at least looks normal >> also people have been saying rising stocks. but it depends on what you're borrowing. if you're borrowing short-term, yes, it's gone up. if you're getting a mortgage, i think mortgages now reflect more of the 10-year they're going to start coming down >> do you have any anxiety about
8:06 am
the big corporates it is to me the big dead question which is the big corporates that have a lot of debt on their books right now, and what that really looks like in 2019, i mean -- by the way, i think they can pay it off especially if they ever have to get rid of their dividend. at&t has a huge amount of debts on their books it's a huge challenge. it could be a challenge for them i don't know if it will be, but i just raise the question when you -- how much of that you think is going to be the story in this next year? >> i'm not worried about at&t. >> i'm not worried about at&t. as an example of -- no, an example of a leveraged company >> well, i think we've seen in previous -- i'm not saying there is going to be a crisis. this doesn't have a crisis feel to me about it, by the way but crises are always something we didn't know about until they happened and honestly, i don't know the extent of the leveraged loan market
8:07 am
that it's investment grade that's hidden through these borrowing channels 3 maybe it's there the way the mortgage market in 2007 went crazy, people were giving out toasters. >> there's some of that happening with corporate debt. this is where druckenmiller and others have said, look the reason the fed should have tightened sooner is companies can -- and this is stuff you can see. they put on so much. i think the number of $7 trillion since the crisis. so is that the new problem we haven't really seen a problem like that in awhile. >> well, honestly, i don't think it is necessarily. you know, people are starting with the president bashing the fed for raises rates what do these critics know that the fed doesn't know what is their superior information out there? does the fed not know where the -- i mean, we do know from past history that the fed is not
8:08 am
necessarily all knowing. but presumably they are getting a ton of data in there, a lot of which we don't see i assume they have data that also is our leading indicators of outlets coming up then they went ahead and raised rates. i don't think they did that just to spite the president they said over and over again, we're following the data this is what the data suggests i don't feel i'm in a position to say i know more than they do. >> what's happened in december the markets is wrong to think something worse could be around the corner >> well, i don't know that they're pricing in disaster. i mean, the stock market was very richly valued by september. the average market pe was somewhere up in the mid-20s compared to the overall
8:09 am
historical average extremely richly valued. it was exceptionally optimistic about what was coming forward. there wasn't any good alternatives to the stock markets. and there had been some valuation that was really high i'm hearing more people boasting about how they're getting 2%, 3% out of their money >> it's a super distinction that hasn't been true for years >> from just holiday gatherings and people are crowing to me about this the big cd they bought i have not heard that in at least ten years. >> because it hasn't been true >> that's true >> you would buy -- so facebook is trading less than earnings. google is crazy. >> at&t has a yield of 7.5%. >> think of the high fliers. would you be buying these companies here >> well, some of the -- definitely some of them.
8:10 am
i think the big tech stocks which really got way out there, and there was -- i won't call it a bubble, but there was a kind of -- >> we have an acronym for it there was a mania. >> there was definitely the faang mania which i think got out of line. they're now down as a group well over 20% and i think some of their -- like a facebook valuation like that, that started to look really good. i think the -- you know, most of them are advertising driven stocks and the consumer looks very healthy, very confident, employment numbers are great i think the average housing market is going to be very solid going forward. >> probably just going to shore up their business, frankly >> yeah. and they're grabbing more share from traditional advertisers i'm a little less excited about apple which is less of an advertising play but they are doing some interesting diversification things
8:11 am
i think the story is they've got a way from it. >> do you see whatever else you think is up their sleeve is on the horizon? >> well, you never know. they're very, very -- how secretive are they about what they've got coming up? >> they're driving around on those. on what kind of thing they have. >> they're trying focus with regard to the iphones and what they're doing to society they've been making the iphone to cigarette comparison for 20 years already basically. or 15. and so it's probably their way of saying, look, we're trying to help promote health. >> right which it's a very, very big market it's a big addressable market. and i don't blame them for focusing on that the watch i would say so far the watch hasn't taken off
8:12 am
>> the question is in a year or two from now, whether anybody over a certain age is going to have the watch simply to do the ekg and because it hasa fall alert on it. so if you fall, it will automatically alert. that to itself could be worth $400 you think about how much an ekg used to cost >> all the posters of steve jobs in their dorm room, i don't think that -- >> i understand. but if everybody buys one of these watches and they're the only ones doing it, the question is where the fast follower would be to actually compete with them on that. that could be a huge market. >> i totally agree >> may take away from the cool factor which is another problem. >> i think investors often tend to look at these companies as static you know, they're not getting a big premium for potential innovation yet they have a very good historical track record. they have the resources to try and fail and try again which i think is important
8:13 am
and they have the brains and the talent look at how they are attracting, you know, smuyoung, smart peopl. not just silicon valley and seattle. they're putting up new centers they're getting a lot of brain power. >> what about data privacy as an issue? is that already priced in as a negative factor whether it's to apple or to facebook or is there worse to come than one of those? >> i think a lot of it is priced in and i think there has been a little bit of a divergence there between regulators who rightly are concerned about this and journalists who have been investigating. again, i think it's important. there are people who care about it but there are also -- there seems to be a lot of users who vp at least from my view are not
8:14 am
caring as much they're not obsessed with the idea that the companies know what they're doing some of them who are, likely some of the benefits from that, they like the urge there is a concern they rightly are having their feet held to the fire. with all this innovation they're doing, little of it was actually being spent on trying to protect users and trying to prevent fake news in particular >> you raised an interesting point earlier which was about thevaluation levels. and how they've come down particularly i'll put apple aside he's always traded as a discount when you look at facebook, netflix. should we think back to 1999 and say you know what? you're never getting that pe again. that momentum trade is over. maybe you'll trade it 15 times
8:15 am
just like the rest of the schmucks out there but the big super premium is just gone. has that market sentiment just shifted especially with rising interest rates i don't know that anybody knows the answer, but it's a question. >> the super high premiums are i think not going to come back because these are now becoming more mature companies. the super high premiums tend to result when people have no idea what the future growth trajectory is going to be like and we're starting now to see that you can only grow so fast so far for so long and there are some real world paths emerging on these trajectories no, they're not going to get pes of a thousand or something like that i don't think. again, depending what the growth trajectory looks like. >> i think we've got to separate but we'll come back to that.
8:16 am
>> jim stewart is going to be sticking around the rest of the program. coming up, a report card for hedge funds. we'll look at how the world's biggest money managers faired in 2018 it was not a good year or end to the year talk about what to expect for 2019 and talk about the potential currency drivers stay tuned you're watching "squawk box" on cnbc ♪ ♪ move to the enterprise-grade cloud that's built to handle all your apps. ♪ ♪ the ibm cloud. the cloud for smarter business. the new sleep number 360 smart bed. it senses your movement and automatically adjusts to keep you both comfortable. and now, the queen sleep number 360 c4 smart bed is only $1299. plus, 24-month financing on all beds. ends new year's day. allow you to take advantage of growth opportunities with a level of protection in down markets. so you can be less concerned about your retirement savings.
8:17 am
talk with your advisor about shield℠ annuities from brighthouse financial, established by metlife. from brighthouse financial, there's brushing...and there's oral-b power brushing. oral-b just cleans better. even my hygienist said going electric could lead to way cleaner teeth. and unlike sonicare, oral-b is the first electric toothbrush brand accepted by the ada. oral-b. brush like a pro.
8:18 am
8:19 am
welcome back to "squawk box" this morning take a look at futures we'll call this is a minor bump here nasdaq up about 26 points. s&p 500 up about eight points. we were up a little over a hundred on the dow >> the bump is getting smaller >> but remember at one point, i think we were much lower too >> we were flat as well. >> you can spin it both ways let's focus in now on hedge funds with leslie picker >> these are three key themes in
8:20 am
the hedge fund industry that will carry into 2019 first you were funds 2018 was a brutal year with about $10 billion in some high profile meltdowns. more hedge funds will shut their doors in 2019. in recent years when one hedge fund lost assets, another one up and gained them. many expect the industry to struggle overall with redemptions in the new year after a difficult fourth quarter. second, less everage hedge funds tend to borrow capital to size up their positions in more certain environments but in 2019 as rates rise and more volatility takes over, certainty may be more difficult to find. therefore, funds are expected to be more cautious and delever in the new year and lastly, responsible investing. in an attempt to shore up, hedge funds have returned to responsible investing.
8:21 am
that means they're putting their capital into strategies that benefit society as a hole and avoid those that they believe are not like gun manufacturers and tobacco producers. a recent survey found rej funds saw a 50% increase for responsible investing over the last year. with the recent market volatility, it's going to be sink or swim for hedge funds in 2019 a few will flourish in this environment. but many won't know how to handle this new regime and will shut their doors. >> leslie, the q4 as we know has been tough for all market participants but this was also meant to be an environment that they can outperform one broadly speaking might be one or two really failing miserable over that. >> when people looked at them, investors mainly, said you're underperforming the market by a lot. what's the benefit of putting our money with the hedge fund
8:22 am
right now? they say you want to keep your money with us because when volatility returns, we're going to be the ones that can preserve your capital and based on the early numbers that we're seeing from the fourth quarter, that's not been the case for the majority. >> any big names that were big losers in the fourth quarter >> a lot of the risk parity funds have struggled some of the aqr funds are ones at least when you look at the mutual fund equivalent which often matches that strategy has not done well. which michelle and i have talked about quite a bit are essentially when you're long and levered a variety of asset classes. when you look at a market environment like this where you have a lot of asset classes that have struggled and they have all gone down at the same time, funds with that strategy can be punished as a result >> going back to what secretary mnuchin said earlier the the week about liquidity, discounted whether they are likt.
8:23 am
it is true to say for these hedge funds, getting liquidity, it has fallen. but it's come down a lot in the last year or so. >> that's a really important point too. a lot of people turn to rules based trading. and they say this is responsible for some of the crazy behavior we're seeing now i'm not going to come on here and say whether they're the perpetrator of the market volatility that we're seeing or the victim because a lot of the funds have underperformed as well wu thing is clear when you do have less liquidity in the markets, those movements become less pronounced or more pronounced and the quant funds drive up the trends from a momentum standpoint to the upside as well as to the downside that's why you're seeing large swings >> any blowups yet i know i asked you last time. >> no. we call around to see if there are blowups every day. a lot of what we're seeing could
8:24 am
be a result of massive unwinding. we have not seen any evidence of a big blowup but they're not telling investors yet as they're trying to get out of these positions. >> okay. leslie, great stuff. thank you. by the way, there is a great interview. you know steve cohen did an interview? it's on youtube. i just watched it on christmas day, no less anyway, you can go check it out. never talked coming up, more from our guest jim stewart. michelle caruso-cabrera is here. and we'll talk media mergers "squawk" returns in a moment
8:25 am
8:26 am
8:27 am
still to come, currency check. we'll talk brexit that could move currencies. and let's look at u.s. equity futures. we are higher but losing a little bit of steam. back in a couple minutes you always pay your insurance on time.
8:28 am
tap one little bumper and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪
8:29 am
8:30 am
♪ good morning welcome back to "squawk box" here on cnbc we're live in times square the latest figures on u.s. home prices, they're going to be out in about 30 minutes. the case shiller reports is released at 9:00 a.m. eastern time take a look at crude
8:31 am
prices this morning are rebounding right now after their hit their lowest level in 18 months earlier this week on worries of a weakening global economy. wti crude still well off its october high of about $77 a barrel you're looking at wti crude at $42.87 if you looked, by the way, at the budget for saudi arabia, they needed to be at $80 to make that all work. >> and yet the highest budget necessitated one >> bingo president trump criticizing the fed once again sayi ining t fed is raising interest rates too quickly. he also expressed confidence in secretary steven mnuchin steve liesman now joins us on set we're going to dive into the balance sheet. >> yeah. let's talk about that. it's suddenly become controversy. the market responded with crickets for much of that time the plan
8:32 am
has been executed, the market soared no one complained. now the man with the biggest megaphone in the world screaming the balance reduction plan is too fast not supportive of its fiscal policies some in the markets agree. let's go through the tale of the balance sheet. balance sheet happens is the title of this graphic if you're on the radio you guys find that amusing, right? somebody's got to make monetary policy amusing we started off before the crisis it was really 0.88 it winds up to -- 0.9 trillion there. note that we took a half trillion off through december 2018 which is where we are now $4 trillion. the market did pretty good in that time period we'll talk about where we're supposed to go next year we're going to take $600 million off of the balance sheet. >> trying to get down to what level? >> hold on don't jump the gun because
8:33 am
that's the next screen let's look at the next screen here -- no, no the ones before that you're jumping the gun here. go backwards there we go. there it is on the left a constant balance sheet before the kind of rose with the economy. then we jump up qe 1, 2, 3 then going to the star one is 2019 then the estimate, the fed has not pegged a definite place we're going to go, is between $2.5 trillion and $3 trillion. we will end up with a much bigger balance sheet -- >> why >> for a variety of reasons. good questions one of is because people are holding more currency. amount of currency in the economy is offset. treasury holds a bigger balance sheet there. there's other stuff there. the idea there needs to be more excess reserves. >> so can we bring up that graphic again? >> what you're saying is we
8:34 am
should not expect the right hand side of that chart to decline to the point that we see on the left-hand side >> no. i'm not going back to kansas if that's the question. >> we've already had 50% -- over 50% of the reduction. >> but over a four-year period of time. >> right exactly. no not a four-year period of time well, yes. it went sideways and by the way, i don't begrudge the idea that this is a controversial issue. right? because nobody talked about -- and the fed put it out there we're going to let the funds rate dictate our response to the current economy. i want to talk about one more thing if you don't mind for a second none from bank lending in excess reserves wilf you may know more about this than i do bank lending in all aspects, commercial, industrial, real estate loans all going up while the excess reserves went down.
8:35 am
and that's the primary way you would think you would see this now, there is obviously an impact in the market from their being less stuff sloshing around and you would initially see it from an economic point of view now, there is one other interesting aspect here. this idea that the president wants the federal reserve, the monetary policy authority to react to the fiscal side so the president raised an interesting question couple of them should the fed's monetary policy take account for the trade war does the fed have an obligation to weaken the dollar to help mr. trump in the trade war and should it keep it low to help pay its debts? typically the idea is it would be no, we might braes the impact of that. but not preemptively he specifically wants to engage or enlist the federal reserve in these fiscal policies.
8:36 am
it's happened before in the '50s there was a treasury if we were at war, if there was a single minded social cause out there for example a war. there probably would be no question of the federal reserve engaging with the fis value authority. >> this sounds like lbj. >> if we were deep in recession right now, by the way, these things go together when we are in recession, the fiscal and monetary come together when we're in expansion, we go apart. that's the normal cycle of things these are questions worthy of debate the president brings them up in a different way. rather than with a quiet lunch with the central chairman. >> relative to the u.s.'s gdp -- >> it was never as big as bank of japan
8:37 am
now it's smaller still >> and we got through the first chunk of slinking it again while the economy is still stronger than it is in either of those two countries. so my point is i guess a slightly different spin on what we've gone through the stock market sold off. >> it's not monetary policy. >> can i say all is wrong about this >> what do you mean? >> the stock market has a bigger decline. if there's a big decline in the economy that you're not going to alter the balance sheet policy she said yes that's the case fast forward to jay powell who has adopted that being on autopilot. and i think the reason this has never made quite as much sense to me, we know more about the
8:38 am
effective interest rate hikes on the economy and less about the impact of the balance sheet on the economy. we're going to put the balance sheet on autopilot i wonder if it should be the other way around but other point is so far they've done the balance sheet and it hasn't seemed to have a big impact in the place. wilf, question to you. do you hear the bankers who you lunch with, have breakfast with, go to switzerland with them. you're all over with these bankers. and that the balance sheet reduction plan is reducing lending? >> so their point always is that their liquidity, their capital levels are at record highs and therefore in a strong position themselves i think what you'd hear them complain a bit about to your loan growth point which has been positive that they faced sort of
8:39 am
structural breaks. and that's why it hasn't been as strong and probable. which is a regulatory issue. they've got plenty of liquidity themselves it's just not been a demand for loan growth. >> one more question bring that chart back. >> which one >> the one i asked about before. it's not going to go all the way back down. doesn't it imply at some point they have to get back in the market like right now they're just letting tough roll off they're not going to come back to the prices. to maintain the size of the balance sheet, it's got to be doing operations on the far end. >> by the way, still doing operations on the whole thing. some of it runs off. there are operations going on that net selling or net runoff yes. at some point they'll have to go back in and begin to replace >> you're telling me qe is permanent. it's permanent at a certain level. >> okay. >> does that mean it's permanent
8:40 am
based on the stock argument? >> yes maybe i am happy we're finally having this conversation. here's the thing nobody knows the fed doesn't know you don't know michelle, you just used the term qualitative easing is it easing to bring the balance sheet down to a level that the fed believes is an equilibrium level for the balance sheet? because they think the amount of excess reserve acquired by the banks that will allow for the smooth functioning of the bank system plus the rise in curre y currency what i think they're going to do is get to a knew ral rate on the funds rate and get to what they think is a neutral rate on the balance sheet and look around
8:41 am
and smell the roses. >> and your point is the knneuta rate is that isn't as low as we are. we think the last three months but it doesn't need to hurt them for the next two years we can get to that $3 trillion level. >> i guess one of my points is there's a lot of factors that could be affecting the market right now. the weakening global outlook, the fed's monetary policy, and the instability of the administration it would be great if we didn't have the instability of the administration so we'd know what these other two factors were here >> do you think they can just -- last thing can they maintain the line that the balance sheet is not monetary policy? >> you saw that john williams maybe backed off a little bit -- >> it's different than saying it's not a tool of monetary policy 37 -- >> they will bring rates down to zero before they altered the
8:42 am
balance sheet reduction plan >> all right >> which i think is extreme. and you wonder if -- here's the trouble now, of course michelle, you may have a thought on this. which is at what point does the fed if they reduce their balance sheet reduction plan end up looking like it's kowtowing to the fiscal side and to the president. >> i have a thought but the control room doesn't want me to answer >> are we over >> my apologies. but thank you for this time to finally talk about the balance sheet. >> thank you, steve. let's talk more about the dollar which ties into all of this kathy lien is here good morning to you. so where the dollar goes from here is based on these two things, right? monetary policy, how big a deficit we're running, and i guess how the economy is doing what do you think about all those things >> all those are major issues. i think they're going to be much more of a red flag in 2019 as we're coming off this
8:43 am
excessive dollar strength in 2018, we're starting to roll over already seeing the stocks crash. already seeing the economy weaken housing is slowing so all of that creates a situation where 2019 is going to be a year of fragility for the u.s. and the world >> my dad told me he thinks the dollar is going to weaken a lot. he's probably at home this morning enjoying what's left of christmas. is he right? is the dollar about to weaken? >> well, there's going to be a lot of volatility issues in 2019 at minimum you'll see the index fall lower i think we've got a lot of excess demand that still needs to be weaned off in the new year and i think that's going to be what really is the theme at least in the first half of the year >> is this good kind of dollar weakness or bad kind the good kind is the rest of the economy is strong. it's not a safe haven.
8:44 am
or is it the bad kind where we're running big deficits and, you know, the economy's not looking so strong. something like that? >> it's never just one factor. so i think it's always going to be, you know, a combination. there's a lot of things that, you know, president trump can do in 2019. it's kind of the slide in the stock market and i think that's, you know, basically involving coming out with a trade deal with china you know, perhaps infrastructure spending perhaps some sort of tax cut whether that happens or not remains to be seen, but i think for the most part, you know, you're going to see a combination of dollar weakness as a result of fundamental issues but also as a result of, you know, just position readjustments. >> how much of dollar strength is the result of a reaction to the tariffs? and can fed policy have any effect if the president were to raise tariffs again? wouldn't the other currencies that were the exporters to the
8:45 am
united states, wouldn't those currencies react simply incorporate the policy and weaken in addition >> they have already emerging market weakness is one of the big stories of 2018 i think it's going to continue to be a big story. the tariffs are certainly an issue, but it's not just that. we all highlighted the overall strength of the economy in 2018. unemployment rates are low now oil prices are low so all of that is good news in a way. and i think that if those tariffs continue in 2019, you're certainly going to see, you know, emerging market currencies fall but i think the fed's getting concerned too. and so i think, you know, there is a guidance that's coming out that 2019 the policy is going to slow and i think all of that is going to create more of a tug of war in the dollar. >> thank you so much thanks for joining us this morning. still to come, much more from our guest hosts michelle caruso-cabrera and jim stewart let's look at u.s. equity futures. we're up 70 points on the dow.
8:46 am
8:47 am
8:48 am
. welcome back to "squawk box. we are already rolling out the world economic forum package ahead of davos kicks off in switzerland next month. "squawk" will be there covering the gathering of top leaders vladimir putin might also be making an appearance they did not rule out that possibility that putin would
8:49 am
attend after concert organizers lifted a ban on several russian tycoons. we're going to bring you full coverage of the forum next month. there's also speculation president trump may return to the forum. >> i thought he was going. >> we'll see who ends up there there's been -- i don't know if they officially said that he was definitively going just yet. but there's a huge delegation. mnuchin and others have they officially said he's going? >> go back to the impact he had last january basically top ticked the market. >> yes, he did kind of laid out a lot of what ended up coming to bear. >> when we return, it would be interesting to see him and putin together we will talk about the big media names and potential deals of the year mr. jim stewart is still here. we'll talk about that. take a look at the futures right now as we speak. things right now up 67 points on the dow. 'rba ia ment
8:50 am
8:51 am
8:52 am
joining us now to discuss how next year is shaping up is jason weir we should also say jim stewart is here. jason, what do you think is going to happen here >> oh wow, after our question, a lot can happen content remains key in this space. those companies that original to
8:53 am
have original programming have a lot of opportunitiy and the markets pounded of every stock out there. and sucking up so much oxygen in this landscape, it could get interesting in 2019 to be sure >> let me ask jim in this question, the at&t deal -- all of the major distributors may say to themselves, look at them, they're doing this we now need to do a comcast own nbc or they look at verizon assort of a single play distribution vehicle only and say that's the way to go >> well, first of all, verizon is the key player here how many at&ts are there there was a stampede
8:54 am
wait a minute, well, there is basically one which is verizon verizon looked like it was heading that direction by nibbling these media properties. looks to me that verizon is falling back well, let's not be so fast here. we got to have these mega companies where everybody -- >> right >> the other side is who else is coming into this space and how are they going to do it? amazon and netflix is amazing story. they did not go out and buy big media company to do this they did it on their own apple is going to be moving aggressively in to this area you are seeing technology companies, how i aim the media space with some real synergy
8:55 am
>> jason, one of these speculations earlier this year was a report of amazon looking to buy some of the original sportsn sport network. do you see it being apart of the piece of the puzzle. >> that's certainly the landscape. look at what disney has done espn has been subjected for the past couple of years they are continuing to pay more and more for the rights of these sporting programs and events that are really difficult to substitute a way from a live experience of sports yeah, i think there are certainly something to that. twitter had been sniffing around in that area for some time as
8:56 am
well >> did anyone buy snap >> it is in the vicinity >> i sure hope none of the companies we own buys snap >> really? >> i think they're probably, it could happen it seems to me it is a low probability type of situation in a high risk as far as integrating the synergy. it is a competitive landscape, i would not want to be fishing there. >> jason ware. >> thank you later on "squawk on the street," don't miss richard kovacevich, the ceo of wells fargo stay tuned, you are watching "squawk box" on cnbc
8:57 am
i'm ken jacobus and i switched to the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy. and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet? you might or joints.hing for your heart... but do you take something for your brain. with an ingredient originally discovered in jellyfish, prevagen has been shown in clinical trials to improve short-term memory. prevagen. healthier brain. better life.
8:58 am
♪ ♪ put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business.
8:59 am
welcome back, a quick moment to get final thoughts from our guest hosts. >> jim, you first. >> we talked about hedge fund earlier. the bear market is here. are they hopping up and down they are change their tune again. now they're telling me we are better than fixed income and better than bonds this year. we are a bond alternative. i will say if they are as good as investing money as they are marketing. they would be involved
9:00 am
>> what did the card that moonves sent you did he send you one? >> what i should have been getting is a business card from cbs. they're all upset. wait a minute, your shareholder is getting $120 million thanks to all this. >> jim stewart >> happy new year. >> thank you for being here. >> we'll see you tomorrow. "squawk on the street" begins right now. good wednesday morning, welcome to "squawk on the street," i am carl quintanilla with sara eisen. cramer and faber had the morning off. futures are slightly green this morning after the biggest christmas eve loss in history. oil remains below 43 not a lot of data today bu


info Stream Only

Uploaded by TV Archive on