good morning. the day's top stories, retailers are romg out huge after christmas deals and hoping shoppers show up ready to spend. maybe we can make up some of the lost ground and get positive. i don't know where we are exactly. speaking of holiday commerce, some packages didn't arrive in time for christmas this year after an unpredictably large number of packages overwhelmed u.p.s. and preparing to close the books on a very good year for stocks, there's only four trading days left in 2014, but santa is still welcome. it is thursday, december 26th. "squawk box" begins right now. >> good morning and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with joe kernen and michelle caruso cabrera is here.

becky will be back tomorrow. traders returning from the holiday. weekly jobless claims are set to hit the tape at 8:30 eastern time. economist expect first time filing to decline. many international markets are closing to do boxing day holiday. it's boxing like the presence of boxing. anyway, just in case you didn't know. u.s. equity futures taking a look, setting itself up on this post christmas day. nasdaq, up about 5 points, the s&p 500 up 3 points. also, a lot of obviously great news for investors to be happy about this holiday season. data showing it's been the best year for stocks since 2009. the average u.s. equity mutual fund gained nearly 32% through december 20th. that edges oat the s&p's 30% gains during the same period.

also, small company stocks eating their larger counterparts growth top value and returns of u.s. funds. >> the day after christmas has become a huge opportunity for the neigh's retailers. some began sales online yesterday. stores are looking to capitalize on people redeeming those gift cards. target's spokesman says today is the single most popular day to redeem the retailers gift cards. >> you -- are you like sugar ray leonard or something, you thought it was a day dedicated to -- >> years ago you saw boxers, boxing day. >> you know how there are certain words that you have these revelations about what they are -- sky scrapers was a word that i remember about 15 years ago it was actually scraping the sky. up until then, it was a worse. boxing day, for some reason, i thought -- >> look what they do for a

living. >> they hit each other. >> they beat up their mind. >> they get terrible diseases early in life. >> but i don't think they deserve a full on -- more than any other sport. >> how about a day off from work? >> you know b the gift that keeps on giving, it's not only the jelly of the month club, but the sweater of the month club. sweater of the month club is something that is good year roend aus clark -- -- no, what -- >> what you're accused of today is there is a stain on the tie. >> yeah. i had a sweater in my bag. we don't need to show the -- there's a stain on the tie. it's not that bad. >> how do you know it's not a water stain or a drool stain and it drys up and identities it's gone?

>> i don't know. there's also something else. we can talk about it later. but this is a big story. >> it is. they were buying presents on, like, monday. >> are you blaming the victims? >> yes. >> buying on monday presents they expected to give people on wednesday? >> there are corporations in america just to find dloifr. >> i was a victim. >> did you not get a gift to give or you did not give a gift? >> i had a plan to give a gift on tuesday to somebody before christmas. and i had ordered it on saturday. and it said expect delivery on monday. and continued to see on amazon expect delivery on monday until 8:00 p.m. on monday. so i waited and waited and waited. i went downstairs to figure out if it was really coming. and even at 9:00 or 10:00 at night -- >> fedex? >> u.p.s. >> this was not a family member. it was somebody we were going to

see -- >> it was early. >> this isn't me you were going to -- because i got diddley from you. is that why, because it was tuesday -- >> it didn't come. >> it did come on tuesday, but too late. you see? >> where the hell is it? let's go. >> it's your fault, not the delivery person's fault. >> the person already knows about it and was very sympathetic to my plight. >> should we tell people what we're talking about? >> no. i just think -- you're usually early, to in this case it's appropriate that you were late. u.p.s., right? excuses all the time. >> this squad ward moment has been brought to you by joe kernen. >> u.p.s. says it was

overwhelmed. did you use fedex or u.p.s.? >> it was amazon, and in this case it was u.p.s. >> i kind of feel for u.p.s. they were overwhelmed by high -- >> i've had -- >> a lot of weather, canceled this, this meant that some didn't arrive before christmas. the shipping company, there were patches of bad weather. angry customers vented on social media, amazon.com responded with an e-mail to effective customers they were going to use drones, but they're not ready yesterday. meanwhile, a supervisor told nbc news that there were extraordinary delays that deliver giant. >> i think this will be one of those moments where we mark the shift to online, this is the year, critical mass and.

>> next year they'll add. >> but something happened this year that somehow the shift was monumental. >> you also realize that every retailer, their new bottle next at the shipper. it used to be that they are cared about the people who were just shipping to the stores. >> or the in-store service. >> and it's not even your own people. that people's very complicated. there's basically two people, maybe three companies that you can use. >> there is the postal service. >> right. fed ix, u.p.s., then maybe the postal service. reuters hoping that those who attack markets, we had talk about this earlier. a senior executive who says a major bank could be able to crash did encryption code and

make fraud ewe lint withdraws from people's accounts. a spokesman for target says there is no evidence that pin data has been compromised. so that is kovconflicting. >> i didn't think the retailers were allowed or even able to use -- when you type in your four digit pin number, i thought that that never went in -- i thought that was never saved by the retailer. >> we do not have this whole story. there's something very fish injury here. 40 million people in that short amount of time shopped at target. you're telling me more than 10% of the shopping population was affected but this and there's something that -- i don't know what's going on, but we do not have the whole thing. >> they should have an obama care signup. they should. they should have a desk at target. >> that's actually, by the way, if walmart and target and a

couple others had the desks -- >> that would be the administration relying on the private sector. tease something they don't do. >> this latest extension -- did you see it yesterday? basically there's an extra day. and i don't know, there was -- it was an open ended extension, wasn't it? >> they have dismantled so many parts of this mandate. it's crazy. you can claim hardship now, that the premiums are too high, so it's a hardship and you don't have to buy it and you're exempted. did you see that? you have to buy catastrophic, don't you? >> no. there's always been an exemption, that if you had some kind of hardship, you the didn't have to buy the -- >> then they buy it for you,

don't they, with a subsidy? >> you can be exempted through some kind of hardship. >> but the whole point was that it was mandatory .we were going to cover. >> bingo. >> happy holidays. google's -- anyway, whose turn in it? it's turkey. >> to a number of international comments, turk keps's prime minister presenting a new list of cabinet members after many resign. turkey currency is getting hammered over a last week or so.

a huge corruption scandal. they arrested like 85 people about a week ago. that hammered the stock market by 5% in a sympathy day. a number of hedge funds got caught flat-footed. now there's video on local television stations of 4.5 million in cash found in the son of one of the minister's apartments. it's getting really, really messy. turkey has a vulnerability to financial markets. >> who wants a crisis? be optimistic. >> what's going on in china? >> credit fears appear to be easing at least for now. traders say they expected the central bank to refrain from

more open market injections today after 8.4 billion in the financial system on tuesday. speaking of china, the chinese state news agency says edged down to 7.6% and warnings it faces pressure to decline further. 7.6% looks good. >> yeah, it does. a duck dynasty marathon. these a&e guys, to cash in on the controversy, they launched a double super marathon. >> that's what i'd be doing. >> what is -- is it all about the all mighty dollar, my friend? >> yes. >> i don't want to get into this. i'm not going to get into this. >> if you were a tv programmer for the next two weeks, you should -- >> what was their initial high minded -- >> oh, you're saying they're

being hypocritical? >> isn't of kancanceling the sh now they're running a marathon. >> hoe some holiday spirit. >> anyway, if you thought u.s. stocks were having a good year, which you check out the nikkei. >> yeah, but it's 40,000. look at that. it has to double to get to where it was. >> you don't have a long enough chart up here. >> 56%. >> that is pretty good, though. i'd like -- i'm hoping for that for 2014. >> jan niece prime minister shinzo abe visiting a shrine honoring japan's war shrine. he's the first prime minister to

visit the shrine while in office since 2006. convicted war criminals are on the shrine and making light of the suffering endured by the korean and chinese people and as a result, abe said its purpose was just to give thank for his first year in office, also to make a vow to avoid wars in which people would suffer and die. as opposed to the other kind of war. >> he did it on the 120th birthday of mao. >> it's an interesting -- the whole dynamic of any type of military intentions in japan following world war ii. we're not real happy when it looks likes they're reasserting any type of military intentions. which, you know, that tends to happen after so many -- >> and you wonder if at some point we might regret that as we see the rise of china's military

power. >> it's stuff. we need a very good secretary of state, one that's got a plan and we have one that has a plan. >> we have some other international news this morning. in libya, the prime minister there saying the tribal leaders will hold more stocks to seize, but he says the government will not negotiate with protesters blocking the importants. brazil's eike basista looking to reeling kwish ogx control. equity gets something in brazil. this thing is going into debt renegotiations. normally what would equity get? a big, fat zero. but in brazil, the equity holders get a vote. >> how much is he worth now? >> it's hard to know. >> what do you think? >> maybe a hundred million, maybe. maybe. i mean, it was worth 34 billion

last year. these guys reached this deal until christmas eve. oh, and they're going to put money in. the debt holders are going to put money into the company because they have one old field left that they're hoping might produce some oil. they hooked it up like two months ago. they've hit zero on every other single well. that areas of the world is far more geologically complex than anybody anticipated. >> i remember when you go to the milking conference in los angeles, he would be -- you remember he would go on "60 minutes" and he was it. >> charlie rose, blah, blah, blah. >> but he has such a bra vado

about him, if you will the. i remember having lunch with him years ago at the four seasons restaurant and he really fwaf you the whole show, lee or four years ago. >> at his peek. >> but how is his dmoonder -- he gave like two lines to the twaet street journal. but he supposedly loved posing with the president of brazil and all his infrastructure projects. >> and let's check on the markets now. a great week so far and a great last week. that is unbelievable. up another 75. no one is embracing it. we were sneaking this in at the end of the year.

i wonder if we hit 30% on these volume indices. >> is there any volume on this stuff? >> it doesn't matter. >> and there is always something to point to. anyway, 75, let's look at the oil markets, 99. we're right around 100 for a while. the ten-year, i think this has really helped. it's more than it had been, but still it was 2.87%. eight basis points is all we've increased. >> do you think there's anything magical about the 3% level, if we hit it? >> it depends on how you feel. it dpndz on whether you think qe was holing it down or whether the economy itself was so weak globally that -- >> that was the reason why it was low? >> it wasn't that different than where it would have been, anyway. and the dollar is

confounding. i'm looking for parity, but that might be a while. >> i'm looking for a dollar. that's about what it's worth. >> it's closer to parity with the swiss franc. >> which is important to you. >> but i'm not going to switzerland this summer. >> but he's going to davos in about three weeks. >> that's right. how can i forget? >> i won't -- i'll write off a dollar tip if i have time. i don't care what it costs in switzerland right now, unless i'm going to bring some chocolate home on my own dime. >> hey, let the good times roll. >> no, i wouldn't do that. kidding. i'm very frugal with the company money, very. let's look at gold, the markets today, up 2.80. above and below that $1,200 mark. a lot of people calling for a

bottom now. the same people that said it's going to 2,000 are now saying a thousand is possible. i don't know. >> is this the first time in 13 years that gold has put some negative here? >> it really has and it was an ugly one. there was -- you know, it was a slam dunk, people thought to go above 2,000. it has been happening. take a wrong turn at albuquerq e albuquerque. >> hannah bar bare ra. >> i think of albuquerque, then it goes -- >> walter white. >> there's a marathon coming up. >> i might have to participate in that. how do you see the fifth season? netflix? >> no, you'll have to pay per episode on i tune pes. >> you can't even buy the whole thing? >> you can buy the whole thing. i can spot you that for your christmas present. >> oh, you already have it? >> no, i don't already have it. actually, i probably do have it

but i don't think i can send it to you. >> why don't you buy it for me, then? >> i think i will. >> other than -- parting all my tv wisdom -- >> i'm going to get my credit card out right here and i will do that. >> you still feel guilty about that money i gave you for reading that book, i paid him $1 to read a book and he learned nothing. >> you reads it? >> yes. >> have you read capitalism and freedom by milton freedman? >> that i skipped. >> just tin trough, it's brilliant. >> how many times pages? >> the intro is about ten pages. >> pay him a dollar a page. >> done. >> we have some corporate news this morning. we're watching shares of blackberry today. the company's co-founder michael

lazaridies, he's now trimmed his stake in the smartphonemaker to just below 5%. he sold 3.5 million shares in recent days and is, you know, he's a little late on that, let's just say. softbank reportedly in talks to acquire t-mobile u.s. the japanese company said to be discussing funding with financial institutions, lots of reports over the weekend on this here in the united states, also in japan. analysts are saying u.s. regulators are seeing competition on the concern. he wants t-mobile. he already owns sprint. would talked for a long time about whether at&t shoovsh allowed to buy t-mobile. >> right. >> i thought it what as bad idea. >> i know. >> this is the perfect on outcome. this would be good for everybody, good for consumers. >> put some capital into this thing.

>> and the network would be better. >> that was the point back then. if there was nobody else, it could be a spectrum of whether it would be you. >> right. we're celebrating 930. i guess it is if you send a lot of data or whatever. >> you send a lot of data on your phone. it is not a cheap way to live. >> really? >> you could spend easily 1,200 a year on your phone. it's a lot of money. >> but think of everything that has been replaced by yoen phone. >> and that does not get factored into cpi. >> that's true. you're right. >> again, that's a big i don't see too often and i don't really know about. i should send more.

i'm very proou frfrugal with -- that list was like this. >> that was about a six-month list. i have done my expenses for six months. >> oh, god. i have, too. i have like a parking thing when i go in. when i do go in, it is to meet with a guest host or something. yours i've never seen -- that list was like -- i mean, you -- what do you total on a year for an expense account? >> i'm going to think about that and we'll talk about that during a break. >> do you have a "new york times" expense account? >> if i write a column related to somebody, i would expect that, sure. >> so that was only half of your expenses. you pay for anything at all? >> of course not, no. if i read a book, i get paid to read the book, clearly. >> he's got it wired, doesn't he?

>> and yet -- >> right. >> politics don't seem aligned. >> don't push my politics. >> they don't connect too many dots on that side of the aisle about hypocrisy. >> coming up, why popular knee surgery may be unnecessary for many patients. details of an interesting new study next. first, the national weather forecast from the weather channel's alex wallace. >> tracking snow. we're seeing that moving through the great lakes, and that will move through the northeast, as well. but not looking for huge totals. this is what we think through tomorrow morning. generally, there will be 1 to 3 inches, but maybe pockets of 3 to 5 in pockets of maine as well as new york state getting closer to the great lakes. what will happen is we head through the weekend. that cold has been that has been blacked in, a warmer air mass. but that will set the stage ford

next storm system. and tracks the moisture up into the east coast with rainmaker weekend on tap.

welcome back to "squawk box." it's now time for the executive edge. a new stid study in the new england journal of medicine reporting a popular surgical

procedure worked no better that can than fake operations in helping people with one common type of knee problem. thousands of people may be undergoing unnecessary surgery. the surgery dealt with people dealing with a torn meniscus. arthroscopic surgery is performed at an estimated cost of $4 billion. >> they fake the operation on half the people. so they did these fake incisions, but didn't repair the menisc meniscus. a year later, they said they felt like just like the people who did have their meniscus operated on. >> i want to understand how the test worked. if they didn't do it to you, wouldn't you be so upset or not? >> to find out you had been lied to? >> yeah. >> it's pretty upsetting. >> there must be something -- i'm sure the people that paid for -- >> no, they probably knew they were in a test.

tell tell you you're going to get the drug of placebo, we can't tell you which. so maybe they were informed that -- >> sorkin, you thought we were going to start with the nsa. did you see snowed.? >> i did. >> he looks 20. that's the one thing i was stuck by. is secondly, i thought he was dramatic. >> i thought he was reading a teleprompter. >> he said just know that any child born today, that any thought that he ever has will not be -- there will never be another moment of privacy in this person's life. and then i read today, they've got so much data, they can't even interpret it. i don't get the feeling that the nsa knows anything about me or is breathing down -- maybe i'm just naive, i guess, that your twins will never have a private moment in their entire life again? >> i think they will, but if we dent --

>> but you're concerned? >> no, i'm not that concerned because i don't think there's that much to worry about. >> i think he wants to end up like being, i don't know, like a -- >> on the cover of "time" magazine? >> yeah. that was pretty close. but almost as a freedom fighter or something like that, like a patriot. >> but you highlighted -- i better story here is the nsa getting all this data .they don't have the ability to scrape it and -- >> trillions of pieces of data. >> i covered crime for ten years, right? and you had people listening to hours and hours and hours of phone taps. it's too much sometimes. you can't deal with it all. and i've got to think it's the same. >> take some no-doz.

in terms of all the other people that they have been supporting this network of people and views. anyway, we're going to talk more about that nsa story, coming up. we're going to get 2014 market predictions from tony when we come back. but first, ceo wishes for the new year. >> i believe my economic wish for 2014 would be for less government intervention need and interference. that's allowing the free market system to, again, lead us through the economy and take this country to some great places. i think that would be my number one wish.

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welcome back. joining us on set is tony creszenzi. thank for coming back. you do come back once in a while, right? >> i am bycoastal. >> do you feel weird out there? sometimes you miss it? >> yes. i'm 100% italian. and there's no good pizza there. i say the best fee squaw i can find is dominos. and it's great pizza, but -- >> ed asner was explain to go will ferrell, don't take the gum up, it's not free candy. and number two, ray's pizza. there's 18 different original rays. that's the only thing that he told him. >> staten island has the highest concentration of pizza places in

the country. >> per capita? >> that's where i stay when it when i come in. >> because of the pizza. >> do you fit out there? >> i don't know. >> girls love a sovereign accent, right? >> the ten-year i say has been orderly. is it part of the reason the sfok market has been able to do well because it hasn't freaked out. >> there hasn't been a new high put in in yields. possible, but not probable, there will be a new yield put in by the first quarter of next year. but you can't expect a meaningfully high level. let me give you a stat that helps to explain it. the ten-year yield relative to the fed funds rate, the policy rate, it's never yielded in 50 years more than four points over that level.

so that would make a top for 20144% for the ten year. but that's an old way of looking at this four-point rule. that's where it only reaches sometimes, where it trades, too. it's given you a sense of when the policy rate will go up, probably the end of 2015. investors when they put the ten-year yield, 4 points over the funds rate, me never had that forward guidance or trillions of bonds held by the fed. that should help contain yields below. now it's a 2.5%, to 3% rage. probably shipping there right now. the gears are moving that way given the economy's momentum. about 3.25% possibly. >> possibly. simply because the economy has this momentum that people are banking on. the fed is banking on a 3% economy. pimco is projecting a 2.5% economy. but we're thinking it will be faster. >> it's a little better. it's a new new normal.

>> yeah. i call it for race, a new normalization for rates. rates when they normalize go up quickly. >> you're in a universe as i try and look around the corner. i understand that. go jets. >> here is the thing, though. here is the thing. in the past, i have said on an absolute basis, these yields are so low that no one should be sweating them out. but when it moves quickly, you can't help that people have big poe positions. if it happens orderly, don't they have enough time to prepare? >> yes. and now they have prepared. it would start in may. ben bernanke seemed to suggest that the fed may not buy bonds forever and things change. there are so many sa statistics to point out. >> and people are ready for this. >> you know that people have been selling mutual funds, households. but let me give you one example. it's not technical. in the euro/dollar market, this is a market where investors go

to invest in libor. in may, speculators, noncommercial traders as they're called in chicago, they were long about 700,000 contracts. they were betting on low interest rates forever. now they're shot, 900,000 contracts. 1.6 million contract shift. the ten-year, one last example, the futures, near record short. risk parity traders, reits, individual investors, they've all been selling. they did it for a short time. so you would expect it to be more orderly. >> this rate right now where we're heading is not that different than an unmanipulated rate based on fundamental. >> as it's occurring now. >> so the ten-year is where markets might put it? >> but considering one thing, inflation rate was released last week. the one where fed follows, it's at 1.1%, the record low since 1960s, 0.9 in 2010.

so 1.1. three, two points over inflation, pretty normal. and we had low rates, in fact, the rate was below inflation. >> this is an important concept joe is highlighting. everybody talks about the curve being so manipulated and what are real rates? and now we're getting the sense of they're exactly kind of where they -- >> longer rates and normalized. the fed is losing control. it's buying in its bond buying, it's qe3, about 80% to 90% of the long bond. it's telling markets it's not going to bsh we have some markets already, the fed losing its grip on longer rates. and we'll control them until a rate hike is near somewhere in 2015, probably the latter half given what the fed told us. >> leave us your phone number because you do come back here occasionally. >> always here. >> and we like pimco, but it's good to have someone who is not an outright communist and talk about -- >> the liberal and -- the new york mayor.

>> the more -- the bigger they're -- >> from a new yorker. >> and the richer ones, the worst they get. the richest ones, the ones worth billions -- >> i've been earning my own money since a paper boy at 10 years old. >> but you can't convert. you've tried. >> did macaulay cut his harriet? >> remember, he left pimco. >> but he left to go up on a mountain top and -- >> we learned whether or not he's cut his hair sometimes in here. invite him on and let's see. >> i think he did cut it. >> i don't think so. >> oh, he did? >> a little shorter. >> good to see you, tony. coming up, from luxury hybrid toes space travel, we're going to talk about revolutionizing the world as we know it. phil lebeau profiles one of the world's most important people in business .finance, coming up next on "squawk box."

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welcome back to "squawk box." we're wrapping up 2013 with a look at the year's most influential people. phil lebeau brings us this view of elon musk. >> i want to be in the middle of a battle. >> he's challenging conventional wisdom, showing the world cars can go electric. >> he has brought to the american consciousness a thought that, in fact, electric vehicles can exist. >> not only exist, but sell in big numbers. more than 20,000 this year, attracting buyers with unique styling and the allure of almost 300 miles on a single charge. >> in some respects, tesla is the equivalent of the moon shot,

where really he and tesla are pushing the paradigms of the industry in terms of how they develop the vehicle. interestingingly enough, the industry is learning some lessons. tesla has earned a profit by charging a premium. tesla is building a recharging network coast to coast. and critics said tesla is a one-trick pony, but musk has lined up orders for the model crossover utility vehicle coming next year. >> whether or not he's going to be successful within i don't know. i personally believe he's going to run out of money. i personally believe he needs more product. >> now musk is changing how cars are sold. for decades, automakers have gone through dealers, but tel tesla is cussing them out, opening stores in malls. auto dealers have been fighting musk saying he's a threat to their companies. and in some cases, they've won,

blocking tesla from selling directly to customers in certain states. but just a few years after many considered musk a zant story, musk is making many of those people think twice. coming up, two entrepreneurs disrupting the world of retail and getting consumers a good deal in the process. the cofounders of huckster are going to join us on the set with their stone when "squawk box" returns. sounds like a really good deal. jake from state farm at three in the morning. who is this? it's jake from state farm. what are you wearing, jake from state farm? [ jake ] uh... khakis. she sounds hideous. well she's a guy, so... [ male announcer ] another reason more people stay with state farm. get to a better state. ♪ just by talking to a helmet. it grabbed the patient's record before we even picked him up.

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to talg or huck all their favorite gift ideas in one place. thanks, guys, for coming back. >> thanks for having us. >> so here is the question. there's some stuff that's, like, really on sale now. i mean really on sale. >> some of the great discounts we've seen all season, actually. >> for example? >> give us some examples. >> okay. beats headphones, 50% off at best buy right now. >> is anybody making money on

that? >> the margins are slimmer. >> this is not the time to -- you were buying them because they were dr. dre's beats, right? i know them well. i have two pairs. >> so if i wanted the headphones, i would say i'm following these headphones. >> exactly. tell us the color you're interested in and we would let you know the moment the price dropped. >> to what? is there a level at which i need to indicate i'm only willing to pay? >> you could indicate a level or we'll tell you anytime the price fluctuates. >> we'll have a screen behind us here. we have this 35% off the jawbone. i wear it on my wrist, but that's a mini speaker, right? >> those are cute, they come in red, white or black. >> is that $30 off or 30%? >> $30 off. so it's about $150. >>. >> a lot of classic items are deeply discounted.

>> is that in the holiday season? >> no, either on christmas eve or christmas day. >> what do we expect -- in terms of product over the next couple of days, it's going to be heavily discounted. is there more stuff, do you think? can you predict what's going to go down? >> yeah. a lot of times we can. we do see the trends year-over-year. with the hunter boots, all the department stores are really slashing prices with apparel and accessories. >> are you predicting that? or you got an algorithm that's scraping that's going to predict that for you? >> we can predict it based off last year's data. >> computer intel? >> yeah. but we have worked in retail our whole lives. we do know the cadence of sales, as well. >> their whole lives. >> our professional career. >> in terms of retail discounting, that's been the story of the season in terms of margin compression. how does it relate where you're seeing on the app this year compared to last year thus far? >> we saw the discount start earlier this year. so last year, the wednesday before thanksgiving, we saw a ton of discounts across most

online retailers. this year, it happened as early as monday or tuesday. and then they just keep getting deeper and deeper. >> so we've been trained to wait. why buy anything? it's a classic deflationary spiral. >> if something's trending and you want it under the tree, you have to pull the trigger. if it's a wardrobe essential, staple like denim or just a v-neck sweater, you can definitely wait because the prices will continue to drop. >> okay. people say 30 is just -- you've got to get 30 to buy it. >> 30% off? >> yeah. that's the deal. but then afterwards it goes to 50%. >> j. crew's been 30% off for the past month. >> yeah. >> which is kind of incredible. >> they're 40% off sale right now. >> right now? >> yeah. the effective discount is more like that 50%. >> i got an e-mail. >> start celebrating christmas like on new year's or something. >> right. >> just in your own --

>> i could start looking at discounts. >> we like to call it treat yourself month. you bought all your gifts for everyone else and now it's time to splurge on the great deals happening for yourself. >> well, happy holidays. thank you, guys, for coming in. >> did you get anything good for christmas, by the way? >> it's better to give than to receive, i think. adults don't get much anymore. did you? >> i got some sweaters. >> you get 12 a year anyway. >> not for -- they're not sweaters you can wear on tv. more like weekend with jeans. >> for what you wore on friday, i can't imagine anything you can't wear on tv. >> that's true. >> the guy in my building said i saw you wearing pajamas on tv. coming up, shipping issues at u.p.s. and fedex. it's a huge day for retail

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it's the morning after christmas. >> you're late. >> but holiday shopping season is far from done. retailers are slashing prices and counting on a flood of shoppers today. turmoil in turkey. a corruption investigation threatening the leadership of a key partner from the west and the global markets are taking notice. predictions for 2014, only four trading days left in the year. we'll look ahead for what's in store for your investments in the new one. the second hour of "squawk box" begins right now.

♪ >> you ever watch telemundo in the morning? they're always dancing. >> have i ever watched telemundo in the morning? yes, i have. i watch all the different nbc -- >> you can't go 15 minutes without dancing. yeah. >> okay. >> all right. good morning and welcome to "squawk box" on cnbc. i'm michelle caruso-cabrera along with joe kernan and andrew ross sorkin. our guest host is ed kian. let's show you what the futures are doing this morning. they suggest a higher open. dow jones industrial average would open higher by 51 points, the nasdaq higher by more than six. and remember, the dow and s&p closed at a high on tuesday, wednesday -- tuesday. there are more -- these are your morning headlines. u.s. stocks coming off record

close tuesday. s&p 500 and the dow transports. and a gain for the dow today would be the sixth straight. something it hasn't done since back in march. christmas is over, but the crowds are not. today is the day many retailers offer post holiday discounts in what's already been a highly promotional season. also the most popular day to redeem gift cards. many consumers are also spending the day wondering what happened to their christmas gifts because both u.p.s. and fedex reported delivery delays. bad weather in parts of the nation as well as extremely high volume, much more than they expected. amazon is offering gift cards to customers as a result who were affected by the delays. we'll have a live report from atlanta in about 15 minutes. in global news, turkey's prime minister presenting a new list of cabinet ministers after some resigned amid a corruption inquiry. the turkish currency at this point has been volatile. but as you can see there, it's

up today in china. traders say they expected the central bank to refrain from open market operations today after it injected $4.8 billion into the financial system on tuesday. and a little bit of corporate news for you this morning, soft bank which owns sprint reportedly now in talks to acquire t-mobile, the japanese company is said to be discussing funding for a deal like that with financial institutions. analysts say u.s. regulators, though, are seen raising competition concerns over the deal. and you'll recall at&t ran into trouble when it tried to buy t-mobile, as well. but perhaps this one will get through. also, though, some interesting issues because there would be a japanese majority owner in this case. among the newspaper headlines capturing our attention this morning, a story in the "wall street journal" profiling the creator of some of the computer code used by the nsa to snoop on internet traffic around the world. and get this, the former employee now says that the spy agency is drowning in useless data and struggling to make

sense of it. he says this is harming the nsa's ability to conduct legitimate surveillance. too much data. >> this is like a stream of data. >> this is like stop the presses. how many terrorists are there? there are not that many. it's all useless. what did you expect? you didn't think it was going to be useless? it's all useless except that one time, when there's a money transfer, there's this, there's that that leads to something. but 99.9999% of what's going on, nothing -- that's what i said. nothing i'm doing is interesting. nothing that any of you -- >> and are you suggesting they shouldn't be collecting? >> no, i'm -- it's not surprising to me it's not interesting because most people aren't doing something that's interesting. >> or they can't tell what they've got. and you end up not achieving the mission you set out to do because you've got too much clouding the picture. >> why don't you look at it this way. do you know how many people we have screened?

don't you ever wonder that going in waiting in that line at the airport. don't you wonder. because of this, look at the misspent just useless stuff. how many people have we checked for, what do you think 99.999999 -- there's nothing interesting going on. the juice they check, you know, the bottles, the cream that's in your -- how much of that was worthwhile time spent? it's all worthwhile because you've got to do it, but all the bits of data. none of it meant anything. they're all negatives. all negatives. >> so now i'm going to make it -- i don't know if this will be controversial to say. >> you know this world we're living in now. >> profiling. because the reason we're collecting so much useless data. the reason we're making people go through these airports the way we do because we refuse to actually profile. >> they do in sort of -- >> we've made it more expensive

because -- >> it's not based on the color -- the background -- >> it's not about the color of your skin and where you're from, necessarily, but those -- all of these points will get put into a computer and somebody's going to say -- >> we have reverse profiling. if you are a frequent business traveler, right? you can do all of these things and you meet a certain profile of person who travels sufficient amount, they do your background check and everything else. >> there was a piece on a guy from israel in the way it's done in israel. i don't think they worry about profiling a lot. they know a lot about the people are traveling. and they might, you know, they check -- is that profiling? you're in the middle east and -- >> look, if we were doing what israel was doing, there would be. if you think there's an outcry now about the nsa, yes, there would be protests in the streets. >> it's just that, stop the presses, most of the data's useless. that's my only point. no kidding. >> but the larger point is, are you missing the ability to

actually capture someone because you've got too much? >> well, when it's that much. but what's the answer to that? i don't know. i think i -- i want to know who's calling yemen. >> he hinted on it. you profile, right? very specific people. >> not profiling. >> and everybody else. >> you can't look at a wire correspondence and tell whether it's, you know -- you can't be -- i don't think you can offend anyone looking at a wire. >> the problem, though, the idea. >> do you pick the wire based on the person's last name? >> and the problem with profiling is one day there will be a, you know -- >> a white girl from texas. >> a white girl from texas who does something and then whatever your preconceived notions or -- >> i know exactly -- >> people are going to say the whole thing's -- >> right. >> 2013's been a great year for the stock market. is it possible to see a better year in 2014? our guest host is ed keon.

i can't find it in the notes for today, but did you find the one thing we learned is fundamentals matter and don't trade against fundamenta fundamentals? >> well, i think -- >> did you say that? >> yeah, i think all the guests we've had on this year talk about corrections based on it was happening in washington or some other extraneous events that weren't related to the fundamentals of earnings and the economy and the valuation of the stock market. and the people who traded persuasibased on what they thought what was happening in washington would have a major impact on the economy turned out that was a bad trade. >> but when i read that to focus on fundamentals, i thought if you focused on fundamentals, you could have been out because the one fundamental you could focus on was qe-3 and ben bernanke. and is that a fundamental? >> well, i thought all year we were exaggerating the impact of qe on the markets. and i still feel that way. in other words, as qe goes off.

and in fact, you've seen the last several weeks is tapering is real. what did the market do? did it collapse? >> rallied. >> continued to go up. and i think made the point earlier that real interest rates are actually pretty much in line with historical averages. yeah, i think rates will go up further this year. not only because of qe coming off but the economy's getting stronger. i think we're actually going back to normal the new normal is going to be the old normal. we'll have north of growth of 3% this year. and already the equity market is anticipating that and that's one of the reasons we had a good year this year. >> are you in -- next year, what do we do? everybody's saying 10%. >> i'm pretty much the consensus guy on this one. >> anything good for us, besides maybe 10% up next year? either we'll do 30 to surprise people or be down 20 or something. what's it going to be? >> i think earnings are going to

grow at about 12% next year. >> what's the market going to do? >> i think it's reasonable to expect the equity markets to go up about 12% with it. >> everybody -- does that ever happen where people all say 10%, 12% and turns out to be 10%, 12%. usually the market tries to confound the most people. >> it sure did that this year. and it's not all about qe and the federal reserve. earnings have gone from $49.50 in 2008, estimates next year around $122 and change. that's a big pick-up in earnings. it's not just about liquidity. i do think the economy's going to normalize here. i think you're going to trade toward 3% on gdp, maybe a little bit above that. i think interest rates are going to rise. the last time you ended a secular bull market. interest rates went from 2% to 4.5%. and the equity market as measured by the dow went from 174 to roughly 730.

>> going up to very historical levels. it could still bounce around -- could be below 5%. and then you get 3% growth. we -- couldn't we do 30% this year in the markets? is that out of the question, jeff? >> not out of the question. but back-to-back 30% up years is pretty rare. i will say -- >> in the 90s three times, right? '94, '95, '96. all 30%. >> yeah. that was moving into a bubble. and i think we're getting slower but simple gdp growth. i think it's sustainable and i think that's the sweet spot for the stock market. and i would continue to tell people they are profoundly underinvested in u.s. equities. >> whereabouts in the market? you just buy the s&p or do you like certain areas more? >> i think technology and health care. i think growth is going to outperform value in the year ahead.

and i think growth tends to be clustered in i.t. and health care. both of them are trading 1 to 2 standard deviations below their normal historic valuation levels. and tech, actually, has an roe of 22% versus the s&p's. >> who's your guy at raymond james they rank that's done well in recent years in individual stocks? do you have a guy or know the stocks he's picking or that the firm is recommending? you got stocks for me? >> well, david, david henwood is the one that puts together the analysts' best picks up roughly 44% last year. that's got a track record of -- >> why are you on? do you know his picks for this year? or can you -- can you ask him to come on? >> i can. >> you can? >> i can. you can get it off the raymond james website, analysts best picks. >> all right. you don't to that.

in fact, he's moved beyond stocks. and we realized that last time. you're an allocator now, right? >> yes. we look at asset classes around the world. >> because you used to be the stock picker in the united states, didn't you? >> well, back in the old days. >> it's harder to be wrong doing it this way. this is a better gig. >> well, if you look -- some people come on here and talk about how much alpha they can generate. and it's extremely important. but in the long run, you get about a 10% return from beta. if you've been long on the market the last 80 years or so, you've gotten 10%, whereas 5% alpha's very good. if you can get the right asset class at the right time and ride them. there's a chart i like to use now that shows the market on a log scale. and we try to spend a lot of time thinking about those corrections, right because the market goes up about 10% on average. every once in a while you lose

half your money, which is discouraging for people. if you can focus on trying to do a good job during those downturn it is and ride it most of the rest of the time, you get the wind at your back. being optimistic about the market has been a good call for a long time and i think it's going to be a good call going forward. >> i was going to say one last thing to jeff. 44%, that's like 50%. that's outperforming the market by 50%, isn't it? >> yeah. and the analysts' best picks has done that for a long period of time. >> all of the new york firms with the fancy pedigrees. >> st. petersburg, florida. >> all right. >> michelle's old stomping grounds. >> we're going to have that guy on -- maybe we'll find out what's buying in '14. >> see you later. coming up, social media lighting up with consumer

complaints against u.p.s. and fedex. but first, as we head to break, check out our countdown clock to christmas. yes, we have 353 days -- 363 days, of course. buy your online gifts now and they'll make it on time. before you settle for another ordinary mattress, isn't it time you discovered the sleep number bed? the only bed clinically proven to relieve back

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welcome back to "squawk box." u.p.s. and fedex drawing fire after christmas delivery problems. gabe gutierrez joins us from atlanta. gabe? >> reporter: fedex and u.p.s. trucks trying to deliver those late packages and try to calm angry customers. now, both companies are blaming bad weather and increased demand due to soaring online sales. but that explanation isn't sitting well with a lot of customers. many of them sounded off yesterday on social media. one of them calling u.p.s. standing for undelivered parcel shipment. many saying it ruined christmas for them and their families. other customers are throwing their support behind u.p.s. and fedex saying the employees for those companies are working very hard in the days leading up to christmas and they don't blame the companies at all. but this is also taking a bit of a hit on online retailers. amazon.com is saying that it processed all orders on time and

basically pointing the finger at u.p.s. also, amazon is compensating customers, some customers with $20 gift cards and refunds on shipping charges. as for u.p.s. and fedex, both are apologizing for this delay. fedex is calling the increased demand due to those soaring online sales. they're calling that an extraordinary event. and u.p.s. is basically saying they did not forecast the online sales and all of this exceeded the capacity of their network. but, again, those trucks are back out again this morning and they're trying to calm some of these angry customers. guys, back to you. >> that was okay. that was, you know, you didn't have to be on cable to say that. but i came up with some things you definitely couldn't. with those letters. you can come up with some really nasty stuff. undelivered package -- that's nice. not bad. but a lot of people were mad. >> oh, yeah. >> and you would be mad when it came time to give someone

important -- and it's like, i swear i got you something. >> your mother-in-law's gift doesn't arrive. come on, that's bad. >> it happened to you, but on the gift you ordered for me, right? >> still late. >> should we reveal? you embodied the story. you bought something online. >> i got penelope to buy me something online. >> close enough. >> speaking of family things, it's hard to make a december 26th birthday really -- >> yeah. that's a tough one. so it's her birthday. >> blake. >> happy birthday, blake. >> and that's when she first came on. but she's, yeah, she's -- i can't believe it, 14. >> what? that's her? >> that's her. she's 5 -- >> she's growing up more than that. >> do we have more recent? >> that's pretty close. >> that's about two years ago. >> oh, my. you let her go out like that? >> that was at a little -- yeah, that's her last birthday. i think that's from last year. happy birthday.

and we got -- how do you separate the gifts from -- >> what did you get her? >> a bunch of stuff. a lot of apple stuff. >> apples -- tim cook is doing well today? >> so is sony. just in general. in the -- >> sony. that's -- you know -- >> that's so retro. >> we have two ps3s. we only had one before. and a ps -- >> where are you on xbox? microsoft's not taking your money? >> that didn't happen. not sure why. anyway, happy birthday. a retail analyst rings up this year's winners and losers coming up next. so you can see like right here i can just... you know, check my policy here, add a car, ah speak to customer service, check on a claim...you know, all with the ah, tap of my geico app. oh, that's so cool. well, i would disagree with you but, ah, that would make me a liar. no dude, you're on the jumbotron!

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it's time to tally up -- >> it's time to tally up the holiday winners and losers in retail. joining us is suntrust retail analyst. are they telling us essentially this is the year where online shopping just holy smokes took over? >> absolutely.

i mean, it's been coming, building up as the years have been progressing. and it's much easier for people to do the online shopping, especially with the tightened holiday period we had this year. people didn't want to head to the mall when everything was available for them online. and all the deals we saw starting early on black friday, even walmart, which opened very, very early. you were able to get the same deals online that you were able to get at the stores. why even bother going in dealing with the crowds? >> the majority was free. the majority of retailers have figured out how to price in the free shipping. free returns is something we haven't seen across the board yet. but for the holiday season, we were seeing extra discounts on it. >> and how unhappy, though. as a result of people not getting their packages when they were supposed to get their packages, do you think it changes the mindset of the consumer next year or changes the mindset of fedex and u.p.s. >> i think it changes the mindset of a certain consumer. i think the older customer wasn't necessarily always shopping online.

and now with this, they're the ones spending a lot for the holiday season and all of a sudden their kids don't have gifts underneath the tree. next year, it may actually help the pure bricks and mortar retailers. for the younger generation, i don't think it's that big of a deal. >> when you talk to retailers or get information from retailers, at what point do you learn the online sales -- the ultimate question here. are the online sales so good that they're going to offset all the negative stuff we heard about the bricks and mortars this holiday season? how do you find that out? >> sure. well, the majority of our retailers no longer provide the monthly comp store sales. it's more about the quarterly information, which we won't be getting until february. some do provide updates early in january. and there's also a big industry event. icr. and ahead of that, a lot of companies will provide preannouncements if need be. and within that, they will give us the online sales numbers. >> who won this season, do you think? >> sure. when i think about this season, i think about apparel in general

as we know was not very robust. that was not what people were looking for underneath the tree. it was more about the electronics, the high-end jewelry, luxury, et cetera. of the apparel retailers, i think the missys in general were winners in general. the color denim was a big item last year, a lot of women didn't want it. so i think there was a replenishment cycle going on. when we think about that, ann taylor was a winner. ann taylor and loft stores had the right product for their customer. a lot of planned promotions going on that resinated for them. >> thanks so much for coming in. we really appreciate it. >> thank you. >> happy holidays. happy new year. coming up, executive changes in 2014. who is going to be running microsoft? could it be alan mullaly. tdd#: 1-888-648-6021 there are trading opportunities

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welcome back to "squawk box." in the headlines, just one economic report this morning as wall street returns from christmas holiday. some people, not the big people,

they're out -- they're not watching? probably? and they're not cold. even if they're outside right now. right? >> because they're in palm beach or -- >> maybe skiing. >> st. barts, have you been? >> i've not been. >> it's hard to get there from here, people say. >> you've got to take the private jet. >> our first-time jobless claims since it is thursday, it'll be released at 8:30 eastern. economists are looking for 344,000 new claims for last week. we had a weird jump last week to 379,000. elsewhere, a judge has ruled against bp and yet another case involving that oil spill. bp wanted businesses to provide specific proof that financial losses were suffered during that time and were directly related to the spill. and then the price of a first class postage stamp, we just never catch up with what it costs. but we keep -- it's weird. it'll go 3 cents to 49 cents as

of january 26th. this particular increase was an unusual one. it was improved as a temporary measure. the hike was only good for two years to help them recover from losses it's already had during the recession that began in 2008. big losses year after year after year after year. huge losses, but gets more -- less and less important, right, with all this other electronic stuff. but you still, you know, christmas cards, stuff like that. >> they should be doing phenomenally well. look at what happened with fedex and u.p.s., right? >> you knew -- >> there's a resurgence in shipping and the postal service can't capture it, i'm shocked. >> i know how to press your buttons. >> but the reason they can't capture it is because they have costs that u.p.s. and fedex don't. >> like what? >> they're having to ship the last mile in all markets that are inefficient. there are places that u.p.s. and

fedex will not deliver packages to. >> what about pension costs? >> and pension costs. >> but i'm just suggesting it's a little bit more complicated. that's -- and i'm not sailing -- i would actually try to privatize the postal service if there was a way to do it. i don't know how, but i think we should. >> oh, man. >> you can't get it. >> you have to be like the client. that would make sense. i was surprised when he said it. we're talking about a conversation last hour. >> people watch. >> fine. >> we've got to have the guy come on. we'll have the guy come on and get his -- but he better not come on and not tell us. >> we'll get the list. >> you could get the list. >> i'll work on the list. >> you could easily get that list. in the meantime, we're going to talk about one of the biggest leadership questions. >> call the nsa. >> they'll know. >> they can't find it because they have too many lists. >> they give you every stock. >> we've got to get to the next story, which is one of the big questions heading into 2014, who

is microsoft's next ceo. our next guest is a corporate culture expert who works with fortune 100 companies to strengthen leadership strategies. joining us now to talk about, john gordon, the ceo of leadership consulting. you know, his name is in the title. it all works. john, thank you for joining us this morning. >> good morning. >> good morning. >> so if alan mullaly is the name and you are on the board or advising the board. would you say this is the right choice or the wrong choice? >> well, there are only a few people who could run microsoft right now. and alan is one of those people. you have to understand what your culture stands for if you're microsoft. and once you know what you stand for, every decision you make is easy. so will they pick a c.o. that redefines the culture of fit the culture that exists? >> and that's the question,

john. is this a company you want to have the culture redefined? and can you change the culture if the de facto ceo or ruler of the company still is bill gates? >> you cannot change the culture as it is right now. that's why, you know, if you want to go with a bold new strategy, a bold new vision, it would be very difficult for microsoft to do that. you have to bring someone in that fits the culture. because you have bill gates, 100,000 employees. you have this big machine that will be very hard to turn and navigate in a new fast direction right now. >> when you say right now as if this is something that's changeable. and the other question is, does it have to change. >> well, it'll depend on the next few years. this is a very crucial time for microsoft. it's going to be very difficult to change, very fast now. over the long-term, yes, you can change. i believe microsoft is going to continue with their strategy of

incremental improvement with their product and services continuing down the road of a little innovation, new products. but nothing bold and nothing crazy. >> here's a question. you've advised lots of corporate ceos. also coaches, i'm thinking mike smith of the falcons and others. can you go to somebody like a bill gates who is clearly the founder of a company who has a huge ground swell of support and has a legacy and be able to coach them to change? if you believe that's where the change has to come from? >> when i worked with the atlanta falcons and mike smith took over, we talked about what he needed to do to change the culture of the falcons organization. he was willing to change. so, if the leader is willing to change, it could happen. it all really depends on the leader being willing if they are coachable. if they're coachable, we can make that change. >> do you ever have a situation where a board hires you and

says, look, boy does this ceo not want to change. >> i haven't had that yet. but that would be a fun challenge. >> when you think about what's going on in corporate america right now in terms of jc penney, other companies that need real turn arounds, who do you look to and say they got it right and they got it wrong? >> well, there's a lot of -- southwest airlines. you know, when they brought in a new ceo, gary fit their culture. he was perfect for southwest, he plays the guitar at company meetings, the kind of guy with a fun-loving attitude but a great leader. he's someone doing it right. southwest is doing it right. dell, i spoke to dell years ago and i saw their culture really going downhill. i knew they were doing the wrong things years ago before they started to crash. >> where do you put jc penney in that? we've been talking a lot about retail.

>> right. i'm really concerned about jc penney and their ability to turn things around with the big challenges they had in the past. i understand microsoft being very cautious about their ceo because you don't want to have another jc penney. >> then i look at a company like yahoo and think of marissa mayer. are you surprised by the success of that? >> i'm not surprised. i think she's done a fabulous job. when you change the culture, you have to rally everyone in that company to change. she's done a great job of that. a lot of it is vision. casting the vision and being able to move that entire company towards that vision. and she did a great job with that. >> what does a training coach really do? if i hire you and say, listen, i'm having issues at work, this

is -- >> delivery -- >> this is not completely hypothetical. >> i'm available tomorrow. >> do you have a friend? do you know somebody that came to you? >> i have a friend who is looking for -- >> the guy who needs the e.d. medicine, same guy, right? >> i don't know that guy, but -- what is it that you do exactly? >> well, i do things on three levels. one, we work at the cultural level helping leaders create a great culture. then i work with leaders to be the kind of leader people want to follow. and then we work with leaders to help build strong teams that perform at a higher level. a lot of it is on positive leadership, getting people to lead with optimism and hope and faith and being able to move that company in the right direction. how do you do that? and at the local level, how do you get people to be engaged? and to be focused and excited about their work every day?

>> sort of part psychiatrist and part tony robbins? >> it's an interesting challenge. it's leadership, it's culture, it's part motivation knowing that, you know, motivation doesn't last. people are driven by purpose. and when they're driven by purpose, they're motivated. >> and how much does it cost to use your services? >> well, it all depends on what i'll be doing. whether it's speaking or -- >> i'll give you the number. >> we'll talk later. >> and is it expensable? >> yes. >> business expense. >> you know, we have talent coaches here. >> we do? >> yeah. >> i deal with it for three hours. it's working, too. it's amazing how engaging and funny and comfortable. it's unbelievable. >> well, you're -- >> i'm complimenting myself. >> i know. >> hey, john, happy holidays, this morning.

>> thank you so much. our prediction series continues with the financial sector. three bold calls for banks in the new year. that's next. when you miss "squawk box," you fall behind on global business news. when you fall behind on global business news, you make bad investment decisions. when you make bad investment decisions, you lose all your money. when you lose all your money, you attempt to hatch an illegal ponzi scheme. when you hatch an illegal ponzi scheme, you end up with this guy as your cell mate. >> nighty night, boys, don't do anything i wouldn't do. >> watch "squawk box." [ male announcer ] here's a question for you:

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you're always there for me. shh! i'll get you a rental car. i could also use an umbrella. fall in love with progressive's claims service. welcome back to "squawk box." checking the futures right now. the day after christmas. take a look -- put it in your stocking right here. dow looks like it would open up about 58 points higher, nasdaq up 7 1/2 points. how will the financial sector fair in 2014? kayla tausche joins us with her predictions in the financial

sector for 2014. first, though, let's see how she did with her 2013 predictions. first, jpmorgan's bench will suit up. this proved correct. we saw chairman and ceo jamie dimon realigning his executive ranks. next, kayla predicted investment banks would change face. this one she got wrong. while they've become far less profitable than they were, their parent companies haven't parted ways with them just yet. and finally, she predicted citi would say sayonara to the bad bank. the unit has shrunk considerably and now stands at 6% of citi's total assets. not bad. will she have better luck in 2014? let's have a look at kayla's predictions for next year. >> reporter: frustrated by fees and red tape, customers will start flocking to less traditional bank accounts. google wallet just launched a debit card, small businesses have been signing up for the new square wallet, and e-friendly

customers have been switching to online simple. reaching for yield, banks for years have been underwriting startingly high levels of junk bonds for low credit companies. as the fed starts to taper, yields will rise, there'll be a rush out of risky asset classes, bond prices will fall and bankruptcies will increase as re-financing gets harder to come by. banks won't take losses on the deals yet, but the alarm bills will start to ring. jpmorgan chase won't be the only bank to face fraud charges. eric holder has pledged more high-profile cases to come and nearly a dozen other banks are being investigated across the country. penance for the financial crisis, far from over. look for another wave of cases to pop up after the new year and keep a close eye on bank of america, citigroup, and goldman

sachs. three bell weather firms that have disclosed ongoing mortgage probes. for cnbc, i'm kayla tausche. >> and tune in throughout the day today and tomorrow, as well, for more predictions and on the web at predictions.cnbc.com. coming up in the next hour, you might want to think twice before snacking on some airlines. but like i always say, anything in moderation. you're not going to eat 20 snacks. how often do you fly? anyway, we're going to reveal the best and worst airlines ranked by the nutritional value of the food offering. up next on "squawk box," don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break. to help secure retirements and protect financial futures. to help communities recover and rebuild. for companies going from garage to global. on the ground, in the air, even into space.

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just a couple stocks to watch this morning. blackberry's co-founder has trimmed his stake in smartphone to just below 5%. he sold 3.5 million shares in recent days and shares of t-mobile getting a boost. soft bank is in talks to acquire the mobile carrier. the japanese company said to be discussing funding for a deal with financial institutions. analysts say that u.s. regulators are seen raising some competition concerns over that deal. what was -- what'd they buy that

other merger? that horrible clear wire mess? >> yeah. it became a mess. >> didn't soft bank? >> yeah. finally. >> let's get back to our guest host. i think i saw something about emerging markets. now, most people think for diversification that it's always a good idea over there. you don't -- that's not necessarily the time? it's not a great time, why not? >> we have been a little cautious. each one, the story's different. we've been a little cautious in the last year. >> you're resisting it? >> not quite there yet. i like to see a little bit better. >> is it all based on china? >> not just china. china's a big weight of the emerging market index. it's very hard to get emerging markets unless you get china. >> you can just say emerging markets and it was this blanket statement. you've got to get a lot more

picky, right? with this whole issue, some countries got a current account deficit. it's going to get hammered versus one that doesn't. >> well, we use a lot of quantitative techniques. and both for our colleagues who do pick the stocks as well as in our asset allocation approach. and we're still a little cautious in latin emerging markets. because the numbers, frankly, don't support. the valuations aren't that cheap. and the momentum of the earnings isn't all that good. i wouldn't be at all surprised in 2014 if i come in and say we have gone to an overweight position. but i think it's still a little premature. >> and we haven't invited you back in 2014 -- >> i assumed -- >> it's very presumptuous. are all developed markets sort of development markets? when you say stocks, you mean europe, too? >> we have been moving money towards europe.

we still have a very big position in the united states. early in the year, i thought the united states was basically almost a no-brainer. we had a huge position there. and we have trimmed a little bit of that and moved toward europe. basically because of valuation. you get a lot more stock for your money after a 30% run-up. >> that's your only point. because of the run-up. there's nothing wrong with the u.s. it's because of the run-up it's not quite the slam dunk. >> that's right. there's nothing -- i have a great deal of confidence in the u.s. economy. i'm way above consensus. i think we're going to start to print some 5% quarters next year. >> really? >> i think we're going to see much, much stronger growth over the next couple of years than most people believe. you're finally starting to see the pent-up demand for autos and housing and other things starting to be realized. you're starting to see the availability of credit improve enough. higher interest rates make that easier. with rates higher, it's more likely that banks will make credit available because it's more profitable to do so.

all that money from qe that's sitting in the federal reserve bank because the banks have not loaned it out, eventually that will find its way into the economy. i'm very optimistic about the u.s. economy. i think the u.s. stock market is a very solid place to have your money going into the year. but my job, i have to pick not just where you're going to make a good amount of money but where you'll make the best money on a risk-adjusted basis. and i think you might be getting a little bit better value in some of the non-u.s. markets, especially in europe. >> in europe. >> and we are in a global business environment. and so when you have companies that are competing for business all around the world, as long as the global economy is starting to recover, you want to be able to get the best bang for your buck in terms of getting the good-quality companies and sectors at a reasonable value. >> do you like recommend any money in frontier markets? >> we have not really got into frontier markets yet. >> so scary -- >> there's no liquidity.

>> home runs -- >> the data isn't really all that good yet. but one of the interesting things about -- >> meaning you can't believe the numbers sometimes the corporate governance. >> one thing people don't realize is sometimes when the data isn't all that good is when the opportunities are the greatest for quantitative techniques. >> but you do risk adjusting, right? willing to white knuckle it sometimes. >> for example, my colleagues have created a small cap emerging markets product which has been delivering a substantial amount of alpha so far based on what work you've done so far. there are opportunities to use quantitative techniques even when the data's not the same very high-quality again in the united states. in some ways it's greater. because it means you have to work harder to make sense of data that isn't as high quality. >> do we have the financial crisis of our lifetime? >> i think so. >> not ours -- how about andrew?

we had the financial crisis in andrew's lifetime? he can live another 80 years theoretically. >> the financial markets and financial companies go through this from time to time. they have for hundreds of years. >> so we're done with it? >> i think it's going to be a while now because we -- >> i don't know. i worry about -- this whole civilized society thing, i worry about. of course, i watch too much "walking dead." you know. post apocalypse, just buy some water, at least. >> right. >> buy some water. at least buy some water. >> we're going to talk to ed in a little bit. coming up, lessons from the bull rally of 2013, we're going to talk about the business and economic trends that could drive trading in the new year. plus, a holiday wrap-up for retail. john feldman's going to join us to talk about his five big winners of the shopping season. ♪ i wanna spread a little love this year ♪

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[ male announcer ] this december, experience the gift of exacting precision and some of the best offers of the year at the lexus december to remember sales event. this is the pursuit of perfection. a holiday retail wrap-up. which companies -- and which

retailers fell short. >> you stink. >> i think you're going to have a good christmas, all right. >> you smell like beef and cheese. you don't smell like santa. >> okay. investing in the new year, lessons from the bull market of 2013 and the trends that could drive trading in the year ahead. holiday travelers, listen up. >> step aside, sir. >> new airline food ratings are out. we'll tell you which companies are the best and worst at feeding you. plus, find out which airline's snacks are making you fat. the third hour of "squawk box" starts right now. >> welcome back to "squawk box" here on cnbc first in business worldwide. i'm joe kernan along with andrew

ross sorkin and michelle caruso-cabrera. becky quick is off today. she'll be back tomorrow. >> just for the day. >> and next week -- like i said, she's got it wrapped. our next guest, more from ed, still to come, first, though, a round-up of this morning's top headlines from andrew. >> there you go. the big story we've been talking about this story all morning. u.p.s. says it was overwhelmed by a high volume of holiday packages. and this meant some didn't arrive before christmas. shipping company also blamed recent patches of bad weather. angry customers venting all over social media. amazon.com responded with an e-mail to affected customers offering shipping refunds and $20 gift certificates to compensate. meantime, supervisor at fedex customer support line told nbc news, they were in his words extraordinary delays at the shipping giant. and his team had apologizing to customers. and in a statement that came out

this morning, fedex says it is projected to handle 275 million shipments between thanksgiving and christmas. fedex ground, for example, during the busiest time of the year. but 1% is a lot in -- >> the first time you read it, i was thinking, it's u.p.s., a lot of -- what happened, man. all these packages. is it christmas or something? yeah, you know, christmas. are you guys ready? apparently not. >> we're learning this year -- >> no, i'm kidding. >> snuck up on u.p.s. wow, all these people are sending stuff. >> no, people like you are finally ordering online. older people are ordering online. >> you didn't have to go there. you could say he was ordering online. younger people. >> i said you and older people. i didn't lump the two of them together. >> my gift didn't arrive on tuesday in time for christmas,

but not in time for you to give it. >> my gift. >> can i call amazon and get a $20 gift certificate? >> yeah, they should have given it to you already. >> it was a total publicity stunt. >> one of the great publicity stunts of all time. >> he's still laughing about that. >> we may not have it fast enough. >> are you saying "60 minutes" was suckered? >> which time? >> and there's mr. bezos, laughing all the way to the bank is what he's doing. there it is. we have some other corporate news you can laugh about this one or not, but report through in talks to acquire t-mobile. analysts say u.s. regulators are seen raising competition concerns over that deal. and, of course, soft bank owns sprint, this would effectively become a merger of those two entities. in global news, we're watching the situation in turkey. the country's prime minister

there presenting a new list of cabinet members after a number of ministers resign amid the corruption inquiry. the turkish currency there falling against the dollar over that -- i don't know if it was called a saga, soap opera, sort of a mess. >> we could see the fall of the government there. this is a big deal. started with the arrest of 85 people. it's hard to know whether this is bad people beating up other bad people, regardless to say, it's led to huge instability in that market. equity futures right now suggesting we'll get a positive open. the day after christmas has historically been good for stocks. since 1945, the s&p 500 has risen 79% of the time that trading was open on december 26th. joe? >> wow. just in a good mood, i guess. a lot of them aren't working. we are less than a week away

from new year's and markets continue to hit new highs in the countdown to 2014. how long will the rally continue? joining us now joshua fineman and steven sachs head of capital markets at pro shares. josh, let me begin with you. ph.d. from brown, you're the man. johns hopkins, right? undergrad? but it's in economics. >> brown gives out gifts? >> yeah. only way i was able to get one. >> i thought you were going to say, oh, i should have checked that. >> too late now. >> that's awful. you think -- here's how i want to approach. you think the economy's going to continue to do well in 2014 and 2015. >> better, actually. >> continue to do better. what scares me is we just decided we won't have another big financial crisis probably in our lifetime. we don't know for sure. but this last one, it's been five years.

we've been recovering. >> yeah. >> can we assume we go seven years, ten years without even a recession? are we just clear sailing because it was so deep? >> not necessarily. i don't think that's the reason. but the recovery hasn't been so great. so we still have a lot of ground to make up. that doesn't guarantee we're not going to have a recession, of course. but i think the imbalances that typically precede a recession, they don't seem to be there. >> the economy owes us this? >> you're not owed anything. that's for sure. >> so it's definitely there somewhere waiting to be -- >> no, it's not definite. but i'm saying, the telltale signs, the excesses that build up before. >> we still have plenty of slack in the economy. >> you're just starting to get credit expansion. we're nowhere near the levels of danger you normally see. >> i guess that's the one silver lining and not having had a great recovery is kind of low

and slow. but it hasn't -- getting close to boiling over. >> '14 and '15, do we see four prints? ed said we might see five. >> well, if you look historically, you have had periods where you get a year or two where you have had that kind of spread. >> usually it's a stretch and it's like a sprain. >> even if we were going to get three prints on a consistent basis we haven't seen so far in this recovery. >> that was one quarter. let's not run with that. >> right? >> that's right. but i'm talking about getting on a sustained basis, you know, where we average that over a couple of years. we haven't seen that in this recovery. so that would be something to celebrate. >> all right, steve, so you heard now you know what kind of economy we're going to have. you can tell us what to do with the stock market, then. >> no, absolutely. and i think myself and most of

the investing community would absolutely take consistent three handles on the gdp growth. i think we occasionally see those bumps around 4, 4 1/2. but ultimately one of the things we learned, nothing wrong with 2.5% to 3% gdp growth. if we can continue that into 2015, you know, i think a lot of the things that have been working over the past couple of years will continue to work. i think it gets a little bit tougher to be a global asset allocator. i think the relative outperformance versus others probably that gap probably closes a little bit. meaning you're going to have to look around the globe into different asset classes to continue to get that big relative outperformance. but ultimately at the end of the day, you know, u.s. equities from a fundamental perspective still look very, very attractive. we're still very constructive on u.s. equities particularly relative to that 3 to 3 1/2 gdp growth we think we get over the course of this year.

>> how much of this will be the multiples? will they stay the same or continue? how much is just earnings per share? and will there be revenue growth? >> i think we see a little bit of that. at the end of the day, we continue to see p/e expansion. when you look at the picture, particularly u.s. corporations, a lot of good positive things in place, particularly from a balance sheet perspective, a cash flow perspective. revenue growth is probably the biggest question mark. but if we can continue to get that 3% to 3.5% gdp number and global gdp number consistently print in those levels, i think that revenue growth or that top line growth number takes care of itself. the fact of the matter is over the last five years, you know, global corporations have become very, very adept at managing balance sheets, managing income statements and ultimately managing margins. so they're in a very, very good position to take advantage of

even slow to low top line revenue growth. i think that's really one of the themes that plays out over the course of this year. >> how's business with you are? how would you rank public participation right now? and can you tell from your business, steve? i wait for the market to get really popular again. and i don't really think we're there yet. a whole lot of people that may never be in a stock market again. but sooner or later, there's got to be excitement about these new highs. and it's not that exciting yet, is it? >> no, it's not. if we look at our data in particular and keep in mind our core client base really are investment professionals, institutional as well as financial advisers that are managing money, you know, for folks. but even the adviser community. while there's clearly been good participation over the last couple of years, i think you're right, joe, at the end of the day the question is the average american investor, you know, back in this market?

i don't think so. we don't get that sense. there's been a lot of performance chasing the back half of this year. and that's one of the things that's a catalyst for the first half of next year, is that retail in this market to a great degree? we don't think so. we also think it's probably a good thing. we don't have those excesses in the pipeline, don't have those built in prices at this point. that's that continued fuel for the fire. bottom line is, no, we don't think the sort of average investor has participated to a great degree, particularly this year. >> do you think about the fed anymore? do you think about the political environment? washington anymore? all of this is going to happen. it's on -- it's sort of going to happen either way, right? >> yeah, i think so. one of the reasons i'm a little more optimistic about the next year or two, i think washington will be a little bit out of the way. this budget deal is a good sign of that. the debt ceiling issue, there's

still wrinkles for sure. i think for the first time in a while, we've got a chance of washington being more out of the way. the fed i think is still going to be very accommodative for a long time. there's a lot of slack in the economy, inflation's low. yeah, they'll probably be continuing to slow down the asset purchases, but they told us. they're going to be low for long and i think we can take them at their word for that. >> do you think that the people that you think of that have been left behind -- and we have a -- when economic times aren't gr t great, we forget that just having everything get better usually helps. >> it does help. >> it does help. we see the income disparity and inequality and see people that aren't doing well that are left behind. are there other things we need to do, too? >> yeah, i think there are. but growth will help. it's not just in the u.s. it's global.

but when the economy is weak, it gets worse. you know, in the late '90s when the economy was red hot, labor market was real tight, the inequality trend, you know, slowed. so if we could get a couple of years of stronger growth, that's not going to solve all the structural problems associated with inequality and what have you, but it would help. >> unfortunately, some of the best laid plans of central planners to deal with income equality can actually hurt the growth that would've helped -- >> that's true. >> it's very hard balance. >> forgive them for they know not what they do. >> you don't want to throw the baby out with the bath water. you don't want to ruin the system that gives you the high, average standard of living. it's a very complicated issue. and like i said, it's not just the u.s. this is a global phenomenon. >> it's more and more previously planned economies move toward a

market economy. it's a tradeoff you accept for growth. >> but the question is, if it goes too far, you start to get, you know, political and social blowback. >> latin america in the '70s and '80s. >> and you can get strong growth. in the 1950s and '60s in the united states. the growing widening inequality has been a relatively new phenomenon. what's more common, i think, over time. >> you think we should've grown even more? we had inhibitions in the economy -- >> it was the best decade ever for stocks. >> right. >> when you look at -- >> i think we would've grown faster, sure. >> and the inequality would've broader, and that's okay? >> when we talk about the '50s and '60s and the '70s, too. when you think of auto workers. what do we know now? we know the auto workers were borrowing from future workers. but all that salary they made was not true. all those benefits. >> right. >> were extremely costly and

were taking from the future. they weren't sustainable. so -- >> it's -- you have to ask yourself. a rising stock market is really, really good for people that have stocks. >> that have stocks. >> is it better if the people that have it -- >> right. >> even people in washington are happy when the stock -- they might not admit it. >> well, also if the stock market this year is in part because of anticipation that the economy's going to be doing better. >> unfortunately, the people that have assets are the ones that are going to benefit higher asset prices. doesn't mean you don't want assets to rise. >> of course not. >> if you don't want assets to rise because -- >> i don't think anyone wants to go back to 2008 and 2009. the stock market got hammered. and income inequality narrowed a little bit during the financial crisis. >> thatcher gave a speech 20

years ago and they were booing her and we played it where she said you people want just to bring down the -- and that's how you want to solve income equality. >> i don't think anybody, you know, when they really think about it. >> we've got to run, the foo fighters are playing us out. with fidelity's options platform, we've completely integrated every step of the process, making it easier to try filters and strategies... to get a list of equity options...

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welcome back to "squawk box." diet detective has released the analyst of snack and meal ratings ranking airlines on the quality and nutritional value of their food. so take a listen to this because if you eat on the planes, you gain weight. it happens to be that way. >> don't take the nuts. >> it's good for you. >> they don't even give you nuts anymore. >> yes, they do. >> sometimes pretzels. anyway. topping the list is virgin america and air canada. both received 4 1/2 stars out of 5 getting high quality marks for freshness and nutritional value. virgin america also praised for the light menu and on demand ordering. not so bad there which means you can eat when you want, not just when they come around with that cart. at the bottom of the list is

allegiant air. the airline received a score of 1 1/2 stars getting knocked off for lack of healthy options. spirit airlines with 1 1/2 stars. overall, diet detective notes onboard meals are getting healthier. the average number of calories per food item. you had said how could you get fat on an airplane? 360. >> how often do you fly? from 388 last year. >> this is a question no one was asking. >> you go to the airport, you eat in advance of the flight at least i do. and i try to think i'm being good. and you get on the airplane and maybe they have more food and you can buy that box of junk and you eat that. get off the plane, get to the hotel and you might eat that. and it's like you think you're on vacation. >> that's not the airline. that's your inability to control yourself before, during and after the flight. that's the problem with most of these things about calories. it's you. not them, it's you.

>> don't you go to the united club? everything's free in there. you do. >> no, i do. >> can i say -- >> cheese and hummus. >> the food at most of those places with the exception of virgin atlantic's national lounge -- is awful. i'm just saying. >> virgin lounges are the best. you get your haircut, get a massage. that's a question people are asking. >> where can you get a haircut, okay. it's your cheat sheet for some of the world's most chaotic places and impacts on global markets in the new year. and breaking employment data here at home. the closely watched weekly jobless claims and sharply higher for the last two weeks. 8:30 a.m. eastern time. tdd#: 1-800-345-2550 trading inspires your life. tdd#: 1-800-345-2550 life inspires your trading. tdd#: 1-800-345-2550 where others see fads... tdd#: 1-800-345-2550 ...you see opportunities.

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when michelle is not filling in on "squawk box," she's the chief international correspondent. she's going to highlight some of the potential hot spots for next year. and you are single. this is a great -- this was a great gig for you. is that where -- your investing hot spot all right. >> financial crisis. >> but there's some overlap between them. >> you've been to italy, you've been to greece. >> yeah.

>> istanbul. >> you've had some crises. >> we're not going to call this wish list. >> you will be going to these places next year. >> it could be. puerto rico, has to borrow money by july of this year. >> did you pick these? >> i picked these myself. i'm hoping puerto rico's crisis really big in the winter. puerto rico's got to borrow some money and haven't been able to access the markets at a price they want. they've been doing major reforms there including teacher pension reform. they did that on christmas eve. and we'll see if they can return to markets. there's huge predictions they're going to have big losses on their sovereign debt. we'll see. brazil, we've got to watch what happens with the world's cup and whether or not those stadiums survive because they have been really rushed in construction. and then there's an election coming up after that, which is, i think, the outcome with the world cup is definitely going to impact that. if we move to the right and look at northern africa. libya, they're still trying to get control of the ports where the oil comes out of.

we've seen sharp productions in the amount of oil coming out of libya because the war lords aren't allowing it to be shipped out. and some weeks, increases, some weeks it doesn't. egypt, everybody's going to be focused on constitutional reform. they've got wicked subsidies for bread and for fuel. >> wicked. love that word. >> very new england. >> they've got to do something about. there is no alternative. iran, that's obvious. we're going to find out if the sanctions are lifted and whether or not they can return to the world oil markets. and if the sanctions aren't lifted, they have potential currency crisis, as well, which would be startling to watch. russia, we've got to watch what happens with the olympics. i'll be in sochi for the month of february. in china, there's so much to talk about china. i think most importantly, we'll want to see, are they finally going to liberalize interest rates, it causes so many terrible distortions when it comes to real estate and people

trying to invest in crappy products no other way to describe it. i think we're interested is in is it going to work? >> coming up, minutes away from a closely watched weekly jobless claims. we'll be right back. before you settle for another ordinary mattress, isn't it time you discovered the sleep number bed? the only bed clinically proven to relieve back pain and improve sleep quality.

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we are back "squawk box." seconds away from jobless claims. rick, what are the numbers? >> all right. 338,000. so that's a drop from 380,000. so 42,000 big drop. i think michelle nailed it earlier. it's been pretty volatile, it's been mostly higher. we're working out some of these seasonally adjusted kinks in some of these numbers. and it isn't only this number. there's a lot of numbers that have been -- they aren't working as well as they used to. here's some of the notable features of the marketplace. 299 and change, we're coming close to 3%.

if you look at the yield curve, i think it's more interesting maybe to look at the 1.75 in a five-year note. we're getting close to a 1.05 handle in the dollar/yen. we continue to see the japanese currency. the stock market celebrated as one of the biggest net changes of the year. but a lot like the nasdaq. maybe the supreme number in 1989 is too far up to contemplate 39,000 considering 16. plus, we want to consider the final issue. and that is preopening dow futures up 44, s&p's up almost three. and all the newspaper stories of late saying the world now believes the central banks have cured the problems. i definitely think we should put that in stone and pull it out at some date unnamed in the future. back to you. >> yeah, i was thinking that, rick. it was like 10 billion started

to taper and we're almost not talking about it that much. like the taper's already over. are we -- hopefully we'll get back to sweating out every single comment between now and the next meeting about whether they go to $65 billion. that'll be the next thing we probably do, don't you think? whether they hit that schedule they came up with? >> you know, i guess the only way i could think about it is, there's a lot of stories about how young people are living with their parents longer. well, i guess if young people had the same principals on their stay as the fed's taper does in the marketplace, most likely they'll be celebrating their 75th anniversary living at their parents' at some point. >> still be at home. let's get reaction to the jobs data. global chief strategist at citi private bank. could you ever see yellen putting it on hold or going up? >> yeah, we do. when she was the president of the san francisco bank, she voted for rate hikes.

we do think -- >> going back up. >> i think things have to go very bad in the world. we have to have an outlook probably for a new american downturn. full blown downturn. they would raise qe again. >> don't have any of the -- it's still slack is ed's point. five years was a pretty long recovery in the past, but no one's thinking there's anything on the horizon of the slowdown. >> well, i do think it's true that we had, you know, housing sector go down deep into the early part of what we're counting as this recovery. we've had relatively slack employment growth. we still were driving around 11-year-old trucks and cars on the united states roads. housing activity is still, you know, weak relatively speaking and going up. just hasn't been that much of a recovery yet. we might want to call the first couple years of this a time-out and where we're going from here, the real recovery. >> you think you can do that? >> we think it'll be over in

september of 2014. there's a lot of good news aside from qe. we're thinking 30% above 2007 levels for american companies. share prices are about 15% higher in the 2007 peak. you know, that mattered, too, the fed didn't just print earnings. you know. so i think going forward the lack of qe, it's going to be harder to generate big upward surprises for the u.s. now that we're expecting more. i think it'll be harder to get monetary policy surprises in the right direction the market likes. but we think there's been a lot of fundamental behind this market rally. >> we don't see any problems -- >> well, there are plenty of problem spots. the world can't run a current account surplus. the problem with the surplus economies for many years, you know, the u.s. -- this is one of the few expansions we've seen since 1980 where we haven't blown up the trade deficit. europe is running a really substantial trade surplus. and that's got to come out of somewhere.

i think we're looking at the u.s. as a leading indicator of europe in a sense that, you know, bank recapitalization has been slow, fiscal tightening is winding down there. the fact that they have led for a long time made sense, but we think there's more improvement in europe. probably little bit stronger surprise and acceleration in europe from lower base. >> well, does that make sense, ed? >> yeah. i think the united states is back to the world leader when it comes to economic activity. china played that role for most of the last decade or so. now that's shifted back to the united states. >> in sheer size, maybe, but not in the actual number. >> do the math. but if you take the growth we have relative to our size of the economy, that's going to be a bigger factor. >> we get 3% on our economy that's still more than 7.5% and much smaller chinese economy even though it's number two. >> i think our growth next year will be much stronger than 3%.

i think we'll see the u.s. be the horse that pulls the cart next year. and i think there is a lot of upside potential in europe, which has not been recognized the same way it has in the united states. and eventually that'll fall into emerging markets. >> even though draghi's been so slow at the wheel according to some? >> well, he's be slow -- >> in a way that's different. >> he has different political dimensions in europe. >> i realize that. he hasn't been able to do as much -- >> checking on that. >> i'm sorry, i leaned on my phone. >> siri. >> it's off. it says it's off. >> sorry. >> so, stephen, what is this, generally seeing lower liquidity options offering small and medium term. >> being realistic about the fact that the u.s. equity market has tripled off the lows.

you could get a bbb corporate at 9% yield and now getting it at 4%. you're looking over a couple of years, a standard liquid equities and fixed income returns are going to be lower than where they were at the crisis point. where if you take a look at some of the alternatives, things like private equity, some real estate investments, returns have fallen too, but they haven't fallen as much. it's very, very easy to find investors for 4% type of return opportunity in fixed income markets as long as you can get out any time of the day. one of the tradeoffs, and there's no free lunch here. you have to trade a little bit in liquidity, have a little bit more flexible time frame as when you get in and out of investments and generate higher returns. >> take on more risk, basically. >> well, take on timing risk in terms of exit points. one of the things you found in 2008 and 2009, the things you

counted on being liquid weren't liquid. there will be points in the future where you don't want to get out of markets at any particular point. >> under which president? >> that was way back under, you know, the second bush. >> second bush, bush ii. you don't have -- it says acquire credits toward ph.d. >> yes. >> on his way. still on his way. >> we're checking everyone's credentials. because you don't think brown offers a ph.d. >> i was teasing the guy. >> guy picked the wrong ivy league school. he changed to dartmouth. thank you, we appreciate it. >> we've never caught anybody, have we on that? >> david faber caught a ceo once. >> on the air? >> i can't remember if he did -- >> i think there was a ceo. >> yeah. it was a contact lens company. >> people tried to catch me. they did and they thought they had me because they were spelling my name kernan.

>> you know. you know. >> i know all too well. thank you for coming in this morning. coming up -- we're crunching numbers. we're going to talk to a retail analy analyst. we're back in a moment. (vo) you are a business pro.

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that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. welcome back to "squawk box." christmas is officially behind us. time to tally up and see which retailers won the holiday traffic wars. joining me now from new york is joe feldman, the assistant director of research.

good morning to you. >> hi, how are you? >> we teased right before the commercial break that you still love and i don't want to put words in your mouth -- best buy. >> yes. >> one of the questions i have is looking at the stock, which has been on such a tare. and even though i know the business has come back from what people thought was the dead, how much growth is really left? and how much is built into this stock? >> well, that's true, expectations are high. as you look into next year, there's so much opportunity for them to improve their website to enhance and leverage the data mining they have. they've never really do that. and the management team has that ability in the background. the cfo was at william sonoma for 12, 13 years, she knows how to mine the data and make it more important part of the business. and then they're competitive on price now with amazon. and i think that there's a way

to drive people in the store. and you see this holiday season, you know, people didn't get their orders on time from some places. >> and you think that's going to have a huge impact come next holiday season? >> i think people are going to think twice. i do think there are some that will think twice about -- i can run down to the store and get it or i can just do it online. >> or is it good news people may not wait until the last minute. maybe the last-minute shopping gets done. no? i don't know. game stop, you also like gamestop. another surprise from you because i've always believed at some point this game stuff would go online and you'd order it on itunes type of thing in the future. how much of a change is this? how cyclical as opposed to secular? >> that is definitely a big part. and that's really what got investors more in love with the stock this year to really drive it higher. i do think that's a big part of it. but over the past three years, probably, i'd say, gamestop has

made big strides in terms of the digital effort. >> why doesn't -- why doesn't this just turn into sort of the blockbuster netflix issue? >> well, i think that the vast majority of people still need the device and want the device to play the games. even if they are going to download, they still want it. if you watch, the games themselves are currency for people. they walk into the store and you'll see kids on a saturday with three games trading in for a brand new one. >> isn't long-term all this stuff be downloadable? the games will be streamed? >> yes. >> therefore, where does that leave gamestop? >> well, the good thing is the store leases are very short. and i think as i mentioned, they're positioning themselves to be at the center of that whole, you know, transition. they can get out of their stores within three years effectively. >> so you also like garmin, another one that makes no sense to me because i've got an iphone now. it has google maps and apple

maps. why -- who is going to have a garmin or even use the garmin software in the future? >> yeah. i'm not sure i'm the one that does like garmin that much. >> i thought you did, i'm sorry. >> you know what, my apologies. this is the gap, not garmin, it's the gap. i was looking -- and i -- >> i like the way you did that, though. >> you got me nervous. >> you like garmin. >> well, you like the gap and therefore -- by the way, i could ask the same question. what is wrong with you? >> poor garmin, nobody likes them, obviously. now i feel bad for them. >> that's right. well, no, gap. gap is one that dana has been a big fan of for a while. i think they've done a lot to reinvigorate their brands. pricing is much better, stores look a lot better. the product is right. the merchandising has been spot-on. and we think they've been one of the winners this holiday season. >> and is that something you think will continue? or is that because of the deep

discounting? have they got their act together? >> a little of both. i do think the merchandise does look a lot better. it's a cleaner look, a little brighter. people tend to like color and i think that's worked. >> do you know what they represent anymore? when i think about the gap or banana republic. the old navy brand i feel like i understand the old navy brand still. i don't think i understand what the gap is supposed to be. >> well, i -- i do think that the core gap brand is still that classic american, you know, clothes that you wear. you go casual, some people do wear it to work. i think banana republic certainly fits that more casual wear to work environment better. but, no, i think there's still relevance and meaning. and especially as some of the other teen retailers have not done, as well. i think the gap's actually, you know, filled in some of that void. >> you've given us a lot of nice things to think about. is there anybody that you think -- any companies you should stay away from? >> stay away from? i do think i'm a little nervous

about target right now, to be perfectly honest. >> because of this credit card breach? >> no, because of the breach. >> that's like people saying they're worried about the 787, boeing because of the battery problem. they get over these things, right? >> absolutely. and i think it'll be short lived. but in the near term, you kind of wonder, how much did it make people think twice about walking into the store before they bought this past weekend? or are they going to go back and pick up some of the deals the post christmas deals now? i think people might worry a little bit. and especially if they do get impacted by it, you'll hear about it. >> happy holidays. >> thank you. happy holidays. >> appreciate it. coming up, phil lebeau goes under the hood of the automobile industry and tells you what to watch for next year. tomorrow on "squawk box," bring in the jobs, bring in the funk. bob funk, former kansas city fed chairman and current ceo of

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welcome back. this year's been strong for the all the owe sector, up 27% year to date. here's phil lebeau for a look under the hood for 2014. >> reporter: 2014 will be the year the battle over luxury cars heats up. mercedes is putting pressure on its rivals. in 2014, automakers and all owe dealers will throw a little more cash on the hood in order to make sure sales stay strong. why? there will be 66 brand new or completely redesigned models rolling into show rooms next year. that's a record number. and in order to make sure the other 234 existing models still sell, the auto dealers will have

to throw a little more cash to sweeten the deal. as for the tesla model s, sales are expected to grow. one thing is for sure, with ceo elon musk taking a cross-country trip in teslas, the model s will be a hot topic for much of 2014. >> make sure to tune in throughout the day today and tomorrow for more predictions. on the web you can see all the predictions. >> lessons from the bull market of 2013. guest host ed keon says avoid distractions, stick to fundamentals. we'll talk to him more that coming up after this break. >> and keep watching for winners and losers in online shopping and a read on the consumer.

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softbank is reportedly in talks to acquire the carrier. sprint and t-mobile would make the best. but then would they be viable? >> i think they'd be much more viable than they are now. at&t and verizon basically own the market. but t-mobile and sprint have done some pretty interesting things in the past year and a half. >> they've been forced to be much more competitive on price. >> i would argue that actually blocking that original deal might have been the right thing to do. >> let's get back to our guest host ed keon for the last word. i was just looking at "usa today." the president is going to have a state of the union address. you know, i'm still hoping he'd come out and say, you know what, i know i've given the speech on

climate change, i've given the speech on gun control. i wish he'd come out and give the speech on corporate taxation or territoriality -- what if he did come and say let's make this a priority, corporate taxation. >> i think there is room for compromise on corporate taxes. the actual effective rate is so far below the statuary rate. >> so everybody else's is lower, too. if people go abroad and build factories abroad, of course their effective rate is lower but they shouldn't be building there. >> if there's any part of the tax codes that both sides could agree on for the same of fairness as well as efficiency, that's the place we can find some compromise. but i think in general, though, this last year, 2013, we spent too much time thinking about public policy issues from an

investment perspective and all that drama we had in washington, meanwhile we had a 30% gain in the equity market. >> what if they became tail winds -- >> if they're obstacles and we had the gains, i'll take them. >> it's like beating your head on the wall. it feels good when you stop it. we're going to muddle through anything. what if we actually had some things that would grease the wheel? >> that would be great. in other words, we already have some restraints on it. >> i don't count on it. >> but i think also the strength of the country doesn't come out of washington. it comes from the systems we have, the history we have -- i remember sitting on this set with a woman who was an entrepreneur from texas one day. somebody asked her, well, what about how is your business growing under the different

presidents that you've seen? she said it really doesn't matter all that much. >> because it's texas. >> it started in texas but it's more of a national, regional company. she said what matters is do we satisfy our customers, do we have the right technology? i think that's been the key to growth and will continuing to the key to both in the the united states. >> thank you, ed. >> stre"squawk on the street" bs right now. ♪ ♪ good thursday morning. i hope you had a wonderful holiday. welcome to "squawk on the street." i'm carl quintanilla with simon hobbs and david faber tod, crams off today. ups is apologizing for missing delivery deadlines on some christmas packages.