world that we live in and things happening on geopolitical front all the time. we haven't had many years if you look back over the last two decades where you haven't had geopolitical risk. >> thanks so much. make sure to join us on monday on "squawk box." for now, "squawk on the street" is up next. good friday morning. welcome to "squawk on the street." i an historic morning. big sell-off in the making as oil, currency, high yield sparking investor worries today. we'll get to that. europe is down 3%. retail sales in the u.s. were okay. keep your eye on crude.

still firmly in the red. we begin with what this $130 billion chemical bid will mean for the markets and the sector as a whole. the ceos of dow chemical and dupont are coming up. iae expects the blunt to be worse next year. and trouble brewing for shippers this holiday season as higher than expected online ordering volumes causing some delays. but first up, dupont and dow chemical agreeing to merge. the combined company will be called dow dupont. it plans a three-way breakup. we'll have that interview with liveris and ed breen in just a few moments. we'll get your thoughts as details are coming in. >> an enormous deal that we've talked about for a number of days and seen the marketplace adjust to a certain extent. you may see dupont shares down a bit. maybe an expectation that exchange rate would have been a bit higher. i don't know that was widely

held but perhaps that's why dupont is down a bit today. both stocks up dramatically on wednesday. that was the first trading day if i recall the week after which "wall street journal" broke it. as we said, they're going to become three very large companies. the agriculture part of this is going to be the largest single player in that business at least for now unless some other combination should take place there. you're talking about 19 billion in revenues and agriculture. most of it contributed by dupont. the dow company really is in many ways material sciences. $51 billion is the overall -- not of course, you wouldn't know that -- is the revenue number for that. 6 billion is being contributed by dupont businesses and specialty products. the sort of -- electronics, communication, nutrition and health, industrial, biosciences.

materials overall -- material sciences will be overseen by the new executive chairman of the combination. ed breen will oversee agriculture and they're going to have a split oversight. they are keeping them separate to be ready 18 to 24 months after the deal gets done. it's quite a ways until you see all three of these companies on the marketplace. >> the market changed its complexion. the market is bad market. we know that. when they saw details of this, they decided that these two companies are not worth as much together as we thought particularly dow at the same price just a couple days ago. david, these are snap judgments. we could argue that dupont is up big from 54 and dow is up from

43. what do you hear about the idea that deals themselves, take away from this deal, deals themselves are no longer producing euphoria they did. what does it say about this market? >> well, first of all, of course, this is a merger of equals. it really is. basically 50-50. you also have a 60% shareholder overlap between the two. that's an enormous overlap in owners or institutions that own both stocks. let's not forget merger of equals doesn't mean there will be a huge premium. you have to move up on the merits of the combination itself opposed to typical acquisitions in which one company is paying a huge premium for the other. no doubt to your larger point that we have to be late in the cycle in which we have seen just in the last month and a half whether it's allergen and pfizer or this deal. so many others as well. green mountain coffee earlier

this week. don't forget s.a.b. so it's been led by corporates this time around as opposed to led by private equity in the '05, '06, '07 time period being the leader. it feels long in the tooth. >> that's my point. i know these companies fairly well. i've been talking about fundamentals. i love this deal. i love everything about it. i think the synergies are low balling. >> that's the run rates we see today. you're not disappointed in those. >> i look at the number of factories and duplications and say there's a lot of people that would will be let go and that's unfortunate to say on wall street that's good. i look at the ag business. i look at the specialty products and i see 3m. i love 3m. material sciences, a low cost producer. a dominant company in the industry. this is an example of what i see

in this marketplace. tremendous value creation is being completely ignored. people don't care, david. it's because they don't care because they think it is late. the deals that are being done now are deals that, well, let's just say they should have done them a couple years ago. i think this deal is so terrific and i look at the market reaction and to me it's d disconcerning. >> i would expect in the days, weeks, months ahead, they're going to be pushing on all of the benefits of this. we'll see, jim. it's an early reaction. stocks have been up sharply on wednesday. >> you're right. i just looked at this and said i see the value that ed breen has done in tyco when he splits a company up and motivation liveris had to get this done.

i don't think people realize how powerful this combination really is. >> we got "the journal" talking about halliburton and antitrust concerns, you don't think it reflects concerns on this deal? >> the government has turned after the period where they allowed airlines to merge, government said maybe we went too far along that lines, too loose. i would say in this particular deal this is a deal that's about globalization. these companies are up against some very serious competitors overseas. that's why they have to do this. each one of these companies is a company that i could buy. i would recommend to you. i would recommend to individuals. that's how exciting they are. yet at the same time i recognize that the economies around the world are bad and that we are in a situation where oil can't stay up in part because of demand and part because of copper, iron, tin and china won't be able to use as much of these materials. i think people say, you know

what? i don't know if i want this. overlap is important. it gives institutionally -- i'm reacting to the fact that this is a value creating deal and dow chemicals where it was ten days ago. >> all right. on that note and we'll get more china data tonight after the close, futures are down obviously as you've seen sharply as oil prices do fall to that seven-year low. iae says oil worsening in 2016 and we got retail sales up .2 in november excludeing autos and gas offering hope for the holiday shopping season. ppi rose by .3. we were looking for flat. september, october, retail unchanged. to get any positive numbers are encouraging to some. what about you? >> i'm on the bottoms up retail here. i'm trying -- i was talking to guys at "squawk" earlier. i'm trying to find a retailer. that's because they have

promotions where you can come in with cash and buy things. >> i hate when you get quiet. it's never good. >> i understand entirely the rate rise and we need normalization. as someone who looks at individual companies, i cannot find an industry group that is doing better than three months ago. i just can't. i would argue that autos might be a peak. i would argue that housing peaked. i would argue that the jobless claims yesterday were a sign that things had cooled. i know that the fed is pretty much made its decision. and i look at the market. yesterday was a day where people said one and done. maybe there will be multiple rate hikes. this economy can't handle multiple rate hikes and this deal in front of us which is a positive deal is being viewed as being not a yawner but i have to sell these stocks and i know that dupont is up. dow is not up that much. dow is at these prices without

this deal and pfizer, allergen was at the deal without pfizer. starwood was above those prices. these are three deals that say to me don't get too bullish here. these combinations would have been very well received and starwood would be at 79 and dow would be at 60 and i believe that allergen would be at 340. antitrust concerns and that this market is hazardous is driving these stocks down rather than up. it's very significant because consumer is not as strong as we thought. industrials very weak. it's time to tighten. >> credit concerns today, third avenue, brazil, yum, the triple c yield spiking 17% this week. highest since '09. >> there are many companies that are borrowing money to pay dividends.

that game is over. over. i said last night on the show, you have to start selling some of these stocks. we have to hear what david has to say, but i wish i could be more bullish. i just don't have the horses. >> we're not done for the day of course in terms of data. we'll get university of michigan business inventories in a bit. when we come back, the ceos of dupont and dow chemical talk about that blockbuster merger in a live interview. futures well in the red as you probably know. in fact, the spy hasn't gapped down 1% since october 2nd. more "squawk on the street" in just a moment. right to our hous. and that's how they got it here. cool. the magic of the season is here at the lexus december to remember sales event. this is the pursuit of perfection. they are. do i look smarter? yeah, a little. you're making money now, are you investing? well, i've been doing some research.

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welcome back. we're in midtown manhattan with the architects of this historic deal. it actually applies. andrew liveris and ed breen, ceo of dupont. thank you both for coming in. let me start with you if i can, mr. liveris. some investors will say wait a second, you contribute $9 billion of a combined 15 billion for the company. why aren't you getting more of the consideration for dow shareholders? >> clearly a great question and one that all of our shareholders

looked at the last decades of these two companies being together in terms of comparison. dupont's market cap is higher than dow's so in terms of our strategy, especially these last five years, innovation, projects, all of the things has been lifting us towards dupont. i think as we go up closer and closer, this deal became a reality. it only happened one other time that i was part of the discussion then was 2006 and at that time dupont had raised bias because the corn based ethanol. the beauty of this deal is it's 50-50 based on all of the fairness tests and input from the people out there and look at the way the market reacted to the rumor. stocks followed each other. >> you had market cap on the potential news of the deal. some investors i talked to this morning say there's unrecognized

future profitability coming from dow given investments that you've made you'll see payoff. could you have gotten a better deal from this gentleman? >> i think our shareholders got a terrific deal. the market speaks based on equity value. as you know and we talk about three businesses that will be created, specialty products group will have a higher multiple. ag business will have a higher multip multiple. we'll have an uplift but it's the quality and predictability. i'm not telling investors anything they don't know. when you look, you have to look at what constitutes it. >> and multiple thereon. mr. breen, you've only been in this job for a couple months. interim and then permanent ceo. why when he came calling were you willing to entertain and engage in dialogue that your predecessor was not?

>> it was easy actually. as a board member -- i joined the board in february. >> february of this year? >> february of this year. i had been on the board and very active on the board with everything going on and we were studying this exact issue at the dupont board. this was not new to me when i came into the job. putting the companies together. i had been studying as a board member and board had been looking at it. >> board had been looking at it even though coleman was not particularly interested in pursuing it. >> we were looking at it. i was doing a lot of my own homework saying there's something very exciting here and kind of architected out i would like to see it laid out if we got to that point in my own mind. it was my first day at dupont andrew called me up and we literally met that sunday and spent the afternoon together. >> day one. you didn't wait.

>> exactly the way i remembered it. ed responded to me very quickly to his point dupont board had been considering the moment in time was arriving and the ag business needed a partnership and this is a game changer for ag and what we're creating in ag and so i think dupont board was heavy ag orientated. 60% was ag. we had an ag property that was hand in glove. we needed the moment in time and the person and the person to arrive to say there's a lot of value to be done here and the board obviously agreed with it. >> you mentioned a merger of equals like this, the personalities can become very important. there's a lot of -- i would assume -- decisions about personnel. who runs this and that. what gives you the confidence that you guys are going to be able to work well together in the future? >> we have been working very

well day and night for weeks just as a point. and we really have plowed through this pretty quickly to get to where we're at. andrew will take the lead on the performance materials company which will be dow after we transition and i will take more of the lead on the ag company and specialty company and so we have worked that out. we're both going to help each other out. we have to because synergy is a huge thing in this deal. we architected about whose responsibility that is and handle that. >> you're talking about delivering 3 billion in costs synergy synergy. you need to be on top of it. >> the chemistry thing -- typically they have not worked. the government structure here that ed started to explain, we put a lot of thought into the

government structure. this is merge, get synergies, create premise for the two spins and three companies. we put a structure in place to get that done. let me give a shout-out to ed. he's practical and straight shooting. i think i am, too. we had no secrets in the conversation. we left our egos at the door to get the value for shareholders. >> do you keep doing that as you operate together? >> we're motivated to do it. >> i wonder on that front some would say, all right, these businesses know they're going to be independently traded and let's call it three years from today or something along those lines. what incentive do they have to keep performing well over this period instead of sort of keeping things okay but waiting until they become public to really ramp it up for their management teams and the like. >> neither he nor i will allow it. >> there's another answer to that. i've been through this before splitting up tyco into five different companies. it's very easy. you say to the management team

and especially the person that's going to run it, you don't get to be the ceo and cfo of the public company if you don't do a good job right now. it's a big motivator. >> you have nod decided who will be ceos at these respective companies. >> we'll do that with six months notice from the time of separation. hopefully before that even but no later than six months. >> and just want to make it clear that we're motivated to set it up so we can answer your question on the people side. the talent. all of the people that we start. i'm not motivated to be the person on the out. this is an incredible value creating deal. if you want to call it fulfilling of a legacy, do whatever you want. we've been working on this for ten years at dow. if we set it up right and put the right people in place, there's nothing that says -- i'll speak for myself -- that's i'm the outcome person. we have to select the best person inside or outside to get these jobs done for the future not just getting the synergies. we're motivated. >> i want to turn back to nyc.

jim cramer who you both know well has a few questions. take it away. >> i'm trying to figure out the role of activism in this. i know mr. bream speen saying t coleman had studied this. were they instrumental at all? because it seems to be and when stock was at 55 you said don't give up on dupont, things could go right. i know from mr. liveris, dan was in your company and how much of it is just people within saying big shareholders, this will be great and you listening to the big shareholders? >> why don't we start with the role with dupont. >> since i came in as ceo, i had a dialogue with nelson and ed and it's been very constructive. i'm glad dupont didn't do something a year ago because this is really the best deal.

we looked at every possibility and analyzed everyone financially. there's nothing that financially compar to the value creation for dupont shareholder anywhere near this deal that we just announced. i'm really happy we got to this point and can transact this deal. i've been talking two or three weeks ago asking them to sign and we brought them under the tent and got their advice on it. obviously very supportive of us doing this deal and thought it was the best transaction by far that could have occurred. and one other thing i'll say in conversations with our investors, they asked a lot about how is the growth going to work in these three companies? very concerned about building these companies up, protecting the r & d and thinking long-term about the future. i appreciated that in my conversations with them. >> was that at all -- did that

at all figure into how you went about doing it? pure coincidence you announce this on friday when it expires on monday? >> i wish i was that good we could bring together this massive transformation of dow and dupont and we announced the deal today that in its own right if this was not a dow dupont announcement that deal itself would get a lot of attention. could i put together two deals like that to arrive on the day before an expiration? i think you would vb thinking i was a magician to do that. i'm not. these are ten-year discussions for us and ten-year discussions accelerated in the last three or four years because of the ag side. i would bow to them. i met nelson a year ago. he had great ideas about this very conversation. i'm very active with the shareholders as has been reported. we listened to all of our

shareholders. they get to see the clarity of the company we're creating. that's what activists want. they want to understand the clarity. there was a mix-up about the dow value thesis. we just got out of our business that we've been in for 118 years. this deal was always to be had. this deal was always there. every investor including activist investors and third point who we settled with and their two directors, great directors, doing the right thing. this is a unanimous approval to get this deal done. >> andrew, we have talked many times how i felt that dow chemicals should have been a $60, $65 stock. ed breen, i said the amount of money you created at tyco was

extraordinary. i feel you have the best ag business. i take yours over monda. the market is making some sort of weird judgment. andrew, your stock, people say you could have got to a higher price by yourself. or does the market not understand the synergies and three companies and how much value you both created in your careers? >> well, look, the market on the rumor really traded us both up equally. we have a lot of work we have to do. the synergy number is powerful. the synergy number will be delivered. both ed and i feel it's conservative and we feel we can get the synergy number and get it quick. that's really important and we'll talk to all of our investors and obviously we see the power of that number.

we could never have done that on our own. just by coming together we'll get that synergy number. >> you hear the sound starting up at the exchange so we only have a couple minutes before the opening bell. the point of why not split dow the way you are now in the future would have been a lot quicker and conceivably you could have gotten it done in a more expeditious fashion. >> let me answer part of that. this deal, you have to understand, is the most tax efficient way to put the pieces together properly. there's no tax. so by us putting the business together, we did not just fix the ag issue which creates the world leading ag company as jim mentioned but we create a specialty company with a nice multiple trade against it and dow puts the right pieces from dupont into where they belong and thwe had the same issue wit dupont. how do you value these different pieces. we fix three strategy pieces at once. then synergies on top of it and

then growth plans on top of that all taxed efficiently and that's not even to normally do. >> it's an accelerant. but being together we can get bigger synergy numbers than being apart. >> finally toward this idea of who is going to run these individual units, you mentioned you're not necessarily going to be outbound. do you know what you would like your role to be once this closes and the 18 to 24 months has taken place? are you done? >> no. the executive chairman role and ceo roll is clearly spelled out. i have direction to set up materials. ed has direction to set up ag and specialities for our boards. the boards will obviously decide the pace of that. we hope to get it done as fast as possible. i've had a tremendous opportunity to be ceo of the dow chemical company. the vision to get here has been a board driven vision and i'm happy once we close this deal, execute and put the plan in

place to get the deal launched, we'll make the right succession decision and there's no reason for me to be that person. >> jim is a great board member. i talk to jim all the time. he loves and understands this industry. jim is also 63 years old. >> gentlemen, we have to leave it here. i could go on for a long time. thank you for taking the time on this day. i'm sure you'll get some rest at some point. andrew liveris, ceo of dow chemical and ed breen, dupont leader. >> dupont in the green for the week followed by mcdonald's and ge. it's been that kind of week. >> it has been. this firm that decided that it could not pay off and is liquidating. i cannot stress enough how important this is.

we're talking about third avenue of high yield fund that is stopping redemptions and will liquidate. if you are in one of those funds, would you pull out today? this is a big issue. this is going to drive that. it made me very concerned. >> definitely one story to look up if you're not familiar with that junk bond fund today. there's the opening bell. very negative as premarket weakened significantly right before the bell at the big board it's equity one. over at the nasdaq, the foundation for cancer research in honor of jimmy v. week. espn's initiative to support cancer research. once again, oil going to wag the dog? >> there's 200 billion in high yield paper involved there. the unique $45 for most of the oil companies to be able to stay afloat without an issue. i'm talking about independents

and not exxons. they figured out they can do well at 35 and 30. i'm concerned about credit. people don't see it. if you're watching the market, you don't understand it's entirely possible that someone like a third avenue, maybe they own this emerging debt and emerging stock market down for eight straight days. we have to pay attention. look at the companies you said are doing well. they are all companies with particular special situations. >> that's exactly right. >> that's what's going on. >> that's exactly right. either transition to other industries and turnaround ceo story or big m & a. >> is that a needle in the haystack? there have been companies trying to shake things up. i think it's interesting going over this deal last night and speaking with a lot of people involved with it and dupont and dow and i like it so much. i was thinking, okay, get the right ratio. dow 56. and this market is so skittish. people are taking money and

running even from good things. i don't like that. i think panic is not a strategy. but kinder morgan cutting that dividend 75%, this third avenue saying we're not going to really redeem which is kind of like what we saw during another period that i don't even want to remember. these are very important and i am not saying sell, sell, sell. i'm saying i'm concerned. i said last night on the show you have a great opportunity because market is up. you have to get out of these companies that are funding everything with debt because kinder morgan taught you this is what can happen. a company a year ago that told you they would grow distributions for many years. the smartest man in oil some say cuts his dividend by 75%. you have to have great balance sheets going forward. look at ge. look at mcdonald's. look at dupont what they're doing. but the other guys are standing around and stocks are getting sold and retail is so bad.

>> we'll get to retail in a moment. i want to get your temperature on rails because we did have the burlington northern ceo say they may be willing to play in some industry consolidation. there's norfolk again close to the top of the list. >> burlington northern ceo saying they are in play. as if anti-trust would say, yeah, rails, get together. there are four of them. why don't we have two? why not have one? are they listening to what's going on in washington? when they shut down two companies that could go by the wayside, what does that say? the justice department reads the papers, too. >> there are some individual positive earning stories. you said yesterday to be careful

selli selling adobe. >> here's the execution. boy, they've done a great job. i was looking for maybe 695,000 new cloud subs. they came in at 833,000. there's a lot of good stories in tech. really good stories. i can tell you a lot of good stories in finance if the fed is going to raise. if i have credit worries and oil doesn't stop, i have to look at these companies that really need oil a little bit higher. and when that came out, that tanked the market. the market was looking good. i slept in to quarter to 4:00 because we had people over. i slept through. we looked good when i woke up and next thing i know i finish the workout and we're down. only thing that happened is iae. that's oil companies and the ability to continue to finance the dividends or finance the

operations. that's the crux of the kinder morgan. this unbelievable -- inability at third avenue to redeem. we're the great bull market. you can't redeem? what else is in that fund? what do they have? who else has it? >> by the way, if you missed iae this morning. global surplus will last until late next year on opec and renewed determination to keep share, iran coming online will add a lot. 300 million barrels and demand is not showing signs of improving. >> latter is what i'm focused on. this country at $2 is not traveling 1% to 2%. china is not using more energy. they have a pollution problem over there. who knows how they'll deal with it. world gasoline,hey use the dirty gasoline. nothing going on in that chinese air i want anything to do with. these things should help.

mr. flemming was on earlier on "squawk" giving a good picture of the consumer. my opec bid that we do a small rate hike and then they go away and banks make more money. consumer gets a little better. and then i look at the weather forecast. i got to tell you. >> it's going to be 65 in buffalo today. >> the pool cover went on. if it didn't cost so much, i would get that pool cover off. i'm going to have club cramer. i'm going to reopen. i'm not going across the street to nordstrom and buying sweaters. i don't need sweaters. i'm done with that. this is summer suit i'm wearing. it's insane. >> no one would fault you. >> i feel that way. if you're columbia sportswear and you sell heavy boots and northface and heavy stuff from under armour that makes you feel warm and cold, i don't want

that. carl, i'm concerned about retail. look at walmart. do this, do that, do this, do that. guys, you have to pray to the weather gods. it's too darn warm and the got -- i remember there were years when my father would come home and go into the bedroom and come back and have a shot of wild turkey it's because it was too warm and his whole season was christmas. he didn't want to come home because it was cold. when it was warm, we ended up with some darn store that went out of business. i took my lunch in a bag for five years because when it's warm out, these people cannot sell their materials. i've done it. i give you my weather forecast. >> i love your retail tales. this morning, tom lee says the top ten stocks in any given year rarely repeat the next year.

>> i think that is not a bad judgment. >> he remembers unp and berkshire a couple years ago. >> the market is fickle. there is great long-term stories that can give up. i know i was concerned that would be the top and they kept going and going and going. longer term people should not sell those because those are companies that have great franchises and great balance sheets. by no means do i say we're in a bear market. i'm saying that i am taken aback by some of the things occurring and that typically with gasoline down, i would like to be bullish and maybe it can happen. but when a company can't redeem debt, you know, what do you do? i don't want to mention other funds that have similar assets because if i were -- i said last night that if you own stocks that are funding a dividend with borrowing money, i want you to sell 50%. if you're in emerging market

bond funds, sell them tomorrow. this guy beat me to the punch. >> the important story of the morning may not make the broader headlines -- >> that's the problem. it's facebook and it's not even expensive. we're not trying to trade. i feel like i can make a compelling valuation but i don't like what's going on in oil because we're not getting the benefit of lower gasoline but we're feeling the pressure in the credit market and emerging markets. down eight straight days. >> dow down 213. s&p back below 2030. lowest in almost a month. bob pisani is back on the floor. hey, bob. >> we got down 1.25% on s&p about 20 points. and jim is right. oil is the primary mover. look at the s&p 500. we were basically flat throughout the evening. this was overnight. and when the iae report came out

early this morning, that's when s&p futures dropped along with oil. if you put up oil, you can see oil went down about the same time when iae made the comments warning that global oversupply could worsen in the next year. you see oil dropping right in tandem with that. even europe dropped. germany was open right about that time. it moved down immediately. and you can see what was going on there. it's been fairly weak all throughout the morning and even over in europe. take a look at our sectors here. it's the cyclical sectors that are down the most right now. some materials, discretionary, financial and energy are a bit weaker and not bounced that much. if you look at the markets this week, there's a clear theme. two things going on here. here's the trends. we'll see oil lower and bond yields lower and high yield is lower and cyclical stocks are lower right now. by cyclicals, look at what's going on here, financial,

energy, materials, all are much worse than the more defensive names than consumer staples and health care. all of this indicates a bit of a flight to safety. what's moving stocks? i'm with jim, oil is primary motivator and i would throw in risk reduction ahead of the fed. these are clearly two main themes you deal with here. look at high yield. a lot of discussion on trading about that third avenue fund suspending redemptions. i would like to see more insight into what that fund has. green had comments this morning it may be more of a distressed fund than an actual junk bond fund. that much of it is the assets they held were not even rated. not cc or ccc rated securities but unrated. this indicates to me that fund had some very high risk instruments in attempt to get a lot of yield. i would like to see more

accurate reporting on exactly what is in that fund. finally, november retail sales, i know this got buried out there. the consumer looks good here. month over month numbers. clothing stores up 0.8%. people are eating in bars and restaurants throughout the year. numbers have been strong in bars and restaurants. electronics and appliances were up nicely. i don't know what happened to auto dealers. i heard about 18 million seasonally adjusted sales for the auto companies. maybe there was adjustment issues on the auto dealers. those numbers are certainly strong throughout the year. the bottom line that i get out of this, carl, retail sales number is consumers looking good but it's oil and fed moving things right now. dow is down 203 points. back to you. >> that's great report. it's true. i hate to emphasize the consumer. they can't get in their head it's christmas.

we were outside in the back. i thought the back was going to close in october. here we are outside in the back. >> let's check in with rick santelli this morning to get the temperature on bonds. good morning, rick. >> good morning. boy, we're going to need a much bigger thermometer i think. if you continue to monitor the great recalibration, all of these big pieces of issues going on whether it's mergers, all of it, in many respects is the lead in to recalibration. why? because of divergence of it. our central bank. the first to try to mop up liquidity. everybody else scrambling to try to figure out how to keep markets more contained because pretty much emerging markets sum it up are having huge drops in currencies trying to keep rates firm to counteract that. we had strong data, didn't we?

i won't say strong. retail sales were good on headline. nothing terrific. control group was pretty good. as peter writes, if you look at this on a year-to-date basis, prices are moving higher. look at intraday of tens. it's like diving off the cliff because of equity markets and emerging markets and everything i described. look at two day puts it in better context. let's look at the dax. you can clearly see that things are getting a bit nervous in front of wednesday's decision and of course the stock market moving down plays right into the intraday strength and euro currency. think about trades and impact of higher rates. look at a two day, it puts it in a much better perspective. all roads lead to what's going on in china to some extent. big story just recently is people's bank of china is going

to recalibrate once again use that word how their currency is evaluated. less dollar, more against the basket of currencies of their broad trading partners. those are a lot weaker than the dollar and it actually made sense. there's more to it. in the here and now, there's a bit of a scramble going on. it takes that comp on the dollar vers and it rockets on the dollar side. >> we'll see you in a bit. rick santelli. obviously a rough morning for stocks so far. dow is down 219. s&p 2,028. every year, the amount of data your enterprise uses goes up.

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nothing in the green on the dow. we continue to watch oil flirting dangerously with 36 now. starting to watch key levels on crude after the iae says it will

last well into 2016. jim, i assume between that and the high yield stories we've been talking about, not a lot positive going on. >> no. i hate to be too negative. you saw a nice rally yesterday. i will point out that going through holdings of this fund that are not oil orientated. they have bad investments. bad pieces of paper. i think that i'm probably being to granular when i look at their holding. the more important thing is full faith in credit of when you put money in a fund and there must be so little liquidity in that market that they can't go to a goldman sachs and say i need out of this and this. it's that that is disconcerting. where did liquidity go? i think from looking at what they own, i said they're not that good at what they did. or they took more risk. you can say it either way. let's say they took more risk. and the fact that you can't get

out is what's disconcerting. there's bad managers everywhere and guys get things wrong but you can get out but you can't get out. that's what makes me think the market itself is not functioning. you should always be able to get bids for everything. i worked for david at one point at goldman. i said, listen, there is no way to get out. this is a whole market where it looks like you can't get out. that's concerning. >> oil now 35.96. we'll watch that. as for dow dupont you heard a few moments ago on our first on cnbc interviews about that $130 billion merger. this is dupont ceo on tax efficiency on this big deal. >> this deal, you have to understand, is the most tax efficient way to put pieces together properly. there's no tax. so by us putting the business together, we did not just fix the ag issue which creates the world leading ag company as jim

just mentioned but we create a specialty company that will have a nice multiple trade against it and dow puts the right pieces from dupont into where they belong and we had the same issue wi with dupont. we fixed three strategy pieces at once. then we have synergies on top of it and growth plans on top of that. all tax efficient. that's not easy to normally do. >> so taxes, the run rate on some of these annual synergies. some tried to paint it as a disappointing. >> these guys are under a premise to deliver. i was going over the structure of these two great american companies and for instance, you know, there are 5,000 products that dow chemical makes. dupont dupont has hundreds of facilities. they said obviously there's some that can be closed. feed stock of dow is lowest.

dow was about to break out as a company. the ag business is the one they are focused on because people feel like -- i asked these guys before, listen, gmo, are we worried about better living through chemicals? they put out a pretty good listen we're nutrition orientated but chipotle makes you feel like that. it's a great combination, carl. and it doesn't matter. i'm sure those guys as much as they are saying don't worry about it, come on. we're giving her all she got. >> we'll get stock trading with jim in a moment. dow down 279. the breath is pretty horrible on the nasdaq 100. four names are in the green. we'll be right back.

markets down 266 on the dow. s&p down 28 points. let's get to cramer. we haven't touched on gpr. >> it's not usual i praise someone who got something wrong. citi downgraded go-pro today. i got it wrong. we were wrong. i love that.

you saw is the ceo say, whoa, i want to point out that gopro is a stock that will not work. i just think you have to focus on the idea that we were in a great bull market where all these things worked and you saw gopro on the surfboard and that was the absolute top. just remember these are companies -- these are not bristol-mye bristol-myers. they don't have these credit problems. i go through the list. they are in stuff. are you kidding me? as a great american actor, he said sometimes you just get had. anyone who is in these things, private advisers are going to call private clients to say i'm worried this could happen to my fund and that's what's going on. third avenue high yield is the

big story of the day. sorry to ed breen. >> what are you going to do tonight? >> i have to analyze this dupont/dow deal and what's going on and what does it mean? >> good weekend. >> you, too. and just i like shady mccoy. if he were playing for the eagles this weekend, i would be resting easier. >> "mad money" 6:00 p.m. eastern time. more on the sell-off with dow down 264. don't go anywhere.

good friday morning. welcome back to "squawk on the street." i'm carl quintanilla at the new york stock exchange. david faber is in downtown manhattan. we'll hear highlights from that interview in a big moment. big sell-off as the s&p is back

to almost one-month low at 2,022. oil cracking below 36. dupont not being well received. worst performing dow component. a lot to watch on this friday morning. let's get over to rick santelli in chicago with breaking news on inventories. >> business inventories october. october is interesting because now you move the inventory data into the current fourth quarter. unchanged. goose egg. no change. so that makes it tied for the second weakest business inventory number of the year. of course the worst was minus 110. the first one of the year and then we had another unchanged in july. no noteworthy for gdp revisions. that will have an impact on some magnitude and not a lot but some on adjustment process to gdp and last look and now to the biggy

on december preliminary read for university of michigan sentiment comes out at 91.8. since that's preliminary, we're going to comp to last month's final at 91.3. but remember 98.1 was the first read of the year. best read going all of the way back to 2004. how did this year turn out? think about that when you look at the confidence numbers for a present-day gauge on what you should do with your investment. simon, back to you. >> thank you, rick santelli. >> let's get to breaking news for daily fantasy companies. not good. >> not good. what we have right now are reuters report saying that new york supreme court judge now granted the new york attorney general's request to prohibit draft kings from operating in the state. accordinto the supreme court ruling that we have here, it

says after judge mendez read the briefs, he's now going to restrain draft kings from doing business in the state of new york that means accepting any entry fee, wagers or bets from new york consumers in regards to competition game or contest run on draft kings website. the latest development here. we should point out that draft kings will file an emergency appeal according to their lawyers. this again per a reuters report. the latest developments on the daily fantasy front new york supreme court enforcing an injunction preventing draft kings from doing business in the state. >> it's a rough open for markets as oil continues to fall and investors remain cautious ahead of the fed meeting next week. in fact, we're down about 3% now for the week overall. all sectors are in negative territory. clearly led by energy. you also see financials and tech leading us lower. dow currently down 230.

so we're off early but clearly there's a lot around. joining us, the chief investment strategist with charles schwab. today looks different than other days. >> it's concerns about what's dpg on going on in the high yield market. it's been a simmering problem but not a big impact on the market. we also have had some decent gains and we've been in this kind of choppy pattern really all year where you're just waffling above and below the unchanged line and waffling above and below the 50-day moving average line and that volatility will persist. >> it's a statement to the obvious to say that next week we have a fed meeting which we expect the fed to finally raise rates. i wonder if this is a moment or pattern we might experience in the run-up to that. people are very nervous. nervous about high yield.

nervous how everybody else would react to a rate rise that's taken so long to materialize. >> in general we think the rate hike is priced in. what's not yet priced in because we don't know what it will look like is trajectory of rate hikes. one thing that often gets missed in the headline analysis of what the fed is going to do next week is they will also publish updated forecasts for their line on the dots plot. it will be interesting to see. likely to come down in the out years but likely will mean a gap between what the market expects and what the fed expects and really i think what we're doing carrying into 2016 is we'll move away from the obsession about the start date if they move next week but the obsession will just shift to how often and how quickly will the fed have to move next year. is it a one and done scenario. if so, what does that tell you about the economic background. >> you know, it's been depressing sitting here over recent mornings because so many people experienced observers coming through with relatively downbeat views on the economy

for next year a thee rld economy relatively downbeat projections ar w tto ma i likely to go. what is the major reason to buy tharket at moment >> i tnk at best you really just want to buy on any kind of major pullbacks. our view since the beginning of this year so beginning of 2015 was we rated the u.s. equity market neutral, which means we were telling our investors don't have anymore than your normal allocation. also in turn telling those short-term or generaliientated bigger pullbacks but make sure you trim on some of the rifts higher. that's our philosophy going into this year. i think we'll stay in this muddle through trend growth and we may see inflection point in global growth. so that's not significantly different than this year. we head into 2016 maintaining that neutral view. expecting pullbacks and bouts of

volatility not different than what we saw in 2015. >> i want to add anxiety of emerging markets which seemed to be playing out a bit today and specifically what's going on in china. overnight china's currency hit a 4 1/2-year low. peoples bank of china saying they'll make changes in the way they measure the exchange rate and manage it against a basket of currencies instead of just u.s. dollar. these are incremental moves but they're a big deal. with you explain why you have to watch these kind of moves in china's currency in the rest of the region and what they say about the chinese economy and overall markets how it reverbera reverberates? >> the interesting thing is since the beginning of last summer the correlation between s&p 500 and the shanghai shares went through the roof suggesting to many that we should be much more concerned about day-to-day movements in the chinese economy or the chinese currency when in fact that isn't the case. coral arelations went up.

not necessarily indicating that the u.s. economy had much greater exposure to the chinese economy in terms of percentage of our exports only about 2%. the main concern about what's been happening in china and the reason why it's caused an increase in correlations is the approach whether at monetary policy or combatting the problems they see in the equity market or even on currency is perceived to be a little bit amateurish or rifle shot. that's uncertainty plaguing more than the action itself. >> i want to ask you one more question to double back on what you mentioned at the beginning which is decision by third avenue management not to allow redemptions while it liquidates its junk bond fund. is this something bigger after clearly a general plunge in junk bonds or just another milestone for the year and we pass and move through it?

>> obviously i can't weigh in on third avenue specifically or that fund but to your broader question, there's a lot of attention recently on this spike in high yield bond yields and comparisons to 2007 leading into the financial crisis given that we saw a similar situation. i think the difference and hopefully the important difference is that the concentration back in 2008 in terms of the problems in high yield market was in the financials. it was a function of a collapse in global financial system. clearly an environment not beneficial to either the economy or the stock market. now when you look at the move up in spreads, it's been highly concentrated in energy and secondary move, steel area and in those cases the proximate cause being a plunge in oil prices is safe for energy sector a positive force for u.s. economy so that's potential important difference. that's not to say you want to write it off as a nonevent. it's at the top of our list of

concerns keeping us more cautious right now. there's an important distinct n distinction. >> we'll hear more of that over the coming weeks. thank you for joining us. great to talk to you. let's send it over to david faber absent from the platform for a good reason. >> we did speak with the ceos of dow and dupont about their plan to create a company that will be split into three separate parts once they close that deal. of course dow and dupont announcing merger of equals this morning. 1.28 shares for each share of dupont and dow gets one share. it's a 50-50 split. warren buffett if he converts will give 52% ownership of the combination. we've been talking about it for a couple days since we got the first reports that this was something in the offing. and we did have a nice opportunity to sit down with two

ceos but we didn't get to a number of different things. regulatory is a question i was able to put to them and advisers after the interview and they don't seem to be particularly concerned about the regulatory aspects of the deal. isn't it creating a giant company that will be under fire perhaps? in each of the markets they create whether agriculture, material sciences or even the specialty products or particularly specialty products, there are many, many competitors and they simplyon't believe given the nature of the deal itself that regulatory will be an issue. job cuts, however, are a different story. and there we can expect to see significant job cuts. $3 billion in operating synergies. where does that come from? a lot of it could be job cuts i'm hearing as much as 15 or perhaps even more at 20%. and interestingly, no commitment to wilmington delaware, the longtime headquarters for dupont

once the spins all takplac at'sn ieresng story on a local level for them. dow will become the materials company. dunt, even t name perhaps, may disappear. for now it's dow dupont. i did ask ed breen about how and when this deal really started to come together for him as a board member of dupont. >> we were studying this issue at the dupont board. this was not new to me. >> what issue? >> about putting the companies together. i had been studying it as a board member and board had been looking at it. >> board had been looking at it even though coleman was not interested in pursuing it. >> we were looking at it. i was doing a lot of my own homework saying there is something very exciting here and

architected how i would like to see it laid out if we got to that point in my own mind. >> the day breen took the job, mr. liveris trying to get this happen for a long time called him up and asked would you consider putting these two companies together? activist play a role in our markets. in both of these companies there's a history of activism. they were involved at least in this deal. and third point, the firm run in dow where a couple directors were elected to the board last year. we asked both gentlemen about the role of activists. >> there's nothing to financially compare the dupont shareholder near this deal that we just announced so i'm really happy we got to this point and can transact this deal. i've been talking about two or three weeks ago and i did ask

them to sign and we brought them under the tent and got their advice on it. obviously very, very supportive of us doing this deal and also thought it was the best transaction by far that could have occurred. >> i met nelson a year ago. he had a lot of great ideas about this very conversation. i'm very active with the shareholders. we listened to all of our shareholders. i believe that third point gets a major win out of this because they get to see the clarity of the company we're creating, which is what activists really want. they want to understand clarity of the value thesis. >> 60% overlap in the share base of both companies. don't expect there to be activism about the deal not happening. it is very, very likely to happen. for now though, not really rewarding either set of shareholders. back to you guys. >> dupont is biggest drag on the dow jones industrial average. we'll see you in a bit. dow down more than 200 points. all dow members are lower.

oil is the story of the morning breaking below $36 a barrel. oil is down 20% since the beginning of november. is there a bottom in sight? "squawk on the street" will be right back.

oil falling to a new seven-year low after warning that global oversupply could worsen in the new year. is there support anywhere in this neighborhood?

good to see you back. >> good morning, carl. >> you read this forecast. it's hard to imagine that this is going to change any time soon. what's your thought? >> we think that oil prices could well stay mired in the 30 to low $40 range between now and the next six months. there are too many negative headwinds right now. if the fed raises rates, opec messaged to the market last week that they are going to continue pumping at record levels because they want to focus on market share over price in the next six months. >> everyone has their worst case support. the goldman call is famously 20. you sound like low 30s. what's magic about that number? >> well, i think it would be risky to rule out a $20 handle on oil right now. there are too many bearish factors and the market is very nervous. a lot of short positions at a

record high level of sport positi -- short positions so i wouldn't rule out that handle. >> one morning we're going to wake up and find saudis have bent. they'll say we can't stomach this and we're going to cut be with russians or without the russians. how likely an event do you think that is? if that happens similar to ecb move last week, there will be pain because as you say everyone is on the other side of that trade. >> that's correct. i don't think that saudi arabia is likely to receive market share right now to iran at least until they get more clarity on the sanctions removal process and just how much crude oil iran can get to market. saudi arabia definitely has some domestic issues but they are very, very focussed on the situation in yemen and they are on polar opposite sides of iran and russia on much of the regional conflict.

that's a near term focus for saudi arabia than domestic issues because they have finances to take measures for that. >> so you clearly say there's a political element in wanting to drive the price down and take share from iran because of the conflict in yemen? >> correct. there are a lot of variables right now. i think the most salient in the near term is on the regional issues especially with uncertainty with what iran can bring to market after sanctions. >> you mentioned the record short positioning here. doesn't that make it vulnerable for a snapback? here we are at the end of the year. we've already been a year and a half into this declining oil price environment. historically how long do these si cycles last? >> supplies got us into it and it has to be what gets us out of it. we don't see that the oversupply really starts to come into balance until 2017 even though there have been massive cutbacks

from energy companies. that's going to have to happen. a supply/demand rebalancing process takes a while and we won't see that in 2017? >> they are compiling what percentage of the energy industry is going to go bankrupt in the next six months. what's your forecast on defaults and bankruptcies and what does that result in a price rise? >> it's very nimble tohe upside. correction in oil prices and you start to see rates cac onne and producers lock hedges a they complete those drill but uncompleted wells so production in the u.s. is sticky to the downside. it doesn't move lower. there could be bankruptcies but the shale energy in general is not going away. costs have come down. it's no longer such a high cost producer. more in the middle range at this

point. >> innovated our way into a pickle. >> up next on the program, third avenue management barring investor withdraws as it fuels investor concerns about the high yield credit market and sell-off we've had there. more on that after this break.

third avenue management is liquidating its junk bond fund into what could be an historic fed meeting. david faber back with us from 30 rock and mike is joining us from hq. this is the topic for wall street holiday parties. explain what's happening and why it's so concerning. >> this is third avenue focus credit fund. it was a high yield bond fund. it was operating kind of in the fringes of high yield market. this was high risk in high risk sector. what happened was fund had lots of redemptions and investors

wanted their money back and they were unable to sell enough holdings that allowed them to honor these daily withdraw requests. they are liquidating the fund. they are going to shut it down. give you cash back but later. so really what it is emblematic of the stress that's working its way through the kind of dicier areas of high yield and spreading to the broader high yield indexes. >> i'm curious about what you're hearing about what that means and what it says overall about shares with liquidity. >> there's a lot of fear right now. i would love to get michael's take on what i'm hearing saying spreading. i've had a couple phone calls with equity and debt guys. you've got high yield managers who can't sell anything, michael, who were then using puts on the indexes to hedge themselves. you've also got high yield atfs. i know there aren't that many but enough out there where

people may be shorting those to hedge themselves because we're talking about a liquid market. to your point some securities that are around third avenue may have been liquid but this has the possibility of spreading and it seems to also be making credit have no bid right now in certain parts of high yield and that has to be concerning to say the least, doesn't it? >> when you have a situation where you can't sell certain things, you're going to try to sell something. you have to turn something into cash. that's basically the way it does make its way in a other parts of the market that on paper should not be under as much pressure. that's what's been going on. the big thing many people have been talking about for weeks at least is that the equity markets have diverged from what the high yield markets have been saying. equity markets at the index level were able to outperform credit basically since early november and people said that should not happen. a lot of the performance in

equity markets has been these huge growth stocks that really are not very linked to balance sheet concerns of leveraged companies. to your point, i do think you have a year end effect. it's exacerbated by small balance sheets. people are trying to weight it out ahead of a fed meeting. >> if you get a lot of concern in high yield broadly speaking you start to wander into m & a market. there are a handful out there. it just can have that kind of an effect. i'm not saying it's going to. but this does bear watching and while oil certainly may be pressuring our broader market, i have no doubt given the conversations i've had this morning that this is also a real concern of equity investors. >> maybe this is oversimplifying it. what is it a symptom of more? this fund was clearly targeting bonds within the energy sector and within the oil sector and therefore it is one of those implosions we might have

expected with the price continuing to fall. is it about oil and energy or a turn in interest rates and a broader comment on credit through the industry? >> i think it's more about oil and energy to your point, simon, as we know. that's been the portion that's roughly 20% overall. but it has been suffering as everybody knows for obvious reasons. i think it may be more about that. these things can spread. and it can create a liquidity across the board in high yield and then you have people again buying puts on indexes to hedge themselves because they can't sell the underlying bond and that can have an impact on broader higher yield market and move over into other markets as well. so it starts at energy. that seems to be the key to why these things were not liquid and not able to be sold. >> it's where energy meets desire for high yields. so kinder morgan high dividend

payout but it was contingent on energy prices. you had a stretch for yield across the markets. you had people basically taking more risk than they might have thought because they just were desperate for that income. >> very quickly. i know you have been scanning the market and looking for who else could be vulnerable here based ed on what positions they have and then my other question pay wii mhich may be a fear fac. is there any fear that we could see something like this over there? >> i don't think this type of lick wit air pocket is likely to hit treasuries in this particular way. no sellers, no prices for individual securities. what are you seeing today? a rush to people buying treasuries. that might be something really for the overnight markets and maybe at some point they do have a hiccup there. who else is potentially susceptible? anything that's a focus credit.

credit opportunity fund. anything you would have scanned that had a very high yield in double digits probably has to own a lot of these securities that right now are going big. >> all right. something to watch. thanks very much for weighing in on this hot topic. we'll see you later. when we come back, more on the sell-off today. dow is down 159 not quite so session lows. 27 straight days without back-to-back gains. second longest streak since 1970. back in a moment. here at td ameritrade, they love innovating. and apparently, they also love stickers. what's up with these things, victor? we decided to give ourselves stickers for each feature we release. we read about 10,000 suggestions a week to create features that as traders we'd want to use, like social signals, a tool that uses social media to help with research. 10,000 suggestions. who reads all those? he does. for all the confidence you need. td ameritrade. you got this.

i'm courtney reagan. a medical helicopter crashed in central california last night killing all four people onboard. the ambulance en route to a bakersfield hospital had a pilot, nurse, paramedic, and patient aboard when it went down. donald trump campaigning in new hampshire says if he's elected president, he'll call for the death penalty for anyone convicted of killing a police officer. he made the comment at a new england police event in portsmith. 163 syrian refugees arriving in toronto last night. the prime minister was there to welcome them. canada has pledged to resettle 25,000 syrian refugees by the end of february. brawl erupting in ukraine's

parliament after one deputy tried to drag the prime minister away. dozens of lawmakers rushed to defend the prime minister and more scuffles ensued. the deputy was expelled over the incident. crazy video. that's your cnbc news update for this hour. back to you. >> that's wild. all right. thank you very much, courtney reagan. we want to talk more about third avenue, the bond markets and concerns leading up to the fed meeting. joining us to explain, jim stewart. a lot of funky things happening ahead of this fed meeting. china changing the way it's going to manage the currency and this high yield scare. >> i know. it's not a sprays they'll raise next week. how long have bebeen talking about this and anticipating it. wouldn't you expect everyone would put the foam on the runway by now. this high yield fund situation is a reminder that we all knew

with this low interest rates there would be pockets of excessive risk. now we'll see this is an example. somebody who was probably too deep but junkiest on the risk curve now facing liquidity crisis. it's not the last that we'll see before this is played out. >> how far could it reverberate? >> it's not that systemic for the reasons that i just said that we all have been knowing this is going to be coming. remember that we had a curtain raziser on this a year and a haf ago. there was liquidity issues and what can happen when rates go up. >> that's not the memory people have. the memory people have is in

august of 2007 when they said we've got two tour three funds that we're unable to make withdraws and everyone is, like, everyone moved on and that's now the beginning of the financial crisis when it first raised its head. the question is to answer the question again, is this systemic? >> i think your question there is are junk bonds equivalent of mortgage backed securities in 2011. that's a legitimate question. it's a good question. it's a huge market. my gut feeling is that it's much more visible and it's a known commodity here. nobody knows for sure. people are jittery. another analogy is in '98 where you had a single hedge fund making a wrong bet on currency which created huge turmoil in global markets. >> didn't they cut rates? >> they can't do that now. >> don't joke about negative

dots. >> having raised the issue is i don't think that's what this is. this is not as big. it's not as systemically important. the worry is will they wake up to say i could have a liquidity issue here and if i need money, i better get it out now. you'll see some sales and i don't see that happening. >> there is major bench mark behind this if the price of oil continues to follow and that must have implications down the line. >> that's another interesting question. were commodity prices linked to this policy? i hadn't really drawn that connection. was $100 oil a function of rock bottom interest rates for the foreseeable future? i can't answer that. it looks like there's a link there the way these are correlated right now. so, yeah, i think that's an issue. will the rise in rates cause further weakness in commodities?

>> you have outflows with junk bond market with prices collapsing over there and manufacturing sector of this economy and what many executives say is a recession including the industrial part of this economy. consumer confidence and spending is up. it's not vibrant. is it really time for the fed to raise rates? >> well, what's the alternative? not raising them again? >> what is the worst policy mistake? >> i think, look, the raise in december has been priced in to targets right now. i don't see from that -- the argument you make is to keep them really low but the world is not going to change because it goes from zero to a tiny bit. >> this is the first tightening move in almost a decade. it comes off of major quantitative easing and zero interest rates for a long time and at the same time everyone else is moving the other way. there's a fear that we don't

know what the world is going to look like. >> it's not like we've ever had interest rate raises for the fed. >> they don't remember them. we have gone all these years without one. the fed raises. the fed cuts. this is a part of every-day economic life. the idea that we're all -- >> this is old school. so old school. >> someone who remembers more than pre-financial crisis. i think it's healthy. we want a world in which the fed raises and lowers interest rates based on economic conditions. >> words of wisdom and experience. what's in the column? >> it's a whistle-blower at jpmorgan but why you can have dodd-frank and codes of honor and the whistle-blower is still going to get slammed. this is great example of it. i think the message i'm trying to say is whistle blowers can really do you a favor.

if they call attention to something you should address, instead of firing them and smearing their record so they never get to work again, look at what they're saying. these companies could end up saving themselves hundreds of millions in bonds and damages and litigation and legal fees and while this is a jpmorgan story, it's not just jpmorgan. this is endemic in the business world. this is a super important story. >> maybe the s.e.c. is not rewarding them enough. >> they are. under dodd-frank. the payday for this guy -- i don't know if it will happen -- if he's deemed a whistle-blower who qualifies, he'll get a bounty that could be tens of millions of dollars. >> takes us back to another "time" person of the year not too long ago when they put whistle-blowers on the cover. >> and the reason is because with people like madoff, you need whistle-blowers. not the most pleasant people to be around but society and businesses need them. >> always good to have you here,

jim. jim stewart from "the new york times." >> up next on the program, stocks coming off their lows currently down 198 on the dow. it was a big move at the open and continues to be broad based. more on that when "squawk on the street" comes right back. when a moment spontaneously turns romantic, why pause to take a pill? and why stop what you're doing to find a bathroom? cialis for daily use, is the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain,

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good morning, rick. >> good morning to my friday guest. peter, one of my favorites. good morning, and thank you, peter. >> thanks for having me. >> let's spend 30 seconds. give me summary and data and the notion that the headline that everyone looks at what the bea

uses to kind of insert into the gdp calc. >> it's mediocre. whether high spending on rent or property taxes or health care deductibles or premiums. we should put to bed the idea that people will spend while gasoline savings. we're stuck in this age of mediocrity when it comes to consumer spending. >> you mentioned savings. what did that do? >> multi-year high. >> i find that fascinating. let's get to the meat of this. i continually say it's the great recalibration. they said it doesn't matter the day you lift off. it matters they're going to lift off. as we see recent activity, the day of liftoff matters. let's play a game. janet yellen gets a mike in five

minutes and says rate increases are off. we'll do more qe. how do you think markets will move? energy markets? interest rate markets? what do you think? >> it would be euphoria. how long would that last? would it be ten minutes or two months? i think that's the question. we're past the point of diminishing returns. and i think after the initial shock of it, then people will realize that the fed is completely screwed in a box it cannot get out of. and the fed will be the parent that can never say no to the kid that's strung out on smack that always needs more. >> all right. so when i look at the equity in the season negative territory and see nasdaq -- i didn't see the last numbers but getting close i see the dax and dollar down for the year. will any of that impact in a last 11th hour ultimate decision of the fed on wednesday? >> i so hope not. anybody who thinks that the fed can somehow extrapolate

themselves or extract themselves from this policy in any smooth way is delusional. there's going to be pain of some sort. it's just a matter of what degree because when you go so far one way deep in excessive monetary policy, there's going to always be a hangover no matter what. it's either take the medicine now or punt it and take it sometime next year or the year after. there's going to be some pain to experience. >> peter, last issue when i look at the general state of the economy, i don't see data dependent surge that should address a higher rate. they need to raise rates. i guess my final question is, do you think the u.s. yield curve would invert? long end is sensible on global growth and yet the need to end this policy from a cost benefit analysis is affecting and will continue to affect. your final answer? >> it will no question invert initially for the next six months. once we recycle out of decline

in commodity prices, the headline inflationary number will tick higher in a mathematical basis. next week's number .2%. >> peter, always a pleasure. have a great weekend. simon, back to you. >> thank you very much, rick. u.p.s. selling cnbc that its delivery network is running as expected and that its peak planning will ensure that it meets the service levels that its committed to despite what appears to have been a 25% surge in volume on last year during thanksgiving according to industry estimates. a spokeswoman responding to an article claiming that u.p.s. is straining to handle the surge putting down rate of on-time delive deliveries. it admits that as always the case a few hubs receive more volume than it had previously planned for.

th personnel were dispatched to high impact locations to deal with additional workload. u.p.s. handles more residential deliveries than fedex >> pa thaek delivery will last for 20 days. >> when we come back, a lot of big news coming out of china today, including on its currency. we'll bring you the latest details and show you what's going on with markets right now. the dow is down. over 200 points. s&p 500 down 1.2%, and the nasdaq selling off the hardest, down 1.3%. energy is getting hit the hardest as crude oil this morning dips below $36 a barrel. squawk on the street will be right back.

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that's why i switched from u-verse to xfinity. now i can download my dvr recordings and take them anywhere. ready or not, here i come! (whispers) now hide-and-seek time can also be catch-up-on-my-shows time. here i come! can't find you anywhere! don't settle for u-verse. x1 from xfinity will change the way you experience tv. >> welcome back to squawk on the street. go pro shares are down over a percent in early trading. loitss at citigroup cut their rating on the stock to neutral from buy. they also slashed the target price to $22 a share from $75.

back in july citi upgraded the stock to a buy from a neutral and now says that the timing couldn't have been worse. the brokerage initially thought go pro would suffer from poor sales from that cam, but now demands for go pro products is softening, and the stock is down, simon, by the way, 70% plus year-to-date. back to you. >> all right, dom. thanks very much. we'll be right back here on "squawk on the street" with the dow down 220.

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s wr ma has that story. this has been a source of mystery and intrigue. >> absolutely. absolutely, sar wra. chinese billionaire widely referred to as china's warren buffett who was reported missing overnight by a chinese magazine is, according to his company, assisting chinese authorities in an investigation. the filing which was released with the hong kong exchange was signed by mr. guang himself. had comes as regulators have been cracking down on corruption. fosun international, which he is executive chairman of, is one of china's best known private companies. it includes investments in french resort chain club mediterranean and one manhattan plaza in new york. according to forbes he is worth $6.9 billion. speculation over the whereabouts of mr. guang sent shares of

fusun lower and other shares of his investment portfolio, and it was seen as one of the reasons the shanghai composite traded lower today, closing at a five-week low. some of the china watchers i speak to, sarah, say it did spark some fear amongst the investor community. >> why is the market worried? >> the broader context is, first, china trying to step up their control over the chinese market, trying to crack down on corruption, show the world that they're really taking steps towards a market that is focused on primarily liberalization. the concern is when they are detaining some of these investors. the question is what are they doing with them and what type of corruption is actually involved? >> seema, thank you very much. let's check on the markets as we close out the hour. the dow is down about 230 points. we're seeing broad declines ruse the s&p 500 and the nasdaq energy is a big source of the concern. crude oil earlier breaking below

$36 a barrel. hovering around that point. energy is the worst performing group in the s&p. >> what's been interesting in the hour since we came to air is that you have had a slight shake-out. there was a mass markdown right in the way across the s&p 500. i think at one point only two stocks were in positive territory. we've now, to sarah's point, come wack from that where you see energy as a leer decliner with southwest and others at the helm of that, but other sect ors have been able to recover. notably, i think utilities are positive. >> actually positive. high yield has been another source of concern. want to point out an etf. jnk, that's the swrunk bond etf. it's hitting its lowest level since back in 2009. hyg is another etf. that one hitting its lowest level since 2011. obviously the concerns are for oil and the broader ripple effects heading into the fed meeting next week. >> whether you want to go into etf's in an environment where they're shutting other funds for lack of liquidity. what do i know? anyway, let's send it over to squawk alley last one of the week. take it away, guys.

>> thanks very much, guys. it is 8:00 p.m. at alibaba headquarters. it's 11:00 a.m. on wall street. squawk alley is live. ♪ >> let's start with the markets. the stocks, as you can see, have been lower all morning long. dow down