tv Squawk Box CNBC December 14, 2015 6:00am-9:01am EST
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unbelievable. monday, december 14th, 2015. "squawk box" begins right now. ♪ ♪ live from new york where business never sleeps, this is "squawk box." ♪ ♪ good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. it is the hottest gift in 2001. now amazon is pulling some hover boards from its floor a mimid concerns of safety. there are fires with them. there you can see it at the mall. first, let's get to the markets. the s&p coming off its worst week since the middle of august. last week the dow was down by more than 3.3%. the nasdaq was down by 4.1%.
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you can see there are green arrows. the dow is up by almost triple digits. looks like the futures would open up by close to 100 points. nasdaq open up to 32 points and the s&p up by 11.5 points. oil was down by $4.35 a barrel. this morning wti down another 26 cents to $35.36. let's tell you about some other stories we're watching this morning. "the wall street journal" reporting that david barse is officially out. the departure after the collapse of the junk bonds. it was hit by heavy losses. third avenue looked to liquidate the fund and block redemptions causing all sorts of hysteria. dan loeb officially calling for the removal of dow chemical ceo andrew livrist. it raised questions about the timing of the company's merger agreement with dupont which happened on friday.
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the journal reporting that loeb supports the merger but he's questioning whether the deal was rushed. it puts the whole bait into relief. the question asked to andrew livrist on friday whether this deal was being done ahead of monday saying the timing was suspicious. yahoo! which dan loeb had been involved with, ranks among the company's 15 largest shareholders. they're urging them to find a buyer for the internet business. meantime, hedge fund spring owl asset management is pushing a new plan to cut the company's work force by 75% replacing ceo marissa mayer and bring in a strategic partner to help with tax itching use involving yah ! yahoo!'s asian taxes.
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we'll have that at 8:15 eastern time. >> on wednesday that's all they want to talk about, band load and if that stands still. we talked about it so much that my eyes glazed over. we talked about the details of it. that was two days before. >> fighting back including one of the board members who was placed there by dan loeb. >> yes. the real question is do you think ed green had been planning this? >> no, livrist -- >> no, but i think do you think green was planning it from before? clearly he seemed to be. the idea that got him there, pulling out just to do this deal. >> it's depressing to me that it's sort of not a -- an authentic, aggressive move that helps broaden something geographically and spring loads the growth. it's just like barely we find where commodities are.
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$35. that's a story from last week. junk bonds. that makes you wonder. >> when i finally checked back in and looked at the oil prices, i couldn't believe it. >> once again, you know, each day we get closer. we're like hanging on that they're going to raise. if it got out -- it's okay, but some of the scuttlebutt over the weekend if this junk bond thing started spreading even further because zts is still liquid, the big spreads. you're selling some of the stuff you can sell. sell stuff you can get out to cover your losses on the really crappy stuff. it's all related to oil. the companies are stretched thin. all of these things are happening. it is fear factor. it's like a magget spread that you have to eat on turf. >> do you remember that? >> do you remember the stuff they had to do on fear factor. >> the snakes? you would eat mag gots on toeas?
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>> before i would fall in a pit of snakes. >> what are snakes going to do. >> what are mag gots going to do. >> snakes are very, very efficie efficient. >> maggots have protein. >> seriously, you would take a pit of snakes? >> maggots on toast? >> i don't know. we'll do a poll often twitter. royal dutch shell announcing it has cleared the final regulatory hurdle for its takeover of bg group. shareholders are voting. company says deals on track to close by next year. as st astrazeneca confirms talks with cancer firm acerta. they're looking at it for more than $5 billion. after all the paris stuff, the cop 21, whatever it was, i think
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i'm going to announce this like shinyea. what's wrong with that? sounds like i might speak french, cheniere. cheniere has been working to become the first importer. wall street journal says the board decided to make a leadership change after re-evaluating the exporting of lng. god, things are cheap in oil. how do you wean yourself -- i mean, it's just funny. how do you wean yourself off hydrocarbons? what a week to try to save the world. what a week to try to save the world. it's going to be so hard with hydrocarbons so cheap. good luck getting every country to stop using hydrocarbons. you still have had no success
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with your wind powered suv. >> working for years. >> you just sit there. you'll never be here. is that what happened? >> yeah, no. go back to gas. yeah. let's tell you about a little bit of global news. billionaire chinese businessman chang attended a meeting after a report suggested that he had gone missing. the story sparked speculation that he was taken by police as part of china's corruption crackdown. his company, fosun international said he had been assisting chinese authorities in an investigation. in the meantime, let's get a check on the markets this morning. as we showed you, the futures are looking quite a bit improved. we were looking at the dow futures up by 99 points a few moments ago. now they are up by 69 points. keep a close eye on that. the dow was down by 3.3%. the nasdaq off by more than 4%. the nasdaq futures up by 25 points this morning. the s&p futures up by 7.5. let's take a look at the early
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trading in europe. there are some green arrows there. the biggest gains look to be coming from the cac in france ups by 1%. gains up by 1% from the dax and the ftse in london. in asia overnight, some of the markets there were under pressure earlier. you can see that the nikkei ended up down by about 1.8%. the hang seng was off by .7 of a percent. the shanghai was up 2.5%. the yield is up at 2.164%. if you want to take a look at the dollar, euro ended the week at 1.099. this morning at 1.0954. the dollar against the yeng up .25. the pound is down and it's at
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1.06. snakes are not slimy, they're nice pets. >> a pit of snakes over your whole body. >> but they're not slimy. >> they're not slimy -- >> it's like nk with a bunch of expensive purses. >> did you not see "indiana jones." >> he was afraid of snakes. he fell into an entire pit of snakes. >> pit vipers that are poisonous. little boa can't do anything. they're nice. >> crawl all over you. >> listen, we've got -- we started a show with "fear factor." that's why we're focusing on this. it is amazing because the fed is facing -- it's like murphy's law, unsettled markets as it considers raising rates. the highly anticipated meeting. plunging energy prices. it's all related. the energy prices related to what's happening in junk bonds. joining us to cover the equities angle is dougs koke and doug
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kildof. haven't done that to him yet and cnbc contributor. i'm sorry. let's talk more about the big picture because, you know, it's just like clockwork. the markets were down 3.2% last week. that's a big move. suddenly there's questions about junk bonds and whether there could be some contagion and then you have oil at 35 which means there's not going to be any inflation. the fed won't hit those targets. i would think they're looking at it and saying are you sure we want to do this on wednesday? i can't believe it. do you think there's any way they want to do it. we're giving them some trepidation? >> we're on the road to normalization? >> are you sure? >> if not now, when? >> a year ago. >> when that -- >> i agree with na. >> >> when the sector was stronger, the gdp. they had their chance. now we have $35 oil. they kind of missed their
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chance, didn't be they? >> well, what does normalization do? some of these markets, especially oil, commodities, they're overdone. it's rehf-allocating capitol. if you put it in context the global economy is $77 trillion. a decade ago it was $38 trillion so we've almost doubled over a decade or more than doubled over a decade and so we're in a different situation. we are strong enough to move forward. if you look at a lot of the downward spiral in oil prices was because the u.s. dollar was too low. now it's normalizing. when it normalizes it affects every other -- it affects currencies, commodities. look at corporate earnings. corporate earnings were really the canary in the coal mine that saw second quarter earnings were down in the energy sector 50%. third quarter down 50% for the
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year. so it was tracking so if you actually followed corporate earnings and what corporate earnings is signaling with negative corporate earnings, that, okay, we have to clear this out. if you look forward in 2016, the comparisons are easier and this, too, shall pass. >> skirting my question. is there any way that they've miscalculated that they've prepared us enough and that they're -- you know, you look at it's a little bit shaky in some of the markets. junk bonds, oil. is there any way it's not in the market and that someone gets caught on the wrong side of what the fed does? >> well -- >> and that something really scary happens or not? >> nothing is a sure thing. i would say the fed is going to raise. >> and we'll be fine? >> we're going to be fine. certainly there is going to be a bit of volatility. i think what fed chair yellen is trying to do is stabilize the dollar. a lot of the reason why is some of the -- >> can you make it not go
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higher? >> ma i can it not go higher. i think we're kind of at a peak if you look at the xy index. we're kind of at our 30 -- a little over our 30 year average. so that's normal. the dollar has normalized. >> by raising once and then pretending they're not going to raise it, is that what you mean? >> yes. we think it gets to 1% a the the end of next year so 3, but i think all the other central banks that are diverging in policy, you saw the european central bank couldn't do all that they wanted to do and that helped the dollar. i think china could certainly do more stimulus and surprise the market. they have a lot of fire power. they couldn't do unlimited. as long as the dollar stabilizes, then the other market is the currencies, the commodities, the corporate earnings, the bonds that are all tied to that. >> yeah, all right. >> should do well. i didn't kill you off, you killed you off.
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kildoff. you have ten seconds. no. was that a -- like a climax selling last week in snoil no, still forward. you haven't said the two word yet, have you, 29? >> i've speculated at it. >> what is it? what's the next? >> 32.70 is the low from the crisis. >> wta. >> joe, there's no real support until you get to the $20 to $30 band that existed for ten years, from 1991 to 2001 when the war started. >> so that would portend -- before fracking and before we got so good at getting it out of the ground here, that would have been really frightening on a demand side of things. we would have thought we were in a full blown global depression. should it be something we're scared about or something we should be able to produce so much oil? >> i was talking with larry kudlow over the weekend about
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this. in the past even when there's been damage to the economy because of oil, it's because prices spiked higher and consumer spending. this time it's a symptom potentially of global slowing. >> are you sure? >> it's not the cause. >> overslowing is not the cause? >> it's no the the cause of the global slowing is my point. >> okay. it's a symptom? >> yes, yeah. yeah. >> is it still mostly suppliers that 2/3 supply, 1/3 demand? >> 2/3 supply and 1/3 demand. >> i like it. don't they like it when it goes down? >> getting driven lower this weekend because of iranian comments. we're going lower this weekend. it evidences the fact with the recount going down and u.s. reduction coming down, the increases we're expecting from iran, iraq, libya cannot hold themselves together are going to more than offset. there won't be any net change in global output. i want to throw in there so we don't mission this. natural gas prices this morning,
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the lowest since 2002, 13-year low. >> wow. >> you don't e-mail a boom, do you? >> i could. do you want me to ask him? >> no. >> last time he came on he said it would be a very long shot for his call to be right. >> wow. >> who's that guy, dan dicker that got all mad at me when -- >> i got all mad at you? >> no, he said the market just -- the market was wrong. it wasn't understanding what he actually knew to be true about the oil market at 90. >> dairy ask what the implication of this accord in paris is on the price of oil? is there implication at all? >> did you read the journal today? >> it's hard to see there being one. there are forward looking aspects to the oil market from the futures curve and what's going to happen, say, but -- >> that's where you were, that's where you were.
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you were over there cheering and crying. >> i was. >> it's still hard to see -- oil's not necessarily the culprit when it comes to global warming with respect to transportation fuels. the output is so low. what's happening anyway, andrew, is one of the biggest surprises i think in terms of helping out the folks in paris here in the u.s. is the wind industry. i mean, that has now become a conventional source. >> who's going to go into green expensive renewable energy at 34, $35 oil? how are you going to give up hydrocarbons when it's the cheapest and most effective? >> china is basically giving away these electric cars at this point to convince people to do it. >> and here. >> npr had a report where it was the price but then you also get a free license plate which is worth $13,000. >> without the license plate -- >> why does it cost $13,000? >> because it's their way of trying to control who's on the road.
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>> wind has become competitive. >> i'm going to fly to l.a. i hope it's really blowing hard on my glider. >> in terms of this place -- >> would you take snakes or would you rather spread maggots on toast? >> wait, are the maggots alive? >> yes. >> i don't have the experience you seem to have with pocketbooks or whatever all over your body. >> snakes are digesting -- >> certainly snakes and i would say one more thing -- >> no way. >> one more thing on oil, below $40, even though they keep bringing down the break even, that is a concern in the market because it's a negative feedback loop that it can impact other markets in supply and refinancing. >> right. >> so we do need oil to be botch 40 but technology as john and i were talking earlier is bringing down the break even price of oil. >> you think we can pretty much
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put isis on the back burner now that we've sold that? we don't need to worry nearly as much? >> not so much. >> you don't think that we've solved -- >> no. >> -- the one won't take care of the other, you're sure? >> i'm worried about snakes on a plane. >> snakes or maggots? you didn't say? >> the protein with the maggots. i'm with a snake on a plane and a wind powered plane. >> we have to run. >> we do have a poll and they put it out already. >> we'll do that. check it out on twitter. in the meantime, why amazon is pulling hover boards from its site. a very busy day at the post office. washington news, senator ted cruz jumping into the gop presidential race. details on the new nbc news wall street journal poll straight ahead. first, as we head to a break, here's a look back at this date in history.
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vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities. while you're watching this, i'm hacking your company. grabbing your data. stealing your customers' secrets. there's an army of us. relentlessly unpicking your patchwork of security. think you'll spot us? ♪
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you haven't so far. the next wave of the internet requires the next wave of security. we're ready. are you? welcome back, everybody. there are now justen shopping days to christmas. it is crunch time for the nation's retailers and for the nation's shippers. the united states postal service says today is the busiest
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mailing day for cards, letters, and packages. officials recommend sending packages by december 21st if you want it to get there in time for christmas. the usps admits that more than 15.5 billion pieces of mail will be sent this holiday season. speaking of holiday shopping. they're running into more trouble. they're pulling hover boards from its store. the news comes from major hover board seller swagway. they asked for safety documentation. in a statement swagway says it meets all certifications and it's happy that amazon has decided to take steps to weed out low quality boards. >> there are millions of knockoffs. some are portending to use samsung batteries and some are just wrapped in the samsung logo.
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oftentimes the connector is not a fully authorized one. >> how can you figure it out? >> it's not been tested pi any real sort of -- i don't know folks who actually test batteries, but it's all about the lithium ion battery. >> they're like segues except you don't have the stand to hold on to. >> yes. there is a sequence of lawsuits around the patents that segue has and another fellow who came up with what he thinks is the patton for this. there's this whole sort of morass of legal lawsuits going on. they're not even hover boards. >> there's not a real cloud either. it's not a cloud. do you know that? >> it's not. i'm not saving my pictures to an actual cloud? >> all the big data in the cloud is not in the cloud? >> no, not -- >> learn something on this show every day. >> they're like sideways skatd boards that move around. do you wear a helmet?
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>> you should. >> you should. a lot of cities are banning them. >> you should never wear a helmet? >> why is that? >> you look like a zoo. >> you thud never do -- >> always weighing wear a helmet. >> you're saying for the fashion aspect of it. you know what, safety comes first, my friend. >> good. be safe. in recent weeks this is the last part of this. in recent weeks there have been at least ten reports of hover board fires. many major airlines have announced a ban to bring them on planes or in the hold citing worries about the batteries and a possible fire risk. let's switch topics right now to some political news. a new nbc news/wall street journal poll out this morning. there are big changes in the polls. we're joined with more news on this from john harwood. >> just before the campaign
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shutsz down for the holidays, we do have a debate in nevada that will be on cnn. we've got some significant movement in the race that may force out what happens in the remaining six weeks until we get to iowa. first of all, in our poll nationally we showed trump still in the lead. 22%. you have marco rubio in third, ben carson in fourth place but when you look at who the combined first and second choices in this field, you see that ted cruz has got 40% of the people and listing him as either a first or second choice to donald trump's 39. what that tells you is that as other candidates fade, potentially trump, potentially carson and others, that ted cruz is in a position to pick up that support. there's a new poll out of iowa that suggests that other candidates may be fading because you see ted cruz with a ten point lead over donald trump in
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iowa. this is the des moines register. you see a big fall for carson, big rise for ted cruz. now on the democratic side our national poll shows hillary clinton with a 19 point lead over bernie sanders. that race doesn't appear to be moving all that much. martin owe molly, the former gov more of maryland a very distant third with 4% of the vote. the register bloomberg poll shows that hillary clinton has a 9 point lead over bernie sanders, the socialist senator from vermont. this movement in the race is very significant. it suggests that if this race normalizes and you have a conventional office holder type candidate who is going to move ahead, that may be ted cruz. at least he's positioned himself. of course, we have multiple weeks to go until we get to iowa. you could still have other candidates, marco rubio, jeb bush, christie, kasich.
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>> number one, it's socialist, not just socialist. >> yes. yes, sir. gotcha. >> i expected more from you. >> noted. >> i expected more from you. >> it's a different flavor of socialist but he's still in the socialist category. >> one of them is like a good kind that, you know, won't destroy the economy and turn us into venezuela. >> but i have a question for you. four years ago who won iowa? >> on the republican side you had a photo finish between mitt romney and rick santorum. >> rick santorum. eight years ago who won iowa? >> you had mike huckabee. >> mike huckabee. >> that's right. >> he became a fox news person. >> excuse me, he was running for president. are you saying he can't win this time? >> hey, yeah, i know. "the new york times" constantly points out in sort of a condescending way that the people in the good state of iowa
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do not represent this country anymore. they don't say it in so many words but they kind of say that, that that's not going to dictate who we elect for president in the more with it -- >> well, they have a particular spin on things. >> they do. >> it's more of an evangelical christian audience. >> i think new hampshire is much more indicative of the way things might actually pan out, don't you? typically isn't that a better indicator? >> yes. but what iowa does, it sort of starts the trajectory of the race. >> i don't know. >> if ted cruz can wound a candidate in iowa, then you have a different dynamic going into new hampshire. >> okay. >> sometimes those candidates turn back. >> you're talking about trump. i can see that. >> marco rubio as well. a lot of people think we have a nominal top line race between trump and carson for a while and the rest of the field and then the so-called real candidates,
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the ones who have conventional campaigns, won elected office and that's where it's going to end up. a lot of people think it's a cruz/rubio race. i think it's a little premature to say that. what cruz does in iowa could affect rubio going in. >> i don't think anyone that won iowa has become the nominee, do you know? >> oh, of course they have. >> how long ago? oh, boy, that was not good. >> let's just talk about trump. >> one more thing, becky, mitt romney did finish in a tie for first in iowa. the fact that he was able to do that, that night he was declared a couple dozen votes ahead in the caucuses ahead of santorum. later people calculated that santorum had a very tiny plurality over mitt romney. >> let's go back to trump though. i was watching yesterday, i think it was on cbs. they were talking about a focus group of trump supporters who
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say they will support him no matter what, no matter whether he is the republican nominee or not. what does that do? what does that mean? what does that tell you at this point? >> i'm not saying they're not. >> people who are republicans, consistent republican primary voters, trump doesn't do well with them as they do a prodder group of people who may not have participated in a republican contest. the question is when we get to the contest, are they going to participate? if so, he's grown the electorate to his benefit. if not, the impressive numbers he's gotten in the polls may come down. >> john, thank you.
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great talking to you. we'll see you. apple music strikes an exclusive deal to stream taylor swift's world concert. plus, attention "star wars" fans, the force will be in hollywood tonight with the premiere of the latest film. as we head to break, check out the futures. we had been looking at the dow up by triple digits. now its that he negative territory down by 2 points. s&p down 1.5 points. nasdaq up by 5 points. "squawk box" will be back. today's strength flows from the force. day, we're seeing new technologies make healthcare more personal with patient-centric, digital innovations; from self-monitoring devices that can interpret personal data and enable targeted care,
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to cloud platforms that invite providers to collaborate with the patients they serve. that's why over 90% of the top 25 global pharmaceutical companies are turning to cognizant. our domain experts, technologists, digital and data specialists, clinicians and scientists are transforming the way clinical research sites collaborate with pharmaceutical companies, and enhancing patient engagement with innovative platforms and solutions. our population's growing healthcare needs present growing opportunities for our clients: to advance the future of medicine with digital, and improve the quality of lives. ♪ the market.redict... but at t. rowe price, we can help guide your investments through good times and bad. for over 75 years, our clients have relied on us to bring our best thinking to their investments so in a variety of market conditions...
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welcome back, everybody. if you are spending time out shopping this week, it's pretty likely that you will hear mariah carey's "all i want for christmas is you" however the song is no longer the most played song played in the stores. it had been for 20 years now. there's an entertainment company called play network that puts together their in store play lists. it now finds a different tune at the top of the list. that is paul mccartney's "wonderful christmas time." here it is here. ♪ ♪ in other music news, apple announcing that taylor swift's 1989 world tour live, the concert video, will be available exclusively on its music streaming service, which i have. this is an incredible moment.
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>> bonus for zblu bonus for you. >> big, huge bonus. i was there in metlife stadium. already -- already sat -- lived through -- was able to enjoy that live already with the fam. the video will be available starting december 20th. i feel like there's nothing new i could really get out of that probably. >> kind of amazing that she's been willing to do this given how against streaming she was originally. she doesn't do it on spotify. she made friends with apple. >> apple changed the terms and that made her really happy. >> she did have some great warmups and some great guests, different. whether that's included in -- >> you came back from that concert. i remember. >> i did. i liked it. i liked it. >> we have some other news. you i know are going to this on friday, i'm assuming, which is "star wars." >> no, i'm going saturday. i bought my tickets for saturday.
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>> i think it starts on friday. "star wars" "the force awakens" premiers. this is definitely bigger than the oscars. four blocks of hollywood boulevard were shut down last week to set up a massive tent for the big night. there are three theaters along this stretch hollywood boulevard although disney lucas films have not told us which one will be used for the premiere. it opens on december 18th. the preorders incredible. people are saying this will be the largest weekend in box office history. at least that is the expectation or hope. >> you're going saturday night? >> saturday. saturday morning actually. >> people our age don't necessarily go -- >> right. >> did you read that about the "moby dick" thing? >> uh-huh. >> ron howard. it was a flop on top of a -- >> but it's on a lot of people's lists for over the holiday. >> the demo is people over 35. they don't rush out. >> they do not.
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>> that's the way they're saying it may be okay for time warner. they had "pan" and had a miserable year. >> adult pictures this whole season have had a tough time. not adult pictures like that. pictures for people over 35 years old have not been nearly as successful. >> change your story. >> this whole windowing modeling where it's going tight on, they'll open in five theaters, eight theaters, ten theaters to roll out slowly. >> a lot of controversy out there. >> are you doing imax or regular? as far wars? >> because of timing i'm going to regular. >> if you get over nine hours of sleep it will kill ya, that's the latest. >> what? >> we're all in luck. >> we're all in luck. >> whenever they do these studies, think about how -- people that get nine hours sleep, what else do they do? they george pizza, they lay on their couch, they get no exercise. they're -- they're just lazy -- >> it's killing --
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>> what do people that get five hours do? they drink, smoke cigarettes, god knows what else they do? >> we're morning shows. >> no, that's a positive way of getting less. if you get 7 to 9 you'll be okay. they did some study if you get more than 9 -- >> 7:40 was the ideal. >> it's a lifestyle thing. >> sure. >> you can't do it in a vacuum. >> 7:40 exactly is the primo number which i still don't get. >> look at that. coming up when we return -- >> what are you looking at over there? >> is this guy a pilot? >> the guy who makes the hotel reservations. talking about pilots and res ser vagtss, the ceo of kayak will be here. oil prices under be pressure. that's adding to broader market fears. first, as we head to break, rubbermaid is buying jarden in a cash stock deal. we'll break down the numbers and give you more analysis when we
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come back. ♪ ♪ that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet?
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think you'll spot us? ♪ you haven't so far. the next wave of the internet requires the next wave of security. we're ready. are you? welcome back to "squawk box" this morning. u.s. air lines expected to fly 38 million passengers. that's up from 3% from last year according to industry trade group. kayak.com processes travel news. it's out with the holiday travel hacker to navigate the busiest travel season of the year. joining us is steve hacker. he's the kayak.com co-founder and ceo. i use kayak like crazy. to the extent you have tips to hack this and make my life marginally better, i'll take them. what are they? >> the first tip is to use
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kayak. i think that goes a long way. in general, there's never been a better time to travel than now. the u.s. dollar is strong. that essentially means the rest of the world is on sale. airfares are low. booking.com and air bnb you have good deals. for americans, it's use kayak or a lesser app, get off the couch and travel. >> is there a hack? if you're cheap like i am and you want the best deals, people say buy them tuesday nights or wednesday nights? do i want to buy the airfare with the who he snell is there really a deal? >> there are lots of tips. but in general if you see a price that you like to a destination you want to go to, you should buy. the earlier the better. some days of the week it makes sense to leave on a tuesday and come back on a thursday. some destinations are off the
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beaten path. non-hotel accommodations are great, too. if you're not familiar with air bnb, check it out. >> i've been in a situation where i've tried to change my plane tickets after they have been bought on kayak or one of the other sites and be the airlines are less likely to deal with you. they say you bought that through a third party vendor. what do you tell somebody in a situation like that? >> it's a misperception. kayak doesn't provide customer service or sell the airline tickets. >> maybe it was price line. >> yeah. we give the consumer a picture of what's the best deal. airline tickets you're better buying supplier direct. with accommodations you're often better off going through an intermediary. >> you would for the other purchases? >> i would because often independent hotels or rent-a-car companies you don't buy those services that often. you're better off going through
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a third party. >> on the left-hand corner on the screen of kayak, it often will give you an indicator of whether you should buy right now or whether the price will go down or up. do you sell insurance against that? there was a company that was going to go into the business of assuring that the indicator was right. >> a lot of companies have tried and explored that space to gain the airfare market. at kayak we don't do that today. we are testing something with a company called options away. that left-hand chart is designed to give the consumer confidence that they're making a good purchase decision. we will show that by looking at the billions of airfares we analyze every day, is this a good time to buy? we'll give you a confidence index. >> i have a final question. >> sure. >> i like the points. mild points. would you ever -- you can sell points in order to do that? >> we don't do that but it's something we've taken a look at. >> have you ever done it? >> we did it six years ago. >> no, i'm saying personally have you ever done it? does it work?
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is it a good idea? >> in general if you have airline points you should redeem it at the airline. the same with the hotels. >> you use kayak all the time? >> i literally -- >> were you using it last week traveling around? >> that's where i was. i was sick lying in bed with my chicken soup. i know you thought i was in paris. >> you use kayak all the time? >> not last week. >> you were every day of hanukkah. how many days were there? >> it's a special sick holiday. no, it's a wonderful holiday. >> you sound fine. you look great. >> thank you. >> bushy eyebrows. >> yeah. >> i was very ill. when i -- i will give you the list of drugs that the doctor had prescribed and we can talk about it. >> symptoms? any -- >> i can give you -- >> i had lots of symptoms. called a super virus. >> he has a super virus. like on "alien" where they let that in. everybody says, don't let it in. don't let it in. victoria stilwell, you appear on tv working with canines.
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are you a dog lover, watson? i do not own a dog. but i work with veterinarians. how do you do that? i help them analyse over one hundred thousand pages of medical studies. that's great... 'cause they can't exactly tell us what's wrong with them. isn't that right, rosco? rosco. who is a good boy? who is a good boy? you are. yes, you are. watson, i think you need to work on your dog voice.
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income strategist. what do you think about this situation? is carl icahn right? >> high yield is by definition a lot riskier than most aspects of the bond market. if you take a look what's been happening in the last three years came to a head in nine months, yields were very low. the down side risk was a lot greater than the upside risk at that point. we think for the current cycle, however, the real risk is mostly contained to very commodity sensitive names. so energy producers, miners, et cetera, because really the source of problems is isolated to the revenue declines that these industries have suffered. >> we heard from jeffrey who said in these situations there's never just one cockroach. you think it will be consolidated to these areas.
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do you agree we'll see more problems? >> i believe we are going to see more problems, yes. the way we phrase to it our clients high yield markets are cheap but getting cheaper. but we've been recommending for about nine months or so that investor that are allocated to high yield market stick with the higher quality aspects of the market. one of the ways is avoiding those commodities, sensitive names. other way is staying up higher in the rating spectrum avoiding the triple c names or double b which tend to perform better as spread widen but etf markets have complicated that situation. >> do you believe the rating systems at this point and do you believe various should feel comfortable with that? >> i believe so. even if you look back to the financial crisis with the exception of the mortgage markets -- >> right. >> ratings function pretty well in the scheme of things. the number of investment grade municipalities or corporations that went out of business during
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that time period were very, very low in the scheme of things. i have confidence in the rating system. but the truth is moodies or s&p can't predict the next downward in oil prices. that's one good reason to avoid commodities. >> also jeffrey said if the fed were to meet today, if the federal reserve were to meet, that they would not raise rates based on some of the chaos and potential for chaos in the markets. how problematic do you think things are. is that an overstatement or do you see the same thing he sees? >> i think it's a little bit over dramatic. we got an economic climate arguing for higher interest rates. until the last couple of weeks has been arguing for higher funding rates. if you look at the market indicators of distress something i like to look at friausr spread it's a market stress indicator
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and the levels are solo it's suggests there's no funding problems. tissues in the high yield markets are more about investors taking a different approach to risk taking and the federal reserve won't affect that one way or the other. >> thank you for joining us today. good talking to you. another reason for trepidation. look at oil right now -- that's in free fall, it was kind of stable above 35 and futures were able to be up 100 points. now the futures in this country are down based on this. >> down 5%. >> the dow supernow. europe turned around and most of the board are down. one was still up. it's oil. we'll cover it all when "squawk box" comes right back. it's hard to find time to keep up on my shows.
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you haven't so far. the next wave of the internet requires the next wave of security. we're ready. are you? the fed set to raise rates for the first time in nearly a decade and embark on a journey that's called the new neutral. pimco's chairman joins us. a hot sector for venture capital. the intersection of technology and education. yien square venture founder is our guest host for the hour. he joins us with the co-founders trying to shake up the world of education. >> shake up in the presidential race. senator ted cruz taking a 10-point lead over donald trump in an iowa opinion poll. the numbers and lineup for tomorrow's debate straight ahead as the second hour of "squawk box" begins right now.
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♪ >> announcer: live from the beating heart of business, new york city, this is "squawk box". welcome back to "squawk box" here on cnbc, first in business worldwide. i'm becky quick along with joe kernen and reed sorenson. oil prices falling for the seventh straight session this morning. take a look at the price of wti. down another 2.3% to $34.80. worth taking a look at natural gas down by 5.3% and all of this is putting pressure on futures. at one point the dow futures were up by 160 points earlier this morning. take a look what's happening. all of those gains have been erased. you can see in just a moment that the futures are essentially flat at this point. dow futures are up by 12, s&p up by a fraction and nasdaq up by ten points. this comes after a difficult week last week for the markets
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when the dow was down by 3.3% and the nasdaq was off by 4.1%. among some of the other stories, twitter is warning some use person a cyber attack by state sponsored hackers. the company sent a warning e-mail to users who were targeted hackers may be trying to obtain phone numbers, e-mail addresses and ip addresses. twitter said the small group of accounts was affected but provided few other details. the company is still investigating the hack. dan loeb is calling for the removal of dow's ceo and raising questions about the timing of the company's merger. he supports the merger but was the deal rushed to be done. and the "wall street journal" also reports third avenue management ceo is out. this departure follows the
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collapse of the company as junk bond fund last month. the firm's focus credit fund was hit by heavy losses. third avenue moved to liquidate the fund. that process kicked off a lot of concern about what else is out there in the market at this point and this is the fall out, at least this morning. >> a little bit of deal news breaking in the last 30 minutes. rubber maid buy iing jarden. they will join "squawk on the street" at 10:30 eastern time. couple people we know from that company including martin who is right there on the screen, martin franklin. this might be one of the good deals that happened for bill ackman that went long on this company. he's obviously struggled with a number of his other investments. one that's looking up. we should also tell you we're days away from the fed announcing whether it will be
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raising interest rates for first time in almost a decade. investors are dealing with a lot of uncertainty. >> reporter: the idea we can go through every single concern and issue in the marketplace we can't. we'll boil it down to a few of the big talkers, big issues that are now facing investors and, of course, what the fed is staring down at as it looks towards a policy decision that could like you said boost interest rates for the first time in close to a decade. as we talk about the crude oil picture, what we saw early this morning crude oil dipped below $35 for the first time since 2009. as we talk about commodities overall and declining prices will that factor in at least in some way shape or form to what fed will be thinking about during its fed interest rates deliberation. wti crude down we're to date. also what will happen here you talk about this idea of the junk
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bond focus here with a lot of investors. if you look at the spread between high yield versus investment grade bonds you can see here these are two etfs that track it. the white line is the junk bond index and orange line is the one that tracks investment grade corporate debt. you can see towards tend that big divergence. what does that mean? will the fed take that into account smaller companies or companies that aren't as strong have to pay more for interest rated products. and last thing. market volatility. it is elevated right now although we should point out it's not as elevated as it has been. over the past week we're up a huge amount on the cboe volatility index. longer term over the past year or so still a far cry away from where we were during that august turmoil. you can see right here we're far away from that. remember, the fed took that into
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account possibly during the delay, i guess we'll call it of its september interest rate hike and now we're in december. does market volatility play into that discussion. three things that fed will be staring at as it starts it policy deliberations tomorrow and into wednesday's decision. back to you. let's talk more about the uncertainty that lies ahead for the markets and joining us now is pimco managing director and global strategic adviser to markets. equity markets doing the best to decouple from oil, just a shocker every time they see it. we're stabilized earlier, above 35. and the markets were up 160. then it started again. now they are up a little. can they decouple from oil, do you think? >> i think the baseline is if you look at the broad market apart from the energy sector the economy is growing, 2.5%.
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a lot of reaction is to the softer economy. that's a factor in addition to oil. solid growth in the yield should be supportive of equities. >> do you think that there are a lot of little things that probably aren't enough to make the fed, you know, wimp out again but they are adding up a little, aren't they in the 3.2% on the equity markets last week, oil at 34, the junk bond market. who knows. can a quarter point increase from zero to net cause further tumult in high yield? >> i think the fed will go on wednesday. i agree they are starting to add up. also remember there's a fed that not too long ago talking about concern about froth in the market. if there was froth in the market several months ago there's less of it now. i don't think a quarter point will be a big game changer. it's the most telegraphed rate hike in history. the fed will be hiking.
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i think they are prepared for some volatility and also year end. i think they factor that in. >> up think the -- wish we got to 105 when dragmario draghi di do as much as they wanted. you think it goes back down if they raise or does the euro go back down or does the euro go up? >> i think the euro does go down. mario draghi disappointed, had his press conference for sure, without i do think that the euro does weaken from here. we'll get more qe out of the ecb. fed will be hiking at a gradual pace. i expect the euro to weaken, certainly. >> has bernanke been in the building? >> absolutely. in the building last week. i had dinner him. >> really? >> what can you tell us? >> what did he say? >> i know you got stuck with the
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check. >> i was happy to pay it and submit it for reimbursement. the fed is getting off for zero. last rate hike cycle began in 2004. so i think the fed wants to get off zero. it will be gradual. the story for 2016 how they communicate that lift off. >> so they were able to take a balance sheet and i don't know what multiple you want to put on it. >> five. >> they made sure that the pain that we felt here wasn't nearly as bad as a lot of people in the rest of the world felt. they threw a lot of money at it. they are going to be able to get out of this and it's going to be -- everything will be fine. they successfully saved the economy and no negative repercussions down road. >> i think they designed a good game plan. it looks great on the chalkboard, looks great on the computer simulations. we have to acknowledge the fed
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and central bank tried to do this and there will be some learning by the fed and markets. >> if they learn and they are successful that will be quite an accomplishment and we would have to tip our hats to them. you think that will be the eventual outcome to successfully unwind this? >> the baseline, although they have a plan for reducing the size of the balance sheet they will be pragmatic about it. i think if they find the balance sheet starts to fall and that's disruptive they will pull back. i think they are not on a preset course here meeting by meeting. over time they will be able to navigate this. >> see, i attribute some of it to luck in that the rest of the world stayed weak so that, you know, if europe had 4%, 5% sovereign yields and we were still at zero but it almost looks like they weren't that orchestrated to stay low because of the rest of the world's loss
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are lower. then they didn't have to worry about inflation because oil for -- because of fracturie i f they got lucky there was no inflation because of the money printing and because of oil -- i can't believe we can write such a happy ending. >> hang in there. make an interesting next couple of years for your show. >> going back to bernanke you assembled this all-star team. i want to know about the battles. any fights going on yet? >> no fights. >> just debates. an issue among this group. >> the group has just been named i'm not sure they even met. it was just announced last week. first meeting is schedule in the spring. >> then you got to -- >> i'll come back then. >> all right. thank you. if there is a fight -- who was at dinner just you and bernanke? >> a group of senior managing
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directors and ben bernanke. about ten of us. >> no argument about red wine versus white wine. >> we didn't argue about it, no. >> pimco, yeah. free wheeling, right? >> it was an enjoyable evening. >> really? >> okay. >> richard, thank you. pimco manage director global strategic economics. >> what a nerd bash. >> fred wilson will join us. we'll ask him about the bubble in tech start ups. then more on the fed's expected retail hike and fall out from last week's sellout. then technology companies are changing the way we think about education. co-founders of general assembly and edge explain their new strategy. we're back in just a moment. ke e personal
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welcome back, everybody. after a volatile week for technology stocks we're joined by fred wilson. he's been investing in start up companies since the 1980s. he's the manage director of union square ventures. he's here to talk to us about the new opportunities for technology in the classroom. let's talk first of all what's happening in the markets. a lot of concern about technology companies, a lot of
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concern about what's been happening with some of these massively funded private companies, and i just wonder where you think things stand at this point? there does seem to be a blurring of the lines preen private and push markets. what's happening? >> publicly trade tech stocks are valued more fairly than the private ones. in the private markets there are companies that raise capital at prices that they probably wouldn't be able to go public at for several years at a minimum. so i think that's where you'll see the pressure the late stage private market is the place that there's going be the most pain over the next six to 12 months is my guess. >> where are the signs that this is what's really happening? what concerns you the most? >> you can see companies having a hard time raising money. when they go public they are going at lower prices. there's plenty of signs out there that the late stage venture market got ahead of itself. >> have you had to mark or remark your portfolio that some
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of the public entities that have stakes in these things have started to -- >> great question. this has never impacted us before because we never actually had other people's marks to look at. and this time, this year when we revalue our portfolio at the end of the year we're taking that into account and mark things down for sure. >> the difference with the public markets as they've seen it, down 20% since the ipo for etsy. >> that's what people in the private markets think i don't want to go public because i don't want to have my stock marked down every single day. for you this is happening even when you raise money in a late stage private market so maybe that's a good thing. >> staying in the private market was supposed to be this great panacea. you could effectively in this new environment stay private for just about as long as you ever want. now that looks tube mistake?
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>> i think it's a mistake. better to get public. deal with the realities of what your company is worth. get liquidity for your employees and investors. get a liquid market so you can make acquisitions. it's fweesht public company. deal with it and grow up with it. >> you said some companies can't get valuations for years to come. what your talking about, two, three, four years? >> that's not what i was saying. you had a company raising money at a billion dollar valuation it may take a number of years to grow into that valuation and if they went back to raise more money they might not be able to get it. if they can raise enough money and stay away from the capital market for three or four years they might be fine. if they burn through that money too quickly they might have to come back. which may not be the end of the world. it's the same thing, just being, you know, revalued.
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>> what about these ratcheting mechanisms that have been installed inside these new valuations. people say we'll call ourselves a unicorn for hiring perspective, in terms of our competition, we need to be at billion dollars. only way to get to a billion dollars isn't straight on the valuation if we go public we'll owe you more shares if we can't get that valuation, are those valuations all false to begin with? >> if there's a ratchet yes it's false. you saw that in the square deal. where they ultimately, everybody who had bought in the last round got repriced when they went public. people who don't know about it are the one not on the in. it's worth 5 billion. not really. it's worth whatever the company will go public at in a year or two. >> when a founder comes to you and says we'll do a new round, we have a couple new investors
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who want to get in, do you say great guys that makes sense or do you say the plan was here. >> we have advised our portfolio companies not to do these at chet deals. ultimately the entrepreneurs make the call. it's their company. we're a minority shareholder in their company. sometimes they will choose to do it sometimes choose not to do it. >> you said you think companies are better off just going public and dealing with the markets as they are. >> right. >> have they missed their moment, markets have gotten a lot more shaky than they were just six months ago, 12 months ago and ipos have dried up as a result. >> that may be true. there's always a moment when public market investors are willing to buy new issues and so it may not be that way for a little bit but eventually it will be. good markets come and go but good companies can persevere so
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the important thing for a good company is to focus on their business and then when there's a time to go public take advantage it. >> you were an early investor to tumblr which then sold to yahoo!. would you bet on yahoo!? >> yahoo! is complicated because they have these holdings and the operating keen unclear what they will do in terms of these other holdings they have and there's tax issues. i have a hard time wrapping my head on what it's worth because you don't know how they are going to dispose of these assets. >> do you think underneath it all in the core yahoo! has value been created or has value been destroyed? that's the fundamental question. how much value is end left? >> well, i think of the core yahoo! assets as a legacy
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business. you know, aol did what i thought was clever. they took their legacy business and put it on, basically -- they just milked it for cash. still people pay-for-a ol di fo up. i think that's what probably what yahoo! needs to do. take the legacy business and treat it as a cash cow, take those profits and invest in something new. they invested in one thing, tumblr but didn't build a portfolio assets around tumblr that was aimed at that same youth market. they should have continued to invest in that strategy. that was a good strategy. >> there's still an opportunity to do that? >> hell yeah. absolutely. they got to do it. >> all right fred is our guest host for the hour. we'll have a lot more to talk with him. later we'll be joined by the
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welcome back to "squawk box". one of the season's hottest gifts running into trouble. amazon said to be pulling some hover boards from its stores or its store. the news coming from major hover board seller which says amazon sent out a notice to all hover board sellers asking for safety documentation. it said it meets all certification and happy that amazon theep weed out the low quality reports. there are ten reports of hover board fires and major airlines have issued bans on hover boards. this coming from lithium-ion batteries. the batteries are okay, samsung batteries but others that are fake samsung batteries and that's part of the problem. we'll watch the developments of hover boards. i want one.
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my wife really wants one. >> did you watch those people falling on their rear ends. i'm not sure i want one. >> that's why you wear a helmet. >> seems like you need some other padding. >> don't wear a helmet. you might be voted off the show. remember what happened in the tank? >> i do. >> what's worse or john kerry in the woody allen full-body -- do you remember that? >> i don't remember that. >> i'll show you a picture of that. >> when we come back markets in focus. first interest rate hike in nearly a decade. we have more on what to expect after last week's sell off. take a look at u.s. equity futures. we've come down from a gain of 160 points for the dow futures now the dew down 50 points. a lot is tied to what's happening with oil. nasdaq down by ten points. s&p down by 7.5. "squawk box" will be right back. developer!
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its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"! you're not gonna develop stuff anymore? no i am... do you know what ge is?
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welcome back to "squawk box" here on cnbc, first in business worldwide. among the stories that are front and center today, goldman sachs ceo is reportedly making tentative plans to resume his full work schedule in early 2016. he was diagnosed with a curable form of lymphoma in early fall and has been undergoing treatment. yahoo! is facing more pressure from investors. the hedge fund is push agnew plan to cut the company's workforce by 75%, replace the ceo and bring in a strategic partner to help with tax issues involving yahoo!'s asian assets. spring house erik jackson will join us with his pitch. go pro downgraded to underweight from equal weight at morgan stanley. the price target cut to $12 from $23.
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our guest host today is fred wilson from union square ventures. do you have any thoughts about gopro? >> i think it will be a competitive market. everyone has seen gopro and now all the consumer people will come in to that market. apple has continued to be innovative and come up with new features to be the premier product. it's up to them whether they can execute. >> no barrier. not like you have to buy above average of 777s. how easy is that to undercut. gopro stock has been crushed. >> that's certainly the case. >> how hard would it be to make a better mouse trap. >> if gopro can come up with a
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new trick. >> you don't think they would. >> i wouldn't bet against it. >> you wouldn't >> i wouldn't bet against it. >> that stock right now at $18.10. >> hitting hard and the fears going through the broader market. we've been trying find out what's been happening. here's what karl icahn told cnbc on friday. posting the steepest one day decline since 2001. >> high yield market is just like keg of dynamite that sooner or later will blow up. i said it to larry and i got respect from larry that blackrock is the etfs, blackrock and these other companies is a very dangerous because there's no liquidity behind these etfs. >> those two guys were arguing in delivering our alpha thing. it was uncomfortable, larry fink
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and still continuing. >> still battling. >> today the "wall street journal" reports third avenue manager ceo is out. follows the collapse of the company's junk bond. joining us now is bob doll. as you watched last week, bob, did you ever, your conviction in the long term bull case did it waiver at all watching all the different things sort of converge last week to make everything a little bit scary? >> we certainly have some issues, joe. some are fundamental, some are market structure. the fundamental ones are the decline in the price of oil and what it means for credit and high yield in particular and secondary concerns are china and the fed and antitrust. the list goes on. so this neutral broad base frustrating trading range is likely to continue. the market structure issues are the absence of the uptick rule,
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dodd-frank prohibiting banks from taking the other side of the trade, the nonfundamental investors if i can call it that, risk parity, etf and the like and all these things converge to give us this volatility that's uncomfortable for a lot of people and then on top of that, of course, the main driver is will earnings recover. if they do we'll break to the top side. if they don't, we'll be stuck, joe. >> the thing is, bob, you know you got these etfs. so hey i can sell them any time i want. they are liquid. suddenly, you realize they got underlying assets that can't be sold. so they may go for less than that asset value. all this stuff -- i don't want to say portfolio insurance, 1987, not going to bring that you want and the interplay -- remember the arbitrage of the futures. then subprime, 2%, 3% of the
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subprime. could a case be made there's a huge credit bubble orchestrated by this and this is just the beginning of the little thing that we're going to, think is totally contained but spread to something better? any possibility of that? >> sadly the answer to your question is yes there's a possibility because when you have interest rates, in my view, at a level below at outwhere they should be at this point in the cycle, people can do things that they shouldn't be able to do and this is one of them. i guess one of the things that make me feel better around energy is this has happened, this energy boom and now bust has happened largely outside of the banking sector, unlike earlier energy booms, unlike the mortgage crisis of the great recession, this is a bit outside the system. doesn't mean it doesn't affect the system but that makes me feel better about the banks.
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>> okay. so we end this year, i don't know, looking like flat, isn't it? equity. >> flattish for the year, which is, i guess after three double digit years in a row we should feel okay but doesn't feel great. >> earnings are the problem, you know, oil and the rise in the dollar and earnings have gone nowhere and that's different from what all of us thought at the first of the year. we need at that recovery in earnings which will require stability in the price of oil and the dollar creeping but not galloping higher. >> probably going to get stable at 28 or wherever. it's worth something isn't it. is that stable, is blars 34 oil if it gets stable here is that enough to move it higher next year in the equity markets? >> yeah. i think if you can tell me oil was going to be 34 all next year that would be okay for tent market. i would prefer 40 or something like that. but stability is the key because every time oil down ticks it
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brings up all the deflationary concerns that exist out there that have been with us since the break in '08, '09 and we got to get through that period. post-credit bubble bust take a long time and we're still in it. >> health care and tech, what are you for 2016? >> yeah. i think the unit growers. less about sectors and more about common factors. quality balance sheets. free cash flow comes out of that quality the kind of names you will. >> you don't think what we've seen with certain retailers and manufacturing and oil you don't think all these things are like strauss that one finally breaks the equity camel's back. you don't think there's anything -- or a recession coming in 2016, nothing like that is on the horizon? >> i don't think so. but all the issues you put on the table is legitimate
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negatives. on the other hand you got the consumer doing okay, jobs are improving, wage growth just beginning to uptick, we got the lower gasoline prices, low interest expense for a consumer. consumer 70% of our economy and i think they will keep from us a recession. >> do you ride around on a hover board? you've seen the problems. >> not me. >> all right. just want to warn you there are some issues with the lithium batteries they start a fire. if you do get one for christmas or something and wear a helmet. >> stay safe. >> thank you. coming up when we return one of the next frontiers of tech investing. education, fred wilson at union square venture will join us along with co-founders of two goes, general assembly and edge. take a look at u.s. equity futures. you're looking right there, red arrows and also take a look at
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the microsoft cloud allows us to immediately be able to access information, wherever we are. information for an athlete's medical care, or information to track their personal best. with microsoft cloud, we save millions of man hours, and that's time that we can invest in our athletes and changing the world. welcome back to "squawk box". globally we spend over $6
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trillion on education. the next big trend in technology is going back to school and fred wilson is here. joined by general assembly edge. let's talk about general assembly. >> general assembly is a global education company. we educate around 5,000 students each quarter on some of the most relevant skills of the 21st century. web development, marketing, and then help those students get jobs in sort of the most exciting parts of the new economy. >> are those students who already have been to college or is this kids out of high school. who is paying for all this? >> so, we really believe that education at our level which is
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after college before or instead of graduate school is sort of the spot that we operate in. so students are coming to us really investing their time, energy and their money with us in order to get a higher roi on themselves and their career. our courses range anywhere from $30 for a one night class up to $3,000 for an evening part time program up to $13,000 for a full time immersive program that lasts for three months and is pretty much 24/7. >> seems cheaper than a masters degree in something. >> that's right. that was the whole idea. by reducing the time and absolute cost of a program like this and increasing the relevance of the skills you learn you can massively increase the return on investment that somebody can get out of that program. i went to business school, i had a great experience there but it's two years, almost $200,000
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and the only way to make that make sense if you rationalize it over 20, 30 years. for this kind of program you can get a payback in under a year and more importantly you're getting a starting career trajectory into some of the most exciting industries that are out there right now. >> tell us about edge. >> certainly. so sej a school of education technology and we do four programs. one we have a three month intensive boot camp where education technology companies apply and live with us and have mentors like jake, rock stars in education technology work with them. we have a space in new york where tech companies live together. we have a conference which is called national education week which is going be this week where we celebrate education innovation both public and private-sector and then we do classes. >> dare i ask, is there -- we talked about a bubble in tech. is there a bubble in ed tech
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right now? there's been a number of relatively high-profile flame outs if you will. >> i don't think the bubble has emerged in the same way in edtech. i will say there's some difference between the east coast and west coast in terms of how companies are viewed and valued. but edtech tends to be more for impact investors people who believe in companies with double bottom line that have social missions as well as profit potentials and these tend to develop longer over time and have more real business models. >> when you invest in edtech how much do you think about this duel purpose bottom line? >> a lot. we have investors who expect us to make money, so the real bottom line is as important as anything else. the thing that's great about the double bottom line is that it brings a lot of people come to work for your because they believe in it. you get media coverage because it's a good thing.
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there's a lot of things that come from that second bottom line that are really quite helpful. >> we often talk about bending the cost curve on education broadly. that's what everybody here is trying to do. sort of look out five, ten years. what does the education system look like? we always say five, ten years what's it to look like? >> first when we say the education system, there. >> system of education. you mentioned that globally we spend $6 trillion from early childhood to all the way to corporate training. so there's a vast spectrum of what we call education. now that $6 trillion is slowly starting to convert into digital technologies, i would it's lagged other industries and i think that's is going to accelerate across spectrum. >> as much as it's about digital technology coming in to education i think there's another disruption happening which is people are starting to
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ask really hard questions about what is worth in education. where should that spend go. because $6 trillion is a lot of money, we should ask ourselves are we getting the return on that investment that we make? so i like to say it's not just about everything going digital there's lots much opportunities to innovate around who pays what, when, where and how. who is going to pay for the tuition. what are they expecting to get out of it. >> do you see a major shift taking place? >> absolutely. you've seen in the national dialogue, you know, much more questioning of who should get a college degree, who should go to graduate school, how long should a degree take. >> up still look at the employment rates in this country or unemployment rates and if you have a college degree, whether you have a massive students debt your chance to get a job so much higher. >> there are jobs like plumbing and, you know, certain technical jobs that you'll make more money not going college if you get a
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real skill. so in this country we've really bailed on the idea of vocational education. dean horrible job on that. if student loan market was focused on outcomes people could not get loans for certain kind of degrees that we know are crap and get full loans for things that are good. it has to become more of a market and less of a socialist system. >> but things like web design, data mining that's different than plumbing -- >> it's in a spectrum. these are about skills that are needed for our economy to function. and i think, you know, one of the things that's really, really happened over the last 100 years is basically when everybody came back from world war ii when the grn gi bill happened, the last massive rush to build colleges. to a certain point that was a great thing. the foundation of our educational system is the liberal arts and i'm a product of it, we're all a product of it. that's a good thing.
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at the same time it became a confusion of correlation and causation. one of the reasons the stats say people who have college degrees do better than people without it's a forced ranking system. if you want to be anything in the united states, it seems like you have to go to college and that's the -- a lot of employers have arbitrary rules you have to have this level of degree in order to qualify for a job fine has no correlation to kind of work you're doing. >> when i got in the venture capital business you have to have an mba. now they don't. >> you make a point about changing the student loan world. that might be one of the most disruptable industries. if you do rewrite the rules what would do you? >> fred mentioned it which is to discussion on outcomes as
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opposed to oppose ed to accreditation. >> if i went to business school and want to gate liberal arts major would my loan be different than if i wanted to become an engineer? >> if the loan was more like equity and long against the earning power of that person loans against people majoring in poetry would sell it like tiny value and people who are majoring in computer software engineering would trade very high value. >> you've seen companies get into the business of making, getting out these different splints and doing student loan refinancing on those that have great credit value. >> do you have to see how the government is doing it? >> get the government out of the student loan business. get the government out. they messed it up. >> i thought they got the
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private-sector out to get the government in. >> we handled it poorly. >> why the reason the government has such a role in student financing is because it allows for a certain type of model where somebody with a low credit score can still get a loan which accessibility is very important. the problem is what they ended up doing making concessions state of the union loans is one of the few loans you can't wipe out in bankruptcy. that increases credit worthiness of the loan for the lender but an albatross for the student. and so what we found there's a lot of really forward thinking progressive consumer focused lenders, things like earnest and there's lots of others who see the future of this as being about the credit worthiness of the person, using social network data and the credit worthiness of the program. >> he got to thank you for a great conversation.
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thank you. >> i was communication media. a comme. >> did you know it wasn't communism when you majored in it? >> i didn't know, right. >> fred wilson staying with us. we have more to talk with him. yahoo!'s ceo facing pressure from groups saying she's out of time. erik jackson sent yahoo!'s board a new plan to get yahoo! on track. he'll join us at 8:15 eastern.
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x1 from xfinity will change the way you experience tv. wilson. lot are watching and trying to make sense out of the drop. >> i tend to be long term focused and patient. whenever i think markets have gone down too much i like to buy. i think that my mentality as i said earlier good companies persevere. good markets come and go. focus on the good companies, companies you understand, companies with good cash flow and good balance sheets. if the markets get crazy see it as a buying opportunity. >> again fred wilson of union square ventures. coming up the fed set to raise interest rates for the first time in nearly a decade.
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oil prices sliding below $35 a barrel, junk bonds getting trashed and the fed ready to hike rates. what can you expect in the trading week ahead and how should you be positioning your portfolio for next year? "squawk box" market master peter fish certificate they're help guide to you profits. >> what will rising rates mean for the real estate market a special report. this year's hottest gifts being pulled from ama stone. we'll tell you what is it and why the company is making the move as the final hour of "squawk box" begins right now. >> announcer: live from the most powerful city in the world, new york. this is box. welcome back to "squawk box" here on cnbc first in business worldwide. i'm becky quick along with reed
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sorenson and joe kernen. we're less than 90 minutes away from the opening bell on wall street and the situation while it doesn't look terrible the situation has downgraded gradually throughout the course of the morning. we looked at dow futures up by as many as 160 points. now they are down by 30 points. s&p futures are down by four points and nasdaq off by four. this comes after a big week of declines last week. take a look what's been happening with the markets in europe. at this hour, at this point some of those gains have been given back. earlier today we were looking at gains across the board. in fact the cac was up and now down. we've been watching this as crude oil futures continue to fall. right now they are on their longest losing streak since mid-2014. wti down by 2.6% a decline of almost another dollar to $34.69.
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natural gas is also down sharply down by about 5.6%. a lot of over supply worries once again acbig catalybeing a for this drop. >> the nationwide average for a gallon of regular over the weekend $2.02. down 58 cents from this time last year according to trip all a, lowest average price in south carolina at 1.79. hawaii juans are shelling out $2.76. other stories investors are talking about. rubber maid buying consumer goods company jarden. shareholders getting $3.60 in stock. the company's top executives will join "squawk on the street". gopro daytona 500 graded from
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equal wait and cutting their price target from $23 to $12. the analyst point to persistent high inventory and other factors. 19.15. third avenue management ceo is out. it follows the collapse of the company's junk bond fund laflt month. credit fund hit by heavy losses, third avenue notified liquidate the fund. >> a big week for the fed and investors. early results from a vare are in. just how hawkish are dovish are members going into 2016? steve liesman joins us now with the findings. if you put in thursday and friday might be a little more dovish than before. >> that's fair enough. thierngs. we my going in with the shift in the board four guys come out four go out.
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it was going be a more hawkish fed. i was wondering how much more hawkish. what we did we went to our panel. 40 respondents. we asked them to put a number between zero and ten on how hawkish or dovish they were. we came up with essentially a cnbc dove-hawk index. take a look at the current board. leapt me show you,000 orient yourselves. five are right here. fischer and lockhart are dead center. evans is the most dovish of the current voting members and jeff lacker on his own. take a wide view. you can see how the board skews to being more dovish than it is hawkish. now take a look at the next board and you'll see the 2016 committee and what we have these new entrants.
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loretta midwester, george would be the most hawkish of the voting members and jim bullard. gone are lockhart and williams. evans goes away and rosengren comes in. now a slightly more hawkish committee. what we have, we have a committee if you look at the middle in 2015, it was a 4.3 on a zero to ten scale now it goes to 4.7. there are some things you see. evans at 4.3. governors 4.1. janet yell lenen 3.7. should we have overrated yellen? we didn't do that. the question you want to know what does this mean for fed rate hikes next year? we have the answer but you're
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going to have to wait until tomorrow when we give the full results of the fed survey. how is that for a tease? >> i guess i have to wait. >> you have to wait approximatewait. >> high yield market getting hit hard. u.s. junk bonds posting the highest decline. carl icahn says this is just the beginning. high yield is a keg of incidedy. peter fisher is a senior fellow at dartmouth school of business. peter, we know that the lion's share of credit is not high yield, it's not junk. so, we think that it most likely will be contained. we also have the excuse that a lot it is not specific necessarily to the economy but more to the large preponderance
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of oil related junk going down. my question is are we missing -- is it possible we're missing a much bigger contagion something like a subprime where we write it off as not a big deal and this could be the canary in the coal mine? >> i don't think. we don't know. normally when you see this sort of acceleration in implied default rates coming out of high yield that's momentum and uptick telling you a recession is around the concern. we should be aware. unless it's telling us something we know, we have a recession in the oil patch. it may be telling us what we already know or telling us there's a broader -- >> how do we know? what's the next signal or sign to indicate which one is this? >> well, i think -- take a step back. think of the recession of 2001. the household sector did pretty well. we didn't even have a negative quarter of consumption.
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but we had a corporate recession. then credit crunch in 2002 from the fallen angels. i think we could see the u.s. economy as a whole do okay, but we could see the corporate sector not do so great because the cycles are out of sync. >> that's bad news for the stock market? >> margins already had their run. that's one of the problems of the fed extended what they've done so long. normally when the fed gets ready to tighten because the economy sicking up speed and accelerating. this time we're two or three years past that moment in recovery. so we're not going to see that expansion of corporate revenues here that would help buoy asset prices. >> you think this time will be different if the fed goes ahead and raise rates. >> i think the fed will raise rates. we'll be seeing these events in the high yield market in december even if we were sitting around debating whether the fed would go in march or not. right? look at the stresses coming through the energy patch and a
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lot of the old industrial companies. >> it's not etfs as much as energy but etfs -- we always screw things up by the way we trade this stuff. >> etfs are helping. >> do you? >> we have 4.5 billion in volume just in blackrock's high yield and volume on friday. a normal volume day is -- >> i didn't want to get into a political argument. >> no, no. >> people sell the etfs and expect they are liquid when the underlying assets aren't. >> it was more liquid on friday. look at the facts. we did half -- the cash market on a normal day 6 to 9 billion. we did that in one etf. we only have 560 million in redemptions. it's another place. it doesn't solve the liquidity equation. we can't take our money out of the bank on the same day or sell our stocks and bonds on the same day and not expect prices to change. of course they will change.
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but it's another place to go for investors to express their sentiment. it's not a magic bullet but it helps. >> the bubble we're missing from this for eight years if it's credit, let's say globally, sovereign, everything, could this be the, once again canary in the coal mine telling us there's an unraveling and fed will have a hard time unraveling. are we on a precipice of something like '07 or '08. >> we're seeing it. it's different. the hawk-dove thing that steve is talking about is a little bit different. over indebtedness caused inflation. it's the deflationary consequence. >> either one -- >> we're seeing it play out in the entire commodity complex. >> start feeding on i want self and get worse and turning into
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some type -- everybody will have horrific negative interest rates. >> we could if we thought there isn't enough money lying around. so the race for the excess now just isn't going to be the same as it was in 2007 and 2008. trillions of dollars of excess reserves sloshing around the banging system looking for something to do. it's been causing the overindebtedness. >> at this point do you think we're close in junk? do you think that the spread are close to as bad as it's going get versus investment grade at this point? >> too soon to tell. this is the reason the fed shouldn't have waited until now because stuff happens. >> is there any analogy at all to, we thought subprime was such a small part of the overall market. is there any analogy of that and what we think of high yield right now? >> as i said it's in the corporate sector. i don't -- it's a tax cut for the household sector so
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two-thirds of our economy is consumption. >> it's really not systemic like housing was back seventh >> it may feel like it for some corporate ceos but i don't think it's systemic for gdp in the same way. may not feel good. it won't feel like a roaring economy even if house to hold sector does okay next year but yeah we'll notice it. we sure noticed 2002 and 2003 with the falling angels. the economy underneath kept chugging on through. >> oil at this point seems to be the problem with a lot of what's happening. is that really just a supply issue because if it's a demand issue everybody is missing some type of slow. citi group talked about next year being a higher probability of recession than a lot of other wall street firms. and the atlanta fed cutting gdp estimates for next year. is oil, are we just writing that off to fracking and the supply here and missing somehow that
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china really is worse than people thought and developed economies worse, europe is worse, are we missing that? >> i think we see the global slow down taking place. we hope to u.s. economy muddles through which it can do. the employment -- the fed has waited for employment to heal and for wages to start coming through, they will start coming through now. the energy, the oil cut is going to be good for house to hold. i think -- >> something wicked is not this way coming any time soon. >> no it's right in front of our nose. >> not as bad as it's going to get? >> it could get worse but markets will trade for us. i want to come back to the problem the fed faces. i think that yellen introduced in her speeches a couple of weeks ago the novel thing we have to focus on this week. which is she said, you know, we really ought to go now because if we wait any longer we may have to raise more and faster. there she's introducing the risk that the fed right have to move faster than people expect if the
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data moves. the big thing we need look for in their statement this week is are they still going to be calendar dependent, every other meeting, or are they going to lean intook data dependent? data dependent leaves room for them to surprise us, surprise us they tighten more -- >> i thought we were data dependent. >> there's a debate going on about how much uncertainty to give us all. so are they going to tell us it's a simple smooth path not to worry or data dependent? it's a little of both but leaning into data dependency which is what she did in her speeches. >> front page of the "wall street journal" today suggests the fed is worried about the idea that inflation is nowhere near what they anticipated. they think it will rise next year. they have wrong for the last four years. >> the missing inflation data is because they don't get it, overindebtedness causes deflation. that's the problem. look at the energy patch. we got credit flowing into there not just here and fracking, by
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vince around the world. putting in to output and energy across the planet and now look at the consequences. it's dragging inflation down. both governor carney and bank of england and janet yellen cited famous debt deflation essay from 1923 where you talk about the problem and make sure you have enough money around and just that as a justification for qe. read the essay. in it he says easy money is the cause of over indebtedness and overindebtedness is the cause of deflation. we stretched out the cycles. the cycles are out of sync and now the credit and corporate cycle is so much further along. >> do they fix that? do they correct that by raising rates and how much do they have to raise rates to do that? >> that's a mystery. if they are going shift and stop focusing on the labor market which they think has healed and
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stabilize asset prices, they will be raising rates a lot. i don't think they will do that. they will try to split the difference. >> think things are better now than a year ago? do you think the fed has -- this is a better time to begin the first rate increase or were we in better shape a year ago? >> i think we were in better shape a year ago. they wanted to wait to see the labor market turn a concern. >> so as people try to cover their losses in junk, they aren't going to selling more quality issues to make it took like there's a bigger problem. that would get people thinking there's a bigger problem. plus we got, you know, this new terror perspective that's right around the corner, you know, around the world. all those things make it seem like 18 times earnings is not
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the right number for the stock market. no? >> that's problem with waiting to tighten until december when markets are always churning like this. everyone is trying to capture their p and l. as i said margins get squeezed next year. it will be a challenge to keep these pe ratios where they are. >> financial crisis 2.0 is not likely happening right now. >> not with the global economy and the ecb and bank of japan. >> i'm not going bother it. somebody asks me i'll say no peter fisher told me not to bother it. you okay with that? >> you do whatever you want. >> when we come back, can yahoo! be saved? details of its plan to turn around the struggling internet company. the fund's manage director will join us next which includes throwing out marissa mayer. "squawk box" returns in just a moment.
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what? wow... yeah! okay... guys, i'll be writing a new language for machines so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"! you're not gonna develop stuff anymore? no i am... do you know what ge is? ashley bryant, you are a teacher of small children. that's right. i have read it is the hardest job in the world. that's why i'm here. can you... i can offer advice from the accumulated knowledge of other educators... that's wonderful but... i can tailor a curriculum for each student by cross-referencing aptitude, development, geography... sorry to interrupt. but i just have one question: how do i keep them quiet? (pause) watson? there is no known solution.
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and replacing ceo marissa mayer. joining me now is eric jackson to discuss this. thank you for joining us. let's talk about it. you do not mince words in this 99 page deck you sent to yahoo!. you said marissa mayer misa located $10 billion in capital. you talk about her compensation package. you talk about $26 million in stock options. you talk about her spending $108 million on free food and a great gatsby holiday party. all these things to some degree or another are unique and interesting but to the larger question of how do you fix yahoo! beyond the parties, beyond the comp, what do you need to do? >> i think you need to do three things, basically. the business still makes a majority of its money from desk top pc and can probably continue
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to milk a lot of cash from the home page and from mail for many more years than people think just the way aol has done with dial up. you have to double down on the properties that are working at yahoo! some of the biggest ones still working are finance and sports. they've gotten short shrift over the last few years where yahoo! is unfocused and doing thousands of little apps and websites that none of us even know. so, there's got be a lot more focus, has to be fewer people. just turning around the core is probably the single big squeft thing within the company's control that it can do for its shareholders. finally, obviously, you got the two stakes in alibaba, and wj. >> you talk about the company ousting here partnering with a company called liberty which
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obviously a tax expert to some degree. >> i think it makes enormous sense. i think the yahoo! shareholders would be compensated highly for bringing in a latter near like liberty. liberty oversees internet assets that garner a 14 x multiple. if you believe starboard at present yahoo!'s core is get valued by the market at a 2 x multiple. obviously an increase in the multiple due to competent management would help shareholders enormously. in term of the whole tax issue i mentioned earlier i can't think of anyone better than someone like liberty to help on those issues. >> fred wilson was on in the last hour. he told tumblr. sold to it yahoo!. we asked him what to do. one of the things he said he thought there was a mismatch they had actually -- they should have taken tumblr and tried to build more products around it
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for millennials. not focused as much as you are on the sports offering. >> obviously that was the biggest buy, about $3 billion which mayer has spent. tumblr cost $1.1. they've done nothing with it. so the traffic they thought they were getting from tumblr didn't materialize. it's an open question what they should do. it's being valued at nothing. so i don't think it will generate much more value just to get rid of it or to spin it off. you know, i think there's something there to do with it for sure. it's worth looking into the ideas. >> is there an acquisition opportunity? is there something they should of bought and didn't? >> hail mary acquisition is the worst thing yahoo! can do. they need focus. they need new management. they need to build this business back day-by-day organically not
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deteriorate way the world does mobile search or doing another crazy multibillion dollar acquisition. >> erik jackson, thank you for coming in this morning. fascinating story. coming up when we return we'll check on the broader markets. also more on the situation in junk bonds, oil slides and much more when "squawk" returns. or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the 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, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.
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welcome back to "squawk box". here what's in our headlines. the annual changes to the nasdaq 100 have been announced. among the new entries we have xpedia, norwegian cruise line, t-mobile us and ulta salon cosmetics. dow chemical's board of directors issue ad statement for prosd merger with dupont. it emphasized the two directors designated by thej fund were among those backing the deal. this follows a letter by stan loeb questioning the timing of
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the deal and calling for the removal of ceo andrew liveris. loeb is in favor of the deal. a volatile morning narngts. the principal at dough blas sea lean which manages $4.5 billion. lot of investors are worried. are you? >> i'm nervous in the short term. unintended consequences of what we're seeing in the credit markets kind of like what we saw in august where spread widen, investors get nervous. what happens is because they get nervous, in one market equity markets get hit because so many people are leveraged on the equity side or trying to get more liquidity which means you sell your winners and that goes right across the board. that for the short term and head wind of what will the fed do. on wednesday all this adds to a big combustion. >> let's talk about what's happening in the credit market. where you see one cockroach in
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an area there's plenty of others hiding. are there more issues? >> especially if you look at energy commodities, issues there. price have come down. coverage is not there any more. i do think that will spread to a couple of other sectors he as you see highly indebted company that can't go the markets and if that is, then you get this issue we can't issue debt we have to issue equity. >> one of the first people we've spoken with today that thinks it will spread beyond the oil patch. >> so look specifically industry by industry. technology is flush with cash. you might see it in the retail sector especially companies that are looking for working capital can't get it. have to be careful with the balance sheet. industrials. some over levered industrials that have been selling only to the oil patch or commodity patch. look at the companies you own. this is where this could spread and in the short term you could get the shorts after them, you
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could get companies with liquidity. i'm not saying longer term, shorter term you have to be careful. this is where the opportunity is too because as we know when things sell off you can buy some really high quality companies. i think, you know, in the retail patch you can find companies like the macy's of the world you can buy at lower prices because everybody else is looking to see where the other cockroaches are. >> you say you're nervous short term. longer term you're not >> i'm not. positively what we're seeing so far, if energy prices are coming down, still a lot of cash in the storm. rates are still low historically. consumer strong. wage inflation -- wages are coming back. house cigarette still strong. there's still money in the system. this is not an oh, god, too much liquidity in the system. longer term we're still positive but you have to pick your spots. today like you saw in august we haven't had that pull back. this could turn into something more of a sell off rather than a couple of percent. >> we spoke with peter fisher from blackrock and he poin out
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if the fed goes ahead and raises rates traditionally that's not a big deal. but this time is different because we've gotten ahead of ourselves. the corporate issuance is far ahead of where we would be. >> right. but the offset of that is the corporate issuance was to buy back a lot of debt. i'm not that concerned about that. i do think that the message from the fed will sob for by going forward because this is a one and done and let's see what happens because they are so concerned about overseas and having the disparity between our currency. the currency is one of these things that can cause a huge slow down in our economy because if we go and become really strong currency again that will be a major issue. >> so if the fed comes out, raises rates, let's say by a quarter point on wednesday but says along with that, that we're going to move very slowly, we'll be watching what's happening to markets that to sue a signal that the markets would maybe take a little calm out of that? >> you'll see the dollar would sell off on something like that.
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if the fed says look things are good, we'll keep on moving forward and look like to raise rates which i doubt they will to. that's not a scenario. if you remember for the last few times every time the fed has signaled they will raise rates the market has been in trouble. >> 100% for wednesday? >> i'm close. yes. >> what if the etfs and the junk markets absolutely plunge today and tomorrow and that drags down the stock market and that also gets oil down 32 or 33. >> the worry i have is that the fed doesn't do it then the markets will -- >> something amiss. low on j and k. >> right. >> women running into short term stuff. >> i think you -- the market will get punished. >> you don't think if it started off it would be 50-50 they would raise.
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that would scare people. >> yes. if they didn't do it then, basically the market will do this every single time. they will have to do something where they raise rates and not tell anybody or signal it. but i do think the next two days will be important to watch. that issue of if the fed and the game of chicken happens again it's a lot worse. >> down 3.2% on the dow last week. you're up 160 today. now we're down -- >> marginally. >> from past friday we were up 250 points. >> 3.2% last week and if it was -- we went down 3%, 4 home runs tod-- 4% today and tomorro. >> if there were some nonfundamental issue then i think you got to watch the fed. but the statement will be important. >> people that want forever zero they could play around with the oil market. get oil down 31, 32 and stock
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market will sell off and high yield will sell off and wouldn't take much to get these people to chicken out. >> i still think fed will go. we'll see. >> you were at 100. i talked 75. >> i still think the fed needs to do this. it's a signal. >> thanks so much for coming in. first hike in interest rates won't be much, but if it happens i want will send a ripple through both residential and commercial real estate. i added if it happens, diana, because we're writing things like it's done. we're watching everything that's happening in real-time and i guess it pretty much is a sure thing but you never know. >> reporter: you never know. we'll put an if in front of it. a quarter point hike in the fed fund rate if it happens doesn't suddenly and inaverage rate on a 30 year fixed mortgage goes from 4% to 4.25% on wednesday. that's not how it works. that said mortgage rates do
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loosely follow yields on the longer term ten year treacherousy and that yield will react to whatever the fed does. take a look where we've been since 2013 when mortgage rates were ream super low and that spring the fed just said it was going to start pulling it back on its mortgage bail out stop buying mortgage backed bonds and just on that news mortgage rates jumped dramatically and sheems suffered. why? let's do some quick math. if rates were to move higher by a quarter point, 4 to 4.25 the monthly payment on a $250,000 mortgage would go up by about $36. now rates move more than that in 2013 but it still is not a ton on a monthly payment. the bigger issue is qualifying for a loan at a higher rate because banks are very sticky these days on the amount of debt you can carry versus income. so bottom line, i'm going to say we're pretty sure the fed will raise rates on wednesday but we don't know exactly how investors
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will react and that will increase mortgage rate volatility and in any case will likely push them higher. >> thank you very much. when we come back this morning how exposed are you to the turmoil that's taking place in the high yield credit market. we have mike santoli that a meltdown could have. >> take a look at the etf tracking junk bonds hitting its lowest level since 2009. "squawk box" will be right back. approach remains. t we ask questions here. look for risks there. and search for opportunity everywhere. global markets may be uncertain. but you can feel confident in our investment experience... ... around the world. call a t. rowe price investment specialist, or your advisor... ...and see how we can help you find global opportunity. t. rowe price. invest with confidence.
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. like most people you go hey high yield i don't have any of sthauft. how exposed are you, those to contagion, to the turmoil in the high yield credit markets. mike santoli joins us now with more. i think like the canary might be kind of, you know, not singing as loudly as he was. i still think he's with us. >> he's with us. i'll say if last week's fund headline fund, that was a very weak disabled canary in the first place. doesn't tell you much about the overall -- >> that might have been a runt. >> let me tell you from the top down, high yield debt fund investors are asking what it means for the sector and for
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those popular high yield etfs. third avenue focus credit was far from the mainstream fund. taken outsized bets which could not be sold readily to return cash to investors who are leaving the fund. this doesn't mean it was purely a one off accident. we had a couple more announcements. consider the half of third of a enough's ratings were rated ccc or lower. blackrock's etf has less than 10% of assets in low grade paper despite higher etf jnk as the ticker has 14%. high yield market is far from healthy. high yield bonds offer higher yields because they are riskier. the sector has been weakening. high yield bonds have lost 6% this year dragged down largely by energy companies which represent close to 15 puerto rico of the entire junk universe. you should check your bond mutual funds to make sure they
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don't have big concentrated funds in paper. it's probably a sign of some pretty toxic paper. plenty of bond market veterans say the shakeout is making the sector look attractive with yields compensating investors for the risk we're seeing. >> that's part of the question, right? were the yields too low for the riskiness and now they look about right? >> got too tight especially a year and a half ago. people were saying the default rates are low going to be a long cycle. >> once again because of the reserve stretching for reserves buying these things which is supply and demand. >> as a matter of fact, it's also -- that was exacerbated -- a lot of new money in high yield. >> so can you weigh in, we were talking with peter fisher from blackrock about the etf
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situation. >> structurally i don't think that they are the problem. they are kind of potentially, help in overshoot in the market. huge volume in those etfs on friday. people shorting them. people buying puts own them because they are convenient. easy thing to sell. they also traded down to about a 1% discount the value of the bonds they hold. they can stray from the value of the indexes that they track. that's something investors should keep in mind. he did mention $4 billion worth of those etfs changed hands. that does not necessitate selling or buying in the underlying bonds because people are meeting in the etf. i'm buying the etf from you. i'm not selling the etf and therefore they've liquidate those bonds. >> we learned the last time around that it's not solvency that gets you in trouble it's liquidity. can this get out of hand and goes down the risk current? >> it starts with the erosion of the credit caught. remember we talked about '08 about the levered etf. that wasn't the problem for most
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of it. so i don't necessarily think you can. here's one good thing is that it's hard for it to go systemic because the banks are safer. one reason they don't have to trade this stuff as much any more. that's why you have leslie quid markets. >> stay where your. we'll bring in another voice, michael antonelli. he joins us now. where do you weigh in on this conversation, michael? >> you know i agree with mike. i don't think the systemic issue exists because he's right the banks don't have to hold this stuff any more, they don't have these giant positions in these high yield debt instruments. they are not the ones at risk. the ones are at risk are people that just tone assets at the wrong price, and the markets doing that right now. it's hunting down the paying trades. who owns these bonds and i'll punish them. >> the question is, are this people out there through etfs that own this stuff that don't
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appreciate it? >> well, you know, there's a lot of people that have reached for stuff that they don't understand and when you see these messy on lines people are realizing they own the wrong thing and maybe they are in something they shouldn't in and then they run for the hills. you can see that happen all the time in equity markets and debt markets opinion so these people and etfs, they are going to be fine if they hang out but there are people that just won't able to hang on for that hong. my kale, what do you have to hear from janet yellen on wednesday and anything she can say to calm the situation down >> i'm not sure the fed would be focused on this specific high yield kind of trend. to them i think they are looking at the big broader macro picture of employment and how the economy is doing. i think they will mention credit stress. >> up don't think this as connected as anything? we've had some guests on who are suggesting we'll have a tough time come in 2016 in large part
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because of this. >> i think what people have misunderstood with the fed is the bar for the first hike is lower than i think it is but the bar for the second hike is much higher than we think it is. they will mention credit market stresses and global stress. for mare mandate and where they see the economic data they will continue with their course and hike and then mention, look, we're also concerned about the credit stress, and for the next hike we'll be monitoring that situation. >> every time oil goes down another dollar it feeds into everything. it feeds into the crappie junk in that area. then the yuan. there's a lot of things that seem like they are trying to tell us something that we keep making excuses for that it doesn't go any further than the isolated cases. >> yeah. one of your previous guests said it right. whit comes to the fed, you know, they have to keep their credibility high. every time the market quakes or
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shakes a little bit they can change course or else their credibility gets shot. >> oil rallied to above 35 and futures are now up in positive territory. they are almost point for point. >> that's what matters for now. it it will break at some point, but not at these levels. i think it is easy for the fed to look at that dynamic and say that credit is not telling us anything scary about the economy, it is all oil. even if it is -- >> and oil is not telling us anything bad about the economy either. >> you just never know. >> when the world almost ends you're ready for the next time it is going to end. when we return, amazon yanking some hover boards off of their site. and then jim cramer. here are the futures right now, we'll be right back. the possibin quickly
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[martha and mildred are good to. go. here's your invoice, ladies. a few stops later, and it looks like big ollie is on the mend. it might not seem that glamorous having an old pickup truck for an office... or filling your days looking down the south end of a heifer, but...i wouldn't have it any other way. look at that, i had my best month ever. and earned a shiny new office upgrade. i run on quickbooks. that's how i own it.
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some hover boards. overstock.com also stopped selling them among safety concerns. in recent weeks, there have been ten reports of hover board fires. they site worries about the batteries and possible fire risks. it will help the junk market stabilize a little bit. and then we will live happily ever half, is that possible? >> yeah, the window of opportunity between the fed, and the sunday night football, the cardinals need the bye, but we can have a relief rally, but i just listen to your guests and i
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feel like i just want to slit my wrists. >> oil is worth something. it has to bottom sometimes, does it not? when it bottoms. will not worry as much. >> i am convinced. i want to know if anyone that comes on the show drives. we drove down to the eagles game. it is cheaper now to drive. maybe they don't get that. there is 317 million people that don't drive. this is more money. >> yeah, you know, the super duty. because honestly, i know there is $200 billion in debt that could be affected but there is
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317 million people that could be doing belter and they would be shopping if it wasn't 65 degrees. it is hard to fathom that there is a holiday coming up. >> which i'm also not ready to just say i don't like. after this weekend, sitting outside in my backyard, the kids on the swings, south carolina weather is pretty nice. >> i hope that karen -- i, you know what? i'm ready to give him a try. >> ye, maybe he will be better than we think. >> jim, thank you. and maybe it is happening. maybe, you know, it is bottom, see you. when we come back this morning, it has been a volatile day for the markets. we'll look at some of the movers after the break. and 2% back at the grocery store,
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crude oil. this is what has been driving k equities all morning long. continue to watch that board closely, natural gas still down by 5%. the yield on the ten year treasury hanging in there. we're watching all of this "squawk on the street" will take you through the rest of it. join us tomorrow, now it is time for "squawk on the street." good monday morning. welcome to a big week. a two-day fed meeting where wee could see the first hike in nine years. high yield, crude oil, nat gas in china. oil back here broke below 35, it has rebounded somewhat after the worst weekly loss i
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