squawk box, you need to watch, tomorrow on cbsp in. it's 8:00 a.m. out west, 11:00 a.m. on wall street and "squawk alley" is live. welcome to "squawk alley." kayla is back after a long absence. john steinberg is here as well. watching a lot. the markets of course, fed week, and apple down nearly 2%. morgan stanley lowering their outlook for iphones. calling for the first ever decline in iphone sales.

lowering their forecast for fiscal '16, citing what it calls weak supply chain data points. everyone's trying to game out not just the december quarter but the next year. does this call make sense? >> it does. i think the holiday is going to be strong. tim cook has already said expect the holiday season to be up unitswise and revenuewise ver versus a year ago but after that it's questionable. the apple watch needs an overhaul to be a mass market success i think. beats, i didn't like that to begin with for $3 billion. i think it's still bad. the main defense for it is how do you tell tim cook how to spend $3 billion? but they have not overhauled the headphones, the key product there, in more than a year. that's embarrassing given the demand for that kind of product so there you have it. >> big product changes are what drives it. the consumer still has money for

technology that they want. thank god that they did the large form factor phone. over the past three quarters, the large phone has gone from 26% to 40% market share. 3-d touch on the "s," it just wasn't enough. most people say it doesn't make enough difference. they need new product, new innovation. >> this note says maybe apple needs to go smaller, maybe go to 4 inches to sell in emerging markets like india. >> and all the notes we've read is there's very limited market for a smaller phone. there's little evidence the smaller phone factor is actually going to do anything. >> they say price conscious buyers in india. >> i think no matter how large of a form factor you use, after a short period time, it doesn't seem that large anymore. you realize how small the original two generations ago iphone is when you use it compared to a current 5 or 6. >> the problem is, they're still selling the 4-s and the 5, right, and they need that in the emerging markets. they've been using it to gain

share. once those products get so old that the chip sets are not relevant anymore, they kind of have to come out with something to serve that market that's cheaper with a smaller screen. >> even the 5s are so cheap. i went to sell a used iphone 5 on my mother-in-law's and i just got offered 20 bucks for it so i just gave it to my kids. these things go down so fast. >> the resale value doesn't cut. >> ipad touch is 200 bucks. a 5 used, just turn off the cellular service, is 20 bucks. >> taylor swift also striking a deal, apple music, to show her tour exclusively. she addressed her relationship with the company after speaking out about screaming. quote, i was struck with this overwhelming sense of fear. like, are they going to turn my phone off? am i going to wake up tomorrow and all of my music will be off itunes. like absolute terror hit. swift saying apple showing such

humility in what they did. so that's how we get to hear. sort of a far cry from that initial letter to cook. >> maybe taylor thought steve jobs was still running the company. i thought yeah, that would have been what she should have been afraid of maybe ten years ago. steve was known to play hard ball at times. in one week, it will be exactly six months since she sent out that to apple love taylor letter. quite a bit has changed. couldn't come at a better time, this deal for apple, just timingwise. third most popular online shopping day. if you are a taylor swift fan, even if you own all the albums, and you try to decide what platform technology wise to invest in, this could take you over the edge. >> apple gets the exclusive because it paid taylor swift. >> exactly. she was nervous like a deal killer. at some point, when she had this tussle with they, she was like, i'm going to come out more than neutral on this thing. i got them in a corner. they want my music. now i'm going to go get a mega deal following on this reconciliation. and she did it.

she's the next steve jobs in terms of deal doing. they should be afraid of her. >> how much do you think they had to pay though? do we have any estimate? because the tour grossed more than $200 million. >> my guess would be tens of millions of dollars, that would be my guess. bigger than an nfl game. there's nfl games and taylor swift, right. >> you got to pay her tens of million also of dollars to show up at the company party, they probably paid her more than that. >> yeah, yeah. >> bunch of calls on tech. go pro downgraded, morgan stanley. take their price target to 12. that stock's down 15%. square initiations getting out today. square getting a buy or overweight from goldman. and then teslaish ish initiate. offset by an intensifying competitive landscape and high cost structure. go pro has gotten a few of these piper and city over the past few days. this is the time of year where they were supposed to shine. >> they're in a mind. software saves go pro if

anything does. they've got cheap chinese competitors at the low end attacking them that have products that are pretty much good enough. you've got smart phones at the high end that are not as versatile. how many people are out there sky diving every day anyway? not many. they've got to have software that makes their product easier to use, higher value, follow the apple model in that sense. >> the last time we heard from nick on cnbc, he talked about the problem being an awareness problem. they stopped spending on advertising after the ipo. they thought that everybody knew the brand. but i don't see that there's that much more awareness from a marketing perspective since he made those comments. >> so disappointing that they're coming out. morgan stanley note has that quote from management that it's awareness. clearly it's not awareness. this company has more advertising in every possible place you could look at it. the issue is they're getting attacked from below. i was on wish.com last night. $40, $38, $35 for go pro. also in the note, the software is not good.

getting your content off this stuff. even if you make a media company, you know, cutie pie's only making $12 million a year. >> on squawk this morning, they asked him, he said, i wouldn't bet against these guys. even at these levels. >> i thought he was honest in his appraisaappraisal. i think he doesn't know go pro very well. i think people tend to be reticent about being negative about companies they don't know well. >> the market's pressure is going to be -- come out with another hit hardware product that's high margin. strategically, what they really need to do is probably pare back, don't focus on the drone and the vr rig, but actually focus on getting that software app that nick told me more than a year ago was coming. where is it? that's what they need. do they have the courage to pare back on what's going to make them money? >> that's a good point. >> also, management doesn't say what's obviously the truth. it concerns me, john. saying it's an awareness problem, that just disheartens

me even more. >> finally, some increased pressure on yahoo! today. canyon capital, one of yahoo!'s 15 largest shareholders, sending a letter to the board, urging it to find a buyer for the internet business or the entire company. eric jackson also out with a 99-page presentation on why meyer should be fired. fred wilson was asked about yahoo! on squawk box earlier this morning as well. take a listen. >> it is complicated. it's unclear what they're going to do in terms of these other holdings they have. and there's tax issues. i have a hard time wrapping my head around what it's actually worth because you don't really know how they're going to dispose of these assets. >> he calls it complicated. that's the same word meyer herself used. >> absolutely. i had defended her a month or two ago and said it's unfixable and eric calls me out in her report saying it's fixable.

i agree with a lot of what he's calling for. i actually said get jon malone involved. he seems to figure out this thing. >> he suggested that. >> so i think eric is very sailing. the issue is they're moving the goal post on marissa mayer now. it was to make this a hot internet company again, show growth. now jackson is basically saying, well, just aol it, kind of have a cash flow die with dignity thing. but marissa is not the person to do that and she wasn't asked to do that initially. >> i think bottom line, this is good for marissa because if you had everybody arguing for one single thing, that would be an enormous amount of pressure on her. if you have one side saying, hey, do the reverse spin, the other side saying, absolutely, don't do the reverse spin. well, they can say, well we're going to sit back and analyze which thing we're going to do. meanwhile, she has time to try to deliver on this turnaround. >> also, eric jackson says it's worth $24 billion.

the core is not worth $24 billion, right? eric thinks it's a transfer of value if it gets sold now. i don't believe it will be sold cheap. as said before, i think it's going to be sold for well north of $10 billion. given all the bidding that goes on. >> we should point out, jackson's recommendationings are not just layoffs, but to lay off almost everybody. you're keeping a minority of the existing employee base. >> that's typically it seems what happens in these kinds of situations. the people who want to liquidate it, it's like sell everything off, you know. you have people saying the same things of course about apple. michael dell's quote that he hates hearing -- just sell it all and give the money back to the shareholders. i think bottom line is you can always turn these things around until the buzzer sounds. it's just a question of does the leader get the right running room, does luck fall into place, can he come up -- >> i don't think you can turn

around an internet business. my professor used to say at a certain point you need to die with dignity. which is very different than a turnaround. they should get a different ceo in. either sell it off or die with dignity. >> john steinberg, daily mail, north america. >> we're keeping an eye on the markets today, largely driven by the move we've seen yet again in the energy complex, supply concerns over iran are exacerbating the price again today. you can see how the dow, s&p and nasdaq are faring, all down by about .5% today. that's despite more activity in a record year for m & a. a lot of action this morning. newell rubbermaid acquiring jarden. some interesting moves in both of those companies. stocks newell down. jarden is up by about 2%. we did speak to both ceos on

cnbc but some hedge funds are trying to make sense of the spread between those deal prices. after dow and dupont announced their historic merger on friday, an activist calling yet again for dow ceo to step down. he would be remaining with the combined company. but those stocks down about 4.5%. john. >> coming up on squawk alley, more on the moves this morning in commodities and higher dead and what it means for the market. plus, organized labor for uber. why uber and lift drivers may unionize in one city soon. and a miserable year, at least not so good for tech ipos. will 2016 be any better? when squawk alley comes back. 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

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major ripple effects in the market. joining uscashin. all of this stems from the closing of that big third avenue fund. but really we're trying to parse what this means for main street. potentially it's not limited to this company. what should we think about? >> absolutely. the pain is not limited to this company. the market has been there for the better part of 18 months. so you have your returns from high yield in general suffering for a while now. in terms of this closer, this

type, when they're liquidating the assets and they can't get good prices for them, that's probably at the fringe. that's kind of a subset of mutual funds that were really operating in much lower quality ill-liquid stuff. >> is this about the deterioration in energy? or is this about something else in a broader contagion? >> it's bled from high energy to the rest of high yield. you had stuff that was really not priced correctly for the risk. now, in terms of whether it spreads more broadly or it's saying something bigger about the economy, it's not entirely clear. it's saying something about corporate profits which peaked around that same time. >> we've long been looking at high yield and small caps as leading indicators for equities overall. have we been missing something? have we been missing signs from high yield for a while now. >> people sour on it generally

and there's a rush of redemptions. not only do you have things that are mispriced, but if everybody trying to get through that same door, then you're trying to have other people put up the gate and say you can't have your money back yet. that can help start a panic that will be contagious. >> at the same time as we're having price discovery in the yield market, a fed is staring down a potential rate hike this week. there seems to be a certain safety in treasuries. what's the fallout there? >> well, the situation is you've got things going on in europe, too. there's a debate whether the ecb is unified, can they move things around. so there's a general concern. i have said all year that i didn't think the fed would lift off. i suspect they're now in a possession where they have to and i think it's the wrong idea. >> you asked where is third avenue in the school of london whales and mf globals.

>> i think it's a good chance where it's something like this. mf global was about the euro sovereign debt market. it did not spill into a contagion. both those times, you had the central banks helping out, in easing mode. we don't necessarily have the same transmission mechanism from high yield today to something 2008 style. mostly because the banks have been caged, right? so it seems not yet able to bleed too heavily into the banking system. >> your take on that point, art? >> i think that's true. the other thing is this is not enormous a universe. you know, it's in the billions, but it's not in the trillions. unless it begins to spill into other areas, it becomes a problem. i think the viewers should watch. if they hear about a spike in redempti

redemptions, it would be concerning. we just slipped below 2,000. you're starting to see, look, the etfs that cover the high yield universe, have been under big pressure, they're down another .5% today, at least earlier. they are trading below the value. so there is a way these etfs, which make it very easy to express a view on the sector, to trade out of step. >> two hours into trading, what's the prevailing thesis? as we see the major averages start deteriorating more. volatile future session today. we seem to be hovering near the break even line for much of the open. now what? >> you saw deterioration. there's a rumor around. let me emphasize it's a rumor. we had some volatile trading earlier. the feeling is that may have been a misplayed strategy. somebody was trying to roll a position into future months. inead of doing that, whoever executed it, just made an outright sale.

they had to come back and buy it. that's why we saw the market go up and down. or may be why we saw the markets go up and down. >> seems in general you didn't want to see the morning as a slow bleed, right? if you thought friday was extreme, you wanted to see either a real purge or genuine buying coming in. >> they need to keep an eye on 1995. if we break -- 1994, excuse me. if we break below that, we might have some trouble. >> we're just a couple points away from that now. thanks for joining us. coming up, the fed's rate decision comes in two day's time. how will mortgages, including yours, be affected? we'll have that story up next. plus, europe is going to close in just a few minutes. dow now down about 93 points. we'll have the close of trading in europe on the back of those comments earlier this morning. that's coming up next.

if the fed does move on

interest rates as expected, many are asking how their mortgages might be expected. our own diana olick has the answers in washington. hi, diana. >> today's consumers have the data on their fingertips. they shop for homes on mobile devices and do the same for mortgages. even if the move happens wednesday, it won't be dramatic. consumers will know immediately. a quarter point hike in the rate does not mean the average rate on the 40 year fixed goes from 4% to where it is now to 4.25% on wednesday. mortgage rates do loosely follow yields on the longer term 10-year treasury and that yield will react to what the fed does. since the start of 2013 when rates were low, that spring, the fed just said it was going to start pulling back on its mortgage bailouts, stop buying mortgage backed funds.

just on the news, home sales suffered. here's some quick math as to why. if rates were to move higher by a quarter point, 4% to 4.25%. the monthly payment goes up by about 36 bucks. rates moved more than that in 2015 but it's still not a ton on a monthly payment. the bigger issue is qualifying for that loan at a higher rate. because banks are very sticky now a days on the amount of debt that you can carry versus income. now, if rates do move dramatically over the coming year, we could see more consumers actually move to adjustable rate loans, which have lower rates, but higher risks. you may remember those from the heady days of the housing boom, john. >> all right, thank you very much, diana olick. in the meantime, europe is extending its losses going into the session. >> that's right, carl. this has been quite a brutal day as it emerged through the session for europe. one of the major reasons for that is proportionately the

value of the international bench mark for oil is falling more rapidly than west texas in this country with all the ramifications that has. worth pointing out s&p today warned the uk on its referendum to leave the european union. a bigger impact is s&p's warning to them, putting them on credit marks. basically the reason why last week they went to recover. bleeding in red, as you can see. the majors are lower, but a lot of the banks are also lower as the high yield credit concerns move across the atlantic. on the oil majors, today, royal dutch shell finally got chinese approval for the bg by '16 billion dollars. trying to get the market more convinced this deal is a good idea as the prices fall away. volkswagen is also lower notably today.

they've released their second clear month of sales figures since the crisis, the emotions scandal. perhaps no surprise, they're down 15% saleswise in this country. latin america, down 42%. you can see, having rebounded quite nicely, vw is heading south. finally, just a recap. in france over the weekend on that second round, the far right fails to win any of the new super regions. sarkozy for the second right did well, winning 17 of the regions, in part, because socialists stood aside in some of those instances so that the far right would not win. he, for his part, has said this is a warning to everybody what went on the week before last, in that first round, and the french need to have an in depth debate about what is clearly worrying people. guys, back to you. >> simon thank you very much. when we come back, a lot more on the oil market. wti dropping below 35 earlier

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cnbc news update. a bus crash in northern argentina has killed 41 police

officers. part of a convoy of three vehicles carrying border patrolman when it went off the side of the bridge and fell 65 feet. rueters is reporting twitter is warning some users they may have been the target of a state-sponsored cyberattack. the alert said it appears no sensitive information was stolen and that a small group of accounts were affected. the notice was the first of its kind from twitter. getting a drone for christmas? get ready to register with the faa. the agency's out with new rules which require owners drones weighing between half a pound and 55 pounds to register them. the rules go into effect a week from today. and all the hype is leading up to this, "star wars," the force awakens, makes its star-studded premiere tonight. four blocks of hollywood boulevard are shut down where three theaters will show the movie. that is our cnbc news update at this hour. let's get back to "squawk alley." meanwhile, we're watching the oil market.

oil, wti, falling below $45 a barrel this morning. although it has been recovering slightly. jackie deangelis is at the nymex with more. >> oil prices actually turning positive briefly. and it's really not surprising after the kind of selling pressure we've seen that some traders would want to get in and buy the dip. we fell under $35 a barrel. $34.53 was the intraday low. the intraday high, so far, $35.98. so not going over the $36 mark. the situation continues to be the same. we're awash in oil. you've got opec pumping in record levels. the u.s., over 9 million barrels a day. so as long as that situation remains the same, we will see more pressure to the downside on oil prices. we will continue to test new lows until we break and hold.

gasoline suffering a little bit today as well. the natural average, $2.01. as we head into the holidayen is, looking for that drop under $2, a little more savings for consumers. the nat gas dip today. not related to what we're seeing with the dollar or crude. this is a weather related trade. very mild temperatures out there. until that changes, nat gas could see pressure too. >> although we did enjoy it this weekend. >> yeah, nobody was complaining. >> nobody was complaining. thank you, jackie deangelis at the nymex. some financials are moving because energy financing at major banks also causing invettor concern. wells fargo warned, quote, stresses in its portfolio last week. the ceo said services companies would be the most challenged. they're putting away some reserves. i asked about the company's energy exposure when i sat down with him. >> we're still a net importer of energy. so this is a great thing for

consumers. and sure, it's hard for those in the energy patch tied directly to the business. secondly, these companies are figuring out not all will survive and only 2% of our standings are related to energy. and only about half of those are in e & p. we have some large companies, some midstream and so forth. i'm not trying to understate it, but we're much more affected by what's happening in real estate for example which is 30% of our portfolio. >> so of course all things relative. only 2% of the loans in their portfolio tied to energy, 30% real estate. carl where you need to actually look is the regionals. look at what zions is doing today. a smaller bank with a larger portion of their portfolio in energy, about 7% to 8%. that stock is falling today. it's been falling down this year, down about 1%. but you can see in just the last month, it has taken a steep

drop-off. the big banks are able to manage their exposure a little bit better. >> yes, that was certainly one of the takeaways from the goldman conference. even in oil-rich energy-producing states they're not seeing consumer defaults. we may look back later and say these were early days, we don't know. >> the smaller financial institutions, remember, the savings and loan crisis. it can cause problems down the line. >> they want that rate hike very badly. >> they may get it on wednesday. coming up, considering a bill to allow lift and uber drivers. what do you got your eye on today? >> everybody seems to have their eye on one sector, the corporate sector, the high yield or junk sector. the reflection of these etfs and how they track their index may be a lot like your driver

rearview mirror or your passenger mirror which says objects may appear closer than they really are. in this case, weaker or stronger, i'm not sure, but watch out for reflections on indexes after the break.

coming up on the half, high yield and your money. we've got mohammed and a junk bond manager beating 90% of his peers. plus, a well-known analyst taking a knife to apple today.

it's our call of the day. and the pan who toman who told short oil earlier this year is back. it's been a winning trade as we all know. we'll see what happens. john. >> we'll see you then. it's been a brutal year for tech ipos, the worst since 2009. those tech companies that did go public still say they wouldn't change a thing. let's go to our josh lipton at one market in san francisco. josh. >> john, only 28 technology companies entered the u.s. public markets this year. that's compared to 62 last year. and 48 the year before according to deal logic. some of those tech companies haven't exactly wowed investors. pure storage for example is just barely over its ipo price of 17 bucks. and box has been another disappointment. the cloud storage company is down some 7% from its january ipo price of $14. still, box's aaron levy tells us

going public was the right decision and encourages other start-ups to do the same. >> i think if you wait too long, you don't necessarily build the right kind of operations. you don't set yourself up for building a long-term durable public company. certainly when you're public, you do operate on a different rhythm with a different type of mind-set. and i think that's actually in many ways healthy. >> now, as we roll into 2016, will there be a pickup in tech ipos? that's the question. expects there will be. and three on his radar, stripe, cloud era and drop box, a company he says could get pushed into the public market because private markets he says may not be as receptive to financing rounds. one big reason, capital remains readily available. start-ups raised more than $47

billion in the first three quarters of this year, according to the national venture capital association. but vcs, like this one, tells me his colleagues on sand hill road might not be as eager to keep pumping money in if these private companies don't go public and start showing investors some actual cash returns. john, back to you. >> all right, thanks, josh. when they come public because of maturity, it tends to look different. we'll drives it next year. seattle could be the first city to give uber and lift drivers the right to unionize. the latest issue to face ride hailing services. mike, great having you back. >> thank you. >> i always talk to my uner and lift drivers about how they feel about the job. i don't think one of them sounded like they wanted to unionize. am i just getting the odd driver or what do you think is behind

this? how is it going to affect the business? >> i think that's fair. uber makes the point most of their drivers are part time, set their own hours, maybe 10 to 15 hours a week, something like that. it's hard to really tell, you know, how accurate that is as far as like a cross section of the country or even the world. but their big point is, you know, unionization isn't necessary because most of the people are just doing it on their off time. >> sounds like they were okay with it in the early days, and then something happened. what was that something? >> oh, you're talking about the drivers? >> the drivers, yeah. >> so essentially in the beginning, you know, uber was getting -- was giving huge incentives for drivers to come on the platform, they were saying you can make $5,000 this month if you get your friends to sign up. rates were really high per hour and per mile. and then, you know, later on they started pushing those rates down and they felt -- at least a few drivers i spoke to felt completely blindsided by that. >> what does this tell us about the competition in this space? it would seem like a natural

cycle. first, you lay out all these incentives to recruit drivers, now you have to recruit riders because there are a lot of options. what does this tell you? >> think about essentially the people who are in this industry talk about liquidity on both sides, right. you need an ample supply on both ends. to do that, you have to cut rates or else people are going to see uber as a sort of luxury service rather than what uber sees itself which is a sort of way to upset existing transportation and -- like subways and things like that. that means lower rates in the long run. that means probably closing down on the big subsidies up front and drivers are probably not going to like that. >> when uber in particular finally does go public, how big a role do you expect china to play in the narrative? because now a lot of the investment is going on overseas. dd is investing in building out this network which includes lift. of different geo graphic partners. uber says it's not a big deal

yet. isn't that forcing them to spend money? >> i believe they said publicly they're spending up to $1 billion just pushing into china. you know, i mean, there's the dominant ride sharing platform in china and, you know, you have this american company, very brash ceo, that's wanting to sort of play on turf that's not their own. so they're spending -- the subsidies there are insane. i don't know when that's going to die down. frankly, it's not even that clear if they're not going to actually win in china, you know, like how long can you keep spending tons of money just to get people to use you over say dd. >> is it your sense that the fires of litigation they've been fighting all around the world are starting to flat be out? we haven't talked about it as much in recent weeks as we were earlier in the summer. >> it's very long-term stuff. they have this ongoing thing about our drivers employees, are they independent contractors. so that's one issue. they're making some progress there. they can try that as a class

action lawsuit. that's still going to take probably years. legal experts say they might come to some sort of compromise. that's in between full time and 1099. >> three, five years from now, we looking at uber as a software and platform play for delivering goods as much as people? how should investors think about the technology platform value of this company? >> it's really funny because uber has toed of waters of food delivery and there's all these other food delivery start-ups and goods that are popping up. but it still seems like a sort of upside potential for investors to push up valuation in these rounds they're doing. their most recent round was $62 billion evaluation. but they haven't really pushed into it. i think because they're still figuring out how to make the math work on food delivery. the margins are so thin already. like, how can we actually make money there. so i think it's like a tbd long term but right now i wouldn't count on it. >> $62 billion is more than

general motors is worth in the market. i mean that would tell you something about how valuable it is to investors to have this asset-like model. at some point does uber need to start producing its own infrastructure, cars? how much does it need to do for itself? >> that's the long-term sort of bet, right. like self-driving cars. obviously, that's a long way off. google is working on that for a very long time. i think they'll do more of that in-house. that's probably ten years often. when uber's raising this money, they're gaining on pretty preferential terms. they're not saying what some of the unicorns we've been saying lately is doing. which is taking ratchets, taking things that are not so great for them on ipo. so they seem to be pretty strong. >> the day lore swift of the start-up world. want to define their own terms. mike isaac, thanks. when we come back, a surprising development at third avenue management, firing its long-term ceo as the drama in the bond market develops. dow's down 80, s&p with a one

handle for the first time since october 15th.

the fallout at third avenue management continues with the firing of the longtime ceo over the weekend. we are at third avenue headquarters in new york with more on that story. seema. >> that's right, a surprising change at third avenue.

parting ways with its chief executive. this fol lowing news last week it plans to shut its fund. highlighting the risk associated with the high-bond market. or high-yield market, excuse me. a bit of news on david barse. he was with them for 24 years, became ceo in 2003. before that, he was a bankruptcy attorney. following this, marvin whitman says today's announcement is a step that enables third avenue to return to its roots. this investment committee is comprised of its cfo, cio among others. they will lead third avenue going forward. the focus credit fund, which it plans to liquidate, according to morning star, was down 27% in 2015. vastly underperforming the high-yield sector which is down 4%. this news of him being ousted coupled with the closure of its high yield fund has sparked

concern among the investor base. and whether this is the first of many closures, perhaps other management changes to come as well. for now, guys, back to you. >> seem, thank you very much. in the meantime, let's get to the group in chicago, the santelli exchange with rick. >> good morning, carl. you know, in your side mirror on your car, most cars in the last 15 years have this little thing written, objects may be closer than they appear. >> it's a reflection that has some distortions. just changing the reflection entirely. indexes are tracking. you come up with a single number by putting a lot of ingredients in. you put a lot of ingredients in. you get a cake. once you have the cake, it's very difficult to extract or see

exactly what's in it. so when we think of an etf on high yield, i'm not picking on them. it tracks the market i-bos dollar liquid high yield index. i remember many years ago, being on committees here at the chicago board in the '80s, coming up with a corporate bond contract, a lot like the treasury securities. they have a deliverable quality that really gives a standardization there. so the contract for the most part is easier to price. when we tried to construct an index, the problem was, we couldn't quite find the exact audience that would be willing to use that contract and take the basis risk. basis risk is corporate securities sometimes price differently, especially odd lots and different types of different securities so it's different. the point of this is, at a time where having etfs, it may

actually help, we're not sure, they may hurt. because ultimately, whatever that basket of securities is, the experience of a person using it, for example, as a hedge, is may track its index but it doesn't mean it's going to be one and one with the type of securities you're holding that you want to hedge. think about it this way. when case jeweler comes out every month on housing, they have various housing price indexes all over the country. but the experience of any of those indexes in your location might be a completely different experience than your house and its price structure. so this is where the rubber hits the road. at a time where many are using etfs as hedges and speculators selling them, thinking there's going to be a transfer of some systemic risk, akin to housing and how sub-prime securities was one drop in a gallon of water, but it changed the color of

everything. that is where the issue is. but you could also argue, without these etfs, maybe the world would be more dangerous. why? because we all are nervous about treasuries, which is much more generic on the liquidity scene. because banks aren't the big market making players they once were. they have these securities in places for corporate finance due to regulations. when you get into corporates, it's much more interesting and decentralized. at the end the day, what you see when you look in the mirror of an etf's index value, maybe a reflection not exactly like the person standing in front of it, in this case, a security. >> rick santelli, thank you very much. when we come back, a hot holiday gift being banned from amazon. we'll get some details on that. plus, for more on the high-yield market, bill gross ringing the alarm on twitter. bill will join power lunch exclusively today at 2:00 p.m. eastern time. we'll be right back.

amazon is the latest company to say no to hover boards. they will stop selling several models as the devices could pose a fire hazard. the rise in popularity has spurred a number of dangerous lower quality knockoffs. several airlines including

american, delta and united have banned the hover boards from cites, citing the batteries as a factor that makes them dangerous to transport. some reports, guys, amazon is asking manufacturers to prove they're safe before they're sold. >> one dominant brand that everybody can agree is great. it's a bunch of small brands. there are a lot of two stars. 1 1/2 star reviews. kids around my neighborhood in a couple cul-de-sacs, they definitely want these. they're expensive though, a couple hundred bucks. >> have you seen any spills? >> no, i have not. these are like elementary and maybe junior high age kids who want these hover boards. but skate boards, you know, growing up we had spills on skate boards. that's, you know, kids. it's going to happen. >> no combustion but definitely injuries. >> just stay away from traffic. >> mattel is up 3% today getting positive comments out bmo. you got to go back to summer to

see levels this well. we know ---er kn everybody knowt the seasonality of the toy business. >> goldman says barbie's going to be the toy this year for girls. it will be interesting to see. it's still down 12% this year or in the last year. interesting action today in cme group. it's up by about 1.5%. we talk a lot about the volatility. executives actually said last week perhaps they're a beneficiary of it. people trade more. they have more convictions in certain directions. that ultimately benefits their bottom line. >> meanwhile, some of the biggest losers today. newell rubber made continues to be a lagger. whether they're buyouts, they're not being treated as equal as they were earlier in the year. the new company will be newell brands. >> go pro down 16% almost, right around $16.12 a share. we'll see if that discounting works out for them and what they

can pull out in the new year. that's an ugly level for go pro. >> a busy day tomorrow. the debate and the beginning of the two-day fed meeting. strap in for the week. in the meantime that does it for us here at post nine. let's get over to wapner and the half at hq. welcome to the halftime show. steve weiss is here, along with joe terranova, josh brown and pete. the apple trade, why one well respected analyst just threw shade on the iphone. what it means for the stock and your money. high yield, high risk. the very latest on what's happening in that part of the bond market and what all of it can mean for the fed. mohammed joining us live in just a moment. we begin with the markets and those continued jitters over junk bonds. stocks are selling off again at this hour. investors are still trying to ma