box begins right now. ♪ >> live from new york where business never sleeps, this is squawk box. i don't know who it is but you know the song? good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with joe kernen and andrew ross sorkin. the u.s. and cuba reaching a deal to resume commercial flights between the two countries. we'll have more on this story just lal ba little bit later th hour. the global markets reacting to the first fed rate hike in nearly a decade. u.s. equity futures are up again this morning. the dow is up 50 points above fair value with the s&p futures up by 6.5.

yesterday the markets were sharply up across the board. the dow was up with a gain of 224 points. s&p up more. a gain of 1.5%. a gain of almost 30 points. the nasdaq was up as well. taking a look at what's been happening, the stock you can see surged into the close yesterday. the s&p is now on its best three day winning streak since early october. it's the first three day winning streak since early october. treasury yields moving higher as well. two year yield rising above 1% for the first time since may of 2010. check out the yield on the ten year this morning, 2.239%. >> and the global markets taking a queue from wall street this morning. asian stocks jumping overnight. this coming despite some worries that our u.s. rates could have weighed on emerging markets. you can see right there. green arrows across the board. the nikkei up almost 2% there and shanghai composite up by 1.5%. european trading seeing lots of

green arrows. same story there with the dax up by 3% and ftse 100 up by 1.5%. >> check out the dollar which is basically what we saw. went down to 105 and then we had draghi and all the way back to 109. now 108.5 or so. i know the yuan hit another intermediate term low yesterday. >> 2011. >> yeah. >> and check out oil. oil was a feature yesterday coming down so much and it's down again today. it's 1%. only 36 cents but not to the recent lows yet. it's going to be interesting to watch. and then gold take a quick look at the safety trade. i don't know if we need to be safe quite yet in terms of financial stress. i mean, i'm afraid to go outside my head might be cutoff.

and other than that you need to worry about security before you worry about the economy. that was the message from the debate the other night. let's get that squared away and then we'll worry about monetary policy. just make sure that you can leave your house. do you think that's overdone? that's what the left is saying. >> security. >> no, the republicans were fear mongering and just what isis wanted playing into their hands. just too much talk about it. >> i don't know about fear mongering perse. but i think that they took advantage of this moment politically. but if i was a politician i might do the same. >> i don't know when to go on my rant but -- >> i'm the spark t catalyst. >> here's the consensus in the united states. we're usa today fed finally takes it. it's the equivalent of the new york times and area of the job.

and there are -- historic gamble. >> as the fed decides to charge money on charging interest rates on money. is this a historic gamble to go to a quarter point. >> historic gamble? >> no, but you know it's known as the conservative. >> so it is conservative verses the rest of europe? >> for sure. >> what color is this. >> number one. >> salmon. >> salmon. >> if he uses the sounding rant. >> i'm glad. >> it just depends. i'm not going to speak for any of the papers. i thought it was a dovish statement. the fed pulled this off. it was something of a gamble. i think they did it in a dovish

way. >> they should have done it a year ago. >> if you're so sure about that, most of the members of the fomc disagree with you on that but that's all i can tell you. >> maybe the fed is taking a victory lap too soon. we don't know how a lot of this is going to play out too soon. >> the world is going to end. the idea that something bad could happen. and the market reacted well. i don't know what's going to happen tomorrow. doubters will blame -- >> blame the fed. you would think that the markets are efficient. one of our guests here taught me that overtime. when i look at the two year note i would think it would immediately price in a higher level of the funds rate if it were surprised. it was not surprised. i think 100 is a reasonable rate. it's going to be somewhere between 100 and 155 at the end

of the year. it might be misunderestimating the federal reserve. i don't know that. i want to show you why this was a dovish hike. not over the top. gradual was in there twice. if the word gradual was in there it's past the rate hike. it was in there twice. the word actual inflation was in there in terms of what the fed was watching. it's in the sense that we are looking at the current rate of inflation. not on our expectations. it probably headline what is they thought and then the final thing was that the balance sheet when they said -- we're not going to be reducing the balance sheet until we're well into the process of raising rate which is is an extension of that. joe i could see you're right. the idea was the previous expectation had been they would do the tapering and six months later they would hike rates. it's now a year. you got an extra six months on

that. here's the path of the fed's funds rate verses the cnbc fed survey. you can see the market as judged by our survey which is not far from the future's market is much lower than the federal vefsh. pick your point. who is right in with the fed and their own forecast be right or the market be right. the market has been lower than the fed. it's tended to be right. that's a question this morning and to the question of how the markets behaved the rest of the day or the rest of the week or into the next the question is is three or four rate hikes something the market can sit on. that's what we're going to be thinking about. >> that's brings up a lot of things. the first goal post is 6.5%. that was at a time when the fed was pretending this unemployment rate was historically like previous unemployment rates which we know it's not. it's a bizarre strange 5%. there's no wage increases and i also think what you disagreed with is there's merit to that.

you need to make 13, 15, $18 an hour to leave your home if you have all the benefits. >> i only partially disagree. it may have some effect in terms of giving some people a home. >> it's not your product's employment rate and the fed found that out as we went from 65 and now they finally go a quarter point when we almost have a full handle on unemployment. that's unbelievable to wait that wrong. maybe it's a different unemployment rate. >> but you're answering your own question. >> you should see me when i'm alone. >> i don't want to see that at all. >> when i'm alone i'm mostly right about everything. >> if there's all of this excess slack out there then you're agreeing with janet yellen that the fed should be positive and raise rates very slowly. >> if it was hiking inflation from staying too long you know that right away but if you worry if there's dislocation that

takes years to figure out. they went up from 2004. they didn't know until 2008. >> fair enough. that's why he has been out there saying it is not right in a capitalist society to have a negative return on money. you can't live at a that way. >> it creates those dislocations. >> instead of paying the whole money, let's bring in -- if i ever come back i want a last name that's the same front wards and backwards. >> i don't want two first names. but it doesn't matter. >> that's great. >> and you had it when you worked at isi because that was the same. >> anyway, you used to misunderestimate. no, you're a strategist research partner. and also contributor.

will either of you just agree as do or where were you on it. >> it needed to be in the fomc statement as well as her press conference. so if any of those elements were not in this statement i think the market would have much more significant reaction and yesterday's performance in the dollar and the financial market was the best case scenario for the fed as well as the best case scenario so i think that there's a lot of criticism of the federal reserve and i think to their credit they manage the market's expectations appropriately to engineer this type of reaction. so i think that they are -- i wouldn't use the word gamble but the trajectory of tightening that they want to have next year is a little risky and i think the prospect of some type of slow down or contraction being

caused by this is quite high. especially the environment where we do have a crippling decline in many parts of the world including europe. it's definitely risky. >> we do it from both sides. that's a tough job but if they actually orchestrated the ease and the exit and everything worked perfectly. >> i love it. >> it's a great metaphor. no more rates than they have to get that balance sheet down. >> by the same token the positive is that you're starting to normalize rates. the positive is that the fed is starting to realize that you long passed the point in which you have fed easing and as a

matter of fact a lot of people on the left might worry about income inequality, it's the way it contributed to that. it's never about that. the other thing that's going on this week. i'm sorry to change the subject but there's a big budge bill going through congress and the good news for my point of view is physical policy looks like at least for next year it gives the stimulus. we think it's going to add something like .5% to gdp and you're talking about defense spending, the tax extenders, all of these other things so it gives the fed some wiggle room and it gets back to a more normal. >> if you can look at where you say okay we're not going to have these constant -- >> it's from the washington perspective. >> on the bill, yes.

>> so i think the world isn't very different than it was three days ago. >> it isn't a nice reaction. and it's impact on the industry economy are still here. >> why does the market rally. >> people positioned in some form of bearish way ahead of this meeting and it's okay. something is cleared out for me to go and invest in stocks. i think there's some hope to just the general policy mix is going to be better. so you're not going to be relying on something that's not particularly working and that you're maybe going to be focused on fiscal regulatory trade policies. >> the people that think this will end badly, people who agree with joe, when we ask a question will it end well, and be 38% say the whole process of normalization will be badly by the u.s. economy.

>> you say it's openness. i wonder how many people will be with joe. >> you think it will end badly. >> and that why i'm interested in -- when something like yesterday comes through and goes well, is that why you get a rally in the market. that's why we asked the question. >> going into the fomc they manage expectations properly and suggested they would have a dovish rate hike so everyone started to take off their positions so everyone rallied for a lower base. a agree that the fed is raising interest rates and they're ignoring a lot of pockets of weakness and they ignored the slower wage growth and manufacturing and service sector numbers and they ignored the volatility that we're seeing in high yield assets which i think is dangerous and risky. it's not to say that 25 basis points is going to change things

all that much. but i'm worried about the aggressive outlook for hikes. >> if you're worried that the guy next to me is more out there and the guy next to me is going to be worried. i wake up and see that the fed hiked rates and he's not as worried as i thought he was. then you conditions for a rally. >> it's an interesting part of the market for stocks. just because there's a general -- >> a rally in december and you have a lot of hedge funds out there that were positioned i think negatively because of the market. >> it's something that was a tradeable market. >> how does it manifest itself. >> is it fire. >> try to walk through how it

transpires. >> what i expect is that i think the tightening by the federal reserve is going to lead to minimal stock market gains next year. probably some steep losses that's going to lead to risk aversion and pause. maybe some sort of safe haven bid in the u.s. dollar so that's why i think next year is a dangerous time to be aggressively long overall market. >> you're the reason the market went higher. >> you're the reason. >> the whole attitude. >> it's short. >> a agree with you. there's a little bit of a relief rally but in the long-term there's a crippling decline that everyone should be worried ab t about. >> you have seen what -- this budget deal, so you're long. so you don't care what they do. your stocks go up. did you see this? budget full of goodies. planned parenthood funds for

climate deal meets obama's priorities. the dems will be the majority of votes. sessions says this is why voters are in open rebellion. this could be the honeymoon with paul ryan might be over. are you a real conservative? >> i am a real conservative. >> you know my day job is to try to figure out which way the markets are going to go and i'm going to say listen. >> so you're happy? you're okay. >> i'm telling you that i think the markets are going to very respond positively. >> i understand him. >> trust me joe. there needs to be a reevaluation of our debt situation and this is not the way of doing fiscal reform. >> but you'll take it. >> but we'll take it. we'll take it. >> i'm not a sell out. i'm trying to help you. >> it's the budget. >> better than shutdown.

tax reform would be better. infrastructure spending would be better. >> nascar racehorses, you know, they got all kind of goodies in here. >> anyway, thank you. >> thank you. and to the world over here. >> you don't read the newspaper. >> i do. i do. >> read your paper. >> can't be optimistic. it is a real issue. pandora is going to have to pay more money to pay songs. it's jumping 20% higher and we'll explain when we come back. tis the season for shipping. profits beat forecasts. first though as we head to a break, take a look back at this date in history. wallapop makes it simple to sell anything!

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welcome back to squawk box. among our stocks to watch this morning, pandora, shares in after hours trading after the copyright royalty board issued a rate increase on broadcasters. but it's a major part of the cost of pandora. it's a key source of income for the artists. and internet radio operators will baby 21% and pandora believe it or not asked for the rate to be lower.

while record companies wanted the bigger hike. it's balanced at 17 cents now but that stock was down as much as 20% and then going up 20%. so talk about volatility. that's where you saw it yesterday. continue to face currency head winds. gave investors some reason for pause. and the total cloud revenue growing by 31%. if you exclude the currency effects. that stock is down by 1.6%. >> stronger than expected results. it's a record number of holiday shipments. e-commerce growth. a lot of people saying good things about fed ex overnight. joining sus the transports analyst. how much of this is a surprise for you? >> i think it was a surprise for a lot of folks andrew. because you think about it going over the quarter. a lot of folks are concerned

about the economy and slow down in international trade and ultimately they have to prove they have a number of initiatives helping to drive growth for these guys. that's one of the main reasons we're so optimistic about the stock long-term. that's one of the questions i was going to ask is to the extend that this is an indicator of the larger industry economy which we all believed has slowed, is this an indicator that things are better than we think or that fed ex has figured out how to operate a little bit better and we're still seeing some of the benefits from the restructuring program that began in late 2013 and we'll stand in terms of the profits we're seeing somewhere next year. >> what you're seeing here andrew is these guys are doing an excellent job. really hitting the milestones that they layed out. that's what is driving the growth here. the upside for a lot of folks is in the express segment. that's their ldl business that

disappointed and i think really these guys excelled despite a industrial economy and that's what has people so surprised this morning. >> but you're not looking at this and saying well, everything is so much better i should buy ups too. >> no, i'm not. we like ups as a company but i think really the main reason why we're overweight fedex is because fedex is positioned to grow mid teens or high teens earnings over the next several years despite a sluggish global economy. it's close to ups. >> it can grow over the next several years. and kit grow for another year in part of a program and still has a little ways to go but once you get through that then it gets a lot more complicated. >> that's something that people really don't understand is when you look out through 2017 you have the benefit of the profit

approval plan and in 2018 you'll have it kick in from tnt which will close in the first half of counter 2016 and you have the benefits of the acquisition which finally began to bear fruit and you have fed ex smart posts and ground together which i think will pay significant dividends into 2017 and 2018 as the next several years. >> practical question for those of us still shopping for the holidays, are they going to get all the gifts everywhere they're supposed to on time? >> i hope so. i'm relying on it to get there on time too. i think on time reliability for both have been relatively high. fed ex has been a little bit higher. but i don't think you want to procrastinate with your holiday shopping. >> when's the last day? is it today? yesterday. >> oh, no, amazon prime -- you can go up to the 22nd or 3rd i think. >> i do think it's the 22nd.

>> so this is it? today's the day. >> well, i take that back. unless you're willing to pay for the extra shipping on other ones prime is excluded from that. >> if you're going to pay extra you're going to do it by today. >> i'm a procrastinator so i'll end up having to pay it. >> that's against your thriftiness. >> it is. >> happy holidays. >> happy holidays to you too. global market reaction to the fed's decision to raise rates. a live report from beijing next. plus bill george will join us with a look at what the central banks move means for companies. first though as we head to a break a look at yesterday's s&p 500 winners and losers.

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♪ welcome back to squawk box. global stocks rallying today after the fed hikes rates and eunice yoon joins us. she has some reaction from beijing. >> thanks so much andrew.

well china's commerce ministry said that they expect to have an impact on trade and because of the u.s. fed rate hike, they didn't explain how but they said that they are probably going to be looking at the overall picture in the global economy and global demand. people here are still very much worried about the overall chinese economy and exports play a very important role and they are in the dull drums. and in fact just recently i was in a city in the manufacturing heartland. it's a place that just pumps out all the stuff that you get atwal mart and home depot and the government there said already hundreds of factories have shutdown and the people that i was talking to said they actually believe the number is more in the thousands. most of the manufacturers there were complaining that they're just not getting enough orders and that is what the authorities are worried about. the other impact of the fed rate hike is the impact on the currency. because the fed rate hike increases the pressure on it to

depreciate and today again we saw the chinese yuan hit another fresh 4.5 year low. it makes the exporters here more competitive. they wanted to make sure that they couldn't manage the currency. they don't want things to get out of control and they don't want it to weaken too quickly. overall in the stock market a different story all together. a big rally there and traders were basically saying that they were just happy that the fed had finally lifted the rates and actually lifted all of this uncertainty in the market. guys. >> making it clear this was a slow progression to come. and the former chairman and ceo of medtronic.

the rate hikes are coming. they're coming slow but what do companies need to start thinking about right now? >> this is the most overanticipated move in history. the companies are fully prepared to make the move. i was pleased she layed out a steady progression. we have to get back to more normalized interest rates because the extremely low interest rates can lead to back things. i think companies will adapt quite easily. the only concern i have is that we have raised the value of the u.s. dollar and if you're look at constant currency it's not a problem but if you're looking as reported you're going to see larger currency negatives coming in. >> what should companies start doing? we know that companies in the zero interest rate environment have done things like load up on debt because they can get it for free. they have been buying back a ton of shares. we've seen mergers and acquisition and activity pick up. what is going to change or is anything going to change with a quarter point rate hike? >> i always felt that the real test would be to see organic

growth and they have to invest, invest, invest. a quarter of a point doesn't mean very much. i think they need to move now and make their moves and get their capital equipment in there and continue to invest them. >> do you think companies will actual dloi tho it. >> i think it's the fact that you can have a steady rise in rates and the signal is get your balance sheet in order now because it's coming and can make the investments and that's really critical. there's been too many stock buy backs and the balance sheet has to be better. we need to start rewarding it. >> we have seen they're already going to start raising the rates that they tried for auto loans and things like that but they're not necessarily paying savers at this point to keep their money there. >> it's about time we start paying savers. >> you wrote a very provocative piece recently about the mergers

over the past year but even just really this last sort of quarter and how you think that they are value destroying and terrible for the country. dow, dupont in particular was what inspired you the most recently. >> i didn't say the short-term value was inspiring what i said was i we have to ensure that they're continuing to invest in research and development internally. that's my big concern. and i think you hate valeant. >> i have a lot of questions about their business model. let's put it that way. >> but even if you think the accounting was right i'm not sure that you respect the model unto itself. >> right. >> but the question that i have about interest rates and everything else, is that going to change what's going to happen here? do you think that actually people are going to invest in the research because the economics are somehow going to be different? >> i think we need to get back

in measuring him on that. i think so. now they have been trying to raise the price increase and they have been impressive in my opinion. it's an unfolding story but valeant, look, mike pearson is one of the great deal makers of this era and now they have to get back to operating. he has 18 billion of debt. he has a low stock price. he can't just continue to buy buy buy. and that means that they are actually going to have to invent drugs. >> as a health care ceo would you be long or short that company at this point? >> i wouldn't be investing in that company, okay. >> because you think there's no value there. >> i think it's a short-term play and the short-term traders will make that judgment call better than i am but i don't see the pipeline coming that's going to give them the fuel to grow. i would look at companies like merk with a much stronger pipeli pipeline.

>> if they want to compete globally don't market forces cause you to continue to innovate and do research and development? are you saying they somehow don't need to compete with each other anymore? since when are they not sufficient to cause a company to do what is necessary to thrive in the future? how would you change it? >> seeing short-term actions and research takes time. it takes -- i want to make sure of the investment. >> things are tough. and that's the way things were. >> and that will be the big challenge. >> what would you do? >> i think they have to ensure that they're competing with a basf. >> that's a long-term play. it's going to be next.

>> the company isn't going to do well and he's going to be ousted. >> i talked to ed breen. who are you going to put in charge of two of these companies and as they get and continue to make the long-term, what happens when the pressure comes on. you have to continue to invest in the research. if a recession comes if they're together and rationally operations. >> if they're only cutting back office things. they're going to continue to invest. i want to see the long-term investment. here's a contrarian view. we made the argument to me that actually the world has changed. and some of the companies about dupont and health care companies. >> and today there's plenty of venture capital. it's actually flooding into health care and bio tech and all of these other places.

and it's actually shifting but the venture capital guys become if they departments if you will. >> it's a strong pipeline without them having 70% inside 30%. i think the corporate -- >> but it exists 30 or 40 years ago so you need what you're talking about -- >> his theory is dangerous. that somehow corporations, we're not going to invest in corporations and spend money on research. that's a flawed theory. all the great companies that sustain their growth are one or two or three decades to that. i don't think you'll say everything changed. it takes them 12 years too you know. yes i believe some off balance sheet work. that's what they're talking about so you don't have to have the balance sheet but you to make the investments internally. if you don't, look at pfizer.

they haven't made the investments and cut rnd and now they have to do financial engineering. that's not the right thing to do. >> valeant had a slide yesterday in their presentation when they said it's not how much you're spending but how wisely you used it and they quoted apple steve jobs saying at the time they invented the iphone that ibm was probably spending 100 times more than they were. so part of it is making sure that you're investing -- >> of course. but you have to create an innovation machine. it's not 3%. it's more like 10% for medical technology and more like 20% for pharma. you're not going to do it on 3%. all you can do is some short-term product innovations and the great companies i have been looking at are companies like amgen and roache and those making the long-term investments. that's why they're doing so well is they're making the investments and rolling off the line. you see it coming and i think

mike pearson is going to have to get back to doing that or he's going to be forced to spin off businesses or get something to raise cash and i would expect -- this is an unfolding story. you'll see it a lot more but i don't agree with that business model at all. i think we should go to venture capital and make investments in them. i believe in being an industrial partner. we had three to four dozen of these investments. so when some of the great things came like the diabetes business. and they're expensive but it's okay. >> bill, thank you very much for coming in. >> thanks for having me back. >> now coming up, see what song we're playing here. ♪ >> i have a problem. they did not make it into the rock and roll hall of fame. cheap trick, chicago, deep purple and steve miller. but didn't make it to smiths and

yes. >> i can't believe they didn't make it. >> they put it in before cheap trick. they had like two songs. they had a guy with a weird guitar. >> we're going to play some of these and for steve miller, i said living in the usa or space cowboy. no jet airliner or keep on -- none of the pop crap. no, no. retailers are feeling the heat. they are slashing prices. retailers going into the final shopping weekend before christmas and the warm weather is not helping. we know what that's from. expectations for super saturday, next.

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welcome back, everybody. check out the u.s. equity futures at this point. dow futures up by 58 points. s&p futures up by 27 points and this is coming after the first fed rate hike in nine years. markets up sharply yesterday too. it's the home stretch for holiday shopping and retailers are feeling the heat at this point. courtney joins us with more. >> good morning to you becky. part of that has to do with the actual heat outside. retailers are holding out hope. this saturday which we now lovingly refer to as super saturday is ranked 2nd in terms of retailers in store revenue. black friday is still number one. this coming sunday, monday and the day after christmas and also rank in the top ten. according to the national retail federation the final week of december can account for as much as 15% of retailers holiday sales but concerns are

well-known too. unseasonably warm weather is hitting many retailers hard pushing promotional levels higher. he warned in a blog post that continued heavy promotions in the face of higher consumer costs have combined to create a very deflationary atmosphere. so adding the price index shows the retail prices were almost 3% lower in october than a year earlier so we asked consumer market research company info scout to crunch some data an over 150,000 customer receipts. this is the change in average transaction values in a basket of goods compared to last year and it's higher at amazon, best buy and macys. but the kicker is the average number of units sold at every retailer is up by 9.4%. put simply, people are buying more but overall it's costing them less. good news for consumers seeking

deals but bad news for margins and profits. >> folks we do have breaking news to tell you about. there's a report out that the ceo that has been so reviled for jacking up the cost of a life saving pill to $750, reports now crossing the wires that martin shkreli has been arrested on security fraud charges. this has nothing to do with turing pharmaceuticals. it comes from him illegally taking stock from a bio tech firm that he started in 2011. they say that he illegally took stock from that company and used it to pay off debts from an unrelated business dealing. he was later ousted from that company but this is a report on bloomberg right now. >> wow. crazy story. we will try to find out more and bring it to you as we get it. in the meantime coming up we do have the box office awakening and fandango feeling the power

of the force. 91% of ticket sales coming from star wars fans. a popular executive joining us next as we talk about the blockbuster and the movie biz. stay tuned. you're watching cnbc squawk box right here first in business worldwide.

welcome back. the force is with "star wars," $

$100 million in advanced ticket sales, the filming th, and movi released in select theaters tonight before the major market debut tonight. becky has tickets. >> i do. >> joining us now is eric davis, and fandango is owned by nbc universal. good morning to you. >> morning. >> you have seen the film? >> i have. it's good. >> like how good? >> it's really good. i think if you're a fan of the original trilogy, this is your movie. this is a movie made for the fans. i don't know if necessarily the next couple movies will kind of take the same course, but this was really, peoples like a reboot of the original first movie, a new hope follows a lot of the same beats. you would expect hans solo to be like the big selling point, you know, the best part of the movie. not so. it's the new characters. i'm wearing a bb8 shirt, a

character people are going to love. >> i don't know if you saw the comment, but george lucas was asked about the film, and he said that if he had done it, he was not trying to be critical of the film, but he would have done it differently. >> i'm sure. >> what do you think that meant? >> yeah, you know, george lucas had treatments for the movies. disney was, like, thank you, but we're going in other direction. it's like this movie feels like they make up for the prequels. >> thank you. >> people were not crazy about them. and i think he would have done different things, and prequels were very much movies george lucas wanted, not so much the fans. he went back to the original trilogy and adjusted them. fans don't like that. they are getting back to making movies for the fans. >> the movie, andrew, carol is a film, groom is a great film. >> that's a great film. i have a question, though, about ticket sales speaking to the industry question, which is, is

this movie going to suck up all of the movie dollars so that these other pictures that are coming out, big shorts coming out around christmas time, the new leonardo dicaprio film, other films, and there's a worry from what i read in hollywood that those films are not going to get the attention nor the ticket dollars because people spend money on this. >> you know, i think it could go either way. i think that if you're opening up a -- look at the alvin movie coming out, tickets for that are outpacing the first couple chipmuchi chipmunk movies. it raises awareness for everything around "star wars", and maybe you're watching trailers, seeing it this weekend, other movies on christmas day -- >> have you seen those? >> i've seen everything. >> give us the top five. >> christmas day or -- >> just before new year's. >> i would say "spotlight" is

one. >> love it. >> i would say the remanent is a crazy violent movie. got to see it. he'll win best actor. you got to see star wars. point break looks crazy. that's an action movie. >> groom? >> it's good. if you're a parent, it's going to destroy you. >> it will. >> it's good. it's going to be an oscar contender, the actress in that wins best actress. >> is jason what's his face in alvin and the chipmunks? >> yes. >> quickly, "big short," good, bad? >> like it, accessible for people who don't understand. it's a great movie. ete visibility into your business, it can quickly become the only thing you think about.

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markets cheering the hike by the federal reserve since 2006. the ceo, joe sullivan, weighs in on the weight hike and impact on markets. >> delta airlines is one of the best performing u.s. airline stocks this year. the ceo richard anderson is here to talk competition, energy costs, and security against terrorism. >> the shift from brick and mortar to online shopping giving fedexa holiday bonus. the second hour the "squawk box" begins right now. live from the beating heart of new york city, this is "squawk box." see, it matters.

we didn't want to play smoke on the water. >> i love that song. >> no. welcome back to "squawk box." deep purple made it into the rock n' roll hall of fame, los pz los mr.los los lobos did not. there's an outrage. equities at this hour indicated to extend that -- it was not a steal your face after your head rally, was it? >> rip your face off rally. >> adapted it to the grateful dead. >> 500 points. >> right. >> looking better. >> we have not made up for last week yet. >> no. feel you missed the opportunity. >> we'll see. it is indicated higher. you know, it also depends where oil is? we didn't look at it. >> around 35. >> i know. i'm not rooting for oil to go up. i can't.

it's not in my d na. >> maybe we should. >> it's down 3 cents. stay there. that's fine. uh-oh, there it goes. >> we have other headlines to tell you about at this hour. reports saying that turing pharmaceutical's ceo has been arrested if you can believe this on securities fraud charges. the charges are not related to the recent controversy over huge increase in the price of that drug. he did say, though, that -- he said to be accused of taking stock from a firm he founded and used it to pay off debts from unrelated business transactions. reports this happened, but now apparently he's been arrested and we'll bring you more as it develops. fedex in the news, reporting profit of 2.58 a share, benefitting from higher profit mar begins and cutting costs.

hilton hoping to spin off into a real estate investment trust according to the wall street journal. this deal involves 147 hotels around the world to be worth more than $10 billion. the day after the big rate hike or the small one, depending on your appointment of view. our senior economic reporter, steve leisman, joining us now, what's next from the fed? steve? >> becky, thanks. fed enacted the first rate hike in a decade yesterday. banks followed suit hiking their prime rate hiking rates on consumer loans. >> i mentioned that. >> prime rate thing? >> how it's been temperature years since i've been able to ream them how discussing -- when rates come down, it's, like, six months later. they might finally move. that was within milliseconds. >> do you think people at home think you're sarcastic? you ream the banks? really? >> yes. >> it's sticky.

it's the way it works. >> that's not true, though. they studied -- >> down -- >> the studied the phenomena. there's been multiple economic phenomena, and it is not. the fed rates, they make more money. i don't know how banks did yesterday. >> scum. scum. >> can i continue here? >> you know -- >> you just disrupted my flow, joe. >> oh, geez. >> how high will they go? the fed twice yesterday said that the future course of rate hikes will increase and will be gradual. fed chair yellen spent time explaining these will not be regular hikes. >> my guess is that the economy will progress in a matter that's not sufficiently even, that we'll decide to make evenly spaced hikes. >> all right, here's early forecasts. the economics say the second rate hike, june 2016.

barclays says three hikes in 2016 and 2017, and jp morgan and rbc calls for four hikes in 2016. the market expected two rate hikes in 2016, but now we have the projections from the fed officials themselves looking for four next year or one hike every other meeting, which yellen says she's not going to do it. unclear how that's resolved between the market and fed. look at the two year note suggesting that the short end of the fixed income market sees only modest hike in the next couple years. not exactly clear why the fed moves now or next as it was why they moved the first time. firm to higher inflation, continued modest growth of 2% or higher and stable and low unemployment rate of 5% likely bringing on the next hike. there's at least an even chance now for it to happen in march. remember, the 2016 fed, guys, is more hawkish than the 2015 one. >> coming into the voting position?

>> yeah. bullard is in there and esther george. last year, you had the single hawk of jeff lacquer. >> you say you have the one gas station at $4, and everybody else at $2. the refinders in the schedule delivery -- is that how you operate there? you notice how gas prices go up immediately and down slow. >> it's not true. >> with banks? >> with banks, it's true. with gasoline stations, it is not. there's been -- >> okay. >> rocket and feather and gas stations -- >> you're not winning this argument. >> there are multiple researches -- >> unbelievable. >> you're not going to win. >> that's what i do. like, i defend indefensible positions day after day. just saying what the research shows. >> you grocery shop at the convenient store for the prices? >> no. >> they are aged like wine. >> pancakes in the diner at two in the morning. >> steve, thank you. >> thanks. our next guest runs a large

investment firm. joinings now with reaction to the fed's move is joe sullivan, the chairman and ceo, joe, great to see you. >> great to be here. >> joe, we knew the move was coming, but what happens now? >> look, i think as steve mentioned, the fed has been very transparent, that and janet was again yesterday, again, pointed out she mentioned twice in the remarks, gradual. nay have indicated they are going to be measured, data dependent. they always are. what i look back to is how the fed handled the taper. they were measured and thoughtful in tapering bond purchases, indicative how they proceed going forward. >> does that mean it's not time to change much in your investment strategy, or is this the signal that, hey, we're going to be looking at a different world a year from now, and you should gear up? >> i think if you're only thinking about your investment portfolio now, it's interesting in one of the papers this morning, there's an ad that says the fed acted now.

now you should. you know, if you're adviser's only calling you now to act after the fed, it's time to consider a new adviser, right? what we've been doing is work with people. this normalization of rates has been something that's been anticipated now, we've been talking about this for a year, year and a half. >> we're in the getting to normal in quite a while. >> exactly. our view is, i think, a lowered, continued overall lower level of rates for an extended period of time, but nevertheless, it's gradual. it is going to move higher. >> what should people be doing? talking to them already, you knee it was coming, what should they have been doing over the last year? >> move away from more rates oriented strategies, and right now, quite frankly, we believe this is actually the most important time to have your active management, right? asset management is going to give you passive results which is negative in a rising rate environment. this is when active management matters. >> they have done well -- >> particularly fixed income.

>> three of the last four years. >> nay have it in equities, but fixed income has not produced results if you look at it. this is the worst time to be invested passively in fixed income. you want an active manager who has the flexibility to be able to adjust duration, adjust credit, adjust the types of securities, move into flowing rates if you want, move into used derivatives, things like that. if you're passively invested, you take what the market gives you. >> talk about equities again, though. >> sure. >> is this a situation where you need an active manager? are you worried that indexes are near highs that they rebounded to levels they should not be at? >> no. there will continue to be differentiation. moving to a more normalized economy, differentiation and security selection is going to matter more. >> like what do you think will do well? >> well, look, clearly, the financials will do well. i think there's going to be -- this is where i'm going to get

off, our investment manager says, joe, this is not your area, which it's not, but having professionals to differentiate in a more normalized rate environment and more normalized economy. look, we had rising tide of unprecedented fed intervention for an extend eed period of tim. it's lifted everything. making it, frankly, difficult to be an active manager into really differentiate itself in terms of security selection. as that changes, as rates move higher and as you have companies that have earnings and things like that, i think it'll be more important to be an active management than passive. >> fed stepped away because they feel confident in the economy at this point, that the economy can kind of take the baton and run from here. do you agree with this? >> yeah. i don't think -- look, i think it was time. i mean, i think everybody was tired of talking about this and anticipating this. we just needed to take the training wheels off a bit and

get going. i think they would not have raised rates a single time. if they were not confident they could continue to raise rates a couple times in the next year, i don't think they would have done it once. it was time. we needed to get going. i think the other thing is that, you know, the last time i was here, we were -- rate hike day that didn't -- where the fed did not raise, and that was in september, and they were, at that time, if you recall, heavily influenced by china and other markets. you had credit, high yield, credit markets, all that. look, if the fed waits for the perfect time when all markets are perfectly aligned, it was not going to happen. they needed to go. >> joe sullivan's going to be here, more to talk about over the next half hour. coming up, exclusive interview with richard anderson, the ceo of the airline, making a stop on the squawk set first.

impact of higher interest rates on banks, the ceo, dick evans, weighs in on fed and energy investments. at the top of the hour, rick fisher outlines expectations for rate hikes in the new year. "squawk box" returns with that in a moment.

people think you're coming.

>> welcome back to "squawk box," everybody. futures indicate a higher open again. dow on the morning after the rate hike look to be up 62 points, s&p up by 7, and nasdaq up by 25. >> delta airlines hosting the final investor day of the year here in new york today. shares nighing high. just 1% away from the all-time high and outperforming the broader airline index by 20% this year. richard anderson is here in studio, of course, the ceo of delta airlines. good morning to you. >> hi, andrew. >> we just see federx's earning, better than expected, and you talked about the idea, even though you are a commercial airliner, perhaps some airliners should be valued more in line with the other transports in the world, and i don't know if you think about the train market, if you will, or fedex, look at those say, that's how you guys should be looked at in a different way. >> absolutely. if you look at our business

mod model, we're more alike in s&p industrial or in s&p transport, and the kinds of cash flows that we produce cause us to want to say multiple so we're five or six turns behind where s&p industrials are, but we have high higher cash flow yield. >> what do you think has to change to capture that multiple, if you will? people have said in the last couple years, airlines may be closer to looking like trains because, actually, there can't be the competition there used to be. is that required? >> no. we have to prove ourselves to the market place, that we can be successful through the cycle. so we have to december risk the balance sheet, have diversity of revenues across the world and across different product segments, so that we do look like the stability of a good

industrial. >> how much of that is delta and how much is about your brother and rivals, some of which are not doing what you're doing. >> well, all industrial companies are in very competitive markets. we just want to be the best of the market place. we are certainly the best. we are certainly very competitive marketplace. >> you're going to take that -- >> we will take the debate before. >> in the most competitive -- >> we are. >> stand up for yourself for god's sakes. >> believe it or not. >> i don't believe that you're one of the most competitive. >> full of crap. >> explain this, then. >> watch out now. >> hold on. >> watch out now. >> prices on certain routes, not all routes, but certain routes have gone up in the past five years. >> look at the data. >> i looked at the data. >> the dot publishes data, and the data says on a real air fare

basis over the last decade, down 10%, so the market place is very competitive, and in the end consumers choose, right. >> look, becky and i joke -- >> they don't have a choice. gh going to omaha to see warren buffet, you don't fly there, by the way. only way to get there is on two direct flights on united. well, you fly there, but you got to go through -- a connection. >> yeah. look at competitiveness of markets, the one stop competes with nonstop and product substitutes between the two offerings in the market place, one stop versus nonstop, in the transparency our business has, no other industry has the internet transparency that the airline business has. >> made no money for 20 years because you're idiots. it's actually tough, really? >> it is tough. >> huh. 20 years, not making a dime. >> it's tough. the last decade, a year ago, ten

years ago, our enterprise was coming out -- was in bankruptcy. >> make you a utility so you don't make money? it's a public service that you're doing. that's what i'd like to do. no profits at all. >> no, that's not right. >> okay. >> he's been sarcastic. >> i know. just saying it's not right. >> i done see why any companies need money. just help for the public good. good citizen. >> richard, how important has low fuel costs been for the success -- >> it's been awesome, just awesome. [ laughter ] >> we're still on camera. >> i know, but it is. next year, if you just take today's forward curve, next year we'll have reduction in fuel. i don't know what fuel prices are a year from now, but a $3 billion reduction in cost to goods sold is huge. >> we do know sixty prices. >> the obvious follow-up question, are the ticket prices,

how much lower? >> well, the industry has been a negative unit revenue for most of the year, so yields are going down, but what we do is keep 75%, the goal is 50-75% of the fuel goodness, but we make investments back in the business, but a lot of boeing airplanes and facilities working hard on the product. >> why don't you ask howard schultz why he raises starbucks prices as coffee plunges? with him, you bow at the altaal. what's the difference? >> go to any corner on the street and get two starbucks. i argue the airline play a huge role in the economy of the united states, coffee, a little bit different take. >> there you go. we do play a huge role. >> saying there's a ewe tilety.

>> as a citizen, you should not make money. >> i'm not making that argument. another question, which is, you look at what's beginning on with coach, back to the bus, back of the plane, front of the plane, you invest more in the front of the plane. >> not true. >> that's not true? that's the perception in the industry. >> it's not true. >> anything true yet said? >> well, i mean, i don't want to be critical of andrew. >> why? >> because he's a nice guy. >> okay. all right. >> rich, what is going on in terms of -- there is a perception in the airline business across the board that there's been a lot more investment in the front because there's more pricing pressure or ability to raise margins. ? well, no, not the case. we invested in the airplane because unlike a hotel business, we can't segment with different props but have to csegment on t same airplane. we added, essentially, four products on the airplane.

on all, individual video, investment in seat power -- >> do you find customers are more loyal today to a brand than the price? we just have the ceo of kayak on, the average consumer just goes on, figures out how to get there, and the question is, how loyal are they? >> we have high loyalty because our net promoter scores are high, and in the end, that's key, net promoter scores. are your customers -- a net promoter score is what percentage of the customers recommend you to their friends and relatives as a good brand. you want positive net promoter scores, and we have high brand p loyalty which is translated into a large revenue pree yum in the

u.s. >> snacks. >> never gone away. >> is that to squeeze more and more revenue out of the flights? are we going to swing back the other way? coach starts getting dr. >> well, we've always taken the view that one of the things that had to change in the industry was we always treated ourselves as commodities and did not treat ourselves like employees. the reason we are the most profitable, most successful, highest quality airline in the world, we decided we have to care for the customers. we do not provide a commodity. it is very hard to run an airline of our quality, this year having almost 200 days of no cancellation in the domestic business, this is not a commodity. we have to make investments in it for our customers. >> quickly because we have to go, security concerns. everything that's going on in the world right now, what's changed inside delta? >> well, a lot has changed in

the industry. i fly on our airline in coach all the time. i experienced the product and go through tsa like everybody else and cbp. a lot changed in the last decade. while we criticize tsa, they have done a good job. >> they have. it's not theater as described? >> it is not. it is a sophisticated risk based model, and jay johnson has led, i think, a very important transformation of how we use intelligence to manage risk in the aviation. >> you hear terrible reports where there's been tests where they have put, you know, guns and bombs through and somehow they magically get through, and them you think the whole thing does not work. >> well, what's really happened is we've moved from trying to screen 100% of everyone to risk based screenings, and i think that's key. risk based screening is what makes the difference. >> is that profiling?

>> no, it's not profiling. it's taking all the data we have as an industry and that our government has and using that data to be certain that we employ air marshalls correctly . >> companies themselves, that you do independently of everybody else? >> we do a lot independently. our board of directors has established a committee of the board, the safety and security committee, and we just appointed to the board, tom donalin, retiring to the national board of security to the president so we make it a priority not just to rely on dhs and the government, particularly outside the u.s. where we have a lot of flights in places that -- >> are there enough air martials? >> well, you don't know what the numbers are. they do a good job. >> i love those guys, man. you'd never know.

>> never know. >> you never know. >> have i convinced you? >> you have. you have. happy holidays. >> what? >> five years i never convinced you of anything. what did he convince you of? >> that there's competition in the market. >> bs. >> there can concerned customers that the stopping over thing is good as -- >> if you revised -- >> no, i have not. i do love richard, though. >> i like the debate. i like the debate. he's always good. >> i had to conjure it up. >> you stir the pot always. >> what? supposed to do something here, aren't we? caught on tape is spanish prime minister punched in the face in a campaign rally. that video next. later, today, i hope we have it in slow motion, and later today, famed short seller, jim chanos on china. was that a sneeze? bless you. >> thank. >> china, fed rate hike live from the yale ceo summit today

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welcome back to "squawk box," everybody, this is cnbc, first in business worlds wide.

the turing ceo arrested according to multiple reports said to be accused of using stock from one company he funned for unrelated business transactions. this arrest is not related to the recent controversy about a price spike for turing's drug. >> and heaving spit balls in study hall too. >> he's 32. >> oh, okay. never mind. >> a busy morning for economic data as we get the first roberts to come after the fed's rate hike. in an hour, we'll get initial jobless claims, and also the fed index will be released at 8:30 a.m. eastern time. later this morning, the conference board has index of leading indicators with the report that gets attention today, energy department's weekly look another natural gas inventories. the commodity fell to the lowest price in 14 years, although,

rebounding ever so slightly this morning. >> this is the video, check it out. spain's prime minister punched in the face. ive not seen it yet. >> oh. >> that guy, man. >> oh. >> does he have any people around him? anyway, that's it? punched in the face in a campaign stop yesterday. the video of the take shows a man in the crowd, as you can see, i approaching the prime minister, and he was punched in the face, and a man reportedly, says here, asked for a picture with the politician before punching him. police say the attacker was 17 years old, arrested on scene, and the prime minister did not suffer any serious injury, but appeared later with a red mark on the face. the country's holding a general election on sunday. >> wow. >> in time for a quick final thought from joe sullivan, chairman and ceo of leg mason who i find just to be a very

attractive man. i think we have a two shot. check this out, joe. >> the last time i was here, you were giving me a hard time about the hair. look straight in the camera. look at this. >> fair enough. >> smile together. >> all right. >> that is -- where were you born? >> minnesota. i'm from minnesota. >> i was adopted, and i'm wondering, do you know your lineage at all? your name. >> yeah. it was rumored i had a brother. >> this is so weird. >> i never knew. [ laughter ] >> let me ask one last thing to prove it. do you see the gray there. >> i know. same thing working. >> you die the stuff brown? >> stop. somebody asked that. if i would dye it, i would not do it this way. >> looks fake. >> it's not. it's real. >> neither is mine. >> let's have coffee afterwards. >> all right. >> have your individual that has an elevated position that makes

more than minimum wage call mine. how was that? >> great. >> at this point in 2016, my fear is that a lot of the head winds this year were boiled in the strong dollar, but uncertainty about the point when the fed raises. you heard it's two next year, maybe three, maybe four, maybe june, maybe mar. . it's going to be the same soup in terms of waiting every month to see if they go up. does it not matter now? we started on the way up. >> we're in the process. you look for points in markets. i think, for example, we did not talk this morning, thought we would talk about high yield market in credit. you know, if you think about it, there's a significant disconnect, particularly in high yield, but investment rates between what the markets are seemingly prices in from default perspectives. there's plenty of opportunity. rates move higher. it's going to be slow.

it's going to be gradual. you want a manager with flexibility and can be thoughtful, and there's maturity and all that kind of stuff, but there are opportunities out there, and significant disconnects, and i think right now in this week, the last week or so, credit has reared itself as a significant disconnect. an opportunity. >> so credit is an opportunity. okay. it has not been for a lot of people. >> we've been in a bear market for credit for the last year and a half. >> stocks, nothing else. so next year, if multiples up, or stuck with whatever earnings gain? multiples at the high end. >> i think it's going to be a lot about earnings going forward. >> do better than high single digits when earnings seem like there's head winds? >> it's kind of company and industry specific. >> you got to pick the right ones? >> not a 20% yield?

>> moving from the environment where the rising tide rises everybody. it's going to be company specific going forward. >> okay. where we having coffee? >> yeah, i have trouble listening because your looks, to me, i find so appealing. it's hard for me to even -- that's scary. anyway, thank you. >> thank you. >> all right. >> enjoyed it. >> all right. >> it was good. >> thanks. >> happy holidays. >> you too. when we come back this morning, fallout from the fed's decision to hike rates. rebecca patterson talks currencies, equities, and path for future increases. stick around. "squawk box" will be right back. . . 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?

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dollar index gyrating, the highest level in a week after the decision to raise ratings, and seeing where currencies head from here, i didn't know they were going to have app

introduction. i have my own idea of how to approach this, and that is that we talk about it not being much, but talk about not being a big deal for credit markets or stock market, but for currencies, that's why whether it's the stronger dollar or emerging markets. we have to see what it meant, yesterday's action and what we see next year. what's it mean for currencies, in your view? >> well, we'll see. if the fed goes along the path that the market's discounting, it's not a -- >> staying where they are? >> of course not. it's not going to be the same thing seen in 2014 and early '15. it went up 25%. that's a huge move. since then, trading in a range, up a little bit, again, some currencies down against others. from here, with fed hikes priced

in, modest fed hikes priced in, if that's what we get, dollar strength continues, but in a moderate way less scary. the euro stays at 108-109? >> go back to europe next year for vacation. it's closer to 1, but closing 105 is the technical support level. we'll flirt with it. maybe breakthrough it. i think the ecb wants a weaker euro. that's the strategy. >> not just us calling all the shots. the ecb goes the other way. >> exactly. >> depending on how weak china is, they either, you know, pause on their efforts to change what kind of an economy they have because it's going to be tough. they are not exporting as much. they don't have the consumer economy they want. they got to get -- maybe go back to the future or -- well, back to the past. >> right, exports.

>> we need china chugging along for the rest of us. >> we need a strong china, but not via weak currency that's destabilizing. we want our cake and eat it too. >> keep raising? >> to me, it's the cliched thing, it's about the pace. if china weakens its currency, but it happens slowly, it's not as disruptive for markets. if we wake up with a 5% devaluation in one day, that's more disruptive and shocks people. >> fed continue to telegraph from here or guess from here on out? >> that's what worries me a bit with the fed. in the past, we knew we were going to get a certain hike every couple meetings or at every meeting, and now we don't have certainty. the market loves certainty, and so we're going to be watching wage data, watching confidence data, any inflation data, and i think that could bring more pockets of volatility like hopefully, not as bad as this year, but see volatility in the year ahead because of the we don't have the fed certainty. guests talked about this.

for me, it's about wages. if you see any signs that u.s. wages rise faster than people expected, the fed does not want to get behind the curve, stronger dollar, that could be disrupted for a lot. >> all currencies go -- do they decouple? you know what i'm talking about. >> you know the currency, my favorite is now the peso, joe. >> that's going to go up or down? >> already going down. >> going down more. >> emerging markets, we put the year ahead outlook out, about emerging markets, underperformed, equities under performed, time to get back in? answer's no. the one country to watch is argentina. once they devalued the currency and a new reform minded government, a great finance minister, a colleague of mine, an i think they could be the bright lite in the space. >> you don't have a view on the -- >> i'm still pretty much negative on emerging market

currencies. >> leave it at that. i can't do it to you. >> happy holidays, joe. >> i know. >> major bank stocks boosted after the fed rate hike announcement. we have a look at what higher rates means for financials, and dick evans, the ceo of colin frost bankers, taking on the impact of lenders. right back with that and more. (trader vo) i search. i research. i dig. and dig some more. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours. i built my business with passion.

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welcome back, banks wasting no time to raise their prime rate for borrowers. good morning. >> good morning, becky. banks move rates in tandem with the fed funds rate, an increase of a quarter point yesterday means the prime rate increases to 3.5% beginning this morning. bank of america, chase, citi, wells fargo, pnc among banks making that announcement after hours, effective immediately, that increase is taking place. it's an important move because it is a benchmark for credit with variable interests like credit cards or adjustable rate mortgages and some small business loans are priced off of prime. it'll take a couple billing

cycles for borrowing to see interest payments tick up slightly, but it will take longer for banks to pass on that higher income to consumers in the form of deposit interest. not a single bank announced it's increasing the standard deposit rate, and there's really not any pressure for them to do so. goldman sach's analyst writing, quote, for the overwhelming majority of house holes, the incentive to switch banks in order to get, call it a 50 basis appointment higher rates on deposits is low. he says switching cd with less than $100, and switching a savings account is less than $40, the effort is not worth it helping the banks retain more period of time for now. they can park the same deposits overnight with the fed, but for a higher rate, and they don't pay customers more, at least not yet. the long waiting period and flattening yield curve and effects of a stronger dollar that could hurt growth, hurt exports are still issues that

the banks are grappling with figuring out the path of the rate hike when rebecca talked about. they took down earnings sharply, now expected to grow only 2.6%, less than half the expectations, kb guys, just in object. you see how the street is expecting this to take some time, but for now, customers only see a little bit of an impact there. >> okay. thank you for that. see you soon. in the meantime, regional banks boosted after the fed's announcement. regional banking etf, the kre rising over 1% after that hike, and joinings now, dick evans, ceo of texas regional bank. the immediate impact on your thought process and what to do in terms of loans? >> well, quite frankly, right now, you won't see a lot of change. we did raise interest rates, our prime rate today, and we'll continue to move forward, but i

think what we saw yesterday is a miracle. after nine years, we finally see the fed make a decision. it's been too loose too long, and i think this is a real positive from the stand point for lending because what you see over time when rates start to go up, you also get a reaction that i've missed the bottom, borrow money now. particularly in the business side and also in the retail side. >> so you don't think this is beginning to slow lending, but increase lending? >> i think this is a positive going forward. >> when you think about what's going on, you're in texas, and the energy complex, we talk a lot about what's going on in high yield, in energy. are you making new loans to energy companies right now? >> we have. we had a more recent drop, oil go up from this time last year

100 to 80 to 50 for a while, d iran slowing down, and china down do 45, and recently it's trading at 35. it's been hit pretty hard. i think the industry has adjusted extremely well by cuts costs. the thing that's not good for the country is to cut too far and take so many people out of the industry that this is a thing that will cycle, move up. i don't know when. nobody else does. th this, what we're doing when you have the relationship and with cullen frost, we have a strong balance sheet, a lot of liquidity, and we know the customer, and i don't see any new customers having problems that i didn't know about in january of this year.

>> i understand that you don't think there's a new problem. the price of oil is obviously a lot lower than people anticipated, i among, even your own modelling making the loans. there is an expectation, a conversation we have around here a lot about a lot more bankruptcy and restructuring. do you see that coming up? how do you position yourself ahead of that if that's the case? >> well, there's no question, there will be $35 oil, you see more, and where you see it with with the companies who had too much leverage. not a surprise. that's always where it happens, and, particularly, in bigger companies that grow too much. we start talking about interest rates, the problem is the bun created by having rates too low for too long. there was money chasing too few deals and the energy business is part of the problem. those companies that were overleveraged will have the

problem, and our particular case, where we know our customers, i work with them, we just have to work through it and, quite frankly, it's very manageab manageable. our charges are higher, sure they are. >> okay. we're going to leave the conversation there, dick, we appreciate your perspective this morning. the day after that historic announcement, thank you. >> thank you. when we come back, we have more of this morning's big movers. the list of stocks to watch is next. then, strategists back with us with an update on the bold bullish call earlier e this week. >> i think the market here has a potential for the rip your face off rally. human nature to read into negativity, what happened last friday, but it doesn't deconstruct the bullish case right now. could be new highs by the end of the year, new all-time highs.

welcome back, futures indicated the market to open 40 points. anywhere from 50 to 65, 70, now back down to 38 after more than 200 points the market gained yesterday. good day the day before, but still now, not making up last week's losses. i guess fed is happen. coming up, former dallas fed president richard fisher joining us on the fed's nonhistoric rate

hike saying this is critical in the new year. we'll be right back.

markets ringing in a new era, yellen signaling the economy is strong enough to

withstand higher borrowing costs. inside the fed's decision and what it means for your money with the former dallas fed president, richard fisher. >> with a rate hike out of the way, does that clear a path for s santa claus rally? the ceo of quicken loans here breaking it down. announcing the rock n' roll hall of name class of 2016. ♪ ♪ smoke on the water >> the list who made it in and who got snubbed as the final hour of "squawk box" begins right now. >> live from the most powerful city in the world, new york, this is "squawk box." welcome back here to "squawk box" on cnbc, first in business worldwi

worldwide. less than 90 minutes from the opening bell on wall street, and the futures now are looking up after that interest rate increase yesterday. dow jones looks to open higher, 39 points higher, and nasdaq up 20 points, and s&p up four points, and checking out markets in europe at this hour, they had a strong gain as well on the backs of what happened here in the united states. the dax up over 3%. looking there at the cac up 2%, and ftse up 1.5%. >> up to date on stories that investors are talking about today. avon shares are jumping this morning. the journal reports the private equity firm is near a deal to take a 17% stake in the cosmetics company and buy most of the north american business at 80%. the stock up 13%. general mills has earnings out this morning, short of estimates on bottom and top lines on retail volume declines. the company says, however, results are in line with its own expectations, but, still, the stock is down 3.6%.

we have the latest weekly jobless claims in the hour, and economists look for 270,000 new claims for the week down 7,000 from the previous week. turing ceo is arrested on fraud charges. >> this happened this morning. martin was taken into custody by fbi agents at his manhattan residents appearing that the charges are related to some dealings at his old company which was he was ousted from, ceo of the company before he moved to turing, and as ceo of that company, the company actually sued him for $65 million earlier this year claiming that he was defrauding investors using some funds from the company to pay back investors in the hedge fund, and that appears to be what the claims are today. we'll learn more about this, but we know he has been taken into

custody, claims of illegally using the company to pay off debts, et cetera. >> interesting. we knew the story line. we knew the company was suing him. >> right. >> do you think the additional scrutiny brought the fbi's attention to the case? >> couldn't have hurt. you know, if they are looking for a target, this is a guy everybody knows, out there buying, making all statements on twitter, saying he wished he raised the drug of the price higher, but that's not getting him in trouble here, but it's the securities. >> what brought in a lot of additional scrutiny to him. >> images? a perp walk part of the -- >> apparently, reporters were on site when arrested. i wish i got that invitation. i was not there. >> okay. >> there may be some. >> images may emerge. >> we're told there's a noon proconference to talk about it too. >> we'll cover it all day. >> thank you. >> thanks, guys. federal reserve announced, as you know by now, first increase in the feds fund rate in nine years.

richard fish er joining us now, former dallas fed president, and i'm sure your response was, oh, finally. >> finally. >> finally. you know, we've said a lot, and it 1 it just -- are we right, richard, some of the critics that the economy was probably in better shape a year ago than it was yesterday in that they probably should have done it then? >> oh, i argued for that, and i think they should have. finally, they acted. i think the key thing here, as i said yesterday, was or is, this is the yellen fomc. the key point here is there is a pivot, a turn, and we'll see what ensues, but i would have liked to have seen it earlier, but that does no good. fact is, just occurred, finally, as dick evans said in the earlier segment, a great banker from texas, waiting and waiting,

and you see the immediate effect in terms of what you reported around the world. there's relief. people expected this, thought it should have happened before, should have happened in september, but it's happened. that's good news. >> his point is that serious damage done by flawed monetary policy is not seen immediately in higher inflation or a miscue like that, but takes years before you see effects of monetary policy. do you -- is that going to happen? do you think that everything at this point is going to work out? i know bernanke could not believe rates were at zero that long. >> yeah. >> i didn't read the fine print there. mean they waited too long or conditions, didn't think the conditions would have warranted waiting being at zero for that long, do you know? >> joe, when you bring rates

down to zero, you change the way all investable assets, future cash flows are discounted. we had markets elevating in every category. look at where cap rates are in real estate. ridiculous. look at what happened with bond markets in the triple cs coming down on sustainable yield, corrected, equity prices elevated everywhere. it's a question of the rate at which they continue this process, how much they do going forward, but it's the nature the way cash flows are discounted. maintaining this for so long created a dependency on central banks, and i like to say it's -- they've been administratie in ritalin to the markets for years. we know with that administration of ritalin, it does no good.

it calms things down, but eventually, there's after effects. we won't know under the be bernanke, whether it works or not. we won't know until it's unwound, but the process gradually, baby steps taken, and we'll have to see over time if it was a successful venture or not. >> well, we, you know, down to 5% unemployment, and i don't know if there's cause and effect there, but i'm sure they claim that that was something they orchestrated, and we've also probably performed better than most developed countries. >> absolutely. >> than the rest of the world, so they said, you know, maybe we have things like triple bonds need to go down in value, but maybe the things that we need to deal with are not offsetting the goods that's come from that. i don't know. >> well, look, i'm very proud of having been with the group, a wonderful group of people who made very tough decisions. bernanke, a great leader. i think janet's going to be a

great leader. it's just starting. again, she'll determine the legacy, joe, and you will not know if it was long term successful until we normalize. whatever that means. we take some of this drug out of the market place and see how it settles down, but so far so good. >> so it just -- in your gut, do we go up faster than the fed thinks or the market thinks or do we stay where we are or even go down, which would be -- going back down, which would be a shock. >> no. i, you know, i think we've started going up. it may hold for a little while. my favorite quote here is pipyo cross the river by feeling the stones on the soles of your feet. forget about the math about the stuff and precision everybody would like, it's clear from the press conference yesterday that's the way they will proceed. cross this river by feeling the stones and really assessing

quality and quantitative whatever inputs they have, and it's a judgmental business. people have forgot that. in fact, i believe the fomc forgot that for a while. we thought we had the formula for everything. it really is a matter of just watching, observing, smelling, hearing, feeling what's going on in the economy as long as the economy comets to progress forward, unemployment comes down, hopefully without too much heat from the wage price pressures, and i don't see that right now. they can proceed gradually. perhaps pause every now and this. time will tell, but no specificity was provided in that press conference yesterday, and i think that's a good thing, actually. >> okay. richard, thanks. thanks for the update on your thinking and we'll hopefully see you soon. >> thanks a lot. >> okay. >> have a great holiday, guys. >> you too. >> thanks, richard. stocks on the move, fedex took off after posting stronger than expected results because of holiday shipments.

citing better revenue quality and e-commerce growth up. whipsong, the company or copyright royalty board issued a rate increase on internet broadcasters. the royalty hike up 20% was blow the record companies hoped for. the increase imposed covers a 2016-2020 rate period. also, oracle reported a mixed quarter as the software company facing currency head winds and they topped earnings while revenue was in below estimates. the cloud business a bright spot with revenue growing by 31% excludeing currency effects. when we come back this morning with the fed rate hike out of the way, can investors expect the santa claus rally on wall street? find out why banks could be poised for a nice move from the head of fidelity's income fund. look at futures this hour, higher all morning, but this is the lowest all morning. futures indicated by 32 points. s&p futures up three, and nasdaq

up by 18. "squawk box" will be right back.

welcome back, everybody. breaking news this morning. shares of a company that is a very small microcap, a company called kalobios. this is news because turing's ceo arrested on security fraud charges. this company kalobios is a company that turing took a stake in last month or earlier this month. they planned to liquidate that. the stock down more than 50%. we have to note this is a microcap company before the moves today, talking about a market capitalization of under $100 million. it's going to be far less than that today, but the news here is that martin's been arrested, the ceo of turing pharmaceuticals and took stake in this company earlier this month. that stock is down by 53%. >> i mean, that's the one that it was as low as 44 cents,

buying it for pennies. right? and that's -- so at $23 the mart cap was under $100 billion, so at 44 cents, the market cap was, like, i can't do the math that quickly, but -- >> under a hundred million, yeah. >> under -- >> under 10 million. >> it would be under 10 million total. he ran it up. >> looking for the same play where you take a drug that's been out for decades, raise prices. >> you don't remember, but i remember they did this in the early days of cnbc all the time, reverse blind pools and the power boat that go ts something or another, and i think all those guys went to jail. i think part of that might have been -- a hero with a yacht, a beautiful girlfriend played by,

you know, leonardo dicaprio. >> this happened with the markets, stocks surge after the fed raised rates for the first time in a decade, and there's a new generation of investors who have never seen a rate hike or tried to invest in one. let's see what sectors could benefit from the move. joining us right now is jim morrow, with $8 billion under management. jim k thank you for being here today. >> thanks for having me. >> fair point there's plenty of investors who never lived through a rate hike or lived through one while investing. it's been almost a decade since we've seen this happen. what do you think it changes as we get into higher rates? >> it's interesting. i think a lot of things change with the fed's action yesterday. think about it at the sector level, one of the areas i think is most interesting is banks. it's been a long time since banks were in the news for positive reasons, but this action by the fed's really going to help banks at a fundamental

level. net interest margins under pressure, and higher fed funds is going to help them fundamentally drive strong relative earnings growth next year. >> are there banks you like? talking the big banks against the small banks? >> yeah, i think the most interesting part of the market is in the regional banks. again, these are not real capital marketings driven banks like big wall street banks, but bread and butter, regional banks throughout the country, in great position from a credit perspective right now, they have low loan to deposit ratios and low deposit costs so this action by the fed's going to help them. >> market likes what the fed has done, but this was a very clearly telegraphed move. from here, we're not sure what happens. what does that mean for volatility in the markets and concerns every time we're back on a rate hike or meeting wondering if a rate hike results? >> yeah. i think we can finally stop worrying about when the fed is going to start to raise rates, and you're right. i think the question now moves to at what pace are they going

to raise rates? i think the action yesterday in the market and decline in volatility showed a huge sign of relief in the market so i think this fed has shown it's data dependent, and as the economy evolves over 12 months, that dictates terms of change in the interest rate. i think the market gets back to basics, look at earnings growth that drives the market from here. >> don't we have a question hanging over the head now, with every rate hike, with every meeting from the fomc, the idea that could or could not raise rates having impacts on stocks and more volatility? >> yeah. i mean, it's potentially true, but moving forward with the first rate increase was really a concern the market had, and now there's a chance to see how the economy responds. i think yesterday's comments by the fed were pretty clear they are going to be data driven and be fairly cautious at moving too quickly. yeah, each meeting is exciting for a while.

this is sort of back to normal, wondering what it is on a go forward basis, and that creates healthy action in the market. >> if you think it's about earnings expectations or growth, what are your expectations for earnings in 2016? >> again, i think it's continuation of the status quo, in a low nominal growth environment, head winds from fx and dollar strength and it's stock specific and sector specific for growth. turning back to financials is an area of the market where this action from the fed has a fundamental impact and could have strong relative earnings growth in that sector for the first time in a long time. it's been a long time since people were excited about bank earning. go back a decade, i think. >> what do you think about industrials? facing a tougher road if the fed continues to raise rates and dollar gets stronger. >> it is a head wind seen in

results, particularly for multinational industrials, but each industrial has different cycles at work if you leverage to the energy space, you're in a different environment than domestically focus the, and so i think this is an era where good stock picks and active management plays a role in finding ideas in a low nominal growth environment that works really in any sector. >> okay. jim, thank you for joining us today. >> thank you. coming up, uber friends. friends facebook. unique deal. details after the break. rate hike out of the way, should you be looking at that mortgage now? how rising rates affects home prices. strictly forbid it from "space cowboy," the ceo of quicken loans joining us. this was a no. ♪

welcome back, facebook and uber making it easier to hail a ride. order your uber straight from facebook's private messaging app, the messenger. that integration's been coming for a long time. recode reported the two sides in talks about doing this in december of 2014, and unclear, though, whether facebook takes a cut of the sales. check out shares now of facebook at $107.

i can't imagine deciding that's how i get my uber. >> weird. >> silly little integration, but uber's been doing that with a lot of apps. >> were you on facebook yesterday? >> every day. >> are you? >> was there something that i was supposed to see? >> no, no, no. i wondered. some people -- seeing if it's going away. people don't go on that much. >> i go once a day to check. >> you do? you too? you don't? >> i didn't used to, but with events recently, i'm on more. >> i love myspace, and i'm just -- >> just sticking to it? >> you're on myspace. >> no. i have not been on any. i have a twitter account. i don't like it. i like looking at the news feed and keeping up with things. chipotle's co-ceo speaking to jim cramer on "mad money" last

night on the e.coli outbreak. >> we worked very, very hard to find what the source of this contamination was, and we've not been able to find it. we've done thousands and thousands of tests, testing our employees, tested surfaces, all the ingredients. nothing came up showing any e.coli whatsoever. >> the two guys reaffirmed faith in the long term outlook for chipolte putting the company's money to work. >> we've been very aggressive in the softening in the stock to buy back just as many shares as we can. >> a chance to talk to jim cramer about that in a bit to see what he thinks of it, too. >> yes. in the meantime, it is official, avon and private equity firm struck a $605 million partnership. they buy an 80.1% stake in the company, taking stake in the remaining company. the stock rose this morning on

reports the deal was imminent. up close by 27%. >> who might be a future nobel prize winner? that's the opinion of no less than russian president putin says blatter is well rchted and it's up to investigators to see if action was corrupted. >> give him one for economics. that's not a big deal. >> one of the great -- >> talking about peace. >> one of the great, you know, endorsements. >> talking about peace? >> talking about endorsements. >> a peace prize? >> they are. >> yeah. which is also sort of through inflation, not really worth that much these days, right? think about it. >> i won't mention -- >> i thought you were going elsewhere. >> i won't mention names. you know what i'm talking about. >> i do know what you're talking about. >> three of them ridiculous. >> anyway, tonight, on nbc, a

special special edition of "running wild" president obama goes across the alaskan wilderness. the president reveals off the script stories and what it means to be a father who happens to be president. his relationship with his wife and children, and like all parents, balances time between work and home. no subjects off limits on the interview tonight at 10:00 p.m. on nbc. >> coming up, snubbed by the rock n' roll hall of fame, talking about who made it and who did not in our "keep squawking" segment. send us thoughts on those who did not get in. tweet us and be sure to #keepsquawking. as we break, look at u.s. equities at this hour. back in a moment.

welcome back to "squawk box" this morning. unemployment data minutes away. rick santelli, before you give

us numbers, thoughts on yesterday's rate hike, sir? >> well, i think joe's nailed it all morning. it's about foreign exchange. recalibrate anything by massaging the currency. i think this needs to simmer through. i think equities will be firm for a few sessions possibly, but i think as it sinks in and the path becomes more obvious and the markets reconcile issues, it might change the credit markets scenarios. we have 271,000 on claims, andrew. that comes off unrevised 282,000, down 11k on that, and 124 billion, of course, minus for the current account balance,s cousin of the trade balance. with regard to philly fed, i think that's going to be a fairly important data point today. i wish i could tell you i had it. it's now supposed to be out at 8:30, maybe people that get the memo this morning, but with the dollar index strong as it is, i

urge investors to look at the 20-year chart of the index and consider as a technician that the more work you do in the price level, it gives you like the floor, builds floor joists. we have a lot of floor joists in the 1994-1996 area in the dollar index. a clearer path above. minus 5.9, remember, this is one of the forward looking numbers. it's december. how does that stack up to history and expectations? it's worst than we expected. we looked for a positive number. minus 5.9 is the lowest number of the year. you'd have to now go back to -- oh, boy, looks like february of 2013 to find a negative number larger than the minus 4.5, so i think that's rather significant as richard fisher pointed out today, and you discussed, there's been many more opportune

moments over the last several years with regard to data dependent so that it really is up for the adults in the room that want truly understand the fed to get in their head, terrorist not because of data improving over previous periods, why exactly did they raise? i have my own theories, but i think when you answer the question, there's a better chance to predict the pace in the future because i think the real next set of dots by the time we are, see how wrong the dots are, the market is already making a play, in my opinion, to try to handicap true path of rates which i think is more aggressive than some of the markets are pricing. back to you. >> okay, thank you, rick. appreciate that. for more on numbers and fed's decision to raise, let's bring in michael hanson, and jeff saut, chief investment strategist, that rip your face after rally beginning in earnest or are you in the camp of rick

where we have a couple days of positive news but a new realization? >> there's a line at 2090 on the s&p. i asked myself, are we going to bulk up against it for a pullback before we go through it or go straight through it? eventually, go straight through it and make new all-time highs. >> mike, where do you land? >> i think that the equity markets are a good sign, the fed shows confidence in the recovery, it's gradual, but they pull through okay. >> pull through a santa claus rally, and we're going to look at 16 and see what? >> well, there's volatility on the way there, but we're in the house, see 2200 next year. so you look at what rick is saying or joe, on the other side of this? >> no. i don't think anybody at this point would say, wow, the fed, i -- they think the economy's getting better than i -- it must be if they believe it.

they had no idea a year ago. they have no idea now. nobody's buying. >> they were concerned. >> nobody's buying because they have it. >> i'm saying -- i'm not saying -- >> every forecast over the past five years has been, every one of them came down. they have been anywhere close, but people are relieved they got off the snide or whatever it's called. is that okay? snide? i don't know. >> a little bit of the less uncertainty in the near term is gone. there was a dovish message in the big picture. the dots are not dovish. we look for three hikes, market's at two, they say four. data could be better, early signs of wages stabilizing. the fed could do for. >> if you think you're expecting fewer rate hikes, does that mean you expect the stocks will do well as a result because the fed's so accommodative, or you

think the market won't do well because -- >> it's supportive. they are looking for gradual. i think the market's a vague idea of gradual. market's okay with that. >> you say the same thing everybody else says, it has to be agtictively managed, only on way to do it, it won't work anymore? >> i don't know if i go that far. i mean, as an economist opposed to a strategist, you know, i pick fundamentals are favorable. look at the way the economy's going. the market. >> jeff, for those people playing at home, how do you deal with it in that respect? the idea of having everybody coming on, saying pick individual stocks, can't buy index anymore or etf. it does not work. >> well, i'm not so sure i see it that way. if this is what i think it is, a secular bull market with another six, seven, eight years left in it, indexing the portfolio is not a bad idea.

i add to that, however, i think you can add alpha by picking good individual stocks, and if you follow what smart people are buying, i was with ron baron last week for three hours in your town, and look at the top holdings, he's one of the best stock pickers out there. >> so what do you love right now? >> oh, i like the midstream master limited partnerships that have been thrown out with the baby water, if you will. they have good assets. they have hard assets. they have decent cash flows, and even warren buffet says real companies. i like strong buys from the fundamental analysts, low orbiting satellite play, a preferred out there with a 5% plus dividend yield. >> leving the conversation there, jeff, thank you, happy holidays. hope we see you again. >> merry christmas. >> mike, you too. >> great, thank you. when we return, former fed chair greenspan comments on the rate hike minutes ago.

we have the video next. plus, a look at what a rate rise means for mortgages, and if it's time to lock in the rates. the ceo of quicken loans, the chairman of the mortgage banker association, bill emerson joining us. "squawk box" will be right back.

making headlines, u.s. and cuban officials make an agreement to restore flights

between the two countries, the biggest step in normalizing regulars. a final deal could come in the next few days with commercial flights starting as soon as nest year. >> and happening right now, former fed chairman, alan greenspan is speaking to steve leisman on the council of foreign relations. steve asked about the market rally in response to the rate hike, and this is what he said minutes ago. >> i think it became apparent that the fed was going to just raise the rates and not do a series of rates, a then, basically, the markets just said uncertainty is gone, therefore, you drew up income earnings assets goes straight up, and this is a classic case of this. >> market has uncertainty in figuring out when the next rate hike comes if we're not looking at quarter rate or quarter point

rate hiekes every single meetin. talking about mortgage rates is bill emerson, chairman of quicken loans. great to see you this morning. >> good to be here, becky. >> we know the banks in terms of the credit card rates took the rates right up, higher prime rates, meaning americans pay more on the credit card bills overnight. what happens with mortgage rates? >> you know, this is such an overtelegraphed move that there's nothing that's happened with mortgage rates initially. the fact of the matter short term of the curve moved up a little bit. the fed said about the gradual nature of what to do with rates, we don't believe that mortgage rates are going to rocket up any time soon, so i think, you know, there's an opportunity here in the next six months to take advantage of still very, very historic low interest rates. >> when you say this was so well telegraphed, no immediate move, does that mean it was so well telegraphed rates moved higher in three to four weeks? >> we've seen a little bit of

volatility, but you're seeing interest rates pretty much the same place they were 30 or 60 days ago, in the same place they were 12 months ago. when you talk still in the very low 4% interest rates for 30 year fixed, somebody thinking about touching your mortgage, refinancing or that, i advise you do it in three to six months because we don't know what happens beyond that. in that short time frame, we don't see a big shift in the interest rate market. >> is that what you tell people who have floats rates, get into fixed rate or hold off on that? >> you know, if you think about it, anybody with a floating rate benefitted tremendously over the past three, four, five years with rates being very, very low, but, yes, i tell you if you're in an adjustable rate floating mortgage, thinking of getting out of that, now is the time to do that. no two ways about it. >> bill, what have you seen with activity, refinancing? people coming to the table for

new mortgages to buy new houses? what can you tell us about the housing market from where you stand? >> so the housing market's improving. it's getting gradually better m i think that's good news. home prices up more than wages were up. people are concerned about that, but the area inside of the market that's still dell with are the first time home buyer. they are still a little trepidation about bringing themselves into that. refinancing is still strong. i think the mba's predicting one trillion dollar market next year. of that, a trillion purchases. good news, good sign for the home buying population. >> why do you think first time home buyers are a smaller portion of the population, buying population at this point? >> you know, that's a good question, becky. i think there's two things going on. one is just an educational process. i believe people out there think they have to have 20% down to buy a home. that's simply not the case.

you can do as little as 3% down, 5% in most cases. there's a lot of education that needs to happen there, and i think on the lending side, there's fear of lending to the edge of the credit box because of the regulatory environment and the enforcement environment that exists. when you couple two things together, that leads to that a little bit. >> what do you see in terms of move of mortgage rates for things to be less affordable for first time buyers? wondering in three to six months, moving x percent, that means a slow down in housing? >> you know, i think, again, if we're in the low fours right now, any move to 4 or close to 5 does not necessarily impact somebody buying a home because i think rates are still very, very low in that scenario. what will happen if rates go to the level is you'll see refinancing start to back off, and so from an industry perspective, the focus is on people buying homes, but, you know, i think you have to get north of 5% for that to really

start impacting what people buy and afford. >> and when do you expect to see rates at 5% or north of that? >> well, if i had that crystal ball, that would be a beautiful thing. you know, i honestly don't think we see that until 2017. i really think 2016 is a similar year to 2015 from a volume and interest rate perspective. it just really depends on what the fed does, but given what they telegraphed, we don't see a significant shift in 2016. >> okay. bill, thank you so much for joining us today. >> thanks, becky. always great to be here. >> see you soon. jim cramer talks from the new york stock exchange, but here right now, the futures which are looking up in a big way after that rate hike yesterday. dow jones opening up 40 points higher. back in a moment. . but not every insurance company understands the life behind it.

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i read ahead. i have not seen this yet. here it is. a minnesota mom sunk a half court shot to win a half year's tuition for her daughter at bethany. she had three chances, no luck on the first two. it was short, but it bounced up,

and it still went in. it was short, but it bounced all the way up and rattled through. the school counted it, and she ened up getting the prize. wow. she definitely earned it. that was tough. >> awesome. >> you know, tougher to do it that way. one more time. here we go. >> oh short -- oh! there it goes. [ cheers and applause ] >> oh, yeah! >> that would -- that would count, wouldn't it? >> oh -- >> oh -- >> it would count in a regular game -- >> not if time was up. the bounce would not get you there. >> down to the new york stock exchange. jim cramer is joining us now, he had a meeting last night, just with a couple of, you guys, just co-mexican restaurant magnets,

having a conversation with two others, right? >> they run more stores than i do, and they made the statement they are e.coli free, which you ran two great clips, which i think is basically the line in the sand, and the fact they hav been buying back stock. if you look at the chart, you can tell they have been there consistently. the costs are going to go higher but they are going to bear the costs. they are not going to raise the price. these will strengthen the gross margin and make them into the safety standard. can you buy the stock? i still want to see that quarter but, gee, their conviction level is pretty high. >> so it's good they didn't find the source or does it mean it could happen again? that's the only thing that scares me. >> they are changing their distribution system. even if there was something that might have that taint, they are going to catch it. my friend, danny myers, says he

has eaten there several times since then. when mr. els was on the "today" show, it was a little more haunting. monty is out there saying, listen, business has not come back yet but i think it will come back in 2016. >> could i eat off your floor at your restaurant? do you walk around there with one of those white glove tests? >> when i serve, when i host, let's put it this way, you are going to get a free beer. >> i'm sure all your employees love you but i think i would try to mind my ps and qs if i worked at that place. so what else? the mark went up a little bit yesterday, a couple hundred points. do you think that was something that we can say is going to be the beginning of a nice rally or do we have other things to worry about other than the fed? >> the fundamentals for a couple of companies. yesterday, we had honeywell, fedex, ge, cvs all say, business

is okay. don't worry about our business. the market loves that. if the market is going to love okay numbers, they reaffirmed what they said they are going to do, we are okay shape. we have a relieve rally. we are oversold. once they start raising, you have to be more cautious. you can't be as bullish. pretty simple. >> for you, cheap trick or yes goes into the hall of fame? >> yeah. >> cheap trick or yes? which one should go? cheap trick made it. yes got turned down again. the smiths got turned down. >> put them in. put them in. ♪ >> they are playing this again. if the guy did not have that guitar, i don't think anyone would even notice. >> cheap trick? >> a bunch of weird guitars. >> when we come back, pore than 800 voters and fans picking the

rock 'n roll hall of fame. all making the cut but who didn't make it. we'll break it down for you when squawk comes back. they come into this iworld ugly and messy. ideas are frightening because they threaten what is known. they are the natural born enemy of the way things are.

yes, ideas are scary, and messy and fragile. but under the proper care, they become something beautiful.

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on the network of yesterday. welcome back. time to keep squawking. these are the stories that keep you buzzing. get ready to rock 'n roll. the inductees, cheap trick, nwa, chicago, deep purple and steve miller all making the cut. i want to know how i can vote? >> who got snubbed? >> janet jackson, progressive rock band, yes, britain's the smiths, chaka khan. those were those that didn't get inducted and pete rose. >> they can get in next year.

>> chaka khan will be in there one of these days. >> here is my thing. morissy is an absolute genius. he is crazy as a loon. he is insane for the smiths. for the smiths and yes to be left out. people get mad. cheap trick had some live album that supposedly wasn't awful. people are writing in, what, they have two songs. i can't name a third song, can you? >> chicago, honestly didn't make it? >> they did make it. >> they better. so 25 to 6 to 4:00. i was told that meant lsd was lsd 25 and 624 was a code name for marwan na. >> is that where 624 came from.

>> they are asking anyone does anyone know what time it is? the answer was 25 or 26 to 4:00. supposedly, mother mary was not mother marijuana for paul mccartney. >> but jude was for john lennon. >> there were myths made up by your friend. >> i do know one really good one. >> maybe you shouldn't. >> give me a hint. >> eric burden, the animals. do you know who the eggman was in the walrus? >> i thought it was from alice and wonderland. >> raw egg, you can get salmonella. >> so don't do it at chipotle. >> folks, we should also mention to you that we asked you about what you thought about the new rock 'n roll hall of famers.

one squawk fan tweeted this. steve miller? seriously? >> he did make it. >> not for this. he should have made it for living in the usa and space cowboy, not for that horrible joker album. >> he did very well. >> the cars are not in? >> no. >> they will be one of these days. you have to be patient. >> guys, we should tell you that tomorrow is ugly sweater day here at cnbc. we are going to try and find some ourselves. we would love to see pictures from all of your choices for ugliest christmas sweater. >> you have to be careful. if they had put milly-vanilli in. >> i thought they would have had a shot. >> it would have been like a pete rose situation. >> whatever happened to them? where are they now? >> are you going to have an ugly

sweater? >> i will try to wear one the entirety of the program. i don't want to entire the entire. >> we didn't get to wear hawaiian shirts. >> we will do ugly sweaters tomorrow and a lot of holiday ties next week. >> ugly ones? >> a little ugly. >> we'll go to cramer and "squawk on the street" is next. good morning. welcome to "squawk on the street." i'm david faber. we are live. jim cramer and i. carl seen quintanilla has the d off. a big rally yesterday. we are looking for a higher open. european markets rallying in part off of our move yesterday. you can see in particular the an