we'll spend three quarters of a first meeting if not more than that honing in on the individual and not touching anything more than that. >> then you start talking price, how much you own and everything else. have a safe trip back up there. everyone is saying you're headlining, two inches of snow in boston. get a life. there is some snow coming. thanks. >> great to see you. >> go, patriots. >> we'll see. join us tomorrow. "squawk on the street" is next. ♪ good morning. welcome to "squawk on the street," i'm david faber along with simon hobbs and sara eisen. we are live from the new york stock exchange. carl quintanilla and jim cramer have the day off. let's look at futures now. coming off of a down day yesterday. the s&p in negative territory for the year, safely so. that may change. and you can see that perhaps it will change as soon as 9:31, let's call it, judging from where the futures are. european markets in rally mode

as we used to say. maybe we still do. >> we do. of course we do. >> you can see there the dax in particular up 1.69% off of not a bad overall year as we look at yearly returns. how is the ten-year note yield doing you ask? there it is. 2.25. and of course crude and natural gas -- crude in particular, so important in the movement of the market, down yesterday. market down. up today, we'll see whether the broader equity market follows through. we have the latest s&p case-shiller home price report. that was released just a moment ago. the results being shown, you can see them at the bottom of the screen. it looks like a decent october. 5.2% annual increase based on what they saw in october. 2015. verses a 4.9 increase in september of 2015. san francisco, denver and portland continue to have the

hottest housing markets in the country, at least at this point. not a great year for housing stocks. home builder stocks had a lackluster year when you look at the performance thus far. >> the open question for next year is what will happen to mortgage rates. the commentary coming through from case-shiller is that the data suggests potential home buyers don't need to be worried given where the fed is and where ten-year is trading. >> they make the point it's the short-term rate and not long-term rate that's moving with the federal reserve. long-term rates is what mortgage rates track. so don't be worried about higher rates. ending on an optimistic note. pending home sales tomorrow and consumer confidence later this morning. jobless claims as usual on thursday. >> all of which may be having an impact on the overall market which brings us to the road map which starts with the markets rally. s&p 500 looking to regain that positive footing for the year. >> energy recovering after yesterday's sell off. also has the oil majors moving

higher and the third wave of peak shipping season as consumers go to return holiday gifts. the ceo of u.p.s. will join us in a few minutes. first futures solidly in the green moving higher. stocks looking to rebound after yesterday's losses. and return the s&p possibly to positive territory for the year. on the energy front, got to be watching crude oil. first thing in the morning. crude oil is rebounding, back above the $37 barrel mark. natural gas prices continuing to surge. they're up 29% since december 17th as the weather forecast has turned. with three session s left go in 2015, the nasdaq up. s&p went slightly below negative territory yesterday, and the dow jones industrial average down 1.7%. everything could change today. >> yesterday was the lowest full day of volume we've had so far

this year which is why energy comes front and center. you can get a decent trade on oil, and that bleeds through to the energy stocks. whether that will be maintained as we go into the new year that bearishness, is an open question. >> if we close higher on the s&p that will be four years in a row that the s&p closed higher if we close lower, that will be the worst annual loss since 2008. we are marching into what could be the seventh year of the bull market come march. >> either way we will not be moving much percentage wise. it has not been perhaps the year that many who follow the markets broadly and make predictions expected. the average strategist is up 8% in the equity markets. >> they were overly optimistic. >> if you bought the right stocks you did well. so many hedge funds don't seem to have done that. we talk often about the lack of performance from any hedge fund. they say we adjust for risk. risk adjusted returns are

important. okay. we can accept that. one wonders whether that asset class in particular, which exceeded 3 trillion, will see significant redemocrat shunptio. a lackluster year for most hedge funds. >> it's worth pointing out the figures they played across the screen just now, how strong the gains have been during that six-year period. the average return, if you include dividends for six years, is 18%. for just the past three years the average return per year has been 20%. you're coming off what has been spectacular and historical terms, spectacular gains around the financial crisis, that's why you have this conversation about whether the fed pulled forward the gains and we didn't get this year. if you're a long-term investor you enjoyed that, even at the index level. >> i wonder if this ties into the hedge fund point. we didn't see spectacular

returns in any asset class this year to simon's point about the bull market, we have seen a rally of high yield bonds, of treasuries, of the stock market. you name it. tech stocks, even the dollar we got this year and last year. without a doubt. if you did it as a hedge fund, you can clearly go short. those who succeeded did so in energy, not just the equities, but the commodity itself. to something you follow closely, in terms of dollar strength and euro weakness you came out on top. >> we got an 8% rally in the dollar this year. the last few weeks have been dominated with profit taking from that trade. >> because the eu did not come through with even more -- >> that was part of it. that started it. the euro surged on that. the fed finally did increase interest rates and promised it would be slow from there. the next signal on the dollar, consensus on wall street is that

it will continue to rise into 2016. we have to wait to see what the federal reserve tells us and what data shows us about that federal interest rate hike. for now the fed doesn't believe its own forecast of higher rates for the year. >> has been a story for corporate america, those who have exports as key part of their business and international sales. they will always report currency adjusted, but the fact is margins keep coming in for many of those companies certainly, it's a question for 2016 in terms of where the growth will come from. >> let's leave it there for a moment. when we return, the ceo of u.p.s., david abney will join us live. and looking at the futures, you can see we're set up for a triple digit gain.

the biggest event of the holiday season includes the huge surge in e-commerce, and all those questions as to whether the delivery networks can get the packages where they need to be in time. joining us now from atlanta is david abney, ceo of u.p.s., and

morgan brennan is here at post nine to keep us connected to the fate of the industry through that season. mr. abney, good morning. how did you do in the end? >> good morning. i think we did very well. we got all our deliveries completed by christmas eve. that's a sign of success for us. our success was led by what i call the three cs. first is collaboration, close collaboration we have with our customers in developing the forecast and making sure we had the operating plan that would handle their business. second is control. it's not important how many packages you can enter into your system. of course it's important how many you can get successfully delivered. so working with our customers on a day-to-day basis, and having the discipline to work with that operating plan. then third is just the commitment of our people. you know we had over 500,000

people and a lot of them are long-term employees that have taken care of their customers for years and years. you take those three elements and it led to a successful season for us. >> hi, mr. abney. just to follow up on that, in the beginning of the month we saw service drop a bit. delays in some packages. what did you put in place to recover from that? >> you know, good question, morgan. going into cyberweek, we had good plans. then cyberweek and cybermonday, i would not say surge throughout the network, but in two or three primary locations we got much more volume than we originally thought. we recognized it need limit we deployed teams into those area, we did load shifting and changed our network around.

and within a week, we had that problem reserved and were able to quickly restore into our 97%, 98% effectiveness as far as making service, which we were able to maintain throughout peak season. so we were really happy with the way our people responded to the challenge we received. >> did you have to cap volume? >> i wouldn't say we capped volume, we agreed with customers on how much volume that they expected to be able to give us. and then through our control tower we worked on how to advance additional volume into the networks. we did a lot of weekend escalations. in fact, working for customers we were able to get so much volume moved into the weekend before christmas that we moved peak day from tuesday, 12/22 to

monday, 12/21. it's that part of cooperation that made a difference this year. >> and talking about one of your customers specifically, amazon. last week the "wall street journal" reporting that relation there's are tense? are they tense? is amazon in the process of becoming one of your competitor potentially? >> you know, amazon is a good customer of ours. we work closely with them. we really would not talk about customer relationships with any particular customer. we would talk to the customer directly. we feel that as long as we continue to invest in our business and add the value that we do with our global scale, with our scope of having customers from all different industries that peak at different times in our network, and then having our technology, that we add value and density

that we don't see how any of our large retailers would be better off without us. >> david, i don't know if you got to twice your normal daily volume. you were planning to basically handle that give or take. e-commerce in this country is still only 14% or 15% of total retail sales. and as that rises, it clearly has a disproportionate effect on your business for those peak 20 days. my question is really the degree to which the business can grow and deal with this at two times, two and a quarter times, two and a half times the normal daily volume. or if you reach a point at which the organization can't stretch four that peak and still be what it is today. and whether you know what that point is yet. >> simon, i would tell you you sure can't be my grandfather's u.p.s. and be able to deal with the e-commerce trends that we're

seeing. so it's not only a peak issue, it's -- we think e-commerce is a big challenge, it is a challenge for this generation of u.p.s. we have members that help us control the delivery of the e-commerce deliveries. we added 8,000 access points this year. so we're really changing our business to be able to handle the added needs. not going tell you it's easy, but we feel like we're adjusting accordingly. >> david, anybody who studied or tried to study what you're doing would have huge respect for the sheer scale, all of you, fedex and united states postal service for the sheer physics or physicality of what you're having deal with. my question is really as e-commerce grows, there's a brick wall beyond which it cannot grow or prices for delivery rise to such an extent

that it challengeses the free delivery model and the free returns model. if that is why amazon is building out in the way it is because it knows that is the key to future success when others may not be able to cope. do you a huge amount of work on this type of thing. what do you see five years down the load? >> we don't believe, simon, there's a brick wall. we believe that there's challenges, and that's why we're working so hard to put in orion, our optimize dispatches in 70% of our driver routes this year. it will be 100% next year. that's why we're out mat ou aut buildings. we believe the key is density. so we feel like we are the most

important e-commerce solution for e-tailors out there. five years from now we feel like we'll be in that position. >> mr. abney, speaking of the future, morgan referenced that "wall street journal" story from last week. i would love to you respond to a quote from what they say were executives who say your hub and spoke system moving a package from shipper to hub to brown van to home is growing obsolete. how do you respond? >> first, when you talk about unnamed executives or former executives, our business has changed a lot. anyone that is familiar with our business today knows that we have done such an incredible job of expediting the network, and taken barriers out and putting more flexibility in. i do not agree that's a concern. i believe we're a growing, changing, very flexible company.

and our customers, including retailers, gave us real good reports this year for peak, and we believe that will continue. >> david, last quarter you noted softness in the u.s. economy and specifically you noted softness in manufacturing. i'm wondering if you can elaborate a bit on what exactly you're seeing in the u.s. economy and how that relates to the outlook for next year. >> we're really seeing the same thing. we said last time mixed views. when you looked at consumer spending, you get a little encouraged. we felt good about that. i think that showed during peak of this year. but then when you look at industrial production and the activity that the fed is driving, you're just not seeing the same growth. so it carried on into the fourth quarter as we thought. going into the first quarter of next year we really got to see

if this increased customer consumer spending is that really going to start driving industrial production? now with the strength of the dollar and some other factors we're not seeing it but we're hopeful to see it change come first of the year. >> one more question for you. that's the fact that a lot of folks out there don't realize that u.p.s. is one of the top customers for the freight rail industry in the country. with all of this consolidation chatter going on with certain railroads, how do you as a shipper see that? are you concerned about it? >> you know, what we're concerned about is making sure that the railroads continue to provide us the service that they certainly have over the last year or so. and if they can do that in the present structure or if there's a different structure due to consolidation, as long as we have flexibility, as long as we get that kind of service that we're looking for, then we will deal with the companies that we

need to deal with at that time. it's not something that we're overly concerned about. >> i'm secretly wondering if you have to work through christmas and now you get long holidays. does th is that how it works? >> it worked like that one time. you could get through 12/24, take a couple weeks off. now with returns, you know, returns will peak next week. and so, no. you'll see u.p.s. working just about as hard for the next couple weeks, then we'll have some people that will be able to take some breathers. >> returns a huge story in themselves. david, good to see you. david abney joining us there, the ceo of u.p.s. from atlanta and morgan brennan as well. all right. here we go. three trading days left in 2015. up next, we'll talk to art cashin as we count you down to the opening bell. looking at futures, strong early action with less than ten minutes left to go until the

opening bell. this could take us back into the green for 2015 for the s&p.

a lot of the financial services industry watching where we open today. can we turn the markets positively for the year and attract more money on to the stock market next year? the opening bell is minutes away. sure, tv has evolved over the years.

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you're watching "squawk on the street," live from the financial capital of the world. the opening bell will ring in about 2 1/2 minutes from now. let's bring in art cashin director of floor operations

from ubs, who yesterday shared the stunning statistic that years ending with 5 often end up on the s&p. dare we break the trend? >> we better not. that would be a sign of something. don't know what it means. we look in good shape. almost a universal rally going on this morning. almost all equity markets are better whatever continent you're on. things look up. it looks like the s&p will open in a critical resistance area, the 2070 to 2075. they had trouble there before. you wouldn't like to be repelled at that point and closing negative on the year. >> what moves us at this point? still largely crude? >> yeah. i think as long as crude is behaving, you don't need it to rally. you need it not to be falling. >> it's style not a conviction move. it doesn't say at this stage, we're rallying, we're rallying

into the new year, join us, which is very important for people at this juncture now. >> doesn't look like it has a lot of conviction. as i said yesterday, it's in the interest of many mutual fund operators to see the market close up. even if it's only a few pennies because up in the headline is much better than down. that makes mutual fund sales difficult. >> since you like the historical stuff, got another one for you. >> okay. >> generally in presidential election years the markets go up, 76% of the time according to sam stovall, and the average move higher is 6% for the s&p. do you buy that one? >> as market history, yes. as a prediction for 2016? i'm not sure. the outlyer here is we have fringe candidates, like donald trump, bernie sanders. >> they have a sense of hope and stability, but so far this election doesn't look stable.

>> art, thank you. >> my pleasure. the opening bell about to be rung here at the new york stock exchange. a few more trading days left in the year. there it is. at the big board, bank of america and bryant park celebrating the bank of america winter village in bryant park. at the nasdaq, code of support foundation, providing services to veterans and their families. we have a broadly higher open here. almost all of the s&p opening in the green. aside from that very small bottom right there that is in the red. as you saw, and as was referenced, europe is higher, asia higher. so we had a broad rally on global markets ahead of our own open this morning after a down day yesterday. and with a handful of days left, three days left, three trading

days left we have to eke out something of a gain. even fizz the littlest gain, it helps marketing. >> the interesting thing is whether this year you see much of that people did the year-end work, the year-end dressing before the fed what would life have been like after the fed? you couldn't have predicted that two, three weeks ago. you might have been nervous or pulled forward a lot of that year-end buying. that's a key issue here. >> a lot of people say that. no surprise energy starts at the top of the list. it's either the top or the bottom these days when it comes to moving crude oil, energy shares rebounding. they're the hardest hit down 23%. number two right now in terms of early action here is consumer discretionary. that's been the winner so far this year thanks to the likes of netflix and other e-commerce names, up about 10% for the year. utilities at the bottom of the pack. all s&p sectors are higher now. that has to do with the move

higher in treasury yields, especially at the short end of the curve. two-year yield yesterday went above 1%, the highest level since 2010. >> cowan who a note out saying short-term interest will jump because of department stores, and apparel clearly has been challenged. the question is whether we will get trading segments out of them. >> apparel has been challenged, though nike continues go higher. yesterday on the dow a big mover. the best performer on the dow in 2015. interesting to juxtapose the consumer name. nike strong, home depot strong on the dow, walmart the worst performer on the dow. p & g not a great performer. if you look at the s&p, macy's, michael kors among the biggest losers along with energy names. and then consumer names which are considered consumer names like netflix and amazon at the

top of the pack. >> it's a mixed picture, but retail overall unless you're amazon has not been a good year. >> unless you're in sport apparel. >> nike, under armour. >> as we heard yesterday from that analyst in terms of the strong brand. many of the general retailers have had a rough year. we may look back as it being a seminal year in terms of thes a sent of amazon. if you bought that stock, as many mutual funds did and are happy about it, up over 118% this year. this morning freeport-mcmoran is the top performer in the s&p. yesterday it was a big loser. we talked a great deal about the fact that its founder and chairman, mr. moffett, stepping down to an emeritus position. that got play today. carl icahn who has been present there and shares a significant stake, perhaps having something do with that exit. he also had a good deal to do with the exit of suke not long ago at cheniere energy.

we have seen some changes among senior management. in the case of mr. moffett, he was chairman. freeport is up. i should mention when i mention mr. icahn, pep boys, manny, moe and jack -- >> such excitement around this company. >> that stock is up almost 8%. we're talking about a billion dollar company here. but he did raise his offer to buy to $18.50 a share. not a great year for one of the great investors, mr. icahn. he has been so heavy in energy. if you look at iep, which he -- >> may i point out before you move on, that the offer from icahn is $18.50. you're trading above that. is that an indication that they think bridgestone -- though they're trying to terminate the agreement with bridgestone that they think bridgestone will come back? >> yes. that's the belief that bidding

will go higher. if bridgestone were to come back, they would want a larger termination fee. mr. icahn says do not raise the termination fee if you go up. there's still back and forth, even though they've already done it, back to both. excuse me. >> throwing your pen at me. the "wall street journal" reporting that elan musk is trying to hire from rivals, according to "journal" he's even going out to twitter to recruit engineers. tesla has about 14,000 employees. this is an interesting story to watch over the next year as ford, we know what been hiring a lot of employees. >> autonomous vehicles as well. software engineers. the number of employees per vehicle is far higher than many competitors. >> tesla. >> yes. >> far higher. they do more in-house than other auto motive makers. they want to ramp up volume.

>> tesla is flat over this year and last year. if you zoom out five years, it's a tremendous climb higher for tesla. >> that makes it interesting. if you look at josh spencer at the fund, tesla is the largest holder in that. musk said he will be interviewing people personally and autopilot reports directly to him. i think 100 engineers he was initially after, though there's 1600 vacancies there. to the point you're making, this is one of the big stories of next year potentially, autonomous cars. >> autopilot. >> it will be fascinating to watch how this develops. >> we know apple is hiring. google is hiring. >> the long-term implications, if we do have an autonomous fleet of cars out there, let's call it 15, 20 years what will that mean for the automakers?

>> that's why ford is getting in there so early. >> but if you could have fleets of these cars out there -- >> maybe safer driving. that's what phil lebeau has been saying. >> we'll all live somewhere else and just take the highway in. >> just order up our car. they'll always be around. you won't need to own a car. >> fitbit, we were talking about this yesterday. >> yes. >> it was a winner after it was revealed it was the most downloaded app over christmas. and barclays putting out a note that the fitbit app going through the irs and congress, could be a medical expense and include fitbit. >> is that really going to become law, that you could use

your flexible spending to get a fitbit. >> what about your apple device? >> any apple device. i like it. you should google what you could spend your flexible spending account on. it's a huge array. >> is it? i need to use mine up. here we are at the end of the year. perhaps sunglasses for everybody, perhaps. let's look at what's going on in the broader market. for that we're joined by bobs by bob pisani on the floor. >> we are looking once again at oil. i think that's the main factor moving the markets today. around 7:30 or so shg, 7:20, we a nice move up in oil. that continued for 30 minutes, 40 minutes. 60 cents or so that's a significant move. look at the s&p futures. we moved up early in the morning because europe gapped up. that was a big help at the open

there. 4:00 or so. but when the oil opened, the s&p futures moved up 5 points, 6 points. that's the most important thing in the rally today. look at the sectors. energy, financials, materials, tech leading. that's what you want to lead. these are the biggest laggards on the year, energy, materials and financials. remember something, the defensive names, utilities, healthcare, consumer staples, they're all lagging. that's appropriate for what we need now. there is a -- as you heard from art cashin, the market is prime for a rally. look at the dow leadership. the dow leadership are all of the stocks that have the worst performance this year. all of these are down double digits. chevron, exxon, caterpillar, united technologies, all are down. my point here, picking up on art's theme, the markets are prime for a rally going to the close. a lot of traders are on either side of positive or negative. and small moves, 1%, 2% in the

s&p in the next three trading days could make the difference between being green and red. the natural tendency, if oil behaves for the market to rip up at this point. if you look at some of the metal names, some of the moves in copper. we also had a dollar rally this morning as well. so we're getting some of the base metals moving to the upside. there's the metal names. freeport had news on it. southern copper is up. some metal stocks are up fractionally. the dollar rally has moved some of the commodities up as well. so copper, for example, is sitting at a five week high right now. that's an important move. getting the metals moving along with things. the point is that we're prime for a rally going into the close for the year. i want to mention a big ipo happening, big news coming in the following week or so. ferrari. ferrari had an ipo back in the

middle of october. fiat chrysler is set to spin off the remaining 80% of ferrari in the next week or so. it will trade on the milan stock exchange on january 4th, a series of transactions occurring around that. the nyc ipo in october floated 10% of the shares. the ferrari family controls the remaining 10%. a new company out there, exor will be the largest shareholder, they'll control about a quarter of the shares. the son of the founder will control another 10%. those two will control almost half of the voting rights. this is one of the big ipos last year. went public at $52. a lot of hoopla, big brand name but within two weeks it dropped below the initial price of $52. we saw a series of analysts reports coming out in november, some of them had sell

recommendations on them agreeing that the big brand name was not sufficient to hold to the price. so ten shares for everybody one share of ferrari. we do that on monday, january 4th. >> who could forget the hype and those beautiful ferraris parked outside the new york stock exchange. down 14% since the ipo. let's head over to the bond pits and check in with rick santelli in chicago with higher treasury yelle yields across the board. >> yes. traders down here never have one bit of doubt that the indices and stock market would go up by the end of the year. we see it is piling in a bit. may two-year note yields, i look up at the board, 1.07. year to date of two-year note yield, they have risen 41 basis points. they settle at 66.

april of 2010, that's the last time you saw note yields in this area. let's look at europe's two-year. year to date, it settled at minus 10. currently minus 33 basis points. minus 33, minus 10, it rallied 23 basis points, pushing the yield into negative territory. if we look at ten-year, two-day tens, back up to 2.25. but until we start to get into the low 2.30s, this is an extended range. if you look at a month to date of the dollar index, this speaks volumes. you can see the charts turning up a bit. many saying dollar will be stronger next year. tell me when it's in janet yellen, mario draghi's minds, we could tell you what the dollar will do. but it will have a good day today, how do we know that? it pushes the euro down and makes the dax happy. see the dax month to date chart?

look familiar? like the dollar index which is the mirror image of the euro versus the dollar. simon hobbs, back to you. >> thank you very much. let's see how that's knocking on oil. jackie deangelis has more on that market's open. good morning. >> good morning. bob asked the question about oil. if it's going to continue to behave. the short answer to that question is probably heading into new years and heading into the long weekend. if last week was any indication, we saw the same kind of pattern as we move into the christmas holiday. you had a more than 3% selloff than yesterday, so it's natural that people might want to get into the trade and buy the dip a bit which is what's happening here today. remember the saudi budget coming out yesterday? there's starting to be talk about it today as people digested that news that the low oil prices hurt, even the saudis, one of the largest producers, maybe that will spur action in the coming days.

probably not around the holiday time but maybe early next year. that's something that people are starting to think about. it's not necessarily likely. the oil prices being low have hurt them for quite some time now. nobody has blinked just yet in this game of chicken. having said that a lot of traders are saying this is what we see going into a holiday, but it doesn't necessarily mean it will last. when we come back to fundamentals in january and see nothing has changed, oil prices could retest their 2015 lows. when we return on "squawk on the street," consumer discretionary was the best performing group led by netflix and amazon. we'll look at the best ways to play the sector. some specific stock picks for you in 2016. keep it here with the dow surging up 176.

s&p 0.8%. the consumer discretionary

sector is up nicely this year, 10%, despite tepid retail sales this holiday season. our next guest says you should stay bullish on the consumer. our next guest talks about his consumer picks for the year. you cover it all from restaurants to beverages, electronic names like amazon. let's start with restaurants and food service. it's been one of the few places where we are seeing consumers spend that extra gas savings. is that reflected in the stock? >> well, i think that the casual dining sector is the initial beneficiary of the oil dividend. as people are saving money on gas, they're going out for an extra dinner per month or an extra lunch, we like the cheesecake factory, and the better burger category, we updated habit grill and are bullish on yum brands. >> what about mcdonald's and this late breakout towards the end of the year. they would benefit, too, from the gas savings, and they have an interesting turnaround with

steve easterbrook there almost a year making important moves. >> there's a lot of competition in the basic burger area, the biggest beneficiary is casual dining and better burger areas. they go out for better quality at a slight incremental price increase. >> what about habits which will be new to people. the stock lost a quarter value over the year. is there a secondary offering coming through? >> there was going to be a secondary offering coming through next month, but the biggest play there is the full u.s. rollout. so they're from california. there's two restaurants in new jersey so far. you will see a national rollout. and i think they have a good product offering, good value. >> it's tiny. it's 100 restaurants give or take. >> yes, but that's when you want to get in, so when it grows to 500 restaurants, you will see expansion. you mentioned yum brands, 2016

is an important year for that company if it splits into two publicly traded companies, china a franchisee of yum brands and you have the rest of the world. why do you like them? >> they dominate the key areas of chicken, pizza and mexican fast food. i still think that the chinese market will be a big growth driver for them. >> because they had a tough time in that market. the stock suffered as a result. >> it's been a tough market for a lot of companies. but if you look at it, it's an area as the rising middle class starts to rise in china, you will see that's one of the areas they will go to. >> very quickly, interesting call in the soda land which i follow. you like coke better than pepsi and dr. pepper, even though pepsi and dr. pepper have done better in terms of sales growth. >> we just downgraded coke to neutral. there's no growth in soda, there's growth in the niche market.

>> all right, ivan, thank you. >> have a good holiday. >> thank you. still to come on the program, which global market is best poised to outperform next year? and which might be set for a stumble? that's next on cnbc. day... is the kind where everyone gets what they wished for. make this holiday extra happy when you buy one get one free on our most popular smartphones... like the samsung galaxy s6. buy one get one free. so spread some cheer. and capture every minute of it. right now at at&t, buy one get one free on our most popular smartphones.

three days left to trade. let's get a global market snapshot with our own see seema mody. >> there's a number of global markets set to outperform. europe stock 600 up over 7% thanks to the ecb quantitative easing and weaker euro. italy is a standout, up about 13%, the company not only benefiting from qe but the labor market reform. germany, despite concerns around china and the volkswagen scandal, the stock market up double digits. the big winners are out east. stocks in hungary and latvia up about 40% as these companies implement new measures to stimulate their economies. in asia, while india has not not been seen as a favored country to invest in, it's market, the

bond based index down 5%. analysts citing valuation concerns. the nikkei is up 8%. the yen continues to deprecate. that's a boone for exports. we saved china for last. the weakness in the second largest economy, the prize devaluation in august, not to mention the volatility in the stock market elevated fears amongst the investor base. despite that, shanghai composite up 10% this year, down 30% from its 2015 peak. >> china could be a wild card for 2016. thank you. coming up, breaking news on consumer confidence in the u.s. at the top of the hour and a look at the currency hot spots for 2016 and how much pain those currencies are set to inflict on corporate earnings.

good morning. welcome back to "squawk on the street," i'm david faber along with sara eisen and simon hobbs.

we're live from post nine at the new york stock exchange. we are strongly ahead this morning with the dow up almost 1%. the s&p 0.85 the nasdaq also in that territory. of course crude oil, which has been such a key, is up and the market seems to be following. >> let's throw consumer confidence data into the mix. rick santelli joins us live from chicago. rick? >> thanks, simon. expecting a number around 94, we ended up with a much better number at 96.5. that's the last read from the conference board's consumer confidence. last months upgraded from 90.4 to 92.6. 96.5, it's not as big as the october read of 99.1, but consider we had the high read of the year in january at 103.8. that was the best read since 2007. i'm not sure if confidence steers you right considering the stock mark stock markets outside of nasdaq

are unchanged. markets not paying a lot of attention but it's a better number as we get close to few numbers left for 2015. sara, back to you. >> rick santelli with some good news on consumer confidence, thank you. what should we expect from the markets in to 16? gabrielle sanchez joins us now to discuss it. thanks for joining us. >> thank you very much. >> just in terms of the final few trading days left of 2015, it matters because we'll get a read on whether the s&p 500 finished the year positive or negative. does that matter for clients or where the money moves going into the new year? >> there's very little news this week, we expect to end the year pretty much flat that would be a positive signal for client going into the next year, especially if we consider all the worries for next year from the dollar to commodity prices to china.

it would be a good confidence signal. >> you do say you expect more stability for oil in the new year does that mean you expect stability and even a climb for stocks along with it? >> exactly. two of the major macro factors that have hung over us this year is the strength in the dollar and the fall in oil. it would be key to have stability in both these variables next year. we expect earnings growth to rebound next year and for returns for stocks to be much better than this year, in the mid to high single digits for next year. >> it does seem like the consensus in terms of wall street strategists is for stocks to go higher, but it's a bit of curb your enthusiasm compared to what we saw this year, and this year strategists were way overly optimistic. so why you are banking on that increased earnings growth to drive stocks? we didn't get it this year. >> that's very true. exactly because of these two macro factors that we've talked about. really our forecast is dependent on the stability in currentscy

and in oil prices. that's really fundamentally what's behind our belief in better earnings growth next year. you're right. it will definitely depend on these two variables. >> i'm sorry, but i have to push back. for you to come on the television and say that it is a good confidence signal for the market to be flat this year, it's a positive signal to investors that the market is flat this year, call me old-fashioned. i thought people invested in the stock market to make money. they haven't. how can that possibly be a positive signal? >> we're saying that it's a positive signal if you consider all of the headwinds that we've had this year, and if you consider the fact that we've had negative earnings growth, that's what we're saying. to end the year pretty much flat is actually a positive outcome if you consider the scenario that we've been in this year. you're right. >> aren't we actually going through the looking glass? this is really important because so many houses next year are really downbeat.

i can't remember them being as downbeat for the prospect force prospects for 2016 since the crisis, really. if the houses are saying single digit returns, is the narrative that the stock market should fall next year and i shouldn't give people like you my money and i am better off in cash? and i am one of your customers. >> you're right. there's a lot of negativity out there, not just from shops like ours but from clients as well. that's because of the headwinds we faced this year. i think we can expect more stability next year. and that's really why we're feeling more upbeat, but you're right, it's with the caveat that we are not expecting double digit returns. >> forgive me. my question really in an environment where no asset cl s class, unless you take the big caps and something different, no asset class stood out, would have made basically as much

money in the stock market as you would in cash, why would i give you guys my cash next year to invest in the market if that has an associated risk with it and you are not saying there's a guaranteed return. >> we're not saying put all of your money in the s&p 500. it's one of the areas we like, but also other areas out there could perform the s&p 500 next year, for example, if we look at regions in europe, if we think about high yields as well. so we are not saying put 100% of your money in the u.s. stock market. we are saying have a diversified portfolio which will include, we still think makes sense, u.s. equities. >> beyond the recovery in energy prices, the key for earnings has to be economic growth. do you expect us to break out of this 2, 2 1/2, subpar economic growth that we've been trapped in since the economic recovery for years? will we get to that 2.5% to 3%

growth which would be better and help earnings? >> no, we don't. we expect to continue that 2%, 2.5% pace which has been the new average since the global financial crisis. pretty much led by the consumer, investment spending picking up and fiscal stimulus from the government next year. those are the main drivers for next year. but again, leaves us at around 2%, 2.5%, which has shown to be strong enough for some earnings growth. you're right. it's not going back to 3%, 3% and abo growth. >> which sector would you choose given your optimistic view on stocks and oil, does that mean buy the beaten down companies? >> we're sticking with the consumer theme. again, that theme we've been

talking about all year within consumer spending. we still like financials and to your question specifically about energy, being selective in energy but absolutely thinking there are going to be winners within the new energy dynamic. those winners will be the large, very diverse energy companies. so certainly there are winners within the energy space, we're just being selective within it. >> gabriella, thank you very much. >> thank you. after two very difficult years at u.p.s., the ceo has effectively declaring job done for holiday 2015. after they handled almost twice the normal daily volume in the run up to the christmas period. david abney was on the show about an hour ago. he was saying their able ility deal with the increased volume this year is due to them dealing better with bigger customers

like amazon. the question is whether the likes of u.p.s., fedex and the united states postal service can deal with the increase volume that will inevitably get as e-commerce grows. e-commerce is 14%, 15% of annual retail sales in the country. of course very concentrated around the holiday season. ultimately, as those volumes grow, will u.p.s. be able to cope? the ceo says yes. and there won't be a brick wall, say, five years down the line. >> we don't believe, simon, there's a brick wall. we believe that there's there'ses. we believe the key is density. so we feel like we are the most important e-commerce solution for e-tailors out there. five years from now we feel like we'll be in that position.

>> for casual observers, david faber, people might think amazon is the solution to e-commerce down the line, not just for web hosting but the delivery networks. >> logistics are a key part of its overall value proposition to the customer. they use u.p.s. for a great deal of their business. >> a lot. >> it will be very interesting to see whether those two paths d d diverge or whether u.p.s. is the way to go. >> coming up which currencies will be the most dangerous for u.s. companies next year? that when "squawk on the street" comes right back. i'm here at the td ameritrade trader offices.

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welcome back to "squawk on the street," i'm seema modi. cisco winning a u.s. patent dispute over wifi technology, that sending shares up over 1% in early trade. the ruling from an appeals court yesterday reverses a nearly $64 million judgment against the company. shares of cisco this year down about a half percent. >> seema, thank you very much.

currency volatility became the new normal this year. is there more volatility for next year? joining us is the ceo of fi fireapps. you must have been busy. the dollar was one of the top concerns and excuse force corporations missing earnings and cutting into sales. do you expect that kind of pain next year? >> yes, we have been very busy. we absolutely expect that risk to continue. as i'm traveling around europe, middle east and also around the u.s., you actually see more corporations actually having the position of global head of risk. that in and of itself shows companies are concerned about it. that number one risk is currency risk. it should be no surprise to anybody that we will continue to have this volatility. we had it for four quarters

consecutive. i can't remember the last time that has happened. it doesn't look like it will stop soon. >> we've seen a mixed reaction in terms of stock price, the companies that blame the strong dollar for earnings misses. should investors give those companies a pass? can they better effectively manage their currency exposure and their risk? can you help them do that? why aren't they doing it? >> that's a great point. no, they shouldn't give a company a pass of currencies. at the end of the day, if currencies impact you negatively, that means you have less catch. if you have less cash, you have less money to invest. you will have less roi and higher costs of capital. yes, they can manage it. the number one concern of these companies is the old 80/20 rule. 80% of my exposure, i'm okay because 20% of my exposure represents 20% of my risk. that's not true anymore. 20% of your exposure can be 50%

of your risk. companies need to understand their exposure. the technology is there today to do it. we see a lot of companies doing it. for investors what that means is look at companies that are doing this very well. they're the companies who are going to not be impacted as heavily on currency. therefore the cash flow will be much more predictable and their investments will be higher and the value on market caps will be higher. you have to choose those companies. >> we've been talking about the strong dollar, clearly the story of the year. up 8% this year. for the past few weeks since the fed meeting and the ecb meetings, the dollar has been weakening. is it enough to give companies a boost, a tailwind when reporting next quarter? >> i don't think so. i don't think there will be much. you tweeted yesterday about the russian ruble. these things will continue to

impact t impact. the weakening hasn't been much. we still expect significant impacts of earnings per shares of these companies that are not managing the company risk. >> it the commodities exposed currencies a currencies? canada hit hard, new zealand, australia, any company, whether it's in metals, mining, or energy has gotten slammed by the weakness in commodities, and therefore in currency as well. is that the story as well? we are hearing more and more that commodities could stabilize. >> not only but also would be my answer to that question. of course commodity driven economy alies will have impactsm that, where does it come from? wars, commodities, economics. you have a divergence between europe and the united states. we have tightening. we have continuous quantitative easing under draghi in europe. two completely different areas,

not commodity driven. i think you'll see significant weakening, for example, in the euro. some instability there. people are not really -- i spent a lot of time in europe. i spent probably once a week every since weeks in europe. part of that in germany. people are not really assimilating yet what it means to have a million people immigrate with such a short period of time into germany. it's going to have negative impact. >> wolfgang, i've done this for 18 years. i worked for cnbc for 18 years. the one thing i have learned is that if people come from the foreign exchange markets and tell that you a currency is a one-way bet, you should cover your ears. because they are usually wrong. isn't the -- currencies move -- correct me if i'm wrong, currencies move in a change in assumptions. isn't the danger here that we suddenly realize that the fed is going to be less hawkish than we might have expected, the u.s. economy might be slightly weaker than they believed it to be, and the ecb won't act to further

increased qe? that's euro positive, dollar negative, or you don't get the move to parody which to a man and woman so many people are wrong about again this year. >> i think it's a fair point. i'm not in the business of actually predicting where a currency goes. it's all about volatility. more or less volatility. are there going to be surprises? the stock market in general up or down. don't really like surprises very much. not going to predict we'll go to parody. i will tell you everybody is preparing themselves for increased volatility. this calmness that we've been seeing the last couple of weeks with slight weakness is not very material given what you will see in europe. but let's talk about other countries. let's talk about brazil and further q3, q4 of next year. . you will look at china, stories about china. there are surprises there where they don't know how to

communicate to the market the way the fed does. the fed well inned advance withe increases in the interest rates, knew how to communicate. yuan, every time you get a minor movement you get surprises because they're not communicating with the market. those surprise also s will decr stock markets. >> can you name some names or sectors in the u.s. economy which are most exposed to what you're talking about. >> depends on which currency we're talking about. in general, if you're looking at china. apple is significantly in there. they're doing extremely well. you have qualcomm china. if china comes off, when you have companies 20%, 30% 40% revenues coming from the country it will have significant impact. >> wolfgang, thanks for joining us. >> you're welcome. coming up, biotech seeing

double digit gains over the last three months. what's ahead for next year? will that be a winning area of the market? well, it was nice to see everyone.

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we have a nice rally on our hands today, and alleluia, it's not about tech. financials are higher, consumer discretionary is higher. kohl's, wynn, nordstrom leading us higher. a good day and not led by energy. it's been a big year for biotech. that sector gaining 10% so far. we have is a look at some of the best and worst performers. >> those biotech is up more than 10% for the year, it's been a

rocky second half. let's look at the biotech etf. some have doubled and tripled. starting with exelixis, you have prothena, anacor, dyax and serepta. serepta makeing strides in its muscular dystrophy drug. some losers, losing more than 80% of their value. celadon, lost almost all of its value after its clinical trial failed. synta and chimerix, avalanche and verastem. the big four, amgen, celgene, biogen and gilead, all doing fairly well except biogen, down

due to a slowdown of its multiple sclerosis drugs. a lot of catalysts coming ahead for biogen. the second half so rocky for the index. investors saying they're exhausted. looking looking ahead to january, there should be a lot of catalysts. >> it's been one of the futures of the bull market, biotech and healthcare is a place investors look to in a slow-growth year what are they saying? can that continue into 2016? >> for biotechs specifically, they're not certain it will have another year of outperformance. in january of last year we asked every ceo whether they thought biotech would outperform again. they all said yes for 2015. going into 2016 on, it sounds like the sentiment has changed. it doesn't sound like you can

expect it to youtperform the broader market. winter weather wreaking havoc on travel. thousand of flights being canceled or delayed today. and oil rebounding today after a big fall yesterday. find out what it means for energy stocks which are strong right now. wti crude up almost 2.5%.

good morning, i'm sue herera, here is your cnbc news update. mexican authorities tracked down the so-called afluenza teen. ethan couch and his mother are in custody. he made headlines after he received probation after killing four people while driving drunk. his defense lawyers claim he was so rich and spoiled that he didn't know right from wrong. authorities in belgium have arrested two people suspected of plotting a new years terror attack. the arrests came after a series of raids. authorities found military style training uniforms and propaganda but no reps and explosives. macies is recalling 121,000 sets of martha stewart cookware over an issue with the frying pans. metal discs covering the pan's rivets can pop off and hit consumers. residents in the waterlogged english city of york are bracing

for more rain today. that city has been the site of major flooding which has caused thousands of evacuations and power outages. that is your cnbc news update. sara, back to you. >> more extreme weather, sue herera, thank you very much. speaking of, winter storms causing problems in this country. kristen dahlgren joins us live from new york's laguardia airport with the latest on another day of travel delays. >> here with hundreds of people now trying to rebook those canceled and delayed flights. really a tough day, and it's not just here in the northeast. nationwide they're seeing problems. more than 1,000 cancellations today. more than 1300 delays nationwide. and what we're looking at is this domino or trickle down effect. you saw all of the bad weather in airline hubs like dallas and chicago over the weekend and into yesterday. that starts this whole process, and then it does trickle down through the entire system.

as of last night there were more than 5100 delays. and almost 3,000 cancellations. so all of those aircraft that couldn't get where they were going, all of those passengers who couldn't get where they're going, they are being rebookd and moved around the system. so it is causing problems from here through los angeles, sara. >> thank you very much for the update, kristen dahlgren at laguardia airport. the volatility continues within energy. oil rebounding today after sharp losses yesterday. jackie deangelis is at nymex is the latest. >> all commodities are rebounding today. oil is one of them. natural gas is another one. it's also related to the weather. certainly part of the trade there. but a 25% move in nat gas futures in one week, that's pretty much unprecedented. jeff grossman, let's talk about what's happening in nat gas. exploration today, is this short covering and volatility from that? >> absolutely. the market was oversold when it

went down way below $2. this is a natural reaction to it. exploration will mean something. >> and talking about weather temperatures starting to go down. bad weather across the country. that means demand will probably increase a bit. but we've had a late start to winter and stocks are in good shape. >> no question, but it's perception. the thought is there's a chance that we could have serious weather. the midwest gets serious weather, suddenly inventories dwindle. >> what do yyou see for the res of the winter, short-term eand then longer term. >> we're going into resistance right now. there will be a lot of wood to chop to get the market higher. we'll need help with the weather down the road. i don't see it in the near-term. but down the road, let's say next year, we have some serious weather, anything is possible. >> nat gas under $2 for the time being fishfish finished?

>> i would think so. the reaction that you saw is probably going to temper anyone's bearish thinking. >> crude oil prices, popping a little today after a more than 3% selloff yesterday. is this expected as we go into a three-day weekend? >> you gave my answer. that's the way you have to look at it. it's not a healthy short right here. you would be careful to think it would even out or possibly go long at this level. >> what do you think about crude come january? a lot of people are telling me the 2015 lows will be retested. >> i'm not one of those people. this market has a little move on the upside. more risk/reward here to the upside. we're closer to going to the low 40s here. assuming that there's some weather help. a lot of that will be depend dent on weather. >> okay. we'll be watching. simon, back over to you. >> jackie, thank you very much. with the dow up 163 points,

let's stay with energy and take a deeper dive. we have an analyst from cowan and company to talk about the stocks and the oil majors. sam, welcome to the program. if i gave you $1,000 to invest for next year, where would you put it within energy? what sort of return do you think i could get? >> well, i think in energy there's sort of this myth of quantity versus leverage, you have to make a choice between a defensive oriented company or one that operates more aggressively because it has more risk/reward as oil prices move around. what's interesting about the environment is that you can have both. we're recommending chevron, it's our top pick for 2016. very high quality balance sheet. only 11% net debt to cap. it barely has any debt despite the huge spending profile it has. despite this it has upside as oil prices recover. they're pulling a lot of spending out of their profile and they have growth projects

coming on this year which will contribute to volumes and growth. the upside to chevron is competitive with anything that you would think is more of an aggressive play. >> so you got a price target of $122 on a stock that's trading at 90. that's $30. that's a 30% return despite where we are on oil prices? >> well, i'll put it this way. i think a better framework for the upside is probably dividend yield. typically chevron trades one per percentage point. we think the stock can retrace closer to 3%, which is a higher price target than 120, particularly as the projects come on and they raise the dividend again. that might not be in the first half of 2016 but over time i think 120 is the starting point. >> wow. in your note you also talk about

the permian, where they have a substantial position? why is that a great value to them? producer there's seem to be able do so at a profit margin even with oil at 37. >> yeah. the perian is important. as chevron lowers spending and slows the growth profile in 2017 and beyond, the permian can fill in the gaps. it's easier to ramp production there. it's not necessarily cheap, operating costs are not competitive with opec or places like that but within the unconventional or shale landscape, the permian is a place you can put money and continue to grow, even as the overall spend prognosing profil down. that's the key piece on that. >> general question on oil prices and what we expect from opec next year. we know opec is behind this

historical drop in the price of oil. do you expect a change in their strategy next year? how far along are they in this strategy to squeeze u.s. producers by lowering the price of oil? >> our view has always been that opec would respond to other places declining. they would not be the first to decline, but if they saw lower spending having an impact in the u.s. or russia or venezuela which is part of opec, but not considered one of the core members, if the key opec leaders saw production declines they would respond in kind, so that they could maintain market share. so, i don't think -- you know, one thing in 2015 is production has been more durable in the u.s. than we expected. in 2016 that lower activity level is going to start to have an impact. we'll probably start to see more pronounced declines in the u.s. at some time during the summer and a bit closer to balance. that's when we think opec might start to at least lead with a bit more dovish language, if you

will, even before they cut physically. >> the last 30 seconds that we have, is there any other stock that's a standout for you that you want to mention? >> one stock that is a special situation is shell. they're in the middle of a merger process with bg, which is sort of another hybrid integrated energy company. that process has been long and sort of drawn out and certainly the timing was questioned by investors, since it was early in the energy recovery. after that combination is con consummated, there's a lot of different ways the company can free up cash to play it more aggressively -- that's at a higher dividend yield than chevron, over 7%. >> they're way overpaying for that asset, aren't they? you say bad timing, it was terrible timing. couldn't have been worse. >> but it didn't really impair the company over the long-term. it looks worse optically than it actually is from an operation and health standpoint. >> certainly under a huge amount

of pressure from the shareholders, that's why they could take out more value. good to see you, sam. >> thanks a lot. coming up, jpmorgan becoming one of the first big banks to raise deposit rates for some larger clients following the fed rate hike. will other big banks follow suit? "squawk on the street" will be right back with that discussion. i've read all of your lyrics. you've read all of my lyrics? i can read 800 million pages per second. that's fast. my analysis shows your major themes are that time passes. and love fades. that sounds about right. i have never known love. maybe we should write a song together. i can sing. you can sing? do be bop. be bop do. do be do be do. do do do be do.

you're watching "squawk on the street," let's look at markets. all ten s&p 500 sectors are higher led by tech and consumer discretionary. both gaining about 1% to 2%. powering the tech gains are

shares of western digital, qualcomm, micron up about 1%, 2%. technology is the third best performing sector this year behind consumer discretionary and healthcare up over 6%. sara? >> thank you, seema. we'll zero in on financials. jpmorgan is hiking deposit rates for some big clients. kayla tausche joins us on set with more on what this move means for banks and customers. >> for large corporate and institutional customers starting in january they will see the interesti interest paid on deposits going up depending on the type of relationships they have with banks. they are not likely to flow out of the bank in times of a crisis, and they are liquid. they have heavy transaction flow. they still have relatively stable levels of balances over the course of 30, 60, 90 and

more days than that. they will see the interest paid going up, but who knows how much it will be. right now the current interest paid on jpmorgan's interest rate liabilities on deposits. 0.14%. if you are holding these big balances with the banks, as we know, you've been barely getting paid for them. this is possibly a move by jpmorgan to keep some competitive advantage on the institutional and corporate side for treasury, for clearing, for some of those key businesses for the banks. the first announcement or the first story about this that we've heard since the fed made its move in december. >> profitable areas of the business. what about people like you and me and people watching at home. when do we get paid interests on our deposits? >> probably not until the end of the year. that's what the analyst community is saying. since the financial crisis, consumers have deleveraged, they've been building up balances. and the banks have had a deposit glut. they would like consumers to start spending, borrowing more

and not just piling up assets at the bank. so they're not competing for those deposits in the same way they're competing for the lucrative corporate clients. so they'll take a few quarters to pass those through to customers. >> these are sticky deposits, the institutional deposits you referenced, is it necessary for jpmorgan to give more? is it a competitive area? >> i think probably the fear was that another bank could make that move. and because yield has been so hard to come by, why not go through the process to move that money to get a little bit more yield. the "journal" story talked about the fact that actually jpmorgan is the first u.s. bank to do this, but the canadian banks have been raising their operating deposit rates, cds, rbc to win over some business from big u.s. clients that could have been a source of pressure there. we'll see how this pans out and what the actual rate is when they pay in january. could be very slight, but still

it's competitive where the u.s. is concerned. >> jpmorgan up 7% this year. i didn't realize it was such an outperformer, as we've seen citi, bank of america down. >> jpmorgan had a very strong third quarter. they saw a sizable loan growth. trading down, but they have been cutting a lot of costs. they actually ended up being in a lower capital bucket. i know that's wonky to say. but at the beginning of the year they were so much bigger of an institution that they were supposed to hold way more capital than they need to now because they've been shrinking. investors like that it's the only bank to move its down a peg to meet capital. >> kayla, thank you. we'll see you next hour. let's get over to rick santelli at the cme group for the santelli exchange. good morning again, rick. >> good morning. thank you. i'd like to welcome my guest, andy brenner. thanks for taking the time this morning. >> thanks for having me. happy new year. >> happy new year. you wanted to talk about

contrarian viewpoints, how that worked in 2015, and what it may mean for investors in 2016. so, give me your best. >> rick, i really don't like the european sovereign space. i don't like bunds, i don't like oats, i don't like anything over there. they're priced for an aggressive ecb, and i think draghi is out of bullets. i think you're starting to see now that the euro is starting to strengthen, vi vis-a-vis the dollar. by the time they raise the second time of the second quarter now you will start talking about bubbles in the u.s. and i think some of those may burst. so, you know, where i think the first quarter will be okay, i think the second half of the year, basically where we stalled last year, august, september. i think those could be rough times for the u.s. markets. but i really don't like the european space. as far as what i do like, i like everything that everyone else hates. i like the brazil ten-year which has gone from two and change to

seven and change. if you want to buy 20-year brazil, you're talking 8.5. in europe, i still like greece. they have to get closer to where the other european rates are. i'm big on the contrarian space. listen as they taught us in wharton without risk you don't get reward. this is the right time to get involved in those markets. >> it's funny you mention that last comment from wharton, risk and reward. for the first time in many years, considering the fed bumped up a quarter point, that the risk is going to be a little tighter. in terms of bubbles, i find it amazing, when luke at how gdp this year compared to last year, there's still many traders out there that believe the fed seize sees some strength in the economy we don't. you know what i see? i see all these comments they made after the december 16th meeting worried about commercial real estate bubbles. that's just one area. now, if bubblicious activity because they have small leverage

against all the structural regulatory issues facing the economy, aren't the markets and many traders underestimating the path of rates on the short end that the central bank controls? >> no question. the street is only putting in for two rate increases for next year. right now the fed is still talking about four. you know, one thing that bothers this is you have the unemployment rate at 5%. normally, you know, where i grew up, if the employment rate was 5%, the economy would be hopping around 3%, 4% gdp. it's not. it's struggling to maintain 2%. something's off here. on the other hand, i don't think the u.s. economy is all that weak when i see u.s. car dealerships have sales up 40% year over year. there's some strange thing going on with the numbers, and i think the fed will have a hard time deciphering it all. >> if you only like red m & ms

and your bag is filled with every color but red, you eat what's left. with regard to autos, you heard the last story, jpmorgan chase racing some rates for big investors. i certainly don't see them doing that for small investors. i'm not saying whether they should or >> i think they're going to go a lot higher than people are anticipating. that's it for me. sfroo we're done with time, but if our rates are to go a lot higher, then i want to see mahero draghi's rates, because they're going to be anchored to ours like we were to theirs. andy, happy new year. we're going to go back to "squawk on the street's" gang. >> thank you very much. rick santelli there in chicago.

up next on the program, where some of those high profile private equity alternative investment managers had such a terrible year. at least if you are a shareholder. much more after the break.

turns out shares of some of the street's biggest dealmakers like blackstone and kkr have seen significant losses this year despite what was a huge year for deal-making. mike santolli joins us with more on set on that story. surprising. >> well, wrau. that's the main iron where i here. especially in the last six months, if you look he shares of blackstone, kkr, fortress group, these companies basically down 25% to 45%. where? what's been going on? they've been largely sidelined. we have $5 trillion of global mergers. mostly strategic. if you look at lbo's, it's a percentage of that. it's far below the last time we had a peak in the cycle in 2006 and 2007. they have been selling some of the older holdings, but even that has slowed down. of course, the ipo market has also gotten more stingy. these guys might not be able to exit a huge people wrum. at least the market fears that. right now it looks like these

stocks are cheap. they're kind of discarded. they're sort of creatures of the credit market, and they're saying that the high yield market has peaked in the last several months. all these things are kind of boiling together. investors are not really sure how to value these businesses. i hi they haven't really got their footing as public companies. >> you know, it's funny, though. i remember when fig went public. then blackstone followed i think in may of 2007. great timing there, of course. michael, that's the key point, i think. there's a lack of transparency. they won't say that, but i think some investors feel it in terms of really understanding the earnings power of these businesses, and they're not all the same. blackstone, huge real estate business. huge asset management business in addition to private equity, whereas kkr certainly more weighted towards -- >> absolutely. blackstone does seem like the big class of this group, as far as in terms of the breadth of it and everything else. you're a partner, but a very limited partner with the folks who run these firms. they're all to some degree or another all run by the founders. i don't think that market has a sense that these are institutions that are built to

live forever, right? >> as a casual observer, you might think that a lot of these guys are walking out with very large paychecks incrementally every now and again, but it reminds me of the accusation level of the banks for many wreerz. the shareholders got zip, but everybody else inside was paid incredibly well for an awfully long time. >> it's true. you know what's interesting about these companies is they pay big cash dividends. they're variable, and they're based on how they're harvesting their gains. steve schwartzman has a huge payday because he owns a lot of the common stock, and he gets paid the cash dividend that shareholders do. the problem is the market is not willing to capitalize that cash flow at a high multiple. that's why they look -- you have a lot of folks pointing to, for example, oak tree, which is more of a distressed manager, is publicly traded as well, as perhaps being in a sweet spot because there's a lot more opportunity when high yield is falling apart. >> they had a terrible we're. down 44%. their asset level stayed more or less the same, right? >> all of them actually have done okay gathering assets. it's really just a matter of the

performance and the idea that the hedge fund asset class is sort of losing favor. at least with public investors. >> mike, thank you. see you in the next hour on "squawk alley." >> coming up, a look at what could be new images of the latest version of google fwlas. yes, that is ahead on "squawk alley." yeah, give me a problem and i've got the solution. well, we have 30 years of customer records. our cloud can keep them safe and accessible anywhere. my drivers don't have time to fill out forms. tablets. keep it all digital. we're looking to double our deliveries. our fleet apps will find the fastest route. oh, and your boysenberry apple scones smell about done. ahh, you're good. i like to bake. get expert advice for your small business at att.com/small business.

good morning. it is 8:00 a.m. at tesla headquarters, 11:00 here on wall street, and "squawk alley" is live. ♪ happy tuesday. welcome to "squawk alley." carl quintanilla and john fort are off today, but also joining us from out west this morning jason callicanas. it is great to have you. as soon as we do have you, the market is currently consolidating