of dopes in the senate. if they were as smart as andrew ross sorkin, i'd be much more challenged. >> get something done. >> we would cross aisle and get something done. we'll see. it's a trick cany bringusiness. >> we love having you. kayla, thank you for being here. "squawk on the street" starts right now. good morning and welcome to "squawk on the street." michael is day pe debuting here. take a look at futures. two more trading days left of 2015 undid sister some future. dow down about 33 points in early action. nasdaq crossing over into

negative and s&p is back in the black for 2015. show you what is happening in europe where you see european stock extending their december losses. european stocks are down 4.5% for the month. red arrows across the screen with germany down 1%. germany is closed tomorrow for the you new year holiday. treasuries selling off, yields sharply higher in light trading. big story has been in the two year bond yield where we've seen the highest level since back in 2010. crude oil under pressure, that is hurting stocks. wti just back over $37 a barrel. drench t brent actually trading high. we begin with amazon and google hitting all-time highs. will the s&p be able to close in the green for 2015? >> it's another win for carl icahn. bridge stone says it will not counter his off for pep boys. and apple will settle for

failing to pay taxes between you 2008 and 2013. >> so stocks poised to open lower. data from american petroleum institute indicate supplies building in crude supply. report due out in about 90 minutes. this all after a tuesday rally on wall street. yesterday's ral ily with stocks such as amazon crossing to record highs. it was a relatively broad based rally. nasdaq up almost 7.9%. the s&p 500 is back in positive territory and dow industrials down 0.6%. >> so we could erase potentially the gains during the year during the course of today's session. what is interesting it the moves that you've had also on the fixed income market with the two year yield surging. and the ten year kind of all over the place with a yield in-virtue which we'll discuss through the session.

>> christine lagarde with with a not so happy new year's message about the global economy writing in the german newspaper that global growth is going to be disappointed in 2016. she says in many countries the financial sector still has weakness and emerging markets, financial risks are increasing. that's been a common message from the imf. all of that means global growth will be disappointing and uneven in 2016. imf hasn't been too cheery and it's worrying about emerging markets and the spill overeffects. but clearly we could be looking at another sort of subpar growth year. >> and i think that's kind of consensus. i do think the imf has been consistent in this posture. you remember that they recommended the fed not actually execute liftoff. fed said thanks for your advice, but we'll do it anyway. and you hit on something which is the imf does have an orientation that it is perhaps

steered toward emerging markets and their concerns because the mandate is global financial stability when countries need help, the imf is involved. so i do think that this makes sense, but i don't think there is a lot of news in the idea that there will be muted growth in 2016. >> but let's underline the point that for most of last year, they were warning the fed not to raise rates partly because so many emerging markets dpidn't want it, others did. now they describe it as necessary and healthy. that's a huge turn. >> they have to be i think somewhat supportive. but she did say that they should take it slow and beware of the risks and also they should hit their dual mandate which they're not fully doing. perhaps on the employment side of things, but not the inflation side. and that will be a big question going into 2016. since we're talking about emerging markets, they're down 17% this year. that is the index of stock markets over there. and the question next year is going to be maybe about the fed, but really about commodities, that's what is slamming them.

>> obviously it's about the foreign exchange effect, but also i think the question for investors is did the pain in emerging markets get front loaded before the fed actually moved. in other words, did it get cheap enough before the divergence that there is value there. i don't know that you can definitively say yes for that question, but that is the one that i think investors have to grap well. >> i thought it was interesting that goldman sachs has suggested that the ten year treasury yield -- the ten year yield here is held town by what is happening in the rest of the world. so you're artificially low arguably. but they're suggesting that the treasury yields could reach 3% buyer the end of the year. partly because people may underestimate what the fed will do, but also because growth could be stronger. and this is key. this could be an up side surprise. growth could be stronger in this country than many are anticipating, leaning to the idea that maybe the fred was correct to raise rates.

sglefr si sglefr. >> every single year all the major wall street firms say next year is the year treasury yields rise and growth will come back and every year they're wrong. >> i do think the goldman sachs house view is for at least one more fed rate hike next year than the markets are currently pricing in. so i believe if they have to be consistent about this and say the fed will be responding to better growth and therefore the fed funds rate will be higher, the ten year would have to kind of get ratcheted hirer in that scheme. but yyou point to the global divergences which is key. yes, it's near record spread against over developed market rates. >> only reason you wouldn't get to 3% yield, but the conversation is are yields lower because, yes, the two year yield is an indication of more rate rises, but the ten year is saying it's a mistake. if you do get to 3%, that surely proof process that the fed

didn't make a mistake. >> yes, you wouldn't have that conundrum greenspan warned about. >> can it keep rising -- is it going to be on the back of a few big tech market catch names. amazon and alphabet hitting record highs yesterday. but amazon, i think of a lot of large numbers in terms of the growth of this stock which used correctly or incorrectly, the idea that prime has grown so large, continues to grow and so does this valuation. >> yes. i'm not going to get into the whole definition of law of large numbers again, but i do think it's a concern, but when you consider just how much of consumption amazon is attacking, how big that by is, i'm not going to justify the valuation right here. this move in the last several weeks seems, you know, way too steep to be sustained to say the least. but i don't necessarily think you can say that at its market cap for some reason by definition it's already used up years worth of growth.

>> a lot of the conversation we've had over the past few weeks is where is the santa claus rally. and a lot of the sapsnta claus rally is that people window dress at the end of the year. amazon is a clear winner for the mutual funds. whether they are window dressing so they can go obviously to the retail investor next year in the first quarter and say, wow, look at what we were holding at the end of december, weren't those then great stocks, haven't we got it the right. >> and i should say, they have been one of the stories of the year, but yesterday's rally was broad based. more than 95% of stocks actually closed higher. interesting to watch the energy names that are on the back of this move in crude oil. they are uhe usually on the top or the bottom of list. they were smack in the middle. they didn't get a really large surge from what was almost a 3% move in crude oil. so we'll be watching that. >> yesterday what i saw was a

agagentle allocation into stock broadedly. it seemed as if people were just kind of getting bigger into stocks, smallner to bonds in a very incremental way. and the s&p 500 which basically mitigates the effect was up just about as much as the overall market. >> in the meantime, let's clear out some of the corporate news. carl icahn has won the bidding war for pep boys. bridgestone saying it will not counter the billionaire's investor's offer of $18.50 a share. last week of course bridgestone raised its pbid to $17 a share. this is a household name here. >> a household name. definitely kind of maybe a distant third or so in this space. but it has been a very strong sector of retail if we're going to be calling it retail. autozone, o'reilly automotive

are two stocks up 20%, 30% this year. autozone making new highs repeatedly throughout the year. pep boys has trailed behind. so presumably the idea is that it has a decent set of fundamentals in this sector. activists and buyout artists and such always think they can fix retail businesses. they have real estate there and maybe that's the play here. >> i wonder if it signals more action in the sector. year to date chart on pop boys is pretty stunning, stock up 93% on this bidding war. >> and the other ones are just coops of on their own momentum. what is interesting is car sales, turnover of cars actually helps auto parts. you would think everyone has a new car so therefore you don't buy the part, but it works the other way around because there is churn in the auto sector. >> weakness in china and oil tipping to weigh on global markets, so how will that play

out? anthony chen from chase, we were talking about the imf warning that global growth will be disappointing. the question is, is that already factored into the stock markets that got battered and bruised this year and commodities? >> i think clearly a lot of that is priced in. you can certainly see that with the year to date performance, that has been an outperformer relative to the united states where on a year to date basis, the s&p is barely up this year. just slightly below 1%. and of course shanghai index doing so well. we do know china is important, close to more than 70% of the global incremental growths out of china, but they certainly are doing everything but throwing the kitchen sink at it and still doing a lot of monetary easing in europe. and maybe more to come. and a study shows when the u.s. is moving toward tightening

policy, you generally see the european equity markets outperform the u.s. and i expect that to occur in 2016. >> the question i'm really guy to go ask you, sgich that you're joining us from honolulu where it's 4:00 a.m., whether you've been up all night partying or whether you're just having an extremely early start to the day. but let's talk about where we are on the ten year and what that is signally at the moment. two year broke above for the first time in five years. that is a clear bet that the fed is on a rate rising trajectory. what abouthe ten year is trading? we came down to 1.7%, a level we had not reached for years. what does that tell us about next year? will. >> i think what it is telling us is that the market doesn't believe what the federal reserve is telling us, namely that they will raise rates four times in 2016. and i believe the market is

somewhat correct. i think that in 2016, the federal reserve will raise rates, but not raise rates as aggressively as they're projecting. and last year or 2015, because we're towards the tail end of 2015, the federal reserve if you look at the projections earlier in the year ended up doing a lot less. i think that will be the case in 2016. that's what the market is telling us. and remember, they handle the market with kids' gloves in 2015. i expect no different in 2016. so two to three rate hikes at the most with the risk that it's only two rate hikes in 2016. and remember, they will continue to reinvest the proceeds of all the treasuries that mature. so again, they are really being very careful to make sure that long term rates rise, but they don't rise too much. >> all right. thank you very much for that setup. by the way, march odds in the bond market went up past 50% for a rate hike for next year. meantime heavy flooding in the

midwest prompting a state of emergency. let's go to morgan radford in eureka for the latest. >> reporter: state of emergency here in missouri after 13 people were killed this weekend and the governor has already called in the national guard. but i want to show you how quickly these floodwaters have been rising. they're creating subtle waves in the water because the motion is happening so swiftly. you can even see sand bags here and there along the windows of stores and homes. and they're actually being placed along the crevices of the windows and doors to keep the water from getting inside. but also behind me, you can see this red truck straight here in the distance that has been stranded. they tried to actually drive this truck from the top of this street through these treacherous waters. but as you can see, it got stuck. and the national weather service says that 50% of flood fatalities are actually vehicle related. governor nixon said 12 of the 13

people who died this weekend were actually in their cars when the flood waters swept them away. that's why he's urging people all across the state specifically in areas like eureka where i am right now to avoid traveling. and avoid traveling through trech e treacherous waters like these. >> thank you very much for the update from you're rear eureka,. when we come back, our playbook on making money in the new year. we're focusing on the beaten down transportation index. and taking another look at futures here, two full trading days left of 2015. can the s&p 500 finish in the green is th green? futures are pointing to a lower start. dow down 40. s&p down 3.

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. welcome back. two shareholder class action lawsuits have been certified. facebook accused of hides concerns about its growth forecast. base took says it will appeal and believes the class certification is without pair merit. this goes right back to before their ipo where they allegedly

told their underwriters that their growth in mobile would fall short of expectations. underwriters reduced their earnings estimates and so these investors said, hey, we eventually were sold a pig in a poke here. ironically of course if you had bought and held at the ipo, you're up tremendously from there. but it did have a very, very rough first year or so. >> didn't we go through this at this time? there was a public statement, but i could be wrong. >> after the fact they came back and amended it. >> but before the ipo. >> yes, before the ipo, yes, i believe they did have to do that. now, really, though, i think so many things came together at that ibo that it's kind of muddled in terms of what exactly went wrong. the execution of the ipo on the nasdaq was botched. there were lawsuits related to that. and what is interesting is that it was at the very time strategically mark zuckerberg ways saying we'll throw everything in into mobile. so the timing just worked out

that ait was a huge swing facto. >> it took a year, more than -- >> went below 20. >> more than a year to recover. and then you get the 200% or whatever. astounding investment. >> they really wanted that $100 billion market cap at initial offering. and that was around of course about 300. >> and to maximize the deal at the time. they priced it for that. >> and it was a relatively mature business at the time it went public. it was very profitable already. so they had to get -- >> and they really turned it around. >> as we learned over the three year, but that was also part of the journey. when we return, the we countdown to the opening bell. take a look at where we are on futures. still of course a lot of the financial industry watching with huge interest as to whether these indices can be kicked to positive territory before year ends.

more "squawk on the street" straight ahead.

penultimate day of trading, indications is we will open lower. art cashin from ubs, you were sayi saying in the break there is an interesting phenomenon. >> a lot of people assume that if you have a stock that has done very well this year, you you want to postpone selling it until after the first of the year because that carries you a whole year ahead tax-wise. if you sell today, you have to think about it in april. if you sell it in the beginning of the new year, you basically have a whole year to worry about it. so with that in mind, these two

days, a phenomenon developed where people start shorting those stocks figuring they will be weak. >> interesting. we saw for example yesterday alphabet and amazon having heavy buying and those were lifted to record highs. is that year end window dressing? >> technically what window dressing is would be manipulation of stocks and's illegal. but if you buy more of what you you like, that's good. now, i think yesterday was almost a global phenomenon because every equity market around was moving up. and i think what you saw was a lot of people adding to those winners so that when they published their results at the end of the year, they would look smart. >> that's not window dressing

then from what you've just said, window dressing is something different? >> well, but the assumption is people mark stocks up at the end of the year and that's not legal. >> if you go back to this time last year, december 29, which was yesterday this this year, was the high for the year and in fact we didn't see those levels in the s&p for five or six weeks i think. how does it set up this year compare to that one? i think sentiment back then was a little more optimistic than it is right now. but in terms of position for the markets. >> i think there is a little more uncertainty this year. usually january is a pretty good month for stocks. the last two years, it really hasn't been. and so i think that may be part of this delayed selling phenomenon. and we'll see how that goes. but i think people really want to get into next year and see if it's a sweet 16. you know, as sarah pointed out

yesterday, it's an election year that has a mild upward bias to it. so we'll see what they can pull together. >> and a leap year. >> right. >> we broke a lot of historical patterns. >> and if we go down a few points in the s&p, the unbroken streak of years ending in five, will be finished. >> 140 years. we have to leave it there. art, thank you. >> opening bell just minutes away.

you're watching "squawk on the street" live from the financial capital of the world where the opening bell is sit to ring in less than one minute's time. just for the record, ahead of today's session, which is the second to last trading day of the year, the s&p 500 is up 19 points for the year, that is 1%. can we make it four years in a row for gains. >> as we sit flat, the

difference denied is al differe is all you got. >> but you have to put it in context for the last six years, you've l you've had a return of over 20%. >> there are the opening bells here at the new york stock exchange, s&p 500. here it at the big board, m.a.d.d. marking their 35th anniversary here at the nyse. and the nasdaq is up 8% for the year. helped in part by the facebooks, amazons, alphabet. netflix as well. one group we will be watching is energy stocks. late yesterday, we got an industry report showing a build in u.s. stockpiles for last week. that's why today's report in

just about an hour will be very important. that is the official report from the government on u.s. stockpiles. been a big mover for oil in the last few day, but oil is under pressure because they were where are expecting a drawdown. >> and it's an area that you can trade at the moment. chesapeake yesterday for example actually rose i think 12% by the close. indicated lower at the beginning today. so you're still trieding a trading a lot of these. >> that is your natural gas. oil gets dragged up with it and then one day later a reason to sell these things. so you look at marathon oil, that was another one that had been a leader. these are stocks that the e&p stocks are so leveraged to day to day sentiment. it's not even about the forward curve. >> if you look at the opening trade here, energy is the group under pressure. utilities and consumer staples are in the green. of the dow stocks at the top of the dow in the early session is

nike which really is the dow stock of the year. up more than 30% as the best performer. also we'll be watching disney, that was the only dow stock to close in the red yesterday. and of course it has increased attention because of the "star wars" numbers which continue to blow out. but these lingering concerns about espn and cord cutting are there. >> it's really clear that the stock obviously took a huge dump in the summer. it roared back. not quite to its old highs, but it it seem like a steep recovery in the leads up to "star wars." and it's been a complete sell on the news event. the stock i don't think will really trade on box office really for any movie and especially now that this one is in the books and we're already talking about $2 billion global box office before the thing ever opened. >> the energy stocks are clearly the main losers today. chesapeake down, southwestern energy. top gainer today is carnival. today is the start or this

weekend will be the start of course of the annual wave season within the cruise industry where they start this huge advertising campaign and bombard everybody in order to get around 40% of bookings for the year in over just the next few weeks. and it's interesting, there is a seasonal trade that you buy a lot of these cruise operators at around this time of the year and you hope that the pricing to fill the ships will actually be recommend tifrlatively strong. the indication from carnival recently is that it's true of them and in a market relatively flat to negative, carnival is a top gainer. >> also watching pep boys. just got a statement from carl icahn saying that he is, quote, very pleased to reach agreement to acquire pep boys, sees the deal closing in q1 of 2016. pep boys shares under pressure trading just below the $18.50 that ic's icahn offered to buy m out at.

>> this will trade to the deal value i think. elsewhere in consumer and retail, i've been looking at the kind of dumpster diving in term of looking at the real losers in retail. gap and bed bath & beyond, both up about half a percent. people wanted to buy the big losers feeling like a mean reversion trade, just some kind of a make up for the bad 2015 might happen this january. that does often occur. >> is that like bed bath & beyo beyond, fossil. and yet's session, we saw some of the retailers. that will be a big open question. >> and there is a general sense that we did maybe get a late push in traditional retail buying. >> i'm not sure if we can put up a chart of game stock, but they lost about a third of its value over the last six weeks or so. it was one of the most heavily shorted stocks that we have around on the view that ultimately people will switch to buying their games online rather

than the physical product in the stores. despite the fact that they diversify in to phones, so on. eventually of course over the next couple of weeks, there will be a day of reckoning when we understand what they have done for the season. over the last few sessions, the shorts have been unable to push the stock lower, but it has been a very big move. >> i'm watching financials, as well. that continues to be an area of focus. we see it increasingly trading around energy. energy is the biggest loser right now in terms of the s&p sectors. financials is number two at a time where the fed is finally raising interest rates. we see their fortunes tied to what is happening where the energy story, the fact that they have a lot of loans out to some of these energy companies that struggled aull year and 2016 shows more pain. >> energy filters through certainly on the credit side. so people are concerned about losses building up in the long books, but also i think that on

the inflation side, if you need inflation to get the fed more active, oil is the most direct and real time input to that headline inflation number. so that seems to be the way the enter market relationships are working. >> and let's mechanics apple. we know it's had losses recently. a few stories coming out overnight not least that they apparently are about to start using oled screens from lg display and samsung. already of course supply to samsung. but these screens are thinner and give a better picture quality according to local press reports in south korea ur, appls prepared for fund part of the billions required to in order to manufacture these on the volume that would be appropriate of course for the iphone. the other report out is that it would appear that the next iphone, call it the iphone 7, will be waterproof, which i think for a lot of people will be a bit of a boon. never seems to amaze me how many

people have dropped their iphone somewhere and end up in bags of rice. >> i think that waterproof phones are necessary. >> i wonder what it would do to the sales of the apple care plans. if you don't have the fear that you will drop it in the water, those insurance plans that guarantee these things, not the biggest profit center for aem apple, but it conditiomplaint h. i think there is one type of plan that no matter what happens, you get a replacement. >> bob pa is isani is joining um the floor on what is moving. >> i stopped get being apple care when find my iphone became viable. you never lose it. we are getting smacked around by oil. european markets opened earlier,

if you look at oil, we moved down about 3:30 in the morning our time and we had another leg down close to 7:00 in the morning. and if you pull up germany in the chart at the same time, the german market opening a little after 3:00 in the morning, the same thing happened. markets dropped intra day. and what amounts to 7:00 or so our time markets dropped down again as oil dropped down. so even europe is moving in lock step with that, although if you look at what has been weak in europe, it's a lot of the consumer names that have been really fairly well throughout the year. in our market here, again, materials and energy of course being weak with oil down. consumer discretionary also a little weak. that is interesting. and that's the biggest gainer of the year. that group up 10%. financials, consumer staples up about 5% even though walmart has had a terrible year.

i just want to show you europe again because this is it, germany and italy and i think switzerland will close today, so they're snessentially done for e year. germany at the lows for the day. but put up europe to date because the pig sbig surprise, consensus has been wrong for most of the year. remember when people said last year that europe would have a very weak growth this year and the markets would struggle. by and large, that hasn't been the case. although spain is to the down side. if you look at the global markets for 2015 and how wrong the consensus was there, remember the story, at this time last year, the story was -- put up global markets, the u.s. was the place to be and u.s. has been flat the this year. the art was europe would be weak, have very weak growth and germany 9.5%, the rest of europe is doing well, italy is doing well. china would have very slow growth and be below par. and that did happen, but the

market there, the shanghai, up 10%. nobody had the shanghai up 10% for the year. the only prediction where it was consensus that worked was japan and that was that good for stocks in japan and that was the only thing that really worked in terms of global stock plays for 2015. finally, back to oil here with oil down 30% on the year, it is tremendously annoying and sarah referenced this that whether or not we will be positive or negative in the united states for the year could depend on the weekly oil inventory levels that we get out at 10:30. that could swing the market either way. right now the s&p 500 is frakts fractionally positive for the year. we're projecting a build voergs b of course, but we could get a positive print for the year. that's what the year has come down to, weekly inventory levels. and that's how annoyings ethe ed

of the year has been. >> point is taken. >> tomorrow of course the attention of the world will be on times square. let's kick it up to the nasdaq market site and kate rogers for a look at trades there. >> we're not in territory as we were yesterday's rally. but as sarah mentioned, the nasdaq is up by about 8% for the year in both outperforming the dow and s&p. and a lot of the year's rallying due to tech stocks, that was search the story yesterday with new all-time highs at the close from amazon in both classes of alphabet, not the case today. amazon down a little more than half a percent, but for the year up more than 120%. second biggest gainer in the nasdaq 100. we'll very to see fts rally continues, but it was driven due in part to the amazon prime s

subscriptio subscriptions. and bo both classes of alphabet down this morning. and another name, facebook, you were talking about it earlier, that's down by about a quarter of quarter of a percent after the federal reserve judge qualified the class action suit. back over to you. and now we head down to the bond pits and rick santelli. >> good morning. well, every seems to be wringing their hands that rates are flying up. they are moving up, but let's at every maturity along the yield curve and peg what is going on. two year note, twos and threes are going go the way of the fed. there is just no way around that. so as you look at a chart starting right around two week before tax time 2010, last time we had a -- and everything i look at is based on closing yields.

let's look at the five year. it's an interesting animal. a lot of real finance, a lot of important businesses keep a very close eye on the five. andhe it's got short and long term embedded in it. it is starting to zoom a bit. it's basically away the highest yields since mid september of 2014. now in, terms of tens and 30s, i think i heard somebody say someone thought the ten year would close and i hope they were talking about next year, not this year, at 3%. is it possible? anything is possible. but it certainly shouldn't be shocking that we're getting into the 230s. that was your go-to place for many, many of closes. year to dear chat, theate chart of wood in the 230s and 240s. so i don't see a big surprise there and the third year is

similar. both charts accentuate how the fed has driven the short end and the long end. they used to say it was inflation. i say it's about weak growth. because you're not going to get any inflation without any growth. they're just walking down the street hand-in-hand, walking pretty slow, though. now let's look at the dollar versus yuan. this is the most fascinating trade on the year. haven't been at this level since may of 2011. dollar even deindex october 1, it, now switch it out.'s all ab large part. mike, back to you. >> oil inventories data due out in less than an hour. >> good morning to you. well, as bob said, if the market is hinging on what will happen with oil inventory data, there

is a big weight on our shoulders here. here's what we know going into the 10 chlt 306789 report here. 2.9 million barrels is what the api reported last night, that is putting bearish pressure on the ma market. api and department of energy don't always come in line. traders are expecting a slight build, maybe smaller than that 2.9. we'll have to see what we get. u.s. protection will be deep in the report on a weekly basis, it's flat lining around 9.2 million barrels a day. if that doesn't decline or move the needle anyway, it's also really a bearish factor for oil. meantime the saud dsaudi oil mi was out this morning making some comments that the the kingdom won't change its production policy and that policy is reliable. that is also bearish for this market. so trading 2.5% down under $37 a barrel. i will see you in about an hour. >> jackie, we'll look forward to

it. up ahead on the program, airline stocks have been slumping. investors in cruise operates have had lots of reasons to celebrate the lower prices of the oil. up next, what it will take for that rally to continue in 2016. also ahead, a look inside the business of champagne as the world gets ready to ring in the new year. "squawk on the street" will be drinking to that.

despite every lower fuel prices, will this year has been rough for the airline sector. down about 14%. it's a different story for the cruise operators. they're each up more than 20% this year. and accelerating those gains into year end. does the momentum continue into 2016? joining us from cleveland is james hardiman, analyst. james, welcome to the program. i guess the big difference between the airlines and the cruise operators is that the airlines can put more capacity on more easily where the cruise

operators, they're basically stuck with a certain number of ships and therefore the supply is constrained. is that the difference? >> that's exactly right. certainly from a long term perspective, we pretty much know how much capacity is going to come online really between now and 2020. and that capacity is only going to grow somewhere between 4% and 5% at a max over the next few years. and of that, probably half or more of that is going to go into china. which is a completely independent market from the other developed markets of the world. and so with that limited amount of capacity growth, it means very good things for pricing. and that's exactly what we snau 2015 and what i would expect for 2016. >> of the three major company, norwegian, royal caribbean and carnival, each is a very different story. carnival, underinvested for many year, by far the biggest with 100 ships. royal caribbean's stock is up

30% so far this year or the last section months, put it that way. carnival up about 5%. which becomes the better play into next year? have you had all the gains in rcl, does carnival become the better play? >> i think they're both interesting stories. royal came rribbean is our favo of the two. i think over the last couple of years, royal has shown the ability to curb their costs a little birth better than carnival. if you look at the relative exposure of the two companies, royal has higher exposure in parts of the world that are doing a little bit better, certainly the caribbean has been the growth engine over the course of 2015. if you think about the exposure that carnival has in eastern europe, that's a part of the world that has pain a little bit slower. royal has a little bit less exposure there. but both -- i think the industry as a whole is really more

investable than it's been in a very long time. >> james, i can recall back in say 2011 when global oil prices were above $100 a barrel, the managements of these companies were busy saying we're not really that leveraged to the price of energy products. how leveraged are these companies and are they genuinely big ben owe fish areeficiaries prices? >> they're absolutely huge beneficiari beneficiaries. fuel is one of the biggest if not the biggest expense line items for all three of these companies. used to be the biggest. as oil as come down, maybe not quite as significant. what is interesting is all the companies went through the decision making process of whether they wanted to hedge against fuel. carnival was the last one to come over and they started hedging right at the time where fuel started coming down. so that has worked against these companies to a degree. but there is no doubt that as fuel falls, that is a big benefit.

and when carnival gave guidance to 2016, the biggest positive surprise was their expected fuel expense. and that was certainly well received by the street. >> james, have a good new year. nice to see you. thank you, james hardiman from cleveland. when we come back, the future of emerging markets. will they be a good place to put your money in 2016 after a rough year. "squawk on the street" will be right back. here at the td ameritrade trader group, they work all the time.

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see thmade hoedy is at hq wh a break do you know. >> 2016 will likely mark the start of the emerging market recovery. am growth expected to rise for the first time since 2010, it will come less from china and more from india projected to grow by 7.6%. but that doesn't mean the new year won't be challenging for emerge markets. a hawkish fed will continue to pressure countries with high dollar denominated debt. a sharper chinese slowdown could also have a spillover effect on its asian peers. arguably what is more important than growth is china's management of its currency.

further weakness in the yuan will be bad news for companies that rely on chinese demand. another major headwind will be weaker oil prices likely pressuring economies like brazil, also dweealing with hig political uncertainty and we ak communities. russia is expected to see growth stabilize. other analysts are warming up to turkey. economic growth may recover amid long delayed reforms. so for emerging markets, the story will continue to be bifurcated. investors will have to be slegt difference. >> thank you very much. ahead on the show, breaking news on pending home sales plus the future of fitbit and judgment potentially on whether bill cosby will face criminal

prosecution. stay with us.

good morning and welcome back to "squawk on the street."

we're live at the new york stock exchange. let's take a look at markets in the early session here. we have light decline across the board with the dow jones industrial average down 40. it is the second to last full trading day of 2015. s&p 500 down a quarter of a percent. importantly still in the green for 2015. but just barely. nasdaq the strongest of the bunch for the year, but down the most today. everybody watching oil. decline in wti has been weighing on the stock market, below $37 a barrel. >> breaking news from die r ddi in on pending home sales. >> reporter: pending home sales down 0.9 the% in november compared to october. that's a miss. the street was looking for a slight gain. this report from the national association of realtors shows sales up 2.7% year over year, but that is the smallest annual gain in over a year. remember, this is based on

signed contracts in november, not closings. so you can't blame it on those new mortgage regulations that are delaying some closings. these are just signed contracts. realtors instead are saying home prices are rising too sharply and there is waning supply. we sound like a broken record on that one. but still, sales town in the northeast 3%. in the midwest, up 1% month to month, up 1.3% in the south, down 5.5% in the west. remember the west is where home prices are rising the fastest. so again, a amiss on all accounts. realtors predicting 5.2 million total sales for 2016, highest since 2006, but still 25% below the peak. back to you guys. >> somewhat disappointing read there. diana olick, thank you very much. just want to draw your attention right now to machinery couontgo pennsylvania, where prosecutors are expected to speak to

announce a decision whether to charge bill comes city over an encounter with a woman in that area that happenedo over 12 yeas ago. it's part of alleged assaults against bill cosby, but if they do file charges today, this would be the first attempt to criminally prosecute bill cosby, who is 78. he's been accused by a number of women, so we're waiting this decision. statute of limitations runs out in january. >> it's worth pointing out that she first made the allegations that he drugged and violated her in 2004 and then they decided in 2005 not to prosecute. but that clearly has been unsealed and reproached. only two days left on what has been a volatile year for the markets. plenty of head winds. so what should we expect going into next year? here to discuss, chief global economist at jpmorgan and kevin carroll also joining us,

washington crossing advisers. bruce, we just got the pending home sales there with a fall again. what is happening within housing in your view? >> i think housing is still doing reasonably well in the u.s. i think the benefits of low interest rates, i think the healthy labor market conditions, i think we will see strong growth across the construction sector as we look at 2016. i think it's one of the positive forces in the u.s. economy against the backdrop of global influences holding back manufacturing and business spending elsewhere. >> which we talk about all the time. when goldman says the yields on the ten year will get the to 3% by the end of the year, partly because of what the federal reserve will be doing, but partly because of the 12re7stre of the economy, are you a believer in the strength of the economy? >> i'm a believer in the resiliency of this economy. i think we're look at an economy that will grow somewhere between 2% and 2.5%.

it's hard for me to call that very strong. but there is a drag from international forces probably of about half a percent there to domestic demand probably grower a little bit closer to 3%. the other point to make is that we have a very weak supply side productivity labor force growth, so even with growth close to 2.5, the unemployment rate is likely to keep falling, we'll likely see pressure coming on the fed from that front. >> kevin, what does that mean for the market next year? >> i think it means the market puts in some positive gains. because what bruce is talking about is an economy that grows but slowly. and that is essentially our view. and i think that when you look at where we are, we've come a long way, valuations are fairly rich. margins are fairly steep. so this is for equities of course. and then starting yields on bonds are very low. so i think the main thing is when you look forward from here, you have to have much more realistic expectations about returns going into 2016 than did

you a few years ago when those things weren't necessarily the case. >> kevin, one of the big questions i think here is we've been talk all year about the narrow nature of performance in the stock market. and whether the market can kind of repair itself with having some of the beaten down areas come back, or will we just be relying on these kind of anointed growth stocks for another year. >> yeah, i think that the narrow leadership, it hasn't been all that narrow for all that long. it's not exactly like what we saw in the late 90s daits for example, but you're right, breadth has not been as strong as it was the year before. and also more broadly, if you look across asset classes generally, there are really very few places if any to make money this year. you look at stocks, they were flat. bonds not returning positive numbers. and came mommodities down. it really depends on what happens with the economy and earnings next year. we've seen flattish earnings, a

slow growth economy for structural reasons that bruce pointed out. and if we continue to make progress eventually that gets back on its feet. you see more participation. if it not, i think you'll have a languishing market for a whig. sdl bruce, when it comes to the growth question, so much is rising on the u.s. consumer because it's been would have the healthier pockets lately. we got a good read on consumer confidence this week. and on home prices. but is the coupler in this country in good enough shape to carry the entire burden? we were talking yesterday to the ceo of u.p.s. and he said we'll see how strong the consumer is given what is happening in manufacturing. >> i think it's an important question and i think it's interesting that the consumer numbers have softened somewhat as we've moved into the fourth quarter. but as you noted, fundamentals on confidence as well as in labor markets and overall income look to be pretty solid. i think the consumer can generate about 3% growth here.

i think it is one that will be a strong point for the economy and it will continue to be so. the risks here are what coming from global forces, coming from any kind of pressures on corporate pricing and margins and whether the labor market holds up. right now it looks like we'll get another 200,000 gain when we get the a report next week. >> kevin, i want to come back to i think probably the most important thing that you've said. which is that you believe the next year eninvestors need to have a much more realistic expectation as to whether the market will go. we're in an environment where the stock market recently each year on average has returned 20% if you include dividends. how much in that realistic conversation do you think the stock market will return to people watching now? could it actually within the realms of possibility decline next year, is that the kind of underlying tone of what people are inferring if not saying? >> yeah, well, short of a

recessi recession, i would think we would see positive numbers but lower. when you think about dividends and buy backs and margins an valuations and just overall growth in the economy, probably a 5% to 6% kind of number in a growth scenario makes sense. and i think that that is probably -- when you think about a balanced portfolio, very few people own just stocks. then you have to look at the income side of it. if you're a global investor, places in europe you have long term government bonds well below 1%. there is a big difference between the yields here in the united states and where maybe 2 respec2%, 2.25% actual lly look. so better than inflation, but you have to be realistic. >> and it is astounding that ceos have probably bought back half a trillion in stocks but

still it's flat. good to talk to you both. have a great new year, guys. up next, all signs pointing to a strong holiday season for fitbit. but the stock down more than 20% in three months. get beautyrest, posturepedic,

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a sexual assault more than a decked a after a former temple university employee told police that bill cosby had drugged and violated her at her home -- sorry, at his home near philadelphia. as soon as the news conference does begin on 24 this, we will bring to you live. i believe the news conference is starting in right now. let's listen in. >> with me is chief john norris and chief gallon. we're here to announce today charges that is just been filed against william henry cosby. these charges stem from a sexual assault that took place on an evening in early 2004 at mr. cosby's home in montgomery county. mr. cosby is charged with aggravated indecent assault. this is a felony of the first degree. mr. cosby's attorney has been notified of the charges and he

is expected to be arraigned later this afternoon. when we have a specific time for that, we'll let you know and that will be at the imagine steerial district judge's office. the charges are filed as a result of new information that came to light in july of 2015. statute of limitations in this type of case is 12 years. after determining that the statute of limitations regarding potential criminal offenses had not yet expired, the investigation was reopened. police, montgomery county detectives and prosecutors from our office, our team reviewed the initial investigation, re-interviewed some of the witnesses, examined evidence from the civil case, and information from other alleged victims.

the evidence shows mr. cosby established a relationship with the victim after meeting her through her work associated with temple university's women's basketball program. through the course of their association, the victim came to consider mr. cosby her mentor and her friend. on two other occasions, before the incident, leading to the criminal charge in this case, mr. cosby made two sexual advances at her that were rejected. on the evening in question, mr. cosby urged her to take pills that he provided to her and to drink wine. the effect of which rendered her unable to move or respond to his advances and he committed aggravated indecent assault upon her. now, prosecutor's job is to follow the evidence wherever it takes us. and sometimes that means

whenever it comes to light. when u.s. federal judge edward rabreno unsealed legal filings that contained references to the civil deposition and we learned about allegations from other victims under similar circumstances, reopening this case was not a question. rather, reopening this case was our duty as law enforcement officers with a sworn obligation to uphold our constitutions and to uphold the law. today after examatiination of a the evidence, we're able to seek justice on behalf of the victim. now, going forward, and we ask that anyone that has any information regarding any similar incidents with mr. cosby come forward, we ask them to contact either montgomery county detective bureau here or chel

ton ham township police. at this point -- >> it looks like we have a few audio problems. just to recap, we've been listening to a live press conference where bill cosby has faced his first criminal charge over his conduct with women. this is the montgomery county prosecutor announcing that he has been charged with aggravated indecent assault which is a felony. a previous district attorney declined to charge him in 2005, but that district attorney was defeated in november who made this a campaign issue. bill cosby has said under oath that he has had consensual sexual conduct with this woman. he is set to be arraigned this afternoon. prosecutors opened this case because new evidence was

unsealed in this woman's related civil case and then of course dozens of women came forward with similar accusations to the point where it could no longer be ignored. so just to recap, bill cosby has been criminally charged in pennsylvania with sexual assault. back over to you. >> and just within the local statute of limitations, mandy, thank you very much. clearly the arraignment will be a big focus this afternoon. coming up, matters more mundane, transports are having a rough year. that sector down more than 15% despite where we've traded on oil. more on the transports when we come back.

not every day this happens, but we have a finance story trending on twitter this morning. the real life michael bury, the start of the big short, is making a dire warning. you have more on this interesting s interesting interview. >> he gave an interview by e-mail to new york magazine. we don't really know a lot about him although he has a long paper trail. a lot of material from him on the old message boards. but what esshe is saying is gar

variety concerns about central bank's propping up of the system, banks becoming larger and even bigger than too big to fail before. so i don't know that a lot of people are looking toward these particular big picture warnings and saying we have to heed now because this guy saw the last one. but i think there is a lot of mining of his history as a great deep value stock pecker ba epicd just his wisdom. so he's almost becoming a little bit of a cult hero he. i think it says something that we keep wanting on go back and get wisdom from the people who saw the big thing coming that so many people didn't see coming. i still think we have a tremendous amount of anxiety in the system about something that we're not watching maybe in fact overattention on potential black swans. and i haven't seen the movie, so i don't know what the portrayal seems like. >> i chose "star wars" instead. but actually, he was also asked whether he was surprised if nobody went to jail and he said he is shocked, that executives

at some of the worst lenders were not published for what they did and then proceeded to talk about the little guys will pay for it. >> exactly. and that's not a very novel perspective. he also sort of feels like he wishes there was a culture of personal responsibility that sprouted up that he sees not there. one final thing, current big trade he has right now, feels like water and the shortage of drinkable water will be a tremendous story for decades to come and investigate agricultural products is the main way to play that. basically food is grown where there is lots of clean water. and it's transported to places where it's not. >> would you buy deer? >> potentially, but i think it's ever more either the farm land or the actual crop products. >> interesting. very interesting. >> all right.

2015 off to a close and cnbc is breaking out the 2016 playbook looking at ways you can make money in the coming year. this hour we're checking out the road ahead for transports. here is morgan brennan. >> reporter: in 2015, transports got derailed. buckle your seatbelts because 2016 could deliver more of the same. first the railroad rut will continue. as the commodity collapse continues to dampen demand and cheap diesel makes trucks more cost competitive. railroads will have to curb capex after a record year of spending an consolidation buzz will persist. second, 24networks will get smarter and automation will creep into trucks to meet regulations. railroads will keep implementing a man at a timed automatic braking system, and drones will

have more uses. not just for testing deliveries, but for inspecting tracks, bridges and machine iry, as well. third, package deliveries will get pricier. u.p.s. and fedex are both raising rates, but the oath possepost postal service could create the biggest fill. it could curb all the free shipping perks for the consumer. so those higher postage rates will be implemented on january 17 with the biggest increase in lightweight parcel select packages. so that could have far reaching effects. certainly something to watch next year. >> the fascinating thing as executives at u.p.s. and fedex would say, hey, look at our business, one of the few area where is we can continually hike and the consumer will bear it, but doesn't that translate into

a great stock performance. >> when you talk about the ground part, margins are very thin and both companies in their ground businesses handoff a fair amount of hair patheir packages postal service. so if you see rates increase on that end, it will be interesting to see what happens to the overall price landscape. >> a lot of people see the transports as an on mus signal for the global economy. we'll see what happens next year. thank you very much. straight ahead -- >> keep an eye on trucks. because they have been very oriented towards consumers. >> all right. will do. straight ahead, energy the worst performing sector of the year. we'll talk to an energy funds manager about what if anything he's buying on this dip.

good morning, everyone. shear your cnbc news update. as you saw moments ago, bill cosby has been charged with sexual assault in connection with a 2004 case. a former temple university employee told police she was drugged and violated by cosby at his home. cosby will be arraigned later today. u.s. military officials are calling a weekend rocket launch by iran, quote, highly provocative. the "uss harry truman" was crossing the straits of hormuz when iranians began live fire

exercises. an unguided rocket came within 1500 yards of the aircraft carrier. eight chinese miners have been found alive, rescuers using an infrared camera located the men deep within the mine. to food and supplies have been sent down to the survivors. and the hoverboard delivers the knock outpunch. tyson's daughter posting this video which shows help taking a big spill. wear a helmet! that's all i have to say about that. that is the cnbc news update. let's go over to jackie d deangelis. >> i think some traders are wearing a medical met out take. a build of 2.6 million barrels slightly less than what we heard from the ape last night. but nonetheless it is having a negative impact on prices. we were at $36.63.

dropping about 20 cents since this number came out. a bearish number. we have to dig into the report, see where u.s. productions stand. it's been flat lining around 9.2 million barrels a day. but also some of the negative pressure coming from headlines out of the middle east. you have the saudi oil minister saying that the kingdom is not going to change its production policy despite the fact that at it release their budget and the bottom line is that it is choking on low oil prices. so the question now what happens next. are we going to see austerity measures go into effect in the middle east or will this spur some sort of an action where a production cut is forced early next year. let's take a look at what the saudis are talking about here. for 2016 in that report, they indicated that they think the deficit will be about $87 billion. that is absolutely less than what they came in at this year. but they also are proposing $36 billion in spending cuts. they're basing their projections on $29 oil. here is the key issue.

$36 billion in spending cuts, where will that come from. this is in a region that subsidizes inhabitants are oil revenues, and falling because of these prices. saudi arabia specifically is talking about raising energy prices to its consumers. we're talking about gas prices, water prices and energy, as well. these are net effective taxes on people who are not used to paying taxes. they're also adding a tax on tobacco. a lot of smokers in the middle east. so the question is, will this go off without a hitch, will people feel sort of rebellious about this, will it spur some unrest. and also the other countries in the middle east, will they start to follow suit. this is a larger issue here that could potentially be solved easier by creating and causing that production cut. so a lot of things could happen early in 2016 that will have a big impact on oil prices, but you have to remember, these countries are choking, it's not just u.s. producers. back to you. >> but jackie, people have to

understand the context here. these are not people that live like americans. these are people who have free health care from the state, who are heavily subsidized on the fuel. the baseline from which you're coming is completely different from a free market economy like this one or arguably western europe. >> it really is. and the first thing that comes to my mind is the austerity measures that were imposed in greece. the greek people did not want to deal with a lot of those cuts. people as you mentioned are even a different boat when it comes to subsidies. i lived in the middle east and i can tell yous's an easy life. they don't pay income tax. they're used to paying negligible amounts of money for gas right now. so once you start imposing some of these effective taxes, i don't imagine it is going on go off without a hitch. so there are some really bringing decisions that need to be made that come from not just the kingdom, but the surrounding countries in the gulf, as well that will impact the global economy. >> so just on this data you just

reported, crude oil moving to session lows, stock market following right there with it, moving in lock step with oil these days. dow down almost 60 points. chevron an exxon near the bottom of the heap. you can talk a little bit more about why this number was a surprise, why they were expecting a draw this week, what goes into these weekly stockpile numbers and what the outlook is for next year since they have become such a key market mover? >> well, at this time of the year, we do expect to see slight builds because driving demands comes down a little bit and you have people who are not using necessarily as much energy especially because the weather hasn't been as severe as it could be by this point in the year. so small build is certainly reasonable. but a near 3 million barrel build is a pretty big one. and it brings us back to the fundamental case when it comes to oil. the supply/demand story. all of these things that we just talked about are based on a fundamental picture that isn't expected to change right now. when you look at supply, we are

a wash in oil. we're just not using as much oil as we have. if that is the correct analysis an everything stays the same, you will see these prices continue to go lower from here. that's what the consensus is on the street. but still, the street has been wrong when it's come to oil price. they thought they would go higher this year. they did not. there is always the chance that there could be that wild card thrown in 245 kapgs the whole game and that's why i bring up this case of saudi arabia. >> one day we could wake up and we'll be spiking higher. but we'll leave it for there. thank you very much, jackie deangelis. in the meantime, the iconic toys "r" us store in times square is closing its doors for good today. and they aren't the only onesing forced to shut locations because of what you might term exorbitant rents. more on that when we come back.

you may not believe what stock is up more than 100% this

year. here's a hint. it has something do with postage. get the name and the reason behind the rally at trading nation.cnbc.com. more "squawk on the street" coming up.

you're watching "squawk on the street." let's get a check on markets. utilities struggling to make gain, but standing out as the only s&p 500 sector in the green as stocks trade broadly lower. powering today's games are pg&e, edison international and cms, all marginally higher on the day. utilities are the third worst performing sector for the year just after materials and energy down about 8%. back to you. rick santelli in chicago for the santelli exchange. rick. >> well, thank you.

and i'd like to welcome my guest bob leshefski. thanks for taking the time pre-new year's eve. you're definitely one of the smartest i've dealt with with regard to obamacare. so let's get right into it. give my the reality of enrollment and not just enrollment for the year we're closing out, but a bigger picture enrollment feel. >> well, first of all, in a perfect world, the insurance companies will want to have about 75% of the eligible group, those eligible for subsidies, signing up to be sure that we've got enough healthy people signed up to pay the claims of the sick. in 2015, we're ending the year at about 35%. so in order for obama care to really be on track here, we need about double the enrollment. the administration's announced some pretty incredible numbers about 8 million signed up so far, but those numbers don't tend to hold. at the end of the 2015 enrollment, they said there were 12 million signed up, that fell on 9 million.

so we really have to wait for things to shake out, but they're not on the way to doubling their enrollment, which they really need to do. >> let keep this really simple. since its inception, how many people that were uninsured now are insured directly tied to obamacare and i guess like medicare/medicaid, those issues complicate it, but can you give me a simple number? >> probably about 12 million. and the vast majority of those are the medicaid expansions in the states that have taken it. somewhere between 2 million and 4 million that would have been u uninsured are insured in the exchanges. about half the population or less is benefiting. it's a really small percent so far. >> now, keep that number in mind. contrast that with best you can with how many people used to have insurance they were happy with that covered the things that were important to them, how

many of those have been disrupted to get to the number you just set? >> well, there is no hard number on that. but it's probably the vast majority. people who had insurance before, they're probably paying 60% to 100% more than they paid before. their deductibles are much high person the average deductible on the obamacare exchange is now $3,000. it's $6,000 for the cheaper bronze plan. and the premiums are probably 60% to 100% higher than what they were paying under the old system that excluded people with pre-existing conditions. so you hit an interesting point here. and that is that the people who aren't subsidized in the individual health insurance market and that is about half the market, those people are taking on the chin in terms of costs and higher deductibles so we can get other people covered. >> so basically -- let me interrupt you. and i don't have any flesh in

the game other than i'm not necessarily happy with the way things have morphed personally, but it seems like a dumb idea when you try to do a good thing and the number of people that you impart that on is small compared to the people that you kind of screwed up to get there. just doesn't seem to make sense to me. why didn't they just take the uninsured and make a very special program for them? >> well, that's one of the things that people have proposed. the fundamental problem here is that obamacare works really well for poor people. if you're on medicaid. and if you're low income in the exchanges, low deductibles, low premiums. but if you're working class or middle class, peoples making $60,000 a year or more, they're in the signing up because the premiums are still really high and the deductibles are higher and networks are narrower. obamacare needs an overhaul, no question. it's not -- what we've done is improved things gra matt particularly for the very poor people and we've made things worse for the middle class and for people who are not on

subsidies. no question about it. >> middle class haven't had a good run. my final 30 seconds. isne epilogue on united health? they said enough is enough. >> what this says is so far the business model in obamacare and the exchanges for the insurance companies is not working. it's seriously broken. you know, it's not only united healthcare. for the first time since the 1980s, the not for profit blue cross plans as organizations are losing money. think about that. in the key driver of course to goldman sachs is obamacare. so obamacare has taken the blue cross plans from being a relatively good financial shape to all of them losing money because of this. >> bob, thank you so much for your wisdom on this topic. i hope you have a happy, safe and healthy new year.

mike, back to you. the iconic and overcrowded toys "r" us store in times square will be closing for good today in the face of all-time high rents in new york city. courtney reagan is there live with more. >> reporter: good morning. if you want to ride the ferris wheel, you have until 6:00 tonight. after that, the doors close, gap and old navy are eventually moving in. toys "r" us also close that had iconic fao schwarz location on fifth avenue about five months ago. the retailer says it's looking for new location for toys "r" us in manhattan, but hasn't found one yet. record high rental rates here in new york city are pushing out both small businesses and large retailers. crate and barrel closed its madison avenue location four years before the lease ended because the rent is just too darn high. however the board of realtor says not every area is seeing higher rents. average asking rent for ground floor is up 3%, but that is low compared to a 42% increase in

the flat iron district. times square did remain the second highest in manhattan at $2390 per square foot per month. plus, in new york city, labor cost is higher getting inventory in and storing it is more challenging. okay paps city costs are be up to 40% of sales. that's about four times the rate for an average mall. but many retailers do justify the costs in part as marketing expenses. a partner at retail consultant says new york city is hard to beat when it comes to touching so many consumers especially from a tourism perspective even though tourism may be down somewhat due to the stronger dollar. now, as more retail sales shift to online, traffic at many physical stores is down in new york city and otherwise. and the problem may be further exacerbated in new york city with the retailers that indicator to tourists. nobody wants to buy items and then tote them around all day as they're exploring the city especially if online ordering

and delivery is an option. back to you. thanks, courtney. i wonder if these stores, they say they kind of justify the high expenses as marketing expenses. i wonder if that means there is almost no such thing as too high a rent in times square. if it's just a showcase store, just brand visibility as opposed to trying to make money, where is the top? >> reporter: and that's exactly the question that we asked a number of folks that work with retailers and the real estate people themselves here. and they basically said, yes, a lot is justified because it is just so important to have a presence especially if you're flagship in a place like new york city. but to a point. you've seen lots of people going in and out of this will toys "r" us stores with no bags in their hands. they experience it. it's hard to say, do they go back home and order something or buy something that they saw here in the store? at some point you just can't justify it the anymore which is exactly what is happening here.

it's been a decision years in the making, but finally they said enough is enough. >> i was a little more sad when fao schwarz closed because that was the end of the retail stores. how many times did you travel to new york as a kid to go there. courtney, i wonder if it says anything broader about the toy industry. isn't the toy industry having a good holiday season because of "star wars" but in a broad slump because of the growth in buying online and also electronics? >> exactly. and over time the toy industry is one of those that has been hardest hit by online. especially because you have hasbro that sells its products to retailers across the board, physical and online. so it's very comparable. and very easy to just order that online. and so that is one industry that has been hard hit. and experience is something that a lot of retailers are going after and so they're becoming more comfortable with using their physical space especially in a place like morning city nek city to introduce the brand or

reexcite the consumer about a brand. but again only to a point. if you're paying 40% of your sales in occupancy costs, how much can you do that, how long can you do that. if the rest of the chain and other parts of the country are strong enough to support it, you can go for longer. but that's not always the case. >> and of course for toys "r" us, a company subject to a leveraged buy out. thank you very much, courtney reagan. and speaking of times square, tomorrow night the champagne will be flowing as people around the world of course see in the new year. moex, yes, the official champagne for new years eve in new york city. who 23450u. we'll talk to mo echl t shet ch educator after the break.

with us now here at post nine, seth box, the champagne educator and private client director at moet, which for the third consecutive year is the official champagne for new york city's now year's celebration. good morning. >> good morning. >> so what is that? that's a sponsorship deal with

times square, is it? >> it's a perfect partnership because you have basically the world's coolest party combined with the world's most loved and sold champagne. >> your party is on a balcony this year somewhere -- where are snu. >> i don't know exactly where it's perched, but it will have an amazing view of the ball dropping and everything. >> who gets invited. >> we'll work on tickets later on. >> it's slipping in our coffee cups. >> how much do your sales actually increase on new year's eve? >> this is critical. about a quarter -- it depends on the brand, but one-quarter of the champagne business is typically done in the last month of the we're, and 40% is usually done in the last quarter. it's essential for us, this time of year, that we get everybody enjoying their bubbles. >> part of your mission is education. you know, there's been a lot of reports in recent years of other non-champagne sparkling wines gaining market share. what's your message in terms of champagne and why choose it? >> i think that it's like

anything else and how it's made, truly, and for me i'm an equal opportunist. drink what makes you happy. but if you understand how it's made, it took, for example, for this here, it took us 20 years to make it. >> that bottle? >> this took three years to make. it can only be from one spot. it can only be from certain grapes. the impeer wral will be about $40 a bottle. this is their new prestige cuvet, the very top, top, and that's retailing for $450. it's a bit like anything else. as long as you know what's in it and you enjoy what you get out of it, then it's education. it's teaching people the difference. >> it's the region of champagne big enough to supply the world? because what you saw in puerto rico they sold a lot of their smaller vineyards because it was so tight they couldn't create a global brand. went to australia and pumped -- are you constrained here? >> with champagne we are. it's as big as it's going to be, and we'll never be able to make it any bigger.

it's one of the smaller wineries in the world. it's 17% bigger than burg ubdy. >> there's never a shortage, is there? >> shortage, no, but what you see in expansion is moet and other champagne properties going to england or california or australia other parts of the world and creating sparkling wine brands there that are based on the model in champagne. we have chandon, and that was begot by moet and them making a different style, but it's not sam pain if it's not from champagne in france. >> what are you seeing in terms of the luxury market right now, spending? sluggishness along with sluggish global growth, especially in asia and emerging markets? >> the thing -- this is the u.s. is actually really important for growth for champagne. in the asian market you see the red wine market and cognac being far more effective than champagne. it doesn't mean that it's not important to us in the future, but right now i think that for champagne in particular the growth is -- >> is that because of the tastes? >> yeah. actually, red wine is a bigger

deal there, and here we are a wine drinking market, but we are a champagne growth market, unlike u.k., for example, where it's kind of flattened out. >> yeah. they were very big drinkers for a long time. in fairness, tomorrow night just in finality, when you stand there on the balcony with a bottle of champagne, do you uncork it and spray it over everybody in times square formula one style, or is that too goesh. if you want to spray your champagne instead of drink, it though it might not be my personal choice or yours -- >> maybe a different party. >> it's certainly a way to celebrate. >> do you that at your house. >> if we win the pennant. >> thank you, seth box. seth box from moet. enjoy tomorrow night. >> coming up, yahoo's former coo weighs in on the company's rough year and what's ahead. "squawk alley" coming up next. random? no it's all about understanding patterns like the mail guy at 3:12 every day or

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kayla here on sidewalk alley. andrew ross sorkin. thank you again. >> it's been a fun week with you. hasn't been all week, but a couple of days. >> couple of days. >> also joining us this morning is dan rosen's wife, president and ceo of -- former coo of yahoo. dan, good day to you as well. >> good morning, everybody. how are you? andrew, how are you doing? >> hey, buddy. how are you? >> two scarsdale guys on at the same time. >> that's true. >> dangerous. >> you should know that. we went to high school together. not at the same time, but we've done a couple of things together in that -- >> kindred spirits. >> let's get to apple news. italian authorities say