start to the season. it's wednesday, december 28, 2016. "squawk box" begins right now. ♪ >> live from new york where business never sleeps, this is "squawk box." good morning. welcome to "squawk box" on cnbc. i'm andrew ross sorkin along with joe kernen and michelle caruso-cabrera. we have been waiting for quite some time now getting to that 20,000 mark. the dow looks like it will open up higher, about 18 points higher. doesn't get you over the mark yet. nasdaq looking like it will open higher as well. s&p 500 looking to open about a point and a half higher. in asia, let's show you what's going on. hang seng is up pretty well there. looking at the shanghai composite and the nikkei down. nikkei is down just a tad. and the european equities at the moment, mostly red arrows. the ftse up on its first day back in business after a long holiday weekend for them. and then finally a quick check

on crude right now. looking at 54.24 if you want to buy a barrel. shares of qualcomm getting slammed. that's because a south korean regulator said they would fine the firm $854 million for alleged antitrust violations. the highest penalty handed to an individual company in penalty. the korean fair trade commission said qualcomm broke the law by limiting access of competing chipmakers to its patents. we don't have premarket trading here, but overseas trading -- >> was your pronunciation of patents -- >> very deliberate. so he doesn't yell at me. >> the "t" and the "d." >> manhattan.

what about buttons? >> button. >> when you both say things like this, you know it stresses my buttons. >> patent. another chipmaker is continuing a huge run in 2016 leading the overall gains for the sector this year, maybe for the entire market. nvidia shares rising following a nearly 7% gain yesterday. it's the best performing stock of the s&p 500 this year. um 162% year to date. the graphics chipmaker is benefiting from rising demand. >> people are supposed to stop buying this a couple weeks ago because it was up so much. >> really? >> one of the biggest gainers. >> isn't it near the top? >> triple. how do you know? . i'm just saying, of all the stocks in the s&p 500, it's the number one. >> i think you're right. the semiconductor index hit new highs yesterday it is up more than 40% year to date

outperforming the s&p tech sector rise of 14%. >> mm-hmm. now to the day ahead on wall street. the housing market is front and center. the mortgage bankers association has its weekly survey of mortgage applications at 7:30. 10:00 a.m., november pending home sales. forecast call for a rise of signed home contracts last month. jump in consumer spending in the final stretch of december offsetting a slow start to the u.s. holiday shopping season. new sales data showing a major shift in late december with brick-and-mortar sales rising 6.5% year over year, thanks to strong demand for furniture, home furnishes and men's apparel. the surge attributed to an improving job market, lower gas prices and the arrival of president-elect trump to the white house. he said so in his own tweet this morning i believe or overnight. this after spending fell 3.5% in the thanksgiving weekend. however, despite a late spending

surge, not every retailer will benefit. department stores like macy's and jcpenney are still heavily discounting i ining items. the biggest ben fieficiary this holiday season is amazon. the online retailer said they shipped over 1 billion items this christmas. amazon echo and the echo dot were the best selling items. dory, and the gear virtual reality headset. two notes, don't know if you saw the headline, there's a municipality somewhere trying to see whether an echo was involved with a murder. whether they actually recorded any information. >> oh. >> talk about the hot mike. >> oh. >> alexa, save me.

>> don't know if it's in that reference, but maybe about the perpetrators talking in the room. >> if you think that this thing is listening all the time, they start handing over information on crimes, then you can start -- you know, you can imagine, like, in divorce cases, i want to hear everything that was said in the house. >> not nearly as cool as a parrot. i love you tony! i love you tony! the husband is who is tony! oh, tony! >> not the husband. >> parrots are much more -- i could have sworn i saw meg tirrell walk by the window. >> there she is. >> she may be here. >> your generation, with the -- >> your generation. >> yeah. >> with the instant gratification. we were -- taking us a long time

to get to 20,000. the market was at 17,500 on november 8th, andrew. we're almost at 20,000. what do you want? it's up, like, 10% in a month. you're bored. i'm watching the markets, it's not up. >> i'm not bored, i'm excited. >> you're saying we've been waiting -- waiting a while. >> yeah. >> it's been 10%. we can't go up like this -- >> we can't. do you think we should take a step back? >> you said button. did you see wilfred earlier did his whole read on -- guess what the story was about? >> twitter. >> twitter. >> twitter. twitter. with an a-h at the end? >> he can say it american. >> i know. twitter. twitter. he can. he knows how. he does it just to sound -- >> when he goes in for you, he make him say it american.

>> stocks today, you were worried about toshiba. >> i am. >> falling sharply for the second day after the company warned of a possible multibillion dollar writedown for its u.s. nuclear business. the stock dropped -- that business is nuclear at this point. has a half life of about two days. dropped 11% yesterday. delta air lines is canceling an order for 18 boeing 787 dreamliner jets valued at 4 billion at list price. delta assumed the order as part of the takeover of northwest airlines back in 2008. it will continue to take delivery on boeing 737 planes. volkswagen's financial arm is buying a canadian mobile payments company for an undisclosed amount. the firm pay by phone allows people to pay for parking spaces by mobile apps. phone calls, texts. it also skirts emissions standards automatically.

>> that is not in the script. you made that up. >> yeah. i don't think it has anything to do with -- >> it was cute. >> it processes 300 million in transactions a year. >> that's good. >> i like the name. pay by phone. >> pay by phone. >> a lot of people -- >> what do you do? >> they do emission standards. >> people just waking up at 6:00 a.m., they're not paying attention. really? no emission standards with that? >> to the broader markets now. joining us is rich steinberg, president and chief investment officer of steinberg global asset management. he said a 5% pullback would nbe surprising. and steven dudash says the market is now officially scary. okay. both of you guys. number one, steinberg, has there ever been a time in the history of the market where a 5% pullback would not be unexpected? are we supposed to sit up and take notice that you think a 5% pullback could happen at any

time? am i impressed by that? >> you don't have to be impressed, joe. >> that's good. you don't have to worry about that. >> where we were in the short run, the scales are tipped a little towards too much optimism. in the long run, if some of the rhetoric becomes reality, the market could have a good year next year. i think we're over our skis here. we need a break. investors will get a chance to have an entry point in january. late january that will give us an opportunity to even make more money into next year. >> did you ever -- did you ever embrace the move starting on november 8th? i don't know anyone who hasn't said that we're -- we're -- we've been over our skis the entire time. there's nothing other than an election -- nothing that has happened has happened yesterday. so everybody is talking about how this has run ahead of itself based on dreams and hopes, but nothing concrete. that's what everybody is saying. >> we had about 15% cash going

into the election which we kept. we're willing to make a little bit less money in the short run to see what happens. >> this is all part of your strategy not being part of this move higher. i get it. >> here's the math, joe. in the fourth quarter, earnings will be up 3.2%. on 4.3% eps growth. next year, earnings plus 11% year over year. last year when we sat here, the earnings for next year were where analysts thought they were going to end this year. we just have to make sure that the regulatory move, the tax move, deregulation is going to give us that kind of growth. >> okay. that's what a market should do probably. now you. let's start on you. >> hello, steve. >> hi, guys. >> you're scared? >> no. >> i would be. >> that's what it said, you said the market is down right scary.

>> i don't know if scary is the word, but euphoria. a little bit of euphoria tends to get you in trouble. >> you pointed out the market is up 10% the last month. >> not enough. taking too long. waiting forever. >> i love the lower taxes idea. big fan. love the idea of lower regulation. >> rubbing it all over your body. >> i feel a but coming. >> we owe money to a lot of people. rates are going up. the dollar is going up. we owe a lot of money who will pay that bill if taxes are going down? will we grow it at a -- >> growth. >> we'll grow at 20% now? >> 3.5% or 4% would generate a lot of tax revenue. >> enough? i'm just saying. >> i understand. when rates go up, you owe more or the debt service becomes more. >> i'm not saying companies will not make more money.

maybe they are. >> we have been 255 now for -- >> which is nice. not long enough. >> who knows whether those macro forces that kept us in this low-rate environment, they're not all gone. >> it's more realistic that this might be what took place last january. last january, the market was down the first three days, four days, then the market went down more. then we talked on tv about the market going down. the market is up a little bit isn't the election. >> a lot a bit. which led to the story of it being up more, now we're talking dow 20,000. that might be feeding the markets a bit more than the try math of the companies making more money because of lower regulation and lower taxes. that's all i'm going with. >> we could grow faster here and our rates could stay lower because the rest of the world

has not participated yet. it's almost -- the strong dollar kind of puts a cap maybe on that. >> that's the point. if we are going to be really strong, which things look like it could be. that's what is getting priced in now. that will make the dollar stronger. the rest of the world is not doing what we're doing, which is cap these big multinationals driving the dow at 20,000 and pushing numbers at that level. >> the question always is, how much growth do you get which would be the natural offset to that. >> exactly. >> to deliver to the eps line. >> rich, were you -- how far are you from mar-a-lago? >> about 20 minutes, joe. >> 20 minutes. >> now it's better to fly out of ft. lauderdale because you don't know when trump is coming in. >> normally you're in davie, where are you in. >> if you are ever on a plane and come into florida, fly into ft. lauderdale. >> where are you? normally you're in davie.

>> i live in boca. >> you live in boca. >> i love flying, rich. i have no problem. that's not me. i love flying. that's andrew, right? >> only when babies are in front of bus. >> you don't like flying in general. i have told you -- >> once i'm on the plane, i'm good. >> speaking to mark haines -- >> i don't love flying. >> i told you -- >> i know, i'll be fine. because of us. >> yes. >> god will always bring us back together. >> he will take care of you. >> he's on one of these single engine things -- >> don't do that. >> you will always be here. you will. >> andrew, where is the sweater? >> that's my fate. >> rich, what? >> andrew, no sweater today? >> no sweater. >> i was looking forward to the sweater. it's hot out in new york today. it's like 50 degrees out. >> he's in florida. >> it's 38 degrees today. >> yesterday was nice. >> 56, fantastic. >> it was like florida.

>> you would complain if it was like that all the time? >> 56? are we doing a climate change? >> we could do a lot worse. >> thanks, rich. see you. >> happy healthy new year. see you next year. >> take care. we mentioned this earlier, president-elect trump tweeting about the economy last night. he wrote the u.s. consumer confidence index for december surged nearly four points to 113.7. the highest level in more than 15 years. thanks donald. the president-elect also announcing that his company's long-time attorney will serve as special representative for international negotiations. joining us with more on the announcement and all this stuff still to come, john harwood. hi, john. >> reporter: hi, michelle. i think the consumer confidence tweet from trump echoes the conversation you guys were having on the market. clearly you have had a burst of good feeling post-election. there's a lot of hope now

associated with what donald trump is going to mean for business conditions, for hiring. and that's going to collide with reality in january. if it's sustained, then maybe andrew will have to stop -- won't have to wait longer for that 20,000. we'll be off to the races. if it's not, we'll see what sort of correction we get. >> okay. >> we're not waiting. we're hoping for today, john. let's go. we're not far. >> you think it's today, joe? >> i wouldn't be surprised. i hope it is i'm always hopeful. i like it when it goes up. love it. >> you're not -- you're not inpatient like andrew. >> no, i'm not inpatient. >> so inpatient. >> i'm not inpatient. i like where we are. it's one of those numbers hard to get through but the hats are ready. >> the thing about little kids like andrew, they're so accustomed to instant gratification. they have grown up on these device devices.

>> little kids. my god, you two. >> thanks, grandpa. >> carrie fisher, we were contemporaries, god bless her. she will be missed. but to this day i call her debbie reynolds daughter. i do. >> no kidding. >> out in north hollywood, in a previous life i took acting lessons at her mother's studio. >> that explains a lot. >> we could do a quiz on this. ask andrew if he knows who ken griffey junior's father was. >> i don't know who ken griffey jr.'s father is. oh, ken fwrgriffey senior. >> thanks, uncle john. appreciate that. >> ken griffey junior was great. the big red machine is one of the moments in '75, '76.

>> that was dominance. >> you go through the lineup. unbelievable. joe morgan. george foster. johnny bench. pete rose. really amazing. until you stole up here john gullet. steinbrenner buying teams. >> is that the last time the reds won a world series? >> no, 1990. eric davis years. they beat -- >> yes. in both cases -- >> they swept. >> in both cases, joe, under republican presidents. >> see? >> is it a coincidence? >> maybe it will happen again. >> good things happen. good things happen. all right. thank you. >> remember when tv was in black and white? >> we had three channels. >> portfolio picks for the new year. a look at several international stocks poised for big gains under the trump administration. we'll talk about it when we return with uncle john and other grandpas. >> and papa.

coming up, the dow within striking distance of 20,000. >> get ready to meet your maker. >> will the trump rally power through the milestone or will bears take control and spoil the party? >> ah! >> we'll talk strategy after the break. retiring reted tires. and never get tired of it. e you entirely prared to re? anounever tiringetiring retired s retirement with e*tre. e you entirely prared to re? 'm ints a as aveed investor s i invest with e*trade, where investors can investigate and invest in vests... or not in vests. sign up at etrade.com and get up to six hundred dollars.

welcome back to "squawk box." markets are close to locking in solid gains for 2016. much of that coming since the election early november. despite the upswing in stocks, our next guest sees distent inc opportunities in companies no longer trading at multiples. joining us now is ben amash. good morning to you. walk us through some of these names, ben. >> yes. as we all know, there's been a bifurcation over markets the last couple of months. cyclical sectors have clearly outperformed strongly and what's been left behind is higher quail i quality, longer income stocks which have value. one is softbank.

softbank is a japanese conglomerate. a 75 billion u.s. dollar market cap company. it has a few listed companies that you guys are familiar with. >> sprint for one. >> sprint for one. alibaba as the other flagship one. and if you were to look at it on the sum of its parts, the value of those stakes and the japanese telco business, there's significant upside, about 40% by our assessment. that's one way to look at softbank. the truth is softbank is a conglomerate business. the core domestic telco business in japan generates consistent free cash flow. it can be viewed as permanent capital which then management deploys in a variety of different endeavors. they have also committed to investing $50 billion over five years in the united states over the next five years. the market typically all hates uncertainty. this is an uncertain approach

towards investment. >> what do you make of the $100 billion they plan to put to work in the next couple of years, including half of it here in the united states. the 100 billion is not just softbank. that's a fairly common misconception as part of the softbank fund which will be part funded by some other third parties. but what also needs to be bared in mind is that the investment, we don't know what it will be. we have an idea, but broadly speaking this is a management team which delivered fantastic returns, over 40% annualized rates of return over two decades. >> then you also like anheuser bush, inbev? can you hear us still? may not be able to hear us. not just the delay. i think he's had some problems with what we call the ifb in the

business. >> technical issues. >> hopefully we'll have an opportunity to get back to him, maybe not today but in the future soon. >> good. good. >> he does like anheuser bush inbev. >> coming up, crude prices and the dollar rising since the november election. we'll talk about potential moves in the new year and the impact of a proposed border tax. i know someone who loves the border tax. loves talking about it under the trump administration. you ready? >> supporter adjustment tax. >> that's next. as we head to break, yesterday's s&p 500 winners and losers.

♪ >> welcome back to "squawk box" here on cnbc. a look at u.s. equity futures. we've all been waiting, trying to beat that 20,000 mark. we had the hats hanging out waiting to put them on. >> i got my hat right here. >> we had to hold on to them. dow looks like it would open up 15 points higher. doesn't get you over that mark yet. s&p 500 up about a point. nasdaq up about 7.5 points. abbott labs winning approval

from the federal trade commission for its $25 billion purchase of st. june medical. abbott will sell two medical devices to resolve regulatory concerns. and bp buying a chain of gas stations from supermarket giant woolworths for $1.3 billion. the deal adding 500 stations to bp's growing footprint in australia. hitachi is considering the sale of its power tools business. the move following reports that the company is in talks with kkr on a deal worth $1.3 billion that could be reached sometime next month. we talk about this a little, carrie fisher died yesterday at the age of 60. she had been hospitalized after suffering a heart attack while flying from london to los angeles. kurt gregory has more. >> reporter: carrie fisher was born in 1956 into entertainment royalty. the daughter of pop singer eddie fisher and actress debbie

reynolds. at the age of 15, appearing as a singer on broadway's irene. her film debut was in 1975 in the comedy "shampoo." >> i don't know what you're talking about where e. >> reporte. >> reporter: two years later she blasted off to stardom in "star wars." she would return in empire strikes back and return of the jedi. sharing her time on movie sets and on broadway. behind the curtain fisher battled years of drug dependency and scandal. in 1983 she married singer paul simon, but the marriage ended eight months later. fisher turned to writing, publishing her first novel in 1987 "postcards from the edge." in all writing seven books, working on dozens of plays, and on the big and small screen. she wrote and starred on "wishful drinking" on broadway. >> i'm the pez dispenser and in the abnormal apsychology textb k

book. >> reporter: battling addiction and her fight against bipoller disorder, the book adaptation would go on to become a "new york times" best seller. in the past two years she reprised her role of princess leia in "star wars" 7, the force awakens and in episode 8 set for release in 2017. finding a new generation of fines. kurt gregory, nbc news. disney said fisher finished filming her latest scenes for the next "star wars" film due out next year. she was also expected to play a key role in the ninth installment of the saga, due for release in 2019. thought she was -- last we heard at one point was that i thought she had stabilized and

everything else. shocking. talk about what she said, born into celebrity. she said one of her famous quotes, after i was born, my celebrity could only diminish from there. eddie fisher and debbie reynolds. when she was 19, she said it was some crappy sci-fi flick that sound like fun. yeah, i got a part in some crap little sci-fi flick. unreal. 19, why not. 19, why not do it? >> fantastic "star wars," wasn't it? >> i was not a -- >> really? my god. that bar scene. >> i was at a keg party -- >> the hover craft that could stay above ground. oeb bbi-wan kenobi. >> you were a kid. >> i was going to a frat, tap a kega brew. to a toga party. >> our first sight of princess leia, a hologram. so cool.

>> my favorite line, instant gratification takes too long. >> 20,000, that's andrew. >> harwood said that's the problem with you kids. >> that's tough. >> grandpa harwood. >> this is morris schlossberg here for our trading block to talk about the dollar. steven shork is also joining us from the shork report. i will start with you. the dollar tends to drive oil. where is the dollar going in 2017? >> you know, i think we have to be with conventional wisdom here. the dollar seems to be unstoppable here. we've been looking this whole week for a correction in the dollar. one key telltale sign of a true bull market is nothing comes in. i thought the dollar would correct by 1%. even this morning, the euro is down off the highs. >> why is that. >> rates are driving everything. u.s. rates have exploded, that's

putting a positive spin underneath the dollar. the trouble with the uk and brexit, people are worried that will affect the pound. u.s. economy, the expectation is that donald trump is the second coming of ronald reagan. if you look at the ronald reagan presidency, dollar was king. >> king dollar as larry kudlow likes to say. how much are you anticipating or do you not count in -- do you have economists on staff trying to figure out this border adjustment tax, part of paul ryan's plan, this would be incredibly strong dollar. >> it could be very strong dollar. plus, you know, the repatriation. >> so what's happening thus far doesn't take into account that possibility. >> no right now it's literally driven by yields and growth expectations. joe's 4% gdp forecast that everybody is looking at. everybody said it's all right now forecasting. we have to see it really come to

fruition. but the thing right now, that i think is very hard, is the only thing that makes me cautious is that everybody is not on the same side. >> strong dollar is so consensus, i worry about it. >> strong dollar, generally bad for oil, will that offset what may or may not be what could be opec compliance on sunday? >> we know there is a strong inverse relationship between the dollar being the world's invoicing currency and the value of commodities, ie oil. that disconnect in the short-term has not mattered as the dollar has risen, so has crude oil. looking forward, if boris is correct and we see continued strength in the dollar that will have a double whammy on oil prices. first and foremost from a demand perspective, nondollar denominated sales. certainly going to impede demand as prices and foreign currency continue to rise. from an opec standpoint, your

propensity to cheat in increased production to take advantage will increase. >> even more than they do on a general basis? >> brings us back to the opec decision that apparently will go into effect beginning next week. we're going on broad-based assumptions about this opec. first and foremost, we expect to see something that we have never seen before. that is 100% compliance on the part of opec. even if we do see the impossible, you are still talking about opec producing a couple hundred thousand barrels a day of oil this january more than they were last january. if opec reverts to being opec, that is to say 60% to 70% compliance, opec will still be producing 700,000 to 800,000 barrels of oil today more than january than last january. >> so it sounds like you're bearish. 54 bucks for wti now. you think in 2017 it does what? >> not necessarily bearish.

we are at the top of the market that $53 to $58 range is the top of the market for a number of reasons. earlier this year the dallas federal reserve had a survey of the industry asking what price do you need to see to bring back a substantial amount of production. and the overall response was oil, where it is priced today, out on the curve. $55 to $60 a barrel. so when we look at producer positions on the cftc, the inversion at the back end of the forward curve, we have two big telltales that producers are selling oil forward in the $50 to $60 range. that's why we are near the top of the market. >> parody to the euro, how soon? >> probably q1 of 2017 especially if fed goes through with the third rate hike. >> okay. don't get impatient like -- >> no, i won't. >> thank you. >> thank you. >> all in due time.

good things take time. coming up, cybersecurity warning. the unsecured six digit number on your boarding pass that hackers can use to steal your personal information >> really? >> including your credit card number. we'll tell you how that works next. here's a quick check on what's happening in the european markets now. they're mixed. i'ts your tv, take it with you. wi directv and at, stream le tv awher data-free. jo d dectv today starting at $3month. no extra monthlyees.

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welcome back to "squawk box." time for the executive edge. they never make me read this. you want to -- you love air time. >> you want me do it with my anchor voice? >> i think you would appreciate doing it more than i would. >> my latin anchor voice.

>> does comcast sponsor this? >> you better like it, it's sponsored by at&t. >> i okay. let me do it. i better do it then. >> do it well. >> better for me if you did it. the new year is bringing new gas taxes for seven different states. pennsylvania already has the highest gas tax in the country. i did not know that. at 50.4 cents per gallon. 50.4 cents per gallon. it's going up by nearly 8 cents on january 1st. michigan's tax of 30.5 cents -- see, i needed to do this they'll put that in there. they're at 30.5 cents in michigan. going to increase by 7 cents. nebraska, georgia, north carolina, indiana and florida will see hikes of at least a penny per gallon. not all bad news for commuters. new york and west virginia will see slight reductions in the gas tax. gas tax, when it comes down so

much, people love the idea of rates you used to pay $3.50, it's $2 now. we will use that money to make roads better. >> i don't mind state gas taxes. >> they don't do it that way. they use something else. it doesn't go into filling potholes. you never know where it's going. >> pensions. >> somewhere. >> unions. >> this is a good story for you. travel booking systems pose a major cybersecurity risk. the new report says a lack of proper authentication makes it easy to hack the short code used on boarding passes to alter flight details or steal personal information. six digit codes on boarding passes could be hacked to reveal a traveler's name, travel date, ticket details, phone number, e-mail address, credit card numbers and baggage information. white hat hackers working for the security firm were able to

obtain all this personal information by starting only with a passenger's last name. the researchers. >> reporter: calling for travel reservation companies at a minimum to add a password production to travel records. >> this does not sound like the frequent flyer number. >> the confirmation number. it's only six digits, usually letters and numbers. >> right. >> that alone, they can get everything. >> holy smokes. >> so, there you have it. >> i just changed my password on my delta diamond. >> don't tell the people this. >> coming up, we open cnbc's play book for bio pharma companies. the biotech index lagged other sectors. meg tirrell will have more next.

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as 2016 draws to a close, cnbc is breaking out the 2017 play book looking at ways you can make money in the coming year. this hour meg tirrell has a closer look at what to expect from biotech and pharma companieses in 2017.

♪ >> reporter: if investors expected smooth sailing for drug company stocks after republicans swept the u.s. election, they were in for a surprise. uncertainty in the drug industry is as high as ever and prices, . here's what to expect. first, pricing pressure. donald trump says he's going to bring drug prices down. he could look to legislation to do it but it could be pressure on drug companies. expect also increasing scrutiny of the rest of the health care system. with mounting pressure on the middle men like drug distributors and pharmacy managers. next, an eye on fda. after historic highs on drug approvals, medicines new in the u.s. sunk. 2017 brings multiple levels of legislation. finally m&a hope or hype? hopes for a biotech rebound rests on a trump tech holiday.

big pharma and biotech companies will hold billions overseas. the expectation is if they bring it back at a lower tax rate, they'll gobble up smaller companies. seen as more insulated from pricing pressure. so it's been a tough year for the biotech industry. the biotech etf down quite a bit. a lot of uncertainty on what's going to happen with prices. we don't know what form it will take yet. >> thanks, meg. stick around for more on biotech in 2017. let's bring in ronnie gall. things were going swimmingly for so long. then the prospect of hillarycare, i think, when did that start hurting -- >> we almost have a date. when she tweeted june 2015. >> they got -- on a relative basis, they got really

expensive, didn't they? they were high fliers. when did it start, 2014 or so? >> 2009 was the trough. then straight up the next year around the first half of 2015. >> okay. so then trump gets in and you think, okay, here's a business friendly guy. then he starts talking about boeing and lockheed. he may do the same thing with drug prices, right? >> yeah. so the biggest thing regardless of what the government is doing. 50% of the drugs in this country. the other 50% are by commercial payers. those guys have been under a lot of pressure to control their drug pricing costs. for the last 24 months, they were the ones pushing hard. the fear is that we'll see trump managing by decree like he did some of the others. that is the secondary feel coming in. that said, within health care, got hands full with the exchanges and reversing aca.

he tweeted here and there on drugs, but the focus of the guys he hired is not going to be on that. >> how do we figure out who the next epipen is going to be? >> my guess is we're entering 2017, everybody's high co-pay deductibles get reset. they're going to go to the pharmacy and face $1500 price tag. last year it was epipen. so this year it will be i think insulin. trying to curb that to off discounts to deductibles. maybe the hypertension medications might also be there. >> andrew, you know, has been waiting for 20,000. i've been waiting and i really have been waiting for the sequencing the genome and rational drug design to, like, merge. and there's this guy robert gordon who said we've already

discovered everything. that's why productivity is down. i think there's a quantum jump coming. when? >> i've got to tell you, it's happening. it's geological time that's happening. the first half of next year, going to see new come into the market. >> i want something really big. >> this is massive. this will save kids who are otherwise going to die. we have multiple shots to alzheimer's. >> need that. >> that's probably going to happen. >> obesity, cancer. >> cancer? cancer is being targeted by, like, a hundred little wins. i just came back from ash last month -- >> the conference. >> there are massive discoveries taking place right now. >> you know what i mean. we should be able -- except it's so hard. there's side effects. >> i think the side effects are starting to take on bigger and

bigger significance this year. we're seeing studies sidelined, things are emerging we didn't think about when everybody was go go go. do you think it's a bigger deal than we're making it? >> i think it's the other way around. the chance it will work and be 100% on first try, you're expecting too much. think of software on beta version. it works, there are bugs. next time it's going to get closer. ten years down the road, we'll get it right. you can't get it done all the first shot. >> june of 2015 you said is when the tweet was. i look at the five-year chart and all these exciting things you talked about and yet biotech's done -- never really recovered from the hillary clinton tweet ever. both donald trump and -- it's a bipartisan issue to attack. >> that's the first time we have a -- >> there's the peak and no recovery. >> until now, you know, had a

good drug you did well no matter what the economy did. it's the same with the call saying they're not going to pay you a lot of money for those drugs. it's knocking everybody down. you'll see one or two stars break through. but i don't think for the next six months we'll see the sector revamp or anything like this. >> i want a quantum leap. i'm ready. >> you want 20 a leap. >> i'm running out of time. >> 20-year leap when you look back down, it'll look way below you. >> i need a -- >> sing lairty. >> now we're going there? that's going to take awhile. >> thank you. thank you, meg. >> thank you. >> thanks to those wonderful people over there. coming up, kate moore is going to be our special guest for the next hour. she'll tell us where the company is investing trillions of dollars under management. back in a moment.

christmas may be over, but santa claus is still on wall street. the dow riding the rally. blackrock's chief equity strategist for the americas kate moore is our guest host this hour. sounding the $20 trillion alarm. what should donald trump do to tackle the debt? former indiana governor mitch daniels will tell us about his letter to the president-elect. plus why 2016 was a year the music industry could sing about. we'll tell you what fueled the sales of some of the top hits of the year as the second hour of "squawk box" begins right now. ♪

live from the beating heart of business, new york city, this is "squawk box." >> welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with joe kernen and michelle caruso-cabrera. you are listening to "cheap thrills" by sia. one of the best selling of the year. we'll reveal number one a bit later. >> i don't know what this is. >> you've never heard this song before? >> no. i don't listen to the pulse type stuff. i've banned that. on sirius xm. >> the pulse, that's my fave. >> everything in the first ten are banned. >> that's the stuff everybody listens to. >> no, they don't. >> that's why they're the first ten. >> sirius xm independent rock, new stuff. not this teen bop -- >> this is all iheartradio stuff. this is what they do at the jingle ball. >> right. i've always wanted to go to the jingle ball. >> let's all go there. >> it's hundreds of dollars to

go to jingle ball. >> you must know somebody. >> i don't know if i know -- we all know bob pittman. anyway, our guest host kate moore from blackrock. you can't get us into jingle ball, can you? >> no. but i am a big channel 36 sirius xm fan. >> thank you. what else is there to listen to? alt nation. >> maybe some lithium occasionally. >> i need some lithium. >> i was going to say. >> some lithium or a xanax at this point. let's look at the futures. dow looking to open 16 points higher. nasdaq about nine points higher. s&p up about 1.5. >> but we're 55 points away from dow 20,000. >> get your hat ready rally cap. in europe right now, we're looking at red arrows across the board. ftse marginally up after a four-day weekend for them. >> uh-huh.

dollar stronger, pound's weaker. among today's top stories, the last-minute surge in holiday shopping may have helped forecasts. season got off to a slow start but had a fast finish. mastercard estimates sales through christmas eve rose about 4% from a year ago. south korea's qualcomm has been fined. its largest corporate fine ever in south korea. qualcomm says it will appeal the decision. and don't try to go shopping at gnc today. all 4400 u.s. locations are closed today because the nutritional product seller is overhauling its pricing system because some gnc prices have had as many as four different prices at the same time. stores will reopen tomorrow. so you do some arbitrage there if you were really into vitamin chiropractic. we have a supposedly market round table. it's more of a semicircle.

>> we have a lot of people at the table. >> we do. he's on half-time report because he's a cnbc contributor. and out of all the economists at chase, you're a chief? >> there's a number of chiefs. >> who's the chief chief? >> you are. >> is that wrong we call you that? >> no, it is not wrong. >> so you are chief economist at chase. >> i am. >> why would you settle for less? and our guest host kate moore, chief equity strategist for the americas -- no? now for the whole place? >> it's for everything. >> yeah? >> that was a small edit that needed to be made, but yes. >> wow. congratulations. >> thank you. >> because that's what i was going to wonder. that would cover central america and north america and canada? >> it was just the chief equity

strategist serving north american clients. but this is different now. >> you serve all clients in the whole world. >> i'm a busy lady. busy gal. keep myself busy. >> i think, you know, it's kind of a quiet week. but 55 points, we used to open up and be there. it doesn't matter when we get to 20,000 given this unbelievable run we've had, it's just better to talk about the move itself. but 20,000 could be today, don't you think? >> it could be any day. i think it is really a psychologically important lel. there are all the baseball hats that say dow 20,000 on them. i own one of them thanks to my associate. but i think it's important for people to think about how far we've run in 2016 and whether or not we need to take a bit of a breather for the next few weeks, perhaps, before we reach new highs again in 2017. >> how far we've run in november and december. not really 2016. i mean, we've added the lions

share, we're up 14. so it's been since november 9th. >> since the lows in february, we had a strong run into the middle of the year. some of the rotation in terms of styles, in terms of factors was fully in place before the u.s. election. and just got a little bit of a boost, a little bit of an accelerant from the u.s. election. and expectations for growth. >> you don't get to talk now. you were on "half-time report." >> i want to know what he's come up with between yesterday and today. >> hold on. before you do, i want to -- this is an important question for anthony. so, have you adjusted any of your macro numbers based on, like, consumer optimism or small business optimism since november 8th? >> absolutely. >> you have? so nothing's happened yet, but you made finite changes.

>> finite changes. remember that we just learned yesterday that consumer confidence is at the highest level since 2001. so when people talk about retail sales coming in stronger, that's just a natural thing to happen. >> then when andrew says nothing has happened yet for tax reform or for deregulation and he's not president yet, that's besides the point. because things have already happened. >> we're also starting to build in the impact of potentially lower corporate taxes. which can -- if you go to -- estimates would suggest that over a 12-month period, once that happens, s&p 500 corporate profits can go up 19% to 20%. additionally and if they only go down to 20%, we're still talking about 10% to 11%. when the equity market is rising, there's a reason for it. >> have you adjusted gdp? >> gdp for 2017, something around 2 237.2%. >> and where were you before?

>> 2%. >> that's not a lot. >> i think it's impressive. when you go into 2018, then we're talking about in the neighborhood of 2.5%. >> so it sounds like the impact is on earnings not on gdp. >> when you lower corporate taxes, what happens to the bottom line? you bring more home. of course we've got to adjust. i think that was asking what's changed since yesterday. maybe people weren't watching. so where are you in all that? >> bringing down to the sector level. let's run this here. definitely financials have run, i think you wait a bit to get back into financials. i think they'll do well. going back to the consumer side. look at companies in the home building space. they're going to really benefit as more consumers spend more money at home. those are going to do really well. i think if you look at the health care side away from the consumer, that's been money rotated away from there. they're cheap if you look at diagnostic companies, some of the big pharma companies.

cyclicality has come up. i think earnings are going to grow. the market is going to look at that. and if anything positive comes out of tax reform and the consumer keeps on spending money, you will see a tail wind behind the equity markets. >> complete agreement. the question is, what does the rate have to be? is there any real math going on in terms of where the market is today versus where it will ultimately go? are they mapping out each company. saying if it's 15, it should be here. >> what's interesting in the last 18 to 24 months, the etfs have followed where they're making money. all of a sudden they were shorting financials a year ago. right? because rates were below 2%. then all of a sudden the money went into the xlf. same thing with energy. to say to your point, what companies are going to do specifically well because they're benefitting from either a tax rate or from the consumer spending.

and that's where i think active management is actually going to be a little bit different and we have said this for awhile where companies that can't break away from the pack because they've been along with it are going to be left behind. >> active manager himself. >> exactly. these guys are always -- i know, i know. i want more. and i think you're lowballing things. >> gdp number. >> yeah. >> i think we will see that as you get into 2018 because again, these changes -- >> i don't want 2.4% in 2018. i want 3.4%. >> i would like 5% but i'm trying to be pragmatic. >> you could be low? >> i could be. if the animal spirits take off, it could do better. but i never met a client that got disappointed saying i didn't make enough money. or i made too much money and you told me i was going to make less. a little pragmatic. we have numbers that i think are realistic. if there's risks, there's risks to the upside. no question. >> so the growth we're seeing won't be offset by interest rates going up too quickly?

>> no, i don't think so. because as long as you see interest rates rising because the economy's getting better, it's not negative. some of the things that make me worry are the stronger dollar. the u.s. dollar is now up 4.8% on a year to date basis. that drags from s&p 500 earnings. which is another reason some of the work that i've done shows that when the dollar is getting stronger, the stock market can go up. but it will be the small and mid-cap stocks that go up. if you look at large cap stocks when interest rates and the value of the dollar is actually accelerating, mid-cap stocks outperform on an average market basis. >> their lack of international exposure. if you're domestic based, you're not going to get hurt on that. the other side is if you do get tax reform, they're going to be able to bring money back and buy shares or have increased dividends and growth. that i think is the offset right now. if that doesn't happen, i think large caps could correct. >> i would say there's a lot of

enthusiasm around this mid space -- small and mid-cap. i think a lot of people are looking at the percentage of foreign sales that these companies had 5, 10, 15 years ago not realizing they're much more globalizing than in the past. so if there is a meaningfully stronger dollar, we've heard people throw out 15%, 20% appreciation in 2017. i think it hits many companies even if the sentiment around small and mid-cap stocks is better than the nationals. this is also a place you want to be active in your decisions. >> and that suggestion of an appreciation of the dollar comes almost directly from the border adjustment tax. the corporate rate, whatever it drops to, if they do that type of dramatic change to the tax system for corporations that's how much they think the dollar will rise. totally equivalent to the tax

rate. >> we know the equation always worked perfectly. right? >> is there a small mid-cap mutual fund or etf that's very domestic you want to tell us about? >> i would say if you're going to look for a slice of a small mid-cap space, you'd have to look at the regional banks. that's the cleanest sector exposure you can get where most of the business is done within the u.s. >> and you benefit from a stronger consumer, better lending, and regulatory if they take this fee off from a smaller bank. app lot of that's been priced in. you have to say do we want to get into the regionals. that's where you want to be. you'll get your pure domestic growth right there. >> and there's some sectors that have more of -- including more domestic -- >> the reason i ask, i think people are buying the russell 2000. >> you defer some comp, don't

you? >> i do, yes. >> do you pick three mutual funds to split up your stuff with? >> i think you have to have more. >> i have it in one. >> i have it in three dpop you look at your statement? >> i do. >> it was unbelievable as of september 31st. and this is -- this was september 31st. i looked at it, and a lot of these stocks are going up, i noticed. which is good for me to notice being on tv and all. and small caps, unbelievable. american, like, the international thing is up. i looked at how much i put in in the quarter and the gains were much more -- >> yeah. real. yeah. are you in the pimco fund? >> no. stupid bonds. you're in bonds? >> no. they have an equity fund too. i think they have one that -- >> i'll tell you which ones to put it in. >> okay. during the commercial break, we'll redo -- >> did you look? >> i just got it in the mail. >> did you look?

>> i had my people look. when we return, a rundown of the winners and losers in tech this year. here's a hint. you may want to hold your chips. we'll tell you what that might mean. and later, we're going to talk to former indiana governor mitch daniels. and how companies like apple and google helped drive the music business this year. stay tuned. you're watching "squawk box." what's ctical thinking like? a basketll costs $. what's tm spirit worth? (cheers) whwhat's the valuef talk in thwoods? the value of capital iso create, not just wealth, but in that matter. morgannley

welcome back to "squawk box." the futures right now been up in the teens. there still. up 15 or so. not very far though. doesn't have to be a, you know, 300-point day. only needs to be a 55-point day. less than that, in fact, to get to 20,000. the s&p indicated up less than a point. the nasdaq is up seven or so. oil's been strong. it's back pushing closer to $55 from that range. we just heard -- i love when guys like short the range. if it's at $54, what do you call the range? >> $54 to $48. >> $50 to $48. add four, subtract four, that's your range. unless it moves. that way they're always in the ballpark, right? that's the best way to do it. if you're ever -- >> a strategist. >> hey, hey, hey.

>> probably going to continue to go higher, but there could always be -- >> moving averages. that's how we think about it. >> all right. and we can always use resistance and support. it goes up unless we get down to support where if it breaks, it could go lower. or it could stay the same. >> it could happen. >> are you imitating a technical analyst? >> no. how do you survive in this business? nobody knows. you have to sort of couch everything. okay. let's talk tech for a moment. tech is the sixth best performing sector in the s&p 500 this year. only sixth? right behind materials and ahead of utilities. which were the best and worst performing tech stocks? josh lipton is up early with us to discuss those. >> reporter: that's right. so this year the gold goes to nvidia. that stock has soared more than 250%. why all the excitement? because nvidia's semiconductors are powering many fields they

want exposure to. technology is being adopted by companies focused on ai and self-driving cars. and the graphic processes units also enable popular video games. analysts say that could drive this stock higher. >> what's driving the near term is the hard core pc gamer. what we're seeing is we've got new title releases coming out for the season. so for example, battlefield one is out. that's a high performance game. what's happening is the hard-core pc gamers want the next greatest pcu. and that's nvidia's. it's a higher performing product. >> reporter: now, nvidia will have to work hard to meet investors' expectations though. stock is now priced at 58 times earnings. more than double its five-year average. from leaders to laggers. one of the worst performing tech stocks this year is salesforce. the stock is down some 10%.

and one concern there that ceo marc benioff might make an acquisition, but bulls at evercore expect this to work next year if salesforce gets back on track. emphasizing expansion and not headline making m&a. back to you. >> thank you for that, josh. coming up, a case of whodunit. how the amazon echo might be able to offer a few clues in a murder investigation. that story is next. seen that on "dateline." "squawk box" will be right back.

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so whever your retirement jrneye your takes you, savings. we canelp you reach goals. or your adsor t. rowe ice. vest with confidce. welcome back to "squawk box." an arkansas man facing a first degree murder charge after police found the body of a man in a hot tub back in november of 2015. and now police are hoping that an amazon device could help with the investigation. we mentioned this earlier. prosecutors are accusing 32-year-old james bates of murdering his coworker. collins was allegedly strangled in bates' hot tub. police have obtained a warrant for audio and other records from an amazon echo.

calling alexa. which was inside the home when the murder may have been committed. the smart devices we talked many times listened and can perform commands. amazon says they will not release without a proper legal serve on us. bates has pled not guilty thus far. his attorney says he has nothing to hide but calls this an issue of privacy. the question has always been whether the alexa or the google home or whatever hot mike device you have in the house is actually recording when you don't say hey, google, or alexa. my understanding was if you said the word first, then it turns itself on. the question is, is it actually recording you 24 hours a day? >> we know it's listening all the time because it has to hear alexa. >> it has to be hearing alexa

somehow. the question is what is it transmitting back and is it recording something along the way? does it have to record the words before and after alexa. when they say wake it up. >> there are basic things a cop could learn. maybe learn when the person was alive. because he said alexa at this point. that will help you time the death. >> james bates and his brother norman invite you into the hot tub, you think twice about -- >> you say hey, alexa. >> norman bates, that rings a bell. i'm at the bates motel, should i go into this hot tub? no. >> okay, that aside i would say -- >> oh, we're going back to -- >> and who is keeping alexa in their bathroom, next to the hot tub. maybe the hot tub was somewhere else. >> maybe in the back yard. >> could you keep the alexa in the back yard? >> you don't know what they were talking about.

maybe there's coverups. >> maybe they were ordering from alexa while in the hot tub. >> the murderer could throw people off by saying hey alexa. >> alexa may get a bad reputation from this. >> i'm going to hobble you so you can't leave. anyway. remember that? coming up, former governor mitch daniels penned a letter to donald trump. the topic? nation's debt. he's going to tell us what he thinks the president-elect should do. that's next.

♪ love michael jackson and the jackson 5. love that. no, i wanted a bid -- i tried to bid on the white glove. >> you missed your chance. >> how much did it go for? >> no, there was a minimum floor of, like, $5,000 or $7,000 which i thought was a reasonable price. and i think it went for about $200,000 later. that's why i clearly lost the bidding. among the top stories that are front and center at this hour

besides the white glove, the national association of realtors -- by the way, that was years ago -- out with november look at pending home sales. today that number comes out at 10:00 eastern time. the measure of home sale contracts signed but not yet closed expected to register 0.4%. also two reports out usually on wednesday, they will not be out today though. if you've been hanging on for that news, hang on a bit longer. the association taking the week off for the holidays. they're going to be issuing two reports next week. so exciting, right? you probably can't even contain yourself. the energy weekly release also pushed back to tomorrow because of the christmas holiday. a lot of people, this is upsetting. those pennies in your pocket are worth more than you think. the u.s. mint says the cost of producing a penny rose to 1.5 cents during the past fiscal year. if you want to arbitrage, here's the way to do it.

the mint actually makes money on the dime and the quarter but the penny and nickel cost more to produce than their stated value. i also found a new penny. have you seen it? it has a different back on it. it also seems fake to me. >> those aren't that new, are they? >> it seemed new to me. >> you don't normally carry around pennies. >> pocket lint. >> he watches his pennies. >> i do watch my pennies and i'm very -- it will create stereotypes. but if i see a penny on the ground, i'll pick it up. it's lucky. >> i would never pick up a tails. >> really? >> no. i wouldn't. >> speaking of saving pennies, great transition to our next guest. >> don't pick up the tails. it's not lucky. >> what about buying a boat load of pennies and trying to melt them down? >> i don't understand how you affect that trade though. >> you'd have to melt them down. i'm not sure. >> the smell in his apartment.

that's fine. >> is that legal in new york? speaking of pinching pennies, now to politics. throughout the election donald trump promised to reboot the u.s. economy, a major aspect of that will be tackling the rising national debt. joining us now is mitch daniels, former indiana governor, who's penned a letter to the president-elect about his concerns about the national debt. governor daniels, good to have you here. >> hi, michelle. >> you don't mind the reference to pinching pennies, i hope. i was trying to get to the segment. i want to talk about your letter, but first, we haven't had you on since the election. what do you think? there was a time george will said you should be running for president. and you didn't. president obama thinks if he had run he would have won. what do you think? if you'd gotten in the race, would you have done as well? >> i don't think so. you know, god's good to the united states of america and he spared us finding out the answer to that question. no, i think -- i was as surprised as most people by the

course of this election. but it's a new day and i'm very hopeful that both the economy and our national fiscal picture will look better as a result. >> what do you make of his cabinet picks thus far? happy about them? >> well, those i know or know much about i think are very credible people. they've obviously taken the process seriously. and been deliberate. but, you know, i have nothing but admiration for those who have been named so far. so you wrote a letter to the president-elect about the national debt. tell us what's in it and why you think it's so important. >> i wouldn't be so presumptuous to do it on my own hook. i'm doing it with a group with leon panetta and members of both parties who are concerned of our fiscal future. we wrote on behalf of the committee for federal budget. what we said is it won't wait much longer.

the last two presidential elections, a lot of us have said now's the time. but instead over the course of the last eight years, the national debt has doubled. the only thing keeping annual deficits from being even more terrifying than they already are has been the repression of interest rates. so the clock is ticking. and really let's hope this is the administration and the congress where we get serious about first saving the safety net. and second lly about putting usn a path of coming to the americans who will otherwise with stuck with an unfair bill. >> talking about there will be a lot more growth under president trump. that would solve -- joe brings it up all the time. growth solves a lot when it comes to the national budget and debt. is that not going to be enough in your opinion? >> won't be enough. joe's right. this is the right place to start. we'll never get anywhere against

our debt problems limping along as we have the last eight years. so i think it is essential first step. i'm glad they're talking about punitive regulation. they're talking about genuine tax reform. these are the right places to start. but with population growing slowly, productivity having an upper limit, you know, growth alone will not get us out of a hole as deep as the one we've built. and so after, i hope, a very pro-growth set of policies is put in place, i do hope that the new administration will turn to the unavoidable problems of so-called entitlements which now devour over half the budget. and the rest of spending. >> i like when you talk about paying debts. do you remember the last time you were on, governor? because i think i have the exact

date here. i think it was about september 8th or so. do you know what happened on september 10th? >> painfully, yes. i let the record show i paid up. i assume that it got there. if you want to go double or nothing on basketball, joe, i'm game. >> what did you send me? if it went to headquarters, i didn't get anything. i didn't think you had anything in indiana. i was going to send you skyline chili or ribs. what did you send me? >> i sent you some first class steaks from the boilermaker butcher block and maybe you better check your friends in the mail room. they may have had a meal at your expense. >> i apologize. honest to god. you did. i'm going to find out. so the missing steaks. this is like the missing strawberries. somebody at cnbc has my steaks. really? >> here in indiana we are people of honor out here. >> all right. all right. i have to leave. i'm going to go -- seriously.

how many of them? i love steak. how many steaks? this is outrageous. >> you know what it is governor? maybe they knew you weren't allowed to accept gifts from -- he's a former politician. >> ignore that stupid thing. governor, thank you. and yeah, let's do it again. because the bear cats have a good basketball team and so does purdue. >> you're on. >> double or nothing. i want to send you some ribs. thank you, governor. appreciate it. >> just hope it's on ice. >> yeah. >> or salted. >> that was september, right. coming up, the year in music. nielsen out with data about the music business in 2016. hope those numbers are more accurate -- well, that's neither here nor there. as we head to break, take a look at the best selling singles this year. the song you're hearing now, justin timberlake's -- oh, my

god -- "can't stop the feeling." we'll be right back. >> it's a great song. loing r balance digesystem?

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welcome become to "squawk box." apple wants to help you with your new year's resolution. the company releasing a new update today called ring in the new year to help apple watch users meet fitness goals. i hope those watches are good for something. the update includes three activity rings to be completed per day for the entire month of january special badges and stickers -- >> i got the notice this morning when i woke up. if i do it every day for 30 days, i get a special prize badge. hit my three exercise metrics for the day. >> what do you get? >> a special badge. >> that comes on your stupid phone? >> yeah. you get a badge. >> wow. that's -- >> do you get badges? >> i don't have one. >> right. >> where is your watch? >> can i tell you what happened? you really want to know? it's next to my bed. i don't know if you do this in

the morning because we wake up so early. i usually creep out of the room because my wife is sleeping. then i realized my watch wasn't there and i didn't want to go back in because i didn't want to wake her up. >> that was very considerate. >> thank you. >> she's benefitting from a lot of this. >> you think? >> yeah. she should put up with it. >> not that anybody really cares. >> creeping around your own house you pay for like a church mouse. oh, sorry. you're in here doing unbelievable stuff. >> god's work here in the morning. >> and now i'm doing it without a watch. hard to do god's work without a watch. >> i can't find my exercise -- >> need to make that sound? >> no. it's okay. do you want to talk music? >> i do. >> it's time to look at the year in the music business. from the rise of subscription services to the number of music icons we lost in 2016.

so many. nielsen entertainment david bacala -- >> like dracula. >> exactly. >> a look at the nielsen year end report. tell us the highlights. >> the good news is it's been a good time for the music business. as sales continue to go on a decline where they've been going for the last couple of years. you're seeing album sales decline. >> yoin the modern age by getting on apple music. >> you think you're going to try that? >> i have every song ever wanted at my fingertips. >> that's the beauty of it. unless you're in the bowels of the subway -- >> so money in spotify or pandora for the artists?

>> the artist contracts are a different story. the music industry is doing well. you've seen the news as much as i have. the people that come out that say, hey, this isn't working for me. taylor swift made a very public statement and then came out and launched when apple music came around. there are some things that work for the artist and probably some things that are challenges. >> is tidal working well for anybody? >> probably for their owners. i hope that's the case. tid tidal's really -- it's a premium service. they've got a high definition tier which is probably even more valuable to the artists that are there. certainly prince had all of his music there. i don't want to segue too quickly to those who passed this year. >> seeing the notes, who's dominating online music, amazon, apple, and google. >> and spotify. >> that's what i was curious. >> and pandora is -- >> no, pandora is doing well.

they're in a separate tier where we call them -- they're not on-demand streaming services. they're program streaming services. pandora is coming up with new services, but what you do is go in and say i really like pilots, for example, and they'll play things like that. on-demand services you say exactly what you want to hear. >> they were the big disrupters then it feels like the big guys are coming in and stealing it. >> you talked about the echo before. while it's not finding people killing other people, it's finding great music suggestions, i think, for people to say, hey, i want to hear this or i want to hear that. >> are most people doing that -- so i've hooked up spotify to the echo. because that's how you get more music. because amazon prime unto itself -- is that what the underlying service is on the echo, doesn't really have everything. >> i think all of the services have a varying degree of what type of content they have on there. >> you think ultimately people are going to have multiple different music accounts?

>> i think the technology device is driving entertainment. it's not just for music. it's for sport and movies and tv. >> i was reading yesterday, people don't care about the exclusives in the way people -- >> i think the exclusives are doing a good job of getting people that maybe haven't been in before. you look at some of what they were, and they're in the same genre. in the r&b crossover. >> so i can only hear this song on "x." >> they've windowed it. often tidal will have something first. >> i missed taylor swift on spotify when she wasn't there. i would listen to the top ten channel. there was that big gap. >> then the question is when you go onto spotify and look for taylor swift, what do you do when you can't find it? does it force you to jump to another service. >> yes. >> you're shaking your head no. >> i love taylor, but it didn't cause me to change my service. >> and there's something else you'll find there. that's the balance the artist has to say. do i want to be available

everywhere. is the answer is now, am i willing to risk people like you who say i'll find something else. >> let's talk about -- we have talked about a number of big stars who passed this year. prince being one. george michael recently in the past couple days now. the music sales off the charts on those. >> off the charts. just in the couple days since george michael died, we've seen a 12,000% increase. prince sold 5.3 million songs this year. obviously in this age of internet and viral spreading of news, these things happen very quickly. very immediately. and very severely where the sales spikes and the activity spikes in streaming just go through the roof. >> death is good for business. right? i mean, ultimately, yeah. >> it's kind of the ultimate final marketing piece. it is something that drives a lot of attention. and you can start off the year -- we start off with natalie cole on new year's eve. that was the beginning of

everything. >> david bowie had david bowie bonds. the first person to create a financial instrument around this. i always thought you would want to bring forward the financial sales of your life. what is so you can sell those -- so you can create some of the value now while you're alive not for your estate but for your existence currently. think about that one. >> we had an interesting idea on that. we're not going to share it here. >> you have an interesting idea on that? >> yeah. i think there's a lot to do with publishing rights. a little bit like the green bay packers sell stock in the football team? why aren't artists selling stock in their publishing rights? you know? i would overpay for my favorite songs. i think you probably would do. >> i don't think you really own a share. >> maybe a seat. >> we'll talk during the commercial break. >> mr. bakula, thank you. >> thank you very much. >> thank you. coming up, 2017 market predictions from our guest host

blackrock's kate moore. as we head to break, a quick look at futures at this hour. dow is 55 points away from 20,000. right now would open higher 17 points. we're dwnin information. where, in l of this, is the stuff that matters? the stakeso hi your finances, the styour future. how do youolve this? you don't. you paner with a firm that advisegovernmes and the fortune 500, and, can deliver insig person to person, on wt matters toou. rgan stanley. was not compg in a security breach that di't happ. no. sir,. what went right? everything. we have a brief atemt on this non-breach.

we'reappy to report there's nothininto report. my dad's company wasn't hacked tay. cool.

my dad's company wasn't hacktadirectv now. stream all your entertainment! anywhere! anytime! can we lose the 'all'. there's no cbs and we don't have a ton of sports. anywhere, any... let's lose the 'anywhere, anytime' too. you can't download on-the-go, there's no dvr, yada yada yada. stream some stuff! somewhere! sometimes! you totally nailed that buddy. simple. don't let directv now limit your entertainment. only xfinity gives you more to stream to any screen. let's take a look at some stocks to watch this morning. nvidia is higher in premarket

trading after rising ten sessions in a row. bullish on the chips maker. will continue to be a boost for the company. yelp shares are also gaining premarket. shares rose 5% yesterday, in fact, when it saw a surge in call option purchases. options volume for yelp was more than five times the recent. and continues to slide. affirmed the ratings on the bank late yesterday. central bank lowered the minimum capital requirement for deutsche bank. our guest host this morning is kate moore, blackrock chief equity strategist. we've been trying to -- the two of us together -- help andrew -- >> with his personal finances. >> thanks. >> he's young. he's got a lot of time left to try to do things. he seems to be, pushing back on

mutual funds. >> i'm not pushing back. >> okay. >> i'm just wondering whether there's more, greed. >> whether or not there's opportunity in private markets. i think that was part of it. >> is there -- do you need -- i told him to keep it simple. >> keep it simple. some etfs. >> i think a well balanced portfolio needs to have active etf. probably some private stuff. we visit every quarter. our expectations for the next five years, you're going to get 3% to 5% or 4% to 6% on large cap equities. >> that including the dividend? >> that's including the dividend. >> that's horrible. we got to do better than that. >> if we have a lot of juice in the next year because we have corporate taxes and everyone can mark up the earnings. we're talking about a five-year

cycle. and the chances are that we will go through the next part of the business cycle during that period. >> you are a child of the last eight years, i think. do you remember the mid-'90s? >> i do remember the mid-'90s. >> can we have one year over? >> i'm an equity bull. not just a strategist. we're talking about that over five years. i'm suggesting in the near term if we can get a real improvement coming out of the u.s. and global growth looks a little bit better, higher than the economists forecast, i think we're in pretty good shape. but we need to recognize that we've pulled forward a lot of returns. there's a lot of expectation baked into the market. >> but we didn't have any returns for the last two years. >> we've had a great year in 2016. >> since november. but prior to that, we were turning for two years. >> that same level. >> we also had a earnings recession. we had a real slow period in

terms of u.s. and global growth. >> and then we're going to hear, you know, unfortunately -- or fortunate for the president, he gets to pick the low for when he came in. looks like he's been the greatest thing for the stock market ever. but if you took it prior to the financial crisis, we really haven't done that wuch in the last ten years. >> look, the real key is going to be what happens in terms of regulation if the u.s. does regulation lead to this return of animal spirits? we were talking about before when anthony was on about consumer confidence hitting the highest level in 15 years. but you're starting to see small improvements of business confidence. for me the real show me moment is can we translate that uptick in business confidence into investment. in cash return strategies to shareholders. or is there actually a much more kind of forward looking program that involves investing in businesses for the long-term. that would make me really excited about the potential. >> would you rather -- you would rather have businesses spend

money on capital and expansion and things like that than infrastructure, wouldn't you? i mean, is infrastructure part of your bullish -- do we need to do that for the economy to take off? >> i think the u.s. needs to upgrade its infrastructure, i just don't think it's going to have a meaningful impact in the near term. >> depends where you're sitting. >> right. >> some people that's all they're banking on. >> great to see you. >> happy new year. coming up, just three trading days left in 2016. will the dow hit 20,000? mohamed el-erian will be our guest. we'll be right back.

what's the next new normal? mohamed el-erian joins us with this 2017 predictions and take on the global markets and economy under the incoming trump administration. the american consumer. confidence hitting the highest level in 15 years. is the shopper here to stay? plus this is no child's play. while one of the year's most popular holiday gifts may not be all it's cracked up to be. as the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box."

>> welcome back to "squawk box" here on cnbc. i'm joe kernen along with andrew ross sorkin and michelle caruso-cabrera. our guest host mohamed el-erian, chief economic adviser at allianz. can you just hold your thoughts? i know you got them. >> got a lot of them. >> he always does. we're going to look at the futures. it might be today. look at e the futures. easily could be 55 if it starts up 18. that's all we need, 55 to get to 20,000. treasury yields, did they move too? said the euro was under 1.04. no. $ 2.56% but we're still near the level. >> where's the euro? can we see it? >> seeing some -- took a couple -- it was there two or three weeks ago. >> you know, all the teleprompters just went out. feels like maybe there's some kind of -- look, there it is.

1.0394. >> that's, you know, when you get below 1.04, strange changes start happening. they can't meet. the universe ends, i think, maybe. right? >> that's when the singularity arrives. when there's parity. >> now your prompter's back. thank god. >> i was going to tell you about qualcomm. i don't need to read the prompter. we talked about the story already. so i knew. qualcomm is being fined about $854 million for alleged antitrust violations. saying the company broke the law by limiting the access of its competing chip makers to its patents. and you like that with the "t"? new numbers on holiday shopping. mastercard reporting sales at brick and mortar stores rose year over year. strong for home furnishings and

men's apparel. and also the home -- i watched it with you. "the wall street journal" reports the number of investors who flipped a house in the first nine months of 2016 reached the highest level since 2007. a third of the deals were financed with debt. few stocks to watch this morning. amazon named evercore -- to turn its data driven kpurm insights into increased use of its site. that means they know what people want to buy so they can sell them even more stuff. delta air lines is canceling an order for 18 boeing dreamliner jets. that was one delta had assumed when it merged with northwest airlines back in 2008. nasdaq and bats are seeing convincing etfs to defect from the arca platform. "wall street journal" reports

more than 30 etfs have left the nyse this month for its rivals. that's interesting. we think about the battleground for ipos and where they're going to list. but where are you going to list your etf? that's also a place to fight for market share. fred's is under scrutiny. regulators are unsure the discount store operator will be able to handle its increased size after striking a deal to buy 865 rite aid stores. i'll be honest. i hadn't heard of this company almost ever. it's been in the news day after day after day. and the news of this acquisition of these pharmacies. disclosing 6.4% stake in the alternative energy company. this according to an s.e.c. filing. gnc going to close all of its 4400 u.s. stores today. they're overhauling the pricing system making it more consistent. our guest host mohamed

el-erian from allianz. i want to talk about what you think all of this will mean for the fed. you make some interesting points there that the whole -- those clowns. that data dependency don't do anything. if things start working the way that they might. they might have to anticipate something rather than just react to it. before we do that, let's talk about -- we're trying to be domestic here and we're trying to be nationalists and populists. but you're fall back into the same globalist stuff you've always had. which is trump will have an easy time here you think. but you say it's not going to be great unless germany and china also have some reforms in terms of policy. why do we still need them? why can't we do it ourselves or at least just doing it ourselves would be good. it'd be nice if they came along, but shouldn't we be able to do it domestically here? >> why we need them is because of what you cited a few minutes ago. the dollar. the dollar is now below 1.04.

if there's divergence in both economic performance under president trump and fed tightening more than other central banks, if the dollar strengthens too much, you get a couple of head winds. one is what it does to profitability. and two is what it does to protectionist rhetoric. so in a perfect world, the rebalancing we see in policies here, less reliance on monetary. would also follow in europe. if we don't get that, then you guys are going to be talking about the dollar a lot next year. >> so that -- even though we don't want to be quite as global or at least the people voted that way, there's at least some sentiment that way to be more nationalistic, america first. we still need these other places. because our dollar will cut us off at the knees. >> there's a limit to how much divergence we can have. we've had it over the last few weeks.

we've seen the u.s. out-perform others. others are catching up. now, the hope is that the u.s. continues based on policy announcement becoming design and implementation. >> the rest of the world isn't even talking about it. i mean, europe is hopeless. china feels like it's gone backgrounds. consolidating power. feels far less of a spreading of capitalism there. >> and i think the hardest thing for us today is not what do you think is going to happen next year. it's how are you thinking about next year. already in 2016, we have seen realities. now, we have checks and balances in europe you get brexit, the italian referendum. you've got connections in

netherlands, germany. >> but then the question always becomes what is a realistic growth rate if you think that donald trump is going to make all of these fiscal reforms here but you have all these head winds over there? >> i think the u.s. gets to 3% which is quite a break -- >> next year? >> you would have thought that was unthinkable. i always said the new normal was coming to an end. you heard me say that. you heard me talk about a "t" junction we were going to flip one way or the other. >> you said because it was your term that it's coming to an end. say that again tr me. >> the new normal is coming to an end? >> it was horrible for -- the new normal -- >> there are two other labels. you can call it mediocre. >> i'm sick of living in the new normal. >> what is the post-new normal. >> the political system rebels against the low growth.

breaks things financially. negative interest rates. breaks things economically. low productivity. but breaks things politically. the u.s. looks like the antiestablishment movement will break out into higher growth. so that's how you think about next year is as important as what you think. >> and it could make our breakout temporary. >> you're going to be focusing a lot on the dollar. interest rate differentials are capped by lows. >> if we actually saw some of those european countries leave the euro, that would be growth positive for a lot of the countries. right? wouldn't it? >> he's not going to give you that. you love the eu. he cried the day of brexit. you were wearing black.

you had a veil. >> i don't remember seeing you. where were you? >> you love the eu, don't you? you think it's all -- you know. >> so i think the eu as a political project is really important. i think britain never bought into the political project. i think britain bought into the free trade. remember one thing, when you say it's better, as long as you replace something with something else. you cannot replace. >> they'll grow despite themselves. all the things they should have done to the labor markets but they can drive their cheap currency. >> i know. it might be volatile, but ultimately i think greece would be growing now if they took a bullet years ago and done it. >> there's no question. >> i don't want to have that conversation. but you know. >> the bigger eu letting greece in, letting some of these other countries in.

they said you got to have this, this, and this. they didn't have it and they let them in anyway. >> the eurozone is tough. >> we get mad at bureaucrats here. at least we elect them. that can't last. and then you've got the same interest rates in places that ought to have much higher interest rates. >> my only point is that everybody is so frightened of the disintegration if and when it happens. we've been so wrong on all the things we should be frightened of, it would probably be better. >> just the opposite of what everybody thinks. i don't think the people are afraid. >> i think that people -- i think the people want something different. i think the analysts are afraid because they don't know what they're going to replace the eu or eurozone with. but the markets are saying end of the day the system's going to

hold. >> when did the new normal end? >> it's ending. >> hasn't happened yet. >> if you read the book i sent you, you'd see there are ten sort of underlying -- >> that must kill you that the new normal ended november 9th. >> he's coming up with the new phrase. >> that it ended november 9th must kill him. when that guy got elected. it kills you. >> you didn't expect that. >> it doesn't -- i don't know, joe, why you think -- >> you can be honest. >> the important thing because this is critical is that we don't fully understand the cumulative effects of low growth and we are starting to see it all over the place. >> and we're immune to it too. we think we did okay. that's why so many people -- let's continue these policies. we say we know what they are. are you out of your mind? anyway. thank you. >> he's staying for the whole hour. >> well, we'll see. >> he is staying for the whole

hour. >> if he'll have us. i don't know. coming up, the billionaire who's added the most to his wealth this year. new numbers from forbes. can you guess who this person is? i bet you can't, actually. plus, veteran retailer steve odland will join us. and then we'll talk politics and tax reform. stay tuned. you're watching "squawk box" right here on cnbc.

welcome back to "squawk box." making headlines, warren buffett wins the title of biggest billionaire gainer of 2016. helped to boost buffett's personal fortune by $12.3 billion. he's now worth more than $74 billion making him the world's second richest man. and consumer confidence hitting its highest level since 2001. joining us now for more on the consumer and holiday retail sales is steve odland. he's also a cnbc contributor. good morning to you. >> good morning, andrew. >> i don't know. did you get to -- talking about consumer sentiment, did you see the donald trump tweets overnight? >> no, i didn't. what'd he say? >> he's proud of where consumer

sentiment is, how high it is, and he thanked himself. he said thanks, donald, exclamation point. the question i had is does he deserve the credit? >> look, i don't know. but consumer confidence i think is at a 15-year high and you're seeing retail sales at an 11-year high we're seeing sales going up about 4% this holiday season. and they started slow in early november and then picked up pace most recently. of course the winners and losers are lumpy here. amazon is the -- by far and away -- the biggest winner in all of this. and bricks and mortar by large are losing. bricks and mortar have one more bite of the apple here with returns. you have 10% of all holiday purchases coming back here in the last week. it's an opportunity to sell. what we're seeing for the first time is spring purchase here before the end of the calendar year. spring merchandise. when people come back in the stores, they're trying to get that purchase.

it looks like a good year. >> when people say that 10% come back, they come back in store? amazon we talked about being the big winner. they did a billion dollars in sales. does that mean $100 million of merchandise is coming back? >> even more online because you don't get to see it or touch it. amazon has to deal with their own thing. but for all other retailers, most returns even though let's say they sell 10% online, almost all of those returns come back to the store. so you get big incremental traffic. and the sales are huge this week. the margins must be zero or negative for most retailers here. but it does give you that one last bite of the apple with that incremental traffic and sell some merchandise. it looks like it's going to be over 4% sales growth. >> you hear a lot of retail analysts say, quote, we're over retail. there's just too much retail in america today. when you look at 2017, do you see more store closings?

>> yeah. what they're talking about is retail space. you know, bricks and mortar have this enormous investment. these malls are all over the place. they are huge capital investments. even when your sales decline by 1%, the deleveraging of that is enormous for a bricks and mortar retailer to have happen. you're seeing walmart with jet. these are big for these small online retailers. so i think you're going to continue to see a decrease in store traffic. bricks and mortar store traffic was down 10%. that's an enormous change here for bricks and mortar retail. so i think you're going to see a decline in these malls, the secondary smalls, third tier malls are all going to decline. you don't want to be a mall investor at this point in time, but it's all going online. that's where the growth is. especially amazon. >> what'd you say, 15 -- how many years? >> i think it's a 15-year high.

and i think this is a -- an 11-year high in retail sales. >> andrew said does it have anything to do with trump and you said i don't know. how about 5% due to trump? i mean, really an i don't know? you don't see any correlation between the election and consumer confidence? >> nobody knows for sure, but i think people are feeling -- >> do you see where he is? he's in washington, d.c. he's got to walk out the door in the morning. >> you love that tweet. hold on. you love that tweet where trump thanks himself. do you remember september 13th, obama is at a rally. someone says gas is $2. what was his response? >> he took create for it. >> he said thanks, obama. quote. the president thanked himself and said thanks, obama. this has been done before. >> i think that it was done in somewhat -- with jest. a little bit. >> i certainly hope so because he didn't have anything to do with oil coming down.

that happened in spite of the epa and other things, right? it had to be a joke. but i don't think he was. >> i think it was a half joke. >> was he joking when he said he definitely would have won and all that? those are all jokes? i don't think so. >> i don't know about that. >> steve's in washington, d.c. he's got to walk out the door, walk the dog in the morning, the neighbors could -- >> right. >> thanks, steve. >> forget about mohamed, there's a guy on twitter. >> even mohamed said the growth is going to come back from some of this trump stuff. right? >> right. deregulation, infrastructure, corporate tax reform. >> god, it's like pulling teeth with these. >> thanks steve. coming up, one of the most sought after toys of the holiday season hatching into pure disappointment for parents across the country. plus we're opening up the cnbc 2017 playbook. what to expect in the travel sector. stay tuned.

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welcome back to "squawk box." there's a problem with the hottest toy this holiday season. spin master's hatchimals are interactive toys that hatch from plastic eggs but a growing number of parents are complaining saying that their hatchimal took hours to hatch if it opened at all. and adding to the frustration, some owners of the toys say the batteries didn't last very long

after the animal did hatch. >> birth can take a long time, i've heard. >> that's right. this is a first -- we're hearing about it after christmas. these were big? >> they were huge. i saw them on instagram like live videos of people posting them. >> interesting idea. >> but it only happens once. you pay 50 bucks and it doesn't rehatch. >> then you have the animal. but the batteries don't last. we're in the final week of 2016. cnbc's breaking out the 2017 playbook. susan li looks at what to expect in the travel sector. >> reporter: travel industry is big. employing 1 out of 11 people on the planet. the focus next year will be on trump, terrorism, and closed borders. first the trump effect. with business traveling slowing over the past few years, that

was a slug on the hotel industry. marriott, hilton, and ihg are hoping cash-rich companies will usher in the return of a business traveler. meantime, more americans might be booking a cruise on carnival. royal caribbean or norwegian. those sailing to cuba is back in question after trump's looks at revisiting the relationship. second, terrorism. brussels, nice, and istanbul have taken a hit to numbers as a result of terrorist attacks. expect visitors to continue to avoid hot spots in the new year. and finally, closed border backlash. will politicians threatening to build a wall along the border with mexico and pushing heavy vetting of muslims entering the u.s., expect the number of tourists from the middle east and mexico we saw last year to possibly cool off. now, corporate travel is very

important. it represented 70% to 80% of revenues for the big hotel chains. a host of corporate tax cuts with higher growth translates to more profit in the future. meantime, more money with personal tax cuts online booking companies are hoping for more clicks as well to book the next trip. >> thank you for that. when we come back, today's top stories. plus in a year that saw the deaths of prince, david bowe wee, carrie fisher and much more, how one fan is using gofundme to save betty white from 2016. "squawk box" returns in a moment.

♪ welcome back to "squawk box." here's what's making headlines this morning. one economic report on the calendar today. the national association of realtors is out with november pending home sales at 10:00 eastern. economists are looking for an increase of 0.4%. 76 public companies had no female directors at all for the entire past decade. that's according to a study done for "the wall street journal."

among the familiar names, footwear makers, skechers, six flags. the study said many were small and in male dominated industries. like -- >> i think it would be a great board member. >> you do? >> don't you think? >> yeah. >> mohamed, don't you think? could i be on corporate boards? >> you should. >> you ready to do, like, energy? >> i would love that. >> that's the one you want? okay. >> i just think they need women. >> i agree. >> there was a journalist at the chicago tribune i want to say, a female for years i thought was on the board at mcdonald's at one point. >> you have a reference right here. >> i'll check on that. usually there's conflict issues. and the new york stock exchange seeing conflicts for etf listings. more than 30 have left the nyse for the nasdaq and bats global

market. and listings are down from a year ago from for the first time. with over 1500 etf listings. are you getting nostalgic looking around here? >> yeah. we're not using the studio anymore. >> this is my last day in the studio. >> you're going to miss the chain fence? >> i'm going to miss this. after oz, after that tv show ended, we don't need it. because we can just look out. look. here's the guys over here. the guy's lifting weights. see that guy lying down? he was shived. he was just shanked. over here, you can see -- >> it's a construction site, not a jail yard. >> what i'm going to miss is the -- i don't know if you remember, we had to get radio city to -- they didn't light that thing up until 7:00 a.m. in the morning. when we moved in here, we had to make some calls and talk to some people. and they actually put a person i

think that comes in early. it was a union thing. so it was a whole -- this was actually a cost to them. >> people at home will notice the difference as of monday. >> yeah. in the new studio. >> this -- you know, times square -- >> tuesday. >> there's a big, there's a competition for the tallest things to put your face on. we have something that's like five stories high. and we could use it. we're going to put your face -- >> my face? >> yeah. part of the time. >> show it live as well or just the faces? >> no. just like promos. and we've got to get someone to take pictures because we've really made it then. there's like naked elmo get him in the shot. >> what about naked "closing bell" -- naked cowboy. >> there's now a female naked cowboy. did you know that? >> she's a cowgirl. >> i don't know. >> uh-oh. >> this is way off the radar.

>> people need to watch on monday -- >> tuesday. need to watch on tuesday. >> that's right. >> new studio. let's talk about unique -- new, unique use for crowd funding. a south carolina man has set up a gofundme page to protect betty white from 2016. this is one of the stranger stories you'll hear about. he says he's going to use the money to fly wherever white is and protect her until midnight on new year's eve. he plans to donate any unused money to charity. so far he's raised more than $1800 as a function of this. white is 94 years old. this is so strange. >> it's strange and morbid. it's like saying, you know, you're 94 and everybody else is, you know, checked out in '16 so i want to make sure you make it to '17. >> is she the last golden girls? how many golden girls are still alive? >> she seems very healthy. and age is a -- you'll see. it's a state of mind.

right mohamed? >> you carry around any aspirin? >> she's the last one according to to google. >> if you're going to have a heart attack or you think something is happening. you're supposed to chew it quickly, get it into your blood stream. every doctor will tell you. >> put it right next to the viagra. let's get back to our guest host mohamed el-erian. >> right? i got a pill box. just stick another pill in. what's the problem here? >> what's so funny, mohamed. >> this awkward moment has been brought to you by joe kernen. >> the banking system is said to be more stable. is the financial system -- is the financial system more stable? >> so the banks in the u.s. are not just more stable, but they're robust. >> but that's not what i'm asking about. i'm talking about the financial system. >> the risk has migrated from

banks to non-banks. that is going to be an issue. the biggest risk if you ask me is liquidity. you talk about etfs. etfs promise liquidity at reasonable prices. it's not clear that some of the etfs in the high yield space can -- >> carl icahn raised this the other day. >> right. if you're looking to where the risk has migrated from the banks and within the non-banks to the assumption that liquidity will be there when the paradigm changes. and what we've found out over and over again, when that happens, think of the taper tantrum. think about what happened this year that liquidity becomes elusive. that's the major risk. i think investors have to realize this and make sure that they'll never be distressed sellers. >> that means what in terms of how you execute portfolio? like when you see this happening and you already own it because you can get it. >> just understand that you're

not just underwriting normal equity risk and normal interest rate risk. also liquidity risk. there'll be time when you will not be able to reposition your portfolio. if you're forced to reposition as people found out over and over again, you'll do so at a big loss. not because the underlying asset is bad. >> should we worry about a major financial institution that's not a bank having some kind of potential failure issue? >> no because most of them don't risk their own balance sheets. that's a really important distinction. you shouldn't forget about the banks in europe and in italy in particular. that issue is not solved yet. that's going to be important because it's going to put more pressure on the euro zone. >> a lot of people i'm sure helped manage those portfolios. i'm seeing things that the whole

advantage of bonds could be at risk -- >> with lower taxes. >> people like lighten up or bring maturities? >> so there'll always be a tax advantage of some sort. may not be as big as it is today. because we're going to see other things being reformed. i think the main issue with muni bonds is the credit risk. i think people have to understand that there's credit risk there. >> credit or principal risk? i wouldn't want a 20-year 2% muni bond. i don't want that. >> that's interest -- >> you think there's credit risk. why? >> some of them -- >> because you won't get paid. >> but in this country if we're rebounding, economic growth is going to be better, should be good. >> remember the general obligation is right up there. but people who venture all the way down to locals. joust got to be careful. now, interest rate risk, i'm with you. but that as a bond investor,

that should come normal to you. >> okay. and i don't see, should you buy junk corporates to take that part of the -- you don't want 100% in equities. how do you diversify? >> this is the more general question of is it time to take some of your investment dollars off the table and reallocate them to things that have lagged. high yield has done extremely well. is it time -- i think there's an argument for taking some of your high yield money off the table and reinvesting it higher up in the credit spectrum. >> quality curve. >> correct. i think we've come a long way really rapidly. >> and accept the lower yield that has come with that. you're going to get paid less. >> you're getting paid less but able to reposition yourself later at a much lower cost. you build more resilience and agility in doing so.

we've come -- you were talking about 10% since the election. that's a big move. >> unreal. >> now, high yield has also had really big move. you know, we've come very far very quickly. >> here's the thing. if i'm holding a high yield bond that's paying me, like, 7% or 8% because that's what you could have gotten, i don't want to give that up right now, do i? that's still a high interest rate in this environment. >> remember. you're buying -- >> even if the underlying bond has fallen, if i hold it to maturity, it's not getting paid. >> you're buying total return. so look at both what price you're buying it at. the second thing is if you hold it to maturity, that's great. a lot of people end up not holding to maturity. it's important on what sort of investor you are. that's the point i'm trying to make. >> probably should use different pockets so i don't -- aspirin with the heart pain. i don't want to be like, whoa, what happened! is that what it is when you get a heart -- so it's a blood

thinner, right? >> aspirin, yes. >> chew on the aspirin if you think a heart attack is coming. >> all right. works on both. chew on it -- anyway. coming up, the prospects -- >> what? >> carry -- just make sure you got separate pockets. anyway, for tax reform next year, we're going to talk to the incoming ranking member of the committee -- don't want to mix them up. keep them in separate pockets. john yarmuth will join us next. oh, that's lovely. so graceful. the corkscrew spin, flawless... .his signature move, thying dutchma poetry imotion. and there its, "baby bird". breathtaking. a sumorestler figure skating? rprising. what's n s? how muchoney heather sed by switching to geico. fifteen minus could sa you fifteen percor me.

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welcome back to "squawk box." top democrats in congress are preparing for a battle over the federal budget with a republican-controlled congress and white house starting next month. joining us now representative john yarmuth, the incoming ranking member of the house budget committee. congressman, it is good to see you this morning. >> good to see you. good to see you. >> the hats are getting shifted around a lot. it's not just opposition politics, i guess, now. but maybe a republican president or republican congress that wants to spend money like the democrats wish they could have spent it over the past eight years. is it really the democrats' obligation now to be the loyal opposition? >> well, it depends on what happens. i think most of us and i think particularly the republicans in congress are very confused about what's going to be coming at us. they have no idea. we have no idea exactly what the trump administration policies are going to be in any particular area.

so we're all just waiting to see what happens. i think what you're going to have is actually four different interests in the dynamic. you'll have the administration, you'll have the democrats in congress. you'll have the freedom caucus republicans and then you'll have the mainstream republicans. and it's going to be interesting. it may end up looking a bit like a parliamentary type government. >> i can see that. you're in kentucky. i don't know what -- you're not -- you probably thought the democratic party might have been a little bit out of touch maybe with some of your constituents. and then you got a lot of these people that in formerly blue states that went red. and those -- i think some of those guys, democrats got to be thinking do i play ball. then you got some republicans that probably don't want to play ball. so it's a very strange coalition you can see forming here. >> yeah. i don't think prognosticators

are going to do very well. i think everybody's about to be surprised. and again, if you look at the cabinet secretaries that president-elect trump has nominated, if they actually determine policy, we're going to go at a very, very conservative right wing direction where i think a lot of republicans are going to balk. and certainly democrats will be unanimously opposed. but if the white house is going to make the policy according to the types of things that donald trump talked about during the campaign, then i think it's going to be a very different type of dynamic and you'll see a lot of issues like infrastructure where democrats are very willing to participate. >> so congressman, let me ask you on this last point. there's an assumption in the market that the low hanging fruit right now, meaning where you can get agreement quickly on capitol hill, is infrastructure, corporate tax reform, a certain amount of deregulation. is that the wrong assumption? >> well, i would question about

deregulation. i think there are a lot of republicans who want to do that. but again, we've seen a lot of votes over the last years particularly in the environmental area and the energy area and they haven't had to promote policies that were ever going to get implemented. now they're going to have to do that. once people hear the types of things they want to do and the cost of doing that to the environment, that those are going to be so easy to get votes for. i think in the area of corporate tax reform, there are enough democrats who want to go along with that. that that will be relatively easy. the question will tax reform is where do you stop? and there are a lot of people who say we're not going to do piecemeal tax reform. we're going to take on the whole code. once you do that, you open up to the type of things that happened in the last one through the ways and means committee and got

nowhere. thousands of lobbyists who want to have their say. it depends how big of an initiative they want to take. >> paul ryan i think has some idea of what, you know, what we're likely to see from the president-elect. probably looks something like that. >> but it is interesting. one of the stories in "the wall street journal" is what trump thinks and a lot of his proposed cabinet members think. so who knows what finally comes out. you're in kentucky, don't you have some coal miners in kentucky? you sure you don't want some deregulation with some of that stuff? i mean, co2. >> we're getting that from our governor right now. you know, i think environmental regulation, the market place is actually taking care of that. i don't think it's really government that's going to be the driving factor there.

that's what scared coal out of business. right now to get out of kentucky was about $50 a time. and way more than natural gas. way more than coal out of wyoming. and most of the people there understand that. they know those aren't coming back. >> i'm afraid to drink a carbonated beverage now. you know, i don't like pollution in my drink. that's a real pollutant. right now i'm expending a little too much so i'm going to end it right now. thank you, congressman. appreciate it. >> good to be with you. >> stop breathing for the show. >> 40,000 parts per minute. i got to be careful. when we return, stock picks for the new year. stay tuned. you're watching "squawk box" on cnbc. bo othe track

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welcome back to "squawk box." if 2016 was the year of the utterly unexpected, perhaps it makes some sense to go into 2017 actually expecting the unexpected. but even if that's the case our next guest sees some issues or some key themes for next year. david bonnson is managing

director at high towers. good morning to you. you have three stocks you like you think are going to work if they will in a trump world. >> that's right. what one of the big themes we're focused on is energy infrastructure. and your prior guest, there was conversation about this whole theme of deregulation. now, quickly congress can get some of these things done. but with the energy story we have to remember that a lot of it can and will be done just simply at an executive branch level, just simply approving some of the projects that had previously been held up in an obama administration. we like spectra energy as a great play on this energy infrastructure story. and particularly with this merger coming with enbredge. we think it's a great story into the new administration. >> but what is the executive order if you will, that will give them a lift they might not otherwise have?

meaning is there a project that's been on hold? >> it isn't even just an executive order. it's more departmentally within the energy department and obviously now secretary rick perry and some of the other actors that will be involved we think it's going to be a friendlier administration. i don't think anybody would dispute that. and actually our friends at strategis research have identified 24 projects, not all specific to spectra, but low hanging fruit to the tune of 24 different projects that could be green lighted representing more of a build out -- a lot of mlp pipelines and of course greater production capacity as well. >> okay. let's go through the other two real quick. omega health care, what's the back story? >> yeah. omega's sort of a contrarian play because the reits sector is one that hasn't benefitted in this post trump election rally. the reits story overall is usually kind of punished when interest rates are rising.

and oftentimes that proves to be ill founded. but in omega's story it's a skilled care nursing type operator. the bulk of their business. but they're different than most any other company in the space, so they're not reliant on one or two particular operators. really diversified and you have an 8% plus yield that is totally covered from cash flows. and we think just came out of favor in price. good bargain going into the new year. >> give me the quick pitch on virtus emerging markets and the strong dollar on that? >> so less than 20 seconds, is the overall merging sector very correlated inversely to strong dollar, but this particular strategy, or anybody that's really focused on bottom-up company selection, not a big commodity beta play but good individual companies with high pricing power it always overcomes dollar headwinds through a few months, becomes a great bargain. that's our story and theme here.

>> okay. well, we will watch all three of them. and we'll hope to have you back hopefully successful. congratulations and good luck. happy new year. >> coming up, mohamed el-erian's 2017 predictions. stay tuned, we'll be right back. does your ild need hp with geste balance? y align junior probiot. so she cave a fractiondominati.. geste balance? yhello-yeowelt ki of day. get 24/7 digtive support with aln junior. the #1 doctor recommende priotibrand, now for kids.

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welcome back to "squawk box." our guest host this morning, all morning has been mohamed el-erian. and you have some parting shots for us to talk about if you're the fed and what you think they're going to do. >> i think for the first time in a very long time i think the market is underestimating how much the fed will actually hike. we're getting out of the world in which the fed is the only game in town policy wise. we're going to a different policy regime, so we get three hikes in 2017 skprks if it's not three, it's because it's more than three. and i think that's something that the -- >> you think either four or five? >> i think that the baseline is three, and the balance of risk is towards more rather than risk. >> so be behind the curve? >> no, i think the fed will become more strategic, more comfortable about the overall state of the economy, see fiscal expansion coming and less data dependent and more strategic. >> are they going to wait to see what kind of tax reform is on the table? >> i don't think they'll do

anything in january, right? i think they'll wait and see what sort of reception the new trump administration gets on capitol hill. but don't underestimate the inclination to normalize after too many years at artificial low rates. >> mohamed el-erian, the policies, always want the fed not to be alone and look where it's coming -- no, we got to go. it's coming from trump. it's perfect. make sure you join us tomorrow. thanks, mohamed. "squawk on the street" is next. ♪ good morning and welcome to "squawk on the street." i am david faber along with, let me check here, we got sara eisen, wilfred frost and mike santoli, we're live from the new york stock exchange. jim and carl have the day off. look at futures we're going to get ever closer to dow 20,000 it would appear at least at the open with the look there at where we are before we start trading, about a half hour from