good morning, it's 8:00 a.m. at apple headquarters in cupertino, 11:00 a.m. on wall street, and "squawk alley" is live ♪ ♪ good morning, welcome to "squawk alley. with me, mike santoli, sara and john are off tomorrow is the last trading day of the year.

nasdaq is poised to make history. the index poised to make gains for 11 of the 12 months this year for the first time ever some of the stocks leading the charge, well, you know them well don't you, of course, when we're looking at some of them there. these you don't know at all. align technology, vertex mercadolibre, what's that mean, free books, free something free markets not the typical names that we see. >> those are the percentage winners, the ones that essentially doubled this year. if it's one that stands out, it's wynn. it's not a bio tech company that, obviously, had an amazing run. in terms of who added the most market value this year, of course, those familiar names like the f.a.n.g. stocks, apple, as well. >> alibaba up 96% this year. we were talking earlier in the show on "squawk on the street," of course, about the increase of

market value at a $440 billion value. >> interesting, tech sector almost 24% for the s&p average waiting for the past ten years, 19.6% that speaks to the rally we've seen in the tech stocks. >> all right, let's get to our panel this morning and we'll start off by talking about fake digital content, which is once again under fire buzzfeed reporting an estimated $16 billion is going to be lost due to what they call fake advertising. fake traffic also sent to pages containing ads to major companies such as jpmorgan chase, amazon, and others. legions of contractors hunting for questionable content content moderating could be one of the larger problems in the new year joining us to discuss, tech reporter at the daily beast, and

ceo of chegg, former chief operating officer at yahoo!. we should mention, chegg one of the best performers, dan up 123% or so. >> we still have tomorrow, but so far it's been a great year. >> really strong year. >> we're very appreciative >> we are happy to have you, because you're willing to talk not just about chegg, but broader issues on some of these, particularly as it relates to digital advertising and what actually is the benefits to those advertisers or what perhaps is the perceived benefit that doesn't get delivered, what is your sense here, and is it going to become more of an issue >> yeah, it is going to become more of an issue you can see based on the stock prices there are three big winners in the advertising space, facebook, google, and now amazon people don't really see amazon as a multibillion dollar advertising environment, but it's probably the largest place. so you've got two things going on, those sites being invaded by people that are using it illegally or unfortunately, and

there's a lot of work they have to do and that may cut into their margins and people's enjoyment of the site and create an even bigger issue in terms of people using it or not using it. then the other part of the advertising space, you have advertising sites who are doing anything they can to attract traffic to themselves and what you're seeing is click bait and you're seeing illegal sites popping up to send traffic to people, and those two things may hurt the advertising business overall for quite some time. >> at what point does facebook and a sheryl sandberg cave and say, all right, we're going to start hiring journalists at facebook to keep content sort of above board? >> well, i don't know that it's a cave or not a cave they see themselves as a platform, a communications environment, and they don't see themselves from day one as a creator of content they see themselves as a place content gets created and distributed. so there aren't enough journalists you couldhire to replace the amount of content

created by every one of us, so i don't think that's their issue i think their issue is, how do they build technology, use ai, use humans, to intervene and what do we consider fake content? just because you disagree with something, doesn't mean it's fake content, so i think it's an existential problem. i think we're going to have years of this discussion, unfortunately, but it's going to -- it's creating a problem. >> taylor, disturbing article today in the journal about the out of sight contractors, not actually employees of facebook hired to review all of these things some of them can only last a few days on the job because they are, frankly, looking at so much objectionable content. >> forced to review almost as much as 8,000 posts per day, and they only have split seconds to make a decision on whether or not the content violates terms of service facebook has known it's become under fire for having big contract workers, a lot of their

workers that are support staff are also contract and don't have the same kind of support that, you know, facebook employees get for this type of thing and these contractors will eventually be phased out, you know the goal is they are training these ai systems to eventually handle the moderation, but that's years away. >> you know, both of these issues that we're talking about when it's the mediating of the content or it's, you know, are ads truly targeted to a real person, and is it genuine traffic, get to the very heart of the promise of something like a facebook, which is you have user generated content, this clear transparent forum, and you can really hypertarget to exactly who you want to read it. you're going to have to do rethinking about what the offerings are. >> i think facebook has pivoted their platform a bit, put a huge emphasis on groups, one to one communication. it came out recently saying they acknowledge the way most people use facebook, which is browsing, can have a negative affect on users. so i think they are sort of looking to get back to their

roots as a social network and focus on what mark said, meaningful connection. it will be interesting to see product changes they roll out. >> whenever we have these conversations, i'm led to the conversation of for the regulation, the market power of these companies, their significance overall in our society. you know, is 2018 going to be a key year for them when it comes to that? >> you and i have debated this on air and off air and i said how would you break it up if you were going to break it up, and the answer is, there has to be more regulation. i don't know if breaking it up is the right answer. you have what's app, messenger, the news feed, groups, instagram, but they all have the same basic problem, which is the only way to make money in advertising on the internet is at scale and so the news feed was created to take advantage of scale you had a place where information could be organized and put through the feed and you could put ads in it, and that has served facebook

extraordinarily well as a business question, i think, is a really important question, is their model going to have to change? are we going to see them move into more things like e-commerce and payments how many ads can you have? how many ads can you have in the feed how slow will the site get how many ads can you see on mobile there's a business model question that relates to the existential question that you're asking, are they too powerful. i think the concept of connecting the people is extraordinarily powerful is amazon too powerful is google too powerful those three sites get used more than anybody else, so the answer is, what would people do if they didn't exist the way they existed? they are going to go somewhere >> well, that's sort of a prediction for next year let's get to actual predictions, as well, for technology in 2018 as we wrap up the year you got any? >> i have a few, one is this

theoretical promise of connecting the world i think we've seen that happen everyone is connected on facebook, twitter, and i think in 2018, which is something we're already seeing, people are going to move towards more private networks, smaller, closed systems obviously, abuse is ahuge problem on wide networks people don't necessarily want to put every photo or random thought they have out into the broader world. >> does that benefit snap at all? they've gone the road of saying we really want you to be dealing with only your actual friends, close friends, they emphasize that >> that's true snap has a whole other myriad of challenges, but i think it could benefit facebook facebook owns what's app, they own messenger, they are about to launch instagram's separate messenger, so i think they are equally well positioned to take advantage of this more group chat >> i think those are great predictions. i would say that the bigger are going to get bigger. you know, if you are leading in a space and you're writing the rules for the space over the

next couple years, whether it's what netflix has been doing or what spotify is about to do when it comes out or the bigger guys or us in education, and i think you're going to be seeing the use of data even more. even though there's a lot of complaints about it, i think those are the things that are going to make the value of the model more valuable as businesses, as fewer -- >> scale begets scale, what's everybody else do? >> i think you're going to see a roll up of media properties, because if you take the lack of scale, combined with the value of advertising on these sites, you're going to see them having -- they are struggling. now they are going to struggle even more. i think the bigger are going to get bigger, smaller are going to get rolled up and i have a big prediction, stitch fix was a big deal doesn't get talked about a lot by you guys. now it's essentially doubled since it's gone out quietly, extraordinarily talented management team. women's fashion, women's

businesses, things like rent the runway, are businesses that are all underestimated and ones amazon hasn't won at yet and not ones amazon can necessarily copy really quickly the stitch fix ipo shows that. i also think it means companies that have been waiting to go out are going to go out in '18 because their investors will put pressure on them investors want a return on their money right now. >> what's the prediction >> more ipos in the tech space, more women-led companies coming out and a lot more in the fashion space. >> all right there we go. real predictions thanks to you both thanks taylor and dan. >> thanks for having us. >> thanks for having us. speaking of the big, apple giving ceo tim cook and other executives a big boost in pay after the company topped annual sales and profit goals for 2017. the annual proxy filing shows cook's compensation jumped 47%

to $12.8 million last year, the largest bump among the five executives listed in the filing. also apple and amazon holding separate discussions with saudi arabia officials about investing in the company both sell products and do so through third parties. a licensing agreement is expected by february there with an initial retail store targeted for 2019 guys >> yeah, interesting factoid for you, behind tim cook, angela rentz, chief retail officer, highest paid behind him. >> retail business of apple is a very large enterprise. >> absolutely, and about to apparently expand to saudi arabia >> as we were talking earlier, tim cook is probably underpaid >> i think it's surprising he has not flown private until potentially now. >> i didn't know that. really >> that's fascinating. the board is telling him he has to now >> security reasons? >> yeah. >> i didn't know that. >> the debate about flying

private is that there's lost productivity when you don't. that's interesting, too. >> i feel that way tried to make that case to comcast. hasn't worked yet. hasn't worked yet. >> all right bitcoin prices are under pressure today after new regulation talk in south korea seema mody joins us now with more seema? >> morgan, the roller coaster ride continues, bitcoin dropping 11% overnight on news south korea is clamping down on bitcoin trading following a surge in interest from retail traders, unlike in the u.s. where there are limited merchants that accept the cryptocurrency, in south korea bitcoin use is much more prevalent. nearly 20% of all volume is reportedly done in korean juan as more south koreans buy in, the government is hoping to add transparency by prohibiting anonymous trading and potentially shutting down smaller exchanges. in a statement, a government official said cryptocurrency

speculation has been irrationally overheated in korea. keep in mind similar messages from other governments like china and israel has served as a mini speed bump. check out the volatility this week in the crypto lower on monday, followed by a 16% gain on tuesday, and a drop on wednesday and today news of the south korean clampdown also hurting some of the bitcoin and blockchain related small caps, or so they say. long fin down about 8% the other part of the market to keep an eye on are the initial coin offerings we're already seeing a slow down in funding south korea and china have banned icos and here in the u.s. this controversial way of fundraising has become the subject of intense scrutiny from lawmakers and will likely be the case in 2018 david? >> okay, thank you, seema. still ahead, steven levy with his expectations for bitcoin in 2018 and the three hurdles the cryptocurrency needs

to address in order to survive plus, is home improvement in amazon's future? we'll discuss a potential showdown between the e-commerce giant and retailers such as home depot and lowe's noti td is general motors more invavehan tesla? our next guest says yes. more "squawk alley" when we come back ♪ feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow.

with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.

welcome back to "squawk alley. amazon is on a tear this year, up more than 50%

what will 2018 hold? here's deirdre bosa with her playbook >> 2017 was a big year for amazon its stock crossed $1,000, it splashed into brick and mortar, jeff bezos became the world's richest man, and alexa became a household name so, what's in store for 2018 here are three predictions first, amazon sells more smart speakers, consumers will do more than ever with their voice from shopping online, to controlling the home, but it will be a high stakes battle between tech titans as they battle to get their devices into your home, so expect more third party developers for alexa and a bigger skills catalog. second, we'll find out if 2018 is the year consumers finally embrace online grocery shopping. this as amazon continues to lower prices and integrate prime membership into whole foods. other grocers you can bet are watching closely and they are

already boosting delivery capabilities third, next year amazon will select its second home, known as hq2. while the company's seattle hiring boom is cooling off, you can expect a new growth spurt in a new city >> that was cnbc's deirdre bosa reporting on amazon. there is speculation amazon could take on home improvement retailers in the near future, one of the few areas they haven't already greatly disrupted. this as companies like home depot look to expand, with reports surfacing that company has been potentially considering putting a bid out there for xpo logistics, a logistics and shipping company, to better compete with amazon. joining us now, brent fill, senior tech analyst at jeffries and brian nagle, retail analyst at oppenheimer thanks for joining us today. i want to start with you the point i just made, home depot and lowe's trading at

all-time highs, the sentiment has been for a while now that this part of retail has been much less exposed to the potential disruption of amazon, but now amazon's moving into furniture and appliances, so should these companies and the investors in these companies be concerned? >> well, look, i think it's a good question. i've been recommending home depot and lowe's as top picks. the stocks have performed really well i look across retail, i don't think there's any company out there that can dismiss the threat of amazon now, home improvement in my mind is well protected from that threat, in that the category just doesn't lend as well to online sales, but i think what we're hearing now, particularly from home depot, is they are looking at a company like amazon and saying there's some things amazon does really well. we can do that, too. now home depot is becoming more digital in its strategy. the point i make, you can't dismiss amazon, but i think amazon is helping to make a lot

of these strong traditional retailers even better companies. >> brent, as someone who covers amazon, i put the same question to you should home depot, lowe's, be concerned? >> i think they should be a little less concerned. we think amazon will do better well in low income commodity, specialty high end consumers consumers will want to go to stores before they bring it into their home, so i think, you know, it's a tale of two cities. at the low end, yes, for basic items to help renovate your house, absolutely, but if i'm looking at buying a shed or high-end appliances, i don't think right now i'm thinking about amazon as my first stop. again, never rule it out they are making the procurement process a lot easier fulfillment they mentioned is up in terms of capacity, up 30% year over year, which was a similar stat they put outlast year so we think they are going to continue to make it easier, but

i do think some of the specialty retailers are more insulated and our team at jeffries continues to like a handful of retailers alongside amazon as a basket of names. >> brian, shares of xpo logistics are up 17% over the past week on this recode report that surfaced before christmas that home depot was potentially considering internally a bid for this logistics and trucking company. how realistic would it be to see home depot essentially getting into the trucking market >> well, when that news hit right before christmas, another analyst at oppenheimer and i shared some thoughts and put out a quick note basically our conclusion is there's probably some piece of the xpo business home depot would be interested in, particularly the last mile, the holy grail for a lot of retailers, but i have a difficult time seeing home depot take on an xpo ginn the sheer

size and complexity. seems like buying something like xpo that home depot would be getting a lot of things they don't want it just doesn't make much sense to me. >> yeah. i've heard the same thing from the analysts who cover xpo logistics. i'd make the same argument about amazon certainly it's been expanding in logistics and transportation, but still very asset-like. would amazon continue to push into transportation and potentially bring some of these types of transportation assets on to its books? >> no one thought they were going to buy whole foods that i spoke with, so never rule it out. i think fulfillment is an issue for them costs are going higher, they are having to hire more employees, so it's a major issue, probably the biggest bottleneck for the company. potential m & a could look interesting there. andy jassy said he'd like to do more acquisitions going forward,

as well, so i think amazon will be very active across the portfolio of products and i would specifically site the aws business as an area they'll do more acquisitions this coming year >> brent, we've got to wrap it up, but quick, do you think amazon could get to a trillion dollar market cap next year? >> we think 750 to a trillion is the next goal over the next two years, the sum of the parts by 2022 gets us to a trillion dollars from 580 market cap right now. we don't think that's a stretch. >> great brent and brian, thank you so much for joining us. happy new year >> thank you >> happy new year. when we come back, is general motors beating tesla at the innovation game? our next guest says , d soan he'll explain after this more "squawk alley" coming up. you always pay

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shares of tesla and general motors both in the green this

year, but gm is capitalizing and pulling ahead of its competitor. for more on this, joined by david martin david, good to see you thanks for being here this morning. >> great to see you. >> i guess let's start off by describing your methodology and what brings you to this conclusion that gm's intellectual property and its ability to capitalize on it exceeds tesla? >> first of all, back in 1993 gm started looking at the whole question of not only of electric vehicles and autonomous vehicles, but how the consumer was going to interact with them, so they were thinking about this a lot longer than tesla has even been around. and if you look at how we look at innovation, we are actually looking at a bit of a tortoise and hair situation here. there's been a lot of trial and error that gm has been engaged in over the years, but they've started refining what their

innovation focus is and rather than trying to be all things to all people, what they are doing is focusing on their core competencies, where tesla is taking a much more broader and generalist view and puts gm in a position of controlling a lot of the points around which the actual commerce of electric vehicles and autonomous vehicles are going to take place. >> this does get to one of the criticisms of tesla as a business, as an investment, which is that its technology is not necessarily proprietary to itself, using batteries, for example, engineered by others, but does tesla not have an ability and brand that can derive value out of all that in excess of what some of the other electric vehicle makers have tried so far >> you know, it's a great question i think when it comes to the actual body of the car, the frame and the core components, tesla and gm may be very much in a lockstep with each other, but i'll tell you where gm breaks out. they thought about the consumer as an actual driver, actual

experience and what you find is gm has covered innovation around charging stations, distribution, power, interface one of the critical things gm has been focusing on is anticipating human behavior. how do people spend money at charging stations? how do they actually do the e-commerce of autonomous vehicles how do they navigate and deal with crazy drivers not in autonomous vehicles? those are all things gm has really built some core competencies around, and once again, tesla and gm may put the same car on the road, but gm is focused on the entirety of the experience, all the way from their own management of supply chain, where they don't feel they have to invent everything they don't have to have all the sensors and circuits, but they focused on the core things about consumer safety, consumer experience, and at the end of the day, gm has paid more attention to the human and tesla's paid more attention to the brand. and in the long haul we think that gm is going to be able to

deploy their proprietary positions, where tesla is really relying exclusively on their brand exposure and hoping that brand momentum carries them in a distance that, i think, is going to run into headwinds. >> i'm just going to play devil's advocate for a minute, david, on the last point you made about the brand gm might have been looking at electric vehicle technology back in 1993, but why didn't it develop an electric vehicle back in the 1990s and it really has become tesla that's sort of the brand that kind of made electric vehicles cool whether they are actually, you know, to snuff in terms of production and whether there will be mainstream adoption, different question, begging different answers, but it really is tesla that kind of seems to have made it a mainstream cool thing to even talk about no >> well, i think there's part of it that's right, but if you go back several decades you'd say the same thing about studebaker and you don't hear that name

anywhere a lot of times people running at the leading edge and attracting an enormous amount of popular fan base following ultimately have to get a reliable solution that stays on the road and makes the road safe. and tesla, once again, has done a phenomenal job of integrating a massive great quality product, but in many respects i would give tesla an analogy of kind of being the samsung to apple comparison the entirety of the infrastructure around what tesla has done is it's said let's integrate solutions best of breed, so it's more of an apple branding play, but when you look at gm, you're looking at a samsung core technology and advancement thing and at the end of the day there's room for multiple players and i'm not saying tesla is going to go away, but if you look for the entirety of the ecosystem, where the real points of differentiation are going to happen, what you'll find is many instances the ability for a company like gm to say how do we

reposition ourselves, take advantage of our supply chain, global footprint, take advantage of all of the pieces of innovation, i think what you're going to see is gm going to be a surprise in this one >> all right, david, thank you very much. interesting approach to these questions. all right, let's get a news update now over to kayla tausche at cnbc hq for just that kayla? >> hey, i am kayla tausche here's your news update at this hour the number of police officers killed in the line of duty has dropped to a four-year low, falling 10% from last year the 2017 report reverses three consecutive years of increased fatalities better safety gear and training could be behind the drop the value of u.s. homes grew at its fastest annual pace in four years, reaching nearly $32 trillion not surprisingly, los angeles, new york, and san francisco were the most valuable. worth more than a trillion dollars each he's no longer president, but barack obama is keeping one

title, america's most admired man. it's the tenth straight time obama has claimed the top spot in gallup's annual survey. the former president edged out current president donald trump, who came in second and humans aren't the only ones dealing with the cold the atlantic white shark in cape cod posted these pictures to twitter, showing two sharks whom the agency thinks died of cold shock. the predators of the ocean becoming the prey. that's our cnbc news update for this hour. let's get back to the team on "squawk alley. >> and it is cold, thank you, kayla. when we come back, should you prepay your property taxes before the new law takes effect? this is the burning question for at y nd the coasts whoueeto know when "squawk alley" returns lot of tech companies are reporting today. and, how's it looking? >>i don't know. there's so many opinions out there, it's hard to make sense of it all. well, victor, do you have something for him? >>check this out. td ameritrade aggregates thousands of earnings estimates into a single data point. that way you can keep your eyes on the big picture.

>>huh. feel better? >>much better. yeah, me too. wow, you really did a number on this thing. >>sorry about that. that's alright. i got a box of 'em. thousands of opinions. one estimate. the earnings tool from td ameritrade.

european markets closing a few minutes ago. mostly stocks in europe are in the red on another low volume day as we approach the end of the year, but the ftse 100 has managed to hit a new record intraday high thanks to the minors, which are continuing their strong december performance by riding the copper rally. copper on track for 16 straight positive sessions, and now trading at its highest level in four years looking at the month's biggest gainers, you'll see surging by as much as 14%, followed by angela american and bhp also

with double-digit gains. shares are higher by 40% year to date let's pivot the discussion to italian banks. we're seeing some sizable gains there. one firm says the bank is meeting ecb capital requirements for 2018 as you can see there, unicredit also posting gains let's talk about turkey, where it appears a months-long diplomatic conflict between the united states and turkey has come to an end for now the u.s. embassy in ankara announcing it has lifted all restrictions on visa restrictions after high level assurances on detained local embassy personnel. the lira did get a lift on this by as much as 1%, but despite today's gains, the turkish lira is down 7% against the dollar in 2017, making it one of the worst global currencies this year. morgan, back to you. >> thanks, seema

seema mody home owners across the nation rushing to pay their 2018 property taxes early to take advantage of a deduction that is being scaled back under the new tax law. eric chimey is in westchester county, my home county, new york eric >> that's right. i'm here in the town of greenberg, new york, one of the towns in westchester you can see these lines behind me hundreds of people have been here today, some waiting as long as two hours to prepay their property taxes before tomorrow and when we kind of put all the research together and what the irs said yesterday, it comes down to this if you've been assessed tax already and pay the tax now, you can write it off that's what the people here behind me are doing, because there are town taxes they already know about for next year, but there are westchester county taxes they do not know about for next year and it depends what your situation is we talked to one tax expert and here's what he had to say about that >> ultimately, the decision of whether one can prepay their

2018 property taxes is a local decision the locality must issue a tax warrant. some jurisdictions are doing this >> and so what's happened is westchester county has given them the bills, so they were allowed to prepay part of what they owe for next year it's not a full win, but a small win to get something paid right now. talking to people at the irs, they said they don't even know how the irs is going to treat the prepayments that you do that doesn't fall under the rules, so that's going to be something to watch for next year. people here behind me in line said they did not want to take a chance on mailing something in, that's why they paid today to get the receipt. back to you, david >> okay, thank you, eric >> that's a lot of lines from bitcoin and fake news to cyber hacks, 2017 was a big year for technology companies.

so many of the larger companies dominating the conversation. just given their size and growing power, whether they be amazon, alphabet, or facebook. what can we expect for 2018? joining us now, steven levy, editor and chief of "back channel. in some of your predictions for this year you say big tech companies will be taking responsibility >> right >> what does that actually mean? >> it's sort of a reckoning. these companies all started, you know, sometimes 20 years ago as scrappy start-ups that took advantage of internet scale and have grown to incredible lengths with hundreds and millions of customers and are dominant and it's been in their interest to still operate like that, not really assess their impact on other people, but we've seen last year there's a reckoning there. facebook was center stage, having to take responsibility, and having to come to responsibility and it's tough for these companies to do this >> initial statements from

zuckerberg sort of doubting very much they'd have any impact whatsoever on the election and the presence of any russian hackers on the network and then finally sort of developing -- >> he came around, he went through a literal journey, traveling across the country to get in touch with real people, you know, and hear their concerns not to run for office, but to better understand facebook, i believe. but it's difficult for these companies to do this, because they think it's in their interest to keep driving forward. you visit amazon in seattle, the name of their headquarters is day one. can you imagine that this is a company with, you know, dominates, they say -- >> day two, i don't know >> maybe day zero, right they are dominating, but saying, hey, we're starting here >> that's the basic philosophy >> it's tough to look backwards and say, gee, how can we now take responsibility for the tremendous impact we have of

people who use our services every day and facebook's case 25% of the time people spend on phones is facebook >> all right so many other topics to hit. ones that we mentioned a lot this year, the development of autonomous vehicles, for example, and the growth of artificial intelligence. what are your expectations in '18? are we going to be talking about them more? are there going to be significant developments made next year? >> there have been, and that's been consistent. it's fascinating, because for the last few years a lot of those developments have been under the radar, but now we're seeing this integrated in what we do. we're not having self-driving cars yet, but a lot of cars now coming out of the line in detroit and from overseas have these capabilities that you're on a highway, turn on the driver, just let it happen so we're already probably halfway to autonomous vehicles, and in so many other systems you call customer service, chances are you're talking to a bot, not a human being. >> the race for augmented

reality glasses starts now that's one of your predictions >> right >> are we going to see glasses that don't make you nauseous when you put them on because that's been my experience >> there's two kinds of fake reality, you know, these companies are working towards. one is virtual reality, which cuts off your senses totally that's where the vertigo comes in the augmented reality layers on a digital construct over what you'd normally see so if i were seeing that, oh, it's morgan, that's her name so chances are in the future when you have guests on here who might be forgetful, you can give them those glasses >> maybe we can give them to our anchors so we can remember everybody else's names, as well. >> instead of having these computers in front of you, you'll have something to give you the data you need. >> okay, full commercialization of a.r.? we've heard about it when does it actually start to really take effect >> i think what's going to happen is built in first in the

phone, when you hold up the phone you're going to get the layer, but the real war, and every one of these big companies we talked about, amazon, apple, alphabet, facebook, is working on their own version of augmented reality glasses. something that's very lightweight that you'll have 24/7, when you sleep maybe you don't need it in your sleep, but let's say, you know, 18/7, and, you know, where anything you do on a screen will be done from the glasses. and that's the big war probably over the next few years. >> so, i want to get into the frames business, really. i want to be a glassware maker >> warby parker of augmented reality. >> steven, thank you >> thank you happy new year >> to you, as well steven levy from back channel. when we come back, live in california as marijuana companies there prepare for legalization first, rick santelli, what you got working on today >> you know, david, i'm looking at the good data we've had today

outside of that trade deficit, which was going the wrong way. we're going to make some estimates for why the dollar index has been trading so soft all after the break. ♪ [vo] progress is an unstoppable force. the season of audi sales event is here. audi will cover your first month's lease payment on select models during the season of audi sales event.

i'm melissa lee today for scott walker today on the "halftime report," a money manager with a fund up 87%. you may be shocked to find out what lifted her so far above the

market plus, what may be not the call of the day, but the year this analyst made her call on january 27th wait until you see how dead-on she was. and a man with his finger on the pulse of hedge funds and how they are flooding into bitcoin and other cryptocurrencies all that and more on "halftime report" at the top of the hour see you then, mike >> all sounds good, melissa, see you in a bit let's get out to the cme group in chicago with rick santelli and the santelli exchange rick >> i'll tell you, it's been an interesting day. we had chicago pmi best since march of '11, very strong. but also had a trade deficit that was the biggest deficit since march of 2015. those seem a little bit at odds, and when you figure in the dollar index, now holding at 92 handle, settle at 102, so it's off substantially for 2017 at a time where our central bank is snugging up rates, reducing balance sheet, albeit very slowly, and i'm not sure

reducing is the word, just adding to it more slowly, but these are significant. if you look at the ecb's announcement of curtailing some of their buying as of 2018, although once again still doing an awful lot of it, get bit complicated. now, i want you to look at a 20-year chart of the dollar index. it had a nice little pop around 14, but other than that it really has been kind of a bit of a dog, so to speak if you look at the trade deficit, it has mostly been getting to be a bigger deficit what i find interesting is putting the two charts together. let's go to the white board. black is the dollar index, here's the scale of course the dollar index is going down, scaling is going down, here's 90. the trade deficit, going down, the trade deficit gets more negative, which is not exactly what we want but what i find fascinating is before the credit crisis it makes sense how it worked because as the trade deficit became smaller, the dollar is getting stronger

that makes sense you can buy more of all the products that are coming into the country with the stronger dollar of course the dollar gets weaker, the trade deficit should get bigger right around the credit crisis things got a little crazy. then something weird happened. the dollar index really skyrocketed right around june of 2014 what happened in june of 2014? i'll tell you what happened. first of all, a lot of this became skewed because of central banks. we can debate whether they overstayed their welcome and created distortions which is what i think as you see all the distance on the inverse relationship but june 2014 is when the ecb introduced negative rates. and that's when the dollar popped and the euro went down. that makes sense but really the relationship didn't get back on track the point of this quickly is we are getting back on track, and it certainly looks as though the trade balance getting bigger, the dollar index is getting

weaker i think for 2018 what that tells me is if you're a dollar index bull, boy, you might have a long wait, mike, back to you. >> rick, thanks. as we head to break, let's take a look at the major averages the dow could set a record if it hangs on to the modest gains it has right now. it set a new closing high for the first time in ten days, which this year qualifies as a long drought it's up 42 points. all three major averages in the green. "squawk alley" back after this it really scared him out of the markets. his advisor ran the numbers and showed that he wouldn't be able to retire until he was 68. the client realized, "i need to get back into the markets- i need to get back on track with my plan." the financial advisor was able to work with this client. he's now on track to retire when he's 65. having someone coach you through it is really the value of a financial advisor.

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when we come back, california is set to go green on january 1st. the golden stated will legalize marijuana. we're behind the scenes as cannabis companies prepare for the rollout when "squawk alley" returns.

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welcome back to "squawk alley. as california gets ready to legalize recreational marijuana, what's being called the toek of midnight come january 1st, cannabis companies are prepping for a big opportunity. aditi roy is in san jose with more. >> reporter: hi there, morgan. that's right, we are at buddy's cannabis here in silicon valley where they are ramping up. they have been selling medical marijuana since 2010 and now they are ramping up big-time to sell the recreational stuff once it becomes legal starting next week they have fully stocked up on all of their varieties here and all of their strains of cannabis they're also expanding their cultivation and hiring more people buddy's is the first business cannabis company in the state to become licensed to sell recreational cannabis once it becomes legal starting next week the owner used to be a corporate attorney in silicon valley and has taken multiple companies public

he tells us that buddy's makes annual revenue in the tens of millions of dollars and that he expects that revenue to spike about 30% once that prohibition period ends. >> we definitely see this as a huge opportunity for us because we're going to be the first entity that many of these folks will be visiting to experience recreational cannabis. so this is going to be our opportunity to lose. we are going to be ready for the crowds as i mentioned, we've got plenty of stock on hand we're not going to be running out of anything. >> most other cannabis companies are still facing a lot of bureaucratic hurdles the state only has issued about three dozen licenses so far and those companies still have to get municipal licenses you can see on the graphic there whal marijuana could be a huge market opportunity, about $6 billion by 2021 according to one research group, others aren't as bullish about it fitch ratings just came out with a study that said state and local taxes on recreational marijuana could ending up being

about 45% and that empower some believe the black market. >> all right, thank you. aditi roy in california. >> that's a lot of merchandise >> counting down to cannabis time that's all for "squawk alley." "the halftime report" starts now. welcome to "the halftime report." i'm melissa lee in for scott wapner the top trade, the final countdown. with 10.5 hours left to trade in 2017, the nasdaq is set to do what it's never done, finish where 11 of the 12 months in a year are positive. kathy wood is also here. back to the nasdaq here, it's up 29% this year. te