good morning, it's 8:00 a.m. at apple headquarters in cupertino, california. 11:00 a.m. here on wall street, and "squawk alley" is live ♪ ♪ good morning and welcome to "squawk alley. i'm david faber. with me, kelly evans and mike santoli. carl, john, and sara are all off

this morning of course, our last trading day of the year. speaking of 2017, it has been a blowout year for technology. the nasdaq gaining roughly 30% the index on pace for its sixth straight positive year in a row, the fifth time since 1980. bertha coombs is at the nasdaq and she has more for us. bertha >> david, as mark twain put it, history doesn't repeat, but it often rhymes, and that's certainly true with the nasdaq 100. the big caps up for the ninth straight year in a row, the longest annual streak for the index since the big tech breakout of the 1990s. these four mega caps, you know them, apple, microsoft, amazon, they've made the biggest impact in terms of the upside gains for the s&p 500, overall market, and when you add in alphabet, they actually account for two-thirds of the nasdaq 100's 15-point gain this year microsoft benefiting from its

shift to cloud technologies is up for the sixth straight year, that's its best straight winning streak since the launch of windows in the mid '90s, and on the downside this year, though, we've seen consumer names. they are not huge laggards really many took a hit due to hurricanes, o'reilly automotive one of them. it had ridden the nasdaq rally, down for the eighth time ulta beauty snapping that three-year bull run. but like a lot of retailers, both o'reilly and ulta expect to pay a tax rate this quarter of more than 37%, so as you start to look ahead to next year, under the new tax code, those retailers would see a 16-point drop, which could result in a boost for earnings per share, not taking into effect perhaps how they have to treat their debt or compensation, but in a recent earnings call, the ceo

said they would consider using some of that extra cash to expand internationally not sure how investors would like that, but nonetheless, david, certainly presents a lot of opportunities for some of these really highly taxed sectors like retail. >> yeah. certainly does bertha, thank you. bertha coombs at the nasdaq. for more on tech, let's bring in paul holland, as well as larry haggerty larry, i'll turn to you, since a rare visit here for the nyse for you. >> good to be here >> your fund had a good year, up 27%, correct >> yes >> i'm looking at your letter, though, and it's interesting to look at things you feel you didn't do as well as you might have what did not work, the most prominent fruits we did not enjoy were netflix and amazon. considering these firms as investments we made most of the mistakes, failed to understand the potential of amazon web services, also amazon acting as a marketplace.

does that change for next year, or how does it inform your thinking into next year? >> i think the big thing that's going to be different next year, david, is interest rates are going to go up we're talking about natural gas prices going up, commodity prices like copper going up. there's going to be inflation. retail sales were very strong in the fourth quarter we're going to have probably higher than expected gdp the fed is going to be raising rates. the consensus forecast is three times. that's going to mean interest rates go up. that should affect the valuations of the tech stocks at the highest end of the valuation stream, so if we look at where we are right now, amazon's about 40 times operating cash flow pretax, netflix is about ten times operating cash flow pretax these multiples are very vulnerable to higher interest rates. i started out in the 1972 period with the nifty 50 and we had k mart selling at 50 times earnings, then ten times earnings and it wasn't very pretty

>> so you're concerned at this point, your concern would continue about the multiples particularly versus cash flow for some of these credible growth stories >> you have the multiples, but then you have business issues. i think the business issues are more obvious at amazon first of all, the government has just given their competitors a raise, and they did that by lowering the tax rate. so if you're macy's, you're going to be operating -- and macy's is the fifth largest guy in e-commerce, besides the landline stores, you're going to be operating and have the ability to reduce your prices 15%, because amazon doesn't pay taxes. whether you do or don't, give it to your employees, the shareholders, but you do have the flexibility. so the internet commerce in the united states is going to get a lot more price competitive, and amazon in its value has the idea that at some point it's going to harvest the profits. it's going to be very difficult to do that this year second thing, you have to be worried about antitrust.

just picking up the paper this morning there was another bookseller that went out of business and they commented how can you compete against somebody that doesn't make any money, and amazon, the way i look at it, and i've been looking at retailing for more than two decades, they really don't make an economic profit in retailing. at some point, especially as the president is talking about, even as late as this morning, there's got to be issues amazon, you're going to have a very good fourth quarter, you have the dollar behind you, but there are storm clouds on the horizon and i don't think they are going to go away >> paul, do you see those same storm clouds. >> >> yeyeah, probably see it a little differently than larry from that perspective. 2017 the big part of the story is the fang stocks apple, google, alphabet nearing the highest market capitalizations in history

you have facebook, you have netflix that have just roared on when i look at those companies, amazon, the other players out there, what i'm seeing is this notion that really it's this idea that software is eating the world. each one of the industries that were not driven by software and technology, but now they are, so i'm a little less concerned about, and i'll be quite blunt, i don't care about macy's, i'm not worried about them at all. i'm worried about other software-driven companies competing against me across the board in my empire competing against me in media, competing against me in shipping across the board i think it's a completely different kind of dynamic. so i'd say 2017 was really guided by the fangs and the growth and the breakout into maturity of those large stocks if you look forward into 2018, i think we have an exciting story, but very different story >> paul, is it an investable story? are there potential disruptors

to these tech giants that you would invest in here >> absolutely. if i think of the three big drivers into 2018, you have a few things going on now. one, the explosive growth in a.i. and ml, on the public sides, a company like nvidia is up $100 billion in market cap, but they've got some very significant up and comers that are going to go after that empire as far as the underpinnings of a.i. and ml and the computing paradigms behind that if you look beyond that, look at cybersecurity, look at some of the intense growth we're seeing there. and also applying things like a.i. and ml towards that, companies like respond software that are working in that dimension. then finally, since we're on currencies earlier in your show, of course, you can't ignore the fact you're seeing the explosion of digital currencies. software disrupting the currency marketplaces with bitcoin and

all the things there i think in 2018 we're going to see an exciting year driven by fundamental advancement. >> sorry, larry, paul mentions the provider of chips to the gaming companies, nvidia, which had a great year this year and extraordinary year last year you benefited from take two interactive, a number of other holdings do you expect that trend to continue, as well, in '18? >> absolutely. i think the innovation in the game business is just mind boggling you look at the nintendo switch, it came out of nowhere it was in no one's forecast. it's going to do 14 million units probably you can't get one in new york retail and the software industry has come up with game after game that have had enormously high ratings. so the software people have driven the hardware, and the

innovation in the game business is unlike anything i've seen in my career, and i've watched the game business from when it started. >> what are you referring to when you talk about that >> well, you talk about an industry, david, that didn't exist 30 years ago and now it has $110 billion of market cap, not counting nvidia, which is another $100 billion so you've created $200 billion of value, and someone owns the value, we own all of these stocks in our fund someone owns the value and is capturing it so the question is, is it going to continue, and i look at the innovation first thing i do every year is go out to ces and 150,000 people there and then in los angeles another 75,000 people for e-3. so the brightest minds in the world are coming to california and nevada to continue the innovation now, is the innovation becoming efficacious? we look at revenue we want to see what's going on with the revenues of these

companies. and almost everybody in the game business, the revenues are accelerating the exception is take two, but that's going to accelerate plenty once "red dead redemption" is released. >> you're such a gamer i love this. anyway, mike, go ahead >> are they stealing eyeball hours in an important way from traditional media we have to worry about? and is it reflected in the media stock valuations yet >> i don't think it's reflected, because the market really pays for the revenues and the advertisers, as yet having followed the dollars, but you look at these businesses, and outside of live sports, mike, they are going down at very, very rapid rates and some of that's going to netflix, but a whole bunch of it is going to gaming and the hours on these devices is -- we'll get somebody talking about that at ces. >> amazon owns twitch, right has that enticed you to amazon >> problem with amazon, kelly, they hide stuff.

i can't see what they are doing. i thought a billion dollars was a high price for twitch, let me tell you, that caught our attention when that transaction crossed. >> eally >> yeah. >> paul, let's end with you. another name we've mentioned briefly was netflix. had another strong year, of course, that part of fang, though the smaller part, given all the other components of it concern you at all in terms of valuation and/or some of the themes you were discussing earlier with your overall approach sort of to technology >> not particularly, and partly because of what we talked about earlier. this notion of driving fundamental innovation you know, if you look at something like a netflix, the folks that have been market analysts that have constantly underestimated the growth there, look at amazon growth there, and what's happening is you're seeing a group of very dynamic managers really attack this marketplace, but also going after very slow-moving competitors in the media business and being able to, frankly, take them down. and i think when you start

thinking about the scale and size of media, then i think you're seeing something that's really extraordinary there's another concept, another topic now that i think is interesting that i noted for you guys, and i'm curious to get larry's take here if we have time, but for the first time we're seeing large companies, the global 2000, come to the silicon valley and try to set up their own start-ups, companies like mach 49 and others, because they are finally getting to a place where you walk into the boardroom and say are you threatened by amazon, air bnb, or uber? i think it's going to be interesting over the next few years to see what happens as they incubate these companies in the silicon valley to disrupt from the inside. it's going to be a phenomenal couple of years. >> larry, real quick, we're out of time, but if you want to add your thoughts. >> making content is hard. netflix just released a movie called "bright," it got a 28

rating on meta critic. that would correlate to $5 million opening at the box the expression my friend manny gerard would say on this movie, it didn't open >> but the audiences apparently love it, their own ratings are high >> if they would let me see, i would accept that. i have learned to believe what i can see. i like ten qs, i like cash flow. >> thank you so much appreciate your time and your insights to both paul and larry. happy new year >> happy new year. >> happy new year. still ahead, more reaction to the corporate tax bill. why netflix, speaking of which, is upping its pay and goldman is cutting its estimates. we'll have those stories first, bitcoin on an incredible run this year, up 114% or so will the rally hold into 2018? here's seema mody with your bitcoin playbook >> with cryptocurrencies capturing the attention of

investors from wall street to main street this year, here's what to watch for as they go more mainstream in 2018. first, for investors, that means more options to invest in the cryptocurrency ecosystem expect a boom in everything from exchanges to new trading platforms that will make it easier for the everyday investor to get exposure without actually owning the underlying coin second, expect bitcoin's rise to be challenged by alternative coins. bitcoin's rapid rise has given birth to other 1,300 digital currencies as bitcoin gets more expensive, traders look for competitors for opportunity. ripple and litecoin offer different functionality. third, get ready for more regulation the s.e.c. has a newly minted cyber unit tasked for finding bad actors using digital currencies for money laundering and funding terrorist activities that means more enforcement

actions in the coming year regulation could add more credibility to the space and perhaps pave the way for bitcoin exchange rated funds to be approved [vo] when it comes to investing, looking from a fresh perspective can make all the difference. it can provide what we call an unlock: a realization that often reveals a better path forward. at wells fargo, it's our expertise in finding this kind of insight that has lead us to become one of the largest investment and wealth management firms in the country. discover how we can help find your unlock.

welcome back apple making a rare apology today following customer outrage and lawsuits on news it slowed down older phones with aging batteries. the tech giant is cutting prices for battery replacements now and changing its software, which

will show you whether your phone battery is good. in a blog post apple saying, "we know some of you feel apple has let you down we apologize there's been a lot of misunderstanding about this issue. the move could end up costing apple $1.5 billion if all eligible customers use it. that's according to jean muenster, who joins us now welcome to you the $1.5 billion figure is if everybody does this $29 battery replacement? >> yeah, essentially, there's about 170 million phones that are going to be under this that are eligible, and the quick math is that it doesn't cost apple $30, it costs them about $10 to implement this, so the total cost is $40, $30 comes from the consumer, $10 comes from apple so the total exposure is about $1.5 billion and i want to stress the reality is, only about at most a quarter of people are going to take advantage of this, and so you can kind of get a number that's

closer to maybe $500 million to their exposure, but just to quickly put that into perspective, that's around what -- it's still a big -- if you think this is an apology or some sort of an ad campaign, that's similar to what mcdonald's spent on tv advertising last year in the u.s. so it's a costly mistake, albeit a rounding error for apple >> so a costlier one would be going forward, we were talking about this earlier, if people become comfortable with replacing their batteries instead of their phones, right >> yeah. that would be the bigger issue, we have seen over the past three years is the time between upgrades has been getting a little bit longer. it's gone from essentially two and a half to three years. we're going to see a contraction in that this year with the iphone x, but that is the bigger risk here, that had particularly painful impact on apple stock as people extended. i think the reality is this, most consumers don't even want

to mess around with this stuff and they are still going to upgrade every two and a half to three years. >> yeah, gene, i guess you could take a bright side view and say people are so proprietary and emotional about their phones, they hate any lagging performance. as long as apple doesn't seem to be doing anything nefarious to slow them down, they'd be okay with it. also we're putting such huge software loads on these devices all the time as you try to get more features, so that would seem to generate constant ongoing demand >> yeah, i think this will blow over, and we can go back and look at the history and suggest that, in fact, this is not going to be a problem. in the summer of 2010, antenna gate, apple remedied with a new case, and also in the spring of 2013 they had what we call china gate, which was some warranty issues they also had an issue, an apology at that point, both of

those are essentially trivia questions right now, no one even remembers it, and i think that slowdown gate will be a similar trivia question. >> no more gates, no more gates. >> i don't like them either. >> gene, this idea of people upgrading in the same cycle, you know, if you're on one of the installment plans and after two years you've paid the phone off or have a family with a number of phones, that can be significant savings. i mean, if the performance of the phone is not really being impacted and you can replace the battery at a very low price, why would you not think people would perhaps push for a longer period of time to have that phone if there's not that big of a deal to be gained from upgrading? >> the reason is that you have to essentially give up your phone for a day or afternoon, make an appointment to do that there's, obviously, some longer term benefits, but i'm betting the majority of people are lazy and they are not going to take advantage of that, essentially, opportunity to extend the life

of their phone there's also something about having a later phone this is the most important device that we own there's apps now that will track the number of times you check your phone and report now it's around a typical person 80 times a day. and if that's the case, i think that there is some benefit to having a faster processor, too, and maybe a better screen, things like that i think there are some other reasons to upgrade beyond just the battery. >> all right well, gene, thanks for joining us, putting some numbers around the hit apple could take here. >> thank you, kelly. >> that's gene muenster of like ventures apple is the third best performing stock on the dow this year, up nearly 50%, hoping to drive the dow's gains. josh lipton joins us from san francisco with more now. >> mike, apple ceo tim cook has plenty to smile about this year. apple is among the best performing tech stocks in the dow. investors are betting that the company's new phones are going to spark a big upgrade cycle in

2018 apple is expected to sell 241 million iphones next year, a jump of more than 10%. some analysts, though, have been skeptical. they say their checks indicate iphone x demand has been weak due to its price point still, more than 80% of financial analysts continue to rate apple a buy here. ibm is the worst performing tech stock in the dow, slipping about 7% ibm's ceo is transitioning the company to newer markets, such as cloud computing, butthe roa has been rocky with revenues declining for 22 straight quarters ibm counters it's making smart investments that are paying off and some tech investors do forecast a better 2018 >> if they do anything at all right in the next year or so, they should be a call option to the upside in the meantime, you pay a 4%

dividend yield, which is twice that of the s&p 500, and the dividend payments are solid. and so i think it is a good high dividend play value investors tech stock for 2018. >> still ibm is dealing with plenty of skeptics, including warren buffett, who told cnbc earlier this year he had been wrong in his initial judgment of ibm as an investment kelly, back to you >> and he's not afraid to say he's wrong, but still a big deal when he does josh, thank you very much, josh lipman when we come back, goldman expects a $5 billion hit because of the tax overall shares down 1% worst performer in the dow right now, coming off the lows, though what the bill could mean for other corporations as we head to break, here's a look how the dow performed during its first year under the most recent presidents obama with a 28% gain, actually edges out trump a bit. he's up 26%, though. there is the rest of today "squawk le wl bk tethisy"ilbeac

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corporations are figuring out how they'll be impacted by the new tax law. a new filing today revealing some changes at goldman sachs. wilfred frost with more. >> thanks to the new tax bill, $5 billion shares trading down as the repatriation tax expense aspect was slightly bigger than expected overall, though, shares are up for goldman sachs and the sector as the tax bill has progressed the net effect of the bill very much positive for banks. stepping back from the tax bill, goldman sachs share price return of 6% this year reflects poorly compared to rivals bank of america the top performer of the big six banks 2018 will be a crucial year, therefore, for goldman sachs many remain skeptical of the achievability of their recently announced $5 billion of revenue

growth initiatives they need to start to deliver on that, while investors will also be hoping a line is drawn under their recent trading woes. aside from that, some analysts frame goldman sachs as the best way to frame deregulation hopes, both because it's cheaply valid and a pure investment bank, especially if the volcker rule is relaxed as part of any deregulation to come mike, back to you. >> certainly would be big for goldman sachs. thank you very much. time for a cnbc news update with morgan brennan. >> i'm morgan brennan. here's your cnbc news update at this hour. president trump says special counsel robert mueller's investigation into russian election meddling makes the u.s. look, quote, very bad. in an interview with "the new york times," he believes mueller will treat him fairly. that stands in contrast with others in the gop, who try to cast doubt on the investigation. he says the sooner the investigation is finished, the better for the u.s protesters in the middle east voicing anger against the

u.s. demonstrating jerusalem as the capital of israel. president trump broke a decade of u.s. policy this month when he recognized jerusalem as israel's capital, generating outrage from palestinians and the arab world and concern among washington's western allies. here at home police are promising heightened security in new york's times square, along with metal detectors, snipers, bag checkers, dogs trained to sniff out explosives will be on hand as revelers prepare to ring in the new year. new york has seen several attacks this year, including a man detonating a bomb in the subway system a block from times square earlier this month. and just in time for the freezing weather, a newborn polar bear at the berlin zoo in germany opened her eyes for the first time the mother and her cub are currently out of sight of zoo guests, but as you can see, a camera caught the bear in action the polar bear cub doesn't yet

have a name. my suggestion, vortex. and that's our cnbc news update for this hour. let's send it over to seema mody with the european close. >> fitting, morgan wrapping up their best year since 2013 and recovering from 2016 when the broader markets were negative for the first time in five years. let's break it down. italy topping major markets up more than 13%, rebounding from last year's 10% decline. the german dax posting a sixth consecutive year of gains, up 12%. france up 9% that election of emmanuel macron as president helping lift french stocks to a nine-year high let's talk about spain the spanish ibex up 7%, despite the politics surrounding catalonia's push for independence the ftse finishing the year at a record high. the european stock 600 index up 8% for the year, but underperforming the s&p 500 by a wide margin, i might point out

a big reason why is the strength in currencies. the euro up 14% against the dollar this year and hitting 120 for the first time since september. the uk pound with a 9% increase. both european currencies impacting the performance of exporters. we also saw movement in the bond market the german ten-year bund yield doubling this year above 0.4 of a percent. a story to continue watching in 2018 speaking of 2018, here's what you need to watch, can europe continue its growth? and if so, will the european central bank decide to end its massive quantitative easing program? economists expect some tightening in the new year ongoing brexit conflicts will take center stage. lastly, the countdown to europe's next election has already begun. italy goes to the polls on march 4th with its first general

election in five years, and the focus will be on the five-star movement, a far-right populist party, which has been gaining traction mike, back to you. >> seema, thank you very much. when we come back, apple issuing a rare apology to customers in response to battery gate will tech have trust issues in the new year we'll discuss that when "squawk alley" returns

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apple says it does not intentionally degrade the user experience and it's cut the price for replacing batteries in out of warranty iphones to $29 from what had been $79 the news brings about a larger discussion about, well, trusting big technology joining us to discuss, john broad, cofounder of confide. and the chief operating officer of new york city thanks for coming here you're a man that's come prepared this is a cold weather thing with batteries >> even if you have 100% charge on your phone and out in the cold, you must carry some kind of charger to keep the battery warm, so i carry this, but i also carry this insane thing this is for normal people, this is for crazy people. >> does apple have an issue here that extends longer than a day or two of headlines? >> i think a couple of days, but by having this happen and not getting in front of it as it should have, it allows everyone

who's ever said there's built-in obsolescence to say, look, i told you so. and those of us who worry about battery life, here's a problem i'm glad they are in front of it now, because it's the ultimate friday news dump, last friday of the year i think people will be okay and excited about what happens in 2018 >> john? >> i think they have a really bad sound bite now, and that's going to go on for a very long time, namely they slow down old phones to get you to buy new phones when you drill down on it, in fact, that's not the case and i think they have a failure here not of policy, but a failure of messaging. i think it's perfectly reasonable to slow down an old phone in order to mitigate shutdowns, but you need to do it in a way that's got clear messaging, clear transparency, potentially even customer choice >> when you talk about transparency, though, does technology have more of an issue as we head into next year and sort of a broader front of transparency, whether it be facebook and telling us who the

advertiser is, for example, or any number of other things that we've encountered over this year >> i think we've run into a tough year for technology. if you look at what facebook and everything that happened there, but also with uber and all the complaints that people have in our house, we're not allowed to use uber, we use lyft because of some of the issues >> what issues would those be as to why you're not using uber >> i was going to say it's about to change. now with the new investment, new ceo, i think there's a clear cut and people are excited about that but in our case we felt that the kind of issues around women and women's corporate policy, sexual harassment, all of that. >> that changed the behavior >> in our house, yeah. >> they had a horrific year with respect to corporate governance. if you think about it, massive data leak of about 57 million accounts, they've got an investor suing the former ceo. they had a scathing report on sexual misconduct in the workplace, alleged corporate espionage. it's hard to imagine a worse

year >> none of which stopped softbank from spending $9 billion to invest, valuation of about $48 billion. >> instead of $70. yeah >> that's a significant sum of money for a company which continues to hemorrhage losses >> that's technology in 2017 and '18. >> i think it's a good investment softbank got 15% of uber at a 30% discount, two board seats, and it also complements their existing portfolio of ride-share investments. they have dd in china, olah in india, grab taxi in southeast asia, so i think this makes sense from their perspective and from uber's side, it cleans up the corporate governance, gives them $1.25 billion when they are planning to potentially ipo in 2019. >> there was new money coming in at the full market valuation, which we should point out, as

well >> on the one hand uber where from a consumer perspective there's not really much to complain about the product, it's more about how the company has been run for the most part on the other side, apple or facebook when talking about exactly what the algorithm does, it's the core of the product people have suspicions about at this point, and it's the exact power of the business models and how centralized and effortless they are, they make money, that causes the suspicion i wonder for a facebook, for an alphabet, for an apple, how much this remains an ongoing suspicion of its product itself. >> also on facebook we are the product. so there is a suspicion that's built in and companies like facebook and others need to go out of their way, overcommunicate, explain what happened, and i think facebook has done a good job to start that process, but every chance they get they should explain why you're seeing these ads, what's happening with the fake stuff you see, and also twitter. you know, slamming all the bots as much as possible and the pain

that you can feel sometimes if you're on twitter and people attacking you. that needs to be at least lessened as much as possible >> i think you make a good distinction, an important one. and i think looking ahead at 2018 it's going to be more difficult. a.i., for example, is that amazon echo listening to me, is it tracking me, so the more crystal clear and transparent people can be, particularly about the product, i think, the better >> we spent a decent amount of time in the last weeks talking about the overall market power of these enormous businesses, amazon, google, or alphabet, facebook, and even perhaps uber when you think about it and some of the others that dominate to a certain extent does it become a regulatory issue here as it has become more so in europe for them? is it something we're going to be talking about a great deal next year, given how they've dominated headlines in certain areas in a negative way? >> i think so. i think you're going to see more attention being paid to all of

this by congress, not to the extent where it's in europe the understanding of privacy is very different from here in america and i think that's why they will always be ahead in scrutiny in europe compared to america and it will depend on all the other priorities that legislators have, but especially as we get closer to the election, the '18 election and '20 election >> do you agree? >> totally agree as these top companies that all happen to be tech companies continue to gain more market share, more market power, more market value, i think this is going to be an increasing discussion i hope we don't get to regulation i think there's room for snapchat to come in at a $20 billion or so valuation, and so i'm hoping innovation ends up trumping regulation. >> you don't think they can be snuffed out? that would be the question can you simply snuff out potential competitors early in their gestation as a result of your own market ower, you don' think so snap are able to compete

effectively with the likes of facebook >> yes that's my hope and expectation >> that's my hope, but we have to not forget net neutrality and what that's going to do to small companies trying to do things. among a lot of us we're not at all happy with what happened in the closing weeks of the year. >> yeah, that's another good point. guys, we have to leave it there. we'll bring you back and talk about what's going to happen next year when it's happening, as well. thank you. well, the tax law already changing how companies calculate earnings and how they pay executives aditi roy is in san francisco with a new disclosure from netflix. aditi? >> hi, mike. the new tax plan is resulting in higher salaries for some executives, who were earning large bonuses because of the high taxes imposed on salaries of $1 million or more. the company wrote in an s.e.c. filing that with the recent passage of tax reform, the performance bonus plan will no longer eliminate such surcharges as such the compensation committee of the board of directors determined all cash

compensations for 2018 will be paid as salary among those getting big raises, chief content officer ted sarandos, who will earn $12 million in salary, along with $14 million in annual stock options, a big jump from the $1 million he earned in 2017. ceo reed hastings will earn $700,000 in salary and $28 million in stock options, a 33% increase from last year. chief product officer greg peters will earn $6 million in salary and $6.5 million in stock options. he recently got a job promotion. and general counsel david hyman will earn $2.5 million with stock options of nearly $3.3 million. one analyst tells me now that the penalty is gone, boards can be more transparent about what is truly base comp and what is bonus based on great performance and expects other companies to do the same thing for the same reason by the way, netflix shares are

pretty flat, down less than half a percent. back to you. >> aditi, thank you. as the dow tries to fight back into positive territory this morning, dow is down 15, s&p down a couple points. coming up, why low-wage workers will have something to celebrate on new year's day. first, rick santelli, what are you watching today >> of course, i'm watching how rates are going to go out for 2017 that ten year is not quite up to unchanged. and we're going to talk about the big number, and the big number is 105. what does it mean? tell you after the break (nadia white) the moment a fish is pulled out from the water, it's a race against time. and keeping it in the right conditions is the best way to get that fish to your plate safely. (dane chauvel) sometimes the product arrives, and the cold chain has been interrupted, and we need to be able to identify where in the cold chain that occurred. (tom villa) we took our world class network,

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i'm melissa lee in for scott walker today on "halftime report," the race to a trillion dollars one wall street firm is putting its money on a company not on anybody's list plus, just a few months ago dick bove said it was time for lloyd blankfein to leave goldman sachs. and the commodity about to move big time based on activity and the options market "halftime report" starts at the top of the hour. see you then, mike >> all right, see you then, melissa, thank you very much let's send it out to the cme group in chicago, rick santelli there with the santelli exchange hi again, rick >> hi and thank you, mike. you know, 105, that's a big number today, and i think it's really an important big number it gives us a glimpse into so many different areas of the marketplace. how did i get 105? first of all, it's a percent

105% it marks the performance of ten-year bund yields they settle at 21 at the end of '16, they are currently trading at 43, which means they are up 22 basis points on the year. up 105%.105% it probably goes a long way into why i've said for many years whether it's the vix or interest rates. it's dangerous to use percentages. they often paint the picture that's not very accurate i think that's why politicians love to use percentages in statistics think reform on tax policy in particular the flat yield curve you know, i think it's probably one of the biggest items of 2017 along with the steep performance and a positive version, of course, with regard to equity markets, and it's not just in the u.s. it's global. not the flat curve part. that's fairly unique to the united states. i think that the federal reserve, like myself and many traders, are not convinced that

the yield curve means anything near what it used to because we're looking at a long end that's highly manipulated, highly managed pick your word so, what it really boils down to is how will the fed manage global rates that are already overly managed the connotation, the very negative connotation associated historically with a flat or inverting yield curve is one of the pillars of many that have studied and traded in fixed income markets, especially the sovereign markets, and i don't think you're going to break that type of conditioning so reality reality and perception become very blurred here, and i think that the fed is always concerned about its fingerprints being on policies that don't turn out well i think that's why they always overstate the stimulus side of the equation and are always nervous about removing it. they just don't want their

fingerprints on things when it doesn't go right, and in this instance that's one of the reasons why the yield curve makes the fed so nervous do they admit it a little bit and behind closed doors it's a big issue should they tighten and be part of the catalyst in inverting or making the curve more flat i don't think that those fingerprints are going to leave a future history that they will be proud of. and when you think about how all the other central banks have managed their long rates and it's one of the key reasons why growth isn't going to make our curve a whole lot flatter, the fed is going to have their hands full too much of a good thing to save us from the worth of credit crisis has turned out to be annabel tros in my opinion for the fed in 2018. mike, back to you. >> all right, rick thank you very much. a lot of good stuff there. as we head to a break, a look at some of the top grossing apps on itunes over the past year. "squawk alley" will be right back you always pay

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it's the talk of the morning. let's check on crypto currencies today so -- ripple is not even up there, guys, but there's several different ways to lock at bitcoin which are up a little bit. there's lightcoin. you know, these are all alt coins as we learned from seema earlier. there's ether up 4%. there's more "squawk alley" right after this four unlimited lines for only forty bucks each.

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we're still learning how the new tax code will impact the economy and it turns out workers earning minimum wage will benefit. kate rogers has more kate >> reporter: hi, kelly those workers across the country will be ringing in the new year with higher pay thanks to laws

or ballot initiatives. the states are raising their minimum wages or january 31th or december 31th. the highest amount in washington state at 11.50 and in maine the workers will get the highest percentage increase to $10 an hour, and there's 20 localities hiking pay in money van view and sunnyvale, california, workers will be paid $13 and hour while in seattle pay will hit $15.45 for minimum wage workers the federal minimum wage is still stagnant at 7.25 an hour that, of course, hasn't moved since 2009 and with president trump in office and republican control of congress there's little chance of changing that any time soon which is why we see states and localities taking matters into their own hands currently these 29 states you just saw in washington, d.c. have wages above the federal four and corporate america has taken matters into their own hand to raise wages for workers

as well. a flurry of companies announced increases to the minimum wage including wells fargo, bb&t and so many with the new tax law back over to you. >> thank you very much that does it for us here on "squawk alley" in 2017 a happy new year to everybody out there. enjoy the holiday. "the halftime report" starts now. welcome to "the halftime report." i'm melissa lee in for scott wapner with four hours left to trade in all of 2017, we're talking about who will become the first -- the world's first trillion dollar company, and the surprising name being mentioned today by m k m partners with us for the hour, jim lebenthal, jon najarian and kevin o'leary. also with us from minneapolis is pete najarian. mkm saying china's alibaba will be the first to $1 trillion beating out apple, microsoft, amazon and facebook. jon, do you buy that >> no, i