good morning it is 8:00 a.m. at apple headquarters in cupertino, california 11 a.m. here on wall street, and "squawk alley" is live ♪ ♪ ♪ ♪ good morning, welcome to "squawk alley. with me here at post 9, kelly evans, mike santoli.

closing alley, you could call it >> i'm thinking about the lyrics in the song, g-4 pilots on a first-name basis did you catch any of that? >> i did, don't ask me to explain it joining us this morning, raul sudd, ceo and founder of unicorn and ed lee, managing editor of recode welcome to both of you on this first trading day of the year, we asked you both to come with your 2018 tech predictions, from deals, ipos, and, yes, bitcoin and cryptocurrencies let's start with you you have some predictions in media. >> media, tech and media that's my favorite topic, because i feel like tech has been sort of dipping their toes in the media water for years media, by the way, they see this threat coming for a long time and they are acting much more quickly and decisively, more dramatically with the tie-ups. you have at&t and time warner, disney and fox >> what's coming next? >> here's the thing, i think the next big step is for amazon in

particular and possibly facebook and apple to take a deeper look at, you know what, maybe we need something. could be a studio, something like a lion's gate, heart of sony pictures or paramount, i think that would be a bold, smart move if they went for it the longer they take, the more time the traditional companies have to shore themselves up. that's the opportunity that should be exploited going forward. >> four years ago i said netflix should buy lion's gate it was a content factory before it was sort of all in the -- >> it was. there at the point now, 50 million u.s. subs, that's their real value, more than owning the content. content certainly helps and that's part of the game plan, but the value if anyone wants netflix now, it's the 50 million subs, which double, you know, the biggest cable provider out there right now. >> raul, you have a bold bitcoin bet. you think the cryptocurrency is going to just about double in 2018 >> yeah, for sure. i think bitcoin will minimum hit

$25,000. i think etherean will go to 1,500 as the platform usage increases. i'm a believer the fastest growing companies will be companies on blockchain, fastest growing in history and they'll grow throughout 2018 it's going to be a ridiculous year for crypto. >> explain that, fin tech companies on blockchain will be the fastest growing companies. what do you mean by that what's that going to look like >> think of it like exchanges, where people go and can buy and exchange cryptocurrency for other currencies i think those aregoing to be the fastest growing companies ever >> so you consider a bitcoin or cryptocurrency trading platform to be fin tech >> i do. yes. don't you? >> i don't know what to call it, honestly, but when i think fin tech, a lot of times people are talking about mobile payments, possible disruption to the banking sector

they are talking about an industry that, frankly, has kind of matured right now and is consolidating, thrown up some of the biggest companies on the planet for you, are you just narrowly focused on things like crypto trading platforms, or how do you feel about the rest of it? >> no, not at all. i think to your point, you mentioned a disruption to banks. this is exactly what i'm talking about. i'm talking about, you know, starting out as a trading platform and turning into a system for regular people to be able to bank you know, they are a cryptocurrency in the easiest way possible there's so many problems to be solved in this space things like wallets and how do i transfer from one currency to another, how do i make payments, mobile payments, all of that stuff can happen via digital currencies and 2018 is the year for that you're going to see all kinds of growth in the space. you're going to see maybe some companies leading up to ipo at some point in time in the space. it is a space that is growing in

leaps and bounds and growing globally, and it doesn't stop. it never sleeps. it's 24/7. >> i mean, i think just to build on kelly's question there, who else is losing value if you have mass adoption and if the actual prices of these cryptocurrencies are to be supported by real economic activity down the road? are we short all the legacy enterprise tech companies? are we short all the banks is there genuine value extracted from the rest of the economy >> yeah, i definitely believe that we should be short banks. banks have a lot of real estate, and, you know, the traditional banking system, i think, is going to change. i think the first bank to embrace the space and really get into it, you know, embrace blockchain technology, embrace cryp cryptocurrencies, find ways to make it easier for consumers to bank in the space, those banks will do very well. i think everybody else, you know, i personally think banking is dead.

look, i make these predictions, you know, sometimes people think i'm crazy, but i've been doing this for a while now and see this happening and so i really believe that traditional banking is in trouble. >> traditional banking who knows what traditional banking is anymore is that what i'm doing on my phone or what i used to do in the bank branch? let's switch topics to apple's battery gate saga. the tech giant says $2 replacement batteries for older iphones are available, although supplies may be limited, and they are not going to make you submit to a battery test to show that your battery is operating at under 80% efficiency either they are going to go ahead and replace those batteries for you no matter what ed, how big a stumble was this for apple? this is one of the few where i feel like they really stepped in it this time i saw some of the people on my facebook feed having trust issues with apple, but then

again apple is also positioned better than any company to handle this in store in their retail stores. >> you're absolutely right this was a rare admission quickly from apple, we messed this up and we're going to fix it, do our best to fix it. because there are so high of expectations for apple, any little thing, oh, we don't trust apple anymore, but they keep upgrading and buying the iphones. you still need to upgrade the phone. even if you replace the battery, they keep updating the o.s., so your hardware won't be able to handle it, so you have to buy into an idea you live in an apple world and are subscribing to their service from here on out. that's the end game here and how they are really winning. if as a consumer you don't like that idea, you should switch platforms, because you're stuck in it forever, you'll always have to upgrade. >> raul, you're an upgrade guy,

where do you see apple sitting kind of in the phone competition? how big a deal is this battery issue? samsung had a much bigger battery issue a year ago >> i agree apple is becoming a nicer company. this is not something they'd have done under steve jobs they are admitting a mistake and fixing it and going above and beyond to fix it i'm not an apple guy, i don't use an apple phone i'm an android person, but i would say apple is generally becoming more friendly, making acquisitions in all sorts of spaces, things like that, and this move to me makes them into a nicer tim cook company >> raul -- go ahead. >> there's a french consumer group that's looking to sue apple or is suing apple for this exact thing. >> among many groups >> exactly right they could be reacting to that >> yeah, trying to get ahead of that, for sure

raul, i was going to ask whether you like the prospect. i think citi raised it this morning, of apple buying netflix. >> yeah, look, i think it's entirely possible. i think apple recently did an acquisition for an ar/vr company that was sort of under the radar. i think that they want sort of first-party content. they want that distribution platform i think netflix would be a great acquisition for them you know what, people were speculating apple would buy tesla some time ago. i wouldn't be surprised if they don't start putting cash to use and making mass i haive acquisis >> wouldn't that be buying the cow if you can get the milk for free wouldn't you have to pull in everything else? >> as i said earlier, netflix's big value is the 50 million u.s. subscribers. apple has more than doubled that people using iphones on apple i.d.s, so they could buy into studio, develop content that feeds into that existing

platform base as opposed to buying another one yes, there's plenty of cash to bring back i think tesla is a better bet, that makes more sense for the dna of the company >> really? >> they are ultimately still a hardware company they make products, they are a retail company in that way something like a tesla fits better into it. the services business, though, is the faster growing business any kind of media content, production, that pieces into that would make sense, as well >> raul, i don't know what you did for new year's eve, but evan spiegel is making headlines, reportedly holding a lavish party at l.a. live in downtown los angeles on sunday for the whole company. the highlight of the night, a surprise performance by drake that spiegel is said to have paid for himself total cost of the party, $4 million. i don't know if this is going to improve morale at the company, raul i'm hearing all kinds of things. spent some time in l.a. in kind of snap territory where it seems

like a few people who work for the company, not so happy about the way things are going what's your take on this spending on a new year's party it's not so out of character the likes of facebook and twitter have done this sort of thing before >> look, you know, all tech companies do this stuff, try to keep it on the down low. i've been to parties that microsoft threw that were pretty big. they had macklemore come and things like that these things happen all the time i think $4 million is a drop in the bucket for snap. i don't know about the morale issue or what's going on over there, but i think people are making a big deal because it's evan, it's snap, and it's in l.a. they are turning it into something that it's no big deal. >> but -- make a slightly different point about this, too, tech is the new wall street. it's over, this is the exact kind of headline ten years ago in 2005, 2006, steve schwartzman or somebody has this --

>> 30 years ago. >> exactly are we hearing any of that after new year's this time around? no, it's drake, snap, and apparently microsoft and macklemore >> go ahead. >> i was just going to say, you know, reminds me of a number of years ago when hp acquired my company. i just commented the other day, but evps were flying around in g5 jets and doing that while running the company in the ground i think $4 million on a party is no big deal. >> $4 million on a party for a company that doesn't make money is the other thing you have to consider relative to what we're seeing in the tech space, it's the new wall street, yes, it's somewhat modest, but again, i think snap needs to figure out its business in terms of how -- >> stock was at 30, maybe 15 >> you could sell some stock evan made out nice on the ipo. >> that's why he paid for drake. >> that's probably a nice idea

>> saved him money he paid for drake. >> yes >> there you go. >> i think you're right, though. if there's an issue with them feeling like, you know, okay, we're not in the headlines every day like we used to be, not the cool new kid on the block anymore, can stuff like this make a difference? i don't know i don't know if it's worth the money. >> well, we'll see if their stock can rise in 2018 neither one of you had predictions about them >> i think snap is a good bet for 2018 in terms of as an issue, absolutely, as a stock, i think, you know, there's only more room for them to grow in terms of the ad business. there's a good chance for them to get it. >> we'll remember you said that. >> raul, ed. >> hold me to it >> happy new year. >> thank you still ahead, tech in 2018. will the run continue as we look at the strong nasdaq open this morning? we have predictions for which companies would be leading the way. and a race for a trillion dollar valuation, the top contenders this year. plus, california's budding market we're live in the golden state, where recreational pot is now

nggal and businesses are cashi in "squawk alley" back after this i love taking care of my mom. it wasn't easy at first. she learned how to better communicate her needs. and you learned how to not ignore yours. i discovered how to make healthier meals. and i discovered how much i enjoyed them. narrator: becoming a caregiver is a learning experience for everyone. find articles, tips and tools from experts and others who have been in your place. the caregiving resource center at aarp.org/caregiving. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.

welcome back amazon reporting more than 5 billion items were shipped via prime in 2017. for more, we are joined by oppenheimer's managing director of specialty retail, along with a equity retail analyst. welcome to you both.

the numbers for prime is huge. how much more can they keep going? there was a question last year whether prime membership is already plateauing >> beauty is, a million of boxes today, guarantee another 2 million going forward. prime is showing an ability of the amount of market share, mind share, and how this company is launching themselves into our lives is not stopping. we have the number today, last week we found out how important the alexa devices were >> they say 5 billion as an analyst, can you put that into some model is there any ways to quantify what that means? >> so we played with it last week, you could get to different iterations, they said the dot was the number one selling device and you know the dot was $29.99 so you can scale up. the numbers, 600 million, is still too low in the context of what amazon has to do, but at the end of the day, what's more important than the individual

sale, there's this fly wheel once you become a prime member, they've got you. that's why the boxes keep growing. the prime members are important, but in as far as how many units they continue to get you to drive. >> this is being absorbed and, i guess, somehow responded to by physical retail, traditional retailers. we had this sort of panic in the middle of the year, as you know, in terms of stocks where are we at now? is the pie big enough at this point in terms of consumer spend that there's some stability there? and are we anywhere near some kind of balance in terms of how the industry is responding >> yeah, no, for sure. amazon taking share away from traditional department stores and retail models is not a new narrative by any means amazon already is the number one apparel retailer in the u.s. and globally, but we continue to think that it's more about replenishment, commodity type of items that fit best on amazon.

and there are a number of categories that are, in fact, in our view amazon proof. whether it's some of the luxury items, aspirational luxury, athletic companies also, of course, are focusing more on their own distribution, so we think with a group, as you mentioned, it's been brutally hated for some time now. we've seen a huge recovery in the past couple of months. of course, the tax reform is one big driving factor, but we are also starting to see demand in replenishment, specifically clothing and accessory categories improving, as well. and that's really something we're seeing for the first time in years >> simeon, are we sleeping on walmart, though? turns out walmart had a great 2017 they've been making a number of moves, buying some tech-savvy companies, gaining some tech-savvy executives. is there a way for them to outplay amazon in this space >> so there's still enough room for both

one thing i was going to point out from what ana was saying and to that point, it's interesting if you look back ten years ago, 2006, 2007, barnes and borders at the same time you watch amazon's media trajectory, there was a period they were below all three, then eclipsed borders and then barnes if you look at amazon's media sales right now, that eclipses each of those at their peak combined meaning amazon grows the share also so this notion of e-commerce, listen, anecdotally, which is what you're never supposed to do, but i'm buying more units and buying them because they are convenient and easy. if you can convince someone to buy more, and if the price goes down, that's a separate conversation, but you can convince a shopper to buy, they will buy people feel good enough to spend if you tell them why i think both of those can work >> interesting thing about the point john is making, too, walmart's strategy has been different in now they are buying up companies and experimenting with personal shopping services in manhattan

do you think the luxury buyer is going to embrace walmart ownership? do they care is this a strategy that makes sense for walmart? >> overall, and we don't cover walmart, but overall the way to win is, obviously, that personalized approach that walmart is trying to do, that every retailer really under the sun is embarking upon. no doubt traditional brick and mortar is changing, will need to change i think the status a quarter of all malls in the united states will disappear in the next five years, but we are seeing retailers adapt to this revolving environment, and, again, personalization is the number one topic >> by the way, there's no stigma to shopping on amazon. what's walmart going to have to overcome, that box with a smiley face is universal, everyone likes it >> as opposed to the yellow smiley face. >> no comment. >> the original. >> guys, thank you very much

simeon seagal, anna andreeva this morning >> thank you so much when we come back, if your new year's resolution is to get fit, we have a look at the hottest workout trends as we head to break, check out shares of disney this morning up 3% right now on news "the last jedi" was the top grossing film of 2017, topped a billion dollars worldwide at the box office "squawk alley" right back.

welcome back hoping to get in shape in the new year well, we have a look at the companies that are hoping to get your business. dana olick has that story. morning, d.a. thaana. >> seems there's a new fad every minute, cryo therapy, electronic muscle stimulation, flying aerial yoga, but for 2018 what's old is new again cross training is leading in growth, up 14% followed by high intensity interval training up 10% and would you believe good old

stair climbing up 9% this is according to the sports and fitness industry association, which surveys core fitness enthusiasts annually this, of course, favors big gyms like crunch fitness, any time fitness, planet fitness. they have not only all the equipment and training materials, but they have class space, as well now, that helps because there is also a big growth in cycling, up 4% but interesting to note, that group cycling, which is your soul cycles and fly wheels, seeing less growth only up 2%, and that could be why fly wheel launched a home cycle to compete for the home fitness enthusiast one big surprise in the survey for this year, boot camp style workouts actually down 6%. this as barry's boot camp embarked on a big expansion in 2017 with more openings expected this year. orange theory could also be considered boot camp style and it's expanding aggressively, as

well the fad could get even bigger this year. >> boutique is growing, and what we see is the millennial customer in particular just wants to see different kinds of options, so they may join one or two different kinds. helpful to the boutique is the economy being stronger and the ability for people to pay. >> and just one more note, the biggest thing in strength training, good old body weight, up 20% with accessories like the trx contraption seeing huge growth, that's because that's what people want to see, is the sculpting. remember, skinny is the new strong again, it's the old stuff. it's the rowing machines, the stair climbers, and, obviously, treadmills are back, as well back to you guys >> i thought strong was the new skinny i can't keep track whatever body weight works for it all >> what did i say? body weight. push-ups, pull-ups, maximum.

>> all right we'll give you 20 in the commercial break let's get a quick market flash from dom chu >> i'm not skinny or strong, but 'tis the season for new year's resolution, especially weight loss weight watchers is being helped along by buzz surrounding its newest brand ambassador, dj khaled. he's going to share his journey on social media. weight watchers quadrupled in value over the course of the past 12 months mindi grossman took over as ceo this past summer and, of course, oprah winfrey has the near 10% stake in the company back over to you >> i thought it would be bigger. he's such a huge social media presence, up 6%. maybe they wonder if he can lose the weight >> maybe they are tempering expectations who knows? it's only day one. >> but oprah had a big day one the ads are everywhere

>> oprah is not d.j. clakhaled >> no, she's not when we come back, hollywood's hollywood's a-listers taking on harassment more on this initiative when "squawk alley" returns (daniel jacob) for every hour that you're idling in your car, you're sending about half a gallon of gasoline up in the air. that amounts to about 10 pounds of carbon dioxide every week. (malo hutson) growth is good, but when it starts impacting our quality of air and quality of life, that's a problem. so forward-thinking cities like sacramento are investing in streets that are smarter and greener. the solution was right under our feet. asphalt. or to be more precise, intelligent asphalt. by embedding sensors into the pavement, as well as installing cameras on traffic lights, we will be able to analyze the flow of traffic. then that data runs across our network, and we use it to optimize the timing of lights,

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woman: so, greg, it's a lot to take in. woman 2: and i know that's hard to hear, but the doctors caught it early. hi, blake! my dad has cancer. woman: and i know how hard that is to hear. but you're in the right place. man: and dr. pascal and her team, they know what to do. they know what to do. the doctors know what to do. so here's the plan. first off, we're going to give you all... (voice fading away) good morning once again, everyone, i'm sue herera here's your cnbc news update at this hour. reports say protesters in iran

attacked police stations as security forces struggle to contain the challenge to that country's clerical leadership. demonstrations continue for a sixth day, leaving at least 20 people dead. the stars and encore channels have gone dark on some cable systems in the new york area last-minute talks over carriage fees fell apart. altice serves about 5 million subscribers in the new york area and midwest. russia wants in on the cryptocurrency craze officials there are exploring ways to create a crypto ruble to help it get around western sanctions. an economic adviser to president putin said it would be the same as the ruble and could be used for russian payments its circulation would be restricted and the kremlin could track it check this out a texas police officer narrowly avoids being hit by a passenger car on an icy road he slipped on the ice, but you can see the other car slid towards him out of control

the officer pulls his hand out of the way of the tires in the nick of time yikes. all righty that's the news update this hour i'm going to send it back downtown to you, dom, to mike, who's going to toss it to dom. >> yes, i will thank you, sue let's get up to dom chu back at hq with the european close >> i now have the baton, mike. european markets wrapping up the first trading day of 2018, posting their best yearly performance since 2013 strength in basic resources offsetting the recent autos hurt by weaker new car sales in france today in european currencies they are weighing in on exporters and weakness in the u.s. dollar, as well the euro came to a close, at least close to a three-year high earlier in the session helped along by upbeat news about growth euro zone manufacturers reporting strongest month on month record with pmi jumping to 6.6 in december, its highest level since the surveys began in

the mid-1997 range germany and austria, ireland, as well, reporting record growth. as for the uk, the manufacturing side of things fell nearly two points from a four-year high to 56.3 in december, below consensus estimates, but the pound still rising against the u.s. dollar. also in the uk, bp, british petroleum, says it will take a one-time, $1.5 billion charge as a result of the new u.s. tax law, but expects the changes to be positive and have an impact positively on future earnings. meantime, germany's volkswagon is facing more legal issues over its diesel emissions scandal a swiss consumer protection organization has filed damage claims on behalf of around 6,000 consumers who own vw diesel vehicles we're goings to finish with the airlines international consolidated has agreed to acquire air berlin

lufthansa backed out of the deal due to some competition concerns, but still some of those airlines very much in focus and, of course, john, with all the talk of zero fatalities in commercial flights globally this year. back to you, john. >> indeed that's all the buzz. thank you, dom and the new year bringing with it a new rally for u.s. stocks the dow, however, well off the day's highs. the tech-heavy nasdaq climbing more than 1%, its biggest gain since mid-november joining us now, colin sebastien and foundation partner steve vasallo. happy new year to both of you. colin, i want to start with you. some of your top picks for 2018, some familiar names. alphabet, amazon, facebook why? why those? is it some play on advertising and just the massive power that google and facebook have there is there something else about their heft, their size, their momentum >> well, really it is a

combination of factors that keeps us bullish on these large cap internet companies first off, there's such a rapid pace of innovation in technology that's benefiting disproportionately these platform leaders things like artificial intelligence, augmented reality, personal assistance. in addition to that, the core secular growth trends in e-commerce, in online media, and online advertising are clearly benefiting the same companies, as well. so when we look at the spectrum of potential alternatives to these large cap internet companies, we still come away more bullish as we look in the year ahead >> steve, for somebody who's investing in young companies, are these big guys sucking up all the oxygen in the room, or is there opportunity for smaller companies to get bought by them? how are you looking at 2018? >> well, i think those big companies there's a lot to be optimistic about they've had incredible execution over the last, you know, several years.

in fact, i would say in my 25 years in silicon valley, i've never seen companies at this scale execute as well as those companies are. but what i think you're seeing actually is, you know, a beginning of a backlash. so, you know, we invested in some of those companies that are doing so well, but what we're also noticing is that it is actually crowding out some of the innovation for young start-ups. whether you look at things like amazon basically launching a blue apron killer the week after the company went public, or facebook doing a blatant ripoff of snapchat's technology, or google being conspicuously quiet on net neutrally last month. i think it's clear these companies have built pretty profitable walled gardens and that's a reason why the tech community and silicon valley in particular is so excited about the area of crypto, because it actually isn't about the currencies or the digital cash, it's about this notion of new network design and openness. that was the openness that enabled many of those new

behemoths to get to the scale they are you have to have that as one of the initial ingredients. so that's what i'm excited about with sort of this next generation of technologies, is they have the potential to kind of come up underneath the walled gardens and begin to build some new technologies >> it's an interesting point colin, what about you in terms of the up and comers you're going to be watching this year >> well, you know, if we consider the large cap companies as the redwoods and the up and comers as the pine cones, looking primarily at public companies, we see signs of life at snapchat, twitter, yelp so we're looking at companies that have, to date, struggled under the weight of the platforms, but have developed a lot of their own either technology, proprietary data, or user bases that could give them a lift so, you know, we don't rank them above those platforms yet, but keeping an eye on them >> what all of a sudden gives a company momentum that is just in its niche right now and, you

know -- i can see when these companies first burst on to the scene the excitement that they might become one of the tech giants, but at this point they are niche. is there anybody else who's going to be an up and comer to reach that major platform size, or can any of the companies you named do that? >> well, i think it's unclear. that's why we favor the existing large platform companies at the same time, there are risks. there are technology risks there are risks around regulation, and those could give a lift to some of the smaller-scale companies. and again, the pace of technology, change, and innovation is so rapid things like voice offer opportunities for new companies to come in and potentially pose a threat we haven't seen them, obviously, yet in the market, but certainly something we need to keep an eye on >> and keep an eye on them we will colin, steve, thanks so much the tech space sure to be interesting in 2018 again. >> thanks, guys.

and some of the biggest names in hollywood are unveiling an initiative to fight sexual harassment and gender pay disparities in all workplaces. julia boorstin joins us from l.a. with more julia? >> kelly, time's up. that's the name of the initiative unveiled yesterday by 300 of the most powerful women across the entertainment industry aiming to end harassment and a widespread power imbalance against women. from both in front of and behind the camera, shonda rhimes, kathleen kennedy, donna langley, ava duvernay and jill solway in front of the camera, meryl streep, reese witherspoon, among others, as well as top talent agents and attorneys driving this initiative, which includes a legal defense fund to help less privileged women. farms, factories, restaurants, hotels, protect themselves from sexual misconduct and retaliation. this fund has already raised

nearly $14 million from nearly 5,000 people with the talent agencies and steven spielberg among the major donors the organization also aims to educate people about harassment and their rights, connecting them with resources. it's working on legislation to prevent companies from using nondisclosure agreements to silence women and is also pushing for 50/50 gender parity at studios and talent agencies by the year 2020 this news comes on not only the heels of outrage over sexual harassment, but also reflecting their audiences. the top three grossing movies of last year all starred women. kelly, back over to you. >> fascinating julia, i'll take it there. appreciate it. julia boorstin in l.a. when we come back, the race to a $1 trillion valuation the big tech name that could reach that milestone maybe even in 2018. first, rick santelli, what are you watching this morning? >> you know, for the entire month of december i was looking for a good trade that stuck in ten-year note yields above that

244, 245 area. first day back, we are getting a move we're going to talk about the on and off relationship between stocks and bonds after the break. you've got prediabetes. but with more exercise and a change in diet, it can be reversed. but i've tried exercising, and it just makes me hungry for bacon. i love bacon, too. and who really likes to exercise? not me. me neither. nobody! [both laughing] mmm! so we're good? what? oh, you still have prediabetes... big time. that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans,

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helps cover some of what medicare doesn't pay. expenses that could really add up. these kinds of plans could save you in out-of-pocket medical costs. you'll be able to choose any doctor who accepts medicare patients. and there are virtually no referrals needed. so don't wait. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. this easy-to-understand guide will answer some of your questions and help you find the aarp medicare supplement plan that's right for you. it's that time let's get over to the cme group this morning rick santelli with the santelli exchange rick >> thanks, kelly and happy new year you know, bonds are, i guess, my passion in the markets, but i like all markets, and all markets always have a

relationship and like humans, sometimes relationships can get a bit odd, a bit eccentric, a bit uneven, if you will. and i think that's summarizing the relationship between interest rates and equities, really, since the credit crisis. and if you put up a chart, we all remember march of 2009 is when the equities bottomed, so the beginning of 2009 is when i'm going to start the chart you're now looking at of ten-year note yields there's a lot on the chart that gives us lots of clues have a good look now let's go to the whiteboard this is my rendition of the chart you were looking at and i've talked many times how double tops and double bottoms are really the key to trading interest rates we all know the double bottoms, 12 and 16, right around 135-ish, but that's not the direction i'm taking let's take the direction of the market we've basically been in a bear market with respect to yields for quite a while. and how do i say that? because other than this one set of double tops, all of them have

been lower okay, so we had 295, 395, 398, 73, 60, that one a bit of distance, but the distance really gave you a couple of really nice moves. so you have 240, 236 now let's get to the really important ones with these lower highs. 299, and the most important of all, last year, we had a 259 at the end of 2016. then march, march of last year, we had 263 that double top is going to be key for the rest of the year first of all, it would be really the first time you've broken the downed pattern if we start to close above that, but if you do close above that, pretty much the chart is telling you where you're going to go, that 3% level. now, when i talk about the relationship with stocks and bonds, i guess what i'm really talking about is back in a bygone era when stock markets were strong, normally interest rates were higher. when stock markets were weak, interest rates were lower.

the change really came with central banks, and now negative rates that still prevail throughout much of the world our rates look pretty good, so there's always this faction of buying, even as stocks move higher the key here is, what happens if stocks take a pause? it's going to bring in more buying so i guess to summarize, watch 263 to the upside, and remember, rates are probably going to stay lower longer than history would have dictated. john fortt, back to you. >> already true, thank you, rick santelli now let's get over to deirdre bosa in san francisco with some breaking news about amazon deirdre? >> good morning, john. sources tell cnbc that amazon is preparing to make a serious run at the advertising market as early as this year and has been in talks with several companies, including procter and gamble and clorox about promoting their products on echo devices this would be advertising for a voice-powered shopping experience as of now advertising is limited

on alexa and the echo devices, but cnbc learned amazon is talking to companies about a variety of promotional opportunities and it's already testing some so to give you an idea what that might look like, say you asked alexa for ideas how to clean up a spill, it could nudge you towards a specific brand or say you bought something from clorox and amazon knows that, amazon, if you're searching on echo, could suggest another product from the same company. voice advertising is becoming increasingly important as a platform smart speaker market doubled last year, and also as advertisers and brands are figuring out their own strategies for this new medium, you can read the full article and more details on cnbc.com back over to you >> all right, thank you, deirdre. kelly, how do you charge for advertising on a platform when you haven't said how many echoes >> you charge and you charge

big. this is such an obvious next generation platform for advertising. the issue for me -- >> how much do you charge? >> ultimately, whatever you want this is amazon it is the retail market. >> it's like paid search it's paid search based on -- >> impressions >> how many it actually shows up to >> does it turn off the users? that's the balancing act they are going to have to strike. when we come back, california's budding market, recreational pot just legalized in the golden state and it could be a huge business opportunity we'll go there live. take a look at the dow way off its highs this morning, only up 35, was up over a 100, but nasdaq, s&p still strong "squawk alley" back. to buy or sell? time with fidelity's real-time analytics, you'll get clear, actionable alerts about potential investment opportunities in real time. fidelity. open an account today.

building on the strong run-up in big tech stocks in 2017 bets are being laid on who reaches the drill cron dollar valuation mark first it's apple, not amazon, that seems most likely to reach the record valuation first, just based on the arithmetic and research by m k & partners joining us is the senior internet analyst rob, so apple just by the numbers at 15% gain in apple gets you to $1 trillion. what are the other factors to consider though? >> well, it's a product cycle company, and the expectation is pretty high on the iphone 8 and x. stoung 50% last yearbled a the iphone 7 was a weaker product cycle so it really depends on the strength product cycle, and -- and, you know, it can get this on a strong follow through on iphone x demand by that's a

binary event on that particular product. >> we're talking about the f.a.n.g.-type stocks and some of the chinese internet names who else has a shot? >> the six leading contender, obviously alphabet is next closest followed by amazon, facebook and ten-cent and alibaba, and i think a case can be made for each of these companies as early as 2020, potentially earlier, for a few of them, and, you know, they are exciting companies with very high growth expectations and very strong eco-systems behind them so we go through, you know, the plausibility of each of them in the note. i think the dark horse here is actually alibaba and they are the smallest of the mega caps today, but they have been beating thein could census expectations by a very material amount, and if the magnitude that have upside continues, then they could possibly get there first. >> rob, whenever stocks start approaching these milestones, we start misuse the law of large

numbers in talking about them so isn't that a risk here that when some of these stocks get close to that trillion dollar market cap that people freak out? >> they do there's some real precedent for the psychological barriers and 1 trillion is certainly going to be a psychological barrier, never seen it before, and i think here the difference is that the earnings multiples are not that high for many of these names. you know, amazon's obviously very high multiple stock and so is ten-cented a names like facebook, google and alibaba not so much, and if the earnings growth is there, then i think it's very difficult to hold the market cap back. >> and i wonder if we're talking about facebook, amazon, alphabet, google all having trillion dollar market caps by 2021 we've never had a company reach that major threshold fanned they do that what does that mean for regulatory risk and public perception >> we talked about this earlier in the year. you know, under the current sort

of structure for monopoly and abuse of monopoly power i think you require policy change because there's not really abusives under the cute, you know, framework for evaluating abusive competitive forces in monopoly power now the framework can change and that's a slow process and many years before we get a major overhaul to things like the sherman act that have been in place for more than 120 years. >> all right just one of the many things we have to watch on this race to a drill crop thanks so much rob sanderson. >> as we head to break, let's check out the major averages the nasdaq continuing its rally. up let's see better anth 1 is% and the dow and s&p holding on to positive gains. we'll be right back. it releases a cooling sensation in your mouth and throat. zantac works in as little as 30 minutes. nexium can take 24 hours. try cool mint zantac. no pill relieves heartburn faster.

welcome back now that california has legalized recreational marijuana can that business companies are looking for opportunities. aditi roy with that story. >> reporter: good morning to you. kelly. that's right we're live at harborside, one of the largest dispensaries in the state, and they have revamped their retail section here in order to accommodate what they believe will be a growing market they have added more cash registers back there in between

the mugs and flowers here, feels more like an upscale retail store at mall than any sort pot shot the owner heroic by the way, one of the pioneers of the california cannabis movement says california will pave the way for the rest of the country are. the owner of constellation brands says he believes the nation will follow suit and legalize recreational marijuana. his company bought a 10% show in a canopy growth corporation, a cannabis company out of canada some believe the california recreational marijuana market will reach 6 billion by 2021, but there's still a ton of barriers, tons of regulations and not a lot of cities are licensing and tax ratings could be as high as 45% which comb bolden the black mark. each the owner of this dispensary believes his prices will go up about 35% because of those high taxes back to you guys >> got to be great for the snack food mark.

thanks taking a look at indseize, major indices holding on the dow still up just over 40 points but nasdaq, boy. >> we've been chuckling about the outperformers and ge is leading the way in the doubt. >> first week of the year you often get that reversal trade. i think that's why the nasdaq is up and dow is up less so today. >> thanks, guys. we'll see if it sticks that's it for "squawk alley. "halftime report" here at the nyse starts right now. >> and welcome to "the halftime report." i'm scott wapner live today from post 9 at the new york stock exchange our top trade this hour, new year's same rally. the first trading day as you november 2018. stocks come off their best year in four and now up for nine straight quarters. the question is how long can this rub last? with us, joe terranova, josh brown, steve weiss and jon najarian joe, what's your best guess here as thi