again, mean to the guy who -- his people are starving and puts people to death, but we don't want to insult him. >> as you know on vacation i wake up at 6:00 a.m. every morning to watch "squawk box squt. >> that's not true i do hear about it don't go on twitter, trump will be tweeting and i don't want you triggered. enjoy yourself. >> the snowflake is about to melt. >> make sure you join us tomorrow, "squawk on the street" is next. ♪ good wednesday morning, i'm carl quintanilla with jim cramer faber is off today the nasdaq crosses 7 k, the first trading day of the year since 2013 and a lot to watch including auto sales and slew of upgrades europe is green, oil right around the 2.5 year high we'll watch that closely

roadmap begins with president trump morking north korea's nukes and mega chinese deal block, and shares of intel are down reports the i.t. industry is bracing for news of a major security flaw affecting intel chips. it did not take long for stocks to make history in '18, that is d nasdaq closed above 7,000 for first time best day since october 27th. what's going on with tech? >> i think that the profit taking ended i believe that there was a huge amount of money that left tech and went over to industrials and a large part because the gains were so great, also because there was a feeling that you could select your lot because of the new tax code, it made sense and turn out it didn't matter. what's really happening here, carl, it is just an unprecedented amount of research as possible.

i sent -- i sent a list today, there's 35 upgrades and what happened is that nobody seemed to realize that nothing is built in every one of these notes is about how tax reform, tax reform or unbelievable holiday season netflix unbelievable holiday season and amazon unbelievable holiday season it's an era of good feelings. >> i was trying to keep a list as well of upgrades. utx ulta, dick's, wells, anthem and that's not all. >> all of these -- ulta, as a random one, why do they like it? the competition is decreased, that's the death star amazon and they've got a lot ofcash after tax reform you know what? this is one -- i know the stock was up by ten points for year end but this is an example of a stock that could be up 30. it could be up 30 based on tax

reform and yet so many people carl, in the last month said it's all built in it's all built in. i tell the analysts who are upgrading and going nuts today for the restaurant stocks, for the retailers, for the down and out industrials, the down and out teches, it is just incredible to me. >> utx from 124 to 160. >> i will see you that -- and talk about a waste management number, where they upped it about 40%. honestly, i'm seeing upgrades -- i'm stunned. i'm stunned. seeing people upgrade -- this is united technologies, this isn't some small cap stock for heaven's sake. i'm getting a lot of those where it's like pvh. 158 to 168 158 to 165 wells went nuts today. piper went nuts today.

merrill went nuts today. >> yep. >> rbc. >> financials less so, jim we'll get the big banks a week from friday. >> true. >> there's been talk about what happened to lone growth in the last few weeks of '17. 1%, if that's going to color the quarter. >> i do think loan growth in the states that got hit by the change in sales -- in the state taxes, that was a lot of business was new jersey, new york, california i mean california is one fifth of the country i mean, i think you're trying to figure out if i do this, if i buy a house, am i going to be down 10% immediately when you buy -- i'm sorry i'm stunned by these upgrades. when you buy united technologies, goes up 10%. you can't live in united technologies but you know what, people -- maybe it can united technology. >> the big engine.

>> otis is doing well. you can live in an elevator, at least it goes up. >> largely about margin pressure at pratt and whitney. >> i know greg hayes, i'm sure he says this is even better than i thought. honestly, he is -- he is everything is working for otis everything is working for hvac and pratt and whitney. but the note is saying, this is the best thing since sliced bread. >> does your playbook pivot two degrees, five degrees, at all? >> there's a restaurant note out today by sun trust basically says these trucks are going to have cash flow gains of 20%. this is for restaurants, buy shake shack and dave and buster's, i pivot because i thought a lot of stocks up 6% on

tax reform, maybe could be up 15 and 20%. fabulous interview on "squawk", down 10% maybe get this big -- let's use united technology, maybe it goes to 140, 145 then goes back to 137. everybody will sell because it's scary. i say how much -- when cvs, general mills, what did they think cheerios were going to cause you to have a heart attack to 63, when do they say buy? 67 you know what's selling? peanut butter chocolate cheerios i thought millennials hated that stuff. they don't have kids, just have instagram. >> on byron, he did say his surprise list widely washed on wall street, 10% correction. but still ending the year he

thinks at 3,000. >> i thought he was magnificent. now the great thing about byron's picks and i followed byron for 30 years, i can say i followed him for seven years but he's been around longer than that when he's wrong, it doesn't cost you anything when he's right, you can make a fortune. i remember fighting with him on intel in 1992. i said, you know, the surprise is going to be up. he is tremendous most people don't have game when they get older, the guy comes in and you know what he's like? he's like brady. >> supernaturally gifted at this age. >> when he gets to be 45, he'll have another five rings, it's ridiculous he's brady he's the brady of our business. >> he had a good call last year on the markets and on crude and now he sees crude going to 80. four hikes from the fed, ten-year near four democrat

democrats taking back the house and senate. >> if everybody gets $1,000, there's an acquisition today the -- one of the worst performers in the s&p, south carolina utility, dominion, very fine company, buys south carolina they give everybody a g. everybody has been hurt gets a g. comcast gets a g but i'm a private contractor i should qualify for whatever they give you. >> we did get american and southwest joining the list of thousand dollar bonuses. >> i thought it was only buybacks and dividends $1,000 is a lot of money for a lot of people. suddenly they come to work and get $1,000 i think those people aren't going to vote democrat. >> aeon has a payroll survey out in which they say they are not -- companies are still not looking at broad -- not expecting to give broadbased wage hikes this year, despite

these very nice round of bonuses. >> i think the company will be shamed into doing it i like that survey i mean, love them. but you know what, the s&p -- 500 companies in the s&p and they are all being shamed into giving everyone $1,000 let's say you know, i'm watching today, we had -- they give target stock rather than $1,000. but everybody gets it -- south carolina, i got hired a new guy to help me here. and he's from south carolina i mean, i think he should get a g. by the way that's $1,000 to the millennials. do they know what a saw buck is? do they know anything other than instagram? >> c note. >> they don't know what a c note is they probably thing it's like fa, a long long way to go. >> a series of geopolitical tweets by the president, including one regarding north

korea. north korea leader kim jong-un stated the nuclear button on his desk is on at all times and someone from his depleted and food starved regime inform him that i too have a nuclear button but it is a much bigger and more power than one than his and my button works why is the market shrugging this off? >> real news i think that the president has a great time and he's absolutely right, we have more of a nuclear arsenal. but you know, we -- it is a little strange it is a little strange >> we don't think it's meant to be funny it's not funny. >> not funny at all. >> we have a division in south korea. we have a lot of soldiers there i wish he would say we want to pull our soldiers out if there's a problem. i don't want our soldiers killed that should be his next tweet. he's going to list a number of journalists, maybe -- i don't want to be on that list, the

enemies list. >> he's been all over the map on twitter, whether it's north korea, palestine, air safety, obviously the press. >> i'm raising numbers with twitter. >> it's done well. >> here's pakistan, not only -- on aid to pakistan i know -- my wife was on the border when the tweet came ouxt i told her get inland. have you seen my wife? >> she's traveling the world right now. >> she's on instagram but i would like to see her here i want her in brooklyn and she's in jadpur. please help me here, editor in chief. i mean, she's in places that they've never seen someone with blonde hair before you don't even have blonde hair. >> amazing part of the world. >> wow. >> i know. when we come back, as we said earlier, intel shares are down on this report alleging a secure flaw in its chips. we'll talk about that and take another look at the premarket as

the nasdaq hits a record along with the s&p auto sales on the way in a few moments as well. more "squawk on the street" in a minute 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. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance.

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intel is down, stating the company's processors made in the last decade might have a massive security flaw according to an online publication it has force d significant redesigns of windows and that similar operators systems may also need an update. keep an eye on that. we're looking to get to auto sales as well. we're going to get numbers out in the next few moments globally probably the best year ever. >> i know that phil gave you projections and he's never bet against phil the gm declines seem overdone. stock to be terrible seems overdone spend a lot of money on the future phil has been covering that very well. >> they have upgrades based on what they call a seat at the table regarding mobility. >> but it still sells at five, six times earnings, micron sells four and five times earnings but gm could raise the dividend

a lot. i wish they would because i think people really want income right now. the stock ver rise zon -- gm could offer a very good dividend and that's what the market needs right now. >> phil earlier said that even though we're likely to see total sales down from last year, barn burner of the year, still probably one of the top five. >> i think that car max is going to be good i covered that last night. i feel that some of those stocks represent great value, buying back a lot of stock. but you know what, the fact is that people are going to say, down year versus last year and don't want to own when they have so many stocks up because of tax reform. >> let's get to ford phil lebeau is in chicago. >> a rise of 0.9%. the edmunds.com estimate, decline of 2%. these are comparisons with

december of 2016, a huge month the fact we're not seeing block buster numbers does not mean a whole lot there. interesting notes, f series up 9.3% we talked trucks and suvs, best year since 2005, they sold just shy of 900,000 f series pickup trucks and record december for suv sales and by the way, when it comes to their inventory levels, they came down about five days now down to 68 day supply which is much closer to where they want to be, really spot on with where the automakers want to be in terms of supply. we'll get to gm in a few minutes. >> we'll come back to you for that, phil. >> remember mark fields? he spent a lot of money upgrading the f-150 and got canned i have a -- i bought an f 350 which is the super duty. the thing is like -- take it through the woods like a sherman tank the thing people don't realize, that is what fields spent a lot

of time on and wanted them to spend billions on -- on cars that are self-driving. he spent billions on trucks that people love. those are high margins, ford seems cheap if the number is worldwide. >> fields and overhaulman similarly squeezed out. >> dealer network all together, rationalized the whole business model. he's just off in the sunset. i hope he's at the rancho valencia playing tennis. like both of those guys. nobody cares i know because they are rich, remember what lennon said the rich are unhappy, it's their own fault. there i go quoting lennon, i have a picture of my lennonon my phone. >> it's a selfie, i look more like him every day because i have to lose weight from that

vacation >> alibaba's financial services affiliate ended the agreement to buy payment services company money gram after objections by federal regulators, they were unable to garner the approval of the committee which reviews acquisitions by foreign entities for national security risks. >> i thought this was punishment i mean, what, money order is national security? i got real news, right, it's block but maybe there are some reasons why we don't want this deal i think also china, get the message, china go help get us through to north korea. this is jack ma. he represents china. and i thnk he would say jack ma is a politician but as a businessman, he i think must sense, wait a second, maybe we got to stop dumping steel. because when we do these we can't get anything done.

maybe we should stop dirtingy the air and take all of what alcoa has. >> you think it's an effective shot across the bow. >> yeah, money gram. i think one of the things the president is trying to say, we're going to do 232 on steel and make it a national defense issue. notice the steel companies continue to go up. this is the shot across the bow i've been waiting for. he wants to shut down little guy. it's the chinese in charge because they keep giving him food money gram may translate into the chinese saying he thinks we're paper tigers, maybe we are. >> we're going to watch to see -- >> trump is trumping them. >> when we come back, we'll get cramer's mad dash and count down to the opening bell and look at the premarket on this wednesday morning. mosqwk on the street" continues in just a moment

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♪ let's get cramer's mad dash. we have our pick of the litter which one? >> steve miller's song is wrong, take the money and invest. i love steve, fabulous guy five reasons to be long oracle a morgan stanley note. upgrade too of ibm this is like, hey, look at me, look at me, i'm good it does talk about the positives of the last quarter. in my conversations with mark, it is very clear that last quarter wasn't nearly as bad as the market said. people didn't like the cloud of disappointment but database is in full swing.

still pretty good. maybe some of the cloud problems are behind them. but repatriation, likely to drive share repurchases. now, they do a bond deal and have a lot of cash overseas and bring it back. what's really amazing here, this is an incredibly cheap stock as is ibm. people keep saying there's no cheap stocks no, it's the opposite. there are many cheap stocks valued -- this stock was pretax reform this is tax reform so i just say, wait a second, why hate -- why put the hate on orac oracle i recognize the upgrade, i'm with larry ellie son for the moment it was knocked down yesterday because fears of amazon and sales force -- couldn't get that confirmed though. >> rbc's target on ibm goes too 180 and both say not just valuation but either the database cycle in this case or main frame cycle. >> i couldn't believe no one talked about the main frame cycle. the margins are big but warren

buffett was a seller and because that trumped everything. who wants to buy from warren buffett. maybe he's done. more importantly, ibm is cheap and if they deliver, the stock could be -- >> couple of big cap upgrades right there. we'll get the opening bell in a couple of minutes. don't go away.

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you're watching cnbc squawk on the street. the opening bell in a couple of minutes, watching the tech rally that began the year for the nasdaq budget is going to be the topic of discussion on the hill as we are still facing this january 19th shutdown. i feel like that's been historically a bad reason to sell if you sell, you may have to buy it back, which is not something i want people to do. in the meantime, we haven't talked oil rally, which is

happening. natural gas, don't get suckeed in hainesville was a natural shale people left for dead rewe burn it because we have no place to put it. and we don't have enough export yet. dominion, which is exporting soon, bought that scana, big nuclear problems but be aware before you go nuts on the natural gas stocks because it's so cold, stick with oil. 180 million americans in below freezing temps and i don't know if you saw yesterday, google searches for the words froze rn pipes are at a three-year high. >> home depot, which is down yesterday, is a buy. i saw a downgrade of masco and that's kitchen and bath. but home depot's hd supply downgraded because it's been so strong i question that downgrade. i like the pipe business

bay the way, copper, freeport, people still use pipes. >> just hit 6094, that's a fresh two and a half year high going back to 2016 there's the opening bell and s&p at the bottom of the screen. at the big board, the warrior dog foundation, providing refirr retirement for working canines. >> i'm going on any lifestyle and nutrition. mind body shames you into spin i tried spinning what the heck is that? peloton, i love that. >> i have to see that on camera. >> my daughter wanted me to do yoga, that hurts me. we went to like a spa, you know, spa with pinacolada. >> hip flexibility.

>> i need mind and body. >> we were talking about the nasdaq and the russell had a closing high transports had a closing high. >> russell is you've got tax reform transports are insane led by fedex and ups but the rail, csx is above the unfortunate death of hunter harrison people feel coal must be being burned off, buying norfolk southern once again, what you have here is people saying these are domestic and they are going to benefit from tax reform. remember again, i keep calling people's attention, we always -- it was in, in the market, in the market no because the analyst hadn't upgraded and they are in control right now. we're in one of those moments where people are listening to them people are looking for new ideas. ibm, oracle. >> ibm is leading the dow up almost 2%, ge is up a full%. >> ge?

ge is not allowed to go up that's interesting. >> your point about the south side research, this is their moment, i guess. >> ibm, main frame performance and adopting the hybrid cloud environment, that's all from the note and i come back and say, okay, what's -- this is what's going to happen. what is still down that i can buy? it's interesting united technologies is not down but relatively it's down relatively something is down that's a -- you can get caught up in that game. >> yeah, i saw this yesterday nearly half of the s&p are within 5% of their 52-week high. >> that's unbelievable. >> but there's still a lot 20% away and a lot remain oil -- >> yeah, and those are -- look, oil is very tough situation because a lot of these guys have sold forward you can't -- we need growth may not have the growth.

i do think at a certain point we're going to say -- people are going to say how much more can i keep paying for united technologies and some of the stocks that have already run i'm thinking in this case i'm thinking about facebook, which my charitable trust owns and netflix. facebook was up five yesterday on nothing there was not a single note about facebook i understand amazon. it comes out and said everybody loves prime. shocker. it stnt matter, at least they had something. >> amazon, a lot of people dissecting what they believe the quarter looked like for prime. categories furniture, beauty products on amazon. >> ulta has been down, wayfair, key downgrade worried about the competition and comparisons, it's an expensive stock. i'm looking at a lot of stocks in tech, micron, blowout

quarter. did not take out its high then went down to 42. it was below where it was and now starting to sneak up on the semiconductor industry association number micron is key to the market, then you have lam research will go up and texas instruments will go up, analog devices go up, all waiting for the stock to go up even advanced microis up today that's saying something but maybe because dr. seuss -- and intel with the setback i'm not going to jump on brian krzanich this article, the article is basically saying forget about intel chips, i'm not going -- you may never come across this flaw i don't use apple, i use this thing the hewlett-packard, does a lot of cool stuff. i can draw on it and be like brady, brady always uses it.

we're two old guys. >> the point about chips is great. lam as you said earlier, up more than 5% this morning along with retail mixed in nordstrom. >> people are talking about it coming back to the market and taking it private because the cash flow turned out to be better than expected is that going to happen if scana gets a bid, they could be in huge trouble because the rates kept going up. i'm willing to believe that anything -- other than the consumer stocks going down because they don't have what we need their international stocks and don't benefit that much. there was a unilever story, really long and talked about the smaller brands and what you have to do, proctor has to do that. i'm waiting for a wall street firm to switch apple from tick

to those stocks. you get the stock at 240 and average of proctor and clorox and colgate goes to 240. >> that has not happened yet. >> if gil et has a battery problem, give you a new battery. okay, so you have to pay a couple of bucks, i like it intel, we've got to study this. >> the intel news. it is lagging the dow and all we have is this one article making really broad based claims about the quality of the product. >> i remember absolutely senational and one of the greatest business books i've ever read. in it, when i spoke with him, they had a problem if you use nine digits, multiply by nine digits and then you get a flaw i'm thinking, okay, i'm just texting -- i'm texting, i'm typing so it didn't surface that much this may not surface as much brian krzanich is money.

the stock has been amazing if you sell i think you'll regret it. you'll regret it >> as we mentioned earlier, financials burnstein did give an upgrade to ufc and nomura took jp to 115. >> i think jpm is going to be a core holding because it sells at 15 times earnings. i talked last night about how wells fargo has been going higher there couldn't be a -- a worst situation for a bank but everyone is buy, buy, buy. >> we have ford out of the way, gm is next on the day for auto sales, let's get back to phil lebeau >> better than expected numbers for general motors, decline of 3.3%, that's december of last year, versus december of 2016 which was a whopper of a year. in terms of sales, the decline is interesting when you look at the inventory, day supply down to 63 day supply that's a drop compared to 83-day supply previous months

they are clearing out the inventory, which is what you want to see. gm's estimate for the sales rate for the month of december, 18.2 million, which would make it a big month. not as big as december of 2016 and here's the stamp that is particularly interesting jim cramer will want to hear about this average transaction price in december for gm, over $38,000. think about that over $38,000 a record high for general motors back to you. staggering you know the ripple effects of the auto is doing well johnson controls, look at that one. third of the profits come from batteries. you want pipes google batteries 50 times, get that up there. when you see gm doing well, think about the rails. when you see g 346789 doing well, take out of the equation the subprime everybody is so worried about and by the way, this is just domestic, gm has a big network and they got out of

a lot of the bad europe. i'm a champion of gm here. i think gm is doing a lot right and you have a cheap stock. >> metals too. you mentioned copper earlier but platinum is on pace for a ninth day of gains those things all sort of blend together. >> rebar, basic substance of major buildings article in the journal today, page b3, talking about how rebar is going to move up because the competitor has been taken out president trump noticed that the dump -- finish the dumping of china and get more people employed. >> also got new redbook numbers on u.s. same store sales up 5 year on year for the week up five. >> up five >> do people know how big this is remember when macy's we were worried about the dividend now we're worried whether it's going to be contained by 30. there's a lot of people short these stocks. >> still >> yeah, because they need

something to short it's been absolutely wrong i mean, the short side has been incredibly bad remember people used to short all the time >> it's painful right now. >> yeah. really painful you see a lot of hedge funds in trouble. one of the reasons they are in trouble, having run a hedge fund, you'll getthe guys who call and say what are you short? i've got to have some shorts what they typically short are the fang stocks, they think they are overvalued these companies define law of large numbers. they are really defying the law of large numbers it's amazing maybe that law is to be repealed >> that's unbelievable to me. >> don't forget we're seeing ancillaries going up and adobes and sales forces going up. people should be buying vm wear. people didn't like the high multiple stocks. >> as we said earlier, ibm and utx leading the dow on the upgrades let's get to bob pisani.

mixed open, still positive on the dow and s&p. let me show you the sectors and this looks like mid december, the semiconductors still up there. retail was positive just turned negative but those two had been the market leaders for a month now. and energy the other big market lead i'll show you the etfs and that has been emerging in the last month as theny leadership face utilities declining and has been for a while. i want to focus on the first one, xop, oil and gas exploration, up 6 to 7% since mid december and xng, natural gas etf, that's up 8% in the last couple of weeks on the frigid weather that we've been getting. home builders, itb, that is the one that's been doing well all year, up 50% last year the retail index up 15% since mid november again, i keep emphasizing this, how unusual it is to see retailers outperforming throughout the month of december and even yesterday they were on the upside.

one thing we're not seeing, even though we're essentially at new highs is a real breakout sector in terms of new highs, if you look at the new high list this morning, you've got a couple of big industrial names you have united technologies and union pacific and smattering of material names like new core, one or two other steel stocks and one or two home builders, what i'm waiting to see is it would take a while for these energy stocks like eog to really break out. they did today chevron did last week to new highs, but they were hit so badly it would be a while before you get them on the new high list not a very strong pattern in terms of breakouts cold weather stocks, you know the story here this always happens whenever you see a breakout of cold weather you get companies like colombia sportswear, close to new highs and canada goose, a great year last year and ipo did well vf corp, that's northface, they always do well that stock was up. what doesn't do well and hasn't

done well interestingly, you usually tend to buy generators companies like generac, they are not really reacting at all i would have thought so but been watching for last week and don't see much as all. it's the cold weather apparel companies that are having small moves to the upside. finally, the big debate right now, what goes on now that we have the tax bill passed, what happens for the markets overall? the street is still bullish. the story is simple, global growth persists and central banks on a slow rate hike path that's very understandable 2018, everybody is talking about what if any boosts we'll get from infrastructure spending plans. they are talking about modest wage increases above what we're seeing and some people are talking about gdp of 3%. all of that is pretty bullish right now. the problem for the bears is there's somewhat defanged right now. they are down to arguing about high valuations and that's true,

we're at 19, 20 times forward earnings, but you can stay there when you get a global economic expansion. they are talking about events like problems with north korea, or some other issues out there or terrorist attack or something. we always know that. we're living with that now they are down to arguing about inflation. but a lot of people believe the relationship between economic growth and inflation has been somewhat broken. i'm not saying curve doesn't exist but people think it doesn't have the influence it had anymore. the whole inflation argument that you normally get worried about, even that is somewhat muted right now. bears need a little more ammunition i think before we get forward any real serious worries, we're going to talk about the etf business in 2018 in the next hour the dow is up 34 points. californi carl, back to you. >> let's check in with rick santelli at the cme in chicago. >> good morning, carl. so many markets and fascinating moves. we have a lot of charts we'll move quickly march of 2017 for 10s, they are

2.44 right now down two basis points. we can clearly see here that 2.63 high to the left of your chart there, that is the key in my opinion to all of 2018. and below the market, there's so many levels, low 2.40s and 2.33 the average price between the high and low yield for all of 2017 a lot of one underneath, not a lot on top bunds, since mid september, two tops at 48 basis points. couldn't quite get there but it is hugging on top. i'll tell you what's had a big move the shots, hard to imagine me saying a big move when it's trading minus 62 basis points but that july start shows you it is lofty considering where it has been remember the nervousness regarding the hyg, high yield etf trading down at the lower end of its range in november let's start it in november listen, it isn't skyrocketing

but it's definitely welcoming the new year with upside and that really speaks volumes about the rest of the markets, whether it's the equities or more confidence in where current yields are trading, not a lot of nervousness in the fixed income market in the u.s. if you look at foreign exchange, this is really interesting this is a 20-year chart of the euro versus dollar remember all of the changes we did, 1.20, 1.20, there's 1.20 and it isn't the first time. in the broader context, imagine a line at 1.20 it slices all of the action over the last 20 years this is a huge level and euro looked quite bullish against the dollar and quite bullish against the yen if you look at january 2011 or sen-year chart we'll start out with one that doesn't look good for the dollar either, that's against the chinese currency the yuan. we talked how it was trading down today it's bounced a little bit but january of '17 clearly shows the dollar is bouncing along the bottom and slow moving relationship with the chinese

currency carl and jim, back to you. >> all right, rick, we'll see you in a bit. >> that's exciting, i agree with him totally on the euro. the euro is on fire. >> it really is. byron's point this morning, how brexit brought the eu closer together. >> wasn't that a great point i love what brady had to say listening to rick, s&p crossed 2700 for first time ever oil above 61 when we come back, mcafee has a list of potential technology threats for 2018 we'll talk to chris young a little later on. don't go away.

a quarter pound -- >> the new arch deluxe >> yeah. >> i was going to say that >> me, too >> the new arch deluxe with bacon. october's taste of the month at mcdonald's >> that was back in the '90s, the arch deluxe was an infamous

flop for mcdonald's, but they're giving it another shot with a revamped version called the arch burger it's being tested at a handful of locations they test things all the time, jim. >> yeah, i remember you going there. it was a fabulous special. i think the ceo does wonderful what can i tell you. when i was punching 210, that was my staple. the arch deluxe. i'm not kidding. that thing was great i don't know how that thing failed i think it was all the styrofoam. mcdonald's is doing a vegetarian burger mcdonald's is trying everything, and they don't need to they're doing so well. the dollar menu is fabulous. i love their coffee. i have really become a devotee of their coffee. >> as we always say with mcdonald's, it's so levered to employment their breakfast menu is so key to whether or not people are driving to a job in the morning, and breakfast has a pretty fat margin >> i thought it was how much you

drank the night before >> there's that too. that's a separate -- >> saturday night game always leads to mcdonald's. i talked about that with easterbrook, he thinks that a staple i do think this is a man who is going to take advantage of the tax reform plow it back i'm waiting to see the 1,000 dollars there. wouldn't that be something >> at mcdonald's >> he can't do it. he can't do it it's too big, but easterbrook is a man of great mystery, by the way, because every time i speak to him about why it's doing well, he says things like mojo that's like an nfl term. >> and we had a bunch of cities and states pass minimum wage laws at the end of 2017. no one talked about that as a pressure >> wow i mean, this is a big hike for -- it's amazing that both coasts are getting hit both coasts are having problems with state and local president trump, it's not really talking a lot about that, but maybe that's fake news what i

said fake is my tax return fake? i wish it were fake. >> when we come back, we'll get "stop trading" with jim. as we said earlier, record high for the s&p, 202ndhe,7 a t dow up 40. usaa to me means

peace of mind. we had a power outage for five days total. we lost a lot of food. we actually filed a claim with usaa to replace that spoiled food. and we really appreciated that. we're the webber family and we are usaa members for life.

let's get to jim and "stop trading. >> yesterday, disney was an up grade. people were talking about how star wars was great. they have a fabulous note out today talking about how defense wins games studiosering parks talking about the modestly diluted nature of the fox deal they feel the narrative disney changing with investors, turning away from the dark side of espn. steve schwartz, old friend of mine because we started smart money together, had a fabulous interview on squawk, said hey listen, espn, don't worry about it they're doing a lot of stuff tech is good i think this is the new narrative. people will forget that espn may be losing and will start looking at how the over the top and baseball is doing and how football is doing and how all these other sports are doing i have continued to like disney the whole way. i have liked bob iger the whole way. i have not been shaken out even at 93, bob knows that, and he's doing an amazing job >> that's true that's absolutely right.

you have been committed. >> i said give it to your kids give it to your kids they know what it is i went to disney world five years with my kids i went to the opening of disney world. i'm deeply committed >> that was 1970 >> yeah. tried to talk to mickey. would have nothing to do with me nothing to do with me. he said nothing. >> what's on "mad" tonight, jim? >> still upset about that. mindbody my wife does -- if my wife ever gets back, you have to follow my wife on instagram, she's going nuts she's an instant -- she's an senate desperado anyway, mindbody is a company that makes it so if you want to spin, get into a class, you can do it manually helps all the gyms and my wife is a spinner, and she's going to use this thing, and i have to tell you, it's great to have you back and wow, i think we got most of the s&p 500, maybe left out about 40 companies, no, maybe

like seven companies >> we'll see you tonight, "mad money," 6:00 p.m. eastern. >> when we comr back, a lot more on another historic day for stocks as the s&p crosses 2700 don't go away. (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, so that travel times are shorter. who knew asphalt could help save the environment?

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welcome back to "squawk on the street." some breaking news some of the first breaking news of 2018. in the form of november construction spending. expecting up half of 1%. we have more up.8%. solid number although last month, we had 1.4% 1.4% was a strong number that's now 0.9%, but still, solid back-to-back gains let's look at something a little more real time december ism remember how strong chicago was. we were expecting a number around 58.2. 59.7 59.7 deluxe number. now, if you go back in september, we had 60.8 60.8 that's the best read since 2004, when you had a 20-year high at 61.4 so these are super solid let's dig down a little bit. prices paid. 69 that's a big jump from 65.5. new orders, 69.4 versus 64

and considering its employment week, employment was the only laggard. 57 versus 59.7 but all in all, really good numbers to start the year. pretty much just like the equity markets are starting the year. carl back to you. >> wow all right, rick, thank you very much rick santelli. >> good wednesday morning, welcome back to "squawk on the street." i'm carl quintanilla with mike santoli, and melissa lee record highs across the board, s&p crosses 2700, oil above 61, and high profile up grades that's where the road map begins stocks shrugging off geopolitical tensions as the president targets north korea in a series of tweets today >> also, bill ackman making a big bet on himself why the hedge fund manager is so bullish in the new year. >> the u.s. facing a deep freeze with record low temperatures and subzero windchills businesses closing and flights canceled more on what to expect >> markets continuing to rally

the s&p, 2700 for the first time ever dow and the nasdaq also hitting all-time highs for more on this, we're joined by pimco's executive vice president as well as jp morgan global market strategist samantha good morning, guys what a way to kick off the new year this new order number on ism, tony, best since '04 is this how the year is going to look >> well, we had in 2017 was to be optimistic about the economic outlook, but to not give up on what pimco calls the new normal or new neutral there could be a cyclical bounce, but barring a productivity miracle, it's not likely growth will stay high for a prolonged period of time we would predict peak growth in 2018 or early 2019, because again, it needs to be productivity led it's not going to be led by the number of new entrnlts into the labor force. we need more investment in the united states. that's what tax reform was all about. it remains to be seen whether or

not that will ignite cap-x in 2018 >> is this tony's narrative basically correct? you get a little juice, but you still had a huge anchor around your ankles. >> i agree with that with clients, we have to toggle between the here and now and what returns are going to look like for the next two years versing the five and ten-year, which is arguably a little more negative but for 2018 and 2019, we think these trends continue. growth, earnings recovery, international markets have a lot of room to run there are reasons to feel good the tax package is part of that, but when you're talking about longer-run asset allocation, a little more hesitancy there with returns. >> why are you so reluctant, tony, about growth in 2018, saying it will peak, when we could potentially see a lot of cap-x, we have seen business loan growth really come to a halt in 2017, so there is some notion that there's pent-up demand for borrowing out there, for investing in their business. now you have the juice from tax. it seems like all the stars are aligning for businesses to really make big investments.

>> in fact, we were predicting last year that nominal growth in the world would be 5.5% plus or so, which is pretty solid. it was over 6% the imf and pimco would call for 6% again in 2018 and a peak doesn't necessarily mean reversal to a recession so we're not calling for anything like that it does look like recession is some ways away at least a couple years. of course, it could be stopped by a number of things, including, who knows, this year, the federal reserve could be more of a factor in markets than many expect, but many looking for three rate hikes what if is four? we wouldn't say that would put the economy and markets over the cliff. so it may be a peak, but it doesn't mean the end of the world. simply good news but watch out in terms of the factors that are necessary for good long-term investments. >> samantha, one of the things that is a feature of this market at the start of this year is people generally agree things look good. i think that's a little bit of a shift from past years. i would say it's been six or eight months since the mantra

has been global expansion, stocks have great momentum, you're being paid to take risk is that going to continue to be the case, and i guess, when tax reform gets filtered through to s&p earnings as people are now revising their numbers, is the market going to pay up for that or is that largely accounted for? >> we think they're going to pay up for it. the issue is some of the tax reform is going to be hard-pressed to show in the actual accounting numbers. it's not just about earnings estimates but also interpreting those. we don't think it's been fully priced in yet. if we get the pop in cap-x, which will be supportive to growth in the long run, that's another push up for the market >> what do you mean by interpreting the earnings? earnings are earnings. they're either in the earnings or not in the earnings >> with a sense, how the tax package gets filtered through with what companies are doing, how it shows up in the numbers with some of the accounting and the expensing. i'm not sure it's going to show up in third-quarter earnings this year. >> the fourth quarter we're going to hear about in a few weeks is going to be a mess. everyone is taking these

non-cash charges for repatriating earnings and all the rest of it it's almost as if it's in the eye of the holder, if they say we're going to base this onthe tax rate or not. >> what do we intest, tony where do we go >> perhaps the single best investment, the one that is not in the current portfolios. another way of saying it probably will be a little more volatility in markets this year than last year possibly because of a change in views about the federal reserve. there is such a thing as too much of a good thing, and being careful what you wish for. we all wanted strong growth. for years we have, since the end of the financial crisis, but strong growth with a jobs rate at 4.1%. we saw it in germany fall to a record low today near a 20-year high, perhaps it's too much of a good thing. so the best single investment may be having derisking portfolios for bond investors, do the things bond investors do to make money. don't make best on interest

rates, don't make bets on the yield curve. do simple things >> you don't mean cash by dry powder >> it could be leaving a little bit in your risk budget. it could mean moving up in credit quality, moving away from high yields. moving up in the capital structure, away from a little built away from a very great time to invest in core strategies total return type strategies to protect the gains. look for investments like core strategies that move inversely with equities if they move down. you want to protect your investment gain from last year >> is there where you are, to not reach as much? >> so there's a quality bias, i think, that's necessary later in the cycle. that's a way of derisking. with respect to fixed income, there's been that search for yield, which arguably means more risk we're saying your core, you have to know what you own, and your core has to be plain vanilla core it can't be something else disguised that way you have to know what you own. that means a quality bias and core that is truly core. >> we haven't talked a lot about

risks for the year, but today is a day where the market is not even paying attention to tweets we would have taken more seriously ten years ago. i'm guessing, about a nuclear aggression >> about a big button that's bigger and stronger. >> yeah, exactly >> well -- >> how long does that last >> in our discussions with one of our advisers, john boehner, he has made the point that china recognizes that it's received a deal of the century. in other words, that in exchange for u.s. patience on trade, they would receive some help on the north korea issue. there do seem to be many ways of -- there does seem to be evidence that north korea has been cooperating in a sense, despite the tweets, despite the rhetoric, it does look like things have calmed down, believe it or not. >> we're going to obviously have a longer-term story to watch thanks, guys a nice way to start 2018 >> when we come back, geopolitics are in focus

president tweets about the nuclear button and a lot more. >> plus, a moment of truth for trade negotiations korea and nafta get under way. we'll tell you what's at stake >> plus, one retailer making a comeback we'll tell you who that is and if the stock can hold on in the next year. see if you can guess this chart when "squawk on the street" continues. at ally, we offer low rates on home loans. but if that's not enough, we offer our price match guarantee too. and if that's not enough... we should move. our home team will help you every step of the way. still not enough? it's smaller than i'd like. we'll help you finance your dream home. it's perfect. oh, was this built on an ancient burial ground? okay... then we'll have her cleanse your house of evil spirits. we'll do anything, (spiritual chatter) seriously anything to help you get your home. ally. do it right.

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geopolitic on the president's mind he talked about protests in

iran such respect for the people of iran as they try to take back their corrupt government you'll see great support from the united states at the appropriate time that's after a tweet storm yesterday addressing pakistan, israel, palestine, and mocking north korea nukes. we're joined by the founder and chairman of geopolitical futures. george, good to have you thank you for your time. >> thank you >> north korea first i mean, these things heat up, they cool down they heat up again your point is that basically, the overall dynamic has been pretty static. is that true >> yeah. particularly on the part of the united states. the president has not engaged the question of what to do, and his critics haven't engaged the question of what to do they have focused on his jokes so the real issue is this. since clinton, every president has had as his basic policy the idea they would not accept a nuclear north korea. we now have a nuclear north korea, although not yet an icbm. question is what are we going to do about it? and everybody has been carefully

evading the strategic question dealing with nonsense. >> do you believe that the olympics just about 30 days away or so, carry some kind of event risk or not? >> i don't think the north koreans have any intention of hurting south korea. this is their opportunity to peel south korea away from the united states. to demonstrate that the united states is not going to come to their assistance or if they come to their assistance, it's going to be a test to south korea. north korea is seeing this as a chance to in a strange way reunite the korean peninsula and they're not going to hit the olympics they want to participate in it they want to share in it >> at the same time, george, how do you interpret the chess game going on north korea and south korea, it seems like things might be on track to having some sort of talks. north korea certainly made the overture by using the hotline,

and at the same time, president trump comes out with this tweet, a hard-hitting tweet how does this all fit in with each other >> the president's joke said the united states has a much larger nuclear capability than north korea. that's true, that's obvious. the way he said it should or shouldn't have -- isn't the point. the american policy is that we will not accept an icbm that can reach the united states. at this point, the word is north koreans don't have that because they don't have the guidance ability yet. but mattis and others have said that if they develop that, the united states is not going to permit it. so we're still in the situation where the american policy officially is that the united states will act militarily to prevent them from developing this, and they hope that the north koreans don't do that. to this point, either they couldn't or they chose not to. but we don't know what the negotiations are but there are serious

negotiations going on between the united states and north korea. the north koreans have been relatively quiet and we're watching the wrong game when we look at all the tweets and everything. there is a negotiation going on. >> george, more broadly, would you expand this idea that there's basically an underlying equilibrium in all these relationships. there's been a lot of talk about how allies and adversaries alike are thrown off by some of the moves at the top in terms of retreating from international agreements and whatever else, but do you actually think we're not necessarily courting potential crisis because really the relationships are unchanged? >> well, whatever he said will remain part of nato. whatever he said, we have maintained sanctions on russia whatever he said, he has not become very aggressive on chinese trade. whatever he said, we're not backing out of nafta distinguish this president says and what he does everybody wants to act as if

when the president says something strange, it's a crisis but we should be getting used to the fact that what he says and what he does are two different things and in fact, he hasn't backed out of any of the traditional foreign policy positions most of the positions he's taken are pretty much what obama said. >> right but how long would you expect that to continue if people decide that his threats or his attempts to cajole are without consequence? why does that not turn him into a toothless tiger of sorts >> because he's the president of the united states, and the president of the united states is never toothless he commands the largest military in the world, and one quarter of the world's economy. so he can say things that others can't. but you know, consider his position on iran the idea has been ever since 2009 by several presidents that the iranian people should rise up against the iranian government, which is corrupt and repressive he said that in a tweet.

that really was the position of obama all through the 2009 crisis so we're not really looking at much different actions it's like going to a businessman and hearing his press release and his press conference, and then taking a look at how he runs the company he may want to take a public position that's different. >> so in that sense, i guess you believe the markets, financial markets have correctly priced in really his tweets and the way he tweets from the get-go >> we have accepted the fact that this president uses social media in a way that no other president has. he also says things far more bluntly than other presidents. other presidents have said we're a far more capable nuclear power than north korea he just said it in a way that was odd. but the basic reality is that

the united states remains a stable force the rest of the world is appalled at the united states, but remember, they were appalled at obama they were appalled by george w. bush, one of the things the world loves to do is be appalled at american presidents this one more so than others but it's important to really distinguish what is actually happening and what he's tweeting in the same way that you don't take a presidential press conference all that seriously. >> yeah. good advice for people who, as you say, like to turn every tweet into a crisis. george, please come back good to talk to you. george friedman joining us on the geopolitics. thanks again >> take care it is a moment of truth for trade policy negotiations set to resume with south korea and nafta partners kayla tausche joins us with more on what's at stake in these talks. >> you guys were just discussing it, but the trump administration have spent the last year initiating these renegotiations and investigations into issues

that were popular on the campaign trail, butthis is the month when many of those will come to a head president trump must decide by january 14th whether to levy tariffs on overproducers of steel, and by january 21st on producers of aluminum. there's a january 26th deadline to decide on the size of tariffs on chinese solar panels and an administration official tells me we could see a report on china's intellectual property violations this month too despite hardline advisers like steve bannon and peter navarro, there have still been questions on how to proceed. steve mnuchin and gary cohn want to stay the course the biggest wild card is nafta republican senators and governors have been seeking assurances from the white house that the u.s. won't withdraw at one meeting in early december, a source says senator lamar alexander asked litehe'ser who name one senator who supported withdrawing, and he

couldn't they're convening regularly to discuss the issue, and a white house official says the discussion of withdrawing is premature. the montreal round beginning january 23rd is being called make or break. in canada just today, is suing over lumber tariffs it says are unfair so we will see where this all goes one thing the people are watching very closely is this monday when president trump will address the foreign bureau convention midday in nashville all of this is coming as the white house has called a temporary truce on that trade rhetoric during tax reform, but that's over now. with tax reform in the rear view, so there are questions about whether their stance will change now we'll see in the next few weeks ahead. back to you. >> all right, kayla, thank you kayla tausche in washington for us coming up, nike bouncing back, finishing 2017 on a high note, gaining nearly 20% in just the past three months. what's in store for the stock in the new ye 'ldiuss that "squawk on the street" will be right back you always pay

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in case you didn't know, the u.s. in a deep freeze. a shot of arctic air is bringing record low temperatures and

subzero temperatures justin michaels joins us now with more. hi, justin >> hey, melissa. i tell you what, the next couple hours are going to be a doozy here especially into thursday and then really into friday morning. all up and down, through portland, maine, down here into new york coming up midnight tonight, that's when we're calling winter storm grayson is really going to kick in here on long island. we're in islip, new york they have a dusting of snow. so far this year, six inches, but they could get an additional nine inches by the time greyson heads out of town and moves north. really a big problem, not just because of the snow. the snow is only 5 to 9 inches people here in this part of the country can manage that well it's going to take work, but they can manage it the real problem is after the storm because we're talking about intense winds, 25, 35, maybe even 45-mile-per-hour sustained winds, gusts well over 50 miles per hour. and then come friday, and into

saturday, we're talking single digit to maybe 10 or 11 degree air temperatures that's the high temperature of the day. and we're talking feels like temperatures or those windchill temperatures well into the negative digits. that's a major problem because of this storm, and the winds associated, there are certainly are a great potential for power outages. as people going into subzero temperatures like that, feels-like temperatures, if they don't have power, elderly people, people who have illnesses, that can be a very dire situation so timing here midnight tonight, islip, new york, can expect snow to start a winter storm warning here right now. there are blizzard warnings north of us. they're not happening here right now. that's a good thing. they're hoping they're not going to happen here winter storm warning here right now. it's supposed to extend all the way until midnight tomorrow night. midnight thursday into friday is when that winter storm warning ends so it's going to be a tough 24, 48 hours here in this part of the country, and like i said,

come the weekend, it is going to be subzero, make sure people are staying warm check on your neighbors, check on the elderly people on the street people need to stick together to get through this storm back to you, melissa >> justin, thank you justin michaels in islip, new york stay inside until monday that's the solution here >> nike rebounding in the latter half of 2017, up more than 20% after a rough start to the year. what does 2018 hold for the world's largest athletic apparel company. we're joined by randy and susan. good to have you both. happy new year randy, lets start with you you say 2018 is going to be a very difficult transition sort of year. part of that transition is this -- makes sense, nike's decision to direct to consumer what does it do with the wholesale business >> the stock ran up because the group ran up it's not that nike ran up on a move it got multiple expansion because the world finally figured out retail is not dying.

however, nike is mostly a wholesale business oriented model. about 70% wholesale. they have 20,000 doors of distribution in the united states it's the most ubiquitous brand behind coca-cola they need to do something with that distribution. it's going to take time and choppiness in terms of fundamentals to get through that distribution that's why we don't want to buy nike stock on the run-up >> you have a whole rating >> susan, you're also at a hold rating do you think nike, if it were able to move tomorrow to direct to consumer model, would a lot of its problems be solved or is there a more fundamental problem at nike when it comes to innovation and its pipeline? >> i don't think so. i think the transition also is going to take time, and i think the environment going forward is going to be a lot different than what we have seen historically we have seen a very robust athletic wear and footwear environment in the past five to ten years. i just don't see that growth anymore going forward.

it looks like we're moving more into a fashion cycle now i think while athletic wear and athletic footwear is still going to be popular and consumers are going to still want to wear it for comfort, we're not going to see the growth we had seen i think it's going to be more difficult for them to return to the double-digit growth in north america. >> randy, even if the category is not growing the way it was, i guess in the past several years, there's a bullish case on nike that says there's a basketball boom going on that maybe plays more to their strengths, and places like china seem like they still have a lot of momentum >> i don't disagree with that. the way i would play this move, basketball is strong, i would want investors to buy foot locker you can buy it today for ten times earnings nike is near 25 times earnings and foot locker is needed by analyst. nike said they're going to curtail a lot of wholesale distribution, but they said they need foot locker and dick's sporting goods why play 25 times earnings when you can play it at 10 times with foot locker.

>> your take on fashion wear is interesting because it has ramifications well past nike athleisure is arguably a bit -- a fashion cycle. how much can athletic wear play if in fact you say it's -- it sounds like you're saying that trend, that athleisure trend we watched is not rolling over but maybe plateauing >> i think athletic wear, which is more apparel or footwear worn to go work out in, which people started wearing for casual wear for a while, which now has turned more into athleisure, though, which is more fashion hp based athletic wear, which you wouldn't really wear to work out in, still popular. i think nike can play in that area lulu is better at it, but nike can be fashionable, which should help them, but i think consumers are wearing more denim now we're seeing a denim fashion cycle starting to occur with the retailers such as american eagle doing very well with denim sales off the charts so i do think the consumer is shifting more into that area >> randy, you mentioned you like foot locker.

you also like under armour over nike you see the upside, the value there. >> under armour had a tough year nike had a tough year as well except for the end of the year where it really ripped under armour is a brand here to stay and it's in a very good category of athletic apparel that it's long-term growing and has little competition so why play nike at 25 times earnings with a huge market cap when you can buy under armour that got hurt last year, down 50%, with the mark cap today of - >> the multiple on under armour is so high >> a little misguided in sense that the operating margins came down the sales slowed if you believe it's a long-term grower, you want to buy the under armour stock today >> randy and susan, our thanks to you >> thank you let's get over to sue herera and get a news update at hq. >> good morning, carl. good morning, everyone here's what's happening at this hour bullish market sentiment decreases to 61.9% from 64.1%.

that's according to the latest u.s. investors intelligence poll the survey finds nearly 23% of those polled now expect a market correction >> amazon said it shipped more than 5 billion items worldwide through its prime service last year the e-commerce giant reports its fire tv stick and voice assistant echo dot were the best sellers. >> in the real estate market, the office vacancy rate rose to 16.3% in the fourth quarter. that's up slightly from the prior year the first increase in five years. and they're watching that closely in big markets like new york, miami, and los angeles >> and forget snakes a very disturbing story this morning. a rat on that plane. an alaska airlines flight from california to oregon was canceled after a rat jumped from the jet way onto the plane oregon is a nice place to go maybe he wanted to go to oregon. passengers who had boarded got off the plane. the airline took it off of

service until an exterminator can certify it as rodent free. that's the news update this hour back downtown to you, carl >> all right, sue. thank you very much. >> when we come back, pershing square's big acumll ackman makia bet on himself we'll tell you what has him so bullish. dow is now 96 points away from 25k. "squawk on the street" continues in a menomt.

a little more than an hour into trading with the dow at 24906. now for a look at what may be the big market trends in 2018. bob pisani is on the floor with the spotlight. >> the big question here is are we going to see some correction in the year, and that will change the course of investing in etf let's look at the trends the story is basically out of mutual funds, into tfs and out of active management,

stock picking, and into index funds. and generally, out of higher cost things like mutual funds and into lower cost etfs, particularly index funds a lot of people are trying to game the market now. that's the hot thing what happens if we get a 10% correction what would do well so a couple of areas people are looking at right now number one, low volatility might make a comeback if we had some kind of decline in the market. number two, active management might do a little better because people who are betting against it would do well this is true so here's a couple of ideas. low volatility etfs were popular a little while ago they tend to -- there's one, splv, that's the biggest one they tend to invest in consumer names like coke and hershey and utilities. defensive def is another one out there, similar flavor. not outperforming the market because growth has done better this year, but if the market slows down, low volatility will have a shot. i'm a little less sure about the idea of stock picking making a

comeback you know stock pickers have had a dismal record in the last several years. take a look at what happened last year in the middle of the year, the last time we had numbers for it, the percentage of managers who underperformed their benchmarks, 60% underperformed the s&p 500 60% of mid-cap managers underperformed the numbers are terrible, and this was a good year last year a lot of people argue, if suddenly the market slows down, people who are actively picking stocks will be able to do it maybe. here's the problem they don't have a good record doing that and number two, there's not a lot to buy amongst etfs, you can get tot, the gun locks fund that's a bond fund pimco is another really big one. the money market fund. that's really a short duration fund with a kicker in it. again, sort of very defensive, and you have ishares short maturity, another one that's largely a bit of a money market fund with a kicker

there's not a lot of big stock picking etfs out there, a few like dorsey right aacr would be a symbol there they base on strength. not a lot to buy if i were most people, the passive investment strategy has done well for the market in the last five or six years. >> bob, all that true, but isn't the etf industry redefining what passive is it's not a pure traditional index you're investing in, it's kind of a low-cost strategy. you set out some of those in your report. i wonder how far that can go now. >> yes, you can do active -- you can do low-cost active management and if they get that sufficiently down in price, down towards say the 30 basis point range, certainly as 40 basis points range, you can say here's active stock picking and the market changes and the pickers do better, the assets under management are going to go up. so farl, though, you have to

admit, it's pretty modest. outside of the pimco funds and gun locks fund, there's not a lot to buy in the active management space >> certainly not active as we traditionally talk about, that's for sure thanks, bob. >> pershing square's bill ackman is making a big bet on bill ackman leslie picker joins us with the details. >> that's right, bill ackman along with a group of pershing square advisers and senior executives announced a plan last night that would increase their ownership of the firm. pershing square revealing a potential tender offer up to $300 million by the management team, who believed the firm was, quote, undervalued remember, pershing square is publicly traded in both amsterdam and london and has been trading at a discount to net asset value. something that prompted the firm in april to begin a buyback program of up to 5% of the shares outstanding that program would be suspended in lieu of the tender offer. while pershing square shares are trading higher today, at the end

of 2017, pershing square's price on the euro next was about 21% below nav per share. now, some investors may argue that discount is warranted after a rough 2017 for pershing square, acuman took a $4 billion loss after selling his stake in valiant in march then in november, he failed to obtain a single board seat after a contentious proxy fight at adp, and last week, pershing square egreed to file a lawsuit for $194 million, reducing pershing square's performance by 132 basis points pershing square was down 4% in the year, making 2017 ackman's third consecutive year of not just underperformance but negative returns, guys >> those are some sobering numbers, leslie. what a story we'll be watching that closely leslie, thank you so much. >> when we come back, new year, no relief. retailers may be bracing for another tough year ahead as a

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shares of netflix and disney surging as the new year kicks off. so should you buy into these stocks good question. find out the answer at tradingnation.cnbc.com more "squawk on the street" coming up.

welcome back we have a little news on spotify. seems that the company is getting one step closer to being listed publicly. axios reporting that the company in december filed confidential plans for an ipo, and spotify has been in the process of doing a direct listing this would be a non-underwritten offering no road show, no traditional ipo, just a list of private shares of spotify on the public

exchange so insiders and other early investors can have liquidity. axios reporting that process has moved ahead a little more. >> a lot cheaper in terms of no fees to invest in banks. >> cheaper fees. some say it shows a reluctance on the part of spotify to play the game >> they're saying q1 listing, which is interesting giving the timing of the lawsuit. >> already one of the best capitalized private companies out of europe, and has been for a long time. >> seems like the private investors, they have provisions that are basically forcing the public listing yeah, you have to figure that will be one of the risk factors. >> a $1.6 billion risk factor. >> meanwhile, let's get to the cme group in chicago rick santelli is there >> hi, mike. thank you. i would like to welcome my guest, bill isaac. former fdic chair. bill, thanks for taking the time >> i had that in my earpiece, but i don't know if it went out.

>> that's okay, bill okay, bill, you wrote an article in american banker, i believe, in november, talking about congress needs to intervene. we need small dollar business loans to get juice today in the "wall street journal," there was an article i believe by rachel enson talking about business loans fell off a cliff at the end of last year. now, i know that the consumer financial protection bureau's new leadership in the form of mulvaney and we passed a tax package. you know what? i think my guest is having a problem. we have to go back to mike we'll come back in a bit with bill isaac >> we hope so. wee into t'rgog ake a quick break. "squawk on the street" will be right back

let's get back out to the cme group in chicago rick santelli is there with his guest and the santelli exchange. >> thanks, mike. bill, we're going to give it another try. whether it's small dollar business loans or big business loans that fell off a cliff at the end of 2017, you know, is there going to be a way for businesses to not only use the savings from the tax reform but are they going to change relationships, find a way to interact more with the banking system in your opinion >> well, i sure hope so.

and particularly, rick, the small dollar loans which about two thirds of the population of the united states cannot qualify for prime bank credit and so we have really got to figure out what we're going to do to help people out what we'r do to help people in the lower two-thirds of the economic ladder they cannot get lending right now. the cfpb, consumer protection bureau has pretty much shut down payday lending and other types of short-term lending. the banks don't do it because it's subprime and regulators haven't been too enthusiastic about it in fact, they have been pretty negative it's really to me a really serious problem we need to address as a nation. >> now, mr. mulvaney has taken overhead of that bureau. do you think that will make a difference, bill >> i think it will i certainly hope so. i believe that we need to do a lot to get the financial system to be responsive to the needs of

lower and middle income people it's really dangerous right now that these people have been shut out -- two-thirds of our citizens have been shut out of the credit system. we've got to fix that or we're not going to have a very sound economy for very long. >> let me go in another direction real quickly freddie and fannie they are like the engine light that's on but you ignore it. are we ever going to address functioning of gses just because they are ignored and seem to be humming along a bit doesn't mean all is well. your final thoughts, sir >> we've got to fix them there's no doubt about it. we've put off this for the last decade, the problems inside 2008 and 2009 it's now the time, it's pastime. we've really got to fix fannie and freddie and get them under proper regulation, which we've been doing and getting them back into their function as primary lender on housing programs in

the country. i think it's critical we fix them there is a study out that has very good suggestions and a lot of people areworking hard on it. >> i'm out of time hopefully the president will address it in 2018 thank you for your thoughts. carl quintanilla, back to you. >> rick, thank you rick santelli. time for sector sort we'll get to dom chu. >> check out what's happening in technology, the best performing sector in s&p 500 as we hit record levels across major u.s. indexes. you've got shares of amd and ibm. check out stocks not in the s&p. blackberry and baidu after collaborating on self-driving car technology blackberry one of the best performing stocks in the north american tech, igv we'll keep an eye on those particular symptoms. we'll send it back to you guys, mike. >> dom, thank you very much.

trouble ahead for retail despite better than expected holiday shopping season, new report from cushman and wakefield, a number of u.s. store closings expected to jump 33% to more than 12,000 this year adding another 25 major retailers could file for bankruptcy in 2018 let's bring in ceo whose company owns 63 malls around the coun y country. let's start with that, would you dispute the idea there remains intense pressure in terms of a lot of change, a lot of store closures and therefore malls under some more pressure >> absolutely. i would dispute that 100%. we started this year on such a good note. we had a great holiday season. i don't see anywhere near the level of closings we had in 2017 we feel like we've got a stable retail backdrop, a good economy.

the tax breaks will help in terms of the retailers being on more stable financial footing. so we feel very encouraged about what we're seeing for 2018. >> you also within your company have disposed of some malls. you've been working to kind of manage this issue with vacancies and some retailers that have gone into bankruptcy here. do you think you're free and clear of those issues or the industry in general is not going to feel this kind of pain? >> i think it's both we've done a lot of work in terms of dispositions, and we're also using this as an opportunity to bring in different uses we're doing a lot more with restaurants, entertainment, service, fitness only 25% of our leasing for the first three quarters of 2017 was with traditional apparel so we're really transitioning the types of uses at the mall. it's really happening not just at cbl but across the industry >> all right dana, how would you character

how the anchor tenants in mid market malls are doing that's where cvl is really focused? >> i think overall what we're seeing from anchor tenants, they are reinventing themselves i think they are going to be different anchor tenants as some anchor tenants have closed, whether it's bringing in experiential tenants or movie theaters or department stores reinventing themselves we're going to hear about them expanding categories or diversifying their categories of use. there's change the weakest retailers are the ones that should be going away the strongest retailers and those improving themselves look to 2018 as a year that's on better footing than 2017. >> how long does this transition take, steven in the months of december you had a slew cut wagts to underperform you took down full year guidance substantially, cut your dividend by 25% investors want to know when these rosey predictions are

actually going to materialize here. >> we purchased last year five buildings from sears, macy's, working on those and expect to make announcements shortly it's definitely a process. it's not a fast turning business but we're taking advantage of this opportunity because of our financial strength and our investment grade rating, and what we've done in terms of preserving capital, we've got the resources to make these changes happen >> dana, you know, there's sort of recasting of malls is something different, lifestyle and everything can we expect something similar in sales per square foot that seems to be one of the inside for the landlord here not that people aren't coming for anything, they might just not be spending enough on the property. >> one of the things we're seeing, you may see consumers making fewer trips to the center but when they do go to the center, the conversion is higher because the trips are planned. the other element of what's going to happen this holiday

season when companies report, buy online, pick up in store is becoming even more relevant today. so don't forget that gift card attachments when consumers come and redeem gift cards, we're going to see higher sales from those gift cards. >> all right we'll look for that. dana, stevphen, thank you very much for your time this morning. >> thank you. >> when wecome back, world iaders taking to twitter. ist time for them to be banned from the social media site we'll talk to it them about it with walter isaacson next.

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