now. ♪ live from new york where business never sleeps. this is "squawk box. >> good morning, welcome to "squawk box" here on cnbc, we're live at the nasdaq site. lee is out today, but our guest host is shark tank's kevin o'leary, bringing some wonderful to the set this morning. and a lot to talk to mr. wonderful about. >> most wonderful time of the year. >> how appropriate. >> and mr. wonderful is here >> we are going to get back to mr. wonderful and all of that in a minute, and specifically, we're going to talk a lot about the fed and the fed decision i want to show you what's going on in the markets right now. as we get set for the market day, after this big fed decision, u.s. equity futures look like they would open lower, off, we'll call it about 50, 51

points s&p would open down about 8 points and the nasdaq would open down about 13 points let's show you treasury yields as well, after extending, well, the markets extending those losses from yesterday. a bit disappointed 2 pn 2.767. we want to show you what's happened overnight in asia tlooe at least on this side of the atlantic been sleeping, the nikkei down 3% hang seng, not nearly take the same kind of hit european equities, also showing red arrows across the board. the biggest hit to the cac, and the italian ftse is down a little bit it's not a great situation >> not right now it's not terrible. especially after yesterday's market action. >> still early >> what? >> it's still early. >> i know. a lot can happen.

>> it can get terrible we have time >> we were off, what, more than 300 points at one point in the day and completely reversed that. >> i watched in just horror. i was hopeful yesterday. i was hopeful. >> you thought there was going to be? >> i was hopeful for a one and done, and then we don't get any big updates but slowly stabilize with the idea that maybe it was, or that, you know, what, we're totally data dependent we'll see what happens next year that's not what we got ask kramer, it was like he learned nothing since he spoke to judy woodruff. >> in the middle of the press conference, and you can watch the trades on indices. it's not going to be three, it's going to be two. what the hell is that, that caused chaos on every indices. >> it was the comment on the balance sheet specifically during the press conference. in fact, take a look at how the markets reacted when fed chair

jaye powe jay powell was talking. >> many expected that economic conditions would likely call for about three more rate increases in 2019. we have brought that down a bit, and think it is more likely the economy will grow in a way that will call for two interest rate increases in the course of the next year. the runoff of the balance sheet has been smooth and has served its purpose and i don't see us changing that. from this point forward, we're going to be letting the data speak to us, and inform the outlook. political considerations have played no role whatsoever inou discussions or our decisions about monetary policy. nothing will deter us from doing what we think is the right thing to do. there's, you know, a mood of concern or it's a mood of angst about growth going forward if i could just capture it in a one thought. >> he was saying it was going to be twice >> what happened today that dependency why guarantee two? >> that's my point

>> he did say data dependent he did but it was the balance sheet that wasn't going to be data dependent. >> it's inconsistent on the two, plus, no, maybe not a third, and the balance sheet runoff he said he's not going to change that. >> we had jim karyn on yesterday. he said it was fine. he said everything he heard from powell was basically saying, all right, we're aware there may be some weakness and we're going to be data dependent. other people saw it, and you really didn't learn anything from the last time did you think the fed could overshoot at 2%? i used to think no now i think they can make their classic policy mistake where they're taking an economy that's doing pretty well, and they actually don't need to, and in hindsight, you could look back and say, you know, this was powell's policy mistake. that may happen. >> what i heard is 50 bips more come hell or high water. i'm a seller >> it's based on models again.

right? >> which is it that's my question which is it? what did you finish with yesterday? >> based on data not models. >> then why guarantee two? >> i listened to the whole press conference i don't think there was a guarantee of two >> i heard expectation of two. >> an exceptation pectation of . think of how far they have come from september or october until now. there was a real acknowledgment that he was looking at what was going on in the global markets we didn't hear that much before. we heard effectively the fed is going to do its thing. we're not responsible for what happened. >> what are you giving one out of five on press conference skills right now >> bad and not only that, i used to think, i mean, i flip-flop, i admit it i used to think the dual mandate, i didn't like the full employment part of it. i like the price stability now they think they're looking,

there's no, you know, inflation does not seem to be a problem, so now they'it looks like the em might be weakening and they're fighting inflation when we don't know whether that's something they need to fight right now. >> is this about style points, about speaking. >> you think janet yellen had a lot of style >> we lived with the allen greenspans who not only were boring were so obtuse, you wouldn't understand what they're saying. >> that's better >> this guy, at least, actually says what he think the you may not like what we thinks. >> he reinterpreted the official policy that's what i heard. he basically added his own spin to it with that extra two. that bothered me. >> the two, i'm not disagreeing, the two and the emphaticness of it all. >> so the stock markets are spoiled brats, they want rates to stay low. how does he know that it's not signaling housing weakness or

auto weakness or global slowness or weakness in germany or china. how does he know this volatile stuff is going to allow for two more hikes he doesn't why say he's going to wait and see. >> that's for sure >> social securiisn't that a de and see. >> it's built into the market so it's not that's the problem, and then it becomes a self-fulfilling prophesy >> let's talk to some experts, i guess, for more on the market reaction let's bring in tally jay and also joining us matt thoms from voya. you're not a rabbit or a squirrel, are you, matt? >> i am not. >> i get confused. talley, you're listening to all of us armchair quarterbacks talk about this was it a mistake yesterday was the market going to go down

no matter what because you can't please all the people all the time >> when we take a step back, we have to recognize the selloff began in september the fed just exacerbated the draw down, but look, i think some people are talking about a dovish hike in that the fed lowered its glide path from three hikes to two hikes i think it's going to be a challenge for it to stick to the two hikes, and look, andrew, you said that it's priced in the markets, i kind of disagree. i see a big gap between fed projections and where the market is. >> my anxiety is the market is going to get there. >> i think the fed will converge they cut to two. i think it's going to come down even more. i think the fed needs to back off before they make that policy error. >> i can't believe you can make a policy error at 2 1/4 to 2 1/2. >> this is on top of qt.

we have double tightening here. >> i know. >> matt, what do you think >> making a policy error is about movement, not levels, if you get to 2.5 from 0. that's 200 basis points of incremental tightening you can make a policy error at any level. the mistake yesterday was the word auto pilot in our estimation it means the fed has a predetermined course and we know what the predetermined courses look like when they end. that's the scary word. they have to adjust that and take into account all of the hiking they have done in future policy he didn't say that that was the mistake >> now we're down about 37, but talley you said it started in september. you don't tie it to the time when judy woodruff interview where he talked about being a long way from neutral, you don't think it was kind of coins dental with those comments

markets correct from time to time. >> right i think it's tight financial conditions look they have been raising rates since 2015 four times this year precisely. but we're seeing a sequential slowing in economic growth in response we started the year at 2%. we went up to 4. we're at trend about 3.5, and the atlanta fed's tracking model is a 2 handle. you mentioned yourself inflation is slowing in part because of the strength of the dollar the argument for continued aggressive rate hikes isn't there. >> see, that's the thing he almost seems stubborn to me that it's hitting him over the head that maybe you could have said data dependent, right >> i wish he said, look, i want to bring on 50 more basis points for one singular reason, to protect us in the next downturn, i want some ammunition

instead we got, i think, chaos, and you saw that chart you brought up earlier in the runoff which has already been predetermined. nobody suggested he was going to change the runoff pace that was not part of the discussion the only delta was the idea that i'm going to hit you with 50 no matter what happens. >> and now we are going to obsess over this the next three months >> every minute. >> we're going to, like the next six weeks. the end of january >> we're not going to say anything we're not going to know what he's thinking. >> i don't intend to make this political. and i thought that a little bit of what he was doing was trying to say i am completely independent. i don't care what the president -- >> i thought there was this sort of emphaticness about everything he was doing. >> we should erase 50 billion in market cap for that? >> no, but i'm just suggesting that i think he's taking this sort of political cloud of all of this much more seriously than i thought he was. >> a lot of people have joined trump in saying that it's not the time to raise.

>> he was very clear >> i know. i'm saying this almost was that. >> as a reaction. >> i don't mind job owning trump but taking ydown the market to show you i can do what i want. >> what happened to that, they must be in those meetings, like you, kevin, doesn't have any hair to pull out, but they must be pulling their hair out. sorry, talley. i don't want to leave you out either. >> i'm going to grow mine back >> can you >> whoever does that, that's a shark tank deal right there. i'll invest in it. >> so matt, i thought that the equity market was trying to find a bottom at 25, you know, 2,500 on the s&p can it find a bottom now that we're totally sort of, every little bit of body movement that they make from here on out we're

going to be interpreting either positively or negatively, can we make any headway >> i think you need a statement. i think that the fed -- >> i didn't mean what i said yesterday, sorry i screwed up. >> the ft, the "wall street journal," i think you're going to need some leak that they have opened the door and they will adjust as they go forward. it's not on auto pilot, that's the most dangerous word. i do think it's salvageable. but they have clearly left the markets to the holiday, concerned about something. there's too much to be concerned about globally already on growth we didn't need to fight the fed ad as well. it's correctable but it will take a little bit of time. >> i hate to be to satisfy the spoiled brats, the traders in the market you remember when qe was ending, they had a temper tantrum. they're going to sell the market off when they don't get what they want. >> the credit spreads did not blow out yesterday, which generally are confirmation of

chaos head into a recession, but the ten-year plat, you have to look at the, bbb and below, we didn't see moves on the chaos. >> the cash credit markets are nearly closed for the holidays liquidity is quite low where you saw it is in liquid trading and that moved substantially down a whole po t point. i think the bond markets will not like this. >> no more optimism out of me. >> the house is not burning. we don't need that on this show. we won't allow it. talley, world is ending, what are we going to do >> given everything you said which sounded pretty bearish, i'll highlights positioning is lopsided, sentiment is really washed out, we've got a preponderance of bears >> you don't run a short fund.

>> i'm making tactical statements, too, and all of this stuff helps. >> it's a short-term rally and a weak trend >> that's fair look, i would say longer term, if we're right that the economic expansion continues and look, 3.5% economy is far from recessionary leading indicators of business activity are strong in the ut.s, despite the fact that they're behaving like it's a recession, i don't see it here. i think this could be a buying term. >> thank you to talley leger and matt toms, voya investment strategist we needed a fixed income voice today. we are following a developing story out of washington the senate making a move overnight to avert a government shut down, passing a stopgap bill that would fund several funding agencies through february 8th the bill does not include, this is important, the $5 billion in funding for a border wall that president trump had demandedment

the bill will now -- demanded. the bill will now go to the house for passage, which will need president trump's signature before midnight to avoid a partial government shut down fingers crossed there. we have an update, the tokyo case has not extended the detention of ghosn he was arrested, charged with overstating his income the court had been widely expected to extend ghosn's detention. it is unusual to grant bail to suspects who insist on their innocence. appeals are exhausted and bails granted, ghosn could be released tonight but more likely the middle of next week. reute reuters is reporting that nissan and renoux those efforts were abandoned. a lot more on squawk this morning. two corporate stories involving beer, cigarettes and marijuana that's next, plus we're going to talk about the big business of the ski season the ceo of telluride is going to

be here and join us after the break to talk about vacation trend, consumer spending and shredding it as we head to a break, he's a look at the biggest pre-market winners on the dow

altria is reportedly closing in on a 35% stake in juul labs sources tell cnbc that altria's board has approved the $12.8 billion investment, valuing the e-cigarette maker at $38 billion, more than double the valuation the company fetched in july during a private funding round. premarket at altria not much happening there. up a third of a percentage and a beer giant is making a bet on marijuana. ab inbev is teaming up with one of the fastest growing canadian cannabis companies, tilray labs. a lot of alliteration.

anxious anchors. both companies will invest $50 million to research and develop nonalcoholic beverages containing thc, the active ingredient in marijuana, and they will work on drinks with cannabidiol. cbd. >> the biggest thing going right now. >> great >> which is being touted as a treatment for a wide range of conditions the partnership is limited to canada where recreational marijuana is now legal they are using the labat brand for the venture. spiking more 14% ab inbev is down >> this is on the heals of their announced venture with novartis, and in jurisdictions where it is legal. so tilray has had quite a week, and we have the ceo of tilray to talk about the joint venture with ab inbev on power lunch.

>> it seems like the hottest thing going. >> i have a lot of questions i can't wait to ask about the schedule one issue cbd on its own without 1 or 2% thc delivery model, there's debate about whether it's effective. that's why i can't invest, and it makes me mad. >> interesting meantime, let's talk about skiing this makes me happy to talk about skiing one of the biggest weeks of the ski season is upon us. before he hits the slopes, bill gener jensen, you got pounded with snow this is a good thing. >> we have had a great start to the season, and there's more snow in the forecast around the holiday. >> what's the expectation in terms of what you think is happening with the consumer in america today given the fact that we have debates around how strong the economy is, what the fed is doing, what kind of wealth effect the stock market may have created or is taking away >> this season i think we're

really looking for a strong skier economy, and with the advent of the epic and icon pass, the consumer is really winning right now in the ski market. >> can we talk about this? i just subscribed to the icon pass you guys hooked up with the epic pass this is what i call the all you can eat sort of netflix model for skiers explain the economics of this. i know the goal is to get people to the mountain more than anything else. but i did it, frankly, i have done the math, the sorkin family is going to save a lot of money using the icon pass and kwoowe' going to ski a lot more behind it. >> that's the intent behind it there's two strategies, a regional strategy near population centers where there's a day market of skiers that's a volume driven strategy. the second is for vacationing skiers or destination skiers destination skiers spend about five times as much per day versus a regional skier, so

there really is two games in play here within the industry. >> so the real money i assume is in the rentals, the food, the ski lessons, all of that. >> the lodging, everything that goes with it it really results, the average family on a destination vacation spends somewhere between 10 and $20,000 where a day skier may only spend a hundred dollars. >> can i ask you what percentage of the industry does the all you can eat pass now versus 20 years ago. i never went anywhere unless i called ahead and said, look, what's the know like if there's no snow, particularly in the early season, december period, i don't care what the pass price is, i don't want to be sequestered in a motel or hotel or resort and do nothing how much is it you risk, 50 or 60% of the revenue goes into all you can eat? >> no, not that much i would say somewhere between 30 and 40%. >> but you wish it was a hundred

percent. >> i wish the industry wishes it was a hundred percent because it's an insurance policy against weather and snowfall. >> what's the economic model, let's say you spend 7 or $800 on an epic pass and i go to your mountain for four days of the season, and i end up going to vale for a couple of days, and is killington on the icon or the other one, and i go to a couple different ones, how much money do you get for the fact that i showed up to your mountain does everybody get the money how does it get split up >> on the epic pass in our relationship or our aluliance, e get a per scan payment from vail resorts. >> so traffic matters in this deal, this isn't a guaranteed nfl deal, right? >> this is not a guaranteed nfl deal, so traffic does matter. >> but a day pass would be, what, 90, $100 a year? >> we're 139. >> 139

i'm sorry for underpricing you what's telluride what is the epic pass system effectively pay you out? sfl s >> it pays me out what a skier would purchase a five or six day lift ticket, which has a discount, it pays that equivalent >> you know the rental, the food, the alcohol. >> we as the resortgain all of that, so our alliance with the epic pass at telluride, i believe it will have a 5 to $6 million incremental revenue impact on the telluride community? >> how many more people do you think are going to be on your mountain this season >> we believe with the epic pass holder that can come to telluride will represent about 5% of our total business. >> what are you seeing in general traffic, what's your sense of the economy just quickly? >> i think we are all concerned, just like you guys are watching it right now, our skier comes from an affluent household, and

day-to-day decisions about spending may not be as significant as perhaps somebody that would be in a regional market >> okay. te telluride's bill jensen, good luck on the slopes are you going to ski this weekend? i've skied a dozen times this year >> how many days do you ski a year >> 50 days a year. >> it's part of the job. >> the snowboarder never took over >> what's the percentage, do you think? >> depending on the region of the country, obviously higher in colorado, telluride, it's less than 10%. >> there are places they are not even welcome >> skiers hate the board dudes. >> i do. i hear them coming down behind me oh, my god >> there are places that don't allow boards deer valley, there's no shredders. >> it's hard to find a place >> knuckle draggers. >> we got to go, guys.

>> you would be very happy at telluride. >> if i could get there. we'll talk to the ceo of a company that's been keeping offices running smoothly for more than 100 years. abm industries will give us his read on business and the economy. abm stock rebounded from a 52 week low, stronger than expected earnings as we head to break, take a look at yesterday's s&p winners and losers at fidelity, our online u.s. equity trades are just $4.95. so no matter what you trade, or where you trade, you'll only pay $4.95.

fidelity. open an account today.

you'll only pay $4.95. not long ago, ronda started here. and then, more jobs began to appear. these techs in a lab. this builder in a hardhat... ...the welders and electricians

who do all of that. the diner staffed up 'cause they all needed lunch. teachers... doctors... jobs grew a bunch. what started with one job spread all around. because each job in energy creates many more in this town. energy lives here. this is a tomato you can track from farm, to pot, to jar, to table. and serve with confidence that it's safe. this is a diamond you can follow from mine to finger, and trust it never fell into the wrong hands. ♪ ♪ this is a shipment transferred two hundred times, transparently tracked from port to port. this is the ibm blockchain, built for smarter business. built to run on the ibm cloud.

welcome back, you're watching "squawk box" live from the nasdaq market site in times square good morning, i'm andrew sorkin, along with joe kernen and melissa lee. the song we are playing is for mr. wonderful. he's here. >> i'm honored and i'm moved. >> i'm not sure you realized what the song was for a minute. >> wonderful time of the year. you know the responsibility i have being mr. wonderful i have to stay wonderful all the time it's not easy. >> calling you that is like calling you curly. >> there's truth in advertising. >> dow is up, andrew. >> equity futures at this hour

after the big decision, and some words from jay powell that have been spooking the markets. right now, maybe not spooking it the way it did yesterday dow looks like it's opening up one point higher we just went into the red. >> sell it it's wonderful >> in the mr. wonderful way. >> it's going back down as you talk. >> it's flat, guys. >> shares of newell brands, carl icahn increased his stake, now owns just under 10% of newell, adding four new board members recommended by i cahn. new orders rose 11% on strong demand across al of its products they make cool chairs and stuff. >> it's office

maybe that's good. i'm looking for anything. >> high end office. >> maybe businesses. what do you think, just put in a big order for chairs, how does this happen? >> armless chairs, so we don't slouch, although i still found a way. >> hasn't worked really. the next guest is a ceo of a facilities company that started in 1999 as a window washing business now worth almost $1.8 billion joining us is scott salmirs, ceo of abm industries. >> thanks for having us. >> your company provides critical services to various commercial spaces, airports, office buildings, et cetera, what are you seeing in terms of demand for your services and how is is that a read on the economy? >> we have great services. this year was our highest revenue growth year. as companies are expanding, we're expanding with them because of our national footprint. we love a strong economy. >> i mean, what are you seeing in terms of driving that demand, and how are you feeling on the cost side? because wages are going up >> yeah, and i think that's what's driving the demand

because people want efficiency so much of today is about work force management, so companies like us can do it efficiently, whereas there is still a number of companies, educational facilities that end source their labor, and they are looking for outsource alternatives that have expertise and that has been driving demand for us. >> how long is your contract if i were to use you as an index to look at the economy, do i tide you for a year, a month because you're going to reprice as the economy goes south. i'm going to get a better deal so how long is the contract? >> typically three year contracts. >> so that's not a perfect index. you've got people locked in regardless of what happens to gdp growth >> that's right. we constantly have conversations with clients about pricing and the economics of what we're doing. >> you mentioned something interesting and that is that, you know, facilities, airports, office buildings, they want to out source because of the wage costs, you have to hire people,

too, aren't you feeling it as well >> we are, but we're investing in technology. we are using beacon technology so we can dispatch people to planes that are arriving rather than looking at a static schedule, we can tie into the airport's systems for dispatch, and we can put people there efficiently. that's the whole thing, how do you utilize labor more efficiently, and that's something we expert in. >> the need for labor or bodies, before beacon, this new system, what happened and now, how many fewer people do you need >> that's what we're trying to do, become as efficient as possible, and you do that through technology and through good scheduling. there's a number of ways to do it, but that's what it's all about, reducing the cost to serv serve? >> was it five people at the gate, and now it's four people at the gate for an hour. >> it's about getting them there faster it may have been the plane was coming in at a certain point in time you would be there, but if it was delayed, you wouldn't know that now you can dispatch people, find out who's in proximity, and

push them there faster it's about being efficient. >> what percentage of your cap x is now software firm where technology is as opposed to where it was ten, fifteen years ago. >> we're spending much more on technology and innovation. not only just for how we're dealing with clients but even internally with our hr system and processes. >> you're not reducing jobs, you're just using these people more productively, that's the key? >>st that t that's the key. we're investing in hr platforms. you want to get people on board as quickly as possible in this economy with the way labor is going, if you're waiting two weeks to on board somebody, you've lost that person to another player. >> are they all union laborers because they're airport? >> we have a mix of union and nonunion. >> how difficult is it to find workers, blue collar workers are hard to come by these days >> it's really challenging. you have to be creative.

>> are you relaxing your standards, drug tests, things lining that. >> fortunately, we haven't at this point we background check all of our employees, we have a robust process. >> you're still finding them. >> not without challenge we have ad recruiters. it's difficult. >> scott salmirs, the ceo of abm industries. >> thank you. much more on the fed's decision to looks like, at least plan to hike interest rates, u.s. equity futures at this hour are up 15 on the dow the s&p still down in the red, but basically flat it could turn around, you know, at any moment. a lot of time between now and 9:30, and even more between now and four we're going to talk to the ceo of priceline.com about travel trends and the health of the booking business that's coming up at 8:00 a.m senator david perdue will join us to talk about the bill that would avert a government shut down stay tuned, you're watching "squawk box" on cnbc

what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.

a new way to save on travel. now when you book a flight you unlock discounts on select hotels that you can add on to your trip up until the day you leave. add on advantage. only when you book with expedia.

welcome back to "squawk box" a check on the markets this hour

after what had been a wild ride in yesterday's session in the green across the board, s&p 500 looking to be up by a 1/2 point. dow up 20 and nasdaq futures up 10 right now happening right now, russian president vladimir putin is speaking in moscow this is his annual year end news conference in the past he has answered questions from members o. media for -- of the media for more than four hours. no surprise the event lasts that long because more than 1,700 journalists are in the room. we'll monitor this and bring you any headlines as they develop. listen up business travelers, flights in and out of london's gatwick airport have been suspended for hours it's not because of weather this time it's because to drones were spotted in gatwick's airspace. flights into gatwick are being diverted to other nearby airports, including heath row. authorities have not been able to ground the drones or find out who's flying them, which is. >> this time of year it's more

of a problem think of how many drones are wrapped up under the tree. >> it's a little disconcerting. >> they have systems to shoot down drones. did you know about this? >> the little tiny drones that fly? >> they can shoot them down? >> not bullets but these electric. >> if that's flying there, it's because they have deactivated the geo locking. >> if you buy a dgi drone, they have gps coordinates. >> you should be worried if a drone is flying around an airport because somebody really has hacked that thing, nefarious to say the least, maybe. >> i think like there's a you tube tutorial on how to do it. >> don't give anybody any ideas. we have other news to bring you this morning, pinterest preparing for an ipo, the "wall street journal" reporting the social media app could finally go public as early as april. reportedly seeking a valuation of about $12 billion pinterest has more than 250 million active users per month, on pace to generate $700 million

in revenue this year that would be up 50% from a year ago. mr. wonderful, do you use pinterest at all in terms of marketing any of your products >> we do in the clothing area. we do use it all of these new offerings are going to be coming into a market that is going to be very skeptical. i don't think that will be an easy ipo i will not be buying that. i will be waiting multiple quarters to see what the free cash flows are, a long time before i own that thing. >> the president's up. >> he's awake. >> nothing yet on our radar. but talking about syria at this point, 53 seconds ago, and 18 minutes ago. it's about syria so far. >> it's got to be coming. >> we'll keep our eyes on the twitter feed out of pennsylvania avenue this morning. but gymboree may be headed for chapter 11 they could file for bankruptcy for the second time in less than

two years. they are seeking a loan that would give it the chance to keep some of its stores open while it searches for a buyer company has earmarked a hundred stores including its janney and jackie outlets. >> you want to buy any of this stuff? >> no. >> you know, think about it, there's other, if you think about deploying capital now, you can derisk yourself a lot with, you know, real companies with real cash flow that have generated a ton of money and are trading at 11 pes that were 17 only 90 days ago that's interesting >> okay. coming up, a lot more to talk about this morning more fallout from the fed's decision to continue hiking interest rates we're going to take strategy with paula hicky we'll do that next futures have turned positive a quick check on what's happening in european markets right now as well. back in a moment

at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react...

never do i do that, i never buy a frappe for $2.50 i drink coffee, one cup every morning. it costs about $0.18 to make it, and i invest the rest. every time i pick up something i'm going to buy, i say to myself, do i really need this. i don't buy a lot of crap. i buy good stuff that i need and i invest the rest, and it works. many fomc participants had expected that economic conditions would likely call for about three more rate increases

in 2019. we have brought that down a bit and think it is more likely that the economy will grow in a way that will call for two interest rate increases over the course of next year the runoff of the balance sheet has been smooth, and has served its purpose and i don't see us changing that. political considerations play no role whatsoever in our discussions or decisions about monetary policy. nothing will deter us from doing what we think is the right thing to do. there's, you know, a mood of concern, or it's a mood of angst about growth going forward if i could just capture it in one thought. >> that was the market response to fed chairman jay powell's speech in realtime at the moment, let's show you the futures. >> they were up by 18. and started running it again >> it's pretty funny, though

here it comes again. if you didn't see it yesterday >> now, it's come down even more the founder of the investment group, as you watch that, remember the blue dress, some people with the blue dress and some people thought it was the white dress. >> oh, right. >> what do you see >> i didn't know where you were going. >> it's really interesting that you bring that up, because if you just look at the prepared tax that he had yesterday. if you just read it, it was fine low inflation, subdued economies. >> if you read it on a piece of paper. >> on a piece of paper when he speaks is when the market got off it was the first conference talking about the yield curve, diminish be the importance of the yield curve was in october the offhand comment about the policy market-free

it's no surprise, every fed day, since he's become the chair, the market has declined on a fed day. and that's the longest sfre esei history. yesterday's prosecutors worcesss the worst day as far as the press conference >> do you think we're misinterpreting when his view is >> when you're being glib or offhanded comments what the market is reading, that's what the actual thoughts are whaern t rather than the massaged text. in september, we had strong earnings reports and we declined on the good news time and time again, we've been seeing good news and the market has been selling off that's the message that the market is sending that isn't a particularly positive one. >> so, how much damage has been done to the market at this point? >> the russell 2,000 has lost --

coming to the press conference yesterday, the financial markets aren't going to dictate policy the russell 2,000 completely levered to the u.s. economy lost a quarter of its value so if that's not going to cause you to have some sort of pause to your policy, what is. >> back to the prepared text, versus the press conference, in the modern-day fed as we have now, if you're going to give a press conference, i'm asking your opinion on this, why shouldn't he, if he wants to be transparent, continue to explain what he said yesterday, why isn't he here right now to explain? look, you're giving press, apparently, it's not going so well why don't you think he goes on the road to talk more about it >> i think they're showing signs, next year, they're going to do a press conference ever

every meeting. >> according to you, it's horrific >> well, the way it's been going, yes i think they're trying to increase some of the explanation. right now, there's a miscommunication, i think, between the markets and the fed chair. and when he speaks in he's off handed comments, we see weak market reactions >> you know, algorithms on text on what he was saying, you almost get paid to short the market when he gets to the podium now >> yeah. like i was just seeing, we've seen declines. fed days historically have been very positive. the last fed days, the markets have been down >> let's get from the philosophical to the practical, what are you doing about all of this >> so, i think we've had -- once we saw in earnings season stocks selling off on good news, you just have to listen to the message of the markets what the market is telling you,

it's selling off on good news and bad news so you have to take a more cautious stance until you start seeing signs of market rallies, we've closed in the lower range of the day for seven straight days. that hasn't happened since 2016. and the way the market has been closing, selling on strength, the ways, you can look at it, it's the weakest we've seen in this bull market >> what are some of the sectors, what are some of the stocks you're looking at most closely yesterday, i saw you were flagging amazon. a lot of technical analysts are looking at amazon and there's a huge air pocket and we could go down by a tremendous amount. we closed below 1500 in the stock session yesterday. that's sort of key >> with amazon, if you look at the long-range chart, it doesn't look like it's moving right now. you want to look for the stocks, the leaders on the way down. home builders.

semis, again and even some of the faang stocks facebook was one of the first to go down and see how that starts to react yesterday was a dad bbad day. watch that for the next few days >> thank you happy holiday. >> you, too. coming up, well, the market is selling off after the central bank rate hike yesterday the futures, a little open more on the dow at least. we'll talk strategy, after this. ♪

fed matters. investors still dazed and confused nearly 18 hours after

the central bank's rate decision and chairman powell's news conference crude crushed. oil prices plunge again. plus, trains, planes and automobiles. >> exit, okay, there's one back here and there's probably one over by t the wing, usually. the ceo of priceline swings by the set the second hour of "squawk box" begins now ♪ down holiday road ♪ >> announcer: live from the beating heart of business, new york this is "squawk box. good morning, welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site on times square with joe kernin and melissa lee. becky is off but our guest host this morning

is "shank tank's mr. o'leary, mr. wonderful. futures at this hour, we are up. >> by the way, it's been moving around left and right. >> it's just down again. >> do you want me to run it again? >> no, no, no. >> the dow looked like it would open up. moving around say, 60 points higher 70 points higher 40 points higher we were in the read an hour ago. nasdaq looks like it will open up higher, 20 points higher. s&p up 5 points higher we do have some breaking central bank news. this time, we're not talking about the fed. the d.o.e. holding rates steady at .75%. >> we should also note that this comes after the boj as well. we're getting all of the central bank activity today. much more on the fed, u.s. fed and global reaction in just

a moment but first, here are this morning's top headlines. wa the government is one step closer to setting down but president trump will sign the bill senator perdue will join us. in remarks in an wall news conference, putin also said that the u.s. presence in syria is illegitimate and there is a risk that islamic militants should regroup. tilray and ab inbev partner on the active ingredients in marijuana. the partnership will be limited to canada where edibles will be expected to be legalized in october 2019 each will invest $50 million in the project. and we have brendan kennedy,

tilray's ceo is later on the show >> would you like to hear what david tepper says, number one, merry christmas and happy hanukkah powell told you the fed debt is dead meanwhile the fed is still in typing mode. three, the net biggest issuance of treasuries and worldwide fixed income is coming next year something is going to get crowded out, bonds, stocks, et cetera four, oh, and there is this trade war question i think we should be having a fight with china on different issues, not conducive to confidence, freezing some worldwide activity, five, cash is not bad he says cash is not bad, but we

can play a song that's cash is not cash that's davit i'm going to send that over. >> you know, tepper, he's legendary guys, the last thing said, when i was young, i used to have large guts, in terms of trade. he'd use the different things. >> through the beginning of selloff to september to where we are now, earnings estimates next year up 7%, 8% on the s&p. i mean, this year is the best we've ever seen in small cap in terms of the companies i invest in better year ever when does this turn down when do we actually have the bad news from the actual cash flows because i haven't seen it yet. >> well, it's not now.

it's whether this is going to create that. >> the trajectory is still going up >> is that what powell says? >> i don't know, we're very negative right now in particular on the russell 2,000, boy, that's getting cheap. >> the russell 2,000, you want to buy here? >> not all companies >> the third are zombie companies. they don't have enough ebitda. >> that's not horrible >> we have a powell side adam clayton powell -- no, actually, we're not going to run any more >> we're going to run more we've got leisman coming up. >> earnings alert, we're hearing from the dow component, walgreens, eps on 1.46 and other stocks to watch, it's official, altria announcing it's

going to buy 35% of juul labs. wish i started juul labs >> i'm glad i didn't >> you shouldn't -- but it's helping -- if it's helping people. >> we don't know if that's the case >> instead of, you know, 10%, 20% -- it doubled the use. >> that can't be >> no, a delivery system for something that you don't need that you become addicted to. it's more nicotine >> i know. >> it can't be good for you. >> it's a $12.8 billion investment it values the maker at $38 billion. shares of al trtria up a little bit. and shares in hong kong as the u.s. prepares to lift sanctions on the empire of the russian businessman who i think is -- he's walking around in

switzerland sometimes. >> sometimes >> sometimes, we catch a glimpse of him he can be seen anywhere now. and spectrum pharmaceuticals down more than 30% this morning. the company says that its drug to treat certain types of lung cancer failed to get breakthrough therapy status from the fda. and that's designed to help expedite the view of drugs that are used to treat life-threatening conditions. we're at the top market story. yes, it is the fed we want to get to steve liesman. steve. >> andrew, thank you the question after yesterday, the fed hike sand strong selloff is whether it's the fed policy or the matter of trust in the way powell is communicating to markets. it could be it's anything more than a forecast of no rate hikes and the fed forecasting a recession and an immediate halt to reducing the policy but you wonder what the fed has done has convinced markets that,

first, the outlook is brighter than the markets believe and second, that it's a data-gedata data-dependant, not a promise. >> i think going forward, we're going to let the data speak to us and form the outlook. so there's a fairly high degree of uncertainty ofboth the path and ultimate destination of any further increases. >> fed chairman jerome powell took pains to describe this chart, essentially here's what it was 2017, the fed forecast two rate hikes. it did one because the economy ended up weaker. 2017, the economy basically came in on target last year, or this year, it ended up being stronger than expected they did one more hike, now forecasting two. here's another problem, powell seems to have a problem setting expectations for the market which clearly went into the

meeting expecting say more devilish outcome than what they got. they wanted one hike, or no forecast for 2019. instead, they got two. there was no chance that the fed was going to forecast one or zero next year that was never going to happen the fed has been steadfast with no flexibility in the balance sheet. more concern about the economy and it was, quote, monitoring developments here. and some of the markets forecast the fed would move language calling for further gradual rate hikes. instead, it was modified to say some further gradual rate hikes. i think the worry is that the fed has lost the trust of the markets or maybe guys it never really had it. >> it took a lot for you to do that we tried to censor you, too, steve. yeah, steve, that was something yesterday.

we didn't plant to play any more powell sound every time we play it, it seems like it goes down. i think you're right about that, steve. and i'm hearing from a lot of people that it just seems like he hasn't learned how to assuag the markets. >> the fed uses it to effect the policy and without that it can be do its job. >> did someone like jay powell want a meeting like this, or a morning like this, saying privately, this didn't work the way i wanted to work or it i don't really care what the markets think? >> i am of two minds to this because powell should have been and should still be the most market-attuned chairman we've

had among the three whom i've covered. he's in the market and worked at pimco. so, what do you do when you know the market do you follow the market's every bit of turn up and down? or do you say, you know what, the market does a lot of stuff and it doesn't necessarily mean anything you can have that attitude towards the market, hey, it's going to selloff today, what are am i going to do go in the bunker and get ready for the apocalypse >> you're an objective guy, you watch powell all the time. how would you rate his performance interpreting the printed release versus what he did. i'm talking about the 2% climb in practically every index in 60 seconds when he got into this. i'm going to give you two, not three. versus i'm going to be data

dependent. what do you give him, 1 out of 5? >> you know, kevin, i don't hear it that way, but the market does and the market is every wrong the way it hears the fed because it hears the fed the way itdoe and that's the way it reacts if 1 is the lowest number, i'm giving him a 1 he's not communicating to guys like you this data dependency thing. >> when i see you later today, i'm going to show you my phone on texts from people that i work with around the world. they freaked out >> kevin, i told you exactly yesterday and date before that what the fed was going to do. >> you didn't tell me this i thought, this isn't so bad now, i listened to him it got worse >> interesting, i told you they were going to go from three to two, i never told you one. i think powell has spent a

little more time trying to communicate with the american public than communicating with the markets. and i think you need to do the markets first. >> hey, steve, do you think we have new viewers from time to time you know we do, don't you? >> i do. >> so, you know the joke, if i take a single shot at you, i now say, nice dome, right? >> right >> and then i say the capitol building looks nice. >> plus the capitol, too >> and then you know what comes next, dome and domer >> i didn't know >> now, o'leary is here -- there will be a price to pay >> you're going to get me. >> and there's no goldman sachs joke coming. >> yeah, exactly we just heard from david, a few minutes ago, powell basically told you that the fed put is

dead china is plummeting and the fed is tightening mode and three, the biggest change coming next year something is going to get crowded out, bonds, stocks, et cetera and four, i think we should be having a fight with china. and there's five, worldwide activity, and five, cash is not so bad and there's a merry christmas and happy hanukkah in there, as well joining us, the chief equity strategy you know what we're talking about here you expected a hike. and then a dovish outlook, or dovish commentary. is that what you got >> i think we got that in terms

of the actual statement. i think what's happened is the fed is changing its forecast slowly the market changed its forecast very quickly and you've got this misalignment where the market wanted the fed to move as quickly as it did to recognize the weakness in the pipeline powell didn't give them that he sort of said, yeah, i'm taking the steps towards you, but i'm not taking the three or four steps that the market wanted that's the misalignment that we had. >> julian, you own stocks, you help people buy stocks you're like, you just can't believe this happened. didn't you think he was going to listen to cramer or trump or somebody saying, look, there's anecdotal evidence that is not going to happen. >> we recommended, too, that the fed not yesterday, yeah.

actually, there's a positive this morning the positive is in the currency market the dollar is substantially weaker and to us, that is the first part of the message that said yesterday may have been a knee jerk reaction to the press conference and in fact, we think the fed given the reaction is reassessing things dino hit on it this is all about the speed of things the problem with ignoring the consequences of the balance sheet reduction really tells you that the fed is not paying attention to the fact that financial markets correct much more rapidly on the downside, than they do in bull markets to the upside >> there is aninconsistency. jerome powell is going to go out there and say we will monitor developments and this forecast is open to others, data dependent, whatever you want to call it and then

saying the balance sheet, how can you have tightening on one site and not on the other? it's just an automatic >> that's a great point. i think there's two things one is, he did acknowledge, the tightening of financial conditions which i think is a positive but then saying, yeah, we recognized it the balance sheet, it was surprising how he dismissed that he was asked about it and then said it really doesn't matter, what was the implication i don't see how you can do that with how the balance sheet was being built up >> on the way up and on the way down, right? >> and on the way down, it's not no impact. if i'm a market participant and the article was pointing to that, you can't just dismiss that it's got to have an impact on the way down if it had an impact on the way up. >> i got a number six here, saying the fed doesn't care about the stock market within

400 spx points >> 400 >> yeah. and in quotation marks, it's the real economy >> ask him -- he said cash is not bad. what portfolio is in cash if he's short we've seen the amount of short in the market drop as we go into the end of the year. what do you make of that >> that's generalized deleveraging it's also -- it's been a terrible year for hedge funds, and, you know, frankly, you are making money on some shorts. but it's really difficult to press stocks that are already down 25% and are discounting a recession. we think now is the time to start looking at the stocks. the question is, when you look

at the stock market a year from now, is there going to be a recession? kevin talked about this a few minutes ago. the earnings trajectory is still there. this was the peak year but we're still going to get decent growth. the problem is, the fed needs to be cognizant of the fact it influences confidence here and that's where the tipping point is >> most mandates for 2019 require returns of 5% or 6%. you can't get 5% or 6% with cash what's you have do, that's why people pay you money to take risks. >> the message from the market this morning is that the dollar is weaker meaning in our view, there's only one fed rate hike next year. and in fact, thinking about it, we may be too high so, from that point of view, international markets look very interesting to us. very beaten up we also think if there isn't

going to be recession, some of these deep cyclicals, financials and dare we say, energy, look interesting. >> is anyone -- i mean, if -- who's the greatest fed chairman in last 50 years? wouldn't everyone say volcker. >> probably. >> probably volcker. is there any volcker envy that you suffer the springs and arrows of i need to do what i need to do what if it's the right time? what if you're trying to take the punchbowl away saying that's what the economy needs because that's the medicine? >> the power of the fed, the problem is, if they go offscript, i mean, you release the data to the market globally. not just domestically. globally

they read every word they talk to each other within seconds of it because you communicate that way, you can't say something different an hour later. it causes chaos which is what happened so, i would say you go back to feds that said to their staff and the team and the board, this is our message and nobody varies from this message. you don't reinterpret it in a press conference >> don't you think that board and kessler -- aren't they weighing in? >> in other words if you're going to give press conferences, keep giving them i want to hear explanation, i want to hear more if you're going to be that transparent >> didn't they talk about transparency, already, one conference with one meeting? >> no, we don't want it. i think that's a good thing. i think to have the fed chairman on every day would not be a good day. >> i'd like today to hear again what that was because that was very expensive, that cost a lot of money

>> why are you so convinced that he would walk it back today? he might not >> do you say in response -- >> i have only one question, i'm just a guy trying to scratch out a living, are you data-dependent or are you not >> data-dependent means they're walking back towards guidance. they're not giving us that forward guidance to tell us what they're going to do. >> we're going to get you a press pass to go to the next press conference where you can ask these questions at the conference >> do you want me there? >> i do. >> will you do a jim acosta if you go there >> not let go of the mike. >> yeah. >> i'm not a journalist, i'm a columnist, but i'd love to ask questions. >> all right thank you dino and julian. coming up a lot more on "squawk," oil prices down again today. we'll tell you why stay tuned "squawk" rur iju a mentetnsn st this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. welcome back to "squawk box. let's take a check of the markets right now. we're back to almost flat right now. we've been all over the place this morning s&p 500 looking to open lower by 2 points

dow up 5, nasdaq up 5 as well. all right, coming up, it's the season for travel. as you know, the ceo of priceline will land on the "squawk" set next, as we head to break, check out european trading at this hour we are taking a look -- >> that's the priceline ceo. >> yeah that is the priceline ceo. here's the futures if you want to cck thehem out, or, i'm sorry, the european markets are all red. you're watching "squawk box" on cnbc

♪ ♪ (buzzing) gather new insights, leave your data protected on-site, and put it all to work with ai. the ibm cloud. the cloud for smarter business.

♪ ♪ it's the most wonderful time of the year with the kids jingle belling and everyone telling you be a good cheer ♪ get that image >> no, no, we repeat, mr. wonderful, you can't unsee that it's too early in the morning. good morning, welcome back to

"squawk box" here. two economical reports due out in an hour's time. the labor report will beout. we'll also be seeing the philly fed index for december we're watching shares, dow component walgreens reported earnings of 1.56 a share also exceeded wall street's forecast walgreens also announcing a cost management program another dow stock, nike is out with quarterly numbers after today's closing bell nike is expected to post a profit of 46 cents a hai s a sh. that would indicate an increase 7.3% marijuana producer tilray announcing a venture >> one of the fastest brewer and

fastest growing cannabis company in canada. tilray and anheuser-busch with inbev. a treatment for a wide range of conditions this partnership is limited to canada where recreational marijuana is now legal ab inbev is using its labatt brand for this we intend to develop a longer deeper understanding of nonalcoholic beverages containing thc and cbd we look forward to beginning our work on this important partnership.

>> frank, thank you. >> thank you >> did you know that was going to be part of your beat, when we signed on to this, years ago, i don't know, the word is changld changeings we'change changi changing >> yeah, absolutely. people's drinks are changing too. >> beer is too filling for me at this point you know, anyway, tmi, i know. i get bloated, right >> yeah. >> i will say the first six beers go down really smooth for me anyway, our top market story this morning, the fed and global market reaction, we're hearing from david tepper this hour saying, one, powell basically told you the fed put is dead two, everyone is tight chinese money growth plummeting.

ecb cutting the last of qe and the fed is still in tightening mode. three, the net biggest issuance of treasuries and worldwide fixed income is coming next year something is going to get crowded out. bonds, stocks, et cetera four, oh, and there is this trade war question i think we should be having a fight with china on different issues butit's not conducive t confidence five, cash is not so bad and six, the fed doesn't care about the stock market within about 400 spx points it's the truly economy, stupid but if it is just the real economy that we're worried about, some other smart people talking about crude at 85 on october 1st. now it's 45. >> copper is at a three-month

low. >> copper has gone -- it's 3.30 in june, it's now 2.60 >> go, why is the $45 oil -- why is that so bad >> it's not bad. if it's just supply, it's fine >> it's a break-even point >> here's what happens, the bottom end of a junk market, they'll all go bankrupt to small players. and all of that debt takes over the equity then there's a consolation back to the big strong balance sheets and we have a low input cost at our economy of $45 the industry doesn't go away it means the big guys survive, consolation occurs and you love the fact that consumers don't pay too much for energy. i don't know why everybody is whining about this thing okay, energy is not the leader on the s&p >> well, we like it. we want to know why, if it's portending something bad. >> but it's a double-edged sword. if you had an economy that had

zero energy costs, wouldn't you like to live on that planet? >> no. >> why it would be great. >> i just can't get upset about $45 oil. i just can't whine about it. i think it's okay. maybe it hurts the guys that took bets on small capital okay they'll survive. bring me to $45. i'm okay coming up, the ceo of priceline on the travel big issues right now but first we're looking at equity futures brett keller, by the way, is his name >> there he is on the set right here. >> the dow furutes and s&p looks to open lower at this moment you're watching "squawk box" on cnbc

welcome back to "squawk box," joining us to talk all things travel. brett keller is here, ceo of priceline. good morning >> good morning. >> we've had raging debate about the strength of the consumer, the strength of the economy. you have a pretty good sense of where things are where do you think we are, the real economy, the one that david tepper says the fed doesn't

care >> well, consumer traveling, no doubt. if you look at what's happening over christmas and new year's break, we have more people flying, more people on the road and people cruises more than ever in history. obviously, the gas people want to drive and two, you've got new year's and christmas eve happening on monday you've got the break on tuesday. a nice four-day vacation >> don't you think people are leaving this weekend or leaving after christmas? >> thursday and friday are some of the biggest travel days today, and tomorrow leading into the weekend. >> into the weekend. >> yep >> talk about pricing. talk about margin. what's happening there >> well, on the pricing side, prices are up. if you're going to fly and prices are down on the

hotels, especially three-star hotels. >> i have a question, i attended your conferen a conference in las vegas, independent hotel owners, they're not loving you, they're taking 20% or 30% out of the margin that they used to make by aggregating their bookings they're trying to figure out, do i sell to a chain because i can't stay independent or do i have 75% of my profit removed by the aggregators like you. they're not in love. >> well, we've got hundreds of thousands on the platform. there's a fair trade happening with the properties. >> what is the new number? >> well, that blends, that varies by hotel. i'd love to share that with you, but that's top secret. >> got it. >> what i can tell you, these properties use us. listen only 60% of hotel rooms are filled they need suppliers like us. >> you say that consumers are

leaving $60 million on the table by not beundling their travel >> that's just on priceline. >> i'm the guy that buys the flight from the hotel. >> yeah, why >> in fact, most people buy separately if you really want the discounts, you need to bundle. just like with insurance, home and auto, you're going to save more same with travel >> talking about one of your competitors which basic i drives a lot of your business, too. we've been talking about digital privacy and the role of tech giants, i'm thinking of google i imagine you have a huge spend of advertising dollars on google they're obviously competing with you. how do you feel about that relationship we were asking barry diller on the expedia side of the world and he had harsh relationships >> well, we don't have have

harsh words for google google is very important to the ecosystem of travel. >> do you think they're eating into your business >> oh, sure, absolutely. but on the flip side, they're also an important part of our growth as well so, travel is a very complicated industry you've got supply. you've got intermediates and search engines >> how much do you worry about that search engine and effectively others trying to ape your business by being in your business >> we worry about it every single day listen, google is a very big player in the space. but we do things that they don't. we have great relationships with hotels, despite what you heard, relationships with rental companies and those relationships are get us to what is unique about our business >> are you using the google platform >> we are. >> have you changed anything

you've seen in the press that facebook is involved now >> we are in the interest of buying traffic that converts well on our platform >> it still works on facebooks right? >> it works, but not nearly to the extent of google >> as a guy who understands the airline business and hotel business very well as an investor, if you were say what is the airline that's killing you or the hotel chain that's killing you right now? >> you put me in a very difficult position with all of my partners that i work with >> i know. >> can you get me a signed album of shatner's new album >> "shatner claus" >> yes >> have you listened to it >> can't you get me something -- >> what do you want -- >> i love him. he's 88, 87. coming up stocks to watch.

>> thank you, brett.

coming up, wall street trying to make sense of the fed's latest move.

complete reaction when "squawk box" comes right back. this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. wall street is reacting to the fed's latest move and jay powell's comments. i'm reacting to joe kernin, coming back from a break mike santoli is here with his take on what is turning into the great debate this morning. >> yeah. so, 24 hours ago, i said that the market was at th

stretched to the downside. the reaction to me shows a couple of things, one is the market, the force of this downtrend, the threshold for what would have pleased this market is higher than we thought, than i thought. but also, the market is portraying itself as if it's in this need of greater rescue. because i think of this liquidity vacuum at the end of the year, association tso, the t psychology has worked its way into this way of thinking. now, once we get this reaction, now what is the big question for me we look back at this 2015 experience, yellen gets a first hike into the cycle, by two months later, she was acknowledging, yeah, i guess we'll do negative risk even with what fed has on paper right now, two hikes in eight live meetings, you're not going to hear about tightening month for another month. i think the focus on the balance

sheet, again, shows more of investors' acute sensitivity of a liquidity drain than anything day-to-day >> and the fact that we have basically no bounce, it seems like at veverted it's telling >> it's great extremes right now. >> right >> i think that's the level of it but also i would point to a half dozen things since october it's not just the fed. we've elevated the fed to be a larger factor, i think in the whole selloff and therefore what's necessary >> also joining us now, joe davis the vanguard chief economist. and joe zoff we've got two joes i'm going to have to go with two joes i forgot about you, kernen >> one of us should be joseph.

>> what do you make of the market's reaction? and are you feeling good about markets these days >> well, we are in the admirable oar advantageous position of not listening to any fed rhetoric. we're looking at earnings and really fundamental factors this downturn provides us opportunity in many areas. we run global money international money. and the international markets have been forecasting this for quite some time. no one seems to pay attention. there's a greater mess there with brexit, italy, germany weak weakening, all of this this is something that will provide an opportunity for us. like the essence of your show most of the clients want to participate in the growth of foreign corporations if they can do that at a lower price, they're happier >> making a call of foreign

versus the capital on a 5 or 6% return next year, where would you put it >> so, in our global portfolios, the best thing is to look at is allocation for the past three year, that global portfolio has been invested in u.s. stock now, we're shifting. it's about 0% in international just based on valuations, the discounts are steeper there, they're more attractive and that's where we will go with our clients' and our own money >> joe davis, we'll go out to you. do you think the market is in the same place and the fed is in a different place? and there's a gap between who moved, do they meet in the middle, or does the fed finally move to the markets, do you think? >> well, first i think what the fed did yesterday was not terribly a surprise to us. we long felt that the federal reserve was going to feel emboldened to raise four times

this year. and approached neutral, i think we're close to it. i think what's going to happen here, we'regoing to get a slowdown indicators in both u.s. and china. i think there's a convergence to your question. i think the federal reserve will be hard-pressed to raise prices twice next year. >> santelli touched on this, joe davis, in terms of winding down the balance sheet, do you think that the fed should have also put in some sort of language to make it seem like they could re-evaluate that program as well why say, you know, fed hikes could be re-evaluated down the road but not say the same thing about another tightening tool? >> i think that's what spafair i think the federal reserve may be getting too much criticism on the fed rate path.

i think there could be more flexibility in terms of the ultimate tone and i think the markets are overreacting to some of the recent language 25 basis points move, if it was so powerful and mattered so much, why did we not have gdp growth of 5%, 6%, 7% for the past five or six years i think we're only now getting to the point where i would view markets for the first time in twoer use modest upside risk, you know, to the broader equity and fixed income markets >> i would say that you could fairly criticize powell for underestimating how much the balance sheet talk matters to markets. not necessarily, you know, say that he has flubbeding in in terms of the actual treatment of the fed policy which was always clear. i think we're looking at this huge issue of short-term treasuries implicitly, what that means,

we're asking the fed to make up for fiscal policy shortfalls, right? in 2011 and 2012, it was the only game in town. you kind of ask them to be the offset of these policies maybe that's the right thing to do maybe they weren't prepared. >> okay. thank you. when we return, shutdown averted, maybe we'll talk to senator david perdue, the spending bill that would keep the lights on in washington david tepper sounding off on the markets and for the portfolios we'll show you his comments, right after the break. and last year, i earned $36,000 in cash back. which i used to offer health insurance to my employees. what's in your wallet?

♪ ♪ move to the enterprise-grade cloud that's built to handle all your apps. ♪ ♪ the ibm cloud. the cloud for smarter business.

what did he say? markets tanking on fed chair jay powell's comments after the central bank's rate hikes. david tepper said the fed put is dead. and a bet on e-cigarettes.

the tobacco producer making a big stake in juul. we'll tell what you what that all means when second hour of "squawk box" begins right now. ♪ >> announcer: live from the most powerful city in the world new york this is "squawk box. >> good morning. i don't think -- i didn't say a recognition there. mr. wonderful, welcome back to "squawk box. >> i have the original vinyl >> honestly? >> yep, yep. >> and when you get home, it gets played when you walk in >> my wife doesn't call me mr. wonderful. >> stop, stop with that. >> anyway, "squawk box" here on cnbc we're live from the nasdaq market site in times square. i'm joe kernin along with andrew ross sorkin and melissa lee.

becky is off we have kevin o'leary. shares are up. all over the place fairly tight range up 70 or so down, 100 or so, i guess at one point 5 now. nasdaq indicated up 11 and the s&p has been right around unchanged, it's right around there, still. treasury yield, i thought the ten-year was fascinating yesterday. what was it? >> seven months left. >> 2.77. how many point that is on the ten-year boy, that's close. >> oh, you mean the spread >> yeah. >> it's close. >> i'm afraid. >> we're watching three big stories i want to tell you about. number one on our list, markets taking a dive during jerome

powell's announcement of the fed's fourth rating hike of 2018 once powell started talking, boy, did markets start dropping. the dow swung from a 380-point gain to an event 350-point loss at the end of trading wednesday. powell saying during his press conference that the fed's $50 billion balance sheet reduction program is going to continue to proceed, as planned, to find some other expectations and a little push from the white house on that. two, legendary hedge fund manager david tepper responding to the latest fed news tepper telling cnbc that powell essentially said, quote, the fed put is dead. that the fed cares about the economy, not the markets and three on our list, altria buying a stake in juul $38 billion. more than double the valuation

that the company said just in july >> you didn't hear from tepper, did you? did you hear back? >> no. >> okay. >> cash is not bad that piqued my interest. i'm sure you're a very popular man at this time of day. >> yes we got a few stocks on the move. dow component walgreens, the company earned and adjusted $1.46 a share. revenue also beat forecasts separately walgreens announced a partnership with alphabet and the two companies will work on a projected aimed at health care and blackberry formerly known foss its phones, among the bottom line there, shares up 3%.

>> ab inbev and tilray announcing a partnership on marijuana and cbd. for now, the partnership is limited to canada. joe. we're on track for a government shutdown tomorrow, but clearly at the end of the tunnel tomorrow. good morning >> good morning. the senate passed the fibill la night that keeps the government open until february 8th. but this bill is really just a band aid it covers about 25% of the government that's scheduled to run out of money on friday that includes not onlyof homelay but also the irs and ago cult ae department it doesn't include government

trump's border wall. and with a last-ditch effort to stop the spending bill a member of the freedom caucus tweeted this, let me get this straight, our cohance of getting the wall will be better in february with nancy pelosi than right now when we have the majority give me a break. it looking for alternative ways for the wall that logjamed negotiations and did allow lawmakers to reach a deal on the short-term spending bill we will let you know when and if it's a done deal back over to you >> thank you we're going to have someone who might know something about this. u.s. senator from georgia, david perdue senator, i haven't seen you in a while. good morning good to see you. >> good morning, guys. >> what do you think, can we count on this? >> you know, this is another

example of the total irresponsibility that you see up here and the dysfunction in washington to put it in perspective, this is the end of the first quarter, joe, agency ys you called out o show before. this should have been done september 30th of this year. so, we have 75% of the federal government discretionary budget funded this year some thing it's good enough. unfortunately, it's not nearly good enough. the president is looking for border security, the land, all of the things not in this. this is 180 continuing resolutions since 1984 when this budget act was put in place. we can do better than this, joe. >> i just wonder how this finally plays out. what do you think is going to eventually happen with the president and how he approaches this do you think it's going to be funded differently do you think -- do you think -- i don't think the democrats,

with some of the same individuals may have been -- you know, may have thought more seriously about doing this years ago, or at least they're on record saying things and they've got a lot of different reasons that they don't want to fund this at all i guess they're saying, what, concrete it's just impractical. it doesn't work. there's better ways to do it but it all just seems like -- is that the real reason, they're just not going to let this guy get what he wants no matter what >> well, it's more a political issue on the left than a national security issue which is what president trump is calling out. look, over the last few weeks, president trump demonstrated he's very workable not only on ways to fund it but also different amounts. the bottom line, this is a national security issue. i voted no for several reasons this is the biggest reason sigh i agree with what they're saying in the house

i believe kicking thecan down the road does two things, it puts us under pressure with how serious we are about defending our border but the second thing it delays next year appropriation process. here's the irony here, by delaying to february 8th, we only have 57 working days, the way the senate works, until july 31 next year which is when we really have to get this appropriating done i'm skeptical, i believe we have to come right after christmas. we're arguing about coming back the latter part of next week to get this done. >> you're the only fortune 500 former ceo in the senate, you rebought dollar general. do you think the fed should keep tightening here? did you have a great deal of confidence when you saw chairman powell's remarks >> look, we have a big balance sheet. i understand he's got to deal with that, so does china, japan

and europe here's the problem, with trillion dollars of debt, joe, you call us out all the time we have $450 billion of new interest this is even exacerbated because of the fact under president obama, our bond portfolio, the duration was taken down to under three years. so, this is now having a very immediate impact $450 billion of new interest alone. and by 2020, the gao and the cdo believe that we'll be spending more on the current rate than our own military this is very upsetting to me it upset the market obviously. >> are you commenting on fiscal issues, or monetary issues there, senator >> well, you've got both, right? i mean, we've dealt with the fiscal issues here in washington to some degree regulation, energy, taxes. we pulled back on the most

onerous part of dowd frank the problem is, unemployment is very low we've got a 50-year low in unemployment we have the lowest african-american unemployment in history. i believe that's driving the fed more than anything else, i'm worried that the ancillary parts of the economy are just now getting going and they need access to capital. >> do you think we can have a trade skirmish with china at the same time that the fed is raising rates? is now the time to do it or not? or do we need the fed on board do they look at what we're doing with china when they raise rates? >> i don't think they are. i think they're primarily focused on unemployment rate and the momentum of the economy. here's the problem, we've got momentum we got nato to increase payments to their own national security that's a big deal. no president since world war ii has been able to achieve that.

we have canada, and japan in the last few weeks talking about it, and now we have an off-ramp with china which is what some have been asking for for months this gives the u.s. and china to save face and actually move to a long-term solution with this problem with china >> are you sure we have a trade deal with mexico and canada? is that going to happen? >> well, in my opinion it is i think it is. the bottom line is, we've got momentum and i'm very worried we're going to put this on the economy. we're growing twice the rate now as we were under obama i believe this can continue. we've got do deal with the labor issues and the trade issues to increase the imports that's what this president knows instinct instinctively. >> are you looking further to the future senator, i know there's nice

courses down there in georgia? are you sure you shouldn't be down there enjoying yourself >> joe, we'll talk about that off air. >> what do you think, the senate, the whole atmosphere seems just poisonous >> well, the point is, people sent us up here to get things done the reason i ran is because of the dysfunction in washington. the global security crisis and the financial crisis right now, this president has gotten the economy moving. we're dealing with the budget process. and we have the first dod coming to us in u.s. history. i think we're moving in the right direction. the problem is, if the house, under democratic leadership, decide they're just going to investigate only and not legislate, that's going to be a major problem for america. and i hope they don't do that. >> senator, let me ask you a question let's assume you get through the current budget issue and you've got a functioning government in

january, handicap the two big mandates are you doing health care or infrastructure which one is coming first, because that matters to me in terms of where i deploy capital. >> well, there are several things i think health care is going to get immediate attention because there's a health care crisis right now, there are two limiters on this economy in my opinion. if you want to continue to grow at 3.5% to 4%. you've got to fix our immigration problem. that means we have to deal with the legal immigration problem and open up abroad health care, if we have anything to say about it, health care is going to be the number one topic when we come back in january >> senator, get back to work although you're doing god's work here coming on to "squawk box," senator david perdue from the great state of georgia it is a great state.

one of the great places to go, ho hot-lanta. coming up, mr. wonderful himself, kevin o'leary, when we come back, the "shark tank" co-host. ♪hold on, i'm comin' ♪hold on don't you worry,♪ ♪i'm comin' ♪here we come, hold on♪ ♪we're about to save you i'm comin', yeah♪ ♪hold on don't you worry,♪ ♪i'm comin'

you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today.

don't get mad. and the army taught me a lot about commitment. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome.

welcome back to "squawk box" this morning take a look at futures ahead the market we're now a little over an hour away from that market open we swung around, we're back to the red. looks like we opened up by 16 points at one point it looked like we would open up by 70 points higher as the market tries to digest jay powell's comments. >> let's get back to our guest host, kevin o'leary, the co-host of "shark tank." and kevin, what we haven't talked about today, shockingly, is the trade war what do you see going on with your portfolio companies >> i like to bring props you've never seen this before. this is a product called a hair wig. >> what the check is that? >> it's a drain wig. it goes down the drain it's an american product american patented came from

utah you throw it out after it collects hair. very simple device it's patented with an american patent as soon as this thing became successful, it was knocked off all over the world, including the asian market, manufactured in china >> right, okay >> now, here's a dilemma for all of us to think about, this company, an american company employing people, maybe 30 employees, sales immediately began to drop off because they were able to cease and desist all of america and europe. but they couldn't do it in china. forget about access to market, this i.p. issue is a big deal. and previous administrations haven't addressed it they're not willing to hold them to the wall. i'm calling out as an investor, supporting little companies like this, that create innovations that are so simple but they're simple because they solve the

problem, let's fight the chinese on this one. >> so, i don't need a hanger that i use all the time. >> you shouldn't, it hurts your pipes. >> use a snake >> you save thousands, joe >> i say, jeeves, jeeves, over here >> he does you have someone else call the -- >> so, that doesn't -- that sits there and the water still goes down >> a few weeks later, you pull it out. >> but it's got a thing on top >> it sits on top of the drain >> you can't close the drain if you want to? >> yes, you can. >> how >> you pull the thing out, close the drain. it's mostly for showers where all that long hair goes down it's used in hotels and homes. the point is -- >> you have no problems, ever clogging any drains, you're the one that -- >> i looked at it and said, you know, probably the reason -- >> how much does this cost >> what's that >> how much does that cost

>> $14.99 depending. >> $14.99. >> yeah. >> margin on this has to be incredible >> yes thank you, yes, it is. there's all different prices my point is the company cries out for help from the government it cries out and says help me, help me. >> i'm glad you brought that example up when you think about fighting property intellectual theft, you think about tech firms. >> that's mymelissa. >> small manufactured here in the united states >> when we call our team on amazon, they take it down, can't do that on alibaba i'm saying enough is enough. it's time to hold their feet to the fire and then there's access to market i have another example you've never seen this this product is a fingerprint

recognition lock an american product that allows to you program in your fingerprint and open and close >> that's good >> but it's manufactured in china. if the tariffs go in january, this company won't be profitable already, it's setting up new manufacturing in cambodia. >> what happens to the -- >> it's a key -- i have a safe it begins with a "b. i have a big heavy safe. >> what's the combination? >> what's the code >> that's a gun lock this is the first patent ever issued for a padlock with a key. this is a tsa lock that allows you to put this on -- >> your battery goes out, there's an external unit that plugs into it that will allow it -- then you can put new batteries in >> but, joe, what do you think companies are doing when they hear all of the chinese companies are moving out jurisdiction >> you know what, i don't like

it, you never know if you turned it on the second one or past -- you know how you got to do that, did i do it more than once. >> that's why the fingerprint is better >> much better >> i think there's a lot of pressure within the chinese government saying we can't let this happen. we'll lose all of these companies, we'll move out to vietnam and edverywhere else >> do you still have a financial -- in each of these companies? >> of course, of course, i do. >> i've got it it's just interesting. coming up, the latest comment from fed chair jay powell, leaving a bad taste in the market's mouth that's mixing a lot of weird metaphors. and later on, we're going to talk to the former economic advice ed lazear on what the fed did wrong or right

you're watching "squawk box," on cnbc

♪ not long ago, ronda started here. and then, more jobs began to appear. these techs in a lab. this builder in a hardhat... ...the welders and electricians who do all of that. the diner staffed up 'cause they all needed lunch. teachers... doctors... jobs grew a bunch. what started with one job spread all around. because each job in energy creates many more in this town. energy lives here.

welcome back to "squawk box. let's take a check on the futures right now, after yesterday's big selloff on the reaction of fed chair jay powell's news conference we've got a mixed picture right now. it does look like the dow could open slightly positive

now, but just barreely. let's take a check on energy oil has been the big story wti down 46% 46.70 is the level brent crude climbing and take a look at change. ten-year yield right now, 2.773% we hit a seven-month low just yesterday on the back of the fed meeting. we're watching the spread. >> the markets are wrong oil is wrong stock market is wrong. but we at the fed, the unelected bureaucrats at the fed are right. we'll see. we'll see. coming up, we're going to get economic data on the other side of this break we've got the latest on jobless claims and the latest on the

advance on it. we're talking about jay powell

we are just seconds away from philly fed manufacturing numbers and weekly jobless claims but quickly on the futures, we've got higher here on the dow but just barely. ten-year note, yields. and rick is standing by in chicago. >> survey says initial jobless claims moved up. moved up 18,000 -- i'm sorry, 8,000 to 214,000 so from 206,000, add 8,000, up to 214,000 even claims moving in a big historical path here they moved from 1.66 million last week. very low up to 1.866 million. yields aren't moving very much we take for granted we're not at

low. but very much at levels quite historically on the low side dollar index taking a hit today. down two-thirds of a cent. that's not only lost the 79 handle it's on the sunny side of 96.5 the dollar loses ground. interest rates lose ground equities lose ground it's going to be very fascinating to see how the digestive process of yesterday's action by the fed not at all unexpected, but many were a bit disappointed at the stencil-like approach the fed continues to take joe, back to you >> thank you, rick we're going to get to steve liesman. just looking at some of the stuff that he was using is going to be interesting. steve, what have you got have it moved to zero next year? >> on the claims number, you mean yeah what i'm looking at here is the philly fed that came out, december, 9.4 which is below

consensus. which was for 15 and november it was 12.9 so it's one of the prices paid about even at 38 employment index went up capx about even. 37,000 and the six-month outlook, my computer keeps messing up here is actually up 31.7. but it joins a bunch of other survey data that's been out there. and again, joe, it's the old conflict that we had for a couple of weeks, maybe a month or so now, which is that the soft data, the survey data is the things going down. the empire state taken down and the philly fed and other surveys have been down jobless claims are a bit of a puzzle this time of year, you want to be careful because of seasonal adjustments, seasonal layoffs. it can be a little squirrelly. the number that most people talk about right now, labor

economists 2.50 is kind of like the mac then you say, wait a second, maybe that will affect the employment level the bouncing around is not a particularly worrisome sign. it couldn't go down to zero, right? we'll watch that number, but not a particular amount of concern right now. andrew >> steve, thank you for that with more reaction to the fed's decision, we want to bring in former council economic adviser chair ed lazear. a senior fellow at the cooper institution. ed, you watched mr. powell's comments yesterday and you thought what >> well, i wouldn't say i was surprised. i think that he said what i expected him to say. i can see why the market is a little disappointed. and the reason is this, you know, when the fed talks about data dependence, the issue is which data there are so many data series that one can look at and what is

the most reliable in predicting where the market is going. i've said this on your show, to my mind what the most important indicator is what the market is telling you. the market is forward-looking. most of the numbers that we get in terms of government statistics are backward looking. so, when you see the s&p fall by the amount it has fallen over the past three months, that's a pretty strong indication that things are turning in a negative direction, at least with respect to growth. so, the chairman said something like 2.3%. that was kind of the median estimate of where they thought we would be next year. the market certainly doesn't think that if you use the market numbers, we're nowhere near that. >> question i have is, is jay powell mistaken about where the economy is going or is the market mistaken about the way jay powell was thinking about all of this? was his comment about two hikes -- too definitive.

he separately said he's going to be data-dependent. so maybe he doesn't do it. >> well, the way to think about this, remember, i kind of had a job like that when i was in the white house, my job was head what we called troika, i don't know if you're familiar with that term, troika consists of chairman of economic advisers and the treasury office and budget and our job was to forecast the economy. and we had really good forecasters. so it's a pretty difficult thing to do. when i got out and started looking at the data, what i found was, our internal forecasts were not generally as good as the market forecasts i think as joe mentioned five minutes ago, the market is saying this, but the fed thinks this again, if i have to bet on one thing or another, i have to bet on the fed

>> ed, are you saying that the fed in fact should listen to the markets more >> yeah, i would say they should listen to the market more. not because they're trying to manipulate the market more you have to be careful there there are a lot of people who advocate that the fed should be bursting bubbles when they see them >> yeah. that's what they need to -- they were manipulating the markets in the obama years higher with the zero interest rate >> well, i think that's the wrong strategy again, you want to look at the market because the market tells you a lot. it gives you information about the future the yield curves give you information about the future you guys mentioned just before the break, i think you talked about the flattening of the yield curve, that's not a new phenomenon, although it's become more pronounced. there are a couple of reasons why that happens one is the future is bleak you're looking at long rates, and they're falling. the other is, the current

situation is one with reduced liquidity and current rates are going up we've seen a combination of both over the past couple months but the primary factor has been that the short end has gone up. to me, that's fed-driven what we're seeing it a contraction in liquidity and if i'm looking at the future, if i'm looking at the next year or so, i think i would be in a situation where i wouldn't be saying two, i'dbe saying probably zero or one. >> you know, on a balance sheet issue, that's something that the markets have homed in on and steve liesman, i'm going to mangle this metaphor, if your basement were flooded and you have three feet of water and able to pump out some water, you've got one foot of water, you've got liquidity there what's your thought on this because the market is very concerned about this aspect of tightening >> yeah, i'm not sure i'd use steve's metaphor i kind offal agree with them

the reason is if you look back at the history of qe as opposed to the more recent qt, i think most people, even critics of the feds, my colleagues at stanford, john taylor, people who are very knowledgeable about this stuff, most people commonwealth that qe 1 was probably a good thing. qe 2 less effective. and that's in the nature of the beast. you always use the tools that are most effective the first and use the things less effective as you move into the subsequent parts of the cycle so, going backwards in the other direction, the same is true. you're going to reduce those things that are going to harm you the least. i guess i'm not as concerned about the balance sheet unwinding, as i would be about really the direct play on the interest rates right now >> ed, what do you think the chance are that jay powell made the comments that he did and was as strident as we was, as a function of it being a response to the political pressure that's

been applied to him? >> well, you know, i mean, that's a tough question. i'm not a great psychologist, so i won't give you a strong opinion on that. what i will say, though, the fed is always in a situation like this where irrespective of the president's comments, they have to balance monetary policy against fiscal poslicy so, during the obama years we didn't have a particularly pro-growth fiscal policy situation. and probably now, it's the reverse. you know, i was thinking back, you know, in talking with rick, rick and i are often saying, gee, they should have got going a little bit earlier well, that's easy to sit in hindsight. i think it's true. janet was sitting there with the situation where we did have an expansive fiscal policy. and they had to counteract that with policy.

and now chairman powell, not so much with the reaction on the personal comments or chiding whether he was the right chair or anything like that, my guess is the chairman is above that. >> i'm not going to blame trump for this certainly, the china stuff is this fault i mean, there must be something -- i mean, this is his fault, somehow or other, we're going to get there, china, one way or another i'm just trying to help here >> yeah. i'm not an advocate of either the president lobbying the fed or of the anti-trade policy. so, in that sense, i'm with you. >> thank you >> okay, good. >> but the question was whether powell was reacting to that, my guess is not so much >> he says no. but i still think that staying the coerce, i'm paul volcker, i do the hard things and you've seen that in the past >> sure. >> they don't change very quickly because they feel like it's weird -- i think they feel

like they want to be confident in their models. or else, they shouldn't do the models by being confident in the models, even when the evidence is flying right in the face of their models, they still stick with them which is probably not great. >> well, that's right. i mean, the fed is by its nature a reactive agency. >> right >> say, you're looking at the data and then you're going to respond to it. you have to react, you have to wait for the data to come in >> you have can do it with rule. that's what john taylor always says having guys that may not be very good at anticipating the future, i don't know, that's no way to run a business anyway, thank you, ed lazear >> thank you >> thank you, ed lazear. >> happy holidays, my friend >> thank you >> a senior fellow coming up, the dow staging a big negative turnaround as fed chair jay powell chatted with reporters. read this stuff after the fed

decision however, futures this morning now down they've been all over the map. we'll get to that. but a big move one way or the other. we'll get you ready for opening bell when "squawk box" comes back we'll talk to cramer that should be good. what do you look for when you trade? i want free access to research. yep, td ameritrade's got that. free access to every platform. yeah, that too. i don't want any trade minimums. yeah, i totally agree, they don't have any of those. i want to know what i'm paying upfront. yes, absolutely. do you just say yes to everything? hm. well i say no to kale. mm. yeah, they say if you blanch it it's better, but that seems like a lot of work. no hidden fees. no platform fees. no trade minimums. and yes, it's all at one low price. td ameritrade. ♪

and everyone i've ever opioloved away from me.thing everything. i blew my ankle out and i got prescribed pain pills by my doctor. if making my detox public is gonna help somebody i'm all for it. i just wish i would've had a warning.

welcome back to "squawk box. our top story this morning, the fed and global market reaction we heard in david tepper earlier this morning he said powell basically told you that the fed put is dead

let's stay on this for a second. because we're going to tell you what a put is and what a fed put means. this goes all the way back to the greenspan years. >> yep >> greenspan put was 1987 and 2000 the term "put" refers to a contractual obligation giving the holder a right to sell an asset to at a particular price to a counterparty. it can be exercised when asset prices decline and protects the holder from future losses. when greenspan was chairman if a crisis arose, the stock market fell more than 20%, the fed would lower the rate, resulting in a negative real yield and the fed ostensibly would prevent any further deterioration in the markets. >> if you didn't know what a fed put was, to begin with, do you think that helped? >> yeah. why? >> i mean, basically a notion that there's a conceived backstop that the fed will step

in and save the markets. >> exactly >> i think that's obvious. but we were instructed to explain it >> i understand. >> there you go. >> you know, people want to know this stuff >> you never know. >> when you say a fed put, you know the fed becomes -- >> well, you never know. >> two, everyone is tight. chinese money growth plummeting. ecb cutting the last of qe and the fed still tightening three, the biggest issuance is happening next year. and oh, there is a trade war question i think we should be having a fight with china, even more so after watching o'leary talk. it's not just high tech. >> no, they steal everything >> that's the big thing that people don't understand, the small american manufacturer is getting absolutely screwed everywhere >> it's not conducive to confidence, freezing some worldwide activity five, cash is not so bad

and six, the fed doesn't care about the stock market within 400 spx points it's the real economy, stupid. i saw another that said another 400 -- that's not what tepper said, another. >> right >> you saw the people saying another. i don't think he really meant another. i just think he meant give or take 400 points. let's get to the bottom of the markets right now and get you set up, joining us barry knapp, research director at ironside and bob michel, ahead of jpmorgan asset management. bob, i'm going to start off with you, in terms of what we saw in the reaction, it was an interesting reaction we saw today. the dollar and nix come off. we're seeing the two and ten spread narrow. because of that, we've got a higher two-year-year-o yield

what are the opportunities here? >> i think the fed got it right. they balance the slowdown in the economy with the fact that utilization rates are very high. they've indicated that they're coming towards an end. i think the market was just frustrated they didn't adjust the balance sheet for us while the fed raised rates, the pboc actually eased. and for us, given the selloff we've seen in merging market debt that's a sign to go back into those markets >> i guess the fed is on the sideline and one of your biggest concerns about emerging market trade has gone away? >> i do think they've indicated they're coming towards an end here and what's caused the emerging markets to crash effectively over the last 18 months has been the concern of withdrawal of liquidity by the fed. and of course, trade concerns. >> barry, after hearing what the

fed has said about the rates and how they perceive their path, what does that do on how you perceive where the opportunities are? >> i think powell made it pretty clear without precommitting the fed that they are pausing. that there will not be a hike for the first half of the year where i think he got it wrong is -- can we talk about basements again? >> oh, the flooding. sure >> here's an issue with that argument i actually sent an e-mail to kelly when i was watching steve say that the problem is, okay, there's a foot of water in your basement, regulators require there to be a foot in the basement i think they under the effect of liquidity coverage ratios. powell gave a speech and talked about how the new money fund rules made the system safer. well, those funds drove $1 trillion into government money funds.

but what about all of the companies that financed themselves in repo markets and commercial paper and the like, they no longer have that available. and when things get unstable like they are now, the liquid at this time liquid trillion swing in global central bank liquidity in 2018. the ecb and boj bought 2 trillion worth of bonds the year before last. this year they were flat. that swing was 2.2 trillion. next year the number is more like 600 billion but the difference between minus 200 and minus 600 is smaller than last year. it should stabilize. issuance is up a lot. liquidity is tight and the fed doesn't really understand how all of this regulatory stuff, when they reach that point when markets are talking, that is

what markets are talking about. when he said the balance sheet is fine and we can put it on auto pilot, that is a fundamental misunderstanding. >> that really interests me in terms of liquidity is understated. which sectors are most -- or which market caps are most exposed to that? >> i think you see it in all of the fixed income spread products. someone was talking to me about bdcs and commercial and industrial lending. this is the same thing that happened in 2016 because in 2015 the fed stopped buying bonds. we lost 600 billion and the chinese outflows -- high yield went from five percent to nine plus percent. >> that's not happening now, though. >> high yields moved quite a bit wider. >> it should have moved a lot

more if the concerns are going to come into the cycle again. >> i'm not talking about fundamental changes. i'm talking about pushing spreads higher. i happen to think the core underlying economic momentum is good and stable. they have to recognize that there has been this liquidity drain and that the treasury is a big drag on this. >> real quick, you like high yield here. >> we do. if you look at where high yield has gone to, it has just backed up a little bit. if you look at 2011 to 2016 it went over. corporate fundamentals look pretty good at least from a creditor's perspective. >> thank you both for your time. let's go to jim cramer at the new york stock exchange. i don't think you were hoping for no hike yesterday but i think you wanted a more clear one hike with some dovish comments or one and done.

did you get that >> no. we didn't get that at all. i think we got something that was basically -- i thought three but now it's two. howie thinks that it's two. we pick one. you are supposed to wait to see what happens. under some way that these guys think it is not prudent to wait and see what happens. i think that is common sense that you would wait because the data from companies is not as good as the employment data. let's see which one is right, so to speak. the data from companies has been not so great. the holiday season, retail has tailed off here. you have a bunch of things that are not positive. you do have good employment. that is why he put the hike through. how can that not be prudent? under what circumstances is that rash >> it's not like you have to

look that hard for things that could be saying something. it's not just stauock market or copper. >> it's everything. it's micron. it's fed ex. it is the overall -- maybe companies don't matter. i know steve talks about how we aren't that far from the top or whatever. i know companies. i talk to ceos. no one thinks it is as good as it was three months ago. does that mean you should say -- how about let's see what happens. it's not in their normal. they are making stuff up. >> do you think that j. powell thinks in retrospect that he misspoke and made a mistake in what he said >> yesterday >> he didn't learn the first one. >> he doesn't care like we do. he is just out of touch.

that's okay. he is an out of touch guy. he is trying to be like the academics. that's fine. if i weren't involved with trying to help people make money i would be fine with what he just said. if i were a short seller i would be sad. that's how i have to look at it. let's up our exposure. most people who watch me are not short sellers. >> economic models. it does make you worry. >> if you are rich it's great. all the rich hedgefund managers are rich. it's great for them particularly if they are already rich. how fabulous is that if you're not rich it's not so great. most people in the country are not rich. so therefore -- >> i read some of your tweets. you might have done one of your things from ten years ago, but you didn't think it helped last

time that much. >> i'm trying to come up with a better way. i like jay. i think he is a good guy. i yelled fire in a crowded theater, but the theater was on fire. he is human and he's wrong. that's all right. i wish he were right sdprmpt when i love the blunt speaking. we'll see you in a few minutes. don't miss a big interview today on power lunch. the gang will talk about the ceo of cannabis producer tilray with the new partnership. that comes your way at 2:15.

stay tuned.

stop fearing your alarm clock... with zzzquil pure zzzs. a drug-free blend of botanicals with melatonin that supports your natural sleep cycle so you can seize the morning. zzzquil pure zzzs.

before we go, check out shares of facebook down by two percent. the d.c. attorney general announced it was going to be

suing facebook over its role in cambridge analytica. >> i just reviewed budgets across 40 budgets, they will use 15% more of facebook in q 1. >> mr. wonderful, thank you. happy holidays. thank you for hanging out. >> we'll be here -- >> "squawk on the street" begins right now. ♪ good morning and welcome to "squawk on the street." we are live from the new york stock exchange. let's give you a look at futures a half hour from when we open here for trading. you can see when i walked in an hour and a half ag