corner "squawk box" begins right now. ♪ welcome to new york stpoet. >> live from new york where business never sleeps, this is "squawk box" good morning, everybody. welcome to "squawk box" here on cnbc we are live in times square, which is empty right now a few hours to go before they drop the ball. right now we are here and we are ready to go. i'm becky quick. andrew is off today. joe tara nova joins us he is a cnbc contributor too pretty strong green arrows dow futures up by 200 points of course that's not a lot of comfort given where we have come it adds to the gains when the dow was up by 2.7% nasdaq up by 4%. it is indicated to open up another 45 points. s&p indicated by 20 points but you are talking about the

three major averages on direct post to the biggest annual losses in a decade look at what's been happening with treasury yields 2.732% 30-year up just above 3% and if you check oil prices this morning, too, oil prices right now are up 1%. here are the big stories we're watching growing optimism about u.s. and china trade talks. president trump said he said a very good call with president of china xi jinping the president added in his words big progress is being made and new economic data out of the country. the manufacturing sector did contract in september. as we close the book on 2018 we

can officially say the chinese markets are their worst performance in a decade. major indexes were down 24%. the two big drivers of course were u.s./china trade relations and a slowdown in the chinese economy. >> the dow and the s&p are on pace for the worst december since 1931 that was a tough one the worst month since 2009 the dow is down 6.7% on pace to break a two-year winning streak with its worst yearly performance going back to 2008 s&p down 7%, which means it will also break a two-year winning streak last week i don't think saying 2.7% really summarizes it.

can we date it from wednesday morning? that was a horrific christmas eve. 600 points before that >> the close >> more than 5% from wednesday to friday. >> 1080 on wednesday 900-point swing on thursday. and a little give back on friday >> but here's my question. do you get to call it a santa claus rally? we are getting back to where we were when everything started it >> was still a welcomed respite for sure >> we'll see joe t., joe z. and joe idol. who am i >> joe k.? >> joe kerr. >> i have earned just joe, can't i?

joe zidel, people finally took a step back and said earnings will not be up as much but they are is still strong. gdp, not growing as strongly but will still be as strong. mark grant will say unless the fed does orchestrate a problem, that maybe we're looking into the abyss, someone is turning the light on maybe there is not a big mop sister there >> i read the notes a little differently. like the fed better change its course or we will hit the big monster. glass half full, glass half empty. >> more and more people are coming to powell's defense that he is just cleaning up the mess from his two predecessors. >> he will be speaking at an economics conference where he is sitting alongside bernanke and yellen >> you can make the argument that he is cleaning up the mess for qe 3

that was end of december, january 2015 now you are at 4 trillion. did you need the qe 3. i think we need to put it into perspective. you still have a vex of volatility measure that sits at 27 even after a 5% rally so i'm not sure where we are turning to a more normalized environment. i think more importantly you had portfolio managers at the end of september put it at 2900, 3.20, and make reallocations 2.70 and the s&p on the 2400

>> i think it was a little bit of both. pensions being forced to do it it is mathematical looking at what the markets did and i think the disparity in terms of quarter on quarter, equities versus fixed income, it probably was one of the more significant diskhroebgzs that we have had in many, many quarters. >> it was really weird how do you not love them here? that's the other question you have to start asking people too. >> unless you think there is a recession. >> does it look that different >> no. no but maybe people -- >> does selling dry up when everyone is taking their losses? >> i think -- listen, i don't know that you could extrapolate very much about what's happened the last four or five days into what is going to happen. >> no one is selling after january 1st to take losses. >> no. no one is selling after january

1st. >> you don't think that is a big factor >> i agree with that but from a technical assistant, if january comes in, we see early weakness, you are going to see selling. the market is very technically oriented >> you remember the year where we just surged into -- the minute january came it was more risk what year was that >> two years ago >> maybe it was '15. it ended up okay maybe it will be the opposite. >> every five, ten days. >> it was '16 that it took us until february to kind of find the bottom and we had the same type of internals. >> wasn't december a great month? december '15 was a great month >> right same conditions with oil oil is so important. and that's a problem

>> similar to 2016, it was the china issue. the slowdown scare you wonder if part of it now is the same type of thing >> we will bring that back to you, davos >> i have my boots right now >> do you have your ensembles put together yet >> they are being processed, yes. >> the rest of the year they look at me and it's like whatever ties, shirts you go to davos, my gloves have to watch why does it work this way? >> are we doing sweaters with a zip up. >> matching solid ties different jackets.

>> they need us to look decent because when we dressed ourselves there were problems. >> they dote on him. every article. he just loves that >> he is the davos man >> he is davos man there is knee and thal man thank you. and davos man, andrew. how did you know that? you knew that. >> i could just tell >> it is self-evident. sorry. >> jeffrey mcdonald, the head of fixed income strategies atrophy durable ear trust international. let's talk about what the bond market is seeing they are betting the fed will slow things down >> yeah and i think you touched on a lot of i in 2019, the yields probably

have a bias a drift higher what we are still looking at, an economy, joe, as you mentioned will moderate but still strong we have a very strong labor market all the indicators, get payrolls on friday. the jolt survey tells us how many jobs are open 7 million jobs aren't going to get filled and unemployment sub4% it would lend an upward bias to rates here we're talking over a trillion dollars that need to get invested in the bond market. 22 trillion. half of that is publicly traded. 6%, 7% you have the balance sheet run isoff we are told is going to continue and i think sexuality market has issues with that you roll all of that up, it could make a reasonable argument that you talk 25 basis points

higher on the technicals alone we think things are biased to the up side. another interesting thing that is going on that we deal with at the beginning of every calendar year is this game of chicken with the fed you have the market that always wants the fed to be more dovish. and the proplz has more of a hawkish view and somebody has to blink. the fed had to blink in 2016 we had the commodity meltdown. we had energy issues in 17 we had the disconnect in 2018, investors wanted lower rates. they came out on a regular quarterly basis. >> what do you think powell will be saying? >> i think what we have seen out of powell is they are still trying to get the messaging down he came out initial comments a long way from knew will tral market didn't like that.

they had to walk that a little bit. i was fortunate enough to be at the lunch where he was describing financial stability by all estimates we're close to neutral and the market embraced that. >> that was the october 3 remarks. when you say the market embraced it >> oh, when you walked it back >> what did they serve >> chicken >> when employment is like it is now, can the consumer just fall off a cliff because, i don't know, they don't care if the stock market goes down as much as rich people but all of a sudden, if it is 70% of the economy, can we just -- don't we need to talk ourselves into a recession

>> the financial crisis that hit housing, that hit main street. >> at the top of the show i said new york real estate is falling even further people aren't the walmart shoppers >> you are seeing monetary we know it exists with a lag nine hikes the last three years, four in the last 12 months you are seeing them into parts of the market like housing, autos. we have had a healthy recovery >> isn't it the best were christmas season in years? >> yeah. consumers are out there. >> i don't understand where the recession fear is coming from. >> neither do we it is a little more constructive than the naysayers the cfo survey that came out they are saying we have a recession in the next 12 months.

i think what you saw earlier in the fourth quarter the twos, fives curves invert, that was a shot to the market saying, okay, fed, we will concede to your 25 basis points in december but enough is enough no need for you to tighten here. the hard part is sticking the landing, right >> you see the depression in the 2019, 2020 stories did you see that depression, 2019-2020. >> i don't see the excesses in the market that would drive that. >> that would come from qe 3. >> or the macro drivers. >> china falls off a cliff >> they will see fiscal stimulus we did ours last year. enjoyed the benefits of it this year china slowing. we are starting to get a sense

there is fiscal stimulus behind it >> you are beginning to get more mainstream headlines to what happened request can the coo and leverage market. is that a concern for main street >> i don't necessarily think it's a concern for main street it is a $1 trillion market it's part of the credit markets that we look at, it is the one we are most concerned about. you see amount of these leverage loans. borrowers are more in the driver's seat in that part of the market refinanceable at any time. they can come back at any time and get their coupon, ratcheted down stricter covenants, maintenance covenants. you have to maintain a certain level of financial performance and sell assets, bring in

equity, raise the coupon now a lot of them are in current space. unless you come to market to bring more debt, you can let the financial metrics lapse. the credit quality concerns us but the we have record clo issuance in 2018 you have to field the beast. that is essentially the issue. >> was there a time you didn't want to be jeffrey mcdonald? >> he's tracked me my whole life he was an army doctor. >> like joel relative kin. "seinfeld" they're at the baseball game >> gary cole is back on tv he played him in the horrifying movie. >> yeah. it is quite the story. >> he is still in jail >> he is trying the get out. >> oh, yeah. keeps appealing. he was a piece of work got off initially.

is seriously killed his daughters went out and baltimore a equality was like a man about time in irvine, newport beach or something. >> oh, my gosh >> you can rent it still >> maybe that's why i never went to get my ph.d.. >> that's for coming out we appreciate it >> thanks for having me >> in corporate news this morning, verizon and disney struck a deal to keep disney from being blacked out on fios disney shares slightly up. verizon weaker it was carrying the ac c-net work it will now be carried on fios as part of the deal. ex paneleding whole foods across the u.s. wall street journal reports that would put more in range of the two-hour delivery service.

employees have looked at idaho, utah, and wyoming for potential retail spaces. amazon shares up 2% this morning. >> the partial government shutdown continues today with no end in sight your paycheck is fine, right you weren't affected because you're covering this, right? >> well, i work for cnbc, joe. i don't work for the government. that is a good thing for right now. >> yes. >> president trump did appear to be laying out parameters to reopen the government. he had lunch with lindsey graham yesterday. afterward graham said the border wall is a metaphor for border security he said the president is open to just a physical barrier where it makes sense. >> the president is in a good mood and he feels like he's got to deliver on the promise of securing our border. he is very open-minded about combining wall funding with other things to make it a

win-win for the country. >> some of the other things could be changes to immigration policy he mentioned protections for the so-called dreamers the good news is the definition of a border wall seems to be open for negotiation the bad news, president trump has changed positions so many times democrats say they do not trust him. the president is continuing his chess game with china. he spoke with president xi over the weekend. afterwards he tweeted the deal is moving along very well. if made, it will cover all areas of dispute big progress being made. if this meeting between u.s. officials and china goes well, then china will reportedly send a delegation to washington but of course the meetings have been scheduled before only to be canceled at the last minute. we will see how this plays out and if they do have the face-to-face meeting in d.c. back over to you >> what would be the biggest indicators of some substantial

progress where we say, okay, we are there meeting the goals. we have cards, cut numbers we used to follow the tweets on a play-by-play basis i don't think people are putting as much into the short answer. >> the short answer is we really don't know so much has come down to the chemistry between the officials who are meeting e. when that meeting does occur next week in beijing. there is that follow up indeed if the vice premier in china comes to washington, obviously that will be a good sign but right now they aren't concerned with what the metrics will eventually be we have seen china make moves already towards taking enforcement around stopping the transfer of technology we have seen them purchase soy biebs, rice. do all of these add up to

substantial progress in the president's eyes that remains to be seen. really only the president can decide that. >> thank you very much when we come back, some of the most memorable moments of 2018 on "squawk box". first, though, as we head to break, the biggest premarket winners and losers in the dow on this very last trading session of the year. goldman sachs is leading the way 1.2%, followed up by apple and boeing

a business owner always goes beyond what people expect. that's why we built the nation's largest gig-speed network along with complete reliability. then went beyond. beyond clumsy dials-in's and pins.

to one-touch conference calls. beyond traditional tv. to tv on any device. beyond low-res surveillance video. to crystal clear hd video monitoring from anywhere. gig-fueled apps that exceed expectations. comcast business. beyond fast. it is always one of our favorite traditions, the last trading day of the year to look back on some of the most -- as you get older, i'm seeing this for the first time too. >> me too. >> i don't remember anything -- >> we really are seeing this. >> but i remember when it happened anyway, these are some of the

most memorable moments of 2018 ♪ >> we are live from times square >> nothing has changed >> no smiling. >> you're there. i'm here >> yo, what up >> dazed and confused maybe. >> could use some cologne. >> wow >> i found a way to whistle through every break. i can't do it now. there are very few ways to get under his skin this drives him nuts >> who >> joe >> i think it's perfect. >> a special guest in the control room this morning. kyle quail

>> hi, buddy >> i see them. >> i love you. >> i think when we get done today, i want to talk about this interview. >> really, really -- thank you thank you. are you taking notes >> i think we are all pickled, our brains >> what's the single best idea what is a final outcome? what's a difficult dilemma huh? >> cookery. >> ladies, he's on bumble. >> it is so close. >> i try not to drink in the

morning. >> drink what? >> alcohol >> i hope you enjoy. >> i know to have strong eyebrows. >> i need hooked on phonics. >> i think the record is eight for andrew >> he's going for 10 >> it is national doughnut day >> take a pwaoeult one more seven and a half >> the entire town is waiting for bigfoot. seriously. can you imagine? >> it's early. >> man, i am out of gas today. >> you did it. i'm not going to do it you weren't on camera. >> i wasn't on camera. yes!

>> squawk! >> all right >> hey, look, he's up and ready to go. one of america's most beloved game shows returns to cnbc tonight. iconic host howie mandel joins us for a look at what to expect. >> rock band def leppard, an artist, among other things >> he's 6'5" >> you live long and -- and if you watch "squawk box", you will prosper. i watch you guys it keeps the masses informed. >> what happened >> thank you, joe. >> you've done this before >> can i take becky with me? >> yes good-b good-bye. >> we're live in cannes. no, sorry. >> a close -- a closer look.

>> new this morning -- oh. new this morning, chinese president xi -- >> what? go ahead and read it >> i'm worried about other people >> you're worried about other people >> no. >> you're not a nervous flyer? >> i am a nervous flyer. >> but you want to go to space >> life experience try something new. >> you want to do the whole -- >> we are. >> usmca >> us -- >> m -- >> ca. >> first i got the nobel peace >> wrong >> don't touch it. >> too nice? come on. >> don't do it >> please don't. >> we're out of time >> yeah. >> all right are we done?

>> we are. >> holy cow that went fast. no bathroom breaks done >> nailed it stkphrfrplts nailed it >> salt of work. thanks to dean millarp and the hard work of those putting that together that was good to see that. >> really good. >> for the very first time >> yeah. very first time. >> now get ready for 2019. >> that's right. create new memories. >> blooper reel starts wednesday. >> yes, when andrew gets back. >> you can't take shots at him when he's not here >> he won't be back on wednesday. >> he's on the following week. >> that was great. sears is living to see another day at least for now the last minute $4.4 billion bid next plus, crude prices are getting

crushed this year. 29 ensqwkbate01wh "ua box" comes right now who says our bank isn't tech enough? everyone, look at your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3, hours. why the delay? cognizant is helping banks use digital technologies at scale to advance speed to market.

♪ >> announcer: welcome back you're watching "squawk box" live from the nasdaq market site in times square. >> good morning again, everybody. among the stories that are front and center, activity in china's manufacturing center contracted in december. that is the first time that's happened in more than two years. sears has been saved from liquidation. eddie lamb pardon submitted a bid late friday to buy the

company out of bankruptcy. it would secure the jobs up to 50,000 workers sears advisers haveuntil frida to determine whether the bid is actually viable. warner brothers "aquaman skwoet taking the box office for the second weekend in row. "mary poppins returns" taking second place and bumblebee in third take a look at the u.s. equity futures this last day of the year dow futures indicated up 210 points right now s&p futures up close to 20 points nasdaq up 55 points. >> it has been a volatile end of the year for oil joining us for a look at the future of opec for 2019 is neil dingman. good morning, neil >> thanks for having me. >> you think people won't be as impressed with u.s. production next year? >> i always say the cure for low prices is low prices

you are seeing a number of producers starting to back off we have heard three of four companies decide that. i think it will take a while you could see pressure in the first half but the result will start to see more demand in the second half >> how much damage do you think is being done to u.s. oil production right now >> the last six weeks, the count has been done. still up more than a couple hundred year over year that's a great point even the permeon, the hottest issue this year, there is talk around texas of those plates softening a bit. >> everyone thought this would be the end for u.s. production

people got more efficient. is it possible it takes us yet to another new high? >> definitely people will become more efficient what will happen is the pressure on some of the smaller companies becomes more and more where, again, you might have larger companies with perhaps a 30 or 35 dollar break. the all in break in for some of these smaller ones is closer to $50. >> neil, it's joe. in a 30-day period earlier in october you had the price of oil go from 76 down to 52. we haven't seen a 52-week high to a 52-week low since 1984. the kul phaeugz of the iranian sanctions, chinese trade war has oil become a political football or proxy that investors have to keep in mind

>> that is a great comment you have had the trump administration in one way or another. with the volatility behind that, the u.s. can do a lot of things on the demand side or even perhaps even more so on the supply side. again, when you have the political environment coming in as stated, a lot is out of the hands of the simple supply is and demand. >> people said looking at the demand picture, it should be sold off in tandem with the equity markets but if demand is okay and there will be less u.s. production, will be the opposite of what joe was just describing? could we snap back as violently if demand is okay and supply can't meet it? >> i think that's the case that's what i'm a little bit worried about.

the things you have is opec have stated they combined will cut is 1.2 barrels. even more recently, if needed. and the u.s. is just sort of a market force as we know. it will be opec, russia, as well as the u.s. >> is neil, 2019 -- qatar is already leaving. the u.s., saudi and russia >> i think it is very, very important. but you have to lump russia in with it. let's call it 99 million girls a day. you have u.s., russia, china responsible for more than a

third. it is still very important >> if they right now wanted to turn the screws, they could still do that? u.s. couldn't offset that? >> no. right now if they want to really turn the screws, specifically saudi, they could come in tomorrow the hard part is based on that political football, a lot of things going on geo politically between saudi and the u.s. prevented them from doing that. >> yeah. they want a higher price for their budget >> neil, thank you very much very much, joining us from suntrust. when we return -- sorry. bad news in the big apple. >> first moment for next year. >> still this year it doesn't make any reel >> cut the tape again. >> it doesn't matter. >> a new report says the down turn in new york city real estate is getting worse and more pain could be around the corner. we have the details right after this first, though, as we head to break, check out the best performing dow stock in 2018

it's merck you are watching "squawk box" on cnbc

welcome back, everybody. we have been watching u.s.

equity futures this last day of the year dow futures have been where they have been all morning. dow futures up 200 points right now. s&p futures indicated to open up by 20. nasdaq indicated to open by 52 dow up 2.7%. a pretty rough year for stocks overall. where we are looking at our worst year in about 10 years for the major averages at the end of the year also check out treasury yields the 10-year, a lot least at this point, looks like it is yielding 2.736% if you want to look at currencies too, you'll see that the dollar is down across the board. euro, 114.56 yen 109.91 >> time for the executive edge 2019 could be a big one for ipos among the names expected to be public are uber, lyft, pinterest, and slack

>> wow new york city's real estate market is under pressure, major pressure a new report estimates that home prices have dropped somewhere between 10% and 20% after peaking in 2015. sellers are offering sleeper discounts, adding the market may not bottom out for months. >> minimum wage will rise in 20 states among the more notable hikes, a dollar an hour increase in massachusetts, in maine and california for businesses with more than 25 workers for the last decade, federal minimum wage has been set at $7.25 an hour. after the latest increases, 20 states will have levels above that >> yeah. 15 in new york city. >> and 15 in california or is it 16 i think it is higher in california >> always california and manhattan. >> or maybe it was seattle >> i was just going to say seattle. >> they were the first to go up

years ago. utility giant, pg&e, speaking of california, could face criminal charges including murder a u.s. district judge ordered an investigation last month documents obtained by cnbc, pg&e acknowledged its equipment may have sparked the campfire in northern california. it killed at least 88 people and destroyed nearly 14,000 homes. when we come back, market watcher mark grant will join us live he is never shy about making the call we'll get his predictions for 19hen "squawk box" comes right back at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists

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we actually will invert.

it will be very problematic for financials. >> my bold prediction is none for 2019 >> if anything, they are underleveraged. >> it will be a bit tough for the in 2019, but there are good values. >> what if there was no rate hikes in '19, would that be good >> i would guessiest unless we're in a trade ward. >> the worth yearly performance since the financial crisis among the biggest losers, general electric among the weakest performers, general motors and verizon >> joining us now is mark grant at b. riley, we were talking

about you earlier, mark, and some of your comments. i wish we knew what was leading, lagging, and coincident. we're going to play some elton john there is no way we can leave the segment without playing yellow brick road or something. what i'm talking about mark, the age old argument is whether the stock market is seeing something that we are not seeing yet or if it is mispricing a global slow down you think the only thing is the fed making a policy mistake and you think the last mic was a bad move by jay powell and friend. let me start by saying happy

holidays to all of you i have been on here for 20 years now. here is the answer to your question, joe, there is a couple things out there that are major that could have a substantial impact on the market the first is if they try to impeach president trump, it will be a disaster for the markets. i'm not making a political statement, i'm making a market statement. two, i think the fed made a tremendous mistake in raising the rates. i think if they try to do it any more it will be a negative for the markets. the governors talk about returning to a normal, but since the financial i ddisaster of 208 and 2009 there is no normal. the global banks created $21

trillion from nothing but computer key strokes, $21 try, but unlike the responsibility, it is a free cash flow so that $2 1 trillion really equates to $161 trillion of a free cash flow that had a tremendous impact on the markets. and i think the fed is just, has wrong headed thinking at this point for what it will do to the economy. >> there is a growing chorus of individuals saying there has been no price discovery. rates have been held low for too long therefore the excesses have been building up, and i guess the notion that maybe jay powell, administer tough but necessary

medicine, right? and there is a -- you can feel like you're doing god's work when you take the punch bowl away and you say i'm going to do what is right, but volker after all of the easy money, i could see how bond individual lvigilad inflation hawks could say that we're in so much trouble but without having that, i'm not sure being as tough medicine or tough love, i'm not sure if that is necessary if you're doing it just to do it. just like volker when there is not necessarily a manifestation, you don't necessarily need to cool things off if there is not inflation. why try to stop the prosperity >> i totally agree with you. the fed was created by the federal reserve act in 1913. it is independent, the supreme

court is independent people are brought in for life the central bank is the fed, not an off-shore institution we have the congress, the president trying to grow the economy which they're doing, it is growing they passed a tax cut and jobs act, and now the fed is saying, you know, we need to stop the economy from growing and i just think what are you doing here. the fed is independent, they can make their own decisions, but like what you said i see no reason for them to do it >> why do you think they need to do it, joe >> the inflation, it is wage push for inflation -- >> concerned about you, we had this conversation on friday. deflation. i told you the feds, exactly >> so you agree with mark grant?

would you wear those cloglasses. >> i'm concerned about you because we had this discussion on friday. >> you were here on friday what is today? is it monday what do you want to ask him. >> i want to ask mark a question i think we tend to forget about some of the strategies that took us through this year and one of them was clearly the fangs you think about the fangs you have facebook down, amazon up 20%. apple down 7, google unchanged looking forward in 2019, but that fang, the technology of 5 g come back once again >> i think the companies attached to the 5 g rollout. that was a hardout, i'm sorry,

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the count down is on we are wrapping up 2018 with the year that was. >> the fed in focus. will it be the same in the new year >> and shareholder activism in

2018 and what it could mean for your money ♪ >> live from the beating heart of business, new york, live, this is "squawk box. good morning again, everyone welcome back to "squawk box" here i'm becky quick along with joe kernan joining us is joe teranova who is here for this and for the next 17 hours or so. he is here for the dropping of the ball tonight long day bucket list, in not, it's going to rain. that is a problem. but that's okay. >> also joining us is ed, it is great to see you here today. let's look at the just equity

futures. wallace disney and verizon have reached a new deal this morning. shares of disney up a little less than 1% this morning. according to white house officials negotiations have broken down and most lawmakers have left washington for the holidays and a form ces ghosn will be in jail for a little while longer >> a few stocks on the move this morning for their own individual reasons. amazon is planning a significant expansion of whole foods, the

gross grocery store that it acquired it says that amazon is scouting new locations in suburbs they want to be within delivery distance for amazon. so you think we -- two-hour delivery, so you can fulfill it and get the order there. >> when do they buy target, too. >> i think the fangs come back in' 19 >> tribune publishing was hit be a cyber attack that caused problems for printing and delivery here is where the u.s. major indices stand. the dow is down about 7% that is on base to break a two-year winning streak. we'll see what happens today obviously, the s&p lower bay 7%,

that is on pace to break a six year winning streak. joining us now is joseph zital let's joe z, how about that? >> how about jay-z >> i was j.z. before jay-z was >> your view, we talked about it earlier because i was referencing you, is that we saw some abnormal activity in the six weeks of volatility until last week where you feel that maybe things stabilize maybe not. maybe the lows are not in forever, but suddenly the market will look at what is right before it's eyes and that is low

unemployment maybe it goes back above four, who knows, gdp, maybe it is not 3%, but maybe 2.5 or 2.5 corporate profits could go up. all of these things the market finally comes to grip with and stabilizes >> i think it will be stabilize and grow bigger. the point is your earnings are still increasing, they're not as increasing as fast, and the growth rate in the economy grows as well. you would grow maybe in the mid 2% range but the underlying fundamentals are the same there is no recession in disney world. the consumer is fine and that is 70% of the u.s.

economy. you have average hourly earnings you had a workweek, the number of hours worked this year was higher than it was in 2015 or 2016 and you have the best tax cuts so you had a market at it's depths last week says there is a 50% chance of a recession coming really soon but you have fundamentals >> that's why i wish we knew what was coincident so glams are, the glams were problematic for awhile that was some -- >> you hit 40 plus year lows and

it is hard to stay at those levels i think it is still very bullish for consumers. the only reason they hire teenagers is they can't hire anyone else, right they will always go to restaurants, but look at teen employment, technology, health care services. >> health care consults. 16 to 19-year-olds in health care consulting. it would be good for millenials but they're still in the basement watching netflix. >> i think it is very much like the beginning of 2016. we had a 15% correction this the

market and the underlying data was saying it is not so bad. >> that was the great year that we had >> just a cratered so think about the last six weeks here in the market you have fears of trade hard landing in china, oil prices, and sentiment swung from an extreme. everybody knew about the trade war and brexit, and they said we don't care we're priced for perfection >> it is kind of coming around to some of -- i need to go back and figure this out though you have uncharacteristically tweeting, and a week ago thursday you were a net setter of stocks. and i don't know about this

week 1800 points on wednesday 900 on thursday, but you're saying last week you went back to buying stocks and selling bonds. >> prices had fallen to the point where i thought -- >> half mondafter monday >> isn't that mean >> but in the last half hour or so of trading, and it closed early and you still could not sell enough. i hope you got coal, and that's all you got, so glour justnext where will we go from here

the fed is trying to engineer a soft landing will it be successful or will it be worse than that i think the markets are assumin things will be okay, and now i think the risks of things being worse than that have risrisen considerably there is a risk premium restored >> so buy the dips and get back on >> yeah, that is back to the -- and we will see if they have gone too far or if we see a drop in the data. and then not pay too much for the perfect scenario >> a guest last week said a 50% of a rate cut next year.

>> i think it is possible. the key thing that we have to with is what is normal the fed is trying to formalize policy but what is the normal interest rate in this time so when you think about what has been happening, europe has been weakening even though they have basically zero negative real interest rates i think the neutral rate is close to the low to mid twos so the fed is trying to find it's way there is no game plan to go off of zero interest rates they're trying to model it an look at the data, but none of us know what the right neutral data

is in an older demographic, that real rate is probably pretty close to zero. >> an interesting tweet last night saying look at all of the grief our fed is getting while their markets are under so much more pressure. >> i would argue that it is like more of a mid cycle slow down. we're rolling over from very, very high levels, but in order to think that the fed is going to cut you have to take some of the best predictive tools that we have, and say okay, they're going to stop working, right the yield curve is the best predictor of economic sectors out there. >> people raise those odds as it flattens >> well flattening the yield car insurance is n-- curve is not

necessarily bad. meanwhile the economy grew at 3.8% don't you think that is an interesting analog to today? going back to the fed and figuring out if they should be cutting rates or raising them? they were too timid and then we had a lift off at the end of the decade >> people were saying the fed was behind it. i don't know if they will face that same criticism today, but they have to solve for this job's market going back to the importance of jobs and the economy, people don't hire anyone they don't need anything else related to trade or trade war there is still a strong argument for u.s. growth. >> for as long as this cycle has been, doesn't it seem like the bigger risk is the bubble in some sectors if you look to housing last time i'm not saying that anyone

should welcome this sell off, but is it a bigger risk than we saw last january >> i think you ideally want more orderly markets than you have overtime so this year we'll end up with a down year unless we have a huge day today. it is about minus 5% so it's not exactly a disaster we put some risk premium back in i think that is pretty healthy >> if the fed, the criticism is they waited too long i'm just wondering if we're missing something with the internet don't be afraid of the prosperity until you see the whites of the eyes of inflation you don't know what normal is. >> maybe there is something to be said about the shadow

deployment thing >> they're trying to get to normal, and the question is where do we get there? when are we going to normalize maybe that would have been premature. from a portfolio perspective, you had opportunities to look at high markets, high yield, investment grade are those the things you should be allocating towards. >> i would be allocates towards the higher beta sectors. as people have gotten more concerned about this cycle coming to an end, they sold off emerging markets, i don't think we're at the end of the cycle. i don't see the fed cutting in 2019 my hypothesis is that this is a

cycle that will go on longer than people think. in the materials and industrials, tech, emerging markets as well. i think the dollar will stabilize. you take a combination of relatively good economic growth, tax cuts, and fiscal stimulus, and we put those things together and we know how it ends. >> we think the value is better there and that maybe there is a bigger pull back >> ed is going to stay and turn over, but joe z of black stone invest me

investment we jdecided to go with j.z >> you have your own theme song now. >> thank you, happy new year >> you too, thanks, joe. >> when we come back it has been a rough year for tech stocks what names could make a come back in 2019 that outlook is next as we take a break let's look at nasdaq over the last year. ouch sfx: [phone ringing] you still have service? call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that. i said ask how soon they can be here not you. right now? what's now? he says they're surveying our property now they're probably at the wrong house i don't see any hovering his name is hovering? look up? by using machine learning and analytics to automate claims,

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>> all right, welcome back to the last day of 2018 we're going to take on look at the tech stocks, it is great to see you today. >> absolutely, thank you for having me. >> we just looked at a chart of the nasdaq, the last few months have been terrifying for investors that are putting their money here >> i agree with your prior guests that there are not strong signs of a recession coming. i think high beta stocks are a

good place to go in my universe i cover 22 names, i think i have two be a bye. ten of the 20 have a upside. i don't think i need to correct for that,i have a 15 x multiple. >> does that mean those stocks recover to back to normal levels or they go past what they were at four months ago >> providing that they continue to grow as i expect them to i think you will see it. >> i know the fang stocks are not necessarily your coverage area >> yeah, and 5g is coming and i think that will be a great benefit, is apple a good stock to you for 2019?

>> my price target on that is about 210 which is about 30% upside, most have about 50% upside do i think there is upside, but do i think that is attractive? no, absolutely not >> one of the picks that is 30% upside isn't good enough >> my three top picks, one is western digital. we're in the midst of a down cycle. i expect that as supply cuts have been made that will be show up in mid 2013, and you will see that is not the end of the world for the memory space i believe incorrectly they have

a normal siized plan. and the second one -- >> but it is traiting -- trading, it is like being up 264 like trujillo this year. >> i think it has been incorrectly punished >> did you change your price target to reflect some of the damage that came in? >> no, i was not surprised by the downside the memory cycle is very volatile as investors we know this, you price it in and put a lower multiple on that as we have seen it play through the changes in the numbers have

not been surprising. i was low on the street because we expected there to be a downside, but was there anything fundamental that changed it? absolutely not >> what is your second favorite? >> it is nutanix currently they price their software on a perpetual or lack of device basis. they are transitioning to a software to service basis. i think it will be easier for them to sell software fu functionality to their customers. as you can see, a lot of software service companies garner higher multiples than perpetual software companies

so -- >> is that a favorite for you? that is a name talked about more months as a possible take over >> my target of $72 does not include the mna. is there potential for it to be a candidate? absolutely but that is not something they take into consideration. >> your third favorite stock, and this is a very small market cap, it is about $200 million, turtle beach corporation >> they make headsets for gaming consoles, it's a very interesting stock trajectory a year ago it was $2 per share it benefitted from the phenomena of fortnite. most of those users are mobile gamers that don't use a gaming console. but there are some gaming

console players in there of the ten million users of the game, they have a console. they're incremental first person shooters that are likely to continue to use the consoles and first person shooter games, and all of those fortnite users will buy another headset. we think that bought them will refresh, they will upgrade, and it will prove to be a very attractive stock and we have upside on that one as well >> thank you very much for coming in nehal. still to come, the fed's focus for 2019 well have a outlook on what investors need to watch for as go into the new year and the futures this morning

look like a nice rebound the nasdaq up 65 we'll be right back.

and it was a hold over weekend. the super hero flick took home 51.5 million in it's second weekend in north america that's when truth is stranger than fiction, "aquaman" is actually a movie >> i totally forgot -- >> brian selter is now famous. now it all makes sense in hindsight. >> when we come back the fed's balance sheet. and we're just an hour away from the biggest party in the year.

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good morning, everyone, welcome back to "squawk box. we're watching wall street traders get set to close the books on 2018. two, president trump says progress is being made on resolving the china trade dispute. and three capitol hill will remain mostly quiet today with

the government shut down now into a second week let's talk about the fed and the balance sheet. steve leishman joins us now. >> continuing our discussion, the fed wanting to reduce the balance sheet by $600 billion next year. they bought bonds and mortgages in response to the financial crisis and then continued inflation and growth here is some of the feeffects tt qe had it boosted the stock market, it da dampened volatility. the fed argues the effects of qe on the way out won't be as strong because markets are not in panic when it happened the market did

not notice it is about half a trillion blow the peak luke crandall says if is insignificant. we're saying there is no money from qe that is in stocks, and here is some data that you can chew on here a lot of the qe ends up in excess reserves. no one noticed, stocks were up 26%. >> what are excess reserves? >> when the fed puts money into the system, hthey have to land somewhere and they go to the banks and go on the books as excess reserve. >> but excess reserve is different from the balance sheet. >> that is what they're required to hold. >> and when the fed put money

into the system it ended up at excess reserves. they write the psychology of reducing the balance sheet is the reverse of the psychology of increating it. it is a big psychological effect, and our friend deano coats says you take the lid off of the pot and all of that boiling steam comes out. i have one idea here, that is that the fed talked about the range of 2.5 to 3 trillion why can't they pick the top end and say they're going to do it in a three-year period >> we're going to look at the effects. i agree with deano, they're a little cavalier here about the

aspects. >> it is hard to believe that if it helped on the way thereupon is no impact on the way out. >> you created a sea of liquidity that you're draining now into a puddle. you could almost made the argument that we made the policy mistake. i agree with peter, i think there is absolutely a psychological effect on the investor >> can i stop because we have the guy here who did it all and i was going to respond to joe, but that guy is better >> let's get that guy to respond, bill neilson, a chief economist, become to you, sir. >> so what do you think about joe's point? >> i don't see any mechanism links the asset sales so equity market volatility.

they put some downward pressure on rates, decline, but it is modest as lou said >> do you think they made a mistake? >> absolutely not. >> during that period of time they were doing everything they could to make sure the recovery was substantial, unemployment was high, a risk of inflation going down >> you're not in the camp that says today that powell is trying to clean up mistakes that the fed should have started tightening before? >> no, i think she continuing the policy of bernanke and a long run way of letting people know what they're going to do. >> i think it is worth points out, and i don't know what is in

people's minds, there is nothing from kwaquantitative easing, if went and i no longer have fed as the buyer of a bond, right that means a private sector person and by the way in the context of rising deficits, all of this money, does it reduce the amount of money that might be available in the stock market to my equities >> usually we think of these things as working through expectations the fed has been running down their balance sheet. it has not changed from that bath there is really no mechanism through which that kind of an effect could happen. the discount on stocks could be a little atmosphere. >> the sensitivity to risk itself, you global central banks in the course of five to even year that's are providing a put to the speculator in that they're going out.

they're buying treasuries, they're buying mortgage backed securities, corporate bonds in europe, they're buying etfs in japan. it has an impact on risk if creates element a riskless environment. and now if you begin to remove that, and you don't see the economic growth, they always said to fiscal policy makers that we need the handoff is growth strong enough globally there is more risk right now as an investor. >> if you look last year, the fed, the treasury, the imf, they all reported that equity valuations were stretched. i don't need to go much further than looking at that the interest rate outlook is uncertain. >> but bill here is the problem with some of the arguments, the fed announced in 2017 what they

were going to do then they did it, and the market basically yawned and didn't pay much attention until it did. and then in a sense you can't blame the market for not paying attention. >> but the pace is picking up. >> but it is not any more than they announced >> but the pace for next year has not changed. >> it has not. >> which is new information. >> they did not react to market conditions and say right, but we went back to 2019. we said excuse me, do you mean to tell us that ewe not going to change the balance sheet change, and they said no, we're not. >> the treat ignored it because you had the tax cuts

>> but you still have the story is that they be shorter than expected these sales will continue, now $500 billion, that is huge that would have been through 2023 or 2026 there is a lot of signs in the financial markets now where they may have to stop relatively soon >> there is a difference between says the pace has not changes, but are you saying it is not monetary policy? >> i'm saying the shrinkage will be less, not more.

it will be z less than expected, and the balance theet is monetary policy, but we're going to use interest rates as a key tool. >> this has an effect through interest rates and interest rates are lower. so the effect of the tightening should not be as great and i have only one thing to end with is that as we can see, balance sheet happens. >> thank you very much >> thank you >> coming up, it has been a busy year what companies and targets will be in 2019 here is premarket winners and losers in the dow. we'll be right back. (urgent drumming) ♪

(drumsticks clatter)

welcome back, everybody. 2018 was the busiest year on record for shareholder activism. joining us now is bruce, thank you for being here today why do you think we saw so much activism in 2018 >> we have had an environment

where investors are looking at the companies they own and they have greater expectation that other investors will put their mouth where their money is and look to help create value, and the activists have looked to help raise money there is hundreds of billions under management, and they need to put that money to work and they look for under performers they are deep value research investors. they have been looking for years at situations and when you have market volatility you end up with targets >> i was going to say what happens in 2019 given the last few months of what we have seen in the stock market. >> with the volatility, it means there are dips for potential

buying activity for a activist that may have been looking at situations for a number of years. sometimes they're looking at companies over a very long period of time with an expectation they may be buying for a long period of time. they're using the dip as a way to monitor their situation >> meaning that a company before may have been considered unattainable, or nobody was going to be able to get into the fortress if your stock prices come down 20%. >> it is still an issue looking at the value under lying that stock price. now you're seeing the opportunities change and there are certain sectors, for example, where the valuations have come down significantly if

you look in the energy space, the price of oil is a significant factor in whether or not a company in that sector will performance perform, and thinking about what companies are doing it right and who may need help from an active sha shareholder. >> i'm just curious are you thinking about the prior landscape of activism itself, did you believe there has been a consolidation overall in the activism hedge fund community and what do you think going forward that will mean for activism overall

>> there has certainly been winners and losers, some have won and run with other investors and been able to raise more funds through pension funds, through other investors, and they have had winners over time, and that is -- >> so is there a much needed consolidation? >> i think there is a value to consolidation, there is larger and larger targets and that requires activists that have a larger pool of investments on the other hand there will be targets in the smaller cap space and those will allow for small captiv captiv activists >> thank you for joining us today. >> coming up, becky you're going

outside? >> yeah, i asked for it believe it or not. >> it is empty now within it will fill up wk, weee'll be live will fill up wk, weee'll be live from the nasdaq which i used to markethealth insurance to my employees. what's in your wallet? the new sleep number 360 smart bed. it senses your movement and automatically adjusts to keep you both comfortable. and now, the queen sleep number 360 c4 smart bed is only $1299. plus, 24-month financing on all beds. ends new year's day.

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we're in times square. i wanted to come outside today because it is warmer than usual and there is a sense of excitement here. nobody here from any of the crowds just yet, we're expecting thousands and thousands and thousands of people when the ball goes down in about 16 hours. but guess who is here and ready to go. new york's finest, thousands of police officers will be here tonight helping with security. these guys are already ready to go, thank you for being here early and ready. the ball drops from right up here we have the scaffolding here, but all of the action will take place from about 16 hours from now. i never in a million years would want to be here at midnight. i'm glad we're here in the morning, but i thought we should come check it out. >> i'm with you even though it is warm, i can't understand it at all when it's like ten

degrees. >> what about the bathroom lines with a million and a half people >> there is no bathroom break. you're in and you're locked in place. >> that is diaper territory. i guess it depends joe is setting himself up. >> i'm disappointed, in a million years you would not do it i was going to invite you to join us. >> so elmo is not there anywhere this morning >> no. >> elmo is nude every day. >> he is furry >> i guess that doesn't count. >> you give them our best. those guys protect us every day, too. that is a blue wave out there, that is cool, that is awesome. thank you, becky we'll see you in a minute. >> coming up, trade, china, and your money health care and more, your 2019 outlooks are coming up

a race to the finish futures in the green on the final trading day of the year. positive trade comments from president trump. >> where to invest key sectors of the market where you can make your money work in 2019 >> whole foods on the rise amazon reportedly eyeing a big

expansion across the u.s happy new year as the final hour of "squawk box" begins right now. >> live from the most powerful city in the world, new york, this is "squawk box. >> good morning, welcome back to "squawk box. andrew is off today and you're looking at live pictures of new years celebrations from sidney australia. >> that is the only live one i might see. i might catch a few more, but not hours. >> that is nice, our guest host today, ed, portfolio manager and a cnbc contributor

they must be preventing people from coming in at this point, right? you can't even get here. >> yeah, you could not when we got here, we had to walk around. >> it is not like a normal -- no, okay let's check out the futures, what do we need to do? a ten for one split or something? one for ten? >> oil is up $1.11 on the highs. >> it will be triple digits all of the time, right good is bad, fair is foul, foul is fair. it is -- the correlations don't always hold forever. but i think it is port to understand them. it is hard to make any head way without oil, and we went from

supply supply supply to demand demand demand. >> we were addicted to oil in 2007, right? president bush told us, and now we're energy independent the treasury yield is not as flat as it was >> 273 on the tenure now >> when did with uninvent. we're back with my last day that we were here it was christmas eve. j are woe flipping that back and forth. >> because we can. >> a glitch in the system. >> maybe we never looked at it this long. >> we're coaching three big stores today the dow was coming off of it's

first weekly gain in december. number two, positive comments from president trump over the weekend. on saturday trump tweeted that he held a productive phone call with xi jinping. more customers will be in range of amazon's two-hour delivery service if they can expand whole foods. and deutsche bank shares are higher in premarket trading. he added there is no need for state aid or merger with another bang as you see they lost more than

half of their shares canada goose is up they are drawing huge crowds as well sentiment towards the company is unaffected by the attentioned between china and canada it was an interesting barometer. so maybe that is now your china trade bah rrometer for the day. >> they're mean, they approach you and if they have babies around, they are. >> i understand that as a mama, but what i don't like -- >> we don't need a wall we need

a net on the northern border to catch all of the geese >> it's the poop, that is the reel problem . >> it goes through you like a blank through a goose. >> any time you take the kids to a park or somewhere -- >> how about in the morning when they're flying by or landing near by. we need a net. and it would be cheaper i think. >> we want a check on geopolitics. joining us for that is michael o' hanlin, it is great to see you, happy new year. let's talk this through as we go into 2019 are there more concerns, fewer concerns, how

would you describe your outlook as we go into this new year? >> one big concern, of course, is not having jim mattis at the pentagon i think his role has been remarkable he has been brilliant and inspirational. but i think his calming effect over president trump has been huge it is because we're not near the brink of war so 2018 was an up and down year. we start with that one in russia i don't think we're in any kind of a place. at least we're not actively moving towards a conflict as best i can tell. we're also not resolving any of the big disputes you were just reporting about

the trained economic aspects that i think is central to the security relationship, too i would like to see a deal, but i think president trump has part of his advisors that would like to see a generation long competition against china. maybe that is the most interesting question to watch. do we try for a deal with why in a. a cool war or intense competition. it is a difficult relationship than we have had >> you said you would like to see a deal, is that from an economic or security perspective? >> i think the deal has to be tough to be effective from a security point of view we do see too many high-tech kinds of assets and military relevant technologies being

taken by china but none the less, i feel that if we really go in the negative direction with china, it could really lead to some others, so as much as i worry about their growth, i also worry about the possibility of just shutting them off from the world economy, interest, and engagement on balance i favor a deal, but it should be tougher than the kinds of deals we have been making in the last 20 or 30 years. >> michael , you wrote a book about barack obama's form foreign policy >> i was not parking lot t of ta

administration you're right that there was a quicker than expected departure from general jim mattis at central command. he would have probably done another year >> we didn't hear a word about it back then >> i think there was a disagreement other whether or not to engage with iran. the obama administration was trying to gear up to do the negotiabled dea negotiated deal. sometimes after two, so what happened with mattis was not extraordinary, but there was no huge meeting of the minds they perceived between general mattis >> trump is mulling a slower pullout in syria

>> we finally have a syria policy that is working on it's own terms, to gradually continue to defeat isis, limit iran's influence, and all of that with just 2,000 u.s. forces on the ground it is pretty good, and president trump seems to have gotten frustrated by and and impulsive. i hope he is reassessing senator graham had lunch with him to try to persuade him to go slow i think it may take a couple more years and that is okay. i hope very much so. but i'm no closer to being able to read this president than i was years ago. >> what does that mean >> it doesn't make me feel good.

president trump has proven she a pretty bright guy, he has smart instincts, not always the world view, but he doesn't make a lot of dumb decisions but he is very impulsive. he seemed to let his impulses determine policy in the last few months i think my anxiety is rising again like it was in the early part -- it is hard to know how the will fung ction in the new year >> who would you say the most stabilizing forces are at this point? >> secretary pompeo. i think he thinks two and three and four steps down the road he also has pretty hawkish instincts that are fine as part of the mix, but his views on

iran don't strike me as all that realistic. i think you need someone else in there with the stature of a mattis secretary soak tear shanahan doesn't have a lot of background i would like to see a retired officer or a sam none. sort of above the fray, but i don't think the odds of that are high in this administration. >> michael, thank you for being with us today. >> happy new year to you, too. coming up, a glimmer of home from president trump this weekend on trade the president tweeting that he had a productive phone call with china's president and the markets are taking notice this morning, going up a little bit we'll find out what america needs in order to make a deal that is worthwhile

stay tuned ♪ [ dog snoring ]

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welcome back to "squawk box. futures are generally pointed higher this morning. the s&p up 18, the nasdaq up 62. this is all after the president was tweeting about trade progress with china over the weekend. he was saying that he spoke with xi jinping and that a deal is moving along very well let's bring in our next guest now, ambassador hollyman, welcome. >> good morning. >> good morning, we're trying to figure out if there is more substance to their talks i think what we're seeing are the initial steps towards trying to reach a deal. the president, both presidents,

have given themselves until march 1st to see if we can make substantial progress both sides are talking and speaking actively. i think the chances of getting a true deal that respects what the u.s. needs from this are still remote i think we will find ourselves in a tariffs opening up the chinese market to more american investment and the trade secrets that are resulted in shift from tsoil but the shift will be tough for them but they really have to stick to our determination to

secure the problem we need >> they just set up more they want to protect their own intellectual property as well. how do you get to the bigger goals of making sure on cyber in particular on i.p. that this is real progress. how can we trust that is the case >> that is the challenge, china made many commitments in the past, they tried to open up their market to allow their competition and they have been very slow. i think the ultimate test will be what type of transparency but fundamentally, we have to been very careful to republican this, this is not about the u.s. trade deaf sis with china.

china's as per rations to get advantage on a global station and they are leading nations and that is a fundamental market change required of china be have to make sure that we are successful in dressing the things that would make us successful now that we have gone down this path, we have a lot at stake to make sure that china delivers, and to get that full delivery it is not something likely to happen, but it could be a cease fire >> you're not big on --

>> i was in the obama administration and we didn't impose tariff taxes. you said i'm not a big proponent of taxes on people that's all >> tariffs are taxes >> i'm just yanking your chain >> on tariff taxes you like the other ones? >> i'm not going to get into tax policy >> new years i'm thinking about eggnog, i'm in a good mood, aren't you i have some resolutions to make. and i had to bring up taxes. >> i want to hear your resolutions. i think being humble all of the time is disconcerting for people >> you think it is disconcerting. to be overly, with this much

humility, right? >> i wouldn't know false humility what are your real resolutions, we want to know. >> i have to think about that. every year is, you know, every year is the same in fact carbs aren't great >> has there ever been a resolution that you have committed to and maintains through the year >> have you ambassador >> i'm still working on that >> what are the best ones, i need a really good one to stick to, i think. >> you want to run a foot race >> try to see the good in all people take things less seriously certain things i'm not willing to do, i like my echo chamber

>> how about fill in on the midday show when scott is gone >> oni have done that, but some people i don't want to be there for. it is not midnight yet and i have gone back -- >> it was like 30 seconds after you said it it >> when we come back today 2019 will be a more lucrative year for minimum wage earners pay is set to arrive we'll tell you where and when when we come back. (clock ticking) (bell ringing) it's time. time for a new kind of cloud. the ibm cloud. the cloud that proactively protects your business from threats, instead of just reacting to them. that lets you modernize and move more of your apps without re-writing. that unlocks insights from all your data and puts it to work with ai.

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what if there was no rate hikes in 2019 at all >>. welcome back to "squawk box" everybody. you can see the do you is up, the nasdaq is up by 51 >> two dozen cities are starting tomorrow a $1 an hour increase in massachusetts and maine, in california businesses with more than 25 workers. for the next decade the minimum

wage that was $7.25 an hour. >> coming up, a pretty good year for health care at least until ilst month we wl return to the things that matter the most for investors. (drumsticks clatter)

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good morning, everybody. among the stories that are front and center, as joe predicted, aquaman was number one at the box office for the second straight weekend they took in 51.6 million in north american ticket sales. verizon fios customers will continue to get disney channels

now. like espn. and alibaba is settling a giant lawsuit. they were accused of concealing a meeting with government officials two months before the ipo. they said they were not taking sufficient steps to suppress counter fit products >> it was a good year for health care at least until the fonl final month. we saw companies invest in new tech a look at the health care sector is anna gupta. welcome to you >> hey, thanks, kelly. >> especially with dcs coming into congress, are people taking this medicare for all thing seriously in the health care industry is it silly to even talk about

it is there no way this would become a reality >> we should tie this back to a the text couas court decision ah lawsuit. i think it is a platform for the affordable care act. they can come in with legislative fixes. i doubt they will go all of the way to medicare for all, but within the caucus, i don't think there is agreement on that >> there is now people that want medicare for 55 and over look at medicare advantage and the ensuinsurers involved in th option >> it is very doubtful in my view i think it will become a public-private partnership if it ever happens i said this once before. it was about a trillion dollar spend, that is like ten times what we had budgeted eight years

ago. they could not find the funding, and we're talking about something of giant proportions so if it happens, it will still happen i think in hardship with the private ensurers i think they're so entrenched -- >> but is the risk for them, if we talk about singer payer or obama care, is the risk that when there was one party to negotiate -- it is expanded access, it has been great access so does this pose any kind of threat for the industry or is it great news >> you're painting it like the public-private option, and the government is going to run health care. cms and hhs, they are not

staffed to do that or anything else >> when is the latest appeal when is that expected to hit >> it will go to the fifth circuit court of appeals, assuming the first appellate court still holds that decision. >> and roberts, i think -- i don't know if he is looking at law or overturning the public -- i don't know if he is willing to do it again. i think he might be a 5-4 against again. >> that's what i think, too. he could walk it back to keeping the pre-existing season. the judge earlier struck down that and i think that might still hold potentially there is really at least some logic to the nonseverability

will they will strike it down? >> what is the -- i understand the lockic behind the taxing authority being gone, but what is the medicare advantage? >> it is separate from this, so that one will remain the way it is, there is no issue on that. >> what california will do for single payer, it would cost how much in california >> it left no money for education or anything. >> it would only be a trillion to do -- >> a trillion is what employers -- between employers and what we all pay for out of pocket costs and -- it is a trillion and a year. that was over ten years. this is a trillion a year. >> so that is like ten times of what we're talking about >> wasn't it like $52 trillion to pay for medicare for all. >> so if we're a wealthiy

country and we can do this you said you would have to keep individual rates where they are. but you can't say this to congress with a straight face. >> progressives always say that. the democratic agenda has been to have a complete public option, and made care is the only faederally funded program. >> so you have all of the ensure -- insurers what are people gearing up to do all of this hanging over this space, what are they seeing? >> i think investors are overly concerned about this whole texas lawsuit. if you look the large gap, they are coming from coverage expansion. the taxes and the fees are

overturned and it is a positive. >> and i don't cover drugs, but from a prod sector standpoint, the focus is now moving away from drug pricing. the growth has not been from volume, it has been from pricing, so they get a reprieve, if you will, from a policy standpoint, at least policy pressures aside >> nehr not trading that way they're all rallying sharply on the expectation that drug pricing reform will not be -- >> they have different characteristics. >> they have been the best performers so far. >> considering we're in a late cycle economy, the policy risk is overblown and the health care can still work of course you know we don't think medicaid expansion will

get overturned, but there is exposure >> once the cost is shifted on to them will they say we could no longer support this >> we could say that, but then it would be one by one you mean the states would say that you don't support medicaid >> i'm saying it would be shifted over time. over time as states face budget pressures and the size of that entitlement continues to grow that the margins could compress but we're seeing a lot of consolidation. i think the consolidation and margin expansion is a off set to any kind of pressures here again. >> you think this eventually nominee in 2020 will be a single payer person i say that because a new

alert -- apparently massachusetts senator elizabeth warren taking a big step toward running for president. she is announcing an exploratory committee to seek the presidency is she okay in terms of the way that whole native american issue played out recently. i don't know -- it brought the issue back and everybody re-examined how her entire career, and whether or not that was, you know, it's hard to go back you didn't know you were going to run for president when you tried to get hired at harvard and now it is all in your record and even native american groups had a problem with, i think, her take on what those tests proved. >> if you look at the midterms, the candidates that really made it were those with practical fixes to real problems

>> are you saying she is not one of those i think medicare for all is trying to solve a problem that doesn't really exist >> but one thing, whether or not it is elizabeth warren, bernie sanders, beto o'rourke, we will have big capitalism talks coming up >> i think the new congress will take effect and we'll start to hear noise all of the way from fixes from the aca up to medicare for all at the end of the day i think within the democratic caucus they will not probably take on medicare for all as an imperative for all if they do, let's look at what happened eight years ago they could barely get obama care passed through the board room.

>> all right >> ann that, thank you so much >> coming up, investors spent the last month profiting off of heightened volatility. what the technical signals are saying about what is in store for the markets for 2019 stay tuned you're watching "squawk box. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade

welcome back to "squawk box," everybody. the futures are trending higher, we have been -- we have been pretty calm all through the morning elatively speaking to what we have seen in recent weeks. >> we're tethered to oil, it is coming back and it is pulling the futures back with it >> all right, after all of the volatility last week we want to take a look at the biggest technical signals that we're seeing in the market now it will be good to get a update from you if it got below 2690 i think you had a 2510 on the s&p, if it got to that and broke under that we

were in trouble. we broke under that, and then the next level was something where you said we would be, things would really be happening the fan, that was 22 -- what >> it is around 2240 that means the bottom dropped out in terms of where there is support for the s&p 500. we did confirm that break down below that leveland then subsequently took out 2010 so that is reflection of negative momentum. i was concerned by the lack of reaction to that very, very strong oversold reading that we had. we still have an over sold readiread i ing, we're reacting to it now, and we have upside so i think we're getting another selling opportunity, or will have a better selling opportunity in the coming weeks as we rebound here however the damage is done to

the charts >> all right, so you're looking at strength to sell then >> yeah, that break down for support and the lack of reaction to the oversold. i would say best case scenario is we're in a 2015 or 2016 type of environment and the worst is possibly over despite how far below that next level is, but it is a more challenging environment in terms of stock selection and being in the right sectors where you have to end up being more short-term in your positioning to take advantage of the volatility and the swings. some people are very good at that, of course, and it can be very difficult >> how long are we talking about being in this period what is your normal time >> i think it is cyclical. not years, but months.

q 1 or early q 2 we take it as it comes and we evaluate the readings that we get, we have an ntermediate reading and the name for more of a relief rally it is more than 7% above current levels, so it could be more of a relief level >> so 7% above the relief rally could be expected to get there, but peter out there, what number is that? what is the math on that for me? >> it is around 26.67. just over 7% above, and the next support is about 10% below so the risk-reward is not that favorable except in the very near term with that in mind. what we will be looking for in q 1 or q 2, looking for a longer term oversold reading, and looking broadly speaking at the momentum gauges and waiting for

those to flash signals >> do you correlated assets that you follow you always do the tenu year for us, do you do oil and commodities like copper? all of these things unfortunately. >> they're all on my radar, yeah they all look to be indicating problem, right >> it has been sort of a macro move >> do you have any idea fundamentally what we're talking about here >> not fundamentally but technically it seems to be broad based. there is no doubt that crude oil has seen a reversal, so that is important to note. copper doesn't look great from a technical standpoint, and testing at an important and

grand yul trend line high yield bonds broke down as well we're keeping an eye on those things and i would say they don't make a very positive comment on the fundamentals. >> you think for three, four, or five months that the overall direction is down and only cyclical, we have not existed the bowl >> no, but the cyclical move that had a sideways to lower bias, with heightened volatility and we have become used to that in the last few weeks, that something like that 2015 or 2016 environment where we had to be more short-term in our positioning.

>> we have unbelievable ratings when there is short-term volatility >> i thought you would say when katie is on. >> yeah, katie or becky. anyway, thank you katie stockton, thanks >> why are you laughing. >> u.s. markets are feeling the paint this month when we come back, we'll look at emerging markets and where they fit into your portfolio for 2019 we will call it 189. we'll be right back. 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.

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all right. welcome back to "squawk box" everybody. emerging markets had some bear pains about six months before this month's action in the united states. so could it be wise to start out 2019 in emerging markets our next guest is excel asia adviser. thank you for being here today, richard. i know you're saying there's not a lot of reasons to make you feel great about being bullish, but maybe the huge selloff, all the pain that's been seen over the last six months or so, maybe that's the one bright spot >> it should be. we're seeing some real pain q-4

in north america so it's been reverting to look a lot more like the pain we've seen in emerging markets most of this year. 2015, a hard and sharp fall in china, a little bit of a blip in the u.s. i think for most investors, it's time if you've been holding some cash, it's time to build your shopping list. >> trying to build your shopping list, and you would start with which economies? >> well, let's look at emerging markets. it's like fruit. watermelon or blueberries, it's not the same thing so for everybody -- look at qatar, up 40%. russia up 10% roughly. there's turkey, down almost 40%. south africa down 20% in both cases because of local political trouble. maybe that's a good place to start. qatar 2017, worst performer. this year, best performer. does that mean turkey and south africa, worst performers, are a good place to started? probably not a bad place. if we're in a time of picking what has really dipped hard, that's a good place to start

at the same time, s&p 500, how many times have you seen your portfolio cut in half in your lifetime y2k, the financial crisis. >> richard, it's joe i like your thesis, and i'd like to expand upon that. let's look at the chinese stock market, down 25% let's look at the indian stock market, up 6%. what does that tell you moving forward? >> so these are still -- when i grew up in the industry in the 1990s, i was really taught hard, don't fight the fed and don't fight the tape i'm a believer you can't fight the numbers. in china and india, you have being numbers in terms of demographics anything that's going to touch the consumer, and how do they consume? in north america, you fill up your suv at costco and you have that brown truck come by because you're always clicking amazon prime. flip cart in india, alibaba in china. they're shopping like us

that's probably a good place to start. >> ed, how about you you were saying something similar. you're ready to kind of test >> we've been adding to our emerging markets positions value has gotten better as a result of the big drop the fed may have a role here a lot of the markets that were beat up last year were beat up in response to tighter policy from the fed so if the fed does ease off and don't raise anymore, or maybe one m tore, the backdrop shouldb improved >> so what do you do do you buy the etf it's the point richard was just making good luck trying to pick the right country and the right time frame. >> we usually do a combination of a bottom up approach. we have a quantitative approach to pick the individual stocks. then we look across the markets to look for good value the best strategy is looking for good value in the combination of country and industry pairs

so indian software stocks, for example. >> so you would buy individual names and not the etf. >> my colleagues would actually pick the stocks, but we look for strategies that can add value for stock selection as well as asset allocation >> i think that's where active management comes into play in the emerging markets you want to find an active manager, a quality shop that knows how to buy companies that are selling to the emerging market consumer. it's really -- you're not looking to buy the country you're looking to buy which consumer looks most like the u.s. consumer, which fiscal policy looks most like the u.s. fiscal policy. >> and richard, very quickly, your favorite market, if you had to pick one. >> i like china and india a lot. they've been hurt. i like the demographic story your speaker there is absolutely correct. country and sector, i'm big on anything that's data so ai, blockchain, iot that's the future, and they're doing it over there really well. >> all right

richard, thank you for joining us coming up, more with our guest hosts. their thoughts on the final trading day of the year and a ensqwk outlook for next year wh "ua box" returns in a moment i consulted with your grandmother's doctor.

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our guest host today, chief investment strategist and portfolio manager. we have no time left so i have to say good-bye. but thank you to your both and happy new year happy new year to everyone out there as well. >> kelly, thanks for being here today. >> thanks for having me. everyone should watch the squawk 2018 package if they didn't see it >> right now it's time for "squawk on the street. ♪ good morning and welcome to "squawk on the street. taking a look at u.s. futures. looks like we're set to end what turned out to be a bumpy month and tumultuous year on a positive