♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc live from the nasdaq market site in times square i'm becky quick along with joe kernen and mike santoli. andrew is off today. our top story is the global market selloff futures this morning pointing to a sharply lower open so happy new year, clean slate, here we go again dow futures are indicated down by over 400 points s&p futures down by 42 points. the nasdaq is down by 161 points the big catalyst overnight, weak economic data out of china a private survey on the manufacturing sector showing factory activity contracted in december that's the first time that's happened in 19 months. the downturn in china comes amid the u.s./china trade fight the major asian markets today

down sharply on this news. japan remains closed today for a holiday. the hang seng down by 2.75%. the shanghai off by 1.1% if you look at early trading in europe, at this hour, red arrows across the board the cac in france down by 1.8% the ftse down by over 1% the dax down by a third of a percentage point look at treasury yields outside of equities, still a risk-off trade ten-year treasury yield backed off. it's below 2.70. it's 2.66% that's as low as it's been since late january so essentially across the world yields coming in people backing away from risk. also noting the two-year note down below 2.5 2.49 obviously people kind of going for that safety trade.

also actually echoed in currencies, if you look. the dollar index is not moving much you will see the yen is rallying dollar down against the yen. that's also pretty much typical safe haven trade otherwise not dramatic moves dollar up against the pound. it's the yen that's telling you that basically people are not interested in adding new risk. >> joe asked the question when he walked in, where the japanese-- >> we should look at our ten-year >> japan ten-year is slightly negative >> the whole idea of that is hard to get my head around you get less back? you get less back ten years from now. >> in nominal terms. if you think it's deflation, you're getting more value back >> we always think deep down there's some -- it seems like -- then -- any way.

there's the ten-year check out germany, too if you had to choose japan or germany, it's like i don't care. either one >> 2.66% still looks good for the american ten-year. >> 16 basis points >> it's not people deciding, y i would like to put money at risk for ten years in this instrument because i think the return is good it's savings or banks forced to own this stuff >> what they think they're doing or what their motivation is, none of that matters compared to the reality. in light of what we're doing here in terms of nine straight hikes, and two or three next year, in terms of a slowdown -- >> this year it is next year. >> you know how long it will take me -- number one, i think it's monday. >> number two, you think it's 2018 >> i still think it's 2018 any way. as for commodities and oil is

sort of correlated to our equity markets, when it goes down, 1.19% you know we'll probably have a tough day the president was tweeting about gas prices, how good it is, it's like a tax cut for true as well. but you look at one of the biggest producers in the world of the oil complex, it hurts a lot of our companies and industries, they hurt when it goes down. it's a mixed bag now it's not just good to get to $15 oil. hopefully that's not happening a bit of a safety trade in gold. remember when that was supposed to stay above 2,000 forever? it has been in an upturn i looked at bitcoin, to see where it was >> where was it? >> 3,800

>> a year ago it was at 20,000 >> you know why i looked at it >> why >> because our guest host. >> tom lee >> tom lee is joining us at 8:00 a.m. eel be here for an hour. >> again, i will get him to finally say, all right, i wish i never said anything! i had a great run with stocks. with my market calls okay i admit it, i hate bitcoin >> stay tuned at 8:00. today's red arrows around the world are a continuation of the 2018 market selloff. the dow, s&p and nasdaq suffering their worst year since 2008 the dow and s&p down about 6%. it's the first time the s&p has been down in ten years the nasdaq lost nearly 4%. the fourth quarter was particularly brutal. all three major indexes down by double digits. the nasdaq was the worst performer. it dropped more than 17% two big market moving events

to watch this week both happened five days from now on friday -- >> no. no >> okay. all right. the december jobs report, that data will be released at 8:30 a.m. eastern beyond those numbers we will hear from jerome powell on friday >> getting back into this. >> perfect he will participate in a panel discussion, totally aid ld libb with his central bank predecessors off the cuff janet yellen and ben bernanke will be there. the damage gang of three. if you have not seen it, it's a good piece in the "journal" today in the op-ed pages, that seth will have to talk about the fed's obama era hangover still kind of interesting that maybe we're paying the piper a little bit

i hope it doesn't get really big paying the piper for this. i'm worried. i don't know >> the other thing tom lee thinks is that this is a midlife crisis for this market he points back to past times where that's happened. he looked at the run you saw from 1974 up to 2000 yeah, you had 1987 right in the middle of this >> the dow was down less than 6% for the year >> that is true. >> would you sign on for that this year? >> no. >> no? you're greedy. >> yes >> if you can guarantee not down 30%, you wouldn't take down -- >> would i take down 6% vers everything off no >> do you think it's likely it will be down -- >> down 6 is still not cutting into muscle as far as i'm concerned. >> if you could guarantee not down 30, you are only down 6 --

>> not at that point >> do you remember 666 on the s&p, we were double that >> i do. >> we tripled it since >> we'll talk to tom about this, but you're dating the start of the secular bull market back then to 74 that's the only way you get 87 being a midlife crisis >> the other one was 1950 to 1970 i pointed to the 1962 mini bear market no recession in site a lot of political noise you had an expensive market that sold off >> and who wants to relive 1987. >> that was not midlife. that was existential seemed like it >> never happened before >> all the dow componentswere single digits. i remember looking at my screen, shaking it earnings season is right around the corner. we are starting to see analysts cut their estimates.

analysts have cut 2019 forecasts on more than half of the s&p 500 companies. earnings are expected to grow by 7.8%, that forecast was 10.1% as of the end of september. profits grew at a rate of 22% in 2018 you still got that market return that we talked about the most recent bank of america and merrill lynch survey shows this >> joining us is seth carpenter from ubs i passed you on the way up the elevator and did a little drive-by harassment, passed you by on the way down >> welcome >> you correctly were one of the early ones calling for a slowdown >> the only. >> the only? okay >> that's when you called me your favorite economist. >> i think i did

yeah it's a really low bar. >> i'll take it. i'm the fastest turtle >> exactly the snail is still on top saying whee >> i know that joke. >> you blame trade policy more than the fed for this. my point to you was if you knew that we were going to have a slowdown and you knew that the trade policies were going to be a headwind, why weren't you urging the fed not to move or do you admit maybe it was a mistake they moved as quickly? >> what we said, when we originally had the call for the slowdown, we thought it would be sharper and sooner, and that the fed would see the data in time and skip the december hike >> you thought they might skip >> we thought there was a good chance of that back in july. we got so much hate mail for

saying that. by the time we got to november people were thinking, wow, maybe you guys are not so far out. leading up to the december hike, even though the data coming in was still clearly strong enough for them to hike, we said we think the fed will hike. boy, we don'tny they should. that's a big change from my job now. i'm supposed to be telling people what they will do as opposed to what they should do >> you are not ready to throw powell under the bus in terms of his communication skills, but you think it needs refinement? they were not disastrous comments or rookie mistakes? how could you characterize them? >> i don't think they shrouded themselves in glory with their communication. the fed tends to be a premium mind precision of language as opposed to clarity of communication. i think what jay is trying to say to markets and the world if the economy is strong enough, we will keep hiking if there's weakness, we will not put our heads in the sand. i think people are missing that.

they only hear the first part, we see strength in the economy, if it stays strong we will keep hiking i don't think they're so clueless as to that. the nuance about china, you think that the trade war is a bigger issue maybe than the fed. you think that's why the market is having some problems. a lot of people who say that are willing to accept it give than they think now std time to address some of our long-term concerns with the way china does business we don't like this, it will hurt, but we have to do it at some point china is weak today. the pmi. we're going down is it because our domestic economy is already feeling the weakness from a supply chain problem with china or is it because china is weak and it's such a linchpin of global growth that just -- it puts us in a negative frame of mind in terms of global growth, oil demand, everything else.

is it our problem yet? is it contagion from there is it china just one of the leaders in incremental gdp growth globally? it's important it's the old adage, no one wins in a trade war you hurt the guy, yeah >> sure. this is the best part about being a macro economist. you don't have to pick one explanation. all of these factors affect each other. you were talking earlier about oil prices, whether or not it's good we'll go further and say not only is it not a good thing if oil falls further from here, it's a serious risk to the u.s. economy. if wti gets below $40 a barrel, you could see a replay of 2015 when oil production, fracking, all the investment and hiring that goes along with it in west texas just shut down completely. 2015 could have been a much stronger economic growth year than it was because because of oil falling so much, so much of that investment spending and

hiring fell off. >> it's not just marginal anymore. >> not at all. that's the biggest risk that people make still. they think lower oil prices are good for the u.s., but we're getting close to being neutral in terms of imports and the amount of capital intensivity and hiring that goes on with fracking, a massive support for the u.s. economy >> you characterized potential lay soft patch for this year is that all it's going to be what gets us out of this psychology of globe is weakening, our companies have to soften up their earnings outlook and the rest of it >> baseline forecast is that it's a soft patch, and that after a while firms learn how to go around the tariffs. we've seen that in the past no one likes to pay taxes with tariffs you found a way around it. if oil doesn't fall off of a cliff, we think it's a soft patch. by the time you get to q2 and

q3, things perk up i will not bet the farm on that. as we've seen oil is falling more than we anticipated and there are clearly risks all the way around ffrnlgtsz >> if we had not done tax form reform, would the counter factual be in a worse position we still may log a 3% gdp year >> for 2018. >> for 2018. what do you think about 2019 back to 2, sub 2 >> 2, 2.5. i think had we not had tax cuts, still had the trade war, then, yeah, 2018 would have been a slower year. >> that's about as much as i'll get from you in terms of a thumbs up on the policies.

that almost sounded like a nod i knew that was the best i was going to get did you like the deregulation? >> i'm skeptical there, a lot of the regulation in place, you have to remember two things about regulation. >> federal regulations come because there's a law that congress passed. the agencies in charge of administering the law write the regulation so it's a bit odd to point at the regulation second, a lo environmental regulation is there for a purpose. >> some of it misguided. >> yes >> but infrastructure, if it takes ten years to get permits, is there a way to streamline that >> welch brings in things, you look at what a business owner needs to do -- >> i heard democrats and republicans complaining about permitting time. >> local and state stuff >> you will get no argument that more infrastructure would be a good thing, being more

responsive is a good thing no question there. i don't think there's a great track record because of the jurisdictional issues. we are here in new york. >> talking about the wall infrastructure i assume that's not what you're talking about. how about the steel slats? thank you, seth carpenter. >> my pleasure >> no different out there. just bring it and put it on camera >> you're still his favorite >> there we go i'll take it. tesla reportedly has more than 3,000 model 3s left in its u.s. inventory tesla has been pushing potential buyers to make the most of the federal tax credit last saturday elon musk tweeted the benefit would drop to half beginning in 2019, and on monday he sent out a list of tesla stores that would be open until midnight tesla shares were down a bit on

this news. right now it looks like they're down 1.75%. netflix reportedly poaching a new cfo from activision blizzard in a securities filing on monday, activision said it placed neumann on paid leave and would seek to fire spencer neumann. >> when i read it last night, i read it in my head this way because i knew you would do this >> what if i had not >> i would have reminded you >> netflix shares, let's take a quick look, down -- that's nice. >> the number of the beast >> the days of the snake

crawling out of the wall a bunch of scary things. you believe that there was a mailman that didn't deliver mail anything that happened on that show has come true >> that was true >> recently, like a month and a half ago, the mailman had not delivered mail in months i don't think he was doing it as newman all these things will eventually -- >> that was the prophecy chinese gaming stocks are all down today in hong kong trading. that sector ended last year on a strong note but investors this morning are worried about a weaker outlook for january demand continued to rebound following a prolonged slump, but analysts expect revenue this month to be flat. it's day 12 of the partial

government shutdown. could a meeting between president trump and congressional leaders lead to a break through? futures right now are comfortably lower. not ready to throw in the towel just yet down 355 >> we were down 400 a few minutes ago. >> here's the biggest premarket winners and losers in the dow. [leaf blower] 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. onmillionth order.r. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪ we don't bake. ♪ opportunity. what we deliver by delivering.

hey, batter, batter, [ crowd cheers ] like everyone, i lead a busy life. but i know the importance of having time to do what you love. at comcast we know our customers' time is valuable.

that's why we have 2-hour appointment windows, including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. welcome back to "squawk box. an unpleasant wakeup call coming from the markets on this first trading day of 2019. futures are down by 350 points if you are just waking up, this is improvement we were down by 411 points less than 20 minutes ago. we're looking at the s&p futures down by 36 the nasdaq down by 142 points. anybody looking at a clean slate, here we go again. >> for context, the s&p was up something like 6% in four trading days

>> they made up a lot of ground. >> we're following the overseas markets, but that's the context for this pullback move on monday, on new year's eve, you had that big pension rebalancing. you had the mechanical buying, and now people deciding to put more money in. >> there was weakness in overnight data reported from china, factory production contracting in december. look at treasury yields. this is where you're seeing a lot of this action playing out even more extremely than we've seen with any of these equity moves. check out the ten-year now trading at 2.659%. the 30-year at.988 2.988%.

in japan, the ten-year is in negative territory german bund has come under pressure as well the bund there, at 0.165%. looking at oil prices, that's another area that people have been trying to figure out what this means for overall global demand wti down 1%. decline of 43 cents to 44.97 we're entering day 12 of the partial government shutdown. president trump has invited republican and democratic congressional leaders to a border security briefing at the white house today. eamon javers joins us live when does everyone get sworn in? when does that happen? >> later in the week on thursday democratic takeover of the house of representatives nancy pelosi presumably has the votes to become speaker of the house. >> so romney is not even a senator yet? >> yes that's right

>> god bless him >> i have an excerpt here. >> i bet you do. god bless him. different than the endorsement he got from trump? >> they have a tortured history. >> depends on when it's in your interest is he running in 2020? what is the deal i don't know >> why don't we -- >> we will how many senators? 53 or 54 he can't be jeff flake and hold everyone hostage to his vote, right? >> the difference between romney and jeff flake, romney is not leaving. he's just elected. this gives him more credibility. >> if he is a no on a simple majority vote, he can't hold the entire republican majority senate -- >> if he stands alone. >> there could be others >> let me flip the order of this hit. we were going to talk about the shutdown you wanted to talk about romney. >> i don't want to talk about

that >> let's put up the full screen. this is what joe is talking about. this is the op-ed that mitt romney wrote in the "washington post" yesterday. it is getting a lot of attention here he writes the president shapes the public character of the nation trump's character falls short. on balance his conduct over the past two years, particularly his actions this month is evidence that the president has not risen to the mantle of the office. it's a scathing criticism written in formal senatese, sounds like an establishment politician lecturing an out of control renegade politician, except in this case it's mitt romney who is about to be sworn in criticizing the incumbent president of the united states it reads to me, joe, like mitt romney's bid to be the leader of the republican resistance to president trump and the question that this will raise in a lot of peoples minds is whether or not mitt romney is setting himself up to run against donald trump in 2020 as a republican, to

primary him in 2020. i can't think of the last time we saw a significant primary challenge to a sitting president. maybe was it kennedy against carter in '80? you have to go back a long way to see something like that maybe this could be mitt romney positioning himself for that as you were mentioning, you're right, we will see this meeting at the white house look at the leaders who will be at the white house later today we expect this to be around 3:00 democrats and republicans, they're billing it as a security briefing by the department of homeland security on border security situations. really this is the first time that these leaders have had the opportunity to sit down face-to-face and negotiate since this shutdown began. we'll see whether they can get a deal or not. the president issuing a tweeted, maybe slightlyly optimistic. the president says let's make a deal, question mark. that's where we start the day

and the new year today whether or not democrats and republicans in this new era of divided government in washington can come together and get a deal or whether it will be more of the same >> looking at twitter. i don't see anything yet this will not go well. >> no. no >> you know what will be answered >> we saw something from the president's campaign manager last night, he put out a statement about mitt romney saying that -- i think revenge is a drink best served warm. not entirely clear what that means. the trump world reacting to this overnight. we'll see something from the president. >> do you think -- it certainly didn't hurt him to get trump's endorsement to win the senate seat in utah, right? >> yeah. this is an indication that mitt romney sees political opportunity being the anti-trump republican -- >> i know, but you just forget that someone just endorsed you and helped you -- the minute you

get n in, you turn around -- >> they've had a tumultuous relationship >> for six years now >> i know. >> you seem shocked that there's politics in washington >> i don't know how that plays untarnished romney couldn't get the job done in terms of getting elected president. >> that the the point, you get from trump land. this is a guy -- >> thank you or me. thank you. trump land >> yes trump land that includes -- that's the campaign, the white house, trump supporters >> or that 7% of the mainstream media that -- >> 7%? >> versus the 93%. trump land >> eamon -- >> you think the 7% is high? >> maybe not 7%. thank you, eamon javers. >> well done >> you came up with something before -- what did you tweet it was clever.

you're funny >> i tweeted something clever? >> weekend >> no, it wasn't weekend >> i try not to. >> was a movie quote >> you filthy animals. >> i said happy new year you filthy animals >> he's looking good, mccauley i'm happy. doing those commercials. >> he didn't look healthy before >> no he looks healthy, good, just like -- he says google order me some aftershave >> i have seen it. >> he doesn't like to do that look anymore >> he'll do it for money >> i think he ought to -- >> he's embracing it now that's what those commercials are about. >> he has the rest of his career to live. >> can you do that for me? >> no. >> come on >> i'll do it if you do it >> all right we'll do it together >> double boxes first. >> one, two -- >> i'm going to do it. >> she did do it >> you can't leave me hanging

like that. >> i'm more of the scream. >> that's going to show up on twitter. >> i would have left you hanging. >> shock >> eamon, thank you. when we come back, continuing coverage of the top story, a global market selloff to start 2019. if you have not seen this yet, check it out dow futures now indicated down by 360 points. the european markets are also weaker, not necessarily what we've seen here. dax is down, just barely dax is down, just barely in france, stocks are down dax is down, just barely in france, stocks are down if you were choosing a netwo by would you want the one 1.38%. "squawk" will be right back. sure, they probably know what they're talking about. or the one that j.d. power says is highest in network quality by people who use it every day? this is a tough one. well, not really, because verizon won both. so you don't even have to choose. why didn't you just lead with that? it's like a fun thing. (vo) chosen by experts. chosen by you. get six months apple music on us.

it's the unlimited plan you need on the network you deserve. now buy the latest galaxy phones, get galaxy s9 free. why go with anybody else? we know their rates are good, we know that they're always going to take care of us. it was an instant savings and i should have changed a long time ago. we're the tenney's and we're usaa members for life. call usaa to start saving on insurance today.

and we're usaa members for life. so they say that ai will put the future in the palm of our hands. that's great. but right now you've got your hands full with your global supply chain. okay, france wants 50,000 front fenders by friday. that's why you work with watson. i analyzed thousands of contracts and detected a discrepancy. it works with procurement systems you already use to help speed up distribution without slowing down your team. frank, tell fred full force on those french fenders. fine. fine. fantastic. for ai that knows your industry, choose watson. hello! the best ai for the job.

welcome back. you're watching "squawk box" live from the nasdaq market site in times square. good morning today's top story, global market selloff. the big headline, a private survey on china's manufacturing sector showed factory activity contracted in december, just barely that's the first time that this has happened in 19 months. the downturn comes amid u.s./china trade fighting, skirmishing. futures down 355 on the dow. let's head to london for the gu full global market story julianna tatelbaum joins us. good day i'm going to go with good day, juliann julianna >> thank you very much we're approaching noon in

london a weak start to the year so far in asia and also in europe as you highlighted, a weak set of data out of china overnight that manufacturing print slipping just into contraction territory, below that 50 mark, which separates growth from contraction. while it is just below that 50 mark, the data raised concerns not only about the external demand picture for china but also the domestic picture. we saw new orders shrink in december so raising concerns around the whole picture surrounding china. if we look at some of the moves that came on the back of this data, the shanghai composite down 1% on the news. that weakness did spread beyond just mainland china. we saw losses in australia, in korea and japan. now shifting over to europe, we have now seen trading over the last few hours that weakness is filtering through. it's been a negative start to 2019 in europe

the worst performer of the regions in europe so far, the french index down nearly 1.5%. i will say the losses that we're seeing now in europe are more muted than the earlier moves so we are seeing some of these losses paired back i want to highlight in addition to the weak data out of china, we had a raft of european data that confirms growth momentum is slowing. we had the eurozone pmi print as well the december print came in line with the flash estimates, but again signaled a broad based slowing across europe. france came out as one of the weak points. the economy there is being impacted in large part by what's going on politically with the yellow vest movement that is impacting the december economic data. across europe we are seeing a cautious start, in addition to china and in addition to europe, european investors are watching what's going on with the federal reserve. putting all of that together

it's looking like a cautious start to 2019. >> julianna, thank you very much let's get to the consumer. sears will be entering the new year strauggling to survive, wht can we tell about what happened over the holiday season? joining us is dana telsey. dana, if you look back at the numbers from the holiday season, it was pretty great, but that doesn't tell us the story of what to expect in 2019 >> exactly it was a good holiday season we had apparel which did better than expected. department stores were down. let's move forward, moving forward it's about a lack of clarity going into 2019. we have higher interest rates, the uncertainty of tariffs, companies may have built up inventories, check out those comparisons. first half of '19 overall for retail, many of them had double digit sales increases. it's tough to comp the comp. when guidance comes out, i would think the earnings increases may

be less than they were this year >> i think this is such an important part of the story. we keep looking at these numbers. who was it that we were talking to on monday, they were talking about going down to disney world and said there's no sign of weakness in the consumer there there are lines everywhere >> or gum wrappers, or trash of any kind >> perfect place if we can see these things, no signs of weakness, why are we so worried about what's coming? >> we see the housing cycle moderating a bit we've heard company after company talking about higher wage costs, higher freight costs. and when we talk about the margins, was it as good as we could get in 2018. we have tailwinds. we have full employment economy, wage increases happening, and tax benefits if these tariffs come through, companies will need to pass on

some of these price increases in the form of higher prices to consumers. >> seems like the market is struggling with exactly how much this investment build up in omni channel for the targets of the world and others is just the run right now in the cost base is that what we have to assume >> when you look at 2018, capital expenditure dollars went up they went up because companies got the benefit of lower taxes you won't see that same benefit in 2019. overall it does take at least 100 basis points or more in order to pay for free shipping in these omni channel investments. you need both, and in the new world it's a lower margin business than in the past. >> the key probably is that anybody who has not been spending and bulking up on this omni channel presence will be in bigger trouble the longer we get into the future. you look at somebody like sears what other players do you look around and say oh, they have not invested for the future. >> we've seen a bunch of players

not invest for the future. dillards not investing in the future as much as others have. many departments have invested, like a nordstrom, like a kohl's, like a macy's. we have not seen that from dillards some specialty players have work ahead of them. 10 >> we've also talked about the death of the mall. i remember that being a story we talked about for more than 20 years. it does seem that in 2018 it was kind of coming to fruition in some areas not the death of all malls, but the death of some malls. >> definitely. you have a bifurcation there's the a's, the b pluses and everything else. how do you reinvent yourself takes capital. for sears t wasn't a matter of if, it was when. it takes a while to kill a retailer you see activities in spas, gyms, coworking facilities, foo and beverage, we'll have a

community center instead of just a mall >> very quickly what would your best picks be for 2019. >> i wanted to stay domestic i wanted to look at off-priced like burlington. athletic wear and leisure like we see out of lulu and i want to look at pvh because of valuation in the brands that they have >> dana, thank you very much for your time. >> thank you. coming up, why you could soon find your credit cards to be less rewarding. what banks are looking to do in the new year when it comes -- yeah at 8:00 a.m. eastern, we'll welcome closely followed wall street strategist tom lee. we'll talk about stocks, touch on bcoitin stay tuned you're watching "squawk box" on cnbc

welcome back u.s. equity futures still looking to the down side the dow set to open up down just under 400 points s&p 500 down 40 at this hour so about a percent and a half. nasdaq down 156. a special message to a man who has seen his market ups and

downs. charlie munger celebrating his 95th birthday yesterday. his birthday is january 1st, 95 years old. happy birthday, charlie. i want to give you a few gems. you wonder about how quick he is, how witty he is, at the berkshire hathaway meeting, he and warren buffett take questions for hours from shareholders these are a few things he said at the last one in may i've been to google headquarters, it looked like a kinder kindergarten a very rich kindergarten he said i don't envy people involved in hostile takeovers. imagine doing that after you're already rich it's insane. and listen to this one, we have bitcoin calls from tom lee here's what charlie munger said about bitcoin in may i like cryptocurrency even less than warren does to me, it's just dementia. a bitcoin trading desk is like someone else is trading turds

and you're being left out. >> turds >> that was in may that was a good call >> that's how quick this guy is, witty he is, with it >> i saw clint's movie >> yes "the mule? clint eastwood >> i will tell you, i felt good. i was the youngest person in the theater. i'm part of the demo directed and starred in it at 88 he does bring it home. i was touched. >> see i thought he was 89. >> he's 88 >> he's got it >> but it's about regrets for how he -- you know, he was with his family and his wife and kids >> looking back. >> his own life i think there's something to that maybe. seems almost sort of autobiographical it's very touching

he's 88. it is amazing. makes me think, if you're watching, zeke emanuel, you don't need to walk into the ocean and turn back when you're 75 >> the wisdom of age is becoming clearer and clearer to me the older i get. >> there you go. >> you may contribute something at 76, 77. >> or 80 or 90. >> or 95 >> when eastwood make the unforgiven, he was already looking back at his characters of the past, we thought he was winding down that was the early '90s. >> isn't that the scariest socialist thinking that i'm just going to -- i don't want to -- any goods or resources -- >> we'll push you off. >> don't worry about taking care of me. just bury me >> i hate mandatory retirement ages guys like charlie munger and warren buffett show you why. happy birthday, charlie. when we come back, riding the wild market ride

l lk volatility next stay tuned, you're watching "squawk box" on cnbc 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...

♪ the end of 2018 was marked by volatility and 2019 is not looking much different so far. the vix is up in 2018. joining us now partner at elevation securities dpp we get to 35? where did we get to one point? >> a little over 30. >> we couldn't get through 25 initially. and we were, you know, 24 and then it looked like it was quiet. got back in the high teens then it went to above 30 with a vengeance in december. are there signs that you've seen the highs in the vix or not?

>> 2019 is going to be a story of higher volatility my expectations for vix in 2019 will range between 20 and probably 28 or so on the upside. probably break through 30 on the upside a fair amount this year we're going to be working through a process where the fed has removed this put the market has had a lot of muscle memory where we have seen a very supportive fed. we need to get, you know, significantly better communication from the fed with respect to what they're going to be doing with the balance sheet. you know, $600 billion for 2019 and quaintitative tightening -- >> if it got really nasty, he'd stop a cut, probably some people think we're at 50/50 for a cut this year. >> zero interest rate hikes for

2019 we need to really pay a lot of attention to that going forward. >> are we dealing with the fed removing the put are we dealing with global slowdown exacerbated by trade tension? should we not be embarking on this process >> the most significant factor we should pay attention to is going to be the fed, their communications, and what they do with balance sheet it's going to be a naturalization of the balance sheet that's going to happen, has to happen. the question is how do they communicate it how does the market get comfortable with the economic impacts of that quantitative tightening and obviously as you point out, we've got all these head winds those are not going to be positive for the market. >> i can't imagine that jay powell on friday is going to say never mind, we're not going to raise rates this year. he's going to say all of those things but if the fed actually didn't raise rates, would the market freak out at that point and think, oh, man

the economy looks different than we thought or is it okay they're going to pause. >> it would be a welcomed relief it's one of those tightening factors the fed is focusing on the second would be the balance sheet. >> jay powell could never say anything that would make it a welcome relief to the market we're just not going to raise and then six months will go by and then nine months will go by and the market's not looking at that as relief because they're looking at a cut that could come any moment >> policy flexibility will be the key words i think people will focus on. to see if we get that out of the fed. and again, get some sort of comfort they will be flexible with policy in the event we get some of these head winds that are weighing on us excessively the interesting thing if you look at the s&p index options pricing within the vix, upside calls have gotten more expensive relative to downside puts. so the market really is telling you we could go higher quickly or go lower.

so these head winds get taken care of or we get clarity from the fed on this. we're pretty cheap on s&p right now. >> tim, thanks when we come back, we have this morning's top story a global selloff to start 2019 a round table of experts ready to get us ready for the first trading day of the year when "squawk box" comes right back. people tell me all the time i have the craziest job, the riskiest job. the consequences underwater can escalate quickly.

the next thing i know, she swam off with the camera. it's like, hey, thats mine! i want to keep doing what i love. that's the retirement plan. with my annuity i know there's a guarantee. annuities can provide protected income for life. learn more at retireyourrisk.org annuities can provide protected income for life. i cowe can do theyour screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

a sea of red on the first trading day of 2019. what's driving the selloff this morning? live reports from overseas, live reaction here at home straight ahead. netflix says game on >> game on >> game on >> the online streaming company poaching the cfo from activision outlook for the gaming sector coming up. plus your 2019 political playbook what it means for your money just minutes away. second hour of "squawk box" begins right now ♪

live from the beating heart of business, new york, this is "squawk box. >> apparently right up here. >> right above us. >> good morning and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square. i'm joe kernen along with becky quick and mike santoli andrew is off. every year they do something with that. you know, it's a better ball >> they improved it. they put more crystals with it >> i know. but it's fine. >> it's called keeping up with the joneses. did you see every other celebration around the world they go all out. >> it's a branding opportunity really what that show is is branding >> waterford crystals. >> we have an early market selloff happening at this hour sea of red across the globe like the same way that new year's

develops over in asia to europe dropping sharply most places this morning oil also under pressure. prices tumbling on economic slowdown worries almost a percentage loss in wti. and u.s. equity futures, 370 that's where we've seen them on the dow this morning the s&p down 38. nasdaq down about 150. some weak china data also dragging markets lower a private sector survey showing that the manufacturing data contradicted f ee eed -- contrad 3. >> good morning. it's a new year but really more of the same when it comes to market moves it feels as though we're really picking up where we left off at the end of 2018. overnight as you mentioned, we saw some weak data out of china

on the manufacturing side. the manufacturing pmi slipping into contraction territory this has raised concerned not only about how external factors like the u.s./china trade spat are affecting the chinese economy, but also its raised around the health of the chinese consumer with some concerns around the overall health of the chinese economy. this is filtering through to a negative tone for all of asian markets. we've got australia, the mainland chinese index, japan all trading lower in the first day of trade for 2019. z now let's look at europe european regions across the board are seeing a downturn to start the year it is red for every one of the key regions here i would flag the losses we saw earlier this morning have been paired back. so this is not a story of continued selloff throughout the morning but rather pairing back

early steep losses in addition to the weak china data, we also had some soft economic data out of europe. the eurozone flash pmis were confirmed in december. and that is showing a broad based slowdown across the region in particular france having a difficult time with the french index underperforming. sectorwise, those real cyclical macro china driven sectors are underperforming this morning basic resources, banks, and autos. we are seeing the defensive names outperform, but still all sectors really struggling for a strong start to 2019 back to you guys >> okay. juliana, thank you let's get to our markets round table at this hour it's more of an amphitheater let's call it a markets amphitheater discussion. is that more accurate? you guys okay with that? okay joining us now hans olsen at

fiduciary trust company. our guest host this hour is sarat sethi. a cnbc contributor i think a round table, there's camera issues. >> truly shooting the round. >> if you're trying to shoot people, you'd see the camera operators getting in position to shoot the people on the other side of the table, right >> right. >> so that's really not what it is hans, more surprisingly than this, i couldn't believe it. are you bullish? have you gotten bullish with this selloff >> you know, things have gone on sale >> kicking and screaming into a bullish -- you ended up looking pretty good. >> i think up. yes. let's be clear up 2768 is the target for the year. on the s&p 500 you know, that's driven by lower than expected earnings growth,

modest multiple. it gets you there. you know, we did this exercise a couple of weeks ago. the return expectation is going to be quite a bit lower, but that's the benefit of having the market correct as we were expecting. so it sets us up for a better entry into 2019. i think the theme here that we have to keep in mind is slowing but growing. >> and 2.5% to 3% for gdp, you think that's doable. a lot of people would sign onto that >> i think that's doable it's lower than what -- >> that's 40% to 50% higher than what the new normal was supposed to be. now, the 10-year treasury yield, i don't know when you told us this, but you say it will be range bound in the year between 3%, and 3.5% it's well below that range this morning. >> yeah. that move has really happened over the last two to three weeks. >> in response to the equities >> yeah. so you get past some of these

uncertainties, and there will be premium over the short end that would put you up above 3% >> there is no alternative you think that with the 2-year where it is that that is -- or cash is an alternative >> yeah. isn't that amazing start to get a real return on cash >> but it's not 11% so you're not recommending it. >> it's not 11%, but it doesn't force you into equities as it has in the past. so you -- you know, you can actually conserve the purchasing power of your capital if you sit in very short-term debt now. which is decidedly new >> so sarat, you heard all that. you more bullish less bullish have more views? >> i'm less bullish. i was bullish when we were 10% higher i think where valuations come down at 15 times lower now and expectation is coming down

almost every day, any upside, any surprise to the upside not just here but globally will take them a different place 2% is an alternative but that i think takes away from some of the sectors in the markets that people were hiding out in and i think you'll see more infor investing in other sectors maybe some of the lower growth reits, consumer staples to more of the industrial cyclicals. >> the idea that earnings estimates are coming down and a slower outlook is being priced in, undeniable the process of going where we are right now and getting that down, even if the market seems like it's overpriced today -- >> you think 7.8% is still too high >> i think if we're going to have a typical trajectory right now, you see the pmi suggested that process is messy, right

>> it is that's the risk premium that people have to take into consideration. when you're an equity investor or non-bond investor, these are what you have to go through. you have to look back and say that was a great year, you have to say i've got to have conviction >> that's really interesting when we talk aboutvaluations, we're going it based on what the earnings estimates are right now. tim freeman was just saying off air we're not looking at 12 times forward looking earnings >> he was saying 2020, right >> oh. >> i think if you think the earnings are coming in as forecast right now, markts is very cheap the question is is the rest of the macro data telling you that's going to get dragged lower. >> when you start factoring in the currency impact, the tax cut, and oil which i don't think people have really started to put into the numbers. you look at the numbers

themselves, they're coming down at a pretty good clip. >> 10.1% at the end of december. now 7.8%. >> you don't do targets, do you? >> no. >> but is 11% on the low end i'm ready to sign on for down 5% earlier. >> that's like sell all your stock and put it in cash >> if i could just guarantee -- >> if that's your perceived floor, then that's not bad >> but i see, you know, along the way we could have these rocky rides. last week when you were supposed to be really quiet then the markets can move 5-10% now. if we live through this and we kind of get through some of the uncertain uncertainty, you get some type of conviction as to what's going on in trade policy, you could see the markets come back and a lot of people being left behind. >> hans? >> i think it's -- we're at a point in this cycle where as it

ages things, things tend to get more fragile whether it's the geopolitics, economics, trade, et cetera. they all start to exert themselves much stronger on the psyche of investors and the prices and i think we're in an environment where this volatility that you're talking about is going to be one of the things we have to deal with this year just as a fengs of where we are in the cycle. >> if it's kind of a scare, if this is a global scare the way we saw in 2016, credit acting up, earnings estimates coming down, industrials having a hard time if you go back to what got us out of that, what were the pieces right? you did have a dovish turn by the fed that went on hold for a year oil bottomed not sure if that was something anybody did or just kind of happened that way. and chinese stimulus seemed to take hold, perhaps >> remember the dollar had quite a run in '14-'15

and combined caused during an economic expansion which is rare i don't know what turns it this time though. and as the cycle ages, it gets back to that earlier notion. >> still got 2017 in terms of equity action too. and mike likes to use the term we're not cutting into the bone yet. which is like -- >> it's muscle >> well, muscle is -- that's right. but can we come up with something else we got some house money or something. >> no? >> we haven't cut into the muscle yet what are we sawing into? >> just the flesh. >> we're bleeding, right >> yes we're already bleeding >> we need stitches or just one of those little butterfly -- >> technology is good with the liquid bandage liquidity is going to help >> staples that eventually dissolve all right.

thank you. sarat will be with us for the rest of the hour there you are there, dr. santo low. few stocks are on the move already this morning activision blizzard is firing its chief financial officer for cause, quote, unrelated to the company's financial reporting. according to an s.e.c. filing, "the wall street journal" reports he will be named as the new netflix cfo this week. wells fargo was upgraded to sector perform from underperform at rbc capital markets the bank shares fell about 20% you see them also to start negative when we come back, washington and your money. the balance of power in congress will start tomorrow and a partial shutdown continues we'll tell you what you need to know about the beltway that is next right here on "squawk box. what do advisors look for in an etf? i tell clients, etfs can follow an index, but which ones target your goals?

it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. 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.

i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. 2019 kicks off with part of the government still closed. and along with this new year, a new balance of power on capitol hill tomorrow democrats will take back control of the house. according to a democratic aide, they have prepared funding bills that would end the shut down now president trump has invited leaders from both parties to the

white house today. joining us now is axios cofounder jim vandehei great to see you happy new year >> happy new year to you >> hard to believe we're now 12 days into the shutdown at this point. if you weren't one of the ones not getting paid, maybe you weren't paying as much attention. does the focus come back today >> it does the president has asked all the congressional leaders, republicans and democrats, to come to the white house. it looks like he's going to try to hold the meeting in the situation room to really amplify that he sees this as a security topic, not just about immigration or domestic politics or policies. i don't really see the lench he has right now. in some ways trump put himself into this box saying this will be the trump shutdown. i feel so passionately about the wall and he was calculating that democrats worry about being seen as weak. i think the democratic party especially this incoming house

class is different than the democratic party we've been thinking about over the last ten years. i don't know that they have the views on immigration that trump thinks they do i think nancy pelosi is in a position in power in resisting the wall if she keeps resisting the wall, i think it makes it hard to figure out how do you get out of this jam and have the government operate in full and congress talking about something other than shutdowns >> people have no idea that democrats had agreed to much higher, you know, amounts. i mean, it's a rounding to the $5 billion you've seen all the videos of all these guys saying we need border security. was there any optics -- the fairmount on the big island, that costs a lot but that is one of the nicest places to be over the holidays

versus being in the white house. you don't think anyone looked at that and said you're over there in -- you talk a good game about worrying about, you know, the have nots. but that's an awful nice place where you are. >> there was one where she was vacationing. i've not sensed there was a backlash in the public there could be any time politicians look like they're aloof and distant from what's happening in washington, it probably dount help them. the more important thing you hit on is in the past most democrats including most democrats in the senate have been on record in support for more money going for the construction of some barrier between the u.s. and mexico. democrats really worked about being seen soft on national security and felt the wall had to be part of the equation in some respects it had to be the starting point now where pelosi is operating

with house democrats, i don't think they care at all about it. i think most of this democratic caucus doesn't think you should do anything or do much at all along the wall. >> is that where the american public is? >> no. i think the american public is very divided about the security threat so there's no doubt there's probably a disconnect between a lot of the people in the caucus and where most voters are. what i'm talking about is where is this democratic caucus in terms of what leverage pelosi has. that's a miscalculation i think trump made. >> if the far left -- if we had open borders and single payer, i'm just trying to figure out what that's going to cost. you know what i mean everybodycomes in, everybody gets free health care. is anyone adding up any of these things or just the logic of these philosophical positions? >> they're not adding them up

yet, but they will you have a lot of 2020 candidates that are about to hop in this race what i don't know yet, what i can't tell is is the majority of the democratic party basically where you just described it to be which is medicare for all, laissez-faire immigration laws if that's where the democratic party is, does that put it in contrast to where the vast majority of the country is we don't know. i think a lot of the candidates getting transaction and had success in 2018 definitely were for some version of medicare for all. definitely had a different tone if they were talking about immigration at all and i don't think the public has paid that much attention to what is the state of the democratic party. once 2020 kicks in, people are going to look at this is what trump republicanism looks like and this is what fill in the blank democratic theology looks like in 2020 to me what's fascinating is for the first time i think in my

lifetime, you have sort of the ideology of both parties very much up for grabs. very much being sort of recast and remolded before our eyes we don't actually know especially when trump leaves we don't know exactly what the republican party stands for at its core because it looks different today than it did two years ago. same thing on the democratic side i don't think this is the party of clinton for sure. i don't even know if it's the party of obama it might even be to the left of obama when all is said and done. >> jim, whatever the party is going to look like, nancy pelosi isn't necessarily a reflection of that. she's somebody who came in and was challenged for her leadership position, so she's going to have to play to the left to maintain things. and my guess would be that left caucus does not want her to settle with trump on anything. so again, back to your orangeal point, how do they get out of this shutdown? >> it's very hard when you sketch out what a compromise looks like if lindsey graham who i think is

more close to trump than not, they spend a lot of time talking. lindsey graham has been floating this idea of could you get close to the $5 billion or get to the $5 billion figure that trump wants to construct a wall in exchange for what democrat it is want on daca or dealing with the dreamers on that side of immigration? not sure if chuck schumer and nancy pelosi would accept that, but that would be a possible way out. it's possible this thing just keeps going on and on because people assume trump will back down and he probably won't and people presume pelosi will back down and maybe she won't. in some ways, once beyond a shutdown, one thing to watch for is how unified the democrats stay this is a big deal if you're covered by it, it's a very big deal. if you're hit by it directly it's going to become potentially a constitutional issue when we have -- if they decide to try to impeach the president. which i think that they're going to try to do

and nancy pelosi, if she's going to go that route and be aggressive on oversight and subpoena power, she needs the full backing of the democratic caucus she needs to be able to read how much leverage and support and how durable is it if she has that showdown? i think that's what's going to define this year >> jim, let's switch topics, talk about facebook. end of the year, mark zuckerberg had a pretty positive message. how proud of the progress the company has made at axios you have one big thing that focuses on facebook as well. >> yeah. we're looking at how much they know about you not just how much they know because you're on facebook but how much they track your location how much business they do with third parties to be able to figure out purchases you're making on facebook and off facebook how much metadata they can take from your photos and your social

graph. the reason this is a big deal, look at the last two years other than enron, i can't think of a company that has had more sustained negative coverage over a prolonged period of time they're just getting kicked in the gut every single day and ultimately, the question is does that mean that republicans and democrats both of whom have concerns for different reasons with the power of facebook and google and to some extent amazon will the parties -- will government start to regulate the companies? either try to break them up or try to provide new data producti protections for the individual consumer that's what matters. i think the arc seems clear. i don't think it happens in the short-term i feel like it's building and building you see it in the base of both parties. a rethinking of how we deal with these companies. how much power we've given to them how much they know about us. in many cases knowing way more about us than what our spouse may know about us.

>> that's creepy jim, thank you very much for joining us today jim vandehei is the cofounder and ceo of axios coming up, one of the big corporate stories of 2018 was the fall, the even worse fall of general electric the one-time dow component lost $90 billion in market value last year that wouldn't be that much if it was $600 billion and lost $90, buzz it's not so great when it's $200 billion or less and losing $90 billion. "squawk box" will be right back. [knocking] ♪ ♪ memories.

what we deliver by delivering. there's brushing...and there's oral-b power brushing. oral-b just cleans better. even my hygienist said going electric could lead to way cleaner teeth. and unlike sonicare, oral-b is the first electric toothbrush brand accepted by the ada.

oral-b. brush like a pro.

still to come this morning, trade wars and the fed tightening will be the worries in 2019. we'll break down what some strategists are expecting. as we head to a break, take a look at the u.s. equity futures. dow futures down almost 300 points believe it or not, that is a big improvement from where we started. we were down 400 points earlier this morning s&p futures down by 30 nasdaq off by 121. "squawk box" will be right back. 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.

we're watching three big stories this morning one, the government shutdown continues. but president trump has invited democratic and republican congressional leaders to the

white house for a meeting today. two, oil prices sliding again today on economic and over-supply concerns as both the u.s. and russia reach all-time highs in production. and three, tesla dealing with an inventory glut with electric saying they were 3,000 model 3s in inventory this past weekend still to come this morning, a lot coming up. we'll have tom lee joining us top of the hour. we'll talk about why he says the selloff in the fourth quarter of 2018 was just a mid-life crisis. his comments straight ahead. right now as we head to break, check out the premarket winners and losers the best you can do is be unchanged this morning

general electric, the former dow component lost about $90 billion in market value in 2018 here with more on the fate of the company in 2019, william cohn that's a nice shot, bill

happy new year >> happy new year. >> couple of your most recent points i see what you're saying ge weathered the december swoon pretty well. it's worth a tenth of what it was worth at the high, basically. it almost got back to the -- whenever 2008, 2009 when it closed at 666 and the depth of the financial crisis, when it looks like commercial paper was going to lock up and the company was going bankrupt, it matched that level in terms of share price. i mean, you are really trying to grasp at something to find, you know, any positive silver lining to this story. i see what you're saying, but it's just -- it's worth $65 billion now. it's just hard to find anything positive here. except it's got a new guy maybe. i don't know

>> first of all $65 billion ain't ten. you know, it's real. a lot of companies would kill to be worth $65 billion i realize that's down like you said close to 90% from its all-time high. you know, that's small consequence, perhaps think about it if you can sort of more positively which is, you know, i'm not pushing one thing or another i don't care one way or another necessarily, but it's got a tremendous number of great assets i mean, that's the thing you have to remember here. unfortunately, it also has about $100 billion of debt which is way too much debt so it needs to use its tremendous assets. number one, aircraft engines, i mean this is cutting edge stuff. its health care business has got to be one of the top two or three. baker hughes which they own about 60% of now, why sell that at a time when baker hughes is trading at all-time lows

they're in a cyclical business, incredible assets. they have to pay down that debt. that should be the focus this year to show the market they're paying down this hn billion dollars of debt. maybe possibly convince the rating agencies they're on the right track. maybe possibly get some upgrades then this is going to be crazy i know that they should get back in the financial services business and show the rating agencies that it's doing that and get some upgrades here i think the financial services business whether you like it or don't is one of the world's great businesses in terms of, you know, making money from ge capital. they still know how to do that and should take advantage of that knowledge keep the great assets together, build up that financial services business again, pay down debt. and i think be on a road to

recovery could be totally wrong, of course >> but if you look at ge today and you look at the opportunities elsewhere in the market and i don't disagree with you, i think there are some great assets but the opportunity today for a dollar invested in other companies and make take other companies to an investor, there is more upside there in an opportunity then looking at ge today because like you said, there's a lot of uncertainty over here. the areas they're in, some of them are good. but you have to deal with energy and debt you know, financial services which i don't disagree with you. but if you look at the sector of financial services, they're trading at single digit multiples. i don't think you're going to get credit today i think it's a great business to be in there. but as an investor, i'm in the wait and see process to let them get turned around. and the downside here is more i think you could go to zero i'm not saying it will but the debt that's the overhang is the hard part to get around >> absolutely. as an investor, i think there's two things

there's the company itself which is, you know, has tremendous assets, tremendous know-how. and then there's the investment coming to this from the outside. the stock was down saying close to 90% we're in the single digits, the sevens it held up pretty well in the last month, six weeks. better than most companies i thought frankly, it could take another step down. it held up well for whatever reason maybe a lot of the danger is out, acknowledged in the stock and this is, obviously there's risk there's this hundred billion dollars debt overhang. but there is a lot of potential i think for investors to make a lot of money with ge if larry culp can convince the market, convince the street, convince his own employees that he's on the right track to resurrecting this company >> bill, you mentioned something about if they can persuade the credit agencies to preserve

their credit rating, it seems to me they have to kind of prove they can service this level of debt and the cyclicality of the business is not going to trap them under all the debt. >> look. if they can pay down a hundred billion dollars of debt for this company is way, way too much you know, even steven tusa at jpmorgan has said, okay, i was the biggest bear on this company ever and now i'm saying yes $100 billion is too much debt for this company but i'm basically saying, okay all the worst is kind of over and there's some upside from here if they can pay down some of this debt, if they can get some credit upgrades, then they're going to be able to show the market they can handle the level of debt that they've had you know, they cut the dividend down to a penny. they should begin to generate some free cash flow. the demand for power in this world is not going away.

i mean, there are 2 billion people in this world who need the kind of power that ge's generators generate through the electrical grid. i still think there's -- it's a company with too much debt pay down that debt, get credit upgrade from the agencies. get confidence back in the stock. and then i think, you know, it's a good investment for people may not work out they may not -- it may be beyond the pail at this point it's just not clear. >> i understand. i just wonder, you add up -- i guess there's a balance sheet somewhere. those are great assets some of them less so i heard anecdotally there were quality issues, et cetera, et cetera, over the years you know, went by the wayside and i don't know, accountability and all these different things but there's great assets until recently, nobody knew about the other side of the ledger and it was just like, mind boggling, what was buried in

there that no one knew about that we still don't know everything do we? >> and i think that -- no. i mean, i agree with you >> i mean, is it -- when you add it up and you net it all out, is it worth $65 billion >> well, you know -- >> you don't know. >> it is right this second rb right? >> i know, i know. >> look. companies do go to zero. companies also turn it around. i mean, apple, you know, famously turned it around. >> right but at zero, think of how it would have weathered that in december it would have been probably unchanged. >> look. i personally think the fact it did not step down further -- >> that's what i mean. not too many more eighths to go. >> 100% downside >> always 100% down. >> stocks in at new lows believe me, i married so many losers when i was a stockbroker.

like my wife married a loser but i married so many losers, i found out stocks hitting new lows hit new lows. you can't buy a stock when it's hitting a high tell that to amazon or something like that. >> there's a lot of risks in this start >> you might be right. >> improved in the last few weeks. >> i think i have like 8 hurkss chairs or something left because i can't find it to sell. >> the truth is i've been thinking about this a lot. this is a company with tremendous assets with a number of hidden liabilities that should have been explained much earlier and should never have been held on those books i think if it gets back to its fundamental way of hitting the market and approaching the market and i think paying down debt and getting back into financial services, you'd have an interesting company it does not need to be broken up further. could be wrong. >> no. you could be right we'll see. probably has a good chance with

him anyway bill cohn, thank you cnbc contributor you don't have to worry about a stock portfolio. you can just fall back on that cnbc stipend that you get every appearance >> and face it, book writing how could that be more lucrative? >> where is that bill, shot? >> hudson, new york. >> that's awesome. >> upstate new york. yeah, well, the reality is not the shot >> it is idealistic though >> yeah. beautiful. coming up, we have an early market selloff happening at this hour sea of red across the globe. we're going to try to break down what it means for the trading day ahead. so goes the week, so goes the month, so goes the month maybe. not necessarily. "squawk box" will be right back. i am a family man.

i am a techie dad. i believe the best technology should feel effortless.

like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back, everybody. markets under quite a bit of pressure on this first trading day of the year. dom chu knows more about what's going on with this morning's early market turmoil and can tell us that now >> good morning, becky like you pointed out, we are off the worst levels of the session so far when i got in this morning before "worldwide exchange," we were indicated to open down 500 points on the dow. maybe that's a little bit of a relief for the bulls out there but take a look at the markets from a global perspective. with the hang seng and hong kong down showing contraction for the

first time there the german dax, remember, closed on new year's eve for a holiday. they're now getting a chance to response now only off by about 1/5 of a percentage point there and then the s&p futures taking the brunt of it so far as we look at the stocks we'll be watching early on, it will be some of the hot spots we've been seeing in the second half of 2018 chip makers for sure playing into the china trade discussions. also the general appetite for risk micron shares, they'll be ones to watch the broader index and etf that tracks these had a four-day winning streak to end 2018 also watching that facebook/amazon/netflix/google, that faang trade, down there particular attention will be to pay attention to netflix looking at the risk aversion

reasons. but also because we have an analyst action out who kept their price target to $355 a share citing what they see as perhaps slowing subscriber growth back over to you >> dom, yep. you're watching it all appreciate it. one story attracting a bit of attention this morning involving one of those, netflix looking to hire newman newman was fired for cause for ununspecified reason from activision joining us to talk about this, scott goodman. do we have any sense of what's going on and does it matter for activision at least right now? >> so no is the short answer, obviously, as you indicated. it's kind of unusual to have a filing like that just as the new year was upon us

the employee in question spencer newman, you know, he's been with activision blizzard for a year and a half as cfo. if you believe the reporting, it's netflix looking to hire someone under contract which is something they've done before. i think some people are trying to read the tea leaves netflix has been looking for a new cfo. david welles has been the cfo for about 14 years so it would make sense especially given newman's past the perception we have is people might be thinking this is a negative for the interactive home entertainment area. >> and are you suggesting it isn't necessarily a negative for the business itself? >> no. i mean, i think people may just think this is a better opportunity to work for netflix than activision blizzard but i think if you look at the

area, the video game software area, these companies have gotten crushed in 2018 i think you're looking at a 24% decline for the s&p 1500 industry. and over the last three months, these stocks were down about e 40%. activision included. we actually have a hold opinion on activision blizzard but we like electronic arts. we have a buy opinion on take two interactive. we made those upgrades not at the bottom because that would mean we upgraded on monday but we did upgrade late in the year as we saw more value presenting itself. >> is this because macro is slowing down and the multiples came down? sor this a supply/demand issue >> i think it's a little both. i think we saw a lot of multiple compressions because of concerns related to the market. in addition, though, i think these companies are very hit driven and when you see delays or you

see disappointments, these companies get hit. activision blizzard is different because they acquired king and every quarter we've seen monthly active users from that business unit going down. that has been a concern for that particular company but take two interactive, they released a game in october the opening weekend sales for that particular product was $725 million. that was literally one of the biggest releases in media history really >> you say they're hit driven. is there still a perception that they're at risk for not being where the gamer eyeball hours are. in other words, you had the fovrt ni fortnite phenomenon and these things that take the gaming world by storm >> it's interesting. if you look at take two interactive, for example, grand theft auto is the title most

associated with them it accounted for 40% of their fiscal year sales. that was a game released well over a decade ago. if you release these top franchises, you can continue to monetize with updates and virtual economy goods and things like that, internet services and if you don't, it really sets you back considerably. >> and what's -- and electronic arts what's the -- what's behind the buy rating there just the valuation >> yeah. so it's really two things. it's the valuation has gotten very appealing to us but also they have a great lineup of new games that people aren't factoring into what we think will be resumed growth and better profitability if you look at these companies, it's more digital, more mobile the good thing about that is the higher margins for those going forward. >> thanks a lot. scott kessler. when we come back, the bull market's midlife crisis. tom lee will join us with his

2019 outlook we're watching the futures this morning. not a great start to the year for the bulls. dow futures already down by over 350 points believe it or not, that is improvement over what we saw earlier this morning s&p futures down by 36 and the nasdaq down by 136 "squawk box" will be right back. one-millionth order. millionth order. ♪ there goes our first big order. ♪ 44, 45, 46... how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪ we don't bake. ♪ opportunity. what we deliver by delivering.

there's brushing...and there's oral-b power brushing. oral-b just cleans better. even my hygienist said going electric could lead to way cleaner teeth. and unlike sonicare, oral-b is the first electric toothbrush brand accepted by the ada. oral-b. brush like a pro.

here we go again a new year but more market pain. futures pointing to a big selloff at the open. shutdown showdown on the final day of the gop congress. president trump set to meet with leaders to come out of the shutdown that is nearing two weeks old. and chips with a dip we'll talk about what chip stocks to watch in 2019 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 and welcome back to "squawk box" here on cnbc live from the nasdaq market site

in times square. which was in the news recently i'm joe kernen with becky quick and mike santoli andrew is off today. our guest host this hour, tom lee from fundstrat global advisers the futures right now are indicated down triple digits and then some. down 371 it was down more earlier right now nasdaq indicated down 150. s&p giving back about 40 after an up week last week today's wednesday. all right. yeah but it was up last week. monday it was up 260 i think, wasn't it? >> the dow yeah it was a final kind of closing buying flourish for four days after the december 26th low. up more than 6%. that's a big bounce you got off the really deep area. >> is that an official santa claus rally?

>> the santa claus rally time keeping the official one started christmas eve which was negative but you have two more trading days the first two trading days of the new year will determine. right now it's in the money. >> but tomorrow on top of that >> today and tomorrow according to the stock traders almanac >> the selloff we had heading into that, if you recover from that are we still going to call that a santa claus rally >> right all that's supposed to do is flash or not flash a indicator >> so we don't want it to do better the next two days >> you do. if it's down on that seasonally strong area, it means tougher year ahead the thing is none of it worked last year. almost none of it. >> were you at times square? don't you live in the city >> i live in the city. i was nowhere near times square. you can hear the fireworks

>> tom >> i think i rang in 1990 here >> i watched 37 i love watching all those people say we're so happy to be here we don't care that it's raining. and there's no bathrooms >> just take prisoners from jfk and bring them here and lock them up for a day. >> the ball is falling for less than a minute. that's the whole -- >> yeah. >> were they happy to be here? if ryan seacrest didn't make $60 million every year, do you think he would be happy? >> i think the $60 million made it barely worth it. >> for $59 million he wouldn't have done it anyway, let's take a quick look at treasury yields. they're below 2.7% in japan they turned negative. you won't get all of your money back you'll get some of it back j germany is down 15 basis points. italy is above >> above our 10-year what's a riskier bet

>> it's close. we are watching three big stories this morning number one, the government shutdown president trump inviting top democrats and republicans to the white house today as he seeks a way out of this 12-day-old shutdown today is the last day republicans control both the house and senate tomorrow democrat wills take over in the house. netflix poaches a cfo from activision spenc spenc spencer newman from activision will start at netflix. he was released due to an undisclosed reason number three oil prices today comes from amid oversupply concerns. right now wti down by about 55 cents to $44.86. a few stocks on the move this morning alphabet's google unit has won

approval for the radar based motion sensing device. granted a waiver at a higher power than currently aloud under fcc rules. in a new report on the cable industry, rates comcast and at&t as top picks in the sector firm said comcast is undervalued based on its free cash flow and it expects, quote, solid results from at&t. calls altice very compelling let's talk markets and what we can expect in this new year joining us for the next hour is tom lee. managing partner at fundstrat global advisers. we've been talking about your latest call this morning don't know if your ears were burning, but you said what we're seeing now reminds you of a mid-life crisis for the markets. whap do you mean >> well, the bull markets tenure at this point it's natural to think we're going to have a bear

market or a recession. but a lot of bull markets that last this long turn out to be super long bull markets. '74 to 2000. about 20 years which means at the midpoint, the markets got this huge debate and i think that's why we had in '62 the kennedy crash. the market culled back big in '87 we had the crash at the mid-point of that bull market. and i think, you know, 2018 is another example. i mean, it's -- whatever happens this year, it's going to depend on whether or not economic fundamentals deteriorate or markets overreacted. >> even if you look at this as a mid-life crisis, i look back to 1987 a lot more pain could be on the horizon even if you are talking about an extended bull market. you're not calling an end to any of the pain we've seen >> that's right. i mean, the problem i think in december is that credit markets have continued to unravel.

right? like high yield has widened. and i think there were a lot of funding pressures in the final days even the stock markets rally of the final days, you know, the debt markets kind of went haywire the last couple days but if this is mid-life, mid-cycle, then long-term investors really got to hunker down there's -- you know, the market's going to be up higher in the next ten years. if it's recession, we could have a deep bear market but i don't think we're in the latter category. >> you mention the credit pressures. that obviously -- those artificial or mechanical elements of that should be over. >> yeah. i mean -- >> you have the new year you have banks and firms they have a full year's worth of performance and balance sheet to work with. we have to watch the response to that >> this first week is going to be critical. part of the reasons i think equities got sold so hard in december is when somebody had funding balance sheet, but if

this doesn't unravel and normalize in january, maybe there's something bigger >> so what would you tell people to do right now? that's the question everybody is asking are we headed into a recession or not >> to me the biggest arbiter of business cycle is two points on the yield curve. either the 10-1 or the 10-30 we've had a weird inversion everywhere else. so i don't think there's a recession yet. i mean, it has to invert but the lesson from 2018 is investors can't bet big. i think everyone's going to start this year betting small. if sentiment gets overly negative, it's going to be a huge buying opportunity. or, you know, things have to get really bad i think it means start small >> what do you think happens

here where the market follows the economy. or where market concerns actually bring on an even weaker economy. >> you know, the level of interconnectedness which i think george soros called reflexivity is much tighter today. so the financial market's movements is the economy right now. so i think that's why the fed really missed a big opportunity in december. because we've seen now an unraveling credit market in response to volatility and equity markets now the fed will have to respond to that. >> and the markets have already gone to the point of essentially pricing out rate hikes for this year, for '19. >> yes. >> now, do you get to do that just because the stock market is down 15% you need a growth scare, you need other conditions to get a lot worse. >> before you price out the -- >> it seems we're playing chicken with the fed but it has to get a little scary before one veers off >> yeah. we posted a chart in our last

piece to our clients it showed basically markets priced in a recession. every recession trade is now working. but as a fact, financial conditions have tightened a lot. high yield has widened a lot costs have changed which means it's now raising the bar for how companies are spending money i think there is real risk because of what happened in december >> you get any flack about your bullish calls? you know how the permabears are. you know, they're claiming victory. they don't want anyone coming on the show that was ever bullish so you probably -- from 900 on the s&p, you were probably long for a majority of that a lot of these guys have been literally negative they manage no money anymore they just opine at this moment but do you take any flack

because they're taking victory laps it's hilarious to even read. >> yeah. one, so i've been doing research for 25 years you're only as good as your last call this is a lot like 2015. i remembered at the start of 2016 we were getting messages especially on twitter, like assassination. people were like, you buried us on this stock. and it's so funny. i feel like posting now -- because the stock was at $17 now it's at $42. i'm like, okay, so why does -- >> are we supposed to trot out every permabear? should we do that, santoli do you think do they have a right to say -- >> no. i don't think it's credit and blame. i just think it's, you know -- >> we're all trying to navigate through. >> exactly >> when you're going from 800 on is the dow in 1981 to 22,000,

23,000, i mean, just to stubbornly hold on to what you think is a superior bearish stance, it doesn't do anyone any good >> right but if every few years the bears have -- >> but if they never actually called it. if you're negative at 900 and you stay negative all the way to 2700 on the s&p and it goes to 2650, you take a victory lap >> that's buffett's point. most people can't time the market he has a handful of people on one hand that he thinks might be able to do it. it's tough to do what would change your mind, tom? what would make you say, okay. this is different and maybe this is the end of the bull market cycle for the economy? >> there's probably two simple things to focus on this year if i had to simplify, one is the yield curve. so either the 10-1 or the 10-30. and the second is high yield high yield in its 35-year history has never posted two

negative years in a row. and it was down last year. even in 2016 after 2015 it was up and after every bear market has had a positive year. >> do you have to wait a full year to make that call are we going to be sitting here -- >> well, if it's tracking in a bad direction, maybe you have to be more cautious. >> high yield is -- i think it's a very intelligent market. the investors are really -- they're only going to get par. high yield price is pretty accurate and so we'll hear it either because no deals are getting done and movements in high yield can happen instantly high yield, if it's going to be a tough year would start off really tough >> tom is going to be with us for the rest of the hour, we've got a lot more to talk about with him thank you. all right. we said we'd watch for it. here it is president trump tweeting and correct me if i'm wrong, i don't know it's january 2nd

i think this could have been worse in terms of talking about mitt romney. he says here we go with mitt romney but so fast the question will be, is he a flake? i hope not would much prefer that mitt focus on border security and so many other things where he can be helpful i won big. here's where it gets nasty i won big and he didn't. he should be happy for all republicans, be a team player and win. >> yeah. the reason there's restraint there, the reason it's not nastier is because he's in the midst of a government shutdown and could use his help on the border control and the wall. >> on all these different things >> looking for a chance to still have somebody to count on his side >> but we made the point though. what is it 53 we got another one -- we got the one -- the gop got one in --

>> well, the naming. >> so you can't be a flake really you can't be someone that says i'm not going to -- you have to do what i say. >> even flake wasn't the official one who could do it at the beginning. only because mccain wasn't there. >> but it's not a one vote he could still get -- >> that becomes a question what kind of support does he get as you get into tougher sledding on the second half of this term. coming up, it turned out to be a tough year for semiconductor stocks when we come back, we're going to dip into the chip sector to find the double dip. another seinfeld reference they covered everything over the years. anyway, we'll find out what's in ayune for 2019 st ted you're watching "squawk box" on cnbc or. we can do the screening at her house.

hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

hey, batter, batter, [ crowd cheers ] like everyone, i lead a busy life. but i know the importance of having time to do what you love. at comcast we know our customers' time is valuable. that's why we have 2-hour appointment windows, including nights and weekends. so you can do more of what you love. my name is tito, and i'm a tech-house manager at comcast. we're working to make things simple, easy and awesome. welcome back too "squawk box," everybody. we've been watching futures this morning. they've been under pressure this first trading day of the year. dow now indicated down 360 the nasdaq off by 135. it was a tough fourth quarter for chip stocks. the philadelphia semiconductor

index was up 9% through the end of september then from october 1st through the end of the year, the index sank more than 15% micron, nvidia, and a.d. all indicated down joining us is managing director at nomura instanet good to see you. is there a way to make a sector call right now at this point looked at as a bellwether for the tech markets. so where are we at >> yeah. you know, listen i'm cautiously optimistic that, you know, a lot of these stocks are washed out there's a lot of concerns today over global growth the chip sector started to see this weakness back in the spring it follows a historical precedent going back to where

semiconductor companies tend to be early indicators for the broader economy. what's interesting is that, you know, we're in the midst of a negative revision cycle, but it's been going on since july. historically these revision cycles don't last more than three quarters january and february would really mark the third negative revision for a lot of companies in the space so i'm hopeful that, you know, after the march quarter, the sector can get back to growth and the stocks can start performing better. >> and would those downward revisions for earnings estimates be taking account of whatever the potential negatives are for china? i mean, did the stocks price in something negative on the trade front at this point? and what are the implications? >> i think they are pricing in some of the issues related to china. you know, if our negotiations with china get worse and, you

know, we're in a situation where the administration is forcing, you know, companies like intel and qualcomm to stop selling into the region, that would definitely add a lot of pressure to fundamentals and stocks >> and within the group, where would you decide to sort of emphasize for buying in the new year >> yeah. our top pick for 2019 is broadcom this is a name that just strikes me as being idiosyncratic. they bought a software company last year which will, you know, by itself give them revenue and earnings growth which i think will be a rarity for the space it's a low multiple stock. trading close to ten times it's got a big dividend north of 4% with a lot of room to grow. i should also say this is one of the best management teams in the space. so coming off of, you know, a weak 2018, we're looking for

broadcom to bounce back. >> just, you know, i think it is interesting how semis and em and some of these other groups that were leading the downturn have started to outperform. again, doing back to your earlier comment about reversing logic, do you think these are signs that either that things are improving in asia even though we're not seeing data, or are these dead bounces >> i'm encourage bid the recent price action at least on a relative basis starting to outperform one of the key indicators we look at is d-ram in pricing. they tend to be a canary in the coal mine for the space in general. and in the last few weeks, we've seen the pricing start to stabilize after a pretty tremendous decline for most of 200 2018

a great example is the micron earnings call from late december i think that's important so you're going to go into january. you're going to see another set of reveisions then some of the seasonal head winds facing the group today start to go away and we'll see what happens but i'm hopeful that q1 is about as bad as it gets for the group. >> you think leadership has to change, right? >> yeah. i mean, i think that's one of the big takeaways that whatever has led in the first ten years, it's rare for that to be the group that leads the next ten years. and, you know, the last ten years, it's all been about growth stocks. especially faang so i think one of the things we have to watch for is this rotation leadership. i think high quality semis is one of those oil tech groups that looks interesting >> and i know you -- you mentioned broadcom, maybe qualcomm the value side of semiconductors, correct? >> yeah.

i think by nature i tend to be attracted to stocks with lower multiples. you know, broadcom has a great franchise, best in class management team. you know, great free cash flow qualcomm you're playing for a catalyst which is a resolution with apple which could be tremendous to earnings then i think there are some other stocks that really are beaten down. down almost 50% from their peak. this is applied materials, micron you know, microchip touches a lot of parts of the economy globally also a well-run company. that's a stock that has seen some pretty big revisions over the last couple of quarters. it's a name my team and i really like down here >> all right leave it there thanks very much coming up, crude oil starting off the year in the red. when we come back, we're going

to tell you what's dviring the move downward. stay tuned you're watching "squawk box" on cnbc

welcome back to "squawk box. the futures right now are down more than 400 again. down 45 on the s&p

>> clean slate new year. >> just 1.5% discount to start the year -- >> if you're a bargain shopper take a look at oil prices also this morning. crude has been on the weaker side obviously a big story for 2018 down about 1.5% right now. $44.72 for wti prices being pressured by concerns of an economic slowdown in 2019. the latest info from china causing overnight moves. oil production there rose to a record high last year on an average annual basis so a lot of supply when we come back, 2018 might have been called the year of the fed yeah, and that every year since 2008 maybe but let's just focus on 2018 for right now. chairman jay powell took office. the central bank raised rates and then everyone started second guessing everything.

when we come back, we've got a look at the factors that will influence the fed this year. we'll find out whether 2019 will also be the year of the fed. stay tuned wchg quk x"n bo o cnbc ♪ ♪ memories. what we deliver by delivering.

♪ good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center on this first day of the year, first day of the trading year i should say, an update to a story we've been following activision blizzard has named dennis dirken as the new cfo replacing spencer neumann. you can see this morning activision blizzard shares down 1.9% the u.s. mint says sales of american eagle gold and silver coins hit a new low in 2018.

gold and silver prizes rose. silver coin sales were down by 70%. and hertz will pay a $16 million fine to settle an accounting case. the s.e.c. says that hertz materially misstated pretax income over multiple reporting periods. hertz did not admit or deny the accusations in agreeing to that settlement sticking with our front and center theme, that's where the fed found itself in 2018 subject to second guessing more so than previous years. steve liesman joins us with what we can expect in the new year. >> none and done is the operative phrase no hikes looking at this in two ways. what's the fed expecting then gaming out what has to happen for the market to be right. what is the zero hike scenario like some sound effects on that.

let's do a little history first. pantheon ian shepardson says markets now think the fed is done. this time last year markets thought the fed would hike twice in 2018. markets aren't always right. here's the fed's own scenario first. the consensus forecast among fed members, 2.3% gdp growth unemployment 3.5% falling a little bit inflation 2% i expect this to come down to be more in the one area what does a zero hike scenario look like? here's my guess. i sketched this out on pencil and then i read about a dozen economic reports and i pretty much stuck with what i have. let's take a look at the wall here and look at what a zero hike scenario looks like there we go. go to the left here, your zero hike scenario would be gdp in the half a point to 1.9% which is top end would be

potential growth rising unemployment and inflation could still be at the target or falling. >> you think we have to have less than 2% gdp in order to get zero hikes. >> i do. >> does that mean the consensus fed forecast has to get below 2% >> exactly now let's go to the one to two hike scenario which is a cop out. i don't know if it's one or two. in the range there that's growth at or above potential. our camera guy is really watching this. he's interested. and inflation 2% could be either stable or rising there then here's your two to three hike scenario. i think you're up near 3%. you could do a wider shot and look at all of this now. you have a question. >> i have a question, professor. you don't put anything on here about market reactions to anything fed not going to be watching that through any of these scenarios

you have a deep downdraft in the market and alan greenspan over the years i've been covering him has changed his attitude about the market the market from classic fed thinki thinking more and more shifted to the balance creating economic outcomes itself. >> you think there's a closer and tighter link too >> yeah. i think financial markets do lead the economy going back to your board, what would be the center for a board to cut >> the last one you notice, half a percent growth lower than that, i think you would get to a scenario of the fed cutting. and possibly easing back

perhaps as much as 120 minutes of cable time. though a growth recession does not mean for the economy, financial markets march to a different drummer and may respond like they're in a recession. so that's something that can happen from that end look you can all fill in yourblanks here you have to be consistent which is i don't think you could -- you don't have to be it would be a good idea to be consistent you can't sit here and expect, i think, strong numbers from the tax cuts and then argue the fed ought to stand pat those are incompatible in my opinion. if you think the tax cuts are going to deliver 2.5% growth last year -- >> unless -- >> you cannot dial in -- >> unless you think the trade war negates the tax cuts >> stop worrying about prosperity it's inflation you should be worried about.

>> the semantic argument is weird. people say there's no inflation. that's not true. so when you think about how policy should respond and i'm not saying that's the ray way to do this. say i got inflation to target. i should at least be at neutral and the fed does not feel it's at neutral yet be careful what you wish for is the first thing. >> on one hand you have powell saying it's true inflation wasn't that much lower when the fed funds rate was at zero >> tom, you don't have to raise your hand. you're a guest host and you can just speak >> i was going to accepted my question in via e-mail going into 2019, aren't there two drags?

because there's the wealth hit from falling asset prices and both credit really moves aren't those drags into any forecast for 2019? >> that's a definite drag. and i think a lot of people i'm reading are saying trade is the number one drag. they're saying if there is no deal -- i think we have to go to breaking news. but seen as a huge factor here. >> let's do get there. earlier, phil, one of our stories was about someone talking about an inventory buildup. i saw immediately that tesla was moving but some of this news that just hit, you need to tell me because i read it as most of it looked like pretty positive stuff. what's the problem >> well, it's positive relative to a year ago. it's not positive relative to consensus out there. and by the way, we should point out that it falls just shy of consensus. this is not a huge miss in terms of people saying we thought they were going to deliver "x" number of vehicles.

here are the numbers in the fourth quarter delivering a total of 90,700 vehicles that was just shy of the consensus of 92,000 vehicles in terms of the model 3 and that's what most of the focus has been on for investors, the consensus was for totaling 64,900 vehicles. tesla was just a little bit shy of expectations there. model s and x deliveries coming in in line with expectation of 27,000 a little over 27,000 vehicles. but again, the overall deliveries of 90,700 will be just shy of what analysts were expecting. but guys, don't look at this and say, wow, the sky is falling here if you are a tesla investor by the way, the company realizing that the federal tax credit is going to be fazed out over the next year

they already delivered over 200,000 vehicles they said they are going to reduce the price of all their vehicles by $2,000 that should help a little bit offset the fact that tesla buyers used to be getting a $7,500 federal tax credit. that goes down now to $3,650, something like that. that is the news here when you look at the delivery numbers coming down of consensus production less than what some were expecting keep in mind, those production numbers, may move all over the place and you've got to look further inside of those to see whether or not you really see weakness there at first blush, i don't see that >> we're sitting here arguing on set while you were talking about this the idea of missing by a few hundred vehicles and that's something that matters what's your point on that? >> i think that's been the story of tesla, right? you have a $57 billion market cap company that is hinging on the single digit numbers a week.

phil's point about the tax credits, that has been a psychological overhang you had elon musk himself talking about getting the orders in before year end >> when we were down this morning, i thought it was because there's not a bag log but more likely because elon was tweeting on monday saying, hey, you can get to these stores that are still open to midnight which has a bit of showmanship to it. but also a hint of desperation trying to get people out so you can goose the numbers for what you're going to hear today >> right and you will get that. the flip side of this is all automakers are pushing big incentives at the end of the year some of them with huge ad campaigns. go into any dealership and they are throwing a ton of cash at people because they want to make year-end numbers you just don't see it to the same degree you see it with elon musk anything related to tesla, people are crazy elon musk could say it's sunny outside and the stock will move

up or down that's the nature of how tesla is >> all right, phil lebeau. thank you. always interesting anything tesla, god almighty right? we need to tally up a full 2019 minute spent on tesla. you know what i mean don't you think? >> you know, last night i was watching "iron man 2" and i forgot elon musk had a cameo appearance i don't know if i ever paid attention to that. >> on which one? >> on "iron man 2. he walked up to him saying hey, elon it was in monaco i'm just filling time so we can get to gene munster. let's bring in gene munster. gene, you heard this news we've been talking about from tesla. what's your take >> it's a big disappointment in part because i'm a believer in

the story and think that this company has a great product road map. whether it's production related which i think it is in this case, my first reaction was just sheer disappointment it's about a 10% miss. some may see that a lot or a little it is a lot in the context when you're ramping a business and when you have this hyperfocus on the production number. i think this is production related. i think the other piece that just really plays into is this concept to get to a cash neutral position, cash positive position and the significance of this is compounded when you layer into the fact that there is some credibility issues in terms of how can investors sleep well at night.

and so, you know, when you put all this together, there's clearly going to be a changing of hands of the stock today. i'm still a believer but think that we probably won't get to this velocity of how to worry how tesla probably for another 6 to 12 months >> you worry that the company can't get the cars delivered to people or because people don't want the cars if they can get delivered >> well, i think demand is doing well i think as they've opened it up to international markets, they've changed some of the configurations which suggest this is not a demand problem i think that is the reason why i stand behind this story longer term i think they've got an incredible position within an open ended market, all the good things we know about tesla the disappointment specifically is around visibility into production this has been the pain point around the story for a year now. and it rears its head again.

and i think it's just there is the piece about credibility around production and how do you -- what do investors really bank on as they build their position separately i think there's a question of how does this impact cash let me quickly talk about that this large debt payment they have coming up here in a month and a half they do have the money to service that without getting the stock to whatever it is. i don't think that the company is in any position to go out of business or this is going to cause a cash crisis. i think they ultimately will emerge from this, but it's going to -- that question is going to be debated here for the next few weeks. >> hey, gene -- sorry. >> very quickly, tell me again what that is we talk shorthand all the time month and a half they have a debt payment due of what if they stock doesn't get to $367.

>> it's a big number hundreds of millions of dollars. >> gene, there was a -- i think it was in "the journal," it was an op-ed piece i thought it addressed tesla from an interesting point. that all the tax breaks that allow the company to do well, rich people buy teslas i mean, not all of them. but those nice ones, that has been a transfer payment to a certain part of the, you know, the demographics of this country. trying to migrate this move to green energy by really lining the pockets of some really wealthy people did you see that piece, gene could that become a populist issue eventually or does the green thing overrule everything in terms of, you know, you'll always feel virtuous if you buy a tesla even though you're getting a tax

break? and you've got a hundred grand to spend on the model s. but even the model 3 is, you know, it's getting cheaper and cheaper obviously. but do you think these go away and can the company survive that >> so the tax credit piece, it is true that it tends to be skewed much more wealthy the reason is it's still an expensive car. yes that is some sort of a payment to wealthy people. unfortunately when you have emerging markets, you're talking 2% of cars in ev, 1% globally in 2018 when you have that, there needs to be a shift. it starts with people who embrace these technologies down the road, this hope of a less expensive model 3 is a reality. i think we will see that this year they gave some numbers out on last call that half of the trade ins. there's a third party that you can trade in your tesla, your

old car in when you buy a tesla. half of those cars are under $35,000. which says that people are stretching so the simple takeaway is yes, historically these tax credits have helped the wealthy. i think as this evolves, it's going to become more of a mass product. look at the production number and be disappointed which i am but you also need to step back and say cars shouldn't be gas powered. it's silly and tesla has possibly the best opportunity to have the production outside of the issues to be at that mainstream price >> tom lee has a question. >> i don't know there have been subscription models for ownership. is this something tesla is looking at and would it be good or bad for the stock >> they are looking at it. they've talked about it on a couple calls

they think about that as kind of a lyft or uber type of business. i think you'll see that in a few years for tesla owners to turn their cars over. and also turn them over from lease -- we're talking to autonomy here. that gets back to this point about the forest versus the trees here the trees is this disappointment i think if you look at the bigger picture, the things they're building not only run electric but autonomy and the ride share i think are pretty powerful i think that would be a good thing for the stock. >> gene, this is phil lebeau they produced just over 86,000 vehicles when i've talked with a number of analysts, most were expecting somewhere between 92,000 even as much as 99,000 i talked to jamie, he said we think they could produce 100,000 in the fourth quarter. what were you expecting from tesla?

>> we were at 91,500 that's called a 5% miss. the 10% i think so is on the delivery number. looking for a hundred on the delivery versus the production of 90.5. >> that's the of 90 and .590.5 >> gene, thank you for calling in on a late notice, we appreciate it. when we come back, we'll be joined by howard silverblatt stay tuned, you are watching "squawk box" on cnbc

welcome back, futures this morning are under quite a bit of a pressure the dow futures are indicated by 420 points s&p is down by 43 and nasdaq is down by 152. there is a good morning for you on the first trading day on 2019 joining us is josh fineman >> howard, why don't we jump to you? we have been talking about earnings expectations have come down drastically that's down 10.1% just about three months ago

have these expectations come down far enough? >> we are looking at 9% for the year we over estimated and in the mid teens, if you go back to june or so, looking towards 2019 the realization that the tax cuts are built in right now, how much organic growth are we getting fund here? we got a little bit ahead of ourselves. the big question is whether it will be the high digit number or the 7.66 are quoting on here 2019 is a tick less than the historical number. the question is does the street accept single digits >> josh, a lot of this comes down to what the economy looks like based on what you see from leading economic indicators, what do you think we are headed

to >> it is a divergence here the economy is doing well and fundamentals is sound and the markets which are sending a much less upbeat message. i think until we get some resolution of that conflict, the fed is going to be watching to see how it plays out >> what about if you look at housing or other indicators. >> housing is an area that's affected by the tax situation and a little earlier by interest rates. other fundamentals for housing looks okay labor market and consumer is still looking strong i think the fundamentals are still good but i do think growths are going to be weaker i don't think it is on a sustainable trajectory so that's going to be an important contributor.

>> 9% is fantastic >> sure. >> let's put it in economic context. 5% under line growth and 2% inflation. you are talking about 4% on top of under line growth >> we are looking at 24% growth this past year >> i know, if you get 9% growth, you should be laughing all the way to the bank. >> the other piece is, the market is sensitive to the global growth picture. >> true. >> concerns are right there. a lot of uncertainty of what's going on in china. it is a black box. the trade, negotiations and how that plays out that clearly lays on the market. if we can get a resolution on there, that would be a positive. >> i will give you the last word howard, your take on what the people should be watching? >> technology is supposed to be good on the fourth quarter

between them and financial over 40%. they'll lead the way for the market today is a toss up first day, 50%. >> howard, thank you josh, thank you. ene me we'll see you again soon. wh wco back, we'll talk to tom lee about bitcoin. en promis. because with expedia, i saved when i added a hotel to our flight. ♪ so even when she outgrows her costume, we'll never outgrow the memory of our adventure together. unlock savings when you add select hotels to your existing trip. only when you book with expedia. onmillionth order.r. ♪ there goes our first big order. ♪ 44, 45, 46...

how many of these did they order? ooh, that's hot. ♪ you know, we could sell these. nah. ♪ we don't bake. ♪ opportunity. what we deliver by delivering. tap one little bumper and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates

due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty mutual insurance. ♪ liberty. liberty. liberty. liberty. ♪ so, the whole world is talking about ai. big, bold promises like... it'll find life on mars! but here's the thing. you don't live on mars. (beep) you build wind turbines. supply car parts to thousands of cities. answer millions of customer calls a year. like this one: no, i didn't order this. it's terrifying. and that's why you work with watson. hello. it knows your industry, protects your insights, and works with tools you already use. that's why it's the best ai for the job. final thought now from tom

lee of bitcoin, what do you think? >> i think it should be 1% or 2% allocation in everyone's portfolio? >> what? >> i think it is going to be an asset class. roughly 2-1 right now and 240-1 speculation use of dollars >> we'll have you back >> make sure you join us tomorrow "squawk on the street" is next ♪ good morning, welcome to "squawk on the street," i am david faber along with sara eisen. carl and jim is both off this morning. let's take a look at the futures as we get ready to start the new year i don't know where we left it some way last week >> yes, it was behind us >> there seems to be a good amount of volatility last week