inflation and aren't taking into account amazon and everything else but the fed is just not going anywhere, unfortunately. >> all right scott, thanks, very much, scott. >> thanks for having me. it's been fun. >> thanks for hanging out with us you will be here tomorrow? maybe no, no i will be lone some and with our fabulous viewers thank you, make sure you join us tomorrow "squawk on the street" begins right now. ♪ rawrap it up < musical notes♪ ♪ i'll take it >> good thursday morning we hope you had a a great christmas holiday. cramer has the morning off futures are steady retailer report cards are pouring in from amazon, tiffany, mastercard, china with comments on phase 1 and more. europe is closed for boxing day.

brent at a three-month high, gold at 15.12. the year end rally, the s&p biggest yearly return in seven and nearing its best gains in more than 20 years. >> plus ecommerce sales hitting a record, amazon saying billions of items ordered world wide. >> boeing still on watch, new documents revealing what's being called quote very disturbing revelations. as 2019 heads into the home stretch, all three major indies says are on track for a fourth straight month of gains. they have surged as last month's sell-off we remember december 26 when everything rallied 5%. >> we were bottoming that horrible christmas eve when we had first concerns about a tariff war increasing. then we had the federal reserve raising rates on the 19th. >> that created a cascade, four down days in a row culminating

in the down day on the 27th, on the 24th and turn around today. >> meanwhile, the year, if you look at the percentage of up days, almost 54%, which is i think only the folks said only five years since 1928 have you had a more consistent pattern of up versus down days. >> one of the things about the rally is the breath is there, sometimes analysts will complain there is a small relative markets moving forward, big cap stocks have done well, microsoft and apple, the broad market advances, many days two-to-one, three-to-two, so when have you new highs on the advanced decline list on top of new highs and the indexes, that's a very powerful rally >> hi carl. >> hi david. into is to see you i hope you had a good holiday, a good christmas bob, nice to see you here as well it's been an interesting year from a macro perspective

we started this year as you say with the federally in a hawkish position we end with a much more dovish tone and china conceivably at least if you listen to the president, a deal will be signed phase 1 very soon as we head into next year at least those two concerns that dominated the macro outlook this year have abated >> it's what i call the four horsemen, number one the trade truce, it's dominated up and down number two the federal reserve no longer hiking, cut three times, now neutral adding liquidity since october people under estimate, the market started moving all around in the beening of october, liquidity concerns, lick quiddity issues were dealt with, markets started moving up with homes of a trade truce and finally hopes for a bottom in the global economy we had new highs in the european indexes, new highs in japan, all on homes, those could reverse

those four factors moved stocks this year. >> we know the consumer will drive the u.s. economy, market returners and amazon says it broke all prior records for the season citing items sold world wide, mastercard says overall retail sales up 3, 4, record high growth of almost 19%. amazon didn't give us too many specifics, grocery delivery 2 x year on year, one week, 5 million new prime memberships or prime trials >> it's really been remarkable i think the most important thing about this year is the winners and losers we like to talk about retail stocks being rallying in the last couple of months, really, though, it's a very small group. if you look at the numbers, you see target, best buy, costco, ross stores, walmart, they're the leadership groups. what do they have in common? they're discounters, best buy is

the bit of an exception. what's the lag guards? the apparel, laggards. the apparel, nordstrom's, kohl's, gap, l brapdz, macy's. it's hard to describe these companies are not anything close to what they used to be. i think that's the real statement here even though the consumer is good, there is very obvious winners and losers >> the journal with a piece out today saying tear 1 malls are starting to feel the pain, which has people focusing on the simons and the nathans >> the forever 21 bankruptcy there have been the 50 malls considered top tier have been thought to have been at least somewhat insulated given their diversity of restaurants which attract people and high end retail particularly in the communities which they are based. this trend keeps going gap, give them break

>> that i need that extra 2.5 billion. macy's >> the loser of the year. >> yeah, macy's is shocking at 4.9 billion and of course the yield. actually below 10% now only 9.37% is the dividend on macy's. we know it's been a difficult year based in the malls. it's hard to see anything that gives a sign that it's going to change when we look at the number, certainly coming out of christmas. >> of course, people were hopeful that sales per square foot might increase. in weird ways they're looking at the metrix i think the important thing is because you can add a new tesla study for example if your mall doesn't mean you are overall necessarily going to make a huge difference there has been all sorts of things tried i love restaurants, alternative events, entertainment, niles water slides i vote for that. >> you like nice water slides? >> we got to get people in medical complex. going down the water slide >> carl, it has been interesting. of course, we mentioned many

times, amazon under performed the broader market s&p up over 28%. shares up 21, 22% this year. retail, of course, continues to cost given the focus so much of the focus on same day or next day delivery there and what that will cost, the building out we all know of the own delivery network. aws is certainly the profit bribeer of that company. don't forget, this year ended with them contesting the decision by the pentagon to award that important contract to microsoft as opposed to the jedi contract to amazon they're saying, hey, that you were playing favorites in a sense, trying to follow the lead of what they believe the president was saying given all the attacks he's had during the course of the year of jeff be ezos, "the washington post" and amazon, break down all the retail numbers is brian nagle, senior retail analyst. thanks for coming in >> thanks for having many e. >> let's start with the

mastercard, three on four would you argue towards the low end of estimates or not >> i think that's basically in line we are kind of the mid-point of that obviously within those numbers which you were talking about stronger online sales even in store sales is up slightly 1.2% which is overall positive. >> you couple that with tiffany said about mainlined china, hong kong and japan, what itself overall tone to you right now? >> look, i there i the tiffany report right now is interesting. it doesn't mean much with the stock given the pending buy. you look at the tiffany report, you saw a couple positive things, one like you said carl, they're continued strong sales in mainland china. this u.s. tiffany brand is continuing to res fate also we saw a modest updig in domestic tiffany's has been struggling domestically to me that's an apology for

tiffany, probably more importantly an apology for overall discretionary spending. >> what amazes me is despite the increase in online sales, i bring this up for the holidays all the time with my friends and family, they say, no, that's not possible i do all my shopping online. yet, the evidence is an awful lot of shopping is still done face-to-face in retail sites on brick and mortar stores. how do you account for the fact the public seems to think everything is done online but it's not somebody is buying in stores rather aggressively still. >> i think it's a great point. i think a company like best buy several years ago did a phenomenal job of recon figuring their business model to compete better online. you look at what they have now, yes they have 25% of sales online a lot of that is happening in the store that consumer, you are seeing the omni channel model take hold.

the stores are still very important. that true for other retailers, that's why best buy is one of the best examples. >> what happens to the gaps and macy's next year >> my universe, i don't spend a lot of time on clothing. i got to think that subsector continues to struggle. that's where amazon is having a big impact amazon and other smaller brands are going direct to consumer with online. so my sense that they continue to struggle. i think what we are seeing now is this increasingly large divide between the winners and losers every year it gets wider and wider. on the winners, there are clearly physical retailers best buy one of them another name five below, it's a smaller store that sells stuff historically is under $5, they're doing really well in their stores >> do you think lvnh will be a better store than tiffany's was, what's amazing is how well they have done increasing margins for some of its high end luxury brands they have been rewarded for it,

really amazing do you feel tiffanys will flourish under lmb sne. >> i do, i followed tiffany for more than a decade they've had their ups and downs. look, i think this move by lbmh is what that brand needs i also think there will be the potential for lbmh to sell a wider product in their portfolio if tiffany stores that will bolster that product selection for customers. >> what's the lesson of best buy? and i can remember sitting at this desk four years ago let's call it when the stock was at lows, maybe it was 5 people were saying maybe they'll go private or try and figure something out and they're getting amazon, they're getting showroom that's what we kept talking about. what did they do right and what is it that other retailers have looked at or failed to understand from best buy's experience and be able to replicate? >> it's a great question if i had to sum it up, i think there are probably two big take away, one, this sounds simple,

take amazon seriously as a competitor we used to talk about showroom all the time what allowed that to happen is best pie was fought pricing against amazon the consumer comes into the store, look at the tv, an their smartphone realize they can purchase it cheaper at amazon. best buy is pricing against amazon is a positive leverage the power of the stores especially for a category like consumer electronics where especially larger screen tvs or other pieces, people want to see that product they want to be educated on that product. so really take amazon seriously, leverage the power of these stores >> i think the key point is how rare best buy is, we were talking it's not quite a unicorn, it's usually nike for example, lululemon, they stand out as unusual considering the number of the disaster in some of the department stores and apparel, nike is there and lululemon is there, too. again, the group that's real

winners is remarkably small. >> i totally agree, the clue is with online with digital, those brands are learning or really leveraging less of a need for distribution partners. they're going more direct to consumer it's helping their margins as they bring digital into their business models, it's helping the product development as well. >> for me, i think best buy, pickup is a huge issue pickup fulfillment, 60% year on year i mean that's, for those who don't want to go in around be educated, that's a big deal. >> yeah, most retailers are i call it talk about buy an line pickup in store representing 70% of online sales. so going online, purchasing the product, subsequently going to the store and picking it up. >> is there any retailer you can think that next year will say that was surprising resurgence or they suddenly got it?

target has been an example we seen this year, not that they were in that bad of a place. they picked it up enormously, the stock reflected that, any sense that any consumer will be talking about in that what i >> well, i have been talking act lows for a while, not necessarily a holiday play i think the lows under new management, lowes, stock is still cheap, i think we look towards 2020, that's the year that lowes catches that stride in that home improvement which is overall healthy home environment. >> home depot the last couple quarters >> home depot is an extraordinarily well run company. i think they have been weaker and i think that's because lowe is getting better. >> thank you when we come back, new developments surrounding the boeing 737 max documents regarding the jet reportedly being viewed as quote

very disturbing. we will fill you in on that. let's give you another look at futures as we get ready for the open 15 minutes from now more "squawkon the street," live from post-nine when we come ck i'm happy to give you the tour, i love doing it. hey jay. jay? charlotte! oh hi. he helped me set up my watch lists. oh, he's terrific. excellent tennis player. bye-bye. i recognize that voice. annie? yeah! she helped me find the right bonds for my income strategy. you're very popular around here. there's a birthday going on. karl! he took care of my 401k rollover. wow, you call a lot. yeah, well it's my money we're talking about here. joining us for karaoke later? ah, i'd love to, but people get really emotional when i sing. help from a team that will exceed your expectations. ♪

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boeing remains the focus after dennis mullenberg was ousted, reuters reveal what is being called very disturbing revelations from boeing employees regarding the grounded 737 max jet. boeing issued a statement saying it had proactively brought documents to the faa and congress and said the tone and content of those documents which we are not aware of the specifics of they do not reflect the company we are and need to be guys, we talked, of course, on the day mr. calhoun announced the incoming ceo january 13th of his immediate outreach to both customers and regulators, including the faa. mullenberg's relationship with the faa to put it mildly was not the best at this point given sort of the waive he had been prodding pushing them putting

dates out there they hasn'tdn't agreed to. there was a reboot >> a lot of people had credibility problems in the last year they're not the only ones. these are very specific issues with the company for example, 3m several profit warnings we saw, issues there. the stock has been down on the year fed-ex, another company out there, that had very specific issues related to them even though they are tied into the global economy slowing or not slowing the story. so this is a good reminder that you can't just go out and buy index funds the rest of your life >> are you putting a warning out there for fred and for mike at 3m >> i'm saying several big companies had very specific issues around them this year that was unrelated to the 30,000 views i tend to give of the u.s. economy and the global economy and the markets moving in tandem

with big global thieves. >> they continue to worsen during the year one of the biggerest if not the single largest corporate story. >> without a doubt i saw some polls of other ceos calling it the bigger disaster story of the year. a reporter says boeing has been doing a lot of internal survey work how it will market this plane once it returns to service. in the past month, their polling shows 40% of regular buyers will be unwilling to get on this plane. some say 40s low who knows are you going to do what you say, walk the walk? it's hard to know at this point. >> they got a lot of things calhoun has on his plate to deal with as you say trying to turn public opinion in their favor, the plane is something they want to get on, dealing with the airlines, of course, dealing with the faa, figuring out when this thing will be able to come back into service. getting the work force back up and running. they're right now they're not

what ra they called -- they're not laid off, furloughed, they're just not making planes anymore, but the question is, will that also change, too >> of course, the broader issue is the faa here. this ridiculously complicated plane, all planes are complicated at this point, but what's the criteria to make i make sure it's safe? >> cramer said, 320, 300 has been a firm floor has not really violated it despite all of this. when we come back, speaking of shakeups, the 2019 ceo shakeup will look at shares of how companies have faired since the departure of their leaders shares look good as the nasdaq is going for a win streak at 10. >> that you got to go back to a prior decade to see before "squawk on the street" from post-9s is bk acin a moment.

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you are watching cnbc "squawkon the street," live from the financial capital of the world. opening bell on this day after the christmas holiday. we got today and tomorrow, really a vacuum of news until next friday when we start getting some pmis bob. >> i think the important thing here is it won't matter. the last few days we got the santa claus rally, the tendency for the markets to move up the last five days the trend this year for december is where it has been in the historic past. last december was a bit of an anomaly. what strikes me as amazing is the big move in the biggest cap

tex stocks where microsoft outperform and the bank rally we saw in the third and fourth quarter as yields started novembering up j.p. morgan up 40% goldman up 40% all of the regional banks, regions financial, fifth third all moving up dramatically in the fourth quarter. >> for that, david, we have to wait i know j.p. morgan kicks off earnings season on the 14th. goldman's investor day, the next day maybe. really mid-month of january, we will get a better look >> goldman investor days an important one. there was some expectation there were gift targets and so there has been a bit of a i don't want to call it confusion, at least some questions about what you're going to get there certainly it's going to be about changes going on at goldman, which are not insignificant in terms of all of its various efforts aimed at a different customer than typical for

goldman. that's an important day for that stock. >> the steepening of the yield curve is number one, the strength of the consumer, you get a better loan growth and a steeper yield curve, that's mana for the banks. i know we spend time talking about trading, there are only four or five of them that do that you won't pass, even wells fargo go pa st that. regional banks i look at it's business loans around personal loans a and the yield curve that matters all of those are looking better. >> yeah. we'll be getting are we talking about as i said, next week china pmis fomc minutes even though people want to say the fed is a non-story the journal has how the hawks will rotate out in 2020. you think the fed is dovish now, it can go more so. >> i think under powell, you will see, they will remain neutral as long as possible, the market believes the fed has its back if something happens, the fed put is very, very real

it's not, it may be a cliche, it's very, very real >> let's get the opening bell here, the s&p 500, at the cnbc real time exchange the head coaches and team captains from the 2019 lake forest versus michigan state at the nasdaq that's for recapping business purposes >> bob you got a good look at sector performance for the decade, which we're going to talk a lot more as we get into the end of the year. >> people ask me, what itself the market going to go in 2020 i always say i don't know. what i look at is how the overall tone is as and the picture for the earnings session. if you look at the last ten years, what's very remarkable is we always point out that stocks that are out performing stocks that are under performing do the opposite this is actually true of sectors on very long basis some let's look at the big winners here over and above everything else

is technology. why is this happening? because individual investors want to buy growth you get it in technology you can say it's a bubble. but people will pay a lot of money for growth here is the truth of that. far and outperforming everything else discretionary has growth aspects there. healthcare, industrials, state, consumer staples also doing well let's look at the laggards, you see the bottom sectors, real saturday steelers, utility, materials, communications services, energy, you might say what will we do the next few years? obviously, let's buy technology. the fact is that is the wrong trade to make at this point. we get what is called mean reversion, essentially the bottom performing sectors tend to do better and the top performers tend to do a little worse overall. this actually happened if you look at the top three sectors from 2000 to 2009, what was the top three?

believe itor not energy was th top. consumer staples and materials, then the bottom three, they were communications services and tech and until, they are the ones that did better this sector. so the best performers in the 2000-2009 did the worse, including energy and the worse performers in 2000-2009 including technology, they were the big winners. so on a mechanical basis, there is people who are arguing and i think there is something new about it energy should be looked at as a potential longer trade given the mean reversion the question, why does the mean reversion happen it's a study phenomenon, it happens because human beings tend to buy the stuff that's working, the fallacy of the history. stuff that's worked in the past must work in the future. you and i know that's a complete fallacy. the future is not like the past. they tend to create bubbles. they tend to create the reverse. in capitalism, you get companies

in bad shape they tend to get restructured >> that makes them more efficient. stuff that's lousy gets restructured and more efficient. so mean reversion is a mean idea it's a practical long-term way to look at that time the overall market if you want to look at sectors >> there has been this question you have explored as well, when will value return to something that potentially out performs? it's been a long time. >> i think the problem here is for whatever reason the average investor has come to believe that growth in particularly earnings, the traditional way you look at growth, those growing earnings year over year is the best long-term way to buy into the stockmarket there is some evidence that the true, by the way unfortunately, growth has been very difficult to find in the last ten years, smaller and smaller. that's why individuals and investors tend to pay up ridiculous money for growth. you tend to get high pe multiple for stock.

which is why apple is not in the growth, it's a value on the tra dibble growth metrics. it's not up there. it's not that pricey anymore i find that remarkable to me you and i know apple i find to be a growth oriented company. >> yeah. stock up over 80% this year. it's been a stunning move. certainly one of the features when we look at the year as well has been that incredible move on apple. another theme we talked a lot about. we got evidence of that earlier this week. ceo departures, which have continued to add a rather torrid case, mullenberg just being the latest perhaps the last of major companies to fire their ceo. we thought we'd do a very much unscientific look. by the way, i think we should do this in two parts. we got a lot of tough stuff tomorrow we start with 8. this was suggested by the way by one ceo no longer running his company. i won't tell you which one it is, not ones we are looking at here but it's a mixed bag

ebay stepped down dismissed. stock down 8.5% in september mcdonald's that surprising exodus steve easterbrooke, yet the stock is okay. larry paige saying i will step aside as well, sundhar has taken over expedia performing quite well. wells fargo you may recall, tim sloan, of course, not unexpected, late march stepped down, stocks up so.4% since then, charlie sharpe of course taking over. boeing we talked about very early, we've had one sex or two to digest that news. gap, we mentioned it earlier, down 2.3%. what can you say is fundamental also what has to do with the ceo departing? finally they put pg & e, that

bankruptcy is too complicated, so many moving parts. >> all four of these companies have very specific issues around them they're not sector issues. iwas struck by a few people. uber, kanick wework kevin burns, also, so slightly different question, i'm wondering if this is sort of the high watermark for founder gurus, are they out of fashion now? are they out of style? or do we have less tolerance we don't want raw visions >> bob, it's a good question if their company is losing money hand over fist, perhaps the spacious not quite there as much as it was, even bezo,s, people point out they were cash flow positive quickly in the early day, remember, he obviously always pointed to cash flows, his first annual letter, it continues to be something he

includes in the annual report. but they didn't look anything like a we, who or even an uber in terms of their total losses so maybe when it comes to sort of these businesses that are early on losing lots of money. the patient is not quite what it once was. >> you can point to kevin plank, another founder, maybe not losing money, lost some share. there is more pedestrian xits, munoz, of united you can do this over two days the numbers of ceos that left in 2019. >> the broader question, is this an unusually large number? it strikes help it is. >> it is, particularly companies we know well now that doesn't speak to, that may speak to the limited time frame that a ceo has in terms of trying to effect change in their organization and/or how they're going to be judged you've always got the possibility of activist investors there. boards these days are much more aware of that they, in fact, have their own playbook they are looking to, because they want to

avoid any potential conflict if they can and shareholders overall shareholders >> more successful in moving ceos this year >> i don't know, bob it's a good question not necessarily, not necessarily. i think that over the last ten years the fact that activists have become such a feature of the market overall figures prominently in the way boards think about their decision-making and they move quickly. quickly. >> not a lot of individual movers, netflix had a couple bits of news one was the ceo of cineworld, the second largest cinema group talked to the ft about "irishman" and blamed netflix for what has been less than a stellar year at the box office quote a properly released scorcese property would have added to box office in 2019. so we will see a lot more of this push and pull between probably the streamers at large and the distributors who own traditional theaters or maybe they collide there is talk that amson could

theoretically benefit from having some physical distribution of film. >> right then the other question of the window as well, there is some speculating 2020 we'll see the first time when you got turner or i should say time warner, warner brothers, a part of at&t, mayfield max, the launch there disney, disney plus will they, carl, ever decide to launch a movie on the platform at the same time that they do and that window for exhibitors, which was very short in terms of the irishman, will it go to zero >> a lot of post-mortems on this, i would like to see "the irishman" on the big screen. with that said, i don't think there is room for a lot of sour grapes here. the fact that scorcese has been on record saying netflix was willing to give them full backing, where was everybody else where were all the other studios, the implication is scorcese's invitation is they were not there netflix was there, he was able to make the movie he wanted to,

it's a magnificent movie, yes, would i like to stay in the movies longer? yes, he got to make the movie he wanted, let's keep that in mind. >> one actual mover based on news, kaigen a company that helps in the testing of things, think thermo, lab stuff. but that stock, take a look at it it's down dramatically why? the company said we're no longer for sale there had been a lot of speculation that there was significant interest in the company. that's very much unclear whether that was the case. that's a look at thermo. take a look at qgen, guys, it's losing about a quarter of its market value this morning after it says, we're moving on, we are not for sale we are not going to, there it is, entertain offers, again, unclear exactly how significant the interest was, certainly the

market saemd to feel there was a real possibility this stock would get or this company would get a viable takeover offer in the 40s. didn't come and can question i'm hearing is, well, was there nothing real there, but they wanted to try to get the stock up to avoid an activist or something like that? unclear whether that was the case but what is clear is it's losing a quarter of its market value. >> so it was close to a $10 billion market cap >> yes, it is. >> we lost $2.5 billion right there. pretty significant. >> we did get record highs on the s&p and nasdaq not quite so on the dow. we will watch that closely along with bonds, let's go to rick santelli in chicago. good morning, rick >> good morning, carl. >> as i look up and listen to carl talk about the strength and equities yet again or the stretch, 11 sessions if we close higher for the nasdaq. you look at a one week chart of

ten year photoyields, idling by at 190 active trade, just not actively able to pop out of the range to the upside of the yields or down side in price, sort of hovering, look at a month-to-date chart. now we all understand there is some ifs about the economy, but not that many big ifs and traditionally, the stockmarket strength has an effect of pulling rates up so f that is already happening, what happens should the nasdaq not have a 12th or a 13th or we have a minor correction. this is the way traders are thinking you can see it in the way they attended the auctions. we have the final auction of seven area to date the five year before christmas holiday was very aggressive. so why would investors want to buy when it looks like rates are at the top of a tight range maybe looking to break through because they don't think it will break through. that itself way they're getting long now if you open the ten year back and zoom it to november, you can see why 195 is so

important. that was the big one we've had a couple of subsequent areas right below that yield without penetrating that level finally open it up to july that's what we comp to, should we break to 195 all on a closing basis. finally the year-to-date chart if you consider we were at 268 on the last trading day of last year, look at where we are now, it's pretty obvious that the strength inequity certainly hasn't had the historic effects on interest rates, carl, back to you. >> all right i'll take the risk rick santelli. let's get more on today's movers and equity markets for that we go over to frank collins. >> we have been saying the nasdaq on an intraday high, amazon, the fang up over announcing free one day shipping has more than the use of it's more than tripled this holiday season over last holiday season,

other fang names trading higher as well, despite the u.s. china trade we seen chip names trade lower, qualcomm one of the worst performers, sky works solution, jd.com, it was trading lower, the chinese ecommerce companies, we have to keep an eye on that throughout the day carl, back over to zbru with your help, we'll do that, when we come back, the 2020 playbook on what to expect from real estate in the new year be sure to check out our podcast as always you can listen to the opening bell hours, "squawk on the street". 50e dow is up the s&p is up 7. we are back in a minute.

with the end of 2019 less than a week away, cnbc is taking a closer look at what investors can expect we have the 2020 playbook for real estate. [ music playing >> reporter: the housing market is a mix of highs and lows so here's what to watch in 2020. first, the housing shortage will

get worse. the number of homes for sale is already low and demand is incredibly strong thanks, to improving employment and the largest generation aging into its home buying years. the demand, however, mostly on the low end where supply is leanest. >> that will cause prices to continue to overheat at the entry level while prices ease on the higher end where supply is more plentiful second, mortgage rates will stay low. they dropped in 2019 and will likely stay low as uncertainty over a trade war keep investors heavy in the bond market mortgage rates loosely follow the yield. the only wild card is mortgage finance reform if major changes are made to the rules of fannie and freddie, rates can go higher. third, we're bullish the major shortage and low interest rates will keep demand high the home build theers have been ramping up production. in 2019, they finally started to

pivot to entry level homes f. they can afford to put up even more big sales numbers will follow their head winds, though, continue to be high prices for happened, labor and regulatory compliance >> i was going to say, we like turning to bob for real estate out of nostalgia >> people may not recall when i started here, i wouldn't say how many years ago, you were the real estate reporter >> i had brown hair. yes. 30 years ago, i was the son of a home builder and my wife is a real estate agent. always we are lucky to have her. limited supply, low rates, stronger economy, it means higher prices, she is absolutely right. we know low end and entry level housing. we can't get it. land values are going up in every area around the united states and number two, labor costs are going up as well, remember the 28 recession, a lot of people left the real estate business, carpenters,

electricians got out, it was a catastrophe, it went straight down, it's been tougher to get them back n. you need to raise the prices for everyone. so this is a major problem finally we're getting a few of the millennial's that are now moving out of their their pare that's getting better. it was awful for many, many years. but i see that as the number one problem, the lack of low entry-level, not low, entry level housing. >> deutsch had a poll out the other day, a third of 18 to 30-year-olds living with their parents. which is incredible demand for if and when they start to move out of the house. >> you have to figure out how can you get the down payment costs? good news vats at 3.5% -- when i bought my house in 1985, 11.5% was the organize rate in 1985, 11.5%.

eventually i went to a 15-year mortgage, paid that off after a couple years. could you imagine if rates went towards double digits? there would literally be screaming. there would be screaming all over the country for that. >> we'd have a lot of issues if rates wasn't that high. we talked as well about the budget deficit when the interest payments would be given the overall deficit. but we're going to be like italy. how many people live with their parents there? >> it's much, much higher. they traditionally stay into their mid-30s overall. but italy has the same problem, very high land costs. >> at least we don't have the demographic issue quite yet. >> they need to have more babies. >> and so does japan. >> when we come back, we'll get a look at the dow's top performer so far this year on the way to a commercial break, apple up 81% f torhe year, doubling off the lows of 2019. back in a minute.

in some ways you're wking our resident historian on certain things. >> i would give that to art, but i'm fraud say i'm an art cache

disciple. people ask what the market's going to do next year and i say i don't know. i'm optimistic i tend to be a glass half full type of person. but i tend to tell investors stay invested and stay long in the markets generally. reason is markets are up over time. that's the important thing. if you look at how the market has done in the last 90 years, since 1928, the modern markets. if you include the dividends, the s&p yoor over year support 72% of the time. i'm including dividends. we tend to show price charts, not total return, but you have to include a kid of or you're being foolish. we get a 2% dividend in the s.a.p. year-over-year the last 90 years the s&p will be up year-over-year. people will say we're up 28% this year, that's not going to happen again. we're not going to do two 28% years back to back. i said you're wrong. there's a good chance this could happen. how many times was the mar kelt up year-over-year in the last 90

years? more than a third of the time 20% or more. 10 to 20, tone 20%. look at these numbers here. 72% of the time you're up. how many times was it down 0 to 10% 16%. and a worse than 10% decline say very rare occurrence. i'm talk about year-over-year. remember you can get entry-year declines. so i think the point here when people say i don't know what do, i don't know how to invest. if you don't want to hire a professional investor and tell them stay low in the market and play the odds, which is what this is telling you right here, the odds are long term will be up and then people will say what happened in 2000 and 2008? yes, when he a lousy ten, even 20-year period where the average returns were generally lower than before. but long, long term i'm talk now ten years or more, 20 years or more, stay with the averages and that's why i keep talk about etfs, buying the s&p, buying the

russ he wi russell 2000 if you don't know what do. >> that's good advice. >> i think that's the only way to do. or listen to people like you every play >> you mean specific stocks? >> for people who know what they're doing. >> yes. >> listen to you and learn about how do individual kinds of investing. but those who are not sure about it, this is why i say the broad averages are the way to go. >> we didn't call you a veteran because your hair went from brown to beautiful play. >> it was brown a long time ago. >> thanks. when we come back, former sachs retailer and we'll get a look at the dow up 48. s retailea look at the dow up 48. s retailea look at the dow up 48. kss retaia look at the dow up 48. retailer look at the dow up 48.

good thursday morning. welcome back to "squawk on the street." i'm carl along with david and julia here on the new york stock exchange. watching retail as the december rally continues quietly. nasdaq's going for 11 days up in a row.

longest win streak in over a decade. >> we start with the market rally. it continues to roll on. the s&p nasdaq also hitting new record eyes. there highs. there's only four days left informant year. >> ecommerce hitting records. amazon saying billions of items ordered worldwide. >> but can netflix continue its run-up in the years ahead i midst increasing competition we'll debate that next. and for retail, amazon saying it broke all prior records for the season, citing billions of items sold worldwide. and mastercard reporting that the online sales grew 3.4% with a high of 19%. we have former saks chairman and ceo steve with us. thanks for joining us this morning. now this online trend continues. that full season sales growth exceeding your expectations.

i'm wondering what you think is behind that. is fact that the online sales are coming from brick and mortar stars shutting down? did we see more discounting in the season what was behind it >> you see a healthy consumer. the overall sales came in at three-point 4% growth which was better than the 3.1% forecast. if you take out the auto -- the gas numbers, it was growing at about 4%. online was the stellar performer, up 18.8%. and it now represented almost 14.6% of overall retail. so it was a shorter lol dholida season, six days less. consumers came in late. the saturday before christmas, monday before mass is were massive sales. you had a lull in early december, then it came online with a strong performance and

good at the very end. >> do you think we saw more discounting earlier on because there was a shorter period between thanksgiving and christmas? >> i think you had a promotional season throughout. it started early, almost past halloween because of the shorter season. i don't know if it was any deeper than last year. i think you had a promotional environment that lasted through the season you're also in a period, because you had such a heavy presence of online, that the returns this week and into next week and the gift card sales are going to be very important in terms of determining how the season plays out from a margin perspective. >> i'm curious what you think the impact of amazon is. we've got the bullish numbers from amazon but not the kind of detail that some people would have liked to hear from them. how much of the market do you think they're dominating this year compared to prior years >> well, i don't know the amazon numbers, but amazon roughly represents a little bit less than half of the internet sales. and if internet sales were growing at 18.8%, that's a very good indicator of what's going

on. amazon pointed out that they had a massive increase in the same day and next-day delivery. so that's really driving the performance expectations for all the online players. so you're going to continue to see this growth of the accelerated shipping, the buy online, pick up in store. that's going to play out as we go into next year. you also have some very interesting characteristics of what's going on in win easy and losers in terms of categories. this was a good experiential year restaurant and house wears, apparel doing very well. department stores still seeing headwinds. luxury on the retail side. >> steve, you speak of department stores, you used to run one. we're talking a lot this year and the last few years about maul-based stores under pressure, of course. do you expect that that trend will only worsen in 2020

>> well, you clearly have a traffic trend in the malls and in physical retail. so the players that are winning are doing a great job of omni channel performance. buy online, pick up in store, et cetera. the wall marts, targets of the worlds. the ball base stores are under pressure. the department stores have been under a secular trend for a long time. they've got change the experience within the stores to be able to win. >> you think they can do it? >> it's a tough one. you know, you've got underlying trends of negative 3% to 5% within the categories, individual players are doing better and worse than others. but, again, they've got to fundamentally change the offering, the experience of the consumer in the stores because today's consumer is very focused on differentiated offerings and that's what they've got move towards. and the againgen z customer andx

customer is looking for something very different. >> does that mean fewer departments and, if so, what do you replace in with? >> i don't think it's fewer departments, it's niche products. think about it, the digitally native brands are opening up stores. you have a muffove to the cente. the department stores and more traditional brick and mortar are becoming more omni channel. it's a convergence to the middle. but you have to offer products and experiences that you can't find everywhere else. it's that unique story of the brand that consumers want. >> it's interesting, this year we saw a real push towards that order online, pick up in store. we see stores like nordstrom increasingly investing in these locations that have no inventory, they're just there for services and for online pickup. and i wonder based on the trends we're seeing this year how much

more dra mamatically you expect things ton shift ne shift next will they do more of this to draw in consumers? >> i think you'll see a lot more of it. the nordstroms of the world are doing it today. you've got create a different model, whether it's the rental, whether it's going to the resale or the digitally creative brands. you've got to create a different model for these stores than they've had. you've got think out of the box. the consumer is doing that and they're moving faster than a lot of retailers are moving. >> when we started off this conversation you mentioned that you think that these numbers are driven by the fact that the consumer is strong. we're about to get into this next wave of spending with the gift cards, but then also returns. as people buy more online, do you think returns are going to be that much higher or do you think there are some of these categories that people aren't going to bother returning and that might help retailers through january? >> i think returns are a part of

the business model with a growth of 18.8% on the digital business and representing almost 15% of sales, returns are a core part of what's going on in the next couple of weeks. having the staffing for the returns, being able to translate a return into a new purchase is going to be critical to the profitability of the retailers over the next -- and that's going to come through at the end of the january or into february when we see the earnings. >> steve, thanks so much for joining us. fascinating time for the retail industry. >> thanks. well, staying with retail, stores are getting ready for the second holiday rush, as julia just said, return season. frank holland joins us. he's got the latest on what could be a record number of returns this year. frank. >> how many returns are projected to be a record $95 billion this year with nearly half, about 47% coming from ecommerce sales. major retailers like amazon, walmart, best buy, and target are projected to see their returns increase by as much as

30%, according to b stock.com, a company that liquidates inventory for those big box stores. most common being women's apparel, appliances and toys. according to a new survey, 83 ers of online shoppers consider the return policy before they buy and 30% of them will make a return compared to just 9% of brick and mortar shoppers. ups said it handle 1.6 million ecommerce returns a day last week and returns will spooik spike higher on january 2 tond 1.9 million. that's a 26% increase over the busiest return day last year. with more companies offering free options for delivery and returns, cbre estimates retailers lose about $50 billion a year in profits because of inefficient logistics. however, ecommerce trends should provide a boost for companies that actually handle those returns. that includes ups and fedex as well as logistics companies that handle warehousing and inventory like xbo and ch robinson

expected to see increased volumes. back to you. >> elevated is the word for it, frank. those some stunning numbers. still to come this morning, stocks hitting new highs as least on the s&p and nasdaq as the record rally rolls on. how should we be positioning your portfolio in the new year later, competition in the streaming wars continue to be heat up, can netflix keep up the momentum big show still ahead, don't go away.

wufrmg welcome back to "squawk on the street." the s&p and nasdaq each hitting fresh highs. this market rally continues right into the end of the year. just four trading days are left. we're joined by investco's christina hooper and global investors portfolio -- portfolio manager burns mckinney. thanks to you both for being here this morning. >> thank you. >> christina, let me start with you. we had byron on earlier this week. he's seen a few market cycles in his career. when i asked him what's the most important single thing he said the fed. you seem to agree. given the change that's occurred in the fed, what can we expect and what does it mean for stocks >> i think we can expect markets doh better than the general economy because i think monetary policy is geared towards supporting markets better than it is geared towards supporting the economy. so that suggests that u.s. stocks should do well. not as well as this year, but

they should do well. what's interesting, though, is what we saw in september, which was the end of balance sheet normalization. and i think that suggests that emerging market stocks should do better than u.s. stocks in 2020. >> why >> well, because balance sheet normalization was creating liquidity stock and it was really negatively impacting emerging markets equities. if we look at the full year for indexes, they underform significantly. but if you look at the three-month period which is about when it ended, you see em outperforming the u.s., particularly china outperforming the u.s. >> because >> because the liquidity suck was ended by balance sheet normalization ending. so there's just more liquidity in the markets and that means more money flowing to em. >> burns, give us your perspective. i know you think a lot of gains expect order hoped for in 2020 are being pulled into the fourth

quarter of this year. how does that impact your outlook? >> i do believe that christmas came early for the stock markets in the fourth quarter. you had a handful of positive geopolitical news. there was the election in the uk took out some uncertainty from the markets there. you had the trade war at least come to a near term detente or resolution with the phase one trade deal and a commitment from the fed to keep rates lower longer. we did, i believe, pull a lot of 2020s gains into the fourth quarter of 2019. and as a result, equities, we had a great run in 2019. stocks have gotten to be a little bit rich. and is going into 2020 we expect that, you know, we don't see a recession on the horizon and so we do expect, you know, these positive returns. but they should be a bit more multied this year muted this year. think going forward in 2020, one

of the biggest concerns will be the election. this is a bit of a unique year because there's probably a more divergent and binary differences between the two outcomes in the election, it looks like, than we've had in a really long time and that could probably add to volatility this year. >> burns, i do notice that energy's amongst at least one of the sectors you think is going to do fairly well next year, at least that's what i'm told. we've had a number of people come on, energy has not performed particularly well, certainly versus the s&p this year. why do you think next year may be better? >> it's certainly i think one of the reversion of the mean is probably one of the best cases you can make for energy. it's been one of the laggers over the last year. you do have valuation on your side. but also i think it's a sector that could probably benefit from a bit of, you know, the fact that you have had some near-term resolution on trade, you to have accommodative central bankers. so i think that really suggests a bit more risk on markets. and so some of the cyclicals

overall should do better. industrials, financials, and energy, again, just having been beaten down so much, i think, you know, you also have the bit of a return to growth in europe. i think we've seen sainz signs bottoming in china should bode well also. >> chair powell said that the bar is high to change the committee's long-term view of inflation. but as some of arguably the journal says the hawks are going retate out. do you think the isobar higher than some people think >> the bar could become even hire and that's what is i think fueling this end of years santa claus rally is more and more gifts being bestowed by the fed. >> when does that get dangerous? >> well, it gets dang from us we g dangerous if we get to double territory but we're not there yet. >> in terms of pes or something else

>> in terms of pes and overparticipation in stocks. we're not seeing the traditional signs of bubbles. and what i think is more likely to happy happen en is a rotatio leadership. but em outperforms u.s., for example. >> there are any sectors that you're particularly focused on, burns mentioned energy. where do you see that opportunity? >> well, certainly if you were to look at a reversion from the main standpoint, beaten down sectors like energy look attractive. but i have to believe that technology continues to perform well, although it should experience more volatility in 2020 just given the politica environment in the united states. but having said all that, companies are spending more on technology because they understand how important it is to productivity. especially when you have a tight labor market. >> and finally, burns, when you think about next year, bob was telling usdon't be surprised.

you sometimes do see incredibly strong years for the market fold by strong years. what would make you think that next year may surprise on the upside >> well, we do believe it's probably going to be a lot more -- a lot tamer returns next year than we've had this year. but there certainly is a case to be made for having a strong year followed by a strong year. i think first and foremost you have the consumer remains strong, he the consumer's really been the pillar of the global economy. i'd like to say they're like the tom braid divinity global econo brady of the global economy. he never retires and remains clean. and you just have central banks accommodative around the world. we have the u.s. central sbaenk gauged in something that looks like quantitative easing. and you have bank balance sheet growth everywhere. typically they say don't fight the fed and the central banks around the world. i think with easy money, with a solid consumer, certainly a case

could be made for another solid year in 2020. >> all right. well, we'll be there soon enough. thanks to you both, burns and christina. >> thank you. got to watch oil today hitting a three-month high, trading above 61 on wti. brent above 67. joining to us talk about the outlook is capital founder, john. good to see you. >> same here, carl. good morning. >> we're in this rally mood but inventory gave us a goose. how long can this last >> i think oil's finally will be joining the party, the equity market party that's been going on for so long and it was left out of for so long. there's several elements that i think right now are supportive of oil prices. "a," if the u.s./china trade deal holds, that's very positive for the manufacturing outlook in chinese demand growth going forward. also, to to, this new found in willingness of opec and russia to get the global overhang

reduced. we'll siee if that holds. and then what is underappreciated the bubbling cold dr cu cold dron in the middle east. >> what is out of hand we were talking the other day about the bombing of the saudi oil facilities, we talked about it for about 48 hours and then never looked back. >> right they were able to get that oil back online very quickly. to the extent the oil market doesn't see any real loss of volumes, you're not going to get the reaction. we've seen that now over the course of decades in terms of strife in the middle east. oil seems to hang in there suppliwise that's why you don't get a reaction. by out of hand, there have been protests in southern tlak have affected companies for nonoil goods. that's where the majority of

iraqi oil gets exported if the that volume gets turned off, that will be a problem. iran, while boxed in already to a large degree by the u.s. and the sanctions that are on, we wouldn't want to see a potential threat to the government there that would cause them to be completely offline, theoretically, if things were to escalate. that's what we're watching. >> john, let's bring it back to home to here where we are the largest oil producer in the world, are we not? >> yes indeed. amazingly so. amazingly so. >> and a lot of that due to the permanentium. what are your expectations in 20 for that very important region of our country zblink it will e >> i think it's going to be the day the reckoning. they've run out of runway in terms of continually fund just outright growth, growth, growth at the expense of everything including profits in the sector i think you'll see a consal s

consolidation and bankruptcies. you'll see think of a production discipline will come into the eoccasion there equation there. we won't see a rop pid growth if any growth in 2020 as a result of the more limited and rationale activity. the u.s. consumer at the gas pump aren't going to have these folks running just nonstop to put more oil on the market. >> interesting. so another argument for why prices would be stable and/or move up from here? >> exactly. certainly a much higher floor now if the consolidations occur, especially. but also to a potentially higher prices to the extent we won't -- we'll have a less of a cushion against all the worss that riese in the oil market. >> give yours perspective on the u.s./china trade war and how that will affect prices going forward? >> it's become a very important factor for oil prices if the you thought the stock market was

reacting in a gyrating passion to the headlines, oil caught the turbulence over the past couple of months because demand growth outlooks had gotten ratcheted down as a result of the fallout from the u.s./china trade war. and to the extent we saw no light at the end of the tunnel, oil prices twashwere taking a ha the same time there's jub ilance over the trade deal. japan had got hurt in the manufacturing sector from this, so that's also a bright light for the oil price looking out into next year, at least from an industry perspective. people like to point out it's very are, in fact almost never had have we had a u.s. recession without oil in triple digits. i wonder if you think gas prices would reflect all this would start to impact the consumer even if we didn't get near

recessionary levels? >> certainly. consumer confidence is at a really all-time high or close to it still. that is one thing that knocks that down. and that is a price spike at the pump. no matter what folks say about, you know, the impact on the oak or what have you, when measuring the input of energy -- then economic growth take a hit as a result. there's just no two ways about that. >> john, good to check in with you. >> same here. >> have a good holiday especially going into the new year. still to come, the world's second largest cinema group taking a swipe at streaming 'lant netflix. wel explain next when "squawk on the street" returns.

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it's the best performing stock of the decade, but can netflix continue its run-up in the near year in the we have michael olson here. thanks for joining us today. i was surprised to see that you actually believe that domestic subscriber growth for netflix

will be up 6%, that's higher than the consensus and perhaps also higher than what netflix itself forecast. why do you think they'll be able to grow its u.s. subscriber base when it has so much more competition now? >> yeah, when we look at the near term, the combination of something we call our netflix navigator analysis, which basically looks at google search trends, along with our analysis of youtube trailer -- that was released in the quarter, both point to q4 subscriber upside for both domestic and international. despite an onslault of theght o we expect they'll continue to capture significant portion of dollars as they migrate towards streaming and that will post positive results. >> we have this comment from the ceo, sane world theater chain saying that the way netflix handled the release of the

"irishman" left them with meaningless box office income. curious what you thought about this. netflix isn't releasing this kind of movie to generate box office revenue, but to drive people to subscribe. do you think the way they handled the "irishman" worked for netflix? you to think they would be smart to try to generate more box-office revenue >> netflix look to make its content available to its subscribers and they're also periodically going to provide a different experience for certain films that they believe have something to offer on the big screen and could be especially an award contender like the irishman or others. we don't really expect it this to change in any way going forward. we think the company's goal is to drive subscriber revenue and not box office revenue. so this behavior for netflix should remain consistent versus what we've seen today. >> but netflix did a number of

theatrical releases this year. they're likely to draw a number of oscar nominations. do you think we'll see netflix continue to move in this direction using the theatrical release market as a way to sign up more subscribers? >> i do think we'll see more of those films released at box office. i think especially the award contenders. but i don't think this will be something they do with me movie that can generate box off revenue. it's more getting subscriber interest. to the extent they can tuesday as a marketing tool to get more interesting among potential subscribers out there, that may be something that they'll do. >> the company has been trying to redirect investors to may more attention to international subs. the bears counter that those subs are less valuable in terms of the return and the cost to get them, where are you this that debate? >> yeah, you know, the coast to get them is maybe higher in the

near term just because there's less awareness. around 60% u.s. broadband households have internet compared to 20% when you exclude china. there's an opportunity for netflix international to grow significantly just based on that but you could also include mobile only, international households, and that would have been nearly double the potential adjustable market for netflix outside the u.s. there's a lot of avenues for significant continued international growth potential. >> well, there's certainly going to be a focus on those international numbers when they report their q4 results in january. thank you so much for joining us today? >> thank you. let's send it over now to d dom chu with a cnbc update for us. >> here's what's happening at this hour. republican senator lisa murkowski is speaking out on the upcoming senate impeachment trial for president trump. she says she was disturbed by

senate majority leader mitch mcconnell's stance for total coordination with the white house. >> i am viewed as one who looks openly and critically at every nish front of me rather than acting as a rubber stamp for my party or my president. i'm totally good with that. hong kong protesters gathering at shopping centers across the city for a third consecutive day of christmas demonstrations. riot police detained a number of people and questioned several others over that protest. and in london, bargain hunters brave the rain and chili temperatures as they waited for shops to open for the boxing sales. they tend to hold back discounts until boxing day creating events that can still draw big kroupcr that's your cnbc update. back to you. >> thank you, dom. when we come back, finance ceo charles will join us on the

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s&p 3232 now. getting new record highs on pace for the best year since 2013, but it's not just the u.s. markets that outperform this year. mike san tolly is here to talk about the pick fewer for global groaning and to what degree the markets are discounting that. >> the markets have been saying we have a bottom in global growth, probably in the third quarter. the nikkei is an interesting case. a lagger for a long time. it's still lacked a new high for the psych the '39% below the record. but the rest of the world's stock index versus the s&p 500, acwx is everything around the world except for the u.s. stocks. this is since mid to late august. late sawing when that switch flipped when it said it's going

to be a global recovery right here. you see that they're basically neck and neck from that period even though on a year to day basis the s&p 500 is the outperformer. so now the question is going into next year, those stocks over there are cheap, he are more cyclical, m more financial than most parts of the u.s. so it's value and cyclical to invest elsewhere as opposed to sticking with the big growth here. >> this reflects a lot of the negative around the world, right? >> that's the backdrop. negative yield in get which is down from what it was a few months zblag sure, seven tear, yeah. >> and central bank responds. ithink the markets have performed so well, we're looking at this one-year window because you have this very powerful central bank easing response without a lot of associated cost. what really was the cost you had a recession scare and you got a little bit below trend in u.s. growth and global growth in most parts of the world. >> do we think 2020 the banks

get less accommodative on a trajectory -- >> yes. >> that's talking year-over-year. >> right. but that's counterered with usmga phase one these tariffs are not going to happen, brazil steel tariffs are not going to happen >> i think that trade, that psychology is all those things insulate us from a recession. the farther out you can push resnetion terms of tr recession in terms when it comes, i that's really the premise of everything. recession or no, if no, then you look at your path deposit of returns, you don't look at whether they're going to be zblof aof. >> any election year -- >> people say things are going to be volatile and choppy because we have the election coming up. that's plausible, but election years they tend to outperform and flatten out in the middle of the year because they're kind of waiting for the resolution. it's not necessarily jie rating

to gyrating, it's more let's reprice to where we think we'll end up ahead of the election and see what happens. >> there's the china trade issue which seems to be moving towards resolution, there's monetary policy interest rates and then the election which seems to be drawing more concern because of the fact that the democratic candidate is -- we have just no idea who it's going to be. >> without a doubt. i think basically that's now become the wall of worry. because we kind of dispense with a lot of the other concerns and now the market is looking to that as the possible either stumbling block or the next thing in need of resolution, however you want it to break. >> the mike, thanks. good to have you back joining us. and all of this is on the advisory group advisory partner charles. it's good to see you back. welcome. >> good morning, carl. it's a pleasure to be with you.

>> you listened to what mike's saying here on set, you can't blame people for thinking maybe we're not late cycle, maybe it's mid cycle, what do you think >> i wish i could feel so optimist rirk despi optimistic, despite the fact it's the day after christmas, i'm nor the sure that this remarkable pace that we've seen in the u.s. and globally can be expected to continue next year, carl. i see still a number of clouds on the horizon. it's true that the ceasefire between the u.s. and china has removed at least part of the cloud over the global economic outlook. but it's important to remember that tariffs ranging from 7% to 25% averaging almost 20% remain in the u.s. on over $350 billion worth of chinese exports. and there's always the risk that new skirmishes could arise. because we haven't really seen the details of the understandings between the u.s. and china. and that's not even to mention

some of the other question marks which remain on the global horizon. >> right. i mean, we're obviously looking for this signing and details of the text. but do you believe that at least on the u.s. side that the white house would get more hawkish from a trade standpoint going into the election? >> well, i doubt that it will get more hawkish on the broad trade issues, although many of them appear to remain unresolved between the u.s. and china, to be quite honest. i think that there will continue to be very difficult issues on select technology companies such as huawei and on investment into the united states. i think the trade tension cos navigate themselves into another corner of the globe. we've seen some already that u.s./european trade tensions could grow this year and they're already rising and there are going to be some rulings, wto rulings and other things that might heighten the tensions between the u.s. and europe, u.s. and france. so i think the trade front may

not be as quiet as we would like it to be as we move into the election year. >> so to distill this, you think trade tensions could remain. i wonder if then you think central banks would, in turn, get accommodative once again and we could wind up with another year like this where we had trade tensions up and down and the markets degrade. >> it's a good question. it looks to me like the fed seems quite inclined to remain on hold for an extended period here in the europe, something very interesting is beginning to happen. you've seen the swedish bank raise rates to get back to zero and there's a grow debate of where the benefits of negative rates have outweighed the cost of it. those costs are middle easterningful in terms of weighing on the banking system and weighing on weak returns in pensioners and savers. i think there maybe a debate that we see in 2020. of course the pace of monetary

easing in japan seems to remain where it has for many, many months and years now. but i think the path on monetary policy is probably not going to be as active this year as it was last year. >> now whether you look at the state of the u.s. markets, you mentioned equity valuations and then there's also the question of usgdp, where do you see that going next year? >> the pace of market returns this past year has greatly outpaced earnings growth. in the private equity business where i concentrate my time now, we look very hard at earnings and value creation possibilities. and earnings in many sectors disappointed somewhat in 2019. now there are some sois some ho they'll pick up. but some many stocks these days have significant global exposures. and something to look at is that global consumption out of emerging markets has really

begun to waeng. y weaken. you see it in latin america, china, india. this raise a question mark in my view. i think are the gdp growth next year looks to remain in the 2% range for the u.s. it remains, i think, quite weak outlook in europe right now. china continues, i think, to pose some challenges on the down side with a weakening economy there. so i think global growth will struggle, i think, to regain some momentum this year. let's face it, debt levels are quite high in many sectors of the economy. consumer debt in the u.s. is very manageable, but corporate and federal state debts are quite high. chinese corporate debt is at a remarkably historic high level. and debts in europe are running high as well. this could pose challenges if markets shift their focus to she's issues duri these issues during the year. >> bloomberg has a piece out

arguing that foreign demand for u.s. corporate debt will continue to be there in the face of 11 trillion in negative yielding debt around the world. these companies are going to be able to offer coupons just as much as they have been this year as long as you have this struckture ral rate picture around the world as it is. to have that change would be remarkable, wouldn't it? >> well, you know, it only takes one unanticipated major event, carl, to shake markets' confidence in trends. and i think we have to be alert to that risk, i really do. i don't want to be tootoo ka and have da like here. b cassandra like here. i think they are quite high and once markets begin to focus in on this, it can shift market sentiment quickly. even though i do think the demand for corporate debt at the moment looks quite positive and bullish globally, particularly u.s. corporate debt, i don't think we can necessarily conclude from that that that

trend will continue throughout the year. >> got to be vigilant on it for sure as we continue to watch it day by day. charles, thanks. good to talk you. see you. >> thank you. this is days after muilenburg was off thusted as boeing's ceo. very disturbing revelations from boeing employees regarding the grounded 737 max jet. boeing issuing a statement that it had brought the documents to the faa and congress and saying that the tone and content do not reflect the company we are and need to be. stock is still ever so slightly higher for the year. more "squawk on the street" when we return. fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself. you need someone to guide you and help you make those tough decisions, that's morgan stanley.

they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley. there's room for more than just the business you came for. whether that's keeping up with what you always do... or training for something you've never done before. that's room for possibility. ♪ through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from finding out what's selling best... to managing your fleet...

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nation.cnbc.com. more "squawk on the street" coming up.

welcome back to squawk on the street. rick santelli here on the floor of the cme group. welcome in steve hank. he also formerly with the reagan administration, admission, senior economist on the council of economic advisors fiscal austerity in a point in history may be about ten years ago was considered to be the right policy for ald a debt ridden globe on liquidity, money, leverage, we all remember but seems as though fiscal austerity is now being abandoned as a policy. is that a good idea or a bad idea >> fiscal austerity is always a good idea. but recent talk about all the problems associated with fiscal austerity are really nonsense, rick the key thing is money

money dominates the growth and changes in the growth of the money supply will effect first asset prices then the real economy and then inflation and then interest rates. interest rates are at the back of the bus interest rates follow growth in the money supply not the other way around and so if you look at the thing, for example, even in the united states, the 1990s, who was the most austere president in the post-world war ii history of the united states? bill clinton he actual will i ran a couple of years of fiscal surpluses. the economy boomed why did it boom? because of money supply boom and if you look at the situation right now, it's very interesting. the money supply broadly measured by m-4, a major calculated by the center for financial stability in new york,

it's growing at 7.4% per year right now. last year at this time it was only growing at 3.4% so we had more than double the rate of increase in the money supply the economy is doing well. the consensus for next year is 1.8% growth. i think it's going to be 2.5 and where is all this money going? it can go in three places. it can go to households. they can go to businesses or it can go to financial institutions right now, the surge is in financial institutions meaning, asset prices are going to be void by this growth of the money supply so the stock market is going to do well. the economy is going to do well. all rest of this talk about fiscal austerity and trade talk and everything is basically just noise. it's money >> you know, professor, it's so

fascinating. we're out of time but to think about what you just said and the motion of central banks really keeping us much more on the dark on the ms than they used to in the '70s and '80s. they used to have announcements on thursday that's would move markets. thank you for your time and thoughts hope you have a happy and healthy in it you year carl back to you. >> same to you, rick >> rick, thanks very much. as we go to break, take a look at today's biggest gainers, amazon among the leaders we're less than 12 points away from nasdaq 9 k. more "squawk on the street" in a moment - [narrator] at southern new hampshire university,

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welcome back to "squawk on the street." stocks are trading near the best levels of the morning. you can see here we hit another record highs. you have cyclical groups like consumer discretionary and technology leading that charge as you can see behind me republic remember, the nasdaq is eyeing a tenth straight record close. the energy sector, believe it or not that, group hit an all important milestone today. exiting correction territory and now trading just 9% off the recent highs from late april among the names leading energy higher, marathon oil, co in.

oco phillips and apache up between 1% and 2%. watch the oil prices they're trading near three month highs right now. oil the key focus to day carl, back downtown to you guys at the new york stock exchange >> all right thanks so much when we come back, founder allen patri patrickof is going to join us when "squawk alley" stars in three minutes.

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