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Transcripts For CNBC Squawk Box 20141224

were left undelivered. it is a half day close for the markets today. germany closed today. other european markets are having shortened sessions. take a look at futures right now and see how the market is setting itself up for this christmas eve market session. dow jones would open higher, about 43 points higher. nasdaq up 10 points and the s&p 500 up a little over 5 points. weekly jobless claims, we're going to get that at 8:30 eastern time. economists are looking for 290,000 first time filings for unemployment benefits. then we've got corporate news to tell you about. takata's president is stepping down amid the scandal over that massive air bag recall. the company's grandson will assume that role. everybody is wearing red. >> merry christmas. >> merry christmas, everybody. among the biggest buzz stories this morning, south korea now indicting -- i thought we were talking about north korea. this is south korea. uber's ceo. the ride sharing services governing a law involving public transport. this is regarding a number of challenges the company is facing all around the world. uber has become a total touchstone in terms of how the country has handled disrupters, companies that are going to challenge all the vested interest in the country. over and over again, you see taxi strikes for decade webs right? and this is just country after country after country. >> how did france -- >> paris passed a regulation that even if you were standing next to a taxi, the uber car -- >> 15 minutes, right? >> yeah. i think it was half an hour and they protested that it was longer. >> they wanted even longer? >> absolutely. >> there was a problem. not only was there a protest, but a car in paris got something like -- through the window? it was a bad story about somebody who had come through an airport using uber. i still used it three times yesterday. >> oh, my god, it's better than taxis in new york. and cheaper. walmart acting to minimum wage increases in 21 states set to go into effect the new year. the retailer will adjust base salaries at around 14 hurnl stores. biggest private employer in the country, so they're definitely impacted. the. the fda is easing a 30-year ban on blood donations from men. the change is expected to boost the blood supply by hundreds of thousand oefs pipes. for years, the donation ban was put in place after the discovery that hiv was being transmitted through tragz transfusions. >> we got a little bit of a plot reversal going on at sony today. >> this is the story that never ends. >> this is the story that never ends. the studio changing its mind and will now allow the interview to open tomorrow on screens where theater operators are willing and able to show it. our report this morning from nbc's howie jackson in los angeles. >> it's a twist that has hollywood applauding. "the interview" back on theater marquiss. some screenings sold out in an hour. >> i was looking for a copy first and now i don't have to. >> i'm going to stand up for free speech as well as to stand up for creativity. >> hello, north korea! sony announced it will release "the interview" on christmas day to small, independent theaters like the historic plaza in atlanta. >> i don't think anybody in this country wants to be told what we can see and what we can't see. >> it's a dramatic aboutface for sony. last week, the studio pulled the controversial comedy which features a fake plot to kill the north korean leader after larger screens refused to air it. a hack the u.s. government pinned on north korea which denies the accusation. in a new statement about "the interview," sony's ceo says we are proud to make it available to the public and to have stooud stood up to those who have attempted to repress free speech. a rebuttal implies sony caved to north korea. >> yes, i think they made a mistake. >> now the white house says the president is pleased with the release of "the interview" because it allows people to make their own choice about the film. james franco posting victory, the people and the president have spoken. seth rogen has tweeted, freedom has prevailed. sony didn't give up. >> there is a whole class of people that want to be able to pay to see this movie. >> the studio may still stream the film. even though a hacker group threatened to retaliate with more leaks if that happened. a town that thrives on drama now bracing for more. >> and it's estimated as many as 300 cinemas could screen the film thursday. one theater owner called it, quote, the best christmas gifts anyone could give us. and, you know, there was a conversation about could they stream it for free, put it on their website and let everybody just watch it. >> but who would carry it? >> any internet -- if they put it on the website for crackle, which is the sony service and offered it for free, everybody would watch, people thought millions and millions of people might go out and watch it. the reason that they didn't do that was because of the profit participation arrangements that they have with all of the actors and directors and producers such that they actually have to try to find ways to create revenue for the product. >> because if you put it out for free, you cannibalize -- >> but why do you care if you're not making money and -- >> but apparently there was a provision in whatever the profit participation arrangement was with all of these people. >> where they have to pay them? >> i don't know if they have to pay them, but sony has to pursue some of the best interest -- >> the best financial interest -- >> the best financial interest of these -- >> so you can't sabotage -- >> i can understand that. >> otherwise, companies might give stuff away for free all the time. >> and you can understand how if you're one of the producers of that revenue stream, we can get a bonanza here. james franco and seth rogen? it's going to be a really -- it's great for them. >> huge publicity, but i think they're down to 400 theaters from the 3,000 or 3200 they were originally planning. so you're going to have to have a lot of different viewings. although i did see some of them sold out within minutes. >> exactly. you get to maximum capacity in a lot of them, i think it might work out for them. "the wall street journal" is reporting sony is considering sale of its atv publishing unit. that group owns the rights to most of its beatles songs. >> more importantly, michael jackson. >> no, more importantly the beatles. >> atv was the smartest thing michael jackson ever did. michael jackson bought the beatles and sold that as part of the atv operation to sony. anyway, long story. >> can you imagine having both of those catalogs? >> in one place. >> unbelievable. >> i had "thriller," but i would take the beatles any day after that. >> you know me and my white glove. >> again, the story that keeps on giving. the unit is estimated to be between $1.5 billion and $2 billion. sony owns it jointly with michael jackson's estate. let's get a check on the markets this morning. the dow closing yesterday above 18,000 for the first time ever. the s&p closed up for its 51st record of the year and, in fact, if you look, we want to coat this from peter and make sure i get it correct. the s&p has not had a losing streak longer than three days all year. that's something that has never happened before. all you have to do is get lieu the next four trading sessiones and that will be an achievement it's never managed to gain. going all year without having more than three days down. take a look at the futures this morning, santa claus appears to still be coming. dow futures up about 45 points above s&p 500. s&p just over 5 points. the nasdaq is up close to 10 points. in europe, the ftse is slightly higher. spain slightly higher. cac is a little weaker this morning. in asia overnight, we saw that the shanghai composite was down by about 2%. nikkei was up by 1.25%. and oil prices, which we've been watching so closely, sitting at $56.20. that's a drop of backside 1. decline of 1.6%. brent crude down 87 to 6082. and if you check out what's been happening with treasuries, in the bond market, the ten-year note is yielding 2.257%. also check out what's been happening with currencies. let's take a look at the currencies board. right now, the dollar is down against the yen, the euro and the pound. euro sitting at 1.2195. dollar/yen at 120.44. and the ruble has stabilized at 54. just last week, we were watching it touch 79. if you watch what has been happening with gold, gold price res slightly weaker, $1,176.80. the dow closed above the 18,000 milestone for the first time. the next milestone is watch is 2, 2,100 on the s&p 500. rich steinberg, chief investment officer at steinberg global asset management. >> sporting a beard. >> yes. >> are you shaving it next week? >> yep, it's for the -- so the markets are good the next year. january 1st, the beard comes off. unfortunately, the market has done a lot of work recently to make it harder for the beard to work. >> let me ask you this, rich. when you shave it off, should we expect to see a pullback in the markets? we have quite a lot of activity at the end of this year. we have a lot of strategists looking for 2200 by tend of next year. has the dow or the s&p markets achieved a lot of that potential at the end of this year to steal from next year? >> we're at 2100 on the low end of the s&p targets, becky, because at 16 times earnings and $130 in next year's earnings, we get there. so the market is going to have to be a show me an earnings market going into the first quarter. the scales are pretty even right now on the pros and the cons, both domestically and globally. and so until we start to see better news come out, i think it's going to be hard to get to 2200 or 2350 where some of the high range is. >> david, do you think this market is overvalued right now? >> i think it's fairley valued. i'm not sure that it's overvalued yet. i think a very good point was made in that you need to watch the earnings. there are a lot of variables up for consideration that will learn about their impact in the first quarter. stronger opg dollar, lower oil prices. those are pros and cons. i think the market going into the end of the year is going to be focused on the macro once we get that more micronews in january. that will be the next leg up. >> we got that gdp read yesterday that was better than 5%. that's kind of shocking. is that the type of thing where people say, wait a second, i need to reassess and make sure i'm here before the macro looks dshg. >> i think the people who need to reassess is the people at the federal reserve. we're looking for 3% in the fourth quarter. this is the strong growth that supposedly hasn't materialized thus far. i think we have an economy which is growing stronger than many people realize. we have a labor market which is tienting. so i think the macro has been pretty good, but the question is can it continue particularly in the face of a stronger dollar? i think that can prove to be -- >> is there any chance that print was an aberration? >> you know, it could have been. when i saw it come out, i was struggling to think the last time i saw a five handle on a gdp, and i think it was a decade. to me, the consumer is coming back online. the consumer should lead investment spending. if you're a business, you're not going to put more money to work. it could be, you know, a flash in the pan, but i think it's -- you know, i think it's indicative of a stronger trend in the u.s. economy. >> if they stem in and start raising rates let's say in june of next year, how does the market react? >> so i think it's a really interesting debate. as the fed does start to raise rates, maybe mid next year, becky, the question is how is the market going to react. we were dead wrong in our interest rate forecast for this year. a 2.25 handle on the ten-year. if the dollar stays strong, the german bunds are going to still buy. i think the comment is responsible for this big run. a week or so ago when i was on, joe and i were talking about increased volatility and we had that big swoon down. then the fed came out with the stations comment. so the other guest's point, we're going to have to really watch to make sure that the consumer shows up. one of the keys will be is oil, lower oil the new qe? so i think that's something to watch. but i think the higher dollar for companies that are having some problems in europe may end up being an execution going into the first quart either of the dollar now, the strength -- >> david, what about the intense fol volume tilted that we've seen in the past? that has been a precursor, actually, to a leg down. >> yep. i think that volatility is normal and volatility should be expected. you know, does volatility tend to leave sizable corrections? yes. volatility shows people are getting skittish. one of the biggest things that i think happen in 2014, we're finally at the year when we can look back. there was no volatility. retail sales, the shot heard around the world caused this correction. people were too complacent. i think that's what low volatility shows. higher volatility to me would be indicative of a healthier market. >> thank you guys both and happy holidays. >> same to you. >> andrew, no sweater on christmas eve? >> i have my christmas shirt on. come on, this is as christmas as it gets. i can't do more than this. >> merry christmas, everyone. >> you, too. >> you celebrate christmas, right? >> i do. >> you do? >> absolutely. as an american jew, i almost see it as an american holiday. i get it, all get into the festive spirit. we have a tree, we have presents from san if a. absolutely, there will be -- we will put out milk. milk and cookies for santa claus tonight and for rudolph and, of course, i will sip a little bit of it so my kids think that -- >> up next, the price of brent crude stagizing a bit over the last week around $60 a barrel. but a legendary oil man says don't get used to it. he thinks it's heading higher again, much higher. is he right? we're going to debate that after the break. first, though, andrew points out, santa's big day is here. volunteers at the north american aerospace defense demand on norad are track his movement. kids can keep track of santa's journey as updates are posted throughout the day and evening on norad's website. it has received 1.5 million likes so far this year. welcome back to "squawk box." our friends at the weather channel are tracking possible travel problems. alex wallace joins us with the details. >> good morning to you. it's not going to be a fun time. already this morning, quite a bit of wet weather. parts of the south moving into the northeast, the midwest, as well. it's all part of a storm system that we've been tracking and a lot of moisture being pulled northward. get ready for things to be quite wet out there. so from portland to maine to boston, down in the d.c. area, we've got the rain. back here in the backside of the system into the cold air, could be looking at a little bit of snow. we're not talking about huge snow, but a couple of inches for us just south of chicago and working your way into lower michigan. if you're looking for a white christmas in the east, it's not going to happen. it's all rain for us up and down 95. some decent rain targeting 1 to 2 inches of rainfall. this goes through our christmas day. and then we'll have to watch for some severe storms in parts of the south. we saw big storms yesterday. we'll watch for the potential again along the southeast coast into florida. damaging winds, hail and that chance of a tornado. if you're looking for the white christmas, it's here in the rockies. we have a storm system moving through and all across the board from montana into colorado, we've got that snow. some decent snow cover this year for ski areas. from salt lake city as you work your way into the wasatch. heading into the rockies, 5 to 8 inches of snow through our christmas. guys, we'll send it back to you. >> thanks so much. legendary oil tycoon boone pickens thinks brent crude will come back up to $90 to $100 in the next couple of 18 months. adding, quote, the world got along just fine with $100 a barrel oil. joining us to discuss this is paul christopher who covers this for wells pargo advisers. good to have you here. >> thank you very much. >> is boone pickens right? >> i don't think so. i think, though, that oil prices will be very volatile next year. our target is $60 to $70 a barrel. texas brent, a few dollars higher than that. but i think investors have to watch out for big swings in prices next year. >> a lot of volatility. why do you think that is? >> well, what saudi arabia especially and opec more generally have done is to leave open the question of how quickly and how sharply this market might rebalance. obviously, by refusing to move their targets last month, they were challenging the market. a lot of people have interpreted that challenge as being directed as u.s. production, the frackers. but i think that challenge is more directly aimed at opec's own members who are overproducing by about a million barrels a day and very close to their own capacity. opec is saying, high, guys, let's reign it in by about a million dollars a day. that could rebalance this market. we could see prices move quite a bit next year. >> so, in other words, when you come one your forecast, you're thinking of reduction in supply, not necessarily an increase on demand? >> yeah, i think demand -- demand could increase. we're looking for an incancermental improvement in gdp next year and in demand. if prices stay low, you could see players like the chinese strategic reserve get into the action and increase by about 200 or 300,000 barrels a day. that would be material. but i think the real question here is what happens with supply? is abundant oil already upon us or is it more a trend that's going to develop over time? i say the latter and i think prices are probably a little bit too low right now. but for investors, again, the point is it's volatile right now. don't step in front of this bulldozer. >> what do you tell them in terms of positioning within the portfol portfolio? a retail investor, for example, like you said, it can be volatile in the best of times. >> yeah, it's a great question, thank you. we do advise any investor who is interested in growing the size of the portfolio should probably have a small commodity allocation, probably no more than 2% to 5%. we recommend around 3%. within that 3%, we would broadly diversify the exposure. so you're not overly exposed to energy. we see good things probably happening in the grains next year and probably in base metals, as well. >> how do you do that for them? do you do etfs or front line contact? stock res so easy, right? you buy them and hold them or you can sell them. when it comes to a treasury, for example, you can hold it to maturity. thooet theoretically, you get your money back. but when it comes to commodity, you have these expiring all the time. >> that's right. so you do have some clients, some investers who are more sophisticated and they're out there buying the curve, not necessarily the front month. they're buying further out, maybe, to lessen that role disadvantage on the contracts. but a lot of clients simply will buy the etf and you don't have -- some of the etfs today, you don't have to necessarily buy the front month. you can pick which one you can to buy. >> yesterday boone's point was that when you see oil prices like these, you see an automatic decline in what oil companies here are willing to start spending for next year. we already heard continental resources is cutting its cap ex budget by about 40%. you are not going to have nearly the number of wells that we had anticipated next year. because people won't start the wells, they'll drop some of the wells or whatever the lingo is. but if that's the case, it's simple supply and demand. if a lot of the picture here has been the excess supply and you don't have as much supply as we expected next year, won't that potentially bring prices substantially higher? >> that could happen, but i rather think that, look, if you just look at, for example, the u.s. industry, a lot of that production has hedged forward. and then if you look at some of the bigger producers around the world, like the sat oils, the canadians, the brazilians, when they make an investment, they have to finish it, really. they can't stop midway. and that's true in metals, as well. there will be -- there will be some additional supply next year, but i think what is more important is that the cuts in exploration budgets that you're mentioning will become more of a factor for direct supply in '16 and '17. >> boone actually said $90 to $100 oil in the next 18 months. does that sound more realistic to you? >> yeah, possibly. but i am looking for this supply abundance story to come back to earth more so in late '17 and '18 more so than next year. there's a lot of social conflict and that could be the catalyst for rugs some of that supply. >> got it, paul. thanks so much for joining us. happy holidays. >> pleasure. merry christmas. >> merry christmas to you, too. a few hours left until the holiday season is officially open. stick around for the answer after the break. plus, take a look at yesterday's s&p 500 winners and losers. there were plenty of winners. check it out. good morning. welcome back to "squawk box" here on cnbc. i'm andrew ross sorkin along with becky quick and michelle caruso cabrera. if you recognize the music, there's a reason for it. we have a gift for you and entourage fan this morning. the long awaited movie is coming back. the trailer dropping this week. ♪ i'm ready for trouble oh, oh, oh ♪ ♪ i'm ready for trouble >> that is crazy. >> we know each other. >> you remember me? >> didn't you used to be really fat? >> and there it is. >> the boys haven't aged at all. >> they haven't. >> ari gold -- >> i love ari. one of the greatest characters ever created in tv. >> does ari something manuel like that character? >> i don't know. ask joe. >> there's a release date slated for the summer of 2015. the comparison is already being made to this section of the city movies. the first sex in the city movie was a grand slam huge success. then they kept going. i don't know if it was as successful. >> seeing that trailer made me miss their antics. >> but they should have done this sooner. three years? >> just watching that trailer quarterba, okay -- >> is there a precursor to bringing back the series? >> i don't think so. i think this is a one off. but they all look great. all those actor res doing different things. >> jerry bivens is doing a show in the uk that you can now see here. >> yeah. >> so they're all sort of engaged. >> making headlines at this hour, the fda approving nordis injection for obesity. it's the second obesity treatment to be approved this year. american airlines plans to play an additional 4 percentage points. ceo doug parker says strong profits is the big reason. and former president george h.w. bush has been admitted to a hospital in houston. his office says he was experiencing shortness of breath and was being held for observation. >> we wish him all the best and hope for a speedy recovery there. >> and it is the final countdown. shoppers making one last trip to the stores. i was there last night and they have to go again today. some last-minute gifts, joining us now to tell us how it's all shaping up, we're in the home stretch next. former ceo of toys r us and the incoming ceo of luxury retail giant hudson, good morning. >> good morning. >> so, what do you think? >> give us a letter grade on how everything has gone thus far. >> i think it's a b plus, a minus. it's better than it's been in years past. there's still time to go. today is one of the biggest shopping days of the year. people don't realize that on christmas eve. >> who is out shopping today? >> men like andy. he said he -- >> i was there all day. >> and they're desperate, too. that's the cool thing. retailers tend to make a lot of money today. some things are on sale, but many things are not. but whatever you have, they're going to buy. >> last year on christmas eve, saks fifth avenue on christmas eve. cheeres and shouts. the team was just thrilled, you know? it was crazy. >> people will buy anything this time of year. anything. particularly men that have no idea what they want, but they've got to have that revenue. >> let's talk about electronics. you can't do it as this point. we've heard reports of fedex customers being upset. some of these retailers overselling, basically selling more than they promised fedex and u.p.s. that they could do. >> there is always going to be some packages that don't make it. when they say 99%, that means 1% are going to away problem. this is why the last week before christmas is the time the bricks and mortar come on their own and really shine. whether you go to the store and shop the hold fashions way -- >> yesterday, my wife and i downloaded the amazon now app. >> for one hour? >> this is the one-hour program they're playing in next new york city. $79..for the one-hour service. we did not order. we downloaded, looked at the price. they have a huge selection. is that the future? >> i think it's part of the futures. it's always going to cost somebody more money, whether it's amazon or the retailer. think about all those stores out there, and this is where i get excited. they're all mini distribution centers. people like macy's have been at the forefront of that. the question is how to link the two of you so you can take it to the store and deliver it to you. or if it's christmas eve day and you don't want to take a chance on the error rate -- >> i have to say, ooib really annoyed with toys r us with what they have online. everybody i've wanted, it's available for in store pick up and i'm not talking about the last week. i think retailers think people like to go to the store and pick things up. >> every retailer needs to master this paradigm. and it's available at all times to every customer. go to the store and get it, you know, get i tell from the vendor have it shipped to your home. i did a chart with 81 different paths where the product can throw in the future and some retailers have some of them, but not all of it. others are just start. >> the economics of the delivery, does that make sense? >> no, the math doesn't make sense. >> does the math make sense on some of the fed sex stuff going on? >> is tate about $10 to $15 for that delivery to your house. think about the person who lives down the country lane in greenwich, connecticut. that is enormously expensive for that last leg. this is why i said from the beginning and fervently believe stores have their own. they enjoy shopping, usually. most people do. >> are you excited about the new job? >> i'm very excited about it. richard baker is one of the most lively, exciting people you can work with. the luxury blandz are huge, you know that. there is huge potential for the future there with building that out. and then we have a value offering that is thriving. >> big challenges that i see. not at jcpenney, for sure, but something that lost its way and isn't part of the american vernacular like it used to be. >> it's a very well known brand. basically, an east coast company, so there's opportunity around the whole country. i think a lot of opportunity there. >> one more shopping question for you. and i know people who do this. they give ious for presents tomorrow and then they buy them on sale, crazy sales on friday. >> why is the enjoy in that? >> i know, but what do you think the sales will be like on friday into next weekend? >> we've seen the sales grow and grow and grow. >> are they making money or getting rid of inventory at that point? >> they're making good money. the only issue is as a consumer, there's no guarantee you get what you want. if you want to take a chance you can't find it. >> very quickly, at the end of this holiday season, do you think we'll look back and say this was a great holiday sales season, do you think wool be disappointed? >> a b plus, a minus, much better than it's been. the shift towards mobile has been massive. this will be known as the year that mobile really came in on its own. >> thanks, jerry. >> merry christmas. >> happen holidays. when we come back, our story goes global. then predictions 2015. a bold call on what next year will bring in the world of technology. and in the next hour, dow 18,000 and beyond. the bold new year's resolution. "squawk box" will be right back. [ male announcer ] your love for trading never stops. so open an account with schwab. and when a market move affects, say, a cloud computing stock you're holding, we can help you decide what to do. with tools that help you see how market activity is affecting your positions. so when the time comes to decide whether to scale in or scale out... you can make your move, wherever you are. and start working on your next big idea. ♪ welcome back to "squawk box." things are taking an interesting turn in the united kingdom. jim joins us now live from london. jim. >> michelle, merry christmas to you. i'm sure you recognize the heart of london's retail shopping district where it's full of last day holiday shoppers. as many women as there are men. but it's almost a ground zero here for british retail giants like john lewis. behind me, you could call that the british macy's, i suppose. ite becoming an annual battle of the christmas advert. tis the season and the store wars are raging. for aids, democrats stores have gone to battle with the quest for the ultimate tv ad. not for any one product, but to sell a whole brand with deep emotions. >> charm wars rather than price wars. you'll see all the major retailers, all the major brands are playing with each other. >> and among dozens of brands, the quintessentially british retailer john lewis is the uncrowned king spending millions of dollars. like this yun boy's impatient wake not just to get a present but to give one, or this love struck snowman defines the perfect gift for his snow woman. this year's effort, monty's christmas hits all the right notes. a 1. $5 million story. in the real world, monty has his own twitter account and tens of thousands of followers. his look alike toys flew off the shelves. but this year, john lewis has met his match. sainsburys, the super market chain, struck back with a four-minute hollywood style blockbuster, counting the true story of world war i's only christmas truce. belgium, 1914, christmas eve, when british and german troops sang christmas carols from opposing trenches and then at dawn put down their rifles, shook hands and even played soccer with an im pro advised ball. artillery fire sent both sides back to the trenches where, in the ad, otto the german finds a gift from tommy, the brit. his chocolate bar. the message? christmas is for sharing. the ad struck a cord on this year of that horribly brutal war and not always positive. shamelessly exploits a moment of genuine humanity to get us to buy more stuff read this tweet. so many are calling this year a draw. and wonder what their retail giants will think of next. >> there's far more innovation, there's more ways in which you can connect with people. >> even the church of england is getting the message. it's tv add this year, the christmas story. >> sainsburys seems to have captured the moral eye ground, announcing it's donating all the sale of those antique chocolate bars to a top military charity. >> forget the nay sayers. i think it's a terrific tradition. i remember how much i looked forward to every year the coca-cola christmas ad. i knew it was going to be fabulous or fun. this is just that on steroids. nay sayers? forget it. >> absolutely. you will be happy to know there was an official poll this year as the best of all-time ads. even though it was a british poll, british people here still remember that first coal coca-cola ad with the truck lit one christmas trees rolling off the into the distance and they voted it as the best christmas ad of all sometimes. there you go. >> like the super bowl. >> cool. >> cool international ads, too. >> they make you cry. >> they do. >> remember i like to teach the world to sing when you were little? so fun. >>. >> they do know how to do it over there. when we come back this morning, if this is the year of the mobile pay, what will 2015 bring in the world's technology? we have more when "squawk box" comes right back opinion cute little guy, huh? this guy could take down your entire company. stay with me. on thursday a hamster video goes online. on friday it goes viral - a network choking phenomenon. why do you care? he's on the same cloud as your business. the more hits he gets, the slower your business may get. do you want to share your cloud with a hamster? today there's a new way to work. and it's made with ibm. welcome back, time for p predictions from our favorite voices, edward lee, the editing manager, happy holidays, ed. >> thanks for that, i appreciate. i like the red, you coordinated this morning. >> we got the memo. we got the memo. walk through predictions for what 2015 is going to be bringing. start with uber. the ceo of the country was indicted in south korea over some of the regulatory issues, and what does that mean for the company, which is now worth some $40 billion? >> i think that's -- that's a good point. i think part of the whole uber story now, the $40 billion valuation is its ability to expand around the globe, but he's having a hard time of it in korea, india, spain, and even here close to home in california, you know, they got hit with lawsuits in los angeles and san francisco. they will not be shut down in california, but they are charged at every doorstep. >> what does that mean, though? does that -- does that mean that the steady march of technology overtakes regulations, regulato regulators will put a block on ability to grow? >> eventually, i think they'll find success abroad, but it'll take more time, just politics on their part. that's something a lot of companies have yet to figure out or still figuring out. when you want new markets or disrupting old markets, you have to sort of play it the right way, talk to the municipalities, the politicians so they understand what you are trying to do, not trying to break the laws, but if there are laws to figure out, you got to work your way through that. i think that's just going to take longer. it's not necessarily going to depress valuations, of course, all the investors who invested, you know, if they like the valuation, they are not pulling back on that, but if they can't make a success in 2015 to get good footing around the globe, that valuation is in question. >> i thought it was the consumer frustrated by the regulations. i mean, new york city, we talk about it all the time, it's transformative, and i'm sure it's the same today as well, the invest the issue there, the drivers are more entrenched in the countries, but doesn't the population itself say they want progress? >> they want progress. they want cheaper prices. that's how a lot of the consumers see progress. if it's -- i can get point a to point b quicker, cheaper, faster, more convenient, yeah, they want it. they'll be the ones to, you know, call city hall, their politicians, saying, hey, we like the service, don't kill it just yet. at the same time, uber search pricing, you know, it's controversial. even in new york when they first started, a lot of the prices were higher than yellow cab, and they adjusted. uber adjusted pricing to fit what you get. that's comparable or cheaper. uber figured that out. >> uber is cheaper when there's no surge prices. >> rierght. >> i'm going to raise the issue of security and m&a in 2015. you think security, obviously, sony a big deal, but m&a, give us one or two headline names that we with speculate about. >> i mean, i think paypal, it's going to get spun off, but there's a small chance someone swoops in, hey, we like that e-commerce online payments. it's an important part of the online infrastructure, and it's still being figured out. that's something to watch out for. >> drop box? >> ibm. there could be -- ibm or, you know, some of the other big enterprise companies, hp, et cetera, they could go for those services, and online, back end services are more important to companies now. that's another thing to watch for. >> happy holidays. >> sure, santa is checking the list, checking it twice, and in the spirit of the season, our list maker is here with predictions when "squawk" comes right back. santa claus arrives early on wall street, and the dow hits 18,000, and the bulls bank on more year end buying. >> a major plot twist in sony, the studio embattled in a scandal. >> santa is not the only one who has to make it to town, but messy weather reeks havoc on the busiest travel day of the year, and the second hour of "squawk box" begins right now. ♪ welcome back to "squawk box" here on cnbc, first in business worldwide, i'm becky and joe is enjoying the day off. we are looking at futures this morning on the morning after the dow, 18,000 celebration, and as you look now, yeah, still not pulling back. markets still going one direction this week, and that is up. 39 points above fair value, and s&p up five point, and nasdaq up by eight. it's a great day to have david on set with us for predictions on making money in the new year in a moment. headlines, ups and fedex limited air express deliveries ahead of the christmas holiday, this is according to the "wall street journal accounts after retailers extended agreed upon limits. meaning customers are buying stuff, but they may not get the presents on time. takata president stepping down, and the grandson will take over the president's role. new jersey gets a short term 40 million loan from the state as it seeks to stabilize the casino business. the loan has to be repaid by march 31st. a developing story outside the world of business. a police officer fatally shooting a teenager at a gas station overnight miles from ferguson, missouri setting off clashes between demonstrators and officers. the st. louis county police confirming the shooting saying the police officer was fearing for his life after a male allegedly pulled out a handgun pointing it at him. the handgun was recovered at the scene. we'll continue to follow the story for you as events unfold. switching gears, today is expected to be the busiest travel day of the year, and kate rogers is reporting from laguardia this morning, and how is it going so far? >> reporter: for those of us in the area, it does not look like much. it's 60 degrees, foggy, and some rain is coming down, but this storm is expected to pick up later in the day, and that could spell trouble for the estimated 98 million people expected to travel by car this holiday weekend, and also for the 5.7 million people expected to travel by airplane. now, this storm is set to move towards the north later today, setting heavy rain, snow, and wind for areas like chicago and milwaukee, and it's also responsible, according to the weather channel, for the tornado touching down in the southeast yesterday killing four people and causing major power outages there, and to make matters worse, we have another storm headed for the pacific northeast bringing heavy rain and snow to the area. we are tracking delays in realtime, and 2,000 flights have been delayed and 400 already cancelled. talking about the most miserable airports in the country? number one, baltimore, washington international, number two, narewark, and number three ft. lauderdale. we're not on the list, but we'll keep you posted on what passengers say next hour. back to you. >> thank you. let's get back to our guest host for the next two hours, and how long before we get to the dow 19,000. who is counting? we're already looking through what we passed the last day. david, a senior adviser in wealth management, and thanks for coming in. >> nice to be with you, happy hanukkah, happy christmas, and happy new year to you. >> happy holidays to you. we got to 18,000, a point that a lot of people wouldn't have expected on january 1st of this year. what do you think happens at the end of next year? how much further do we take this? >> well, i think you could see another 10 to 12% rise, total return, including a 2% or so, less than 2% dividend. the expectation for 2016 earnings, because at the end of 20 15, you look at 2016 earnings. the thought i have is that you're see earnings rise 7% this year and another 7% in 2016's, and then you get a small expansion in the pe multiple from 16.4 to 16.9 times $134 giving you 2275 on the s&p 500. the dow has only 30 stocks, as you know, and it's been dragged down by shchevron and ibm this year. the s&p is up 12.7%. you can see another -- another 11, 12 % total return in the s&p 500. japan, you're going to look at 20 % earnings growth, and then another 14% earnings growth, and so japan, i think, you could see a 20% rise this year. >> do you buy that knowing what they are doing to the yen? you take a lot of currency risk. >> great point, michelle. it's increased 121 this morning in that neighborhood. the expectation is it depreciated another 5% to 127. >> does the stock gain offset that? >> it would. a 20 % rise in japan, minus 5%, up 15% there. >> that's the bookcase. what makes you rethink that? what's the thing you worry about the most? >> well, earnings are going to be the big component of this, andrew, and if earnings where hurt by the dollar being so strong and the money you bring back from overseas earnings are worth less in u.s. dollars, people estimate, and we don't get that 7 and 7. let's say it's in at 5 or less, and that would be one thing, but the other thing is yesterday, the saudi oil minister talked numbers that were frightening low that they would continue to produce that. if oil goes further down, you can get market move from being driven by fundamentals, which it is right now, not by valuation and not by psychology. it it mothen be moved by psycho affected by venz way la, or russia our ukraine. >> a negative? >> a negative. >> oil is lower, and we as consumers, not good? >> if it's well below 50, into the 40s or the 30s. that would cause this feeling that -- the big issue for the coming year is the word called "lowflation" -- that is, low inflation. we have negative cpi month over month, and eight have cpi low year over year. the disney movie "frozen," the yellow brick road was about the goal standard, and frozen is about global disinflation, deflation, and lowflation. >> it is always a drama. we have a plot reversal today at sony. the studio changing its mind to allow "the interview" to open tomorrow on screens where theater operators are willing and able to show it. julie is here to talk about where it's headed. >> well, andrew, as many as 300 independent theaters are expected to screen "the interview" tomorrow, many with heightened security, and some is selling out immediately after sony did a bout face, after calling the decision to pull the film a mistake. the president applauds the decision to authorize screenings of the film. we are a country that believes in free speech and the right of artistic expression. rogan and franco celebrated the release yesterday, but none of the nation's largest theater chains, controlling 80% of the theaters, announced any change in plans. the big question now is how sony distributes the film digitally? they could distribute on demand as soon as tomorrow or soon this afternoon. now, this is different because usually studios have to wait a month after a movie hits theaters, but this is an unusual situation. >> you mentioned, briefly, security at all the theaters. everything's sold out. what do they do at the theater differently? >> it's my understanding sony's been in touch with the fbi and informed them of the list of theaters that are participating. i think it's probably up to the theater owners, how they want to handle security. you know, there's various owners who said they'll take extra precautions, not going into what they'll do, but -- >> shutting down all the computers. >> some theaters are not doing anything. it's up to the theaters themselves. in los angeles, theaters have security guards everywhere, since there was that shooting a couple years ago. >> in the batman movie? >> yes, people take threats more seriously. >> a chance any the big chains put it in? >> we reached out, and as of now, they are not planning to. they could change their minds. we'll see what happens tomorrow if the film does great. you know, a lot is about what the mall owners think because most of the independent cinemas are not in big malls. they are stand alone, independent movie theaters outside. >> more complicated, the digital distribution issue. the reports that i saw suggested that sony had hoped more than anything it may be that apple picks it up for itunes. for better or worse, thus far, they have not. >> they have to find a vod sell-through option, sell the movie rather than representing it for 24 hours. they could do that through apple or the google play store or through cable companies. >> right. >> no one's on board yet. that doesn't mean they won't get on board, but as of now, no distributor. >> the other reports in the 6:00 hour that sony has a fiduciary duty for all the actors and producers -- >> and investors. >> such they have to find ways to create income, they can't just decide it's free as a symbolic gesture. >> that's a standard operating procedure in hollywood because that -- >> nobody's waiving -- i thought some of the folks, the investors and others, would be waiving that component of it. >> maybe they will. but at this point, i think they just want it out there, and the independent theaters is a great way to do that. putting it on 300 screens is nothing. it's a drop in the bucket. they could have put it out on 3,000 screens if the terrorist threats had not happened. they will not return a lot of money to investors. >> all right. thank you so much. coming up, banking on financials in 2015, likely winners and losers in the new year. at 7:40 eastern time, ringing up retail, the final rush is today at the end of the hour, historic changes in cuba, but first, broadway musical in the country since 1959 opening in havana. "squawk box" will be right back. welcome back. this week, looking ahead to the new year, giving investors a play book how to cash in on 20 15, and kayla lays out predictions for the financial sector this morning. let's bring in kayla to dig in more on those predictions. >> the news for banks this year? you're boring. get used to it. animal spirits quiet in the face of rigid regulation with tech companies encroaching on their turf, thanks to just trying to protect their core business model, taking deposits and lending money. 2015 brings challenges. first? vocal shareholders. investors and bank stocks waited, perhaps, too patiently for rates to rise and business to improve. banks are seeing scant return on assets and investors scant returns on investments. regulation is only making it costlier to be a bank with doubts now surfacing on whether bigger is, in fact, better. expect backlash and more activism on buy backs, dividends, governess, and whether just to break up. second, mid cat mergers. slowly, but surely, banks of a certain size tiptoe to deals again. the sweet spot for consolidation? banks with less than $50 billion in assets. analysts are watching coamerica, haustoria, and first financial. third? silicone valley goes to washington. admits to losing ground on technology, but no threat exists without a government green light. look for paypal, google, and apple to explore a move in that direction. >> kayla joins us from the new york stock exchange, and we have david, the senior banking analyst, and let's walk through this a little bit. in terms of the deals, who could we -- you want to throw out names 12 names? >> names mentioned in the piece are coamerica, haustoria, and bankers point to one deal in particular that happened this year as possibly paving the way for more deal, and that's bbt's purchase, and so that is one of the deals that's in that sweet spot, but then, again, the federal reserve has shown that it is willing to hold up certain deals if the governance and controls do not meet. we are waiting approval on mt's purchase of hudson city. that's been held up for two years at this point. while we see deals start to happen, cit one west is another example that bankers throw out. it could be they take time to do all the diligence before actually announcing because the regulatory process is still very rigorous. >> david, you want to weigh in here? do you agree with that? >> i do. it's important to banks to see how long the fed takes to approve the bbt acquisition, and the cit acquisition of one west. the regulators communicated a schedule of nine months. we're still in the middle of that. if those deals go flu on schedule, i think you'll see a lot more consolidation. again, probably in the area of 15, 20, 30 billion in assets. >> is there any possibility, and i'll ask it to everyone around this table. is there any possibility that the bigger banks decide for whatever reason, not because the government is trying to break up the banks yun lat right lane ly -- unilaterally, but the decisions made by feds and other things going on that they don't want to be as big? >> that's a theoretical possibility. you know, we have never seen the fed's proposals on requirements for the eighth largest banks. what has higher capital requirements is jpmorgan, and they said clearly, we can operate with 11.5 or 12% common equity, and there's no reason for us to break up, but you could see, you know, years down the road, you could see other banks with different decisions. >> last i checked, the smaller banks got better multiples from the market compared to the big banks. could that not be something? talking about this for years, the fact to drive what happen drew's talking about, just cry uncle and give into the market. >> look, the smaller banks tried higher for a long time. i think you -- management at jpmorgan, citi, bank of america, wells fargo say their businesses benefit from being part of the larger company. >> i would say, though, that some of the companies have already been working on some of the plans because it's irresponsible as a public company that serves shareholders to not have a plan b in the back pocket. i hear most big banks have done the math on a breakup, what it looks like, and bank of america reaffirmed that it is, at this point in time, better to be a bigger bank, but that could change if you get shareholders saying, yes, i believe you can operate like jp morgan with 11.5% capital, but that's not the most profitable way the company should be operating, so at some point, it's not up to the bank and up to the management team, but it might be shareholders calling for a different business model in the face of regulation. >> could you see activism? are they too big? >> i don't think anybody's too big anymore. microsoft, dow companies that look out for activists, i think nobody is off limits at that point. >> you can get noisy people, but can they make it, you know -- >> makes it painful, and ceos do not want to deal with a loud activist who is unhappy. kayla, you started out saying a message to banks, you're boring. i thought that was the case for the year, it was, but at the end of the year, with the banks getting actively involved, dimon looking for support, does that change some of the rhetoric? does that change some of the mood from main street from some of the elizabeth warrens frustrated? do they get more bang for their buck from that? >> i'm not sure, becky. i think this stems from the effort on that bill, stemming from the fact it was a last ditch effort to try to salvage one piece of the business, albeit a wonky piece of the business that i don't think main street fully understands what adjustments and additions in the bill mean for wall street until, of course, we see the repercussions if they play out in the broader industry. that was a hail mary to say, hey, if there's one thing to protect here, it's one part of the industry that we are concerned about. it's not a widespread overall. >> david, apologies for the uncomfortable question, warren on the democratic ticket, what does that do for the multiples? >> depends on what her chances of winning are. you know, it was -- >> it would be bad. >> right. shocking to hear an argument on the floor of the united states senate essentially that city group was evil and needed to be broken up. that's not something we've seen for a while. maybe that, again, does put a coda on what was otherwise a boring year. >> upgrade from incompetence, evil? >> i think for stockholders, boring could be beautiful. after the years of the financial crisis, stress test capital raise, and billions of dollars in litigation settlements -- >> even if she's not running for president, whatever she's doing is going to change the dynamic over the next year? >> i don't think so. >> right. >> i think for the companies and for the stocks, elizabeth warren is more a political issue than an economic or return issue. >> okay, okay. thank you, kayla, thank you, there's a great piece in the washington post today on elizabeth warren and the debate. >> i don't want to ruin my breakfast. >> no, no, it's amazing. it's a really well done piece. >> oh, okay. >> thanks. >> coming up, the year's most overpaid actor, and biotech stocks soar until this week. the story behind the change still ahead. day music is playin) hey! i guess we're going to need a new santa ♪(the music builds to a climax.) more people are coming to audi than ever before. see why now is the best time. audi will cover your first month's payment on select models at the season of audi sales event. visit audioffers.com today. this is a long list, one many would rather avoid. and adam sandler taking it for the most overpaid actor. the magazine looks at the last three movies of the biggest stars in hollywood and calculates what they were paid and movies earn, and the end result is a return on investment number on each star. apologies, mr. sandler. >> ouch. >> since the hanukkah song, he deserves every penny. >> and the elmo song. >> i forgot that. ♪ a song about elmo >> when we come back, preparing fortunate new year and health care, one of the high flying sectors from 2014, and analysts, barbara ryan breaks down the potential winners and losers. welcome back to "squawk box", everybody, and in the headlines on this wednesday morning, mortgage applications rose 1% last week with more activity in both new home purchases and refinancing. 30 year mortgage rates fell slightly hovering at 4%. south korea has indicted travis, the ceo of ride service, uber, claiming that uber is violating its laws to govern public transport. the former rock star consortium sold patents for $900. they bought 6,000 patents from networks three years ago. the buyer is rpx corporation. and it is a holiday shortened trading day. closing just moments ago, dax closed today, and markets in france and spain close at 8:00 a.m. eastern time. health care, one of the top performing groups this year, 23% in 2014. despite yesterday's beating, biotech crushing it this year. the biotech index up 29 %, joining us now is the veteran analyst, barbara ryan, founder p barbara ryan investors, and, ladies, welcome to both of you. >> thanks. >> so, barbara, a hot year in 2014. >> absolutely. i mean, i -- i think the two most important words would be ipos and m&a driving the sector. you know, it's been a phenomenal year broadly, but in health care conspicuously. there's a hundred health care ipos in 2014 raising 11.6 billion, but what's interesting there is 74% of them were biotech ipos raising 6.1 billion following a strong year in 20 13, and it's been a long, long time since we have seen a market like that. what this has done is really driven a lot of funding into what is really compelling an interesting innovation in science, which we have been talking about all year, and so this is very exciting news for, you know, patients around the world. >> is that journey ending with the end of the year or something that continues into 2015? >> you know, i think markets are volatile, right? we have ups and downs and i think in the spring of this year with the congressional letter, we saw the market crack, but, you know, come back. there's companies like bloomberg, biotech with gene therapy, good news at ash, actually, with no drugs on the market, a $2.6 billion market cap. i think that, you know, we never know what's going to derail these things, but the underpinnings are two things, really. one is real innovation. the second is, clearly, low interest rates, which is driving investors and forcing investors to take greater risk. i think, you know, certainly, you debated a lot about what could happen to rates, and that's something to be mindful of, and i think we'll talk this morning, too, about the fact that many of these sexy new drugs, which provide tremendous benefits for patients have lofty price tags, and so there's interesting news in the space between, you know, abd view. >> this is the first attack, right? spending too much on research? we got an answer to that debate at this point? >> you know, a great question, and i mean, i covered -- embarrassed to say, the industry for 30 years -- >> since you were 5. >> that debate raged on, and there, too, you know, drug industry productivity has been cyclical. it is a very, very risky business. the best performing biotech stock in 2000 -- ipo in 20 14, one of my clients, been up five times since the ipo in june. data came out monday, and that drug has been in development for 16 years. this is a very, very risky long tailed business. so i don't think valiant is new in attacking research and development productivity. i think the consolidation in the industry we've seen over the long, long haul -- when i started, there were 25 u.s. based pharmaceutical companies. there's now five, okay? >> wow, from consolidation? >> from consolidation. if you don't innovate long enough, you have to buy it. >> there's bioteches that are bigger -- >> absolutely. >> there's a shift in that way, and i don't know it was an attack, necessarily on the model embraced by other people in the industry. i mean, i think people think of the outlier, not a strategy a lot of people employ, there's cutting, but never to the extent it does, but it was an interesting thing to watch, and, of course, getting the white knight, the biotech and pharma industries were relieved. >> i would expect that. >> yeah. >> the story the other day about express grips and its deal. that seems like it could turn things on their heads. if they get their way, if they go ahead with this, that's got to be a chilling message to send out to a lot of the same companies. >> a lot of folks wonder about it. the drug, that was the seminole moment about drug pricing. people saying maybe it's the same thing or bigger, potentially, do other pbms come on boards and try to do the same thing, exclude drugs from their formula? >> prescription benefit managers. >> yes, exactly. >> i think that's absolutely right. i think what we have to remember is each market is fundamentally different. so this is going to relate -- you know, the price -- look at a thousand dollars a pill or $84,000 for a course of therapy, but we have to talk about the cost of the liver transplant and downstream costs in productivity and life due to the economy. that's what the industry needs to do a better job of telling that global story. it's easy for the sound bite headlines, but the other is that, you know, for drugs, for rare diseases, right, right now, there's a number of companies that are going to be launching hcb drugs. it's ripe for this situation. we're going to have price competition. >> what's that? >> hepatitis c, so sorry. there's markets where the products are unique and novel and initially, just as we saw, the price point is going to be x or y, but there's followers. >> you're not worried? >> selectively. we have to be concerned about this in selective markets. i also think that, you know, we really have no guidelines currently at the fda for biosimilars, and the buy logics and specialty medicines are where the costs are. >> the cost of generic versions, we don't yet have the pathway to get buy logic generics on the market. they call thaem biosimilars. >> that could come at some point, and, certainly and likely it will come, it's a question if and when. that's the impact. >> your point -- the point is so great about the drug industry needs to do a better job of indicating what the benefit is. if it costs $84,000 -- my son works in the drug industry, a biotech company, and he says the benefit of the $84,000 is multiples of that. can the drug industry -- how can they -- for 84,000, and it's six months or seven months, and you're finished with hepatitis c, right? 12 weeks. >> move it down to eight? >> what's the benefit for dollar terms? that's the headline? is it a hundred thousand that you're saving? >> this is critical. the industry just has to communicate. it's not just to physicians anymore, right? it's the payers. it's you and i. if we an express grips member, and they only pay for ab vooe's therapy? >> why is the world trade organization not saying? not right, the u.s. consumer footings the bill for the entire world. i understand poor african countries getting cheaper drugs, but i don't understand germany getting cheaper drugs. they have a greater economy. >> a great question always raised in the context. they have a free society, and while most pricing is different in many of them, the government not only approves the drug, but they price the drug. okay? that's the question that is, obviously, always raised here. will we have price controls? now, the drug industry, you know, in in supporting aca, did two things, protected -- >> health care reform. >> protected the ability to price their own drugs -- >> for now. >> which is critical, and patent protection, but this battle will come up over and over and over. >> a good point to make is the argument gets backwards. we're focused on drugs that cure things like hepatitis c, and what analysts say is the chronic therapies might not actually face the same pricing pressure because it's harder to get patients to switch off of chronic therapy. something you take every day for the rest of your life costs the health care system more than that's curing hep tie tis c, and so in some ways, you wonder is the argument in the wrong place? that leads to shortage of antibiotics now because the economics are not good for developing antibiotics because it's curative, short term therapy. >> thank you for being here. >> merry christmas to everyone. >> happy holidays. >> you came in red. everyone got the memo. is the bad weather sweeping the nation going to cause some of santa's deliveries to not make it in time for the holidays? shipping news after the break. plus, retailers take advantage of the positive consumer trends? the s&p index up 15% just in the second half of the year. we'll ask the question, will the trend continue? we'll back in just a moment. cant appointment when my teeth are ready? can it track my crew's performance, and protect their heads? can it tell the flight attendant to please not wake me this time? at cognizant, we see opportunities for every company. to meet the new digital demands of their customers. can it process my insurance claim? like, right now? can it download a track while i'm sampling it? can my keys find me? 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[ male announcer ] see how schwab can help light a way forward. so you can make your move, wherever you are. and start working on your next big idea. ♪ well, it is christmas eve, santa is off to a good start. that's norad santa tracker, last seen leaving and already left a half billion gifts. look out, kids, he's on the way. be good today. foul weather sweeps the nation making today's get away a bit of a mess for millions of travellers, but what about santa's deliveries? are the presents going to make it this christmas? the shipping news now from morgan brennan, and what's the latest? >> well, becky, this is a crucial window for ups and fedex delivering tens of millions of packages today to avoid a repeat of last christmas. the big change this year is that the parcel carriers invoke limits on certain retailers. now, they warned earlier this season they would turn last minute orders down if they exceeded preagreed limits. that's happening according to several reports. how's it going for the packages they are actually delivering? well, as of last night, some fedex express packages were stranded in the company's main memphis sorting hub. tweeted things like the service is unacceptable, the package was shipped 12/12 and hanging out in memphis with no delivery date. we reached out, and they say the weather's not impacting operations, which a spokeswoman insists operations are running smoothly begin high volume. overall, ship matrix says boeth vastly improved on time delivery performance compared to last year. the monday numbers, the busiest day, both companies got 98 % of the shipments out on the right day within the promised time frame. now, that's compared to last year when it's 90% on time delivery performance, so we're hearing about some delays, but overall, analysts say up until this point the extra workers, network upgrades, planes and trucks seem to be working, but, again, becky, as you mentioned, it's coming down to tonight and that big wild card that is the bad weather. we'll see whether that affects a delivery as it's affecting travel across the country right now. >> still waiting for one last package. we'll see if it gets here. >> i'm waiting for two. >> it's my fault. i ordered late. i'm not blaming anybody, but you said something interesting, that the shippers guarantee up to a certain amount? >> yes. >> after that, it's buyer beware? >> it is -- so at the beginning of the holiday season, the peak season, fedex and ups mentioned, warning customers if they saw a last minute spike in online shopping in orders for delivery, may charge higher fee eer eer f take the orders begin how the networks already were operating. we are getting reports it's happening nor certain shippers and certain retailers. >> maybe that's a good sign with more ordering going on. >> thank you, morgan. good luck with the packages. >> thanks, you too. >> christmas crunch is what it is. hours left in the season, and there's a lot of reasons to cheer. the economy grew faster than we thought, 5% last quarter, and gas prices are falling, down a $a gallon compared to last year, and cheaper gas means more money for consumers in their pocket, but does it translate to big sales and better retail bottom lines? joining us on set is the former chairman of toys "r" us. another toys "r" us ceo. the ge of the retail industry. you spread out. >> absolutely. >> morgan said the report about the retailers can't get out on time because they hit max allowed that fed ex or ups lets them ship. is that good news? >> if you're a roadway tailer, great news. it's another indicator that the retail forecast of 4 % sales increase we look at for the last six weeks are low. i think that this is going to be a way better retail year than most people think. >> do you have a number in your head? >> 5%. >> wow. >> significantly up from anything recently. >> how much is the decline in gasoline prices? >> oh, i think that's a big piece of it. you know, that's like a 5, 6, 7% for most people, and after taxes, disposable income raise, and you also have depressed levels of consumer debt, and you put that together, you see people not only spend the short term cash that they get from lower gas price, but they are anticipating they can pay off more debt into the new year with that gas savings. that's a big factor. >> i think we'll have a strong sales season, but i'm not sure the way we measure it or proves it, how we measure shopping overall misses the online stuff. >> well, when you take a look at total franchise performance -- >> takes a while before we read it. at least, okay, by january 2, we know how that holiday shopping season was. i don't know we'll know that soon. >> you'll have a good indication by then. the other factor nobody's talking about is if you get an extra couple points in the top line sales, that does a couple things for you. obviously, it generates more margin dollars and reduces the amount of clearance. look at retail and if you're out in the stores and look, the control of inventory is spectacular this year. >> you don't think if you show up at the store friday, saturday, or sunday, half the time people come with returns. there's going to be massive sales you can find good stuff? >> less good stuff than you used to, but that's another interesting trend. when you take a look at the trend of business right now, it's been positive, but what people don't look at is more business is done as a percent of the total holiday season after christmas every year for the last ten years. every year, that's got to be a bigger, bigger piece. you have gift cards, returns, and so forth. the second thing that people don't really take into consideration is there's one more day between thanksgiving and christmas, worth a percent and a half in comp store sales. >> wow. >> what do you think of the online sales of people buying extra products knowing they'll return it, buying two sizes, whatever, but it creates -- you're seeing it -- >> of course. >> you click and do it with the assumption people with caulk in the store to return it or mail it back. >> that's been going on since the evolution of the online shopping. >> with all the free returns and other things coming into play more so now -- >> did it happen in the catalog era? >> sure. happened in the catalog era as well, especially in the apparel side, apparel, shoes, if there's a toy, that was the great thing about the toy business. you want the toy or you don't, got it or you didn't, but it is not, gee, i got it, i don't think it is going to work for my kid. >> what about the gift card business? i'm fascinated. >> getting bigger and bigger and bigger, that why the post christmas period is getting to be a bigger indicator of how the whole season's going to come out. the fact that we're in positive territory early this season, plus the extra day, the gas refunds and increase of the gift cards, plus the buying later and post christmas, all the factors lead you to -- >> is it a float business? is that the business? >> i'm not sure -- >> i assume that there are billions of dollars of unspent gift cards sitting around. >> do you make money on the percentage you hit? bank interest? >> of course, of course. >> regrettably, the states figured out they take over unpaid balances over the the number of years, so you don't get that benefit, but outside of that, you get the float benefit. >> there's no interest right now. >> it's an old term. >> yeah. >> anyway, thank you. >> good to see you, john. >> you as well. merry christmas. >> coming up, cubans get something they have not had in more than 29 million minutes. that's more than 50 years. we'll tell you what next. i don't know what that's about. later, municipal bonds return 9% so far this year. that's the highest rate of return since 20 11. should you consider this for your portfolio next year? we'll ask expert alexander this morning. coming up. act i. scene 3. open port twenty-two-oh-one-seven on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. (clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. cuba gets its first broadway musical in over 50 years. a version of "rent" opens in cuba, and the production will have a three month run and feature the company of 15 cuban actors. >> i would not make a joke about "rent" right now, but it's a great play. >> based on one of my favorite operas. >> about me enjoying it, out that? i do enjoy it. there. >> still to come this morning, "squawk's" version of the "night before christmas," and we go to the milestone of 18,000. don chu says what stock fueled the gains. two men behind the hit "flipping boston" joining us, afraid 2015 could be a rough year for housing. find out what has them worried. we'll be right back. it's the day before christmas, but don't go away, the markets on wall street still have half a day. becky and andrew are here, and michelle's in for joe, and we put together a great holiday show. for market advice? we look very top tier. market guru and adviser, david is here. the santa claus rally, could it be real or fake? we unveil the smartest investments to make. you want predictions? we know what you need. airline stocks that could fly high in 2015, and what to expect when you think real estate. the stars of "flipping boston" talk home prices and rates. one more hour to go before we take our leave. "squawk box" starts right now. happy christmas eve. ♪ welcome back, everybody. this is cnbc, first in business worldwide, and joe is off today. we have been watching a lot of things, but andrew, tell us the top stories. buzz story of the morning, sony changing its mind allowing "the interview" to open tomorrow on screens where operators are willing and able to show it. estimated as many as 300 cinemas could skreep the film tomorrow. sony cancelled the release last week after many large chains refused to show it. we have to tell you, last minute shoppers pay the price for procrastination. the nation's biggest shippers put a cap or air express deliveries reporting that ups and fedex made the adjustment after retailers exceeded agreed upon limits. both companies trying to avoid repeating last year's fiasco when 2 million packages were left undelivered. you remember that story. uber, the ride sharing service hit with lawsuit in india, spain, thailand, and the netherlands and several u.s. city, and now south korea taking legal action issuing an indictment against the ceo, kalanick, and he's the ceo of the entire government, but the government says uber violated a law governing public transport. >> the santa rally is on track, dow topping 18,000 for the first time ever yesterday. today is a shortened trading day closing at 1:00 p.m. eastern time. economic data today, claims a day earlier than usual because of the holiday on thursday, tomorrow, that number comes at 8: 30 a.m. eastern time. another positive day at the start, dow opened higher by 44 points, dow by five and a half, and the nasdaq, not participating yesterday, higher by nine points. european markets on holiday schedule, london closed a half hour ago higher by 11 points, and markets in france and spain are set to close momentarily at 8:05 a.m. eastern time. get the extra five minutes in at the top of the hour, i guess. u.s. markets reopen friday and european markets closed until monday. >> the dow starts christmas eve trading day above 18,000, industrials hitting the milestone 120 days after crossing the 17,000 mark. the statistics guru will walk us through the climb of the industrials and who is behind the surge. >> look at the math, it's been quite a while since hitting dow 14,000 and marched there. july of 2007, that was the first time we crossed 14,000 and closed there. a huge move. that was about the top. we know what happened with the financial crisis, a dip in the markets, and so now it took a long time, almost six years just to get that thousand points between 14 and 15,000. that was may of 2013. it took seven months to get to 16,000, a half year to get to 17,000, and now here we are just on christmas eve's eve, yesterday, hitting 18,000 mark. a thousand points between july and just about christmas time. let's see what drove these point moves here because a lot of big name companies are in the dow, but 3m in particular added 140 points to the thousand points that the dow got between july and now. goldman sachs, a new dow edition, a relatively new one, added 160 points, a higher priced stock. this is staggering here. visa, out of the thousand points that the dow marched up between 17 and 18,000, 300 points of that was just visa alone. a high priced stock, visa, attributed a third of the overall gains between 17,000, becky, andrew, and 18,000. >> it's not surprising, the three heaviest. >> yes, so if you look -- yes, that's the reason why they are, but they performed well, not as well as others, of course, but, again, these guys are heavily weighted, so, yes, they add more points. >> david made the point, take out ibm and chevron and exxon, it would be a different world. >> oh, no. they counted for 150 to 170 points a piece on a drag on the dow. if they were flat for this particular session, you'd be up another 450, 500 points here above and beyond what's already happened. >> there you have it, thank you for that. talking municipal bonds this morning. munis are almost at the cheapest level of the year relative to government bonds, but does that continue into 2015? joining us now is the president and ceo of holdings and cnbc contributor. good morning. >> nornmorning. >> the question is there, will the trend continue? >> well, a couple factors have gone on over the last several week, and we talked about this add inmy need yum, they track treasuries, but when a lot of supply comes in the market, they are cheap. that's what happened over the last several weeks. as treasuries rally, there's supply into the markets so munis are cheaper relative to treasuries. what happens in the beginning of the year is municipalities generally do not issue bonds. >> okay. >> that would suggest that they will not be as they have been. >> what's the timing like? you say, what, january, february? >> first quarter typically where municipalities, in terms of the budget are not going to be issuing debt. >> they have not run out of money yet. >> well, let's not be that cynical on christmas eve here. no, just generally the way they plan for the budgets over the course of the year. >> is there a way -- are there three things you would want individual alexander, looking at the show, opposed to treasuries or markets? seasonality is one. >> that's a great question, actually. yes, seasonality is one. >> credit -- is credit another one? >> credit is another one, but this is really important because credit and what happened in each municipality is each individual unto itself. >> credit quality? >> credit quality. so detroit is an issue unto itself. puerto rico with the exception of the fact that mutual funds across the board hold puerto rico, but the credit issues in puerto rico is an issue unto itself. california, issue unto itself. it's not pervasive across the industry. that's another thing. certainly, what tax bracket you're in, and if you're in a high taxable state and live in new york city where a local tax on top of that, comparing to what your after tax yield would be compared to treasuries, that's something that could be a factor. >> the markets, 2015, you run towards and individual markets to run away from? >> run away from puerto rico. run fast. i've been saying that for a long time. puerto rico electric power authority is the big issue that people have been focusing on for a long, long time. >> i'm joking, there's thousands of issues, right? >> the big issue is the power authority and whether they will be unable to pay their january payment, although, just one little light of hope is the price of oil going down could be helpful, but it's a bad situation. you know, there's certain -- across the board, there are issuers doing well, but in terms of things to look at, you're tax bracket, again, and where you live is going to determine what state, i think, you should look at. >> right. >> we weathered puerto rico pretty well considering, right? there was a time predictions said it would destabilize the entire muni market. that's proven to be completely untrue. >> is proven to be untrue, but the other big, big thing this year was what happened to detroit, the fact it did not get to a judge, and a judge did not have the ability to say, go's do not have precedent in the capital structure. however, there was chipping away at the pecking order of where gos stand. >> that's general obligations. >> excuse me, general obligations. in responding to the notes to the producers, go got changed to ge. where they stand in the pecking order, so, you know, as -- i look back in the days of my grandmothers selling bonds in the early days and my dad selling bonds, bonds are complicated. they are not as straightforward as they used to be. now general obligation bonds, there's tarnish on what they used to represent. they still are backed by the full faith and texts power, but in an entity like detroit where there's not money to pay, there is not a taxing power, there's not tax base, you know, then you got to divide up the kitty as best as it itseexists. >> are there certain states you want in every portfolio, museum quarter that are oscar de l de la renta quality? >> oscar will never go out of style. i like that. >> that's what i mean. >> the state's rating will go up and down. states like virginia and maryland, and, in fact, maryland is sort of, you know, yes, it is the oscar because that is -- there is the money -- the mmd scale off of which all bonds essentially are priced like when we price treasuries, and so maryland is really, but, again, it's your tax bracket, and it's what state you live in. remember, you're going to have to pay the state taxes if you own bonds in a state in which you don't live. >> right. >> there you have it. >> wow. that was -- >> okay, we'll -- anyway, thank you. >> you're welcome. >> happy holidays. >> thank you. coming up, 20 15 play book series continues with airline stocks that could fly high in the new year, and at 8:30 a.m. eastern, jobless claims hit the tape, and bring you numbers and instant reactions as well. then, the stars of "flipping boston" talk housing and future of reality tv. this week, we look ahead to the new year for a playbook on how to cash in on 2015. phil lebeau lays out his predictions in a minute, but first, let's see how he faired with picks for this year. saying they would add more flights between major cities. he was right. he also predicted airlines would push new technology to help passengers stay connected inflight. he was right again. with carriers offering expanded wifi options in the past 12 months. phil said extra fees are here to stay. i know for sure he's right. three for three, phil. airlines expanded fees last year helping make carriers more profitable than ever before. what are predictions for next year? take a look. talk about soaring higher, airlines have seen little turbulence while racking up record earnings. in 2015, look for the airlines to stay in the sweet spot for lifting profits and returns for investors. first, low jet fuel costs are here for a while. that will boost profits in the first quarter when airlines traditionally see the weakest results. but how much of the low fuel cost trade is already built into the recent surge for airline stocks? another thing you can expect next year? packed planes. airlines have been remarkably disciplined not adding too many new flights. they are also cramming more seats into the current planes. jet blue comets that trend in 2015. overall, passengers have grown upled, but they are still flying. but the big change next year will be with frequent flier programs. it'll be tougher for casual fliers to rag up points, but high end travelers love that airlines including delta and united move to programs where frequent flier miles are based on how much you pay for the ticket. if you don't fly much, don't expect much in return. >> joining us now with a look ahead at the airline industry for 2015, a former department of transportation official, good to have you here. let's start with phil's first question there. how much of the airlines' big rally in stock prices in the big decline seen in oil price? >> well, you know, that's hard to say how much is priced in. part of the answer to that is how far is oil going to go? you know, the bigger picture here is oil is turbo charging an industry figuring out how to make a profit at a hundred dollar barrel oil. in a way, it's a boost that keeps on giving. the -- this industry's changed so dramatically over the last four or five years since 2008. that's when fuel prices really tripled in a matter of months, and it scared everyone straight. the industry's changed. they are much more focused on the bottom line. revenue, as phil was talking about, more dense airplanes. they call it densification, and all those issues, fares are up, the focus on the high end business traveler, all that's changed. the revenue picture and costs have turbo charged the industry. >> what's the guarantee they maintain that discipline and not not embark on wars as they always seem to in the past? >> that's the big worry now. the -- there's really two sources of potential competition or added capacity. one is that the existing players, and there's really only four big players now with 80 to 90% of the market, about 80%, and the idea is that -- are they really going to add capacity? they all said no, and they've all taken the pledge and the ceos are adamant about that, and in a way, i think that there has been a substantial behavior change in the industry so that they will not be adding a lot of capacity, certainly not beyond sort of the gdp growth rate which people are talking about as the sort of the marker of what's reasonable. owne on the other hand, there's potential for new entrants. it's hard to enter the industry. it takes money. it takes regulatory certification that can go on, take a great deal of time. you have to have gates, slots, overcome a number of barriers and marketing issues. >> right. >> so, you know, for 2015, unlikely you sigh a lot more competition coming into the market to have any real impact. >> mark, has a question for you. >> what about the impact about the strong dollar? how does that affect revenues, cost, and the international competition component of facing the big four in the united states who account, according to you, were 80% now of the travel. >> you put your -- >> benefit costs if you can give us thoughts on that too. >> yeah, you put your finger on the main weaknesses, one of the few weaknesses in the industry over the coming year is likely on the international side. currency is having an impact, particularly in asia where point of sale, we have issues with japan, and the euro zone economies, others are not pumping out, obviously, at the same level as the u.s. market. that's an issue. there's more competition in the international market where we're having a lot of capacity coming in to china and other places, and -- and some fairly strong new competition from places like the gulf where you have major airlines and high quality service. >> if we can bring up the sale -- the airline index, guys, david, you know, the time to have bought the stocks was the fears of ebola. when you look at the one year chart, we sat in the news room thinking, wow, looking back in october -- >> wow. >> the ebola scare pushes stocks lower, ebola goes away, and then oil starts to fall. look at that run in three months. would you tell someone to buy the airline stocks? >> michelle caruso-cabrera, you'll love this, there's a hundred sub categories in the dow jones, okay? the number one stock group last year was airlines, up 8 is 1%. >> this year, airlines up 77%. there's a back-to-back, one and one. it's hard to go into chases something when it's flown that high like that. give it time to sell off, and in response to mark talking about international competition, maybe the fact that the strong dollar hurts profits they bring home now denominated in foreign currencies, but 81%, and then 77% is just an amazing performance. >> it is. >> back-to-back. >> mark, do you see airlines locking and hedging at these levels, hold the prices for quite a while? >> well, you know, yeah, the whole issue of hedging, they have not been great in hedging over the last several years, of course, and everybody, southwest, of course, was the hero of hedging. >> but there was no reason to hedge. >> now america has no hedges as i understand it, and they are doing great for the moment. >> right. >> to you have to look at the industry and talk about entry points and so forth. this is an industry which is so susceptible to the shocks. the ebola scare, everything dropping for three weeks and suddenly is goes back up. you have a plane crash, sabering in north korea. you have all kinds of issues affect the rather emotional response the industry, so it's a very dynamic one. it's very hard to predict what's going to be happening. >> sure. we can try, mark, right? nice to see you. >> of course we can. my pleasure. >> good to see you. >> benefit costs under control, pensions, health care -- >> that was part of the big run last year. >> that's right. >> they finally got the business model in order. so, all right. when we come back today, jobless claims hit the tape at 8:30 a.m. eastern time. we'll bring you the number and instant analysis. if you or a loved one are traveling by plane today, listen up. when we come back, we'll have your holiday travel forecast. ♪ (holiday music is playing) hey! i guess we're going to need a new santa ♪(the music builds to a climax.) more people are coming to audi than ever before. see why now is the best time. audi will cover your first month's payment on select models at the season of audi sales event. visit audioffers.com today. happy holidays from cnbc. well, no news flash here, but headed to the airport today? guess what? you are not alone. kate rogers joins us from the airport with a holiday travel update, and it sounds a little busier there, kate. >> reporter: yeah, becky, it's definitely picked up in terms of crowds here, but things seem to be moving pretty smoothly. now, we told you last hour, 5.7 million people travel by air in this holiday week, up 1% from last year, according to aaa. flight aware is tracking delays and cancellations for us in realtime. right now, up to 412 delays so far domestically and 215 kapslatiokap cancellations. there's the misery map, and number one is newark, number two, reagan international airport, and number three is baltimore washington international airport. laguardia has not made the list yet, but travelers are saying so far things are sailing smoothly. >> i was glad the weather was okay, you know, no snowstorms or anything. >> i'm actually headed to iowa through chicago today. >> reporter: how is everything? on time? >> on time so far. they've said rain, but maybe in chicago there might be a little delay, but so far looks good. >> reporter: were you nervous flying christmas eve you might not make it? >> no, i've done it before, didn't make it once, but confident today. >> reporter: becky, as we told you earlier, the storm is expected to pick up steam later in the day. traveling this afternoon or this evening, things could get hairy. united airlines confirmed if you want an earlier time today as long as you take offer before christmas, december 25th, they will waive the fee. back over to you. >> kate, thank you. again, kate will bring us updates throughout the day. coming up, jobless claims wednesday, data point moved up for the holiday, closely watched number minutes away. as we head to break, look at u.s. equity futures. a market looks to open higher, dow up 48 points, nasdaq up 10 points, and s&p 500 up 6 points. we are back in just a moment. (vo) watching. waiting. for that moment, where right place meets right time. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. welcome back, everybody, a minute away from weekly jobless claims, watching the futures, and even after closing above 18,000 for the first time ever yesterday, the dow futures indicated higher once again. that's the dow futures up close by 50 points above fair value. s&p higher indicated to open up by 6. as we point out to the end of the trading year, you're looking at a year why so far the s&p has not ended down for more than three days in a row. that's never happened before. there's only four trading sessions left to hold that record. look at the yield on the 10 -year very quickly, and rick santelli is standing by at the cme. rick, take it away. >> all right, 28 0,000, a drop of 9,000 on initial claims. obviously, a very low number. whether there's some holiday distortions in there, i can tell you this. there will be more in the weeks ahead as they get gps back. continuing claims ramped up from 2.378 to 2.4 million, but in all, the number goes hand in hand with the economy, six years, zero interest rate policy, and the resilience in the u.s. economy's finally able to overcome. now, whether it gets escaped philosophy what the federal reserve views as escaped, i have no idea about the definition other than it's on wheels. yes, 228. this is basically a three week high yield, and here's the key, people. this is definitely year end event. it might be a bit different for next week because the bund is making a historic low yield at 58 basis points. the 150 basis point difference between tens and bunds worked well the last several months is not working well over 160 now. the response is widening of that, pulling u.s. rates down. my guess is when this end of the year curve dynamic position adjustment is over, my guess is it's going to be over sooner rather than later. last several days of the year might bring in buyers to narrow the spread, but we'll, of course, pay close attention. we have one seven year note option, the last economic event of 2014 for the most part on the supply side and yields not moving much on the 8: 30 data. merry christmas, everybody. >> merry christmas, rick. >> a nice red tie on too. >> see you next year, rick. >> absolutely. >> we are out of here today. see you next year, happy new year too, rick. >> thanks to all, and great working with everybody for another year, many more good years to come, we have the best viewing audience in america. >> cheers to that, rick. david, your thoughts? >> well, that's now, becky and rick, that's 13 of the last 14 weeks it's been below 300,000, and i think very, very positive for the consumer confidence and consumer spending is the feeling that this tightness of the labor market, if you keep getting it below 300,000, so this adds to average hourly earnings, seen in the latest numbers, up .4% against .1% for november. it's a good thing. you want breadwinner jobs in the united states, not subsistence jobs. jobs are jobs, but you want breadwinner jobs to support a family on. >> the chart looks great. look at the screen. that's a great story. >> yes. >> earnings. >> average hourly earnings, as important as corporate earnings, which are off the chart because hourly earnings are not so good. there's four things helping corporate earnings, interest rates low, oil prices and commodity prices, especially commodity prices low, labor costs low, and depreciation costs are low. so corporations sit on cash, they are not investing in plans and equipment. >> sure. >> you'll now see the share of money going to labor, going up, and that's a good thing for the united states. >> all right. for more on the perspective of the jobless claims and broader look at the economy as well. we are joined by stuart hoffman, chief economist for the pnc financial services group. stu, you heard what david said, 12 of 13 weeks of jobless rates below 300,000. we have the revision of 5% handle, that's something to watch, what do you think? >> i agree with david. the number of weeks we've been p below 300,000, weekly claims, four week average is dialled down to 290,000, low as it's been. no holiday distortion in this one, but will be next week, of course. this week includes the holiday. yes, that rise in gdp of 5%, and for the right reasons. good consumer spending. so what we've seen since is the fird quarter, the data showed that november and october consumer spending was very strong, and i think it's no coincidence that the drop in gasoline prices is coinciding with the rapid increase in consumer spending, and anybody who doesn't see the drop in gasoline prices is at least a net positive for the u.s. economy, and i call them brain dead, at least economically speaking. >> harsh there, stuart. >> they didn't go to penn state like you, stuart. [ laughter ] >> yeah, well -- >> stuart, listen to me, these numbers, are you going to see -- i see all over wall street, 2.2% this year, 2.9% next year. are these numbers a touch to the low side for you given what's happened, yes, you had a big contraction because of the weather last year in the first quarter, but how does it look for you for this year and next year? 2.2 and 2.9 seems low. >> yeah, 2.2 gets revised up based on the 5%. we have this quarter, this fourth quarter ending with 3 to 3.5%. next year, we have 3.3%. we have the consensus, and, you're right, we'll do better than that, the decline in gasoline prices is a positive. it'll be a home grown economic expansion. we won't do a lot in exports, but state and local governments, less from the federal government, housing will do better, and some investment, i know durable goods numbers are weak. we think that will improve, and we suspect, again, it'll be more of the consumer-led recovery as jobs, wages, income, health prices, confidence, and, of course, stock prices continue to bolster consumer spending. >> stuart, the capital expenditure is part of the e equation. supposedly, 30% of total cap x in the energy complex, something like that, 27 to 30%. how does the drop in oil prices and gas prices -- i see they are down 25% this year, oil's down 47% this year. how does that play into the cap x numbers for next year? >> well, you're absolutely right. there's winners and losers. that's one of the sectors that could be a loser, geography, certain companies, and individuals. we'll see a slow down in cap x expenditures and drilling in the energy-related area whether it's oil, whether it's fracking, but i think the benefits that come to transportation companies and come to service companies, come to distribution, come to recreation companies more than justify set that. that's a net positive, but, yes, capital spending is not the leading edge of the u.s. economy next year, and energy related capital spending is the weakest of all. there's a lot that is going on there to be completed in pipeline and drilling. i don't think it necessarily cuts back, but will not grow as rapidly. i don't think, by the way, see if i'm right, but i don't think oil prices stay below 60 a barrel. our forecast next year is that 3.3% gdp growth and about 2 and three quarter million jobs, a little better than what this year will be is predicate the on oil at $70 a barrel. i think it's an overshot, that way through the winter, but we'll see rebound in oil prices meaning that the impact on the energy sector will not be as severe as if oil were to stay at 50 or even below, and we don't think it'll be there next spring and summer. >> okay, stuart, thank you so much for joining us today. >> thank you, happy holidays to everybody and healthiy prosperous new year. >> thank you, you too. we have a follow-up to the airplane gun smuggling story yesterday. a baggage handler for delta airlines has been arrested and charged for helping smuggle guns like an ak-47 into commercial cabins of the flights. it was undetected for five years. the gun runners bought weapons and brought weapons into new york city where they are difficult to buy. authorities say it worked like this. the delta baggage handler brought guns into the airport. this is in atlanta, using his employee badge. the employees are not screened by security. i did not know this, when they enter the terminal because they have background checks, the pass, walk through the gate without a screening. he met another man in an airport restroom who then took the guns and carried them on the plane. this happened at least 20 times over 150 different guns on these planes. >> that's stunning in itself, but the thing that ticked me off with the story yesterday is they said there's no way to change it because it takes hiring too many people to check all the employees as they show up every day. the answer was, we'll review the policies, but we can't say this is not going to happen again. >> it's a huge hole in the system. >> a massive hole, but they can't fix it. that was the knee-jerk reaction. >> right. incredible. >> i've been in line when people walk through, employees show the badge and walk through. >> all the time. >> there's a large number, anyone in food services. >> we travel a lot. don't you feel like the system is a farce with the screening? there's a lot of -- >> yeah. >> marquee going on. >> security theater. >> exactly what it is. it's all theater. it makes our lives so incredibly difficult when you travel. champagne problem, i know, but, still, it's -- i think it puts a damper on people wanting to go on a plane. if you want a short weekend, it's impossible because you spend so much time in the airport. >> for any place that's on the way, i drive. >> it's easier. >> do you prefer no screenings? >> well, i would have very little issue with far less screening than we do now, absolutely. i remember when you didn't need an id to get on a plane. >> right. >> even with the risks involved? >> yeah. >> i don't appreciate the screenings, but there's a difficult -- like i said, eight to ten hours rather than get on a plane. >> it's tricky. >> based on that, i'm never going to the bathroom in the airport every again. >> second airport issue. >> transferring guns -- >> that means you have to use the bathroom on the plane, which is so un-- anyway. >> never mooir-- coming up, "fl boston," why they are worried about next year. story of bribery, intrigue, and deal making coming up next. welcome back this morning. a story of deal making international intrigue. this has to do with zimmers, there was bribery abroad may complicate the deal. confidential documents shows biomet bribed officials in mexico and brazil. they are investigating, and they are not showing signs of abandoning the deal so far, but a big penalty for biomet could change the price, and that's at issue here. biomet told zimmer about the investigation. zimmer knew before taking the company on, before they made the deal, that the investigations were happening. they did not know how aggressive the government might be in terms of the fine. >> they should have known. foreign corruption act, the minute you are close to being accused of violating them, you have an internal examination going on for years, right? it is exhaustive, painful, and costly. >> do you think they'll enforce the law? >> the question is how far they were going -- it's the difference between -- may be, we don't know what the price will be, but the fines seen that bank of america and jp morgan had over the past year relative to what banks were fined three and four years prior to that where it's the mag anitudemagnitudes. the article suggests a price break or zimmer saying, look, we do the deal, we need -- but, look, there's material adverse change clause. i don't think they have a legal leg to stand on. >> it was not kept from you idea. >> we'll see what happens. 2008, the housing crash is not over, according to the next guest. one research firms suggests 2 million modifications to face reset next year. joining us this morning to explain what it means to the housing market in 2015 is peter solaris and dave seymour, stars of "flipping boston" good to see you. peter, why are you worried about mortgage modifications? what's coming up? >> oh, look, tell you what, this is what we've seen. we know programs like the hamp program, all the loan modification programs, 50% already are in default. what's that mean? these were set up to help people, and time heals, right? people forget things readjust, not staying where nay are. your lifestyle has to adjust too, and there's a lot of people out there that just took time as the healing progress, and they did not adjust the lifestyle. hopefully there's not a big resurgence of this in 2015, which, all indicators show that to be exactly what's going to happen. >> david, are you seeing this when it comes to taping the show "flipping boston," seeing this impact at all yet? >> yes, we are, absolutely. we have macro and micromarkets throughout the u.s., and in the boston market, we have short sales, loan modification deals popping up into the mls. the home ecstasy lines of credit, pushed hard in 2005 and 2007, they had a ten year shelf life of the interest only payments. what's happening now, those are due as well. you have a combination of those due, anywhere between 40 and 70 million dollars worth of loans that would be 15 through 18. that has impacts no matter how you look at it. for us, it's an opportunity to be a service to the homeowner, work with them through a short sale process if that's the best exit for them. >> i grew up in new hampshire, and my father's family is from somerville, and i love your accent. >> we have no accents. >> what you mean? wha? wha? we just bought is house there. hudson street. >> it's hot. that market is so hot. that used to be an immigrant town. my great grandfather was a bricklayer in the area. >> look, you couldn't -- >> italian, right? >> you couldn't give away houses. >> was he italian? >> yeah, yeah, you're right, you couldn't give away houses, and now it's really super hot area, right? >> it is. the house has brick in front of it, and, who knows, maybe your relatives had a hand in it, but, yeah, two family, and it's a two and a half, and what's happening is, you know, we're going in there, a lot of people are seeing these things looked at, highest and best use, and the highest and best use now is condo conversion. you're getting 500 square foot in some cases where, again, you could -- so, again, you get 500,000, 600,000 for a condo where you couldn't sell this two family ten years ago for 250,000. you know, it's crazy what's going on. >> can i tag on, peter? >> sure. >> a side note to that too. pete and i invest in the boston market and throughout the u.s. i talk about macro and micro markets, the 20,000 foot bird's eye view and then neighborhood by neighborhood. we recently purchased a brick building in the south side of chicago, seeing resurgence now due to infrastructure and government money in the area. we predict some elements of doom and gloom. i'm not the grinch at christmas. >> exactly. >> resetting the loans, but at the same time, there's still these opportunities for us as investors outside the stock market to be able to find these pockets where there is a lot of potential, and we're seeing wonderful cash flow opportunities in the south side of chicago. one of your guests earlier this morning talked about detroit. you can still buy houses in detroit for 5,000, 10,000, and $15,000, putting renters in place paying $600 a month. there's opportunities within the structure that we currently have. >> david, guest host, has a question. >> quickly, mortgage rates are 393, 395 now for a 30 year conventional. they could go up -- the mortgage bankers association could go up to 5%. how confident are you in the number? >> no, it's not that we're confident they are going up, but what we're saying is that mortgage rates are low and that's obviously helping the housing market, right? but i think that supply and demand is the name of the game here. will there be more of a supply that comes out with these adjustments? if there is, how is the market going to respond to that? i still believe personally that the rates are going to be great in 2015. we have all kinds of good things going for us. you just have to be careful. we don't want it to seem like it's the roaring '20s again. when i say roaring '20s, 2000 and 2002. >> you remember ten hills road? that's my grandfather. he bought it for $5,000 from it the bank during the depression? >> you want to know what it's worth now? >> yeah, we sold it. it did really well. great to see you, guys. >> thank you very much. >> thanks for having us. take care. coming up, jim cramer is going to tell you what to expect from the short trading day. plus, a bailout for atlantic city, but is it too little too late? we've got that story when "squawk box" returns in just a moment. location. location. (shouting) location. here's the location that matters the most. here. or here. or here. it's wherever this is. to get customers to come here and stay here, you're going to need an app that connects to all your systems. so they can bank, shop, do what they need to do, and you gotta do it fast. before the competition does. it's tough out here; you better be on the right cloud. today there's a new way to work. and it's made with ibm. welcome back, everybody. let's get down to the new york stock exchange. jim cramer joins us right now. jim, finally, the dow closing above 18,000. i wonder how you feel about that. i know we've been watching this santa claus rally the whole time. think this sticks? >> first, merry christmas to everybody. great group down there. look, i think it can stick, and i think it can stick because of what dominic chu was doing. i love his work. he broke it down espn-like. you can see why there are a number of stocks that can still go higher. not a lot of stocks that i think can go lower. there's just some really terrific undervaluation in many of the stocks in that small index. >> which ones do you think are undervalued at this point? >> i think goldman sachs should never be trading at this price versus the book value. i do like visa very much. i think charlie sharp is great. i think the drug companies ought to get on the case. they have been a big disappointment. you had a company like ge that i used to work for. i mean, is that company expensive? clearly not. the oils, if oil even bounces back the way stewart hoffman was thinking, you will regret you didn't buy those. you just pick them all off. the banks are just way -- banks are a third lower than the average multiple in the s&p. you've got a lot of stocks you can see go up without any earth-shaking news. >> david wants to say something. >> apple is up 40% this year. it's $112, $ 13 a year. you still like apple. i still like apple. how do you feel about that one? >> you and i -- and i've got to tell you, you are the only one i know who's said from the beginning you do not sell a stock at 12 times earnings with a great balance sheet with new products. this is not a trade. wall street wants to trade apple. you and i both know there are stocks where if you stay in touch with them and look at the multiple, look at the earnings, you don't flit in and out. yet, apple, for all what has happened, has probably been the most footballed stock. drives me crazy. >> beautifully said, jim. best wishes for you and your family. may god bless ken cramer, who brought you into this world. >> thank you. >> jim, mer ri christmas. happy new year. we'll see you in just a few minutes. >> thank you very much. >> coming up, cost kuting at coca-cola, including the end of voicemail. end welco i would welcome that. then an in-depth look at holiday retail. stick around. we'll be right back. welcome back, everybody. it's year-end belt tightening at coca-cola. "the wall street journal" reports that the soda maker for cutting up to 2,000 jobs in the coming weeks. the company also plans to cut executive perks including limousine service. it is disconnecting the voicemail feature on phones at its headquarters, which is expected to save about $100,000. they plan to shave about $300,000 on their annual budget. >> getting rid of voicemail can save $100,000? is that storage? >> the storage, servicing of it. all of that. and it will save you all the time listening to those voicemails. >> productivity, a huge improvement, i would think. >> we were just talking how none of us actually checks our voicemails. >> i don't either. >> we got to run. we want to thank david darst. we want to wish everyone happy holidays. we have a great audience. markets are closed tomorrow, but we'll see you 6:00 a.m. friday. "squawk on the street" begins right now. ♪ good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. stocks close at 1:00 p.m. eastern time for christmas eve. closed tomorrow, of course. futures are steady here. oil sliding a bit this morning. we'll keep our eye on that. markets in london andar

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