Transcripts For CNBC Squawk On The Street 20171212

Of ours. Actually 10 00 we are looking up on all the major averages i guess, yeah, looks like we are. European markets, you ask, we answer what are they doing jim . We trade with the good ones now. Whats that we trade with the good ones. All positive. Other than spain 10 year note right around look at that over 58 this morning our road map as well it starts broadly with stocks on track to open higher boeing boosting its dividend shares rising premarket. The plan maker setting a new 18 billion stock buyback plan and a mega mall merger. Buying the World Trade Center mall and new jerseys nearly 16 billion overall. What . We should have 3m just preannounced. Lets get to that too. Remember the other day a fellow was telling you to sort it it was ill advised. You were on him. I was all over him like a cheap kmart suit. Those are cheap. That was my first thing that i wore to goldman. They said get out of that corduroy suit. A day in which the fed will hold its final policy meeting of the year many expecting a rate high tomorrow as well we got to talk bitcoin. Right. Two minutes in. Bitcoin recouping this mornings early losses one day after hitting a record high. People who own bitcoin use price targets for bitcoin that make it so its difficult to dow 36,000 will happen when you have people say that bitcoin could be 200 times where it is some people do. 400 times. Make its time to buy now it could be the next amazon. Barbers ask whether you should buy it at 1,000 when those guys say buy it, it turned out theyre right and some major bankers are wrong. Youre not buying any bitcoin . No. But i like the fact were getting some price discovered. Now there are some people who say you cant short it other people who say that this market that we see is still unregulated. But bitcoin to 1 million. I dont know we had our guest host this morning. Very smart fellow. Nice to listen to this is what he had to say on bitcoin. The same way i said in 2013 i will put myself out there today, i think this thing is 100,000 a coin probably in the next three to four years and i think it is in the next 20 years a Million Dollars a coin there you go. Thats what im talking about. Good news is he didnt say its going to be 100,000 in four days. No. 1 million a coin in 20 years. A lot of people feel like its repository instead of gold. But gold hasnt taken off the way that these are if youre long, youre not going to say its going to 16,000. No, youre not. No, youre not but you dont hear people say i own it and at 19,000 i am up 190 so im going to take something off. Right. Which is unusual because if it were a stock or bond you would say im being greedy here i would like to take something off but you never hear a bitcoin person sell a bitcoin. I had a friend, he feels like a friend, he sold some bitcoin and made some dollars. You dont hear no one ever says i sold bitcoin. I dont know why that is. Like i come out and say my travel trust, we sold some facebook okay and thats not like a betrayal of facebook. Its as if i pledge allegiance to bitcoin, right . Right well, last thing on bitcoin is the s. E. C. s statement. I thought it was i want to talk to you about the market and other things. We got to move on. Am i on another show. The world social media platforms and Financial Markets are abuzz about cryptocurrencies and fortunes to be made. We are hearing the familiar refrain this time is different. At least jay clayton didnt come out with a 25,000 price target being the head of the s. E. C. I think its going to 30,000. Remember when janet yellen didnt like biotech, if she said like i tried to get gary cohen to Say Something wouldnt go there. I want him to say bitcoin is going 100. He would not talk about an infrastructure bill funded by bitcoin. Quickly on the broad market because we get to updating people on disney and fox last week i dont think people appreciated the violent moves, certainly the head fund guys i talked to. It was nasty yeah. It was almost everybody decided im worried about first in and fist o first out. It was back and forth is that where were sort of going to be for the next few weeks. Were going to settle in in another week and a half where people just buy the ones that are winners. To show how brilliant they are right i mean look we have some obvious winners. So many stocks are up 100 im doing a list its like im using all the free sheets of paper in the world this has been an amazing year. Theyre all stocks i get them i say listen, thats up 380 , you should take something off the table but theres a bitcoin attitude. People are not going to sell. Nobody sells. That is something im concerned about as is jay clayton. Jay clayton, head of the s. E. C. I know. Somebody who is going to sell. Who Rupert Murdoch looks like hes going to sell and not to comcast. No. Parent Company Network is not a buyer. Disney is. We told you on november 6th when we were first reporting on the talks between the two. Theyre on a glide path for a deal announced thursday. Thursday . Thursday. Thursday thursday . Yeah. Go days from now . Correct you have a very good grasp of a week. I stay focused. Yes, you do thursday of course, as we always caution things can go awry in the last moments here you never know you are dealing with the murdochs in particular but speaking to people familiar with the situation on all sides, on both sides it does appear they are focused on a thursday announcement disney will also be opening star wars here in the u. S. Later on thursday. Right. So it could be a busy day for disney. Disney goes to 112 instantly on this thing. Sports network was part of the you know what, theres fox. There is. Theres also 22 Regional Sports networks for which theyre going to pay at least 20 billion. They generate about 2 billion its stuff that people like you can run it on your you can you know, i come back to things here because the only thing i havent been able to share is price. Im not completely clear what i can tell you is the following at least people close to the situation indicated that fox believed the assets fox is keeping would be worth at least 10 a share. Okay. At least 10 a share. The consideration that disney is paying for all the assets its buying, that has been harder to ascertain at this point. At one point they had been talking about a deal worth at least 28 per fox share for those assets my guess its moved up since then as i have been reporting the assumption the debt is an important component as well. Well see where that number ends up as people try to figure it out. Not taxable to fox shareholders. My understanding the Tax Liability will be at spinco. What disney will be taking on and they are getting a step up on that at spinco. So it may not be as large as people may hear. Step up in phases. Yeah. But i dont remember what the number is, jim all of which take a step back. Comcast steps out yesterday and decides to publicly announce something even though they never acknowledged it previously but any trust still has to play a big role here. Comcast, the thought was vertical integration could you get it done . Would there be concern even though the assets are international . Its only nat geo and fx that would be problematic for a deal. But disney might have interests of its own with espn linking with the networks and the studios. Theres a strong case to be made it shouldnt be an antitrust issue but who knows. Well, someone could say look, you have a lot of choices now and this is going to narrow a choice and youre narrow choice argument has not been the way the antitrust look, yesterday we had the head of the ge board saying look, boom right. Theres many ways to get sports. By the way, the sports they have would fit in really well with espn and youll see more. Right theyll populate it with a lot of Different Things. The direct to consumer offerings with entertainment and sports would be aided by an acquisition of fox the avatar franchise for example added to so many of the disney franchises all of marvel under one roof. So many reasons why you could imagine. Listen, when we get the announcement on thursday which is highly likely at this point, we will listen closely not just to price. But to synergy, cost, lot of communicating on both sides. One of the reasons why i like this so much is that you will hear talk that if disney feels theres a problem with espn they combine it with fox and spin it off to shareholders. Fox sports so suddenly like the narrative, i thought whoa, whoa. Fox sports is not going with espn make sure no. Thats important because band tech, what we want ultimate fight club, we want theres a lot of sports that are on these Fox Regional Networks that fit suddenly you would have this discussion of you want local sports and you want national espn therefore, what happens is if you have been shorting disney or selling disney because of espn it might be a mistake. It might be. It might be a mistake and look, i salute both sides but bob iger is doing what you need to do when people dont think that your company has a vision hes giving you a vision and giving you a narrative and therefore, ive always said bank with him, he will figure it out. Hes not a static guy just saying hey, hit me, hit me again. He doesnt have a kick me sign on his back. As we found out last week and we reported along with others, mr. Iger will be hanging around not hanging around, staying around to oversee the integration of these assets. Again, thursday most likely but you never know what will happen. We got to go to a break so we can talk about the mall deal. Disney . 3m, boeing dow dow dow. Dow dow dow bitcoin when we return bitcoin, bitcoin. Different type of purchase now were going to talk about malls. Westfields deal has ramifications. Not just for the two companies but for simon properties, and well talk about that. Coming up. Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade all right. Welcome back transatlantic mall deal taking place. Westfield agrees to be acquired by europes largest property group. Its 15. 7 billion in cash in stock. 24. 7 billion total enterprise value. It gives exposure to the u. S. And the u. K. In a big way. These Westfield Properties are a Properties Many of them. The top sort of malls in the geographic areas to a large extent and this morning what you have got a lot of people trying to do is figure out the cap rate in other words, what is the yield from these the Purchase Price and therefore, the rents theyre getting, what does that equate to in a yield it depends who you talk to anywhere from 3. 8 to 4 overall. Lets call it around 4 to 4. 25 throw that rate on masrich which a number of years simon tried to buy which did a deal 18 months ago at this same level of cap rate where it sold 18 or so of the company. But the stock is down dramatically simon may still be interested. Dan loeb is in there jeff smith from starboard is in there and a lot saying ill take that cap rate. Ill throw it on masrich we have also got what ggp, remember, brookfield is trying to buy what it doesnt own there. A lot of consolidation. Theres a properties and then there are properties that frankly would be better centers. The big mistake were making is to not go mall and Shopping Center to mall and Shopping Center and kick the tires because some places are doing quite well and some are searslike so it really does matter whether its a or not. And we meaning the media just lumps all together i know the kimco people are terrific but theyre not a. Theyre not a simon is mixed there is a belief that he may be under more pressure to do something as of course will the management to potentially consider selling well see where it ends up theres been plenty of speculation about this in the past but this is interesting. Because they have a lower cost in capital than westfield and you can make an argument that they will be back and could buy masrich a year or two from now tabman has voting shares. Now vernado. I dont know. They have addresses but they have fabulous god, im going to Say Something i wish i didnt. Location, location, location and some of the Shopping Centers like what dom wood, federal realty has, theyre very diverse properties, dont have one kind of tenant. As soon as theres a vacancy theres someone that comes in at a higher rate. Tenants at these westfield malls are the highest and talking about the highend european retails. But like theyre an atf and this is a problem i have with atfs. We can lump everything together but the ceos would tell you theyre very, very different and the ceos are right. Its a big deal. Glad you mentioned it. It means that it dovetails with the idea that there are stores that you have to go to. 104 assets. 1. 2 billion visits annually for the properties were going to continue to watch this sector closely. Could change the story of real estate. And well talk with david berman as well broader retail he has thoughts on the malls up next though, we got jims mad dash and count dowonhe eng lln t [ mouse clicking ] [ keyboard clacking ] [ mouse clicking ] [ keyboard clacking ] good questions lead to good answers. Our advisors can help you find both. Talk to one today and see why were bullish on the future. Yours. Thank you so much. Thank you so were a go . Yes we got a yes what does that mean for purchasing . Purchase. Lets do this. Got it. Book the flights hai si si ya ya ya what does that mean for us . We can get stuff. Whats it mean for shipping . Ship the goods. Youre a go you got the green light. That means go oh, yeah. Start saying yes to your companys best ideas. Were gonna hit our launch date scream thank you goodbye let us help with money and knowhow, so you can get business done. American express open. [lagale force winds,s absolute chaos out here so you can get business done. Accumulations up to 8 inches. Dont know if you can hear me, but [monica] whats he doing . [lance] can we get a shot of this cold front, right here. Winter has arrived. Whooo hahaha [vo] progress is an unstoppable force. Brace yourself for the season of audi sales event. Audi will cover your first months lease payment on select models during the season of audi sales event. We got six and a half minutes before we get to the opening bell for this tuesday. Always enjoy talking to you about tesla. One of my absolute favorite stocks is pepsico but pepsi ordered 100 of their trucks. David, youre up to more that 260 trucks dont forget walmart ordered some this preordering of truck is news which is interesting because lets just say you were ordering some trucks from who cares. But when i see pepsico which is such a good company and walmart such a good Company Buying preordering when are they going to have the semi i dont know. Again, those who are short tesla are shorting a technology company. Im not recommending shorts or longs. But you have to be careful like pepsico or walmart cant wait to get this truck be careful on the short side i have a friend and hes absolutely got a great story on the short but the great story on the long is i can say theres a lot of preorders from Real Companies and i bring it up as how hard it is to short. We can assume the trucks will be fully autonomous too . Thats whats going to happen you would rather have that truck driven than a tired driver even though i think the rules on drivers are very good and drivers are very good. I just pointed out tesla, just when you think its about to go coba. 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Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell going to ring now. Jim, what should investors be keyed on its a different way of me asking the question as we approach the open. They have to be keyed on three. Three again im focused on this notion of managements not being static look, the range youre using is too low. That were going to blow away the numbers at the top of the range and remember like boeing what youre betting against are these Great American Companies Truly international with the International World being better i mean, boeing is getting orders from i interviewed boeing and admit, you know, last week, just last week the ceo and gigantic buyback 20 increase in dividends. These are not bonds. They raised their yield so to speak and youre betting against companies that know exactly what theyre doing. And be careful some of these ceos really get it as does bob iger by the way. Who gets it. Alex gorskys numbers raised today. He gets it the best we have celebrating 50 years of being listed over at the nasdaq. Hoopla software. Spend management platform. You know we havent talked cloud in a little while. Too busy talking we should be talking cloud and what happened is were still very early in Cloud Adoption i know people dont believe that but it is true i spent a lot of time with cloud people sanjay has taught me so much about how early we are sanjay when they hit a deal with amazon it was like holy cow, onboard amazon, you could also be with amazon david, its a revolution and we dont know it because its so spent time with the cloud people. I like the cloud people get off my cloud. Okay. Its my cloud you can have bitcoin ill take cloud. Youll take cloud yeah. I would rather have cloud. Cloud to me feels more substantial. Than bitcoin . Yeah. What would happen if pepsico said and were putting some of our cash into bitcoin instead of just all cash into our bank . You know what bitcoin would do maybe theyll buy their tesla semis with bitcoin. One corporate buyer says im going to put for a Cash Management im going to put 10 of our cash into bitcoin and thats what the bitcoin people really are waiting for it does remind me of the mania that we went through in the late 90s and whenever you said a negative thing, i remember the hate emails i would get. Do you remember that yeah. I was investigated by the s. E. C. That saying a particular company was or marcaine you know, anything bitcoin is not nearly as nasty they have been nice saying educate yourself david and im trying well, my Hedge Fund Manager and the s. E. C. Got a complaint from the company i mentioned they dont exist anymore. I remember that. And the investigation went on and on and the company closed. They had a case closed yeah. It feels like it, david, but the cmon it is. A mania. The people who talk about it though are substantial people. They are not they are. Understood understood but its still up what whoever has a lot of cash if jamie diamond were to say you know what, i spoke prematurely, again, it would be 30,000. Thats what happens. The distinction i make that we tried to make is the Underlying Technology of both block chain and the potential it has to change the payments industry in something as simple as stock trading for example or settlement which is a couple weeks ago i was wrong. Its t plus two. Instant. Instant. I dont want to minimize the implication this has for commerce. If dan shulman you know what if charlie sharp were to send me an email saying jim, we think that this is real, you know what would happen i mean, david what about custody or estate street theres all this custody stuff. There would be custody battles. What happens to their business i think they have to make a statement. They all are going to have to make a statement on bitcoin. Or block chain. Block chain is what they should be using. We saw ibm block chain in football. I missed those. Jim, our Parent Company is up. Over 3 . Shares of comcast of course, owner of nbc juuniversal because it bowed out of the bidding for Disney Disney is up because it didnt bow out of the bidding. No shortage of comcast shareholders who said you guys are serious about this and there was a seriousness or purpose in terms of comcast pursuit of those fox assets why . Well, theyre largely International Distribution 70 comes to the likes of star and a number of their other significant assets some in latin america as well. But comcast really would have liked to have had they would have argued the antitrust was minimal because what you were talking about in the u. S. In terms of the actual content assets was largely just fx and natgeo you had emerging of two movie studios but this is going to be the merging of two larger ones, disney and fox but the world is changed the question is who knows what to expect from the doj we dont know. And well have to wait and see with at t. Time warner, what happens. Will people not say it is political about cnn . Rupert murdoch is thought to be a friend of the administration. And zucker . And we had a tweet today about what the president does and does not watch on tv and how much time he spends on tv. Right well, he does watch a lot of tv but watching not the Networks People say and the fake news the failing new york times. 12 diet cokes a day i was out the other day with the ceo of coke. Nice man smart guy. Actually really smart guy. Of who . Quincy is a smart guy. Oh, of coke he must like that right absolutely. The boeing ceo was drinking diet mountain dew at 8 30. If i did that you know what the show would be like you would be having comcast oh, man im told we have some sound from the boeing ceo i dont think he was talking about mountain dew though. No. But that was an observation. Because i used to drink a lot of mountain dew now i got the call from the doctor saying listen want to take a listen yeah, i would love to take a listen thats a tv term. You know, less than 20 of the worlds population has ever taken a single flight believe it or not this year alone, 100 Million People in asia will fly for the first time we see traffic growing at 7 a year thats going to drive Economic Growth. Think about production of airplanes. This year well build about 750 commercial airplanes and be well north of 900 planes a year thats Economic Growth and economic energy. You know, great stuff out of that i like that we came back to it sometimes i think we let these interviews go after we do that its really important. People miss things like that the stock is up another 2. 6 . I use it almost bitcoin 400 over 18 months. 173 billion market value for boeing. This is not the boeing of old which is boom bust this is a boeing that cant meet all the orders they need more factories and worke workers. Thats what we want. Look at that boeing. Was right there for the taking. Boeing and fang and all our friends in technology whether it be apple, facebook, alphabet, amazon, allibaba all down all down. You dont have enough money in the market to have all those guys go up at the same time. This is that rotation that sort of seems to be one or the other. Yes, but pencil of the day. One of the dow stocks im focused on is verizon. Okay. Now verizon has gone from 45 to 52. Almost back to even on the year after having been down as much as i think 17 , 18 on the year. Nothing happens nothing can happen and your stock can bubble up and we will try to create something. Not we like the guys who own the stock. Nothing has happened with verizon. I mean im not going to say yahoo theres a note that says verizon is doing better. People focused on getting 5g. But 5g is not accruing to the company. Broadcom. Broadcom has gone down again. Why isnt qualcomm more invested. They had a big lead they were very pro 5g. Verizon is up and the yield is down of course. That always served as a bottom for that stuff. Boeing is up 9. Stepped down from the g board. You just went right back to it i snuck it in. When you were doing your mountain dew speaking . No. But i point out that you watch the network. You got the boeing it was right there. Right there. Take a listen right there fat one right in the middle of the plate. Right down the middle of the plate that i grooved it. And the guys who were shorted theyre concussed or they have an acl tear. I wish carson wentz the best of luck hes a great man anyway that is as a met fan you understand it i feel your pain. Look, i keep coming back dow stocks are just incredible i mean, goldman is up 2 bucks. Its dow or fang its never down and fang its dow or fang. Finally before we get to the broader markets as well, jpmorgan, bank america, i mean the banks were going to get a rate increase. Thats what you want if you own a bank stock Capital Markets activity has continued to be fairly volatility. Its all on the what they would have its your cash balance theyre going to make money on it really is amazing you cant have fang up and also dow. They just rotate, rotate, rotate but you know what, they always end up up. The fang less than the dow stocks. Yeah. Mattel gave us a warning yesterday. It was yesterday morning we didnt talk about it. We should have. Stock was up at least when i checked it down over 3. 5 today theres still that chance of that hasbro they should let hasbro buy it. Who is they the ma tchttel people. Are the mattel people different than the cloud people. Dont lump the toy people in. You kidding me you lumping people who play chutes and ladders or with what walmart is doing dont you dare. What would happen if the bitcoin people met the cloud people and it was a rumble kind of like an anchorman. Remember when all the stations rumble all right. I dont know i think were done over here bob, are you there bob is on the floor and has more on whats moving. Hello david historic highs, slow going in the Senate Reconciliation process. Take a look at the sectors banks are on the upside. Energy i think is the real o outperformer right now health care doing well i just want to show you brent, the shutdown of a key europe rn pi pipeline that supplies some of oil names over in europe. Your stat oils, bp are all moving i think whats important is these are big underperformers, not outperformers on the year as are all the oil stocks and a big debate among people who do asset allocations about how underperforming they would be in 2018 and are they undervalued. We have jim paul saying they are undervalued here if you look at the sectors in 2017 the underperformance is dramatic the big guys are all up 20 to 30 . Financials and technology, between them 45 of the s p 500 down 7 . A lot of people are looking at this as a play some of the biggest names out there have had a catastrophic year and after several attempts to buy them they gave up the ghost even with oil starting to move to the upside and one of the reasons people are talking about it its a possible outperformer in 2018 elsewhere about boeing we have a historic high. Talk about outperformance. Theyre up 90 so far this year. They raised the dividend and buyback but the dividend is up 20 and now in the top third of the s p 500 in terms of dividends. Most of the big guys are in the utilities and oil space but they are now squarely in the middle of their peers in the Big Industrial space, ges higher up there but lockheed 2. 2 . 3m new 2018 numbers for them. Good numbers 9. 60 to 10 sales growth pretty good organic growth 3 to 5 in local currency bitcoin, far lower volume. This time yesterday, remember they traded sunday night this time yesterday we were at 500 contracts and up almost 20 and they were down from the close yesterday at 4 00. It resets every day at that time about 500 contracts today. I anticipate youll get more action when the cme. Remember the cme is largely a Futures Exchange trading bitcoin future starting next member cebo has a futures business but about a 75 drop off in the volume today right now dow is up 112 points back to you. Okay. Bob, from the stock market to the bonds lets check in with the cme group in chicago, rick. Good morning david. If you look at a june chart going all the way back to 2008 for two year note yields, youll see the high yield was 3 which means were going to be comping back to 2008 for a long time what i wanted to reference is we clicked off another faceless point to 184 into tomorrows point expected rate increase it was about 14 bases points between the 5s, but it is something well be talking about and i think it will quickly. At some point in the next quarter or so. Lets switch to ten year lets look at september 1st of this year. See the way its moved higher but really in a tight range. Now lets have some fun. Lets bear with boon yields from the same period. That was higher than when we settled for 10 we see a lot of indirect correlation. But now were starting to separate in a big way. Lets go to the combination chart. 209, 210 base points separate us why is that important . Because much of whats going on in europe and japan have kept our rates down we were starting to buck that trend. The reason we havent noticed is because we havent gone unchanged throughout the year. Should that occur towards the end of the year it could really get aggressive in terms of selloff to the upside of yield well have to pay attention. Switch back to foreign exchange. Testing and through the 94 level again. Many think thats technically significant. Lets do another pairing and put together 10 year and dollar index and do it right before that high i talked about in october. So from 10 20 of 17 you look at the left side of the chart, starting to grab on my feeling talking to traders is they think going above 95 and going above 2. 5 are synchronized with regard to those two markets going into the end of the year back to you. Thank you rick. Still to come, taketwo interactive have doubled year to date on whats working for the video game publisher and the road ahead for the company. Well be right back. Another day at the office. Why do you put up with it . 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Yerl electric reportedly conducted an internal review, and who knew about it . Sources telling the wall street journal the investigation was discussed at a ge Board Meeting last week and its unclear whether any findings will be public this was a story first made public by the wall street journal. It got a lot of attention, jim sort of a side show to some real story, of course, ge, which we talked about so often, which is the power division, missing the market there, lack of execution. You know, when i talk to people about ge, i say so often, we all are already familiar with the failure to have bought at opportune times and sold at opportune times, but what people might not have understand was the decline, perhaps in execution. The vaunted ge way right thats exactly right that went awry. A lot of people cant believe it when you talk to people about stocks, it always comes up as being an industrial that people say jim, you love the industrials. You love boeing. People want to believe still and they want to understand. Okay, what is next is this an opportune time now at below 18. The company, look, mr. Flannery got dealt a hand. You want him so much to say, okay, this was bad, this was bad, this was bad. This has to happen instead, he just says, look, the cash flow has not been good. Hes never really identified what went wrong. And the timeline of what went wrong. Thats going to be, without that, then theres goi to ngbe continued questions. All right we have stop trading with jim coming up right after this [ keyboard clacking ] [ click ] [ keyboard clacking ] [ clacking continues ] good questions lead to good answers. Our advisors can help you find both. Talk to one today and see why were bullish on the future. Yours. All right, lets do stop trading with jim. Great note this morning out about Morgan Stanley we have been saying on mad money that these Auto Parts Companies were over done buzz of amazon death star. They are saying advanced auto parts, which you know jeff smith, chairman, is ready. Its ready to come back, raising price target on the road to recovery they dont talk about a takeout, which i think could happen, but david, theres so much low hanging fruit theyre talking about. Big bps, basis margin expansion. I really like this call. I have been waiting for it this stock goes higher okay. After a very bad year, to your point. Oh, my. All of it, but auto zone has come back. Oreilly has come back, and this needs to come back we did a lot of work on it last night. We feel very strongly that this is the cheapest advanced auto parts. I know whats coming up on mad, but tell us again v plrx wear, because cloud. You do need vm wear if you want to migrate well, and mcafe private company. I care about cybersecurity i care about hacking of, and it has been hacked before, bitcoin. It is just software. Like the rock you have the rock coming on. I have the rock that guy looked like him, didnt he . I havent thought about that. He does look like the rock a good point i bet hes a good stock picker, too. Thanks what a show go hang out with your cloud people i love my cloud people. We have some strategist people, Goldman Sachs equitly strategist, david coston whats his take for the market, coming up. Ronoh really . Gs going on at schwab. Thank you clients . Well jd power did just rank them highest in Investor Satisfaction with full Service Brokerage firms. Again. And online equity trades are only 4. 95. I mean you cant have low cost and be full service. Its impossible. Its like having your cake and eating it too. Ask your broker if they offer awardwinning full service and low costs. How am i going to explain this . If you dont like their answer, ask again at schwab. Schwab, a modern approach to wealth management. Win an uncertain world . K predictable income pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over 120 billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Welcome back to squawk on the street. Im Carl Quintanilla with michelle carusocabrera, david faber at the New York Stock Exchange saras off today dow up 104 on a pretty good day for equities well go through all of that with david kostin. Road map begins with comcast out announcing it has no longer bided for the 21st century fox assets, paving the way for disney, potentially this week. A red flag for bitcoin. The fcc warning investors of the dangers of putting their money in crypto currencies this has bitcoin edges closer to 20 thrown. And its election day in alabamas controversial election well take you live to birmingham for an update stocks open mixed this morning. The dow and s p in positive territory. The nasdaq in the red. All as republicans work toward passing that long awaited tax bill before the end of the year. For more, were joined by Goldman Sachs chief u. S. Equity strategist david kostin. Always good to have you. Thank you goldmans take has been relatively optimistic this gets done, if not by the end of the year, then certainly by early next year, right correct thats led you to calls such as Information Technology a few weeks ago, ahead of that weird rotation out of tech an expectation looking into 2018 is very optimistic. Its optimistic from an economics perspective, from a corporate profits perspective. Thats all to the positive expectation is the s p 500 will rise to around 2,850 by the end of next year thats sort of a positive trend behind it. In terms of the relative performance under the service, you expect, reference technology, and from perspecti perspective, they are a potential net loser in a sense they have low tax rates right now. They could face incremental tax rates given they have such a large percentage of their sales take place overseas and some of the details of the tax reform. So an area of preference right now for me would be industrials and financials, as two areas that are more positively positioned with respect to tax reform i think really the Biggest Issue is the market has absolutely been embracing companies that are investing for growth that are leaning in to growth, whether thats through cap x and r d, from an m a perspective, theyre spending cash to grow the business thats more fundamental than the tax issue in my opinion. How strong is that going to be next year forecast is around 8 increase in growth in Capital Spending and 8 increase in r d, to put numbers on that, thats a trillion dollar. 1 trillion of cash will be spent by s p 500 companies to grow their businesses organically in cap x and r d, and another 6 growth to grow inorganically via cash spending and m a. Where do you get to the 1. 5 trillion are you just making that up . How do you get to that number . We do a lot of detail obviously im kidding with you to a certain extent. We had ceos on the show, we asked them numerous times given how important this is and the arguments of the administration, nobody seems to say theyre going to do that gary cohn was in a room, raising their hands, few ceos raised their hands. What is the rigor behind that assumption when we analyze and forecast the statement of cash flows of the overall market, individual companies, and look into next year, ceo confidence is very high you have some of the other metrics, the National Federation of independent Nfib Small Business index right now, the highest its been in 40 years. It hit this level essentially in 1983, a little bit in 2003, and where we are today those are three markers over the last 40 years. So when you think about modeling it, its ceo confidence, economic activity, the idea of spending on capital. This is the largest share of corporate spending takes place through cap x. And that remains the case. You think its going to increase by an enormous amount as a result of these repatriated funds. The issue is Companies Profits are growing, so high quality problem. What should they do with the money . Isnt it just buybacks and dividends . If Companies Outperform over the long term, but thats not consistent over every period of time and for the last year, theres been a definite embracing on the part of investors to reward companies that are leaning into growth investing in cap x and r d as a result, more companies are encouraged to do that. On the other hand, companies that for a number of years were rewarded for distributions of cash in the form of buybacks and dividends have not been rewarded thus far this year in particular you think the companies are going to recognize this and change their behavior to a certain extent it depends by category. So if we look at the industrial area, that is a group of stocks, an area of the economy that will be benefitting from Capital Spending on the other hand, Goldman Sachs, we just had our financials conference last week. My colleague did, our senior banks analyst. The feedback there was that companies would be returning even more cash to shareholders with dividends in buybacks within financials, that is a preferred use of cash, but broadly speaking, companies are leaning into growth. They have done well. Theyre continuing from a stock performance, and return on capital is good. Youre optimistb about 2018 how much of the growth that you see in the underlying averages comes from just bottom line increases to the bottom line because of the tax cuts . Whats that going to add to eps, and how much more are you building in if at all for any kind of multiple expansion the answer on the multiple expansion is nothing expectation is pe multiples will stay flat. And they wont contract not expecting a forecast in decline. In terms of the broad thrust of growth, how much of that comes from tax reform, how much comes from underlying Economic Growth, a forecast for earnings per share for the s p 500 next year, 150 a high level on the street 150 thats up almost 15 from last year or from 2017 to 2018 and about 7 of that is coming in the form of tax reform. And that depends, obviously, on some of the details that remain yet to be finalized. But broadly speaking, that is it enhances the growth rate. You want to think about nominal gdp growth you have real gdp growth in the vicinity of 2. 5 you have inflation a little less than 2 approximately. That would give you about 4. 5 nominal gdp growth domestically. Thats what drives the revenues of most companies. On top of that, you have margin expansion, which would come only in the form of tax reform. Lower tax rates will generally lift some of the profits now, you famously said at this desk that flat was the new up earlier in the year, before we knew we were going to have this package why is all this good news youre describing not already priced in well, its likely to continue i think the analysis would suggest that with consumer confidence, highest its been 15 years. Small Business Confidence als high optimist high on the part of ceos that is consistent with further economic expansion and Profit Growth Companies Looking to spend their money to grow the business that would be consistent with over the next several year s earnings grows with respect to the question earlier about the pe multiple being flat, its an earnings driven market as opposed to a pe expansion driven markets. 2850 for year end 18 do you see this midyear trough that some other macrostrategists are calling for . Its stronger earlier part of this year. The path towards 2850 will be front end loaded, if you will, in the first quarter, if you will thats the steepest slope in the trajectory cant wait to read your new report, david. Thanks for coming in david kostin of Goldman Sachs. Thanks. Late yesterday, our Parent Company comcast strangely, you might argue, put out a Public Statement saying it was no longer interested in bidding for the fox assetst that we have been reporting are for sale for some time now. Comcast had been actively trying to buy those assets, which include a large portion of which are International Distribution, of course, 70 of the assets for sales in fact contributed by international. One reason why comcast had a Significant Interest in pursuing it theyre no longer there, and as we reported in the last hour of squawk on the street, fox and disney are on a, quote, glide path for an announcement of a transaction for thursday under which disney would buy the fox assets that we have spent so much time already talking about in terms of what they are, whether its the studio, the net geo, 30 of hulu, and on from there, the studios and everything else. And the Regional Sports networks well see. Of course, gliding doesnt necessarily mean youre there. You havent landed safely, but that does appear to be the case, and it will be incumbent upon both companies to communicate with their shareholder basis around a fairly complex transaction that will include fixed shares to each fox shareholder for the assets disney is buying, and then the spun assets, those that fox is keeping. Mainly its sports, its Fox Broadcasting network, fox news, fox business, into spinco, which will have, im told, the Tax Liability there. This is tax free to fox shareholders and the numbers that i have been hearing from people familiar with the situation, value that business around 10 a fox share. Most importantly, though, will be what the value of the remaining businesses are on a fox per share basis. Dont have that as of yet. Well be more than at least 28, im told, carl and michelle. But they have it nailed down i dont have it nailed down. Got it. You know what. One corner of the world thats very interested in this deal, all the comic book fans of the world. You know, because potentially mean the uniting of superheroes in nearly all one company, the avengers, guardians of the galaxy, disney owns marvel, but fox kept fantastic four and xmen. Those are powerful franchises. And it could represent an important future stream of revenues for disney. Toys, games, all that stuff and the direct to consumer offering, which is going to be so important for disney when it rolls it out on both entertainment and sports in 2019 fascinating star wars coming out. Thursday. Going to be a big day for disney i didnt know you were such a franchise fan. I love star wars. 8 years old and watching the bar scene. Probably not, but i just remember being so startled as a kid to watch this, like wow, this is amazing. Its going to be a big week if youre a star wars fan. My mom let me skip school for the return of the jedi the ultimate. When we return, voters in alabama heading to the poll as special election day gets under way. Well tell you whats at stake later, well talk to the ceo of the largest cloud Mining Company. Hell explain how Bitcoin Mining works and why it matters dow up 89 points on this tuesday morning. Squawk on the street will be right back awg. That was just aight for me. I mean, you got the walk. You got the stance. But i wasnt really feeling it. You know what, im not buying this. You gotta come a little harder dawg. You gotta figure it out. Eh, i dont know. Shaky on the walk, carriage was off. Randy jackson judging a dog show. I dont know dawg. Surprising. Whats not surprising . How much money lisa saved by switching to geico. Wow performance of the night. Fifteen minutes could save you fifteen percent or more. Wow record time. S. At cognizant, were helping todays leading Life Sciences companies go beyond developing prescriptions to offering subscriptions with personalized, realtime advice for lifelong, healthy living. Honey . You almost done . Nope. Get ready, because were helping leading companies see it and see it throughwith digital. Capital founder was on squawk box this morning, had interesting comments about amazon and clarified whether or not he thought it was a monopoly that to me is what i think about as a natural product monopoly it is a thing that now compounds every day slightly faster than the day before its by no means a market monopoly because there are other alternatives, google, microsoft. In china, you have alibaba and t tencent, but its a thing in my opinion that just continues to run. That comes after omegas Lee Cooperman says the president asked him point blank if amazon was in fact a monopoly i guess hes made comments about this in had past i think today he was trying to clarify in terms of a Legal Definition clearly, when cooperman says the president is asking him about whether or not amazon is a monopoly, the president has been critical of amazon, and we look at whats happening with mergers and acquisitions and what the doj is going to get involved with or not get involved with, all of it starts to point to whether or not, what do you think of amazon legally. And i think he wanted to make sure that was not what he was trying to say. A hard monopoly case, but a market power is the most significant. John malone in my interview with him a few weeks back referred to it as the death star, which you can identify back given youre a star wars fan. Absolutely. In a way, it sort of sums it up, when the death star moves into your market, you probably want to be well aware of they could eviscerate you this guy were running the doj when amazon originally proposed the acquisition of whole foods, would that deal have actually happened its hard to imagine you could oppose it on any antitrust laws that exist, but then again, nobody would have anticipated at t time warner alabama holding its special election today, filling the senate seat left open by Jeff Sessions it has been a controversial race with candidate roy moore at the center of it all john harwood is in birmingham, and he joins us with more. Hey, john. Michelle, its been controversial, unpredictable, and its very, very important. Now, the elections likely to be decided today in large part in places like this a Baptist Church behind me in thebirmingham suburb of Mountain Brook its an upscale suburb doug jones, the democratic candidate, voted here a short time ago hes got a chance. Even hoe democrats havent won a senate race here in a quarter century, because hes running against roy moore. This is a republican candidate, divisive within the party, someone who was booted off the Alabama Supreme Court twice, who has been accused of molesting a 14yearold girl when he was in his 30s. Now, donald trump has swung in behind roy moore he tweeted out this morning that alabamans should go vote for roy moore, that hes better on crime and a host of other issues than doug jones and what weve got are polls that are all over the map. Look at these polls in the last couple days before the election. You had a poll from fox news that showed doug jones ahead ten points you had a poll from Emerson College that showed roy moore up by nine. You had a third poll from monmouth shows its a tie. What makes it so unpredictable which nobody knows who is going to show up and vote in a special election, but the stakes are g significant because if doug jones wins, that shrinks the republican majority from 52 to 51, where theyre trying to push the trump agenda through the senate and even if roy moore wins, democrats are going to try to hang him around the necks of other republican candidates next year, so in that way, its a lose lose situation for republicans. And well know in a few hours which side is coming out on top for today. All right john, thank you. John harwood reporting from alabama. When we come back, a transatlantic mall deal, westfield, agrees to be purchased for 24. 7 billion. Enterprise value about 15. 7 in cash and stock from europes uni buy. What it means for e thstate of retail, and well talk about a lot of other retail topics with our retail expert david berman coming up next this is a financn secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for business. Yours. Well, itsonce again. Eason yeah. Lot of Tech Companies are reporting today. And, hows it looking . I dont know. Theres so many opinions out there, its hard to make sense of it all. Well, victor, do you have something for him . Check this out. Td ameritrade aggregates thousands of earnings estimates into a single data point. That way you can keep your eyes on the big picture. Huh. Feel better . Much better. Yeah, me too. Wow, you really did a number on this thing. Sorry about that. Thats alright. I got a box of em. Thousands of opinions. One estimate. The earnings tool from Td Ameritrade. Let out your inner child at the lexus december to remember sales event. Lease the 2017 is turbo for 299 a month for 36 months. Experience amazing at your lexus dealer. What we do every night is like something out of a strange dream. Except that the next morning. It all makes sense. Fedex powers Global Commerce with vast, farreaching networks. Deep knowledge of industries. And, yes. Maybe a little magic. Hedge fund focused on the Retail Industry accurately predicted the secular decline of brick and Mortar Retail more than four years ago. In fact, he did it right here on this show. Even as that decline continues due to the dominance of amazon and wireless connectivity, there are still opportunities to buy retail stocks. Including right now. David berman joins me right now. You can have pockets during this big decline, cant you you famously predicted it some time back, the rise of saa, as you like to call it, samsung, amazon, apple, what that meant right now, things are good for retail things are the best in traditional retail than they have been in over ten years. Its kind of really sounds weird to say because you have amazon, samsung, and apple, but their growth rate is 26 right now the growth rate that we are seeing, and q3 hasnt finished so these are numbers hot off the press. 3. 7 right, so there we have it divided. Theres traditional, up 3. 7 thats a big number for traditional. Mind boggling by the way, the total of 7. 1 , and i think thats the biggest story today, frankly, is that were seeing a 7. 1 increase is the highest increase in retail we have seen in over ten years you track these things, i know, very, very closely we summarize every retailer every quarter. So whats going on . Is it just the strength of the consumer its a bunch of Different Things i think the main thing is the strength of the consumer 3. 7 is very powerful that is up from 1. 5 in the first quarter. So when everyone thought retail was falling apart, it was up 1. 5 the stocks got clobbered index were down. And then, of course, in the second quarter, that bounced from up 1. 5 traditional retail to suddenly up 3 . There was a double increase in total sales which i think the market misses because the stocks didnt go up immediately when we spoke two or three months ago we spoke on the phone yeah, and this group was ready to wrap, and for four reasons, really, which were seeing now can it keep going this rally, because were seeing traditional names. I think of macys, which suffered so much up 35 in the last month or two. 35 . Can that keep going costco is up 25 , the gap is up 15 abercrombie and American Eagle are up more than 50 a massive move in a short amount of time, but for good reason people started to figure out the images are well controlled, b, the sales have doubled or gone higher than that since the low of q1. You have the best of all those right now. The problem is that the stocks have had a huge move so in terms of entering the market at this particular point in time, only good news for these companies through christmas. A really strong christmas, as we have been saying for two or three months now stronger than people expected it to be, because everything is risen from the consumer. The consumer is really strong right now. Strongest in over a decade. In over a decade. Mind boggling because amazon, obviously, working together with the ability to buy online and more than 50 of sales coming from cell phones and things like that, so they work together, amazon, apple, and samsung whats happening is that the sales are up 26 year over year. If you look at the base, its kind of really weird, isnt it normally when you have a big company like amazon and the base is not high, the growth rate is expected to reduce its gone up in the last few years. Its remarkable. So i dont want to sound like im this big bull on retail. And also, a secular decline you discussed with us many years ago is still in motion 100 , and its going to be for Retailers Next year as well, because the 26 increase, imagine that number, even if its 20 or even 15 next year, thats got to come from somewhere. So i think the retailers are getting a bit excited to some degree, maybe the stock is ahead of itself. Who knows that because the near term news will be good, but we have to be careful because the stocks are, the Retail Business is strong for two reasons, maybe three reasons that wont happen next year. Number one, comparisons are really easy. Number two, the way theyre compared makes a big difference this time of year. Last year was unusually warm now its cooler than last year thats good for sales. Sweaters and things like that. Thirdly, last year you had the election around election time, in early december people pulled back. Really bad. Youre up against those really easy comparisons and an extra day now for christmas. All is looking good for the christmas holiday. Beyond that, we have to be careful for minefields lets turn to the big deal today. Retail does bleed into those that house the stores. You know the family behind westfield fairly well. Interesting deal, large deal people have been very focused on the mall owners also suffering many of them have come down similarly as this idea of retail started to go away in brick and mortar are you a believer in that or a deal you have some sense i have been in touch with infamily frank is a legend in building the company from scratch, and his son steve is doing a great job running it steve is running the company, and in terms of who is going to run it next, theres no obvious person to take over. I think the deal makes a lot of sense on many fronts steves done a great job because there are more people think theyre falling away i think the opposite of that i think youll see theyll start to do better over time if you go right now to the Century City Mall in los angeles, you know, youll see that you cant find parking spots. They spent 1 billion plus fixing it up people want to go to stores, they want to see the good stuff. Whats really interesting about the malls and this is interesting, is to make it more entertaining, malls used to be under 10 was food now, 30 30 of that particular mall, the century three mall is food remarkable finally, for years we have been talking about the decline of sears we dont get into too many names here, but you have been outspoken in saying this thing is done. Yet it still lives baffles the mind. We have been talking about this going under for a long period of time how does a company losing a billion in cash every year survive. A lot of equity holders pay anything for that. I understand they could sell this, sell that, get rid of this and that, but this company has up rating margins down 20 right now. How do you ever get how do you recover from that . Comps are down 15 just failing and you know, thats not going to be around much longer and the others that have a lot of trouble as well i expect to see a lot of things blow up. Its like a minefield. You have to pick your spots, whos going to do well or not well jcpenney also theyre in a bad spot a lot of companies are Closing Stores tons of store closings which helps everybody as well. But there are certain areas where amazon in particular is really hurting for example, books continue to get hurt vitamin shops and nutrition continue to get hurt now youre seeing selling online maybe youre seeing some of the nike and foot locker and retailers getting hurt williams and sonoma startingto get hurt youre starting to see blowups, and big blowups theyre not small. We have to leave it there for now. We know youll be back appreciate it always a pleasure david berman thank you very much lets get over to sue herera and get a news update back at hq good morning, everyone. Heres whats happening at this hour new York City Police have charged subway bombing suspect akayed ullah with supporting an act of terrorism, making a terrorist threat, and weapons possession federal charges are expected to be filed later today the International Climate summit getting under way in paris. United nations special envoy for cities and Climate Change former new york city mayor Michael Bloomberg says the u. S. Will meet the emissions reducing target it set two years ago. Together, were going to meet the goal that this country set in paris by reducing emissions by at least 26 , and there isnt anything that washington can do to stop us quite the contrary, i think that the President Trump has helped rally people who understand the problem to join forces and to actually do something. Clashes continuing for a sixth straight day between palestinians and Israeli Soldiers in bethlehem following President Trumps recognition of jerusalem as israels capital. Violence has rippled across the region following the move by the president. You are up to date thats the news update this hour carl, back downtown to you see you next hour. All right, sue. Thanks so much when we return, the ceo of Genesis Mining is with us. Hes going to explain why Bitcoin Mining matters, discuss cryptocurrency regulation and more were a little over an hour into the trading seiossn. Get a quick check on stocks with the dow up 90. Dow and s p up for their foirth consecutive day. Well be right back. [monica] whats he doing . [lance] can we get a shot of this cold front, right here. Winter has arrived. Whooo hahaha [vo] progress is an unstoppable force. Brace yourself for the season of audi sales event. Audi will cover your first months lease payment on select models during the season of audi sales event. Why did you take Credit Card Debt on . Second kid. Private school. Medical bills. Moving costs. Solid ground. A personal loan from sofi is a smart way to consolidate Credit Card Debt. Certain borrowers cut their credit card Interest Rates 42 and increased Credit Scores 17 points on average. Borrow up to 100,000 with low rates and no hidden fees. Find your rate in just two minutes, and take on your debt at sofi. Com. Bitcoin continues its march higher along with lesser known Digital Currencies like ethereum you can see ethereum, how its trading higher by about 6 jay clayton warning there are tales of fortunes made and dreamed to be made were hearing the familiar refrain, this time is different. But one less understood part of the bitcoin market is mining how is bitcoin actually mined. That was the warning from s. E. C. Chairman jay clayton lets talk to one Bitcoin Miner and see what he thinks about that joining us is marco streng, this is the Worlds Largest cloudbased Mining Company good to have you here. Thanks for having me. Before we get into what jay clayton just said, can you tell me what it is you do i understand you mine bitcoin, but are you doing it on behalf of yourself and the company, or do you provide a service that, for example, if i wanted to buy bitcoin, i subcontract out to you and use your Computing Power to do it yeah, so the fundamental innovation behind blockchain and currencies is decentralized system in order to be decentral, you need to have a decentralized validating mechanism and miners are there to validate transactions in a decentralized base comparing it to credit cards, mostly, they have a central entity system to validate transactions now with bitcoin and the blockchain information, thats why the miners are there its an essential part of the ecosystem. Im going to ask you another question, we are struggling to understand you because the connection is not very good. But im not sure you answered my question you did an explanation of why you believe in blockchain and what its good for we have heard that a lot you know, if jane here on our screen wants to get some bitcoin, she can turn to a miner like you a block is added to the chain. If anybody can understand what that means, a check for accuracy, and jane earns bitcoin. What i dont understand, what are you doing . Are you mining bitcoin on your behalf or doing it for the janes of the world and charging them a fee . Michelle, mining is an essential part of the blockchain system of blockchain in general and miners are validating Blockchain Transactions in a decentralized way. And its for the system. So the miners are essential, and i buy bitcoin or cryptocurrencies or you can mine, very comparable analysis to gold. And yeah mining is a more stable way how do you make money, marco . How does your company make money . Well, i mean, i think its not primarily about the money. Its also about obviously securing the system. Miners are essential for blockchain its the essential infrastructure and the essential backbone of the whole system and there are certain types of miners there are miners that are mining you can mine this is something we have heard quite a lot of we really appreciate it, and appreciate you joining us. Were trying to move the ball more forward beyond the philosophical basis of which we have heard a lot about for the last several weeks thanks for joining us, marco thanks for having me. You have truly gotten tired of the not sure about bitcoin, more confident in the underlying blockchain technology. Right i mean, have you heard that for weeks . About 1,000 times i think i have said it a lot. Okay. I mean, i believe in the internet, but maybe not pets. Com you know i dont know i just i want very much to understand this. Of course right all viewers do. I asked yesterday. Im going to ask again were going to look back at the last three weeks affwhat we have been doing and saying, wow, that was katie couric asking what is the internet, or more akin to, god, we rwere right to be skeptical about all of the stuff that was underlying the Mortgage Market at the time we have this discussion after almost every show now. Did we help . Are we helping right are we feeding something that were going to regret later. Its really difficult. We had a guest on yesterday that to me wrereeked of a coniv barker you dont get it, you dont understand, youre too old those of us who lived through the dotcom boom can remember those days, and if your point, it wasnt as if it was an incredible moment in time where the internet was this lifechanging event, but there were thousands of companies that were very much overvalued to say the least. Right lets talk about a different kind of company. 3m, so not bitcoin 3m shares, they have turned negative during the session. They had opened higher by more than 2. The ceo meeting with analysts to discuss the outlook for next year seemed good, said theyre going to make 9. 60 to 10 a share in 2018 they thought they were going to guide to 9. 50 a share tighter, more confident range on the part of the ceo. The consensus is at 9. 63. Regardless, 9. 60 to 10 a share represents Earnings Growth of 10 next year. Also, Sales Guidance is good the sales growth estimates good. 3m thinks theyre going to go 5 to 7 next year. I spoke to the ceo ahead of the meeting with analysts. He emphasized a couple things. First, continues to prune the portfolio. Sold a business to corning yesterday. Focusing on where they can generate higher margins. Confident in chinese growth for the next two years huge market for them sees a lot of opportunity there, for example, pollution control and business water filtration. And what i find most interesting, the opportunity in selfdriving cars. They call it the electrification of cars. Number one for traffic safety, ie traffic lights. They have been in the Automotive Industry for 100 years as we see this merging where cars have to communicate with the road, with signals, with signs, et cetera, this is potentially a tremendous lever for the company that hes excited about. At least 88,000 skus. Individual product models which is why theyre often called an economic bellwether, and the high price means they do move the dow. Absolutely. Some analysts have argued its too expensive. If theyre going to make 10 a year, its easy to do what their multiple is, right now 24, which is a premium to the market and theres arguments about whether or not its justified. Well, jim cramer, of course, who i spent the last hour with, is very much in favor and is a true believer and believes some of the research out there. The growth story will win through. Got a lot of attention because that guy was also early and negative on ge correct so is he correct about 3m is the question we thought a lot about this you can think about these Big Industrial comglomerates they built such a franchise, and how important is the execution of the ceo, et cetera. Then you see ge, and oh, yeah, its really, really important. As we go to break this morning, take a look at shares of tesla and pepsico saying the company has reserved 100 of teslas new semi trucks, the largest preorder of those vehicles to date stocks at isth hour up 104 led by boeing, verizon, and ge squawk on the street will be right back is the monolithic view of emerging markets obsolete . At pgim, we see alpa in the trends, driving specific sectors of out performance. Where a rising middle class powers a booming auto industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Everyday our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. One veteran tech investor reveals what stocks he sees posting double digit gains next year check out our interview at tradingnation. Cnbc. Com more squawk on the street coming up. I think we should do that meeting tomorrow. Well wait. What did you think about her . Its definitely a new idea, but theres no business track record. Well, have you seen her work . No. Is it good . Good . At cognizant, were helping todays leading banks make better lending decisions with new sources of data so, multiply that by her followers, speaking engagements, work experience. Credit history. That more accurately assess a business chances of success. This is a good investment. Shes a good investment. Get ready, because were helping leading companies see it and see it throughwith digital. Lets hop over to the cme group and get the Santelli Exchange with rick santelli. Hey, rick. Thank you, carl like to welcome my first day of the fed twoday meeting guest, bob heller thanks for taking the time good morning. Good morning. Well, first of all, lets start at the top what are your thoughts on tomorrows fed decision and of course press conference . What do you think well see . What do you think well hear well, everybody has agreed that there will be a quarter percent increase as far as the conference is concerned, everybody will try to ask the outgoing chairman what the new chairman will be doing, and in addition, offer her many congratulations on her successful fouryear term. Now, when it comes to raising rates, there was a time not long ago where bank profitability, the complexion of the yield curve, all of these things were highly correlated. But now when you look at banks, they have a lot of floating liabilities and exposure matched with their assets. Credit card debt is 1 to 1 with regard to increases in rates mortgages are susceptible, and savers seem to get the short end of the stick with regards to how often the rate increases help whats sitting in their savings account. Your thoughts on all those issues, bob. What you said is very much true for larger banks. That rely to a great extent on trading, on Investment Products and things like that, for their overall profitability. For small and mediumsized banks, the yield curve is still extremely important. And as the longer rates go up, short rates, deposit rates still are close down to zero, so that widening spread is very profitable for small and mediumsized banks really, its sort of the savers that seem to be paying for part of that it seems as though they have been paying for a lot over the last eight years how much more room do you think jay powell, the new incoming chairman, will have, bob, with regard to rates . We already have 5s and 7s within 13 basis points of each other. At the short end, i think theres still a lot of room left if you look at short rates right now, theyre pretty low. They dont even compensate for the inflation that is there right now. The fed pays you 1. 25 , pretty soon, 1. 5 , and inflation runs at 1. 7 , maybe closer even to 2 so theres still a negative yield on cash itself and i think its importantfor the fed to push that short end up so that people will again get a reward for keeping their money in their checking account. All right, bob. I want you to react to something. I really scratch my head when i read this in the wall street journal today theres an article that says that basically webdriven Comparison Shopping is keeping a lid on inflation, complicating the feds mission. Boy, you know, i tell you what i wonder what Milton Freeman would say to that because it doesnt sound like the type of inflation he used to describe and the type of inflation that the fed used to try to control once again, it just doesnt seem congruent that lower prices of verizon in Comparison Shopping is a bad thing the fed needs to combat your thought youre absolutely right Comparison Shopping is a good thing, and i dont understand the argument its maybe a problem that the bureau of labor statistics has as far as they design their samples, but what could be easier than just going onto a website for amazon or best buy or whatever company and look at the numbers and see, hey, thats our inflation rate there have been enormous discounts before the holiday season, as usual, so i dont think all that much has changed. But i think the people who are designing this price statistic survey, they got to pay more attention to the market. Excellent bob, always a pleasure to hear your thoughts. David faber, back to you thank you very much, john fortt with a look at whats coming up on squawk alley. John david, Take Two Interactive stock has more than doubled so far this year. Coming up, the ceo will be here with us at post 9 to figure out whats next for the maker of nba2k. Thats coming up on squawk alley nobodys putting their money into equities. Theyre not investing in commodities or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. The fed kicking off its twoday meeting today. Steve liesman joins us now with exclusive results from the cnbc fed survey hey, steve hey, michelle i want to show you what our fed survey respondents think about the outlook for the stock market and they say no more double digits is their outlook here take a look where we are now, they expect a 4 return by the end of next year to 27. 75 and up another 3 , but be warned, this group has not done a very good job of predicting stocks they do much better with the fed fund rate, economy, bonds, but not so much with outlook for the stock. They have been chasing this market higher in their forecast. That said, scott ren, Global Equity strategist says this we have right there, u. S. Stock valuations are getting frothy unless you assume margins will expand and Earnings Growth will accelerate meaningfully. We have a lot of people making that kind of commentary. Heres the bond outlook on the ten year they dont think we go negative or flat on the yield curve they think 284 on the ten year, another 50 basis points and again another rise for 2019. 3. 24 is the outlook for the ten year and this question about how concerned the fed is with current stock market valuations, should the fed raise rates to cool markets, 66 say no, dont do it, but 68 say your average beneficial is somewhat, not very, just somewhat concerned about current market valuations. With the idea of great forecasters, take a look at their outlook on bitcoin we asked about the valuation is it a bubble 80 say yes, it is a bubble. Just 2 , i guess thats one respondent of our 44, who say it is based on fundamentals and 17 might be the most honest of all, they dont know, they are unsure is bitcoin a currency, 17 say, yes, it is a currency. 66 say, no, it does not qualify as a currency. Guys, we have all these results online at cnbc. Com carl, back to you. All right eye opening, steve, thank you very much. When we come back this morning, Take Two Interactive is up 120 this year. The ceo will join us live at post 9 when squawk alley begins in just a moment. This is not a cloud. This is a car protected from storms by an Insurance Company that knows the weather down to the square block. This is a diamond tracked on a blockchain protected against fraud, theft and trafficking. This is a financial Transaction Secure from hacks and threats others cant see. This is a patients medical history made secure while Still Available to their doctor at their fingertips. This is an asteroid livestreamed to millions of viewers from 220 miles above earth. This is ai trained by experts in 20 industries. Your industry. Hello. This is not the cloud you know. This is the ibm cloud. Designed for your data. Ai ready. Secure to the core. The ibm cloud is the cloud for business. Yours. Their leadership is instinctive. Theyre experts in things you havent heard of researchers of technologies that one day, you will. Some call them the best of the best. Some call them veterans. We call them our team. Welcome back to squawk on the street. Im dominic chu. Markets are mixed with the Technology Sector as one of the biggest laggards on the day, at least so far Semiconductor Stocks one of the decliners. Advanced micro devices, nvidia, all of those names semiconductor etf, that ticker is on pace for one of the worst days in over a week. Remember the nasdaq has been assuming a leadership role in the markets over the course of the past week. Semiconductor stocks have been lagging some of the most it will be something to watch in the coming days. That does it for this hour of squawk on the street. Back downtown to the New York Stock Exchange for the start of squawk alley. Guys, back over to you, carl thank you very much good morning, it is 8 00 a. M. At facebook headquarters in menlo park, california, 11 00 a. M. On wall street, and squawk alley is live. Good tuesday morning, welcome to squawk alley. Im Carl Quintanilla with john fortt, sara is off today joining us this morning, professor at nyus stern school of business. A lot going on today a very bullish call from former facebook executive on bitcoin earlier this morning take a listen. Same way that i said in 2013 put 1 of your net worth in bitcoin, i think this thing is 100,000 a coin probably in the next three to four