Transcripts For CNBC Squawk On The Street 20240713

Brent at a threemonth high, gold at 15. 12. The year end rally, the s p biggest yearly return in seven and nearing its best gains in more than 20 years. Plus ecommerce sales hitting a record, amazon saying billions of items ordered world wide. Boeing still on watch, new documents revealing whats being called quote very disturbing revelations. As 2019 heads into the home stretch, all three major indies says are on track for a fourth straight month of gains. They have surged as last months selloff we remember december 26 when everything rallied 5 . We were bottoming that horrible Christmas Eve when we had first concerns about a tariff war increasing. Then we had the Federal Reserve raising rates on the 19th. That created a cascade, four down days in a row culminating in the down day on the 27th, on the 24th and turn around today. Meanwhile, the year, if you look at the percentage of up days, almost 54 , which is i think only the folks said only five years since 1928 have you had a more consistent pattern of up versus down days. One of the things about the rally is the breath is there, sometimes analysts will complain there is a small relative markets moving forward, big cap stocks have done well, microsoft and apple, the broad market advances, many days twotoone, threetotwo, so when have you new highs on the advanced decline list on top of new highs and the indexes, thats a very powerful rally hi carl. Hi david. Into is to see you i hope you had a good holiday, a good christmas bob, nice to see you here as well its been an interesting year from a macro perspective we started this year as you say with the federally in a hawkish position we end with a much more dovish tone and china conceivably at least if you listen to the president , a deal will be signed phase 1 very soon as we head into next year at least those two concerns that dominated the macro outlook this year have abated its what i call the four horsemen, number one the trade truce, its dominated up and down number two the Federal Reserve no longer hiking, cut three times, now neutral adding liquidity since october people under estimate, the market started moving all around in the beening of october, liquidity concerns, lick quiddity issues were dealt with, markets started moving up with homes of a trade truce and finally hopes for a bottom in the Global Economy we had new highs in the european indexes, new highs in japan, all on homes, those could reverse those four factors moved stocks this year. We know the consumer will drive the u. S. Economy, market returners and amazon says it broke all prior records for the season citing items sold world wide, mastercard says overall retail sales up 3, 4, record high growth of almost 19 . Amazon didnt give us too many specifics, grocery delivery 2 x year on year, one week, 5 million new prime memberships or prime trials its really been remarkable i think the most important thing about this year is the winners and losers we like to talk about Retail Stocks being rallying in the last couple of months, really, though, its a very small group. If you look at the numbers, you see target, best buy, costco, ross stores, walmart, theyre the leadership groups. What do they have in common . Theyre discounters, best buy is the bit of an exception. Whats the lag guards . The apparel, laggards. The apparel, nordstroms, kohls, gap, l brapdz, macys. Its hard to describe these companies are not anything close to what they used to be. I think thats the real statement here even though the consumer is good, there is very obvious winners and losers the journal with a piece out today saying tear 1 malls are starting to feel the pain, which has people focusing on the simons and the nathans the forever 21 bankruptcy there have been the 50 malls considered top tier have been thought to have been at least somewhat insulated given their diversity of restaurants which attract people and high end retail particularly in the communities which they are based. This trend keeps going gap, give them break that i need that extra 2. 5 billion. Macys the loser of the year. Yeah, macys is shocking at 4. 9 billion and of course the yield. Actually below 10 now only 9. 37 is the dividend on macys. We know its been a difficult year based in the malls. Its hard to see anything that gives a sign that its going to change when we look at the number, certainly coming out of christmas. Of course, people were hopeful that sales per square foot might increase. In weird ways theyre looking at the metrix i think the important thing is because you can add a new tesla study for example if your mall doesnt mean you are overall necessarily going to make a huge difference there has been all sorts of things tried i love restaurants, alternative events, entertainment, niles water slides i vote for that. You like nice water slides . We got to get people in medical complex. Going down the water slide carl, it has been interesting. Of course, we mentioned many times, amazon under performed the Broader Market s p up over 28 . Shares up 21, 22 this year. Retail, of course, continues to cost given the focus so much of the focus on same day or next day delivery there and what that will cost, the building out we all know of the own delivery network. Aws is certainly the profit bribeer of that company. Dont forget, this year ended with them contesting the decision by the pentagon to award that important contract to microsoft as opposed to the jedi contract to amazon theyre saying, hey, that you were playing favorites in a sense, trying to follow the lead of what they believe the president was saying given all the attacks hes had during the course of the year of jeff be ezos, the Washington Post and amazon, break down all the retail numbers is brian nagle, senior retail analyst. Thanks for coming in thanks for having many e. Lets start with the mastercard, three on four would you argue towards the low end of estimates or not i think thats basically in line we are kind of the midpoint of that obviously within those numbers which you were talking about stronger online sales even in store sales is up slightly 1. 2 which is overall positive. You couple that with tiffany said about mainlined china, hong kong and japan, what itself overall tone to you right now . Look, i there i the tiffany report right now is interesting. It doesnt mean much with the stock given the pending buy. You look at the tiffany report, you saw a couple positive things, one like you said carl, theyre continued strong sales in mainland china. This u. S. Tiffany brand is continuing to res fate also we saw a modest updig in domestic tiffanys has been struggling domestically to me thats an apology for tiffany, probably more importantly an apology for overall discretionary spending. What amazes me is despite the increase in online sales, i bring this up for the holidays all the time with my friends and family, they say, no, thats not possible i do all my shopping online. Yet, the evidence is an awful lot of shopping is still done facetoface in retail sites on brick and mortar stores. How do you account for the fact the public seems to think everything is done online but its not somebody is buying in stores rather aggressively still. I think its a great point. I think a company like best buy several years ago did a phenomenal job of recon figuring their Business Model to compete better online. You look at what they have now, yes they have 25 of sales online a lot of that is happening in the store that consumer, you are seeing the omni channel model take hold. The stores are still very important. That true for other retailers, thats why best buy is one of the best examples. What happens to the gaps and macys next year my universe, i dont spend a lot of time on clothing. I got to think that subsector continues to struggle. Thats where amazon is having a big impact amazon and other smaller brands are going direct to consumer with online. So my sense that they continue to struggle. I think what we are seeing now is this increasingly large divide between the winners and losers every year it gets wider and wider. On the winners, there are clearly physical retailers best buy one of them another name five below, its a smaller store that sells stuff historically is under 5, theyre doing really well in their stores do you think lvnh will be a better store than tiffanys was, whats amazing is how well they have done increasing margins for some of its high end Luxury Brands they have been rewarded for it, really amazing do you feel tiffanys will flourish under lmb sne. I do, i followed tiffany for more than a decade theyve had their ups and downs. Look, i think this move by lbmh is what that brand needs i also think there will be the potential for lbmh to sell a wider product in their portfolio if tiffany stores that will bolster that Product Selection for customers. Whats the lesson of best buy . And i can remember sitting at this desk four years ago lets call it when the stock was at lows, maybe it was 5 people were saying maybe theyll go private or try and figure something out and theyre getting amazon, theyre getting showroom thats what we kept talking about. What did they do right and what is it that other retailers have looked at or failed to understand from best buys experience and be able to replicate . Its a great question if i had to sum it up, i think there are probably two big take away, one, this sounds simple, take amazon seriously as a competitor we used to talk about showroom all the time what allowed that to happen is best pie was fought pricing against amazon the consumer comes into the store, look at the tv, an their smartphone realize they can purchase it cheaper at amazon. Best buy is pricing against amazon is a positive leverage the power of the stores especially for a category like Consumer Electronics where especially larger screen tvs or other pieces, people want to see that product they want to be educated on that product. So really take amazon seriously, leverage the power of these stores i think the key point is how rare best buy is, we were talking its not quite a unicorn, its usually nike for example, lululemon, they stand out as unusual considering the number of the disaster in some of the Department Stores and apparel, nike is there and lululemon is there, too. Again, the group thats real winners is remarkably small. I totally agree, the clue is with online with digital, those brands are learning or really leveraging less of a need for distribution partners. Theyre going more direct to consumer its helping their margins as they bring digital into their Business Models, its helping the Product Development as well. For me, i think best buy, pickup is a huge issue pickup fulfillment, 60 year on year i mean thats, for those who dont want to go in around be educated, thats a big deal. Yeah, most retailers are i call it talk about buy an line pickup in store representing 70 of online sales. So going online, purchasing the product, subsequently going to the store and picking it up. Is there any retailer you can think that next year will say that was surprising resurgence or they suddenly got it . Target has been an example we seen this year, not that they were in that bad of a place. They picked it up enormously, the stock reflected that, any sense that any consumer will be talking about in that what i well, i have been talking act lows for a while, not necessarily a holiday play i think the lows under new management, lowes, stock is still cheap, i think we look towards 2020, thats the year that lowes catches that stride in that Home Improvement which is overall healthy home environment. Home depot the last couple quarters home depot is an extraordinarily well run company. I think they have been weaker and i think thats because lowe is getting better. Thank you when we come back, new developments surrounding the boeing 737 max documents regarding the jet reportedly being viewed as quote very disturbing. We will fill you in on that. Lets give you another look at futures as we get ready for the open 15 minutes from now more squawkon the street, live from postnine when we come ck im happy to give you the tour, i love doing it. Hey jay. Jay . Charlotte oh hi. He helped me set up my watch lists. Oh, hes terrific. Excellent tennis player. Byebye. I recognize that voice. Annie . Yeah she helped me find the right bonds for my income strategy. Youre very popular around here. Theres a birthday going on. Karl he took care of my 401k rollover. Wow, you call a lot. Yeah, well its my money were talking about here. Joining us for karaoke later . Ah, id love to, but people get really emotional when i sing. Help from a team that will exceed your expectations. vo than just the business theryou came for. More whether thats getting a taste of where you are, or bringing some of that flavor back home. Thats room for possibility. Lets get to living boeing remains the focus after Dennis Mullenberg was ousted, reuters reveal what is being called very disturbing revelations from boeing employees regarding the grounded 737 max jet. Boeing issued a statement saying it had proactively brought documents to the faa and congress and said the tone and content of those documents which we are not aware of the specifics of they do not reflect the company we are and need to be guys, we talked, of course, on the day mr. Calhoun announced the incoming ceo january 13th of his immediate outreach to both customers and regulators, including the faa. Mullenbergs relationship with the faa to put it mildly was not the best at this point given sort of the waive he had been prodding pushing them putting dates out there they hasntdnt agreed to. There was a reboot a lot of people had credibility problems in the last year theyre not the only ones. These are very specific issues with the company for example, 3m several profit warnings we saw, issues there. The stock has been down on the year fedex, another company out there, that had very specific issues related to them even though they are tied into the Global Economy slowing or not slowing the story. So this is a good reminder that you cant just go out and buy index funds the rest of your life are you putting a warning out there for fred and for mike at 3m im saying several Big Companies had very specific issues around them this year that was unrelated to the 30,000 views i tend to give of the u. S. Economy and the Global Economy and the markets moving in tandem with big global thieves. They continue to worsen during the year one of the biggerest if not the single largest corporate story. Without a doubt i saw some polls of other ceos calling it the bigger disaster story of the year. A reporter says boeing has been doing a lot of internal survey work how it will market this plane once it returns to service. In the past month, their polling shows 40 of regular buyers will be unwilling to get on this plane. Some say 40s low who knows are you going to do what you say, walk the walk . Its hard to know at this point. They got a lot of things calhoun has on his plate to deal with as you say trying to turn Public Opinion in their favor, the plane is something they want to get on, dealing with the airlines, of course, dealing with the faa, figuring out when this thing will be able to come back into service. Getting the work force back up and running. Theyre right now theyre not what ra they called theyre not laid off, furloughed, theyre just not making planes anymore, but the question is, will that also change, too of course, the broader issue is the faa here. This ridiculously complicated plane, all planes are complicated at this point, but whats the criteria to make i make sure its safe . Cramer said, 320, 300 has been a firm floor has not really violated it despite all of this. When we come back, speaking of shakeups, the 2019 ceo shakeup will look at shares of how companies have faired since the departure of their leaders shares look good as the nasdaq is going for a win streak at 10. That you got to go back to a prior decade to see before squawk on the street from post9s is bk acin a moment. My name is john and im a 30 day fitness app user. I work long hours and i have no time to go to the gym. This app solves my problems. Its super easy, all the exercises include demonstration videos. I love the 30 day fitness app. European markets have been closed for boxing day, but our own nasdaq is going for ten straight wins hasnt done that since a 12day win streak in july of 2009 the opening bell is in 6 minutes. What if numbers tell only half the story . At t. Rowe price, hundreds of our experts go beyond the numbers to examine Investment Opportunities firsthand. Like a biotech firm that engineers a patients own cells to fight cancer. This is strategic investing. Because your investments deserve the full story. T. Rowe price. Invest with confidence. You are watching cnbc squawkon the street, live from the Financial Capital of the world. Opening bell on this day after the Christmas Holiday. We got today and tomorrow, really a vacuum of news until next friday when we start getting some pmis bob. I think the important thing here is it wont matter. The last few days we got the santa claus rally, the tendency for the markets to move up the last five days the trend this year for december is where it has been in the historic past. Last december was a bit of an anomaly. What strikes me as amazing is the big move in the biggest cap tex stocks where microsoft outperform and the bank rally we saw in the third and Fourth Quarter as yields started novembering up j. P. Morgan up 40 goldman up 40 all of the regional banks, regions financial, fifth third all moving up dramatically in the Fourth Quarter. For that, david, we have to wait i know j. P. Morgan kicks off earnings season on the 14th. Goldmans investor day, the next day maybe. Really midmonth of january, we will get a better look goldman investor days an important one. There was some expectation there were gift targets and so there has been a bit of a i dont want to call it confusion, at least some questions about what youre going to get there certainly its going to be about changes going on at goldman, which are not insignificant in terms of all of its various efforts aimed at a different customer than typical for goldman. Thats an important day for that stock. The steepening of the yield curve is number one, the strength of the consumer, you get a better loan growth and a steeper yield curve, thats mana for the banks. I know we spend time talking about trading, there are only four or five of them that do that you wont pass, even wells fargo go pa st that. Regional banks i look at its Business Loans around personal loans a and the yield curve that matters all of those are looking better. Yeah. Well be getting are we talking about as i said, next week china pmis fomc minutes even though people want to say the fed is a nonstory the journal has how the hawks will rotate out in 2020. You think the fed is dovish now, it can go more so. I think under powell, you will see, they will remain neutral as long as possible, the market believes the fed has its back if something happens, the fed put is very, very real its not, it may be a cliche, its very, very real lets get the opening bell here, the s p 500, at the cnbc real Time Exchange the head coaches and Team Captains from the 2019 lake forest versus Michigan State at the nasdaq thats for recapping business purposes bob you got a good look at Sector Performance for the decade, which were going to talk a lot more as we get into the end of the year. People ask me, what itself the market going to go in 2020 i always say i dont know. What i look at is how the overall tone is as and the picture for the earnings session. If you look at the last ten years, whats very remarkable is we always point out that stocks that are out performing stocks that are under performing do the opposite this is actually true of sectors on very long basis some lets look at the big winners here over and above Everything Else is technology. Why is this happening . Because individual investors want to buy growth you get it in technology you can say its a bubble. But people will pay a lot of money for growth here is the truth of that. Far and outperforming Everything Else discretionary has growth aspects there. Healthcare, industrials, state, Consumer Staples also doing well lets look at the laggards, you see the bottom sectors, real saturday steelers, utility, materials, Communications Services, energy, you might say what will we do the next few years . Obviously, lets buy technology. The fact is that is the wrong trade to make at this point. We get what is called mean reversion, essentially the bottom performing sectors tend to do better and the top performers tend to do a little worse overall. This actually happened if you look at the top three sectors from 2000 to 2009, what was the top three . Believe itor not energy was th top. Consumer staples and materials, then the bottom three, they were Communications Services and tech and until, they are the ones that did better this sector. So the best performers in the 20002009 did the worse, including energy and the worse performers in 20002009 including technology, they were the big winners. So on a mechanical basis, there is people who are arguing and i think there is something new about it energy should be looked at as a potential longer trade given the mean reversion the question, why does the mean reversion happen its a study phenomenon, it happens because human beings tend to buy the stuff thats working, the fallacy of the history. Stuff thats worked in the past must work in the future. You and i know thats a complete fallacy. The future is not like the past. They tend to create bubbles. They tend to create the reverse. In capitalism, you get companies in bad shape they tend to get restructured that makes them more efficient. Stuff thats lousy gets restructured and more efficient. So mean reversion is a mean idea its a practical longterm way to look at that time the overall market if you want to look at sectors there has been this question you have explored as well, when will value return to something that potentially out performs . Its been a long time. I think the problem here is for whatever reason the average investor has come to believe that growth in particularly earnings, the traditional way you look at growth, those growing earnings year over year is the best longterm way to buy into the stockmarket there is some evidence that the true, by the way unfortunately, growth has been very difficult to find in the last ten years, smaller and smaller. Thats why individuals and investors tend to pay up ridiculous money for growth. You tend to get high pe multiple for stock. Which is why apple is not in the growth, its a value on the tra dibble growth metrics. Its not up there. Its not that pricey anymore i find that remarkable to me you and i know apple i find to be a growth oriented company. Yeah. Stock up over 80 this year. Its been a stunning move. Certainly one of the features when we look at the year as well has been that incredible move on apple. Another theme we talked a lot about. We got evidence of that earlier this week. Ceo departures, which have continued to add a rather torrid case, mullenberg just being the latest perhaps the last of Major Companies to fire their ceo. We thought wed do a very much unscientific look. By the way, i think we should do this in two parts. We got a lot of tough stuff tomorrow we start with 8. This was suggested by the way by one ceo no longer running his company. I wont tell you which one it is, not ones we are looking at here but its a mixed bag ebay stepped down dismissed. Stock down 8. 5 in september mcdonalds that surprising exodus steve easterbrooke, yet the stock is okay. Larry paige saying i will step aside as well, sundhar has taken over expedia performing quite well. Wells fargo you may recall, tim sloan, of course, not unexpected, late march stepped down, stocks up so. 4 since then, Charlie Sharpe of course taking over. Boeing we talked about very early, weve had one sex or two to digest that news. Gap, we mentioned it earlier, down 2. 3 . What can you say is fundamental also what has to do with the ceo departing . Finally they put pg e, that bankruptcy is too complicated, so many moving parts. All four of these companies have very specific issues around them theyre not sector issues. Iwas struck by a few people. Uber, kanick wework kevin burns, also, so slightly different question, im wondering if this is sort of the high watermark for founder gurus, are they out of fashion now . Are they out of style . Or do we have less tolerance we dont want raw visions bob, its a good question if their company is losing money hand over fist, perhaps the spacious not quite there as much as it was, even bezo,s, people point out they were cash flow positive quickly in the early day, remember, he obviously always pointed to cash flows, his first annual letter, it continues to be something he includes in the annual report. But they didnt look anything like a we, who or even an uber in terms of their total losses so maybe when it comes to sort of these businesses that are early on losing lots of money. The patient is not quite what it once was. You can point to kevin plank, another founder, maybe not losing money, lost some share. There is more pedestrian xits, munoz, of united you can do this over two days the numbers of ceos that left in 2019. The broader question, is this an unusually large number . It strikes help it is. It is, particularly companies we know well now that doesnt speak to, that may speak to the limited time frame that a ceo has in terms of trying to effect change in their organization and or how theyre going to be judged youve always got the possibility of activist investors there. Boards these days are much more aware of that they, in fact, have their own playbook they are looking to, because they want to avoid any potential conflict if they can and shareholders overall shareholders more successful in moving ceos this year i dont know, bob its a good question not necessarily, not necessarily. I think that over the last ten years the fact that activists have become such a feature of the market overall figures prominently in the way boards think about their decisionmaking and they move quickly. Quickly. Not a lot of individual movers, netflix had a couple bits of news one was the ceo of cineworld, the second largest cinema group talked to the ft about irishman and blamed netflix for what has been less than a stellar year at the box office quote a properly released scorcese property would have added to box office in 2019. So we will see a lot more of this push and pull between probably the streamers at large and the distributors who own traditional theaters or maybe they collide there is talk that amson could theoretically benefit from having some physical distribution of film. Right then the other question of the window as well, there is some speculating 2020 well see the first time when you got turner or i should say time warner, warner brothers, a part of at t, mayfield max, the launch there disney, disney plus will they, carl, ever decide to launch a movie on the platform at the same time that they do and that window for exhibitors, which was very short in terms of the irishman, will it go to zero a lot of postmortems on this, i would like to see the irishman on the big screen. With that said, i dont think there is room for a lot of sour grapes here. The fact that scorcese has been on record saying netflix was willing to give them full backing, where was everybody else where were all the other studios, the implication is scorceses invitation is they were not there netflix was there, he was able to make the movie he wanted to, its a magnificent movie, yes, would i like to stay in the movies longer . Yes, he got to make the movie he wanted, lets keep that in mind. One actual mover based on news, kaigen a company that helps in the testing of things, think thermo, lab stuff. But that stock, take a look at it its down dramatically why . The company said were no longer for sale there had been a lot of speculation that there was Significant Interest in the company. Thats very much unclear whether that was the case. Thats a look at thermo. Take a look at qgen, guys, its losing about a quarter of its market value this morning after it says, were moving on, we are not for sale we are not going to, there it is, entertain offers, again, unclear exactly how significant the interest was, certainly the market saemd to feel there was a real possibility this stock would get or this company would get a viable takeover offer in the 40s. Didnt come and can question im hearing is, well, was there nothing real there, but they wanted to try to get the stock up to avoid an activist or Something Like that . Unclear whether that was the case but what is clear is its losing a quarter of its market value. So it was close to a 10 billion market cap yes, it is. We lost 2. 5 billion right there. Pretty significant. We did get record highs on the s p and nasdaq not quite so on the dow. We will watch that closely along with bonds, lets go to Rick Santelli in chicago. Good morning, rick good morning, carl. As i look up and listen to carl talk about the strength and equities yet again or the stretch, 11 sessions if we close higher for the nasdaq. You look at a one week chart of ten year photoyields, idling by at 190 active trade, just not actively able to pop out of the range to the upside of the yields or down side in price, sort of hovering, look at a monthtodate chart. Now we all understand there is some ifs about the economy, but not that many big ifs and traditionally, the stockmarket strength has an effect of pulling rates up so f that is already happening, what happens should the nasdaq not have a 12th or a 13th or we have a minor correction. This is the way traders are thinking you can see it in the way they attended the auctions. We have the final auction of seven area to date the five year before Christmas Holiday was very aggressive. So why would investors want to buy when it looks like rates are at the top of a tight range maybe looking to break through because they dont think it will break through. That itself way theyre getting long now if you open the ten year back and zoom it to november, you can see why 195 is so important. That was the big one weve had a couple of subsequent areas right below that yield without penetrating that level finally open it up to july thats what we comp to, should we break to 195 all on a closing basis. Finally the yeartodate chart if you consider we were at 268 on the last trading day of last year, look at where we are now, its pretty obvious that the strength inequity certainly hasnt had the historic effects on Interest Rates, carl, back to you. All right ill take the risk Rick Santelli. Lets get more on todays movers and equity markets for that we go over to frank collins. We have been saying the nasdaq on an intraday high, amazon, the fang up over announcing free one day shipping has more than the use of its more than tripled this Holiday Season over last Holiday Season, other fang names trading higher as well, despite the u. S. China trade we seen chip names trade lower, qualcomm one of the worst performers, sky works solution, jd. Com, it was trading lower, the chinese ecommerce companies, we have to keep an eye on that throughout the day carl, back over to zbru with your help, well do that, when we come back, the 2020 playbook on what to expect from real estate in the new year be sure to check out our podcast as always you can listen to the opening bell hours, squawk on the street. 50e dow is up the s p is up 7. We are back in a minute. With the end of 2019 less than a week away, cnbc is taking a closer look at what investors can expect we have the 2020 playbook for real estate. [ music playing reporter the Housing Market is a mix of highs and lows so heres what to watch in 2020. First, the housing shortage will get worse. The number of homes for sale is already low and demand is incredibly strong thanks, to improving employment and the largest generation aging into its home buying years. The demand, however, mostly on the low end where supply is leanest. That will cause prices to continue to overheat at the entry level while prices ease on the higher end where supply is more plentiful second, Mortgage Rates will stay low. They dropped in 2019 and will likely stay low as uncertainty over a trade war keep investors heavy in the bond market Mortgage Rates loosely follow the yield. The only wild card is Mortgage Finance reform if major changes are made to the rules of fannie and freddie, rates can go higher. Third, were bullish the major shortage and low Interest Rates will keep demand high the home build theers have been ramping up production. In 2019, they finally started to pivot to entry level homes f. They can afford to put up even more big Sales Numbers will follow their head winds, though, continue to be high prices for happened, labor and Regulatory Compliance i was going to say, we like turning to bob for real estate out of nostalgia people may not recall when i started here, i wouldnt say how many years ago, you were the real estate reporter i had brown hair. Yes. 30 years ago, i was the son of a home builder and my wife is a real estate agent. Always we are lucky to have her. Limited supply, low rates, stronger economy, it means higher prices, she is absolutely right. We know low end and entry level housing. We cant get it. Land values are going up in every area around the United States and number two, labor costs are going up as well, remember the 28 recession, a lot of people left the real estate business, carpenters, electricians got out, it was a catastrophe, it went straight down, its been tougher to get them back n. You need to raise the prices for everyone. So this is a major problem finally were getting a few of the millennials that are now moving out of their their pare thats getting better. It was awful for many, many years. But i see that as the number one problem, the lack of low entrylevel, not low, entry level housing. Deutsch had a poll out the other day, a third of 18 to 30yearolds living with their parents. Which is incredible demand for if and when they start to move out of the house. You have to figure out how can you get the down payment costs . Good news vats at 3. 5 when i bought my house in 1985, 11. 5 was the organize rate in 1985, 11. 5 . Eventually i went to a 15year mortgage, paid that off after a couple years. Could you imagine if rates went towards double digits . There would literally be screaming. There would be screaming all over the country for that. Wed have a lot of issues if rates wasnt that high. We talked as well about the budget deficit when the Interest Payments would be given the overall deficit. But were going to be like italy. How many people live with their parents there . Its much, much higher. They traditionally stay into their mid30s overall. But italy has the same problem, very high land costs. At least we dont have the demographic issue quite yet. They need to have more babies. And so does japan. When we come back, well get a look at the dows top performer so far this year on the way to a commercial break, apple up 81 f torhe year, doubling off the lows of 2019. Back in a minute. In some ways youre wking our resident historian on certain things. I would give that to art, but im fraud say im an art cache disciple. People ask what the markets going to do next year and i say i dont know. Im optimistic i tend to be a Glass Half Full type of person. But i tend to tell investors stay invested and stay long in the markets generally. Reason is markets are up over time. Thats the important thing. If you look at how the market has done in the last 90 years, since 1928, the modern markets. If you include the dividends, the s p yoor over year support 72 of the time. Im including dividends. We tend to show price charts, not total return, but you have to include a kid of or youre being foolish. We get a 2 dividend in the s. A. P. Yearoveryear the last 90 years the s p will be up yearoveryear. People will say were up 28 this year, thats not going to happen again. Were not going to do two 28 years back to back. I said youre wrong. Theres a good chance this could happen. How many times was the mar kelt up yearoveryear in the last 90 years . More than a third of the time 20 or more. 10 to 20, tone 20 . Look at these numbers here. 72 of the time youre up. How many times was it down 0 to 10 16 . And a worse than 10 decline say very rare occurrence. Im talk about yearoveryear. Remember you can get entryyear declines. So i think the point here when people say i dont know what do, i dont know how to invest. If you dont want to hire a professional investor and tell them stay low in the market and play the odds, which is what this is telling you right here, the odds are long term will be up and then people will say what happened in 2000 and 2008 . Yes, when he a lousy ten, even 20year period where the average returns were generally lower than before. But long, long term im talk now ten years or more, 20 years or more, stay with the averages and thats why i keep talk about etfs, buying the s p, buying the russ he wi russell 2000 if you dont know what do. Thats good advice. I think thats the only way to do. Or listen to people like you every play you mean specific stocks . For people who know what theyre doing. Yes. Listen to you and learn about how do individual kinds of investing. But those who are not sure about it, this is why i say the broad averages are the way to go. We didnt call you a veteran because your hair went from brown to beautiful play. It was brown a long time ago. Thanks. When we come back, former sachs retailer and well get a look at the dow up 48. S retailea look at the dow up 48. S retailea look at the dow up 48. Kss retaia look at the dow up 48. Retailer look at the dow up 48. Good thursday morning. Welcome back to squawk on the street. Im carl along with david and julia here on the New York Stock Exchange. Watching retail as the december rally continues quietly. Nasdaqs going for 11 days up in a row. Longest win streak in over a decade. We start with the market rally. It continues to roll on. The s p nasdaq also hitting new record eyes. There highs. Theres only four days left informant year. Ecommerce hitting records. Amazon saying billions of items ordered worldwide. But can netflix continue its runup in the years ahead i midst increasing competition well debate that next. And for retail, amazon saying it broke all prior records for the season, citing billions of items sold worldwide. And mastercard reporting that the online sales grew 3. 4 with a high of 19 . We have former saks chairman and ceo steve with us. Thanks for joining us this morning. Now this online trend continues. That full season sales growth exceeding your expectations. Im wondering what you think is behind that. Is fact that the online sales are coming from brick and mortar stars shutting down . Did we see more discounting in the season what was behind it you see a healthy consumer. The overall sales came in at threepoint 4 growth which was better than the 3. 1 forecast. If you take out the auto the gas numbers, it was growing at about 4 . Online was the stellar performer, up 18. 8 . And it now represented almost 14. 6 of overall retail. So it was a shorter lol dholida season, six days less. Consumers came in late. The saturday before christmas, monday before mass is were massive sales. You had a lull in early december, then it came online with a Strong Performance and good at the very end. Do you think we saw more discounting earlier on because there was a shorter period between thanksgiving and christmas . I think you had a promotional season throughout. It started early, almost past halloween because of the shorter season. I dont know if it was any deeper than last year. I think you had a promotional environment that lasted through the season youre also in a period, because you had such a heavy presence of online, that the returns this week and into next week and the gift card sales are going to be very important in terms of determining how the season plays out from a margin perspective. Im curious what you think the impact of amazon is. Weve got the bullish numbers from amazon but not the kind of detail that some people would have liked to hear from them. How much of the market do you think theyre dominating this year compared to prior years well, i dont know the amazon numbers, but amazon roughly represents a little bit less than half of the Internet Sales. And if Internet Sales were growing at 18. 8 , thats a very good indicator of whats going on. Amazon pointed out that they had a massive increase in the same day and nextday delivery. So thats really driving the performance expectations for all the online players. So youre going to continue to see this growth of the accelerated shipping, the buy online, pick up in store. Thats going to play out as we go into next year. You also have some very interesting characteristics of whats going on in win easy and losers in terms of categories. This was a good experiential year restaurant and house wears, apparel doing very well. Department stores still seeing headwinds. Luxury on the retail side. Steve, you speak of Department Stores, you used to run one. Were talking a lot this year and the last few years about maulbased stores under pressure, of course. Do you expect that that trend will only worsen in 2020 well, you clearly have a traffic trend in the malls and in physical retail. So the players that are winning are doing a great job of omni channel performance. Buy online, pick up in store, et cetera. The wall marts, targets of the worlds. The ball base stores are under pressure. The Department Stores have been under a secular trend for a long time. Theyve got change the experience within the stores to be able to win. You think they can do it . Its a tough one. You know, youve got underlying trends of negative 3 to 5 within the categories, individual players are doing better and worse than others. But, again, theyve got to fundamentally change the offering, the experience of the consumer in the stores because todays consumer is very focused on differentiated offerings and thats what theyve got move towards. And the againgen z customer andx customer is looking for something very different. Does that mean fewer departments and, if so, what do you replace in with . I dont think its fewer departments, its niche products. Think about it, the digitally native brands are opening up stores. You have a muffove to the cente. The Department Stores and more traditional brick and mortar are becoming more omni channel. Its a convergence to the middle. But you have to offer products and experiences that you cant find everywhere else. Its that unique story of the brand that consumers want. Its interesting, this year we saw a real push towards that order online, pick up in store. We see stores like nordstrom increasingly investing in these locations that have no inventory, theyre just there for services and for online pickup. And i wonder based on the trends were seeing this year how much more dra mamatically you expect things ton shift ne shift next will they do more of this to draw in consumers . I think youll see a lot more of it. The nordstroms of the world are doing it today. Youve got create a different model, whether its the rental, whether its going to the resale or the digitally creative brands. Youve got to create a different model for these stores than theyve had. Youve got think out of the box. The consumer is doing that and theyre moving faster than a lot of retailers are moving. When we started off this conversation you mentioned that you think that these numbers are driven by the fact that the consumer is strong. Were about to get into this next wave of spending with the gift cards, but then also returns. As people buy more online, do you think returns are going to be that much higher or do you think there are some of these categories that people arent going to bother returning and that might help retailers through january . I think returns are a part of the Business Model with a growth of 18. 8 on the Digital Business and representing almost 15 of sales, returns are a core part of whats going on in the next couple of weeks. Having the staffing for the returns, being able to translate a return into a new purchase is going to be critical to the profitability of the retailers over the next and thats going to come through at the end of the january or into february when we see the earnings. Steve, thanks so much for joining us. Fascinating time for the retail industry. Thanks. Well, staying with retail, stores are getting ready for the second holiday rush, as julia just said, return season. Frank holland joins us. Hes got the latest on what could be a Record Number of returns this year. Frank. How many returns are projected to be a record 95 billion this year with nearly half, about 47 coming from ecommerce sales. Major retailers like amazon, walmart, best buy, and target are projected to see their returns increase by as much as 30 , according to b stock. Com, a company that liquidates inventory for those big box stores. Most common being womens apparel, appliances and toys. According to a new survey, 83 ers of Online Shoppers consider the return policy before they buy and 30 of them will make a return compared to just 9 of brick and mortar shoppers. Ups said it handle 1. 6 million ecommerce returns a day last week and returns will spooik spike higher on january 2 tond 1. 9 million. Thats a 26 increase over the busiest return day last year. With more Companies Offering free options for delivery and returns, cbre estimates retailers lose about 50 billion a year in profits because of inefficient logistics. However, ecommerce trends should provide a boost for companies that actually handle those returns. That includes ups and fedex as well as Logistics Companies that handle warehousing and inventory like xbo and ch robinson expected to see increased volumes. Back to you. Elevated is the word for it, frank. Those some stunning numbers. Still to come this morning, stocks hitting new highs as least on the s p and nasdaq as the record rally rolls on. How should we be positioning your portfolio in the new year later, competition in the streaming wars continue to be heat up, can netflix keep up the momentum big show still ahead, dont go away. Wufrmg welcome back to squawk on the street. The s p and nasdaq each hitting fresh highs. This market rally continues right into the end of the year. Just four trading days are left. Were joined by investcos Christina Hooper and Global Investors portfolio Portfolio Manager burns mckinney. Thanks to you both for being here this morning. Thank you. Christina, let me start with you. We had byron on earlier this week. Hes seen a few market cycles in his career. When i asked him whats the most important single thing he said the fed. You seem to agree. Given the change thats occurred in the fed, what can we expect and what does it mean for stocks i think we can expect markets doh better than the general economy because i think Monetary Policy is geared towards supporting markets better than it is geared towards supporting the economy. So that suggests that u. S. Stocks should do well. Not as well as this year, but they should do well. Whats interesting, though, is what we saw in september, which was the end of Balance Sheet normalization. And i think that suggests that emerging market stocks should do better than u. S. Stocks in 2020. Why well, because Balance Sheet normalization was creating liquidity stock and it was really negatively impacting emerging markets equities. If we look at the full year for indexes, they underform significantly. But if you look at the threemonth period which is about when it ended, you see em outperforming the u. S. , particularly china outperforming the u. S. Because because the liquidity suck was ended by Balance Sheet normalization ending. So theres just more liquidity in the markets and that means more money flowing to em. Burns, give us your perspective. I know you think a lot of gains expect order hoped for in 2020 are being pulled into the Fourth Quarter of this year. How does that impact your outlook . I do believe that christmas came early for the stock markets in the Fourth Quarter. You had a handful of positive geopolitical news. There was the election in the uk took out some uncertainty from the markets there. You had the trade war at least come to a near term detente or resolution with the phase one trade deal and a commitment from the fed to keep rates lower longer. We did, i believe, pull a lot of 2020s gains into the Fourth Quarter of 2019. And as a result, equities, we had a great run in 2019. Stocks have gotten to be a little bit rich. And is going into 2020 we expect that, you know, we dont see a recession on the horizon and so we do expect, you know, these positive returns. But they should be a bit more multied this year muted this year. Think Going Forward in 2020, one of the biggest concerns will be the election. This is a bit of a unique year because theres probably a more divergent and binary differences between the two outcomes in the election, it looks like, than weve had in a really long time and that could probably add to volatility this year. Burns, i do notice that energys amongst at least one of the sectors you think is going to do fairly well next year, at least thats what im told. Weve had a number of people come on, energy has not performed particularly well, certainly versus the s p this year. Why do you think next year may be better . Its certainly i think one of the reversion of the mean is probably one of the best cases you can make for energy. Its been one of the laggers over the last year. You do have valuation on your side. But also i think its a sector that could probably benefit from a bit of, you know, the fact that you have had some nearterm resolution on trade, you to have accommodative central bankers. So i think that really suggests a bit more risk on markets. And so some of the cyclicals overall should do better. Industrials, financials, and energy, again, just having been beaten down so much, i think, you know, you also have the bit of a return to growth in europe. I think weve seen sainz signs bottoming in china should bode well also. Chair powell said that the bar is high to change the committees longterm view of inflation. But as some of arguably the journal says the hawks are going retate out. Do you think the isobar higher than some people think the bar could become even hire and thats what is i think fueling this end of years santa claus rally is more and more gifts being bestowed by the fed. When does that get dangerous . Well, it gets dang from us we g dangerous if we get to double territory but were not there yet. In terms of pes or Something Else in terms of pes and overparticipation in stocks. Were not seeing the traditional signs of bubbles. And what i think is more likely to happy happen en is a rotatio leadership. But em outperforms u. S. , for example. There are any sectors that youre particularly focused on, burns mentioned energy. Where do you see that opportunity . Well, certainly if you were to look at a reversion from the main standpoint, beaten down sectors like energy look attractive. But i have to believe that technology continues to perform well, although it should experience more volatility in 2020 just given the politica environment in the United States. But having said all that, companies are spending more on technology because they understand how important it is to productivity. Especially when you have a tight labor market. And finally, burns, when you think about next year, bob was telling usdont be surprised. You sometimes do see incredibly strong years for the market fold by strong years. What would make you think that next year may surprise on the upside well, we do believe its probably going to be a lot more a lot tamer returns next year than weve had this year. But there certainly is a case to be made for having a strong year followed by a strong year. I think first and foremost you have the consumer remains strong, he the consumers really been the pillar of the Global Economy. Id like to say theyre like the tom braid divinity global econo brady of the Global Economy. He never retires and remains clean. And you just have Central Banks accommodative around the world. We have the u. S. Central sbaenk gauged in something that looks like quantitative easing. And you have bank Balance Sheet growth everywhere. Typically they say dont fight the fed and the Central Banks around the world. I think with easy money, with a solid consumer, certainly a case could be made for another solid year in 2020. All right. Well, well be there soon enough. Thanks to you both, burns and christina. Thank you. Got to watch oil today hitting a threemonth high, trading above 61 on wti. Brent above 67. Joining to us talk about the outlook is capital founder, john. Good to see you. Same here, carl. Good morning. Were in this rally mood but inventory gave us a goose. How long can this last i think oils finally will be joining the party, the equity market party thats been going on for so long and it was left out of for so long. Theres several elements that i think right now are supportive of oil prices. A, if the u. S. china trade deal holds, thats very positive for the Manufacturing Outlook in chinese demand growth Going Forward. Also, to to, this new found in willingness of opec and russia to get the global overhang reduced. Well siee if that holds. And then what is underappreciated the bubbling cold dr cu cold dron in the middle east. What is out of hand we were talking the other day about the bombing of the saudi oil facilities, we talked about it for about 48 hours and then never looked back. Right they were able to get that oil back online very quickly. To the extent the oil market doesnt see any real loss of volumes, youre not going to get the reaction. Weve seen that now over the course of decades in terms of strife in the middle east. Oil seems to hang in there suppliwise thats why you dont get a reaction. By out of hand, there have been protests in southern tlak have affected companies for nonoil goods. Thats where the majority of iraqi oil gets exported if the that volume gets turned off, that will be a problem. Iran, while boxed in already to a large degree by the u. S. And the sanctions that are on, we wouldnt want to see a potential threat to the government there that would cause them to be completely offline, theoretically, if things were to escalate. Thats what were watching. John, lets bring it back to home to here where we are the Largest Oil Producer in the world, are we not . Yes indeed. Amazingly so. Amazingly so. And a lot of that due to the permanentium. What are your expectations in 20 for that very important region of our country zblink it will e i think its going to be the day the reckoning. Theyve run out of runway in terms of continually fund just outright growth, growth, growth at the expense of everything including profits in the sector i think youll see a consal s consolidation and bankruptcies. Youll see think of a Production Discipline will come into the eoccasion there equation there. We wont see a rop pid growth if any growth in 2020 as a result of the more limited and rationale activity. The u. S. Consumer at the gas pump arent going to have these folks running just nonstop to put more oil on the market. Interesting. So another argument for why prices would be stable and or move up from here . Exactly. Certainly a much higher floor now if the consolidations occur, especially. But also to a potentially higher prices to the extent we wont well have a less of a cushion against all the worss that riese in the oil market. Give yours perspective on the u. S. china trade war and how that will affect prices Going Forward . Its become a very important factor for oil prices if the you thought the stock market was reacting in a gyrating passion to the headlines, oil caught the turbulence over the past couple of months because demand growth outlooks had gotten ratcheted down as a result of the fallout from the u. S. china trade war. And to the extent we saw no light at the end of the tunnel, oil prices twashwere taking a ha the same time theres jub ilance over the trade deal. Japan had got hurt in the Manufacturing Sector from this, so thats also a bright light for the oil price looking out into next year, at least from an industry perspective. People like to point out its very are, in fact almost never had have we had a u. S. Recession without oil in triple digits. I wonder if you think gas prices would reflect all this would start to impact the consumer even if we didnt get near recessionary levels . Certainly. Consumer confidence is at a really alltime high or close to it still. That is one thing that knocks that down. And that is a price spike at the pump. No matter what folks say about, you know, the impact on the oak or what have you, when measuring the input of energy then Economic Growth take a hit as a result. Theres just no two ways about that. John, good to check in with you. Same here. Have a good holiday especially going into the new year. Still to come, the worlds second largest cinema group taking a swipe at streaming lant netflix. Wel explain next when squawk on the street returns. Have a good holiday have a good holiday my name im a 30 day fitness app user. I love home workouts and the ability to work out at my own pace. The 30day fitness app is perfect for that. I love the fact that you can do it anywhere because you dont need equipment. My clothes even fit better. Its the best performing stock of the decade, but can netflix continue its runup in the near year in the we have Michael Olson here. Thanks for joining us today. I was surprised to see that you actually believe that Domestic Subscriber growth for netflix will be up 6 , thats higher than the consensus and perhaps also higher than what netflix itself forecast. Why do you think theyll be able to grow its u. S. Subscriber base when it has so much more competition now . Yeah, when we look at the near term, the combination of something we call our netflix navigator analysis, which basically looks at Google Search trends, along with our analysis of youtube trailer that was released in the quarter, both point to q4 subscriber upside for both domestic and international. Despite an onslault of theght o we expect theyll continue to capture significant portion of dollars as they migrate towards streaming and that will post positive results. We have this comment from the ceo, sane world theater chain saying that the way netflix handled the release of the irishman left them with meaningless box office income. Curious what you thought about this. Netflix isnt releasing this kind of movie to generate box office revenue, but to drive people to subscribe. Do you think the way they handled the irishman worked for netflix . You to think they would be smart to try to generate more boxoffice revenue netflix look to make its content available to its subscribers and theyre also periodically going to provide a different experience for certain films that they believe have something to offer on the big screen and could be especially an award contender like the irishman or others. We dont really expect it this to change in any way Going Forward. We think the companys goal is to drive subscriber revenue and not box office revenue. So this behavior for netflix should remain consistent versus what weve seen today. But netflix did a number of Theatrical Releases this year. Theyre likely to draw a number of oscar nominations. Do you think well see netflix continue to move in this direction using the Theatrical Release market as a way to sign up more subscribers . I do think well see more of those films released at box office. I think especially the award contenders. But i dont think this will be something they do with me movie that can generate box off revenue. Its more getting subscriber interest. To the extent they can tuesday as a Marketing Tool to get more interesting among potential subscribers out there, that may be something that theyll do. The company has been trying to redirect investors to may more attention to international subs. The bears counter that those subs are less valuable in terms of the return and the cost to get them, where are you this that debate . Yeah, you know, the coast to get them is maybe higher in the near term just because theres less awareness. Around 60 u. S. Broadband households have internet compared to 20 when you exclude china. Theres an opportunity for Netflix International to grow significantly just based on that but you could also include mobile only, international households, and that would have been nearly double the potential adjustable market for netflix outside the u. S. Theres a lot of avenues for significant continued International Growth potential. Well, theres certainly going to be a focus on those International Numbers when they report their q4 results in january. Thank you so much for joining us today . Thank you. Lets send it over now to d dom chu with a cnbc update for us. Heres whats happening at this hour. Republican senator Lisa Murkowski is speaking out on the Upcoming Senate impeachment trial for president trump. She says she was disturbed by Senate Majority leader Mitch Mcconnells stance for total coordination with the white house. I am viewed as one who looks openly and critically at every nish front of me rather than acting as a rubber stamp for my party or my president. Im totally good with that. Hong kong protesters gathering at Shopping Centers across the city for a third consecutive day of christmas demonstrations. Riot Police Detained a number of people and questioned several others over that protest. And in london, bargain hunters brave the rain and chili temperatures as they waited for shops to open for the boxing sales. They tend to hold back discounts until boxing day creating events that can still draw big kroupcr thats your cnbc update. Back to you. Thank you, dom. When we come back, finance ceo charles will join us on the Global Economy. Hell also give us his outlook for xtne year. Squt squa squawk on the street is right back. Repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Rowithout the Commission Fees and account minimums. So, you can start investing wherever you are even on the bus. Download now and get your first stock on us. Robinhood. My name is john and im a 30 day i work long hours and i have no time to go to the gym. This app solves my problems. Its super easy, all the exercises include demonstration videos. I love the 30 day fitness app. S p 3232 now. Getting new record highs on pace for the best year since 2013, but its not just the u. S. Markets that outperform this year. Mike san tolly is here to talk about the pick fewer for global groaning and to what degree the markets are discounting that. The markets have been saying we have a bottom in Global Growth, probably in the third quarter. The nikkei is an interesting case. A lagger for a long time. Its still lacked a new high for the psych the 39 below the record. But the rest of the worlds stock index versus the s p 500, acwx is everything around the world except for the u. S. Stocks. This is since mid to late august. Late sawing when that switch flipped when it said its going to be a Global Recovery right here. You see that theyre basically neck and neck from that period even though on a year to day basis the s p 500 is the outperformer. So now the question is going into next year, those stocks over there are cheap, he are more cyclical, m more financial than most parts of the u. S. So its value and cyclical to invest elsewhere as opposed to sticking with the big growth here. This reflects a lot of the negative around the world, right . Thats the backdrop. Negative yield in get which is down from what it was a few months zblag sure, seven tear, yeah. And central bank responds. Ithink the markets have performed so well, were looking at this oneyear window because you have this very powerful central bank easing response without a lot of associated cost. What really was the cost you had a recession scare and you got a little bit below trend in u. S. Growth and Global Growth in most parts of the world. Do we think 2020 the banks get less accommodative on a trajectory yes. Thats talking yearoveryear. Right. But thats counterered with usmga phase one these tariffs are not going to happen, brazil steel tariffs are not going to happen i think that trade, that psychology is all those things insulate us from a recession. The farther out you can push resnetion terms of tr recession in terms when it comes, i thats really the premise of everything. Recession or no, if no, then you look at your path deposit of returns, you dont look at whether theyre going to be zblof aof. Any Election Year people say things are going to be volatile and choppy because we have the election coming up. Thats plausible, but Election Years they tend to outperform and flatten out in the middle of the year because theyre kind of waiting for the resolution. Its not necessarily jie rating to gyrating, its more lets reprice to where we think well end up ahead of the election and see what happens. Theres the china trade issue which seems to be moving towards resolution, theres Monetary Policy Interest Rates and then the election which seems to be drawing more concern because of the fact that the democratic candidate is we have just no idea who its going to be. Without a doubt. I think basically thats now become the wall of worry. Because we kind of dispense with a lot of the other concerns and now the market is looking to that as the possible either stumbling block or the next thing in need of resolution, however you want it to break. The mike, thanks. Good to have you back joining us. And all of this is on the Advisory Group advisory partner charles. Its good to see you back. Welcome. Good morning, carl. Its a pleasure to be with you. You listened to what mikes saying here on set, you cant blame people for thinking maybe were not late cycle, maybe its mid cycle, what do you think i wish i could feel so optimist rirk despi optimistic, despite the fact its the day after christmas, im nor the sure that this remarkable pace that weve seen in the u. S. And globally can be expected to continue next year, carl. I see still a number of clouds on the horizon. Its true that the ceasefire between the u. S. And china has removed at least part of the cloud over the Global Economic outlook. But its important to remember that tariffs ranging from 7 to 25 averaging almost 20 remain in the u. S. On over 350 billion worth of chinese exports. And theres always the risk that new skirmishes could arise. Because we havent really seen the details of the understandings between the u. S. And china. And thats not even to mention some of the other question marks which remain on the global horizon. Right. I mean, were obviously looking for this signing and details of the text. But do you believe that at least on the u. S. Side that the white house would get more hawkish from a trade standpoint going into the election . Well, i doubt that it will get more hawkish on the broad trade issues, although many of them appear to remain unresolved between the u. S. And china, to be quite honest. I think that there will continue to be very difficult issues on select Technology Companies such as huawei and on investment into the United States. I think the trade tension cos navigate themselves into another corner of the globe. Weve seen some already that u. S. european trade tensions could grow this year and theyre already rising and there are going to be some rulings, wto rulings and other things that might heighten the tensions between the u. S. And europe, u. S. And france. So i think the trade front may not be as quiet as we would like it to be as we move into the Election Year. So to distill this, you think trade tensions could remain. I wonder if then you think Central Banks would, in turn, get accommodative once again and we could wind up with another year like this where we had trade tensions up and down and the markets degrade. Its a good question. It looks to me like the fed seems quite inclined to remain on hold for an extended period here in the europe, something very interesting is beginning to happen. Youve seen the swedish bank raise rates to get back to zero and theres a grow debate of where the benefits of negative rates have outweighed the cost of it. Those costs are middle easterningful in terms of weighing on the Banking System and weighing on weak returns in pensioners and savers. I think there maybe a debate that we see in 2020. Of course the pace of monetary easing in japan seems to remain where it has for many, many months and years now. But i think the path on Monetary Policy is probably not going to be as active this year as it was last year. Now whether you look at the state of the u. S. Markets, you mentioned equity valuations and then theres also the question of usgdp, where do you see that going next year . The pace of market returns this past year has greatly outpaced earnings growth. In the private equity business where i concentrate my time now, we look very hard at earnings and Value Creation possibilities. And earnings in many sectors disappointed somewhat in 2019. Now there are some sois some ho theyll pick up. But some many stocks these days have significant global exposures. And something to look at is that Global Consumption out of emerging markets has really begun to waeng. Y weaken. You see it in latin america, china, india. This raise a question mark in my view. I think are the gdp growth next year looks to remain in the 2 range for the u. S. It remains, i think, quite weak outlook in europe right now. China continues, i think, to pose some challenges on the down side with a weakening economy there. So i think Global Growth will struggle, i think, to regain some momentum this year. Lets face it, debt levels are quite high in many sectors of the economy. Consumer debt in the u. S. Is very manageable, but corporate and federal state debts are quite high. Chinese corporate debt is at a remarkably historic high level. And debts in europe are running high as well. This could pose challenges if markets shift their focus to shes issues duri these issues during the year. Bloomberg has a piece out arguing that foreign demand for u. S. Corporate debt will continue to be there in the face of 11 trillion in negative yielding debt around the world. These companies are going to be able to offer coupons just as much as they have been this year as long as you have this struckture ral rate picture around the world as it is. To have that change would be remarkable, wouldnt it . Well, you know, it only takes one unanticipated major event, carl, to shake markets confidence in trends. And i think we have to be alert to that risk, i really do. I dont want to be tootoo ka and have da like here. B cassandra like here. I think they are quite high and once markets begin to focus in on this, it can shift Market Sentiment quickly. Even though i do think the demand for corporate debt at the moment looks quite positive and bullish globally, particularly u. S. Corporate debt, i dont think we can necessarily conclude from that that that trend will continue throughout the year. Got to be vigilant on it for sure as we continue to watch it day by day. Charles, thanks. Good to talk you. See you. Thank you. This is days after muilenburg was off thusted as boeings ceo. Very disturbing revelations from boeing employees regarding the grounded 737 max jet. Boeing issuing a statement that it had brought the documents to the faa and congress and saying that the tone and content do not reflect the company we are and need to be. Stock is still ever so slightly higher for the year. More squawk on the street when we return. Fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. Theres room for more than just the business you came for. Whether thats keeping up with what you always do. Or training for something youve never done before. Thats room for possibility. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Cot s p 500 hit 4,000 next year one strategist lays out a potential path. Find out more on trading nation. Cnbc. Com. More squawk on the street coming up. Welcome back to squawk on the street. Rick santelli here on the floor of the cme group. Welcome in steve hank. He also formerly with the reagan administration, admission, senior economist on the council of economic advisors fiscal austerity in a point in history may be about ten years ago was considered to be the right policy for ald a debt ridden globe on liquidity, money, leverage, we all remember but seems as though fiscal austerity is now being abandoned as a policy. Is that a good idea or a bad idea fiscal austerity is always a good idea. But recent talk about all the problems associated with fiscal austerity are really nonsense, rick the key thing is money money dominates the growth and changes in the growth of the money supply will effect first asset prices then the real economy and then inflation and then Interest Rates. Interest rates are at the back of the bus Interest Rates follow growth in the money supply not the other way around and so if you look at the thing, for example, even in the United States, the 1990s, who was the most austere president in the postworld war ii history of the United States . Bill clinton he actual will i ran a couple of years of fiscal surpluses. The economy boomed why did it boom . Because of money supply boom and if you look at the situation right now, its very interesting. The money supply broadly measured by m4, a major calculated by the center for Financial Stability in new york, its growing at 7. 4 per year right now. Last year at this time it was only growing at 3. 4 so we had more than double the rate of increase in the money supply the economy is doing well. The consensus for next year is 1. 8 growth. I think its going to be 2. 5 and where is all this money going . It can go in three places. It can go to households. They can go to businesses or it can go to Financial Institutions right now, the surge is in Financial Institutions meaning, asset prices are going to be void by this growth of the money supply so the stock market is going to do well. The economy is going to do well. All rest of this talk about fiscal austerity and trade talk and everything is basically just noise. Its money you know, professor, its so fascinating. Were out of time but to think about what you just said and the motion of Central Banks really keeping us much more on the dark on the ms than they used to in the 70s and 80s. They used to have announcements on thursday thats would move markets. Thank you for your time and thoughts hope you have a happy and healthy in it you year carl back to you. Same to you, rick rick, thanks very much. As we go to break, take a look at todays biggest gainers, amazon among the leaders were less than 12 points away from nasdaq 9 k. More squawk on the street in a moment [narrator] at Southern New Hampshire university, were committed to making college more affordable. Thats why were keeping our tuition the same through the year 2021. [woman] i knew snhu was the place for me when i saw how affordable it was. [narrator] find your degree at snhu. Edu. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk welcome back to squawk on the street. Stocks are trading near the best levels of the morning. You can see here we hit another record highs. You have cyclical groups like Consumer Discretionary and Technology Leading that charge as you can see behind me republic remember, the nasdaq is eyeing a tenth Straight Record close. The energy sector, believe it or not that, group hit an all important milestone today. Exiting correction territory and now trading just 9 off the recent highs from late april among the names leading energy higher, marathon oil, co in. Oco phillips and apache up between 1 and 2 . Watch the oil prices theyre trading near three month highs right now. Oil the key focus to day carl, back downtown to you guys at the New York Stock Exchange all right thanks so much when we come back, founder allen patri patrickof is going to join us when squawk alley stars in three minutes. Good morning it is 8 00 a. M. At netflix headquarters in california and 11 00 a. M. At wall street. Squawk alley is live good thursday morning