Transcripts For CNBC Squawk 20240705

And check out the nasdaq. Also at record levels, a whopping 44 this year. Did you guys all have your money in nasdaq stocks this year . As you know, were not allowed to hold individual stocks. But you can hold nasdaq and qqqs. Its on pace to have the best performance in 2003. You act like you didnt have it. I have a 401 k . You want me to ask. Where do you have europes, steve . In a boat, a couple of boats. Yes, thats right the s p, half a percent. That index is up just 24 this year. And, of course, you made some money in treasuries as well if you invested at the right time. Take a look at treasury yields. There we go. 4. 01 on the 30year, 3. 87 on the 10. 3. 87 on the 5, and 4. 29. I dont know. Do you think 2024 is the year when we disinvert . Thats a question we have to be watching. Yeah, definitely, absolutely. Do you think happens . Why has it been inverted for so long is the question . As the fed does its thing, you would expect a disinversion yield curb. Eventually. It may not happen too closely. Paul simon said things happen really closely in macroeconomic and they happen much more quickly. Thats why we keep you on your toes. Theres a worry of a fresh round of attacks after attacks in the red sea rattled the market. Theyre stepping up their military Campaign Including an exchange yesterday that saw a u. S. Navy destroyer and f18 Fighter Group shoot down 17 drones and missiles launched by ira Iranianbacked Houthi rebels. This is the latest sign the war between israel and hamas is spreading into a larger conflict. That war began on october 7th. While all this is happening, the Biden Administration is adding crude to the Strategic Petroleum reserve, the government pu purchasing 3 billion barrels bringing the buyback to 14 following last years sales. If you were with us yesterday, we were talking about the slump in natural gas prices. Check out Home Heating Oil dipping more than 5 on forecasts of warmer weather for the east coast. I was also reading headlines about minnesota. People were Walking Around over christmas without coats on. There is some blizzard activity. Theres this el nino thing that says its supposed to be relatively warmer through march. The interesting thing about home heating prices whether it comes from oil or natural gas or electricity is that this is one of the areas where you can make people feel poor because of what theyre spending on winter heating. Weve seen this before. It has a similar impact as summer gas prices when people want to drive and go on vacation. So what you may get is consumers feeling like they have more money in their pocket because theyre not paying out thousand dollar bills every time the guy comes to fill up the tank at home to heat their home. So whether the weather lasts, whether this is just, you know, a freak late fall sort of warmer period is to be seen. I think thats an important insight. Its the prices in front of me that shape your believes about whats going on in your life and in prices. Whether or not they represent a substantial portion of your expenditures. You do go to the gas station every day or every week and you do fill up your tank. Your other prielss are the same every month, but its the prices right in front of you. There was a journal piece about misery index. You dont historically siee it. Usually you have the misery index and inflation and it usually moves invertly with, you know, Consumer Sentiment. This year things have gotten better, but people arent feeling good and they attribute that to republicans not being happy with biden in the white house and effects after the pandemic. Theyre not happy, but theyre still spending. Theyre not happy, but still spending, so does it matter . Spending makes us feel better. I know a little bit about this. I wrote that story last week when we did our cbc allamerica survey showing high Holiday Spending but low sentiment and i wrote that story for the wall street journal in 2002 when after 9 11, Consumer Sentiment number ts plunged, spending remained robust. People found themselves extremely depressed and buying automobiles. Why . Because prices had sunk and they had incentives from the government to go buy autos some of the connection between sentiment and consumption, i think, is tenuous at best. I think if you asked economists, well at turning points it matters a lot, they can go up and down. The most important question when it comes to spending are incomes and the price youre spending. So what ive always said is dont say somebody wont spend until you know the price theyre not going to spend at. If a car is x minus and 10 off, i may go buy that car no matter how depressed i am. Its retail therapy. Exactly. We have Corporate News now. Were leading with apple. The tech giant is appealing its ban of impockets of ultra2 and series 9 smart watches after the white house declined a veto of federal agencies stopping the sale in the u. S. According to the wall street journal, apple is asking the court to allow it to sell its watches once again while the appeal is being considered. It adds if the ban remains in place, apple will suffer, quote, irreparable harm. And bloomberg reports apples outgoing design chief is joining forces with p ales famed former chief design officer jony ive and sam altman. Tam will start at the design firm on an ai project focusing on devices that inlt a great the latest capabilities in ai tech. Apple shares have been on a losing streak, but right now were seeing apple shares are in the premarket still down a tenth of a percent. But look at year to date, up almost 50 . Not chump change. Overnight softbank said it would receive shares in tmobile. This is part of the merger agreement between sprint and tmobile. And tesla is reportedly planning to launch an updated version of its popular model y from its plant in shanghai. It will feature significant interior and exterior changes and should reach mass production as soon as mid2024. The report adds the shanghai plant will pause production for about a week in preparation for the changes. The plant will need another upgrade before peak production begins. Is that what we drive here in the states . I i do think people drive it here, but i know its very, very popular in china. So an upgrade. More news from the Wonderful World of streaming. Amazon prime video will start to show ads starting january 9th. If you want the adfree tier, youve got to pay. It will be an additional 2. 99 cents a month to avoid ads. It will allow it to continue to in vest in compelling content. Amazon shares right now mostly flat, up this year 83 . We talked a little bit yesterday about were paying i dont know what were paying but the price for prime keeps going up. Mostly people may opt for prime for the Free Shipping, but you get the amazon prime on your device without the ads and already the freev comes free. Showing ads for shows we pay for i feel like this is a curmudgeony thing so say. All of a sudden they start introducing ads and he says, what is this . Welcome to life, sweetie. This is how you introduce consumerism early. I remember having a talk with a mall developer once. He said, lets see. They had this thing where you order it online and they send it in five days. Then you have a thing and they send it in three days. Then they have a thing where you order it online and pick it up at the store. Sounds like they invented the mall. Its full circle. Now it feels like with all these ads on streaming, why arent they driving me back to my cable . The ads are shorter. Theyre usually 30 seconds, tar targeted. Theres a convenience to cable. Maybe im buying Cable Companies with all these ads going on. Im very pro cable. Yeah, but we like cable here. Whats the difference. 11. 99, 9 do you have any idea what youre paying for all these . No, i do not. Honestly, ive cut a few in the last year, but no. All right. Were going to continue this discussion. Coming up, a sector investors need to watch coming into the new year. Plus will the s p tap in . Quk xger ferguson. Sawbo coming right back. We have some ads coming up. That first time you take a step back. I made that. With your very own online store. I sold that. And you can manage it all in one place. I built this. And it was easy, with a partner that puts you first. Godaddy. The power goes out and we still have wifi with a partner to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Welcome back to squawk box. As 2023 comes to a close, whats one sector to keep in mind . Dom chu with this years sectornomics. Interest rates are going to play a big part of that story. As we know, theres a lot of focus on whether the fid will cut rates as early as sometime in march. With the s p outperforming in 2023 to the tune of perhaps around 22 , 25 for the overall s p 500, what could be that one driving force . Its going to be financials. We asked a couple of our cnbc contributors why from a fundamental basis. Tom lee is looking at financials for one key reason and thats because of the rate story. Interest rates are falling and Mortgage Rates will fall and that will inprove quality for the banks. They should help Regional Bank and financials. Theyre understood owned by hedge funds right now. Theyre like the energy trade of 2021. We also asked cnbc contributor Katie Stockton from a technical perspective what she likes. Lo and be hold, she said financials as well. It has a base breakout contributess to it. The performance since the october lows, we have seen again outperformance in the s p and sector overall for financials, but the sector spdr etf, up roughly 19 higher from those low levels versus a roughly 16 gain for the broader s p 500 overall. So well see whether or not, le leslie, we see any of that continuing performance heading into 2024. Really interesting stuff. I think financials are also the least sorted sector. Definitely one to watch in 2024. I know i for sure will be watching it. Thank you, dom. Joining us now for more on the markets, zachary, were half a percentage point from another record in the s p 500. Do you think we get there before the end of the year . I think we do. We have positive momentum, seasonality. I think well be hitting alltime highs if not very early in january. Theres you know, some would say the recent rally is leaving the market vulnerable to disappointment maybe not in this kind of setup but at the end of the year with little news, little in the way of Economic Data coming. But youve got earnings to look forward to in the next few weeks or so. Do you think its priced to perfection at these levels . I think its good you brought up earnings. I think thats a cast list youre looking for in coming weeks. A lot has been looking at that. I think what that kind of misses is those companies have really outearned the rest of the market. Equal weight s p or small caps lag behind really substantially in terms of earnings power. Weve seen some breath increase over the last few weeks. Its been healthy, especially for the areas of the market that havent participated like financials you were just talking about, but to see that in a more durable way, we need earnings to validate that. We have windows where you dont have a lot of new information and i think thats kind of dominating markets. But come the end of january, i think were going to be doing a lot of wok to look at what the projections for 2024 might look like. I see you think stocks next year wont beat 2023 gains but you think theyll do better than cash and 3w07bds. So how would you be allocating your portfolio given that thee sus . Thats a great point. I think the last 18 months has been a shock in terms of what rates can do. You see a lot of people move to cash, tbills, money market bills and the like and i think 2024 is going to be that time of year of getting invested. Thats the way these things tend to go. I think its going to be a good year for the stockmarket. We dont see a recession coming. We see the fed kind of delivering cuts in q1 of this year and continuing to do that throughout the rest of the year. Weve got the head winlwind, thl wipd. All of those things tell us you do want to be exposed to stocks here in a material way. And then on the fixed income side, 5. 5 is rate, but what about the sixplus cuts in the curve next year . Its going to look a little bit different. We do think extending duration and fixed income, going from cash to fixed income is a thing that investors are going to be doing really all of 2024. Hey, zach, you have like a double reverse Psychology Program where you say everybody is going away from the big seven into the broader index, but youre going to stick with the big seven. Am i reading the notes right . Not exactly. We look for opportunities, you know, over the one to threemonth time horizon and we see that in the broadening out of the market. Weve been adding small caps in our portfolios, the ones that make the most sense since midnovember and we do think thats a window thats going to continue to work for that part of the market as we catch up. We materially underperform. These things can take a pause and thats kind of a healthy development. I do think as we look forward to next year, we still do think that kind of technology at the very top of the market is driving innovation in ai, Adoption Across the economy. Its going be where you want to be. The last thing i would say is the history of these kind of you call them the mac 7 or fanng, theyll change. I think well see that within next year. Thats something were looking out for. Maybe you wont be saying magnificent seven. Maybe its something else. Coming up, the next round is on the house. The tax on whiskey gets delayed during the ongoingar tiff battle between the u. S. And europe. Squawk box will be right back. Announcer sector nomices is sponsored by sector spdr effs. Why choose a sleep number smart bed . Because no two people sleep the same. Only sleep number smart beds let you each choose your individual firmness and comfort. Your sleep number settings. Its so smart, it actively cools and warms up to 13 degrees on either side for your ideal sleep temperature, and effortlessly responds to both of you. For your best sleep, night after night. The queen sleep number® c2 smart bed is now only 990. Plus, no interest until january 2027. Ends monday. Shop for a limited time and sleep next level. Only at sleep number. Whiskey distillers are toasting the new year after the tariff tax gets punted. Emily wilkins joins us. Good morning. Its easier for distill letters to get into the Christmas Spirit after there was an agreement to suspend the tariff. Its the result of a larger dispute on steel and aluminum tariffs put in place under the trump administration. Now the discitiesers in kentucky, virginia, and beyond can breathe easy,s at least until the end of march 2025. They have been negotiating the tariffs for two years. The representative said the goal is to forge a forwardlooking arrangement that will allow us to join forces economically to incentivize fair and clean production and trade in the steel and aluminum sectors. Republican kentucky congressman andy barr who pushed for the extension of the halting of the tariffs tells me its been critical in his home state 69. After the tariffs were initially lifted in 2021, barr said there was a 21 increase in u. S. Sk exports. Europe really matters. Were still trying to crack the code in asia and other parts of the world, but europe really understands age distilled spirits, and so this is the space where we need a level plap Playing Field to really continue to grow this industry. U. S. Whiskey distillers arent the only ones. Europeans looking to get a harleydavidson motorcycle next year will not have to face tariffs either. It will be a happy couple of years. I went to kentucky when the tariffs were first introduced, and they were up in arms, but the bourbon distillers that i spoke with felt confident that the quality of their product would be the selling point as long as the price point could be overcome. The fact that its punted, d that mean theyre optimistic there will be no negative effect for them . If you want to read the tea leaves, the fact that they both punted on these retaliatory tariffs is a pretty good sign theyre making progress and could come to an agreement soon. Down in kentucky, tennessee, and other places, they did see a drop in exports during the times that the tariffs were in place. They were retaliatory tariffs, but as its been lifted again, theyve seen it bounce back. And as you heard from congressman barr, theyve found a nearby in europe who appreciate it. Bring out the old pappy. Emily wilkins, thank you. Coming up, vice chair Roger Ferguson will tell us where hes seeing the new year and how concerned he is about the nations looming debt. And as we head to break, a look at yesterdays s p 500 winners and losers. Announcer executive edge is sponsored by at t business. Next level moments need the nextlevel network. So, the question is. Cyber attack as cyber criminals expand their toolkit, we must expand as well. We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. Good morning. Lets take a look at the futures at this hour. Currently pretty flat across the board, dow indicated to open up about 17 points. Nasdaq indicated to open up about 12. S p, were on a record watch. Half a parnl point from those levels. Tr treasury complex, yields 4. 3 currently. Looking at the fed rate path, lets welcome in vice chair Roger Ferguson, now a cnbc contributor. Thanks for joining us, roger. Good morning. Good morning. Nice to be here. I was okay not dismissing but leaning against the market, pricing for deep cuts next year beginning in march, but along comes Goldman Sachs who i consider to be more considered about their forecast and maybe not quite so ready to get swept up into the meaning of it all. Heres what they wrote yesterday. We expect 3e consecutive 25 basis points in march, may, and june followed by one cut per quarter till the fed fund rate reaches 3. 25 to 3. 5 in 2025 q3. If the unflappable ferguson gets onboard, im ready to bet on this. Do you think goldman is swept up in the mania or is this a reasonable considered position here . I think its a little bit skbenlt to the market excitement. Yes, inflation has come down quite nicely, looks as though the 2 is well within range. Thats very, very good news for those expecting a series of cuts. Having said that, the economy itself is still strong and is withstanding, you know, some of these Interest Rates as they stand today. We saw what looks like a very strong holiday selling season. The numbers are coming along relatively strongly. The redline r is looking at 2. 3 roughly right now and we have a loosening of the financial conditions. It might create in a sense to the fed lets go more slowly. We dont need to add more fuel to the fire by having six rate cuts of the type talked about. Its a close call, ill admit that. Im still of the view the fed has a preference, not a strong preference, but a preference toward initiating cuts toward the second handlf of the year. Im on the side of june more likely unless something surprising occurs. Youve been there in office when the fed has been cutting Interest Rates. What does it take for you to be comfortable that this is the right call . I think its the first thing you said. Its down at the 2 target. Youd say, oh, its slightly above that. Maybe a start at 3 if you look at 12 months, but if you annualize the sixmonth and threemonth numbers, you might be more comfortable. They want to be highly confident of that. The last thing they want is to see this pick up again. The last thing to drive it is the financial conditions. Obviously the Financial Markets are ahead a little bit. Theyve attempted to push back verbally. Theres a little bit of a concern that if you start to validate the financial conditions get easier and easier more quickly, and thats a risk as well. At this stage, theyre within a hairs breath of getting that much desired soft landing, and i think they think they have room to be maybe a little more cautious than the markets do right now. How much do you think youre haunted by this flurry of the 70s. You look at the inflation in the 70s that went up. The fed came back down and inflation came down and it went right back up again. How much is that a concern that when you basically turn your attention away from it, it could spark back up . Look, i think it was a concern at the beginning of the cycle. At the same time they said its different, the supply chain, et cetera. Still it doesnt go away. I think theres always a concern. No chairman wants to be the arthur burns. I think that continues to weigh a bit, which may be a another thing that slows them down just a little bit. So i think youve got to recognize that these are very serious policy makers. At the same time, you know, theyre human beings, these are the kinds of mistakes they want to avoid. Roger, thank you for joining us today. We really appreciate your insight. Great, thank you. Coming up, the countdown to shutdown. Nothing is happening on capitol hill as congress is in recess. Will there be enough time . Straight ahead. You can get the best of squawk box on your daily podcast. Follow on your favorite app and listen any time. Welbeig bk. L rhtac were days away from another budget showdown. Lawmakers will have just nine days to avoid a shutdown. Joining us now, politicos budget and appropriations order, kaitlin emma. Its good to see you. Heres the thing, it seems like the House Speaker is stuck between a rock and a hard place, and right now its the hardliners trying to get that boulder moving. Right. This is really the same fight weve seen all year over government funding just dragging its into 2024. You know, basically Congress Left for the holidays without a deal on an overall government funding framework so that would be the parameters of a deal that would allow for federal agencies to get updated budgets for the current fiscal year. Right now were operating under a continuing resolution, a stopgap that expends gap funding. Without a deal in place its hard to right the rest of the spending bills that could point to a funding government deal and lawmakers needed this weeks ago. So were heading into 2024 with two Government Shutdown deadlines in january and february and lawmakers are no closer to nailing down the basics. Whats the extent for deal making . Keeping the government open is a huge priority at this point. Hardliners know that this is n not a winning measure. Its almost never a winning message when youre the party thats blamed for it, particularly heading into an election year, you know. Basically congress should be able to keep the lights on and stay functional. But time and time again we see the same fight where two sides are warring over fighting. Speaker mccarthy was being pulled in one direction by his right flank and pulled in another direction by moderates. Okay. So what are the sticking points . What areas do they absolutely need to find compromise on to keep the lights on . Its interesting. The twoyear debt deal that President Biden and former speaker negotiated should have done the heavy lifting. That should have set the parameters for the deal, made thing things easy. Youve had republicans, the Freedom Caucus trying to walk back that deal pretty much for the better part of this entire year, so for the moment, both sides still have to agree to an overall number for military funding and overall number for nondefense programs, whether or not to provide any emergency fund, whether or not to include certain policy provisions, how t to package spending bills . They are details that could otherwise be taken care of by the deal they struck earlier this year, but nothing has been easy for this congress. Caitlyn, do you think one of the reasons is theres an election coming up . Is that seen as a potential reason for lawmakers to really dig their heels in as oh goes posed to trying to compromise or come to some sort of agreement to keep the government open . I think its harder in election years. Congress is often famous for operating under continuing resolutions. I think thats more so the case when youre approaching something consequential as a president ial election. The last government funding package that passed was for fiscal 2023, and that passed last december. So just about a year ago, and a lot of republicans at that point were saying, yeah, im going to support this because i think its the last time we might be legitimately funding the government for a really long time. Everybody knew that coming into this year with the republicancontrolled house that things were going to get so much harder and its really proven true and it just remains to be seen what happens. Do the democrats think theres nene gauche yating to be done . No. Thats the thing. They have this bipartisan debt deal that was negotiating this year and it wasnt a good outcome for democrats. Its way lower than they would like it to be. There was like a Side Agreement to the debt package that would provide an additional nearly 70 billion for nondefense programs, so think health, education, labor programs. That wasnt written in the legislative text. Its something that is like routine. You know, this is a normal thing that congress does where there are changes in mandatory buckets and maneuvers to have a little bit of wiggle room set by the budget deal. So really youre look at a situation where does a potential shutdown really incentivize them to go back to the table on one side and come to the take table on the other. Thank you for sharing some of your reporting with politico with us. Coming up, the feds sig tall the potential rate cuts in the new year and the boost in housing and why 2024 will mark an Inflection Point for real estate investing. Squawk box is coming right back. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. 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Joining us for more on the real estate landscape heading into the new year, rich hill, head of real Estate Strategy and research at cohen and spears. Rich, you say after a challenging two years, 2024 will mark an Inflection Point in real estate investing. Is that purely just based on the direction of rates . Sure, good morning. Nice to see you. Thanks for having me on. Look, it has been a tough two years for commercial real estate and specifically listed reits. Theyre down around 17 from their peaks at the end of 2021. Prices are down around 22 or so. But believe it or not, they were down even more in october, they were down around 35 or so. But what we have seen over the past almost two months now is a big rebound in listed reits. Theyre up more than 25 believe it or not. Actually november was the fifth best month ever and the strength continued in december with returns around 9 or so. So youre right that some of this has to do with decline in Interest Rates. We have seen a big pivot where Interest Rates, both nominal and real rates, have declined. And we do think the market is pricing in the 1 real rate environment or so. But thats not the only reason that listed reits are doing a lot better. Number one, credit markets feel a lot better. We have seen a significant rally in tightening and credit spreads, both Investment Grade corporate and Real Estate Debt spreads and growth is holding up really well compared to historical averages. Growth is around 5 or so right now. Compared to the historical average around 2. 5 , 3 , and recessionary environments are weaker than that. Certainly Interest Rates are helping that, but credit spreads are also helping that, we think the worst is behind us on the credit side and growth is holding up pretty well. Fundamentally, office has gotten a lot of attention as you see some pretty shocking headline numbers of Certain Office properties going for, say, 50 of the value that the buyers paid just a few years ago. And people will point to supply and demand issues here, there is just an oversupply of office out there, and not too Many Companies that need that amount of space, especially as they kind of pivot to more hybrid or work from home models or just rethink their work spaces in general, looking for newer and bigger and open environments. So, how do you reconcile that . I know offices, you know, just a fraction of the overall reit market, but it is getting outsized attention. The outsized attention is warranted. To maybe level set, offices only around 3 of listed reit exposure. It is relative demand. As a percentage of the overall real estate market, it is higher, north of 20 or so. I want to be clear, those headlines are very real. We have seen listed reit exposure in Office Market down more than 50 from peak troth. As we think about the Office Market and maybe as a microcosm for the overall commercial real estate market, we think valuations are only 50 of the way through their declines. So what we have seen happen is the private market reset to take advantage of the higher Interest Rate environment, but the next leg lower after that well see happen in 2024 is really more distress working its way through the system. So youre right, youre going to see more headlines like this with valuations being down more than 50 . I think youre probably going to see headlines even more severe than that. Does the distress have the potential to have kind of a contagion effect . Because i was just reading a note yesterday and they highlighted a st. Louis fed paper showing a 10 drop in value of cre would result in 55 of banks exhausting their capital buffers. So are you concerned that, you know, if you say theyre only 50 through their declines, have another 50 of the way down to kind of mark or match what happened in the publicly listed reit market, are you concerned that that could then again spread to other areas of the economy . Great question to be asking and i think a really fair question. Rewind back to march of 2023 when we saw some bank failures. I think there were some real significant concern that the commercial Real Estate Lending markets would have a swift collapse. Keep in mind that commercial real estate isnt inherently a levered asset class. I think the markets are beginning to recognize the headwinds that were facing right now are going to be here for a longer period of time. So, it is not going to be a swift time like in march. It is going to take a long time to play out. How important commercial real estate banks are or commercial banks are to the commercial real estate sector. To be very clear, commercial banks are important, but we see around 30 funding for the commercial real estate sector. Small banks, 70 of funding. Thats a little bit of a misconception. It will have implications but we dont think it is like the snl prices where commercial led the broader economy. Rich, thank you for your insights. Appreciate it. Thank you for having me. All right, a big hour coming up, we turn our attention to the Residential Real Estate market. Will homes get more affordable in 2024 after a year of rising prices and higher Mortgage Rates and not enough inventory . Plus, what will the new year hold for crypto . B bitcoin up more than 150 . Is all the good news already priced in . Should contessa finally sell . Well get into that discussion in the next hour on squawk box. The biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . 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What does this mean for your business, your clients, and your investments . Ice offers data and markets that can provide critical insight. Manage your climate risk with ice. Good morning. The market rally rolls on. You have just three trading days to make the whole year right. Futures are once again in the green. The s p and nasdaq are once again coming off 52week highs. Bitcoin catching a bid this morning. Part of a rally across the crypto complex. Well talk about whats ahead for Digital Assets in 2024. And can you afford a home next year . After a bruising 2023, rates are finally coming down. Could come down a bit more. What about actually finding a home that is available . Well take were going to talk housing and a lot more as the second hour of squawk box begins right now. Good morning and welcome back to squawk box here on cnbc. Live from the Nasdaq Market site in times square, im leslie picker with Steve Liesman and Contessa Brewer. Joe, becky and andrew are off today. Here are the futures at this hour. Dow indicated to open up 20 points higher. Nasdaq up about 15 . Thin volume this holiday week. As we said in the open, the s p 500 and the nasdaq both hit 52week highs yesterday. And the nasdaq now on pace for its best year in two decades since 2003. Treasuries looking a little red on that complex. You got the tenyear around 3. 9 that twoyear is interesting, leslie. Not quite sure why, but it is an interesting move that were going to be following. Coming off some weakness in corresponding yields in europe as well as asia today. Right, right, right. Could be a spillover on that effect. Oil today also in the red. We continue to monitor the geopolitical tensions in the middle east. Crude down about. 7 . Brent down about. 6 . And crypto, yes, were talking about crypto this morning. Bitcoin up about 2 today as we continue to watch the potential approval of that spot bitcoin etf. And shares of softbank moving higher in japan overnight. The tech conglomerate would receive shares of tmobile worth 7. 6 billion at no additional cost. It is part of the merger agreement between sprint and tmobile. The transaction bolsters softbanks stake in tmobile to 7. 64 from 3. 75 . There youre seeing the moves for softbank up more than 4 . Tmobile in the early trade, just a tenth of a percent. Todays gains bring that year to date performance to a little more than 12 . It lags well behind the benchmark nikkei 225 index for the year. Among todays top business stories, long time apple designer joni ive and sam altman, theyre tapping there is a window washer. Were going to talk about sam altman and what hes doing, but the window washer is going to pick this moment to be outside and has been behind leslie, behind steve, i cant wait hes like everybody else, contessa. No, no, you got to work hard for your money. He has three days to make it right. Okay, anyway. Do you ever wonder do you ever wonder if the stock market is like the final race of a racing card when you go horse racing . Everybody lost money and on the ninth race they all bet long shots . You think thats whats going on . I got to try to make the year i got this story to read here. Guys, go back to the top of this and well read the whole thing again. So, this is long time apple designer johnny ive and sam altman, theyre work on a. I. Hardware, acording to bloomberg. Tan will join ives design firm as it looks on the looks and capabilities of new devices while altman will focus on software. Amazon prime video ramping up advertising like many other streaming giants. This is a scandal of the morning, i want you to know. A letter sent to customers says starting january 29th, prime video movies and tv shows will include limited ads unless users opt to pay another 2. 99 per month. Did i raise my voice . Sounds outrageous. Im trying to express my outrage and your outrage. If thats the scandal of the morning, were doing okay. No, no, no amazon says the ads will allow it to continue investing in content. What was the other money we gave them for . Thats what i want to know. It also says its goal is to have what it calls meaningfully fewer ads than linear tv and other streaming. No, it is a goal. Doesnt say theyre going to do it. Final story here, the u. S. Finalizing contracts to buy 3 Million Barrels of oil. This is smart. To help refill the countrys Strategic Petroleum reserve. The department of energy says it bought the oil at an average price of a little more than 77 a barrel, thats below last years average of 95 a barrel. The Biden Administration released millions of barrels of 2022 to help control prices after russia invaded ukraine, including one sale of 180 Million Barrels. U. S. Repurchased about 14 Million Barrels of oil. I dont know i dont remember how we have a guest coming up, well ask how big the spr is. I dont know when they sell a contract, they should buy a future. Thats what they should do. They should sell forward into the oneyear forward market. We have been talking a little bit about the price of oil right now. There are some predictions were going to see that move higher, just because historically thats what happens. But also because of what we have seen in the middle east and with the red sea problems, we have not seen that yet. But interestingly insurance on those shipping containers has skyrocketed between three times and ten times higher because it is such a dangerous zone right now. If you go around that was going to be my question, if you go around, is it still as expensive . It adds to the mileage . Like 3,000 miles. We read earlier, and leslie read this right, oil is down. 7 , but it is up about 3 to 5 bucks over the last several dies. I dont know if it incorporated all the additional insurance in, the added risk and what else. We talked about this yesterday, got a lot of production here, were sending some abroad from here, that is, i think, attenuating the kind of volatility and upside that you might have had given there is shooting going on in the red sea. There is worry, there is concern that it could spread to become a wider either proxy war or it could expand to other areas in the region. There are a lot of headlines to that effect this morning about concernsthat, you know, it wont be contained as it seems to have been largely since october 7th. Lets get back to the broader markets now and take a deeper look at where things stand. A few trading sessions left in the year. Joining us for that is k ken kensell, a very active lender in 2023. You think that this is a golden age for private credit. What do investors in this space need to know . I think we have seen a tremendous amount of growth in the private credit space. Certainly over the last two or three years. I think that it is increasingly individual investors, their advisers are looking at the traditional 60 40 model and saying there should be room for longterm investments, alternatives, private credit, and that has fueled a tremendous amount of growth in the industry. Even for Retail Investors . Even for Retail Investors. There is a democratization of private credit you think under way . I think there is. It is interesting, if you look back over the last ten years, i would say that the theme has been the institutionalization of private credit, large scale pension funds, asset managers, sovereign wealth funds, adopting private credit, allocating for the space, and i think the next ten years are going to be about the democratization of private credit, individual investors, huge market opportunity. Meanwhile, credit is very tight right now. What are you seeing in terms of the quality of the borrowers and the defaults coming down. Sure. So, interestingly the a couple of things i say today in private credit, one is the quality of the companies were seeing has been quite good. If you think about it, youre not typically going to see the more challenged businesses raising capital today. Theyre going to be struggling to find financing and capital, but Higher Quality businesses, businesses that are growing, companies that are looking for capital to expand operations in the u. S. And internationally, they are seeing tremendous growth and opportunity and were seeing tremendous deals. The other thing i would say is with the tremendous expansion of private credit, Larger Companies as well are accessing the private credit markets. It is a good time to be a direct lender. Isnt there a private credit etf . Im looking that up. Is there a private i dont i think is. There are certainly bdcs that are traded. Aries. Right, and publicly traded bdcs. There are some funds raised, primarily closed end funds that track private credit. The cliff water index, they have a private credit index fund that invests in private credit managers. I think thats the one im thinking of. Yeah. One question i had, the next iteration of private credit is democratization. Doesnt that eat at the heart of the entire Business Model, to say private credit has these longer duration investors, therefore theyre able to make loans that the regulated Banking System cant because their Funding Source is depositors. If you introduce more retail as a Funding Source, do you bring in more regulation and therefore kind of eat into the overall advantages that this Business Model has had . So, today, private credit is still probably 70 to 80 institutional overall. But i think when you look at the growth trajectory and look at the amount of capital that is sitting in the retail space, that is generally underallocated to alternatives and certainly to private credit, 180 trillion generally underallocated, if you talk to most managers theyre allocated 5 to 10 to alternatives. There is a tremendous amount of growth there. I think the question becomes what is the underlying structure for the vehicle. If the structure is right, then i think it can accommodate growth and can accommodate the illiquid nature of private credit. Thats where i think education is important. Investors need to understand that when they invest in private credit, it is generally not going to be as liquid as a stock or a bond. Education is a big part of that. I know churchill typically focuses on noncyclical industries. Going into 2024, what industries do you like . Where do you see opportunity . We Like Software a lot. We have for a long time now. We like business services. Particularly services that are really embedded in, you know, a companys operation, so longterm relationships, business services. We like healthcare. Generally stay way from Healthcare Reimbursement risk. So, particularly prices increasing overall inflation, it has been difficult for Healthcare Providers to pass those costs on. So, generally away from reimbursement, but Healthcare Services we like a lot too. Thank you for coming into the studio here. Where is the next gig, ken . The next gig, were playing in stanford. Where . We got we have two gigs coming up. Ken is in a band called suburban chaos and the musical the musical conversation that happens before the breaks here leave leslie and i thinking we need to start our own band. Giving away our secrets. Girls of tv. Well, women. Women. The Old Greenwich social club coming up in february. So, look forward i understand your band is playing as well coming up. Yes, we are. Yes, we are. Look forward to seeing you. All right. Fantastic. Thank you, guys. Thank you. Good seeing you guys. Coming up, what is next for crypto in 2024 after a historic runup . Well talk about whether gains can be sustained and how much an etf approval by the ftc could supercharge returns. Plus, Housing Affordability this year and next, well trace where we have been and what could be ahead when the calendar flips to january. Stay tuned. Yoreatinsawbo ou wchg quk xn cnbc. Only sleep number smart beds let you each choose your individual firmness and comfort. Your sleep number setting. And actively cools and warms up to 13 degrees on either side. The queen sleep number® c2 smart bed is now only 990. Plus, no interest until january 2027. Ends monday. Only at sleep number. Crypto has had a big year. Bitcoin is up over 150 . Much of that concentrated in this past falls performance, a big q4. The rally is largely on investor hopes of s. E. C. Approvals for spot bitcoin etfs. Joining with us more on crypto and whether the good news is already priced in, perry ann boring, founder and ceo of chamber of digital commerce. Thank you for being here. Lets start there, do you think that the good news is already priced in . There are concerns out there that if and when the spot bitcoin etf is officially approved, it would be a fell on the news event. You t do you agree with that . I dont. There is a lot of pentup demand for access to bitcoin. You have to understand that the government has been putting its thumb on the scale of innovation and preventing publicly listed bitcoin products from coming to market. Now that a spot bitcoin etf will be here soon, it is not and if event, it is a when event, there is a lot of people who want exposure who will now have access to it. When you add a small amount of bitcoin to a portfolio, it increases the sharp ratio. And that is why there is so much interest in this asset class. I really like what michael sailor and Natalie Brunell said about bitcoin earlier this week, bitcoin empowerment technology, bitcoin is going to empower Financial Advisers to allocate again because it increases the sharp ratio. And i think a case could even be made that if youre a fiduciary, you have a responsibility of adding bitcoin to a portfolio because of how it performs. Why is it invariably increase the sharp ratio, which is a way that Institutional Investors calculate risk adjusted returns, including some sort of hedging mechanism, maybe through a spot etf or otherwise to ensure that those returns are, in fact, adjusted according to their risk profile. Well, you add a small amount of bitcoin to an investment portfolio, the risk goes down as well as the volatility goes down. And thats why the sharp ratio goes up. But what is really important about a spot bitcoin etf is that it allows Financial Advisers to be able to allocate their clients portfolios to this asset class. Prior to having a spot bitcoin etf, which is pending, it is imminent, Financial Advisers couldnt really help their clients navigate this new asset class. And investors would have to leave the Financial Advisory and go navigate this ecosystem on their own. This empowers the Financial Advisers to service their clients directly on this new asset class of bitcoin. Okay. I think we dont know what the future of Bitcoin Trading looks like in terms it going up or down. But in terms of the desire of institutions to buy bitcoin, what are you hearing in terms of just that marginal demand that is out there . Do you have any numbers or figures in terms of just the people who havent been able to get exposure to this asset class that may soon want to . Yeah, we use valuation models to try to understand what is the value of bitcoin today. We all know what the price is. It is what it is trading for on exchanges, which operate 24 7. But the real question that we need to understand, investors need to understand is what is the value . We use four different valuation models. Today it has the price of bitcoin currently valued between 100,000 and 210,000 per bitcoin. We also apply an s curve analysis to look at the longterm adoption of bitcoin, currently about 40 of u. S. Households have already allocated and own some form of cryptocurrency today. We are on track for 90 adoption by 2029. Once we hit that 90 adoption, prices could go as high as 1 million a coin because, again, bitcoin has that limited supply, which is a key feature of this technology. So there is a lot of ifs there. I got to ask, if that is the case, what happens when governments introduce their own Digital Currency . Well, i mean, we have already seen Central Bank Digital currencies be introduced around the world, most notably china has been the Global Leader in bringing the digital new line to market. We believe that this is Surveillance Technology that will be used to control an entire population. They can be incredibly dangerous. I do not believe that bitcoin is necessarily a direct competitor to cbdcs. I think that bitcoin can coexist with the money whether in the form of a central bank Digital Currency or the type of Technology Central banks are using today. The legacy technology. Bitcoin is largely being used as a store value. Thats a different use case and a different application than currency. So i dont think we need to pen bitcoin up against as an adversary to the u. S. Dollar for years, for 14 years, they coexisted. And also helping extend the use of the u. S. Dollar internationally. Well, were currently comparing it to the u. S. Dollar on the screen there. But it is showing some decent gains of 64 over the last three months. Perianne, thank you for being here. Good to be here. Coming up, top stocks making moves. And the futures right now looking flattish, higher, but flattish. Well be right back. Announcer time now for todays aflac trivia question. How many holiday cards do e sw wn s send each year . Thanerhesquawk box returns. O do you think taps out first . I think the duck goes the distance alright, you about ready to get out . Whats this . A hospital bill . for a thousand bucks . gaaaap did this goat just say gap . Hes talking about Expenses Health insurance doesnt cover. But with aflac, you can get money to help close that gap. Aflac, huh . Aflac ahhhh okay oh duck 1, goat 0. Get help with Expenses Health insurance doesnt cover at aflac. Com you want to race . For real . Meet gold bond daily healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers 3 vitamins. And. New gold bond healing sensitive. Clinically shown to heal moisturize dry, sensitive skin. Gold bond. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. Cirkul is what you hope for when life tosses lemons your way. Cirkul, available at walmart and drinkcirkul. Com. The first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com there is a lot of information out there. Hamas slaughtered more than 1200 innocent people, holds innocent hostages, and raped countless innocent women. And now hamas is trying to hide Sexual Violence against women. They dont want those women to be able to talk about what happened to them stand with palestinians and israelis for basic human rights. Stand for all women. Announcer now the answer to todays aflac trivia question. How many holiday cards do americans send each year . The answer, 1. 1 billion. Welcome back to squawk box on cnbc. Lets get to dom chu with a look at this mornings premarket movers. Dom, it is 50 degrees. Are you looking at the Weather Forecast like you can golf now . I think the Weather Forecast does allow me to golf, but im pretty sure my family, my wife, are not going to look kindly upon me heading to the golf course. I can help you get around that. Give me a call. Please, i need your veteran advice, sage advice on this front. Dont argue, dom. No, im going to believe me, ill send you an email after this and ask you about that advice. As steve pointed out, we see some stocks on the move this morning. Well start with the Video Gaming Companies like Tencent Holdings which gained in hong kong, trading 4 . Markets reopened from the Christmas Holiday on monday and tuesday. So wednesday was kind of the first day. U. S. Listed shares of netease and bilibili are lower in the premarket trade so far. They posed some big gains yesterday. Big driver of the moves comes by regulators in china who say they will carefully study all the concerns of stakeholders with regard to the draft rules they proposed late last week that, remember, were aimed at curbing excessive Online Gaming and spending on the platforms. Those comments were seen as a possible maybe softening of the stance from regulators in china. Thats some of the maybe upside and bullish tone to some of the names. They have not gotten back what they lost because of the regulatory comments last week. Our side of the pacific, shares of apple down fractionally after a small loss yesterday. Some near term negativity c centered around apple pulling sales of new high end watch models, a patent dispute over Technology Use and track certain medical metrics. Apple will appeal the ban on the watches being put on it by the u. S. International trade commission after the Biden Administration did not intervene to overturn that ruling. The appeal will go through the u. S. Court of appeals for the federal circuit. Apple shares 48 gained this year, down. 1 now. Laptopmakers will get attention today like hp inc. , dell, with distributors like cdw. Analysts have issued some commentary they think pc growth will be in the 8 range next year with customers refreshing their hardware from the covid era pandemic purchases as new products get integrated with a. I. Technology and get released. So watch some of those pcrelated names. Well end on shares of tesla, up fractionally after seeing a 1. 5 gain yesterday. Analysts pulled by lseg say the electric vehicle giant likely deli delivered 1. 82 million vehicles range, thats up 37 from 2022 levels, but still possibly shy of the 2 million vehicle target that elon musk laid out at the beginning of the year. Tesla shares up about onethird of 1 . Back over to you. Dom, thank you so much. Coming up, will it be easier or more difficult to afford a home next year . Well speak with the chief economist from the national aysociation of realtors. St tuned. Youre watching squawk box on cnbc. clock ringing go. And go and go and go. tense music but what if you. tense music stop you work hard. Its time for a bank thatll work hard for you. Everbank performance savings is built to put your money to work with some of the highest rates in the country. Going, thats what got you where you want to be. Were the partners for your next move. Everbank. Advantage, you. Mortgage rates have dropped dramatically in the last few weeks after rise for much of the year. Will that be enough to kick start the Housing Market in 2024 . Diana olick joins us now with more. The woman with the answers. Good morning, contessa. 2023 may have been the least affordable Housing Market in history. Record high and rising home prices combined with rising Mortgage Rates which dont usually go together made that happen. Through october, at least, the typical 2023 home buyer needed to earn an annual income of at least 110,000 if they wanted to spend no more than 30 of their earnings on monthly housing payments for the medianpriced home. Thats according to red fin. The Median Household Income is about 70,000. Mortgage rates started this year at about 6. 5 and Rose Steadily over 8 , jumping there in october. They have since fallen back sharply and will start next year about where they did this year. So, lets compare a 6 Mortgage Rate to an 8 Mortgage Rate. So, if youre buying a 400,000 home with 20 down on a 30year fixed mortgage at 6 , your Monthly Payment is 1,918. Thats without insurance or property taxes. At 8 , that jumps to 2,348. A difference of 430 a month or 5100 a year. Lower rates help on the Monthly Payment, but home prices continue to rise and the gains are getting bigger because the supply of homes for sale is just so low. As of october, prices were up 4. 8 year over year, according to s p caseshiller. Thats the largest annual gain of this year. Sellers, however, were a little bit more active this fall, but the supply of homes for sale is still about 38 below prepandemic levels. So, will sellers get off the fence and list this spring if it would still mean likely trading to a higher rate but not an 8 rate . Guys, we will find out. Okay, but if the supply is somewhat 40 lower, is there any indication that is is that going to crack . Well, only if sellers put their homes on the market and if Home Builders ramp up the building. They have a little bit. We got a big jump in Housing Starts in the last month in november. But builders are still not building at the levels that they need to be. So, we need builders to ramp up more and we need sellers really to just get off the fence and decide to sell, even if it means trading up to a higher rate. Im glad youre back. You left me all alone last week, all right . Housing starts are sorry, i went on vacation. Come on housing sales come out, inventory jumps up to 9. 2 months from 7. 9. I have no idea how excited to be about that. So would you please help me out here. The inventory jumped in the new home market, and the reason it jumped so much is because new homes are expensive, right . So, youre looking at november numbers, Mortgage Rates were higher, Mortgage Rates have come down a bit, in the 7 range in november, so those were november numbers. Okay. Now you got it more in the 6. 5, maybe 6 , maybe the builders get a bump, people come in the door in january, remember, november, december, not big home buying months. Thats why you have the big jump in new home inventory. But it is the existing side, the cheaper homes that people can afford that we need to get on the market. Next time you tell me when youre going, you leave a cell number and dont leave me hanging on the new home sales. Sorry. Thanks, diane. Not sorry. All right. For more on the Housing Market, i dont know how much more you can get than diana olick for all that time there, were joined by lawrence yu, chief economist, lawrence, thank you for joining us. Good morning. So here is the thing im wondering about. Rates are coming down, we still need inside the cpi the housing component to come down to justify the fed cutting rates. Is housing like this tinder box ready to explode when you get down from an 8 mortgage down to, say, i mean, god willing, a 5 mortgage . Well, you know, certainly the buyers always respond to lower Interest Rates. The prices which earlier in the year had been actually declining somewhat, especially in the west region, but prices are beginning to accelerate upwards. Home prices are not part of the Consumer Price index. It is considered like stock prices, gold prices, it is an asset, it is not part of the Consumer Price index. What goes into it is the rental component and owners equivalent rent, hypothetical what the owner would pay in rent, and that has been decelerating because we are essentially at a 50year high in terms of apartment construction. So, many empty units will be reaching the market and i think that will begin to calm down the inflation numbers. Okay. What about the Housing Market . Is there a level that or is it just a relative level that people are going to see, hey, it was 8, now it is 6, its go time . Well, you know, we have a new reference point. People saw the 8 , so theyre comparing from that. So 6 , thats much more attractive, 6 was not attractive when people were comparing 4 rate, so what we needed for the Housing Market is really about the supply situation. So, as long as we have more supply, it will moderate home price growth and that will be good for america. Peoples incomes are rising about 4 . We need home prices not to exceed that 4 level. How many people, i dont know if you have a precise estimate of this, how Many Americans are stuck in their home because of this mortgage situation right now . You know, people are loving their 3 , 4 , which they purchased a few years ago or refinanced into if one looks at the demographic dynamics over the past two years, when the inventory levels were low, we have to remember there are over 7 million newborn babies, 7 million americans who have turned 65, so, there are a lot of people who need to trade up or trade own, but they have not done so. But i think as people begin to realize, you know, 6 Mortgage Rate is not that bad. It is not 3 or 4 , but i need to make the move. I need that larger house or i need to trade down so i think we will begin to see more supply coming on to the market next year. But, lawrence, isnt it the case were seeing supply in places where people dont want to live, either because it is too cold or because there is no jobs . If you drive through Central New York and some of these towns, you can see house after house after house that is either up for sale or looks like it is about ready to be auctioned off by the bank for whatever pennies that they can recoup there. And then, you know, the opposite is true, in florida where we have seen such a migration, and texas, and these low tax, lower cost of living states. You are absolutely right. There is so much variation across the country. The upper end market, there is plenty of inventory there. The downtown, people are not returning to downtown obviously, they work from home phenomenon is leading to the suburb, that strengthened the suburb over the downtown areas. What you mentioned, people are migrating from, say, pennsylvania, new york, illinois, into the Southern States of texas, florida, carolinas. And people going into the Rocky Mountain states of say, arizona, nevada, colorado, so we are seeing some different dynamics across the country. But broadly speaking, the number of homes on the market as people are walking down the street, looking around the neighborhood is about half of what it was compared to precovid 2019. Wrap item f up for us, therea couple right now with a small baby in a small brooklyn baby, maybe another baby on the way, is next year going to be a better year for them to buy a house . Well, there will be more choices to select. Builders are building more. There will be more pentup sellers beginning to put their homes on the market, Mortgage Rates will be lower, so, you know, those are good better conditions certainly than what we saw here in 2023. And let us end on a note of hope. Thank you. Thank you. Coming up, our virtual power plans the Energy Resources of the future. Well talk about the technology that can lighten a load on the nations grid and the companies emerging as power ays plerin the sector. Stay tuned. Squawk box will be right back. U to try knix. Makers of the worlds comfiest wireless bras. For revolutionary support without underwires, and sizes up to a gcup, find your new favorite bra today at knix. Com oooohhh, it is cold outside time to protect your vehichle from winters wrath of course the hot sun can be tough on vehicles too you need weathertech all year round come on, protect your investment laser measured floorliners and cargoliner will shield the carpeting from sand and snow for your interior, theres seat protector and sunshade plus, mudflaps and bumpstep for the exterior order American Made products at weathertech. Com surfs up yeah, right welcome back, as electricity demand increases, virtual power plants might be the answer. Pippa stevens has more. This is a new one for me. Virtual power plants, im trying to wrap my head around what that means. Yeah, essentially the grid is facing a host of challenges as you said, electricity demand is rising, and then intermittent sources like solar cant just ramp up what we need it. Thats where virtual power plants come in. It is a collection of thousands of smart devices, panels, home batteries, thermostats, evs, that when grouped together can help the grid by either providing a power bank or reducing demand at peak times. There are benefits for both the customer and the utility. First is just in more reliable grid. Blackouts surged 64 over the last decade, costing some 150 billion annually. And it can help utilities load chips. They cut emissions and reduce costs. The utility might not have to build a plant and the customer gets a credit for power supplied to the grid. There are multiple stakeholders here including residential battery installers, Grid Services companies and utilities themselves that are adopting the programs including Emerson International and national grid. This is a story about power in numbers. What does it mean for the overall costs . So, essentially it reduces costs for both the utility and the customers because utilities always have to have generation to match demand. There are things called gas peaker plants which fire up, can only be a couple of hours per year. But it has to be there as a resource should demand surge. And so if the utility has a bpp, they may not have to build that gas peaker plant. How does it work . The residential customer buys the battery or the generator or whatever the devices are that are going to feed into the grid and then the utility goes to them and says, hey, we know you bought this, we would like to have you as part of the grid . Customers opt into the programs. A lot of the time utilities will incentivize it by providing Something Like a smart thermostat. Thousands of homes are lowered by one degree, thats had a meaningful do they lower it or do you lower it . The utility lowers it. You opt in and you can choose to opt out. Charging your electric vehicle, maybe you want to charge it at peak times, but everybody is tapping into the grid at this moment, so power prices are higher. You can say to youre utility, you can charge it at a time, 2 00 a. M. , when there is not a lot of demand on the grid, but you can opt out. There is the option to say, hey, you know, i do want to charge my ev at this time. You get a credit and sometimes you get paid directly for the power saved. How reliable is this . I think of anything that is more in my control as being a little scarier in terms of reliability. Is it as functional as, you know, the old way of doing this . Yes, so, you know, ultimately it is here to help for reliability. The idea is that the grid is changing with more distributed Energy Resources, there is no longer this constant supply and demand. Were not ramping up fossil fuels to meet demand, the grid of yesteryear was built to always have that match. And today it is different. Customers are generating their own power. And so ultimately the utility can tap into your battery, and be smart about it, they might not have to implement things like rolling blackouts because theyre tapping into a customers battery in one area and then shifting maybe they want what smis the most striking thing in your report, blackouts are up, at a time when we require the grid to be more reliable, it is getting less and less reliable. It is hard to manage. Costs are going up. Demand is going up. I mean, you know climate risk is real. And there is always the potential for a cyberattack that takes down the grid and thats you know, in the insurance space, this is something we dont need terrorists to take down the grid. We take it down ourselves. 64 increase in blackouts. People are tapping the grid a lot and it is a different grid, no longer the centralized behemoth. Now you have all the devices, evs going around, heat pumps, so much more demand and different types of demand for a grid that was built a century ago. Thank you very much. All right, coming up, a Holiday Season retail wrapup including what to make of a potentially concerning sales growth number. As we head to break, you can get the best of squawk box in our daily podcast. Follow squawk pod on your favorite podcast app. You can stlien anytime. Power that. Well be right back. Why choose a sleep number smart bed . Because no two people sleep the same. Only sleep number smart beds let you each choose your individual firmness and comfort. Your sleep number settings. Its so smart, it actively cools and warms up to 13 degrees on either side for your ideal sleep temperature, and effortlessly responds to both of you. For your best sleep, night after night. The queen sleep number® c2 smart bed is now only 990. Plus, no interest until january 2027. Ends monday. Shop for a limited time and sleep next level. Only at sleep number. Loving this pay bump in our allowance. Wonder where mom and dad got the extra money . Maybe they won the lottery . Maybe they inherited a fortune . Maybe buried treasure . Maybe it fell off a truck . Maybe they heard that xfinity customers can save hundreds when they buy one unlimted line and get one free. Now i can buy that electric scooter im starting a Privateequity Fund that specializes in midcap. You do you. Visit xfinitymobile. Com today. Were about to close out the shopping season on 2023. Retail sales between november 1st and 3. 1 year over year. That is below the 3. 7 forecast by mastercard in september, and well below last years 7. 6 , but, still, 3. 1 growth. I guess a matter of perspective. Joining us to talk about what drove shoppers and which companies saw the benefits is Forester Research analyst. What do you make of the number . 3. 1 growth. Would you characterize that as solid . Would you characterize that as disappointing . Well, its not a great number, and there are a couple of reasons. One is that when you break it out into online versus offline, the online number was about 6 . The offline, which is the physical stores, thats the vast majority where we do our spending and a lot of it actually is in categories like restaurants or grocery stores, which are not really Holiday Shopping places. That number was 2 . Which suggests a lot of sectors, for instance, electronics, did not do well. The other fact sir that there was inflation in that number and inflation is about 3 . And what that means is that when you take inflation out, there was also almost no growth in spending, and that means that demand was pretty soft. The National Retail Federation Head predicted that the amount spent should have approached a trillion dollars, and instead looks like its in the 900 billion dollar range. Including not only stuff you buy but also eating out and what you spend on groceries as well. Give us a sense of, you know, missing that mark, and why that would be. Well, i think that the biggest factors are just that Consumer Confidence, this has been one of the quandaries i think that has really perplexed economists and kind of just observers and certainly retailers for the last year, which is that even though a lot of the key economic indicators, like unemployment rates and wages, are relatively strong, Consumer Confidence continues to be pretty weak, and the shopper is not really spending above that inflation number. I think part of it could be that the consumer spent so much more over the last few years, theyre finally done with all of that excess savings that happened during the pandemic. You have other economic factors, like in the case of students that perhaps some of their anything leftover in discretionary is going to loan repayments. There are a number of factors that could be driving consumer issuing, and with the retailer sales candidly were not great this year either. It was pretty mediocre from a qualitative standpoint. There wasnt as much from a storeoffer standpoint, not as much Free Shipping standpoint. Talked recently on squawk box some retailers are instituting fees for returning items now. If americans are returning 15 of the gifts that they get for the holidays here, how much do those returns eat into the bottom line of these big retailers . Well, returns are definitely a cost center. There are some retailers that do try to turn those returns into exchanges or they try to somehow preserve that revenue, but it is generally perceived as a cost center. Its absolutely that 15 number is a conservative one. I mean, thats the store return rate for your average physical goods retailer. When looking at online that number can be anywhere from 25 to 50 , depending on the retailers were talking about, and its a huge, huge cost. A lot of technology now going into try to optimize return rates. Theres also pretty wellknown staff that you know, minority of shoppers contribute to majority of rueturns and if theres a wa to try to make the experience, you know, more challenging for some of those heavy serial returners is what theyre called in the industry, that is actually something that can improve your profitability. Going into 2024, then what are the retailers you think van opportunity for profit here . Where should investors be looking . Yeah. There are some of the big names that we have been familiar with for a long time that have been capturing more and more share. Walmart and amazon are two that continue to outpace the industry. Theyre outpacing inflation. In the apparel sector, Companies Like lululemon do particularly well and have been doing well. Also have been outpacing their peers in the sector and continue to have a lot of the energy with the shopper. Where i would be a little cautious is in the Electronics Sector at the moment, and that means potentially Companies Like apple which have had some softer quarters recently. Now, that doesnt mean that it wont recover and its innovation wont support it through 2024, but absolutely the Electronics Sector has been adversely impacted by if, they cant sell their highestend watch. Nc in fact, they told the government it would be material. Thats a problem. Thank you. Thank you. Coming up on squawk box the hit and the misses at the Holiday Box Office and what 2024 could hold for hollywoods biggest studios. That and much more. Sometimes you just got to epke on the hook, when squawk box returns. With gold bond. You can age on your own terms. Retinol overnight means. The smoothing benefits of retinol. Are now for your whole body. Plus, fastworking crepe corrector diminishes wrinkled skin in just two days. Gold bond. Champion your skin. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. Cirkul is what you hope for when life tosses lemons your way. Cirkul, available at walmart and drinkcirkul. Com. Good morning. Futures trending higher this morning. Will the bulls continue to roll into the new year breaking records along the way . Well get you ready for the trading day ahead. Big pharmas battle against obesity. A sort of gold rush for the industry this year. Looking at players getting into the race. And barbie wins the Box Office Crown for 2023 followed by super mario. Is there any hope for hollywood in 204 . A sneak preview. The final hour of squawk box begins right now. Good wednesday morning. Welcome to xwb here on cnbc live from the Nasdaq Market site in times square. Im Contessa Brewer along with leslie picker and Steve Liesman. Joe, becky and andrew are enjoying a welldeserved morning off. A look at futures now at this hour hovering around the flattish mark you see Dow Jones Industrial implied open 16 points. Nasdaq opened up 19 and s p 500 all eyes here because were just half of 1 away from hitting that record high again. We havent seen that number in more than two years. That were looking at 4,796. That would be the number to set the new record. In the meantime, treasury yields heading downward this morning. There youre seeing the ten year note at 3. 861 . In the two year, lower as well as 4. 285 . Checking energy. Prices this morning, seeing wti lower by almost a full percent. Same with brent crude. In an opposite move from what we saw yesterday, natural gas up 4 . Almost an equal move we saw this time yesterday morning, steve. Get to dom chu with this mornings stock movers. Good morning. Mr. Liesman, kicks things off with a check on amazon shares up marginally after yesterdays session. Cloud computing and ecommerce giant unveiling flagships that start january 29th for customers here in the u. S. Also in the uk, germany and canada. Other markets will follow suit later on in the year. Amazon, by the way, also offering and appsfree option costing an additional 2 p. 99 a month. Next check crypto world. We know about the massive rally in shares of bitcoin over the course of past year. Bitcoin prices up 158 . Business software and Solutions Company microstrategy which has the most bitcoin on its Balance Sheet of any pub luckily traded company out there. Those shares skyrocketed on heels of the bitcoin holdings. Over 174,000 individual bitcoins on its Balance Sheet. Microstrategy shares up 330some percent over the course of the year. Those shares, by the way, seeing some movement because of momentum in the premarket as well. Broader check on the broader s p 500, because a banner run since the october 27th lows we saw. The blue line is going to be the market cap weighted s p 500 up 24 so far this year. Loosening the 27th, eyepopping 16 gain overall, but outdone, believe it or not, by the equalweighted s p 500, which weights everything on a more equal basis as opposed to marketcap weighted. Since the lows, by the way, also more respectable 18 gain for that equalweighted s p 500 index. Steve, that shows you a little more about, this idea that there is a possible broadening out of the rally. Its not just the socalled magnificent seven stocks and tech media and telecon driving the gains recently that many more companies participated. Some notice out performance in financials notably during that time period as well. Interesting move and dynamic. One trend traders and investors are seeing if it carries over into to2024. Should be red. Heinz 57 trade. You know why . The catchup trade. Made that up, for what its worth. It still has a ways to go to catch up to where it was. Right . Whats the differential. Zoom in. 28 versus, what, 11 year to date. 24 for s p 5in. Full year. About half. 12 , 13 equal weighted s p 500. The gap is fairly wide. Pointed out. Wasnt that wide beginning of the year. Rinchts again, catchup trade doesnt seem like a lot. Talking 200 basis points. Two full Percentage Points of out performance. Look at it on annualized basis over a couple months, a lot of Hedge Fund Managers and investors and traders would kill for a two basis, 200 basis point, 2 full percentage point during that time frame. A lot of folks trying to see whether or not those funds can emulate themselves over course of the next the question, whether or not youve had the gains youre going to get in that catchup trade, or do those two over time we need to see a tenyear chart maybe another time. Over time whether they tend to go together or do they tend to have just a bunch of outliers lead the way all the time. What i would say. Over the course, since the great financial crisis and the era ten years. Dom, look behind you. Unbelievable no doubt during zero rate policy Interest Rate time frame over the last decade and a half youve seen value of megacap technology, median Telecom Stocks overall drive bulk of gains in s p 500. That shows you here, seeing that bear out. Over the course of the beginning, say, five or six years, pretty close. Its been great. But really the meta platforms, right . The microsoft, the apples and whatnot that have done the heavy lifting. Why you see that gap widen out, especially since the pandemic lows. Beautiful. So much by zero Interest Rates and recovery from the pandemic. Mega caps are huge in the story. I thank you and terry king for coming up for that thats not me. You called for that shot. Terry, teresa, all were doing trying to put words to the graphics youre seeing out there. Well done. Catchup trade to catching up heinz 57. Heinz 57. See what other condiments have in store for 2024. A closer look. Mustard trade. At the market mustard trade. Exactly. Relish. Morgan stanley investment management. Andrew, to kind of tag on to what dom was showing us there. Its interesting. Because the socalled catchup trade, we described, that 200 basispoint differential between the equal weighted and the s p 500, to me, thats happening largely during a period where you dont have much in the way of fundamental news. Its after a lot of the earnings reports have come out. Youve got obviously a lot of reaction to potential piv ot by the fed. What does that indicate to you looking into 2024 should get more idiosyncratic information, earnings reports and fundamental n news . What does that tell you about the trend and broadening out seen this year . You have to remember that unfortunately the first year off the bear market low, investors sell stocks. Happens all the time. Saw a net outflow from mutual fund and etfs a year off the covid flow and sea it again this goround. About one year later investors slipped from being bearish to bullish. It happened in february of 2021. It happened in november of this year. When they go to buy, when they realize they shouldnt have been selling, should have been buying, they look around for things that they feel that they could play catchup. It sen tirely logical that the equalweighted s p has played catchup to the cap weight because it was really lagging. So as i move into next year, the breadth of the market, what dom talked about. So many stocks are working now. Look at history it is an extraordinarily bullish signal for the market. You have to have your head in the sand to really be bearish at this juncture. It means the market is breaking the upside as contessa said. Year that 4796. I think when we break through that level, youre going to see it even higher, a higher level of bullishness. Keep in mind. The market has gone nowhere for two years. Thats about to flip. I think its a bullish sign for the markets going into next year. My only comment, interested in what people do not expect. I hear everyone talking about how equal weighted will outperform the cap weight. That seems to be an overwhelming consensus view next year. So im intrigued by, well, what if these big stocks, they have not kept up, obviously, as dom pointed out, they have not kept up with the broader market. So they look, they stalled out recently. So new money, i think new money coming in might go on to say, well, maybe stockless play catchup. Yes, better year to date but kind of lagged recently. Interesting. Youve got, what is it . 1. 4 trillion dollars that went into cash this year. Obviously cash was an attractive asset. Bonds did pretty well if youre a bond investor. I know you believe investors were younder weight equities going into q4. Do you still believe that especially looking at various attractiveness of the other active classes out there. Sure. Money market. Whatever the hottest pot usually doesnt do well the next year. So rates come down, because the economy is slowing down. That will make the money market not a very, as attractive as it was this year when rates were higher. Some of that money will come out and it will go into bond funds, and some of it will go into equities. Look, end of the day, weve just seen fund flows turn positive on a weekly basis. It doesnt stop after, you know, three weeks of positive flows. I think that money will come back into equities, and that will push the second year of a rally, as it did in 2021. Doesnt mean the market looks a little shortterm overbought but a good sign for equities for next year. How much does investors psychology play a role, especially if you turn that calendar year over into the new year. Youve got obviously 2023 really the magnificent seven kind of catapulted into the consciousness of, you know, your average investor. Do you think because the returns were so strong throughout the course of 2023 that, that could be, maybe, a hindrance to performance next year, just base and psychology factors alone . First of all, i love that you bring up psychology, because i think its incredibly difficult to predict gdp, earning look at all the people predicting a recession this year. Earning was going to collapse. Boy, oh, boy, was that deadon wrong. What was so consistent, just what you mentioned. Psychology. Which is, unfortunately, investors humanly get bearish after bear market and we came into this year with overwhelmingly negative consensus. And so its its intearily consistent with what weve seen in the past. We are moving slowly from the fear stage to the greed stage. I dont think one year is enough. I think it will continue. That is the consistency of investing. As i said before, i think predicting Economic Data is very, very difficult, and all you have to look at is what was the average price target for this year to know that thats a fools game. Yeah. So i think the psychology is, we are in the process of moving from fear to greed, but were really only very early in the stage, and its, i think next year is the continuation of 2023. Fascinating. Yeah. Behavioral economics from my favorite classes in Business School as well. Andrew, thank you. Thank you. All right. Coming up, warm weather giving a chill to natural gas and heating oil prices. Were going to look at the trend and the rest of the Energy Market next. Later, eli lilly, a big winner in the obesityfighting gold rush of 2023. Will this sector continue to be a big winner next year . Thats coming up in e xtthne half hour of squawk box. Hm . You your Business Bank account with quickbooks money, now earns 5 apy. 5 apy . Thats new yup, thats how you business differently. Only sleep number smart beds let you each choose your individual firmness and comfort. 5 apy . Thats new your sleep number setting. And actively cools and warms up to 13 degrees on either side. The queen sleep number® c2 smart bed is now only 990. Plus, no interest until january 2027. Ends monday. Only at sleep number. Welcome back. Price of natural gas has tanked in 2023 amid record production and warmer temperatures. For a closer look at whats ahead, bringing in Oil Price Information Services Global head of energy analysis. Tom, thanks for joining us. I guess were up a little bit today. I saw these weather maps yesterday. They were all red for, i guess it was the end of december, but now theres some blue on the forecast maps, which temperature anomaly maps. Those things upon which gas really trades. Right . Yeah. And, i mean, weather is the, 90 fundamental that moves natural gas over time. Its almost like Mother Nature is short some of the heating elements. Whether it be natural gas, to a certain extent crude and heating oil in particular, because shes bailing us out in another winter here for that question. I mentioned second one in a row. Right . Last year, obviously, there was big concern about supplies of energy from russia. Had it been a cold winter, we would be talking about very different results for the economy, for the global economy, really, but, again, its interesting the way you put it. Its almost like youre feeling a little paranoid. Like Mother Nature has it in for you tom. Tell us, and just to be clear, they cant, the guys producing the natural gas, they cant stop this stuff from coming. Right . They can slow down over time, but not on a weektoweek basis. Right . Yeah. They can leave the liquids in natural gas, you know, things like propane and butane when it doesnt pay to remove them, but theyre pretty much tied into this. Look at numbers. I mean, last year we saw the equivalent of 500 or 600 dollar a barrel oil for european natural gas. Its down quite a bit now. Probably four times the u. S. Price. Really, you only brick that sustaining u. S. Numbers, less than half of what europe and asia are,you know, tends to be the lig export. So its very, very cheap. Heating oil is very cheap probably down about 14 or 15 . Right. Actually jet fuel is down about 25 from last year. Tom, theres not to get too geeky about the weather, which actually really like. One is temperature anomaly maps red or blue. But there are longerrange forecasts. If im not mistaken this is an el nino year, and i think that means warmer temperatures in north america through march. Is that right . Yeah. Well, it is. The one thing, steve, you have to be careful of, in an el nino year, sometimes some of the winds and the masses of air do allow for a polar vortex. And you know, one thing about natural gas. Weve got a lot in texas and louisiana and places like that. We dont have a lot of it downstream because its not stored that much. If you had a polar vortex in new england, the middle atlantic, or in the northern midwest, you can have a problem. So thats still something we have to worry about if the sciences are accurate about, you know, perhaps a little bit more of a chance tom i dont want to get too corny here or cue the national anthem, but im enormously proud of what the American Energy industry has done in terms of responding to whats happening in russia and kraine. How much natural gas are we exporting right now . How vital is what the American Natural Gas producer is doing relative to keeping europe warm and keeping europe safe right now . Yeah. I mean, we are the saudi arabia of international gas. Right. Over a combination of the saudis, the russians and u. S. In crude, and it very much makes us a privileged continent. If you look at latin america, where we provide a lot of gasoline and diesel, we provide it, because it doesnt make sense to have refineries in latin america, because they dont have cheap natural gas, let alone natural gas in a lot of places. When youre making gasoline and diesel, you use natural gas to fire up the boilers, but you also take the hydrogen out of the natural gas and that enabling you to make some of the refined products. So one of the reasons why were exporting a million, a million two Barrels Per Day of gasoline is because of the fact that we are the privileged continent right now. Tom, how important tom, i know that theres legitimate ecological and Environmental Concerns but how important is this louisiana natural gas terminal talking about or liquefied natural gas terminal . Well, its important to accentuate the exports and we have the export capability to move an awful lot more natural gas that we can find probably breakeven numbers. Close to a billion to thats one of the battles that rages, because this administration is out for environmental justice. They want to make sure that if we have these facilities theyre operating properly. And yet in the balance of trade, you know, what were sending out there, steve, the one thing i would mention is, we always talk about being the most vital choke point in the record. Close second now is developed in mexico, because this summer well be exporting 11 million to 12 million barrelling a day in various unbelievable. Really good stuff. Tom, thank you for joining us. Natural gas for the winter keeping us nice and warm. Toasty. Coming up, 2023 saw some blockbusters out of hollywood, yet we are still not back to prepandemic levels at the movies. After break, are there opportunities in film in 2024 . Stay tuned. Youre watching squawk box on cnbc. Be ready for any market with a liquid etf. Get in and out with dia. What is cirkul . Cirkul is the fuel you need to take flight. Cirkul is the energy that gets you to the next level. Cirkul is what you hope for when life tosses lemons your way. Cirkul, available at walmart and drinkcirkul. Com. The 2023 box office struggled due to hollywood strikes focus on streaming and dwindling interest in superhero movies. Highest grossing movies of the year of barbie followed by super mario brothers and oppenheimer both of the second are universal films. Saw the third one, i only saw the third one. You did . I did. I saw the first two. Me, too. Because we have kids. Didnt go to guardians of the galaxy. Saw that on the plane. Did you really . Uhhuh. Joining us to discuss what to expect in the 2024 is no, no, no. I can do better. Hair gara bediat. I have a threesyllable make its important. Wont fit on a movie marquee. A problem sometimes. Practice makes perfect. Talk along about the much proclaimed demise of the superhero movies. Im looking at the Top Box Office here and i still see three superhero movies made it to the top ten. Its not all bad. Is it . Thats right. I mean, an idea that theres super hero fatigue. A make a great point. Top movies, many superhero among them. Uninitiated not necessarily big fans of comic book movies having to do a ton of mopework to figure out how the universes fit together. A huge a lot of superhero programs on the small screen as well. I just think an oversaturation of that. But, yes, if you look at those top movies worldwide and domestically, a lot of superheroes there, but, this weekend with aquaman and the lost kingdom, that earned about 38. 3 million for the four days according to our comscore data. People hoped to are more, but i think audiences love going to the movies, and if you have a unique or different way of telling a story, like with five nights at freddys. Godzilla and two japanese and two india sin mall titles in the top ten. I think were getting a lot of actionable intelligence from audiences saying each eth with their absence or presence at the Movie Theater what they want to see on that big screen. How much is because its super important for the moviemakers to appeal to an International Audience . Looking at the domestic earnings versus worldwide earnings. Every case, barbie more than doubled what it made domestically with what it made internationally. That says, to me, youve got to make movies that appeal to europeans and asians and south americans . You just hit the nail on the head. Thats exactly whats going on and, in fact, the first aquaman movie earned almost 71 of its box office outside of the u. S. And canada. In the international market. In fact, this weekend it did much more business internationally than it did in north america. So youre absolutely right. Having a global view is very important both from the filmmaker perspective and also from the studio perspective, and if you look on streaming, look how much content on streaming is internationally flavored, has point of view that has everybody is kind of included in that. Theres something for everyone and different. Yes, a lot of franchises, the big ones rely on that in the Box Office Fast x, fast and furious franchise. For years those have totally relied on the International Box office to build up their profitability. I wanted to ask you about all of this chatter about the potential tieup between Warner Brothers discovery and paramount. If you see a merger of that scale, or, you know, that gets exploded, could comcast be interested with Nbc Universal . What does that do to the creative consent seen in Movie Theaters . Interesting. Combining two huge studios it really is a big deal for their streaming platforms, because they want that content, and a lot of these studios or these streaming entities, they want that filmed entertainment on a big screen first and then that can feed the streaming side to bring people onboard. I think for audiences, they follow show runners, movie franchises, the archive titles, library title, that a lot of these studios have, and then you also have everyone circling around, whether it be amazon or apple, you know, warners whatever it may be all of these companies are kind of doing this dance. Theyre trying to figure out what everyone is doing. Were in a time of incredible change right now. I think were seeing a shift in audience taste. Also i think were seeing how streaming is impacting moviegoing. Meaning i think a lot of people who love streaming also love going to the Movie Theater, but streaming is presented so many different types of content that its opening i think the minds of the audience they want something different. Not cookie cutter all the time. Paul, thank you for joining us. Thank you for your time. Coming up, the fed seems it got a handle on the inflation picture in the last few months, but should investors brace for a relapse next year . Talk about the risk to the economy. As we go to break, listen to us live using the cnbc app. Stay tuned. Youre wchating squawk box live from the market site in times square. When youre wearing the worlds coziest slippers, your comfort zone can be just about, anywhere. Step into your comfort zone with olukai. Why choose a sleep number smart bed . Because no two people sleep the same. Only sleep number smart beds let you each choose your individual firmness and comfort. Your sleep number settings. Its so smart, it actively cools and warms up to 13 degrees on either side for your ideal sleep temperature, and effortlessly responds to both of you. For your best sleep, night after night. The queen sleep number® c2 smart bed is now only 990. Plus, no interest until january 2027. Ends monday. Shop for a limited time and sleep next level. Only at sleep number. Welcome back. Lets talk about inflation in 2023 and what to expect next year. Fortunately we have steve here. Mauling over that for all of 2023. I bet theres not a day goes by you dont think about inflation. Is that right . Yeah. And i didnt used to think about it at all. Remember . Didnt used to think about it. Look at that chart right there. Looks pretty good. Heading back, thats the year over year change and headline inflation. 2. 5 . 2. Right around 3 right now. The trouble is this. Last year around this time, we had some good data. It turned out that it was revised and revised upward. So we thought we were out of the woods and the fed chris waller called it a head bake. Talked with Action Economics suggesting last year was the result of some seasonal adjustments and really nerdy kind of things, could deal with the ukraine war. That they expected a rise in prices. Never happened. He doesnt think were in danger this year with another head bake. One other thing to look at. Lets go back, in the wayback machine i guess they call it to the 70s. Whoo sound effects. There you go. Look at that on the left there. Inflation went up. Came back down. Fed cut rates. What happened . Went back up. Thats the thing that really animates a lot of fed policy. This idea that there was this inflation redux, inflation return, and whether or not they would be, it would be too quick to cut rates next year, because you have this. Now, remember, oil prices came back up. A big part of that. You remember that, contessa. I dont, actually, but ive read about it, yes. Ooh. But to your point. Yeah. If past performance is no indication of future results or anything. Right. Do you think that the specter of that double peak in inflation is overplayed . You know, i dont know if were going to ask our guest about this. My leadin question. What i care about more than anything is that i think it animates fed policy. I think it drives them to be a little more reluctant to hike to cut. Thats important. Look was what we can expect from the economy and the fed in 2024. Joining us ben harris director of economic studies and director of Economic Policy the at the American Enterprise institute. Mike, start with an issue. How ashade should the fed be of cutting too early and having a return of inflation like we had in the 70s . Steve, i think its a great question. The case for being concerned is as follows the labor market is still very, very tight. Laker demand still in excess of labor supply. Labor demand way in excess of what we thought in 2019 was a lot of labor demand. We have 9 million Job Vacancies now in 2019 had millions fewer, and thought that we had quite a bit of labor demand. Potential gdp is likely lower than actual gdp will be. So not just the labor market. The economy overall likely will be running hotter in 2024 than its underlying potential. Services inflation is slowing at a much slower pace than overall inflation. So we have a Services Inflation problem. Wage inflation is slowing, much, at a much slower rate than overall inflation. So Wage Inflation is still inconsistent with the feds target. And most importantly, the market is reacting to the feds communications strategy, the feds decision at the last meeting, by going gangbusters. So what the fed wants to do is to tighten overall financial conditions. Overall financial conditioning by some measures are looser today than they have been in two years. The market is expecting many, many cuts in 2024. And so all of this, i think, should make the fed concerned, that inflation, if it doesnt rebound, it might just kind of get stuck at the 3 level it currently is, which is, of course, much higher than the feds target. Just to fill in some data that michael was talking about. In 2020, before the pandemic 6. 7 million job openings. Now its 8. 7 million. Michael, just, it was like a cold stream of cold water all over the optimism of this market, ben. Do you want, you want to try to restore the optimism . Rate cuts . Or do you want to pile on, ben . Steve, i think i agree with what you said at the outset, which is i think markets shouldnt be assuming the fed is going to cut. I mean, i look at this fed and i see a group thats dieing to pause, and doesnt want to hike and doesnt want to cut unless it is absolutely forced to. If we get three months of really strong inflation data, the feds going to have to cut in march and cut by 25 basis points, but its going to take sharp declines and core pce for that to happen. They did show, and some economic projections, in the december, they are expecting over the course of the year core inflation to fall by about 80 basis points. Which is a lot. That has to happen in order for the fed to cut. I think were in a pause unless the data forces that pause type of moment right now. And ben, stick with you. Give your best outlook for next year. Is it crazy to think that the fed lands this plan . You have a soft landing, keep unemployment low. Gdp at potential and just go about our merry business in 2024 . Yeah. I mean, this economy right now is like the definition of a soft landing. Unemployment at 3. 7 . Weve had a gradual moderation, labor market, something weve almost never seen. You know, you saw labor market tightening not because of, easing in the tightness in labor market, not because of raising unemployment, because more are coming back to the labor market. A great thing. Seeing strong consumer spending. Household Balance Sheets, except for those in bottom, still in really good shape. A ton of reason for optimistic. My base case is for slow but positive growth over the course of the year, consistent with the fed. I just dont think theres much reason to think that well see recession in the next year. All right. Michael, heres your opportunity now to throw cold water on what ben is saying. Are you onboard with this fabulous soft landing well have next year . Im kind of off message for the third day of christmas with all of this negativity. I think ben and i see this a little differently. And youre on message, a good thing. Thats right you know, three scenarios. One, soft landing. Second is the economy heats back up again. Fed has to hike more, or at least pour even more cold water on this dot block that shows 75 basis points of reduction, which is what the feds forecast is for 2024. Third scenario, recession. I would put a soft landing as the least likely of those three scenarios. We dont have soft landings in the u. S. Economy. You can debate how much weve had since world war ii. Some people say zero. Some people say one or two, but its not all that many. I think the underlying reason for that is that recessions ultimately about loss of faith on the part of investors and consumers. Think about this in terms of the labor market. The soft landing narrative is that monthly job gains kind of slow to the, you know, 30,000, 40,000 jobs per month level. Stay there until inflation comes down. Stay there after the fed starts cutting and then kind of come back up again to 150 a month. Right. That just seems way too neat and tidy. If ceos, hiring managers, Small Businesses wake up in the morning and they see, oh, 60,000 jobs gained this month. Oh, 20 or 30 basis point increase in unemployment rate. Theyre going to be worried about their revenue projections. Not add the head count. Theyre going to try to let workers go who they then arent necessary and then the recession psychology takes hold. Thats, i think a much more likely scenario than this really neat and tidy goldilocks soft landing scenario. Michael, we have to leave it there. Do you have nowhere to go on new years eve . Is that a part let me help you. Look at that. Christmas cheer in the neck tie. I see it in the neck tie. Not hearing it in the forecast at all, find it somewhere. Why im wearing the tie. Balance it out. No, it doesnt. Not at all. Ben harris and michael strain, thank you for joining us this morning. I like it. Allin to the tie. How about my red tie . Doesnt play music. It does not. That doesnt count. Coming up, 2023 was the year of the weightloss drog and theweight loss drug maker. Eli lilly a name in that sector. After break, talking about whats ahead in 2024. Is there a diet in the future . Stay tuned. Youre watching squawk box on cnbc. when the day that lies ahead of me seems impossible to face a lovely day lovely day lovely day lovely day a bank that knows your business grows your business. Bmo. Im so glad we did this. Im so glad we did this. Im so glad we did this. Life is for living. Lets partner for all of it. Im so glad we did this. Edward jones this thing, its making me get an ice bath again. What do you mean . These straps are mindblowing they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. And you are . Im an investor. In invesco qqq, a fund that gives me access to. Nasdaq 100 innovations like. Wearable training optimization tech. Uh, how long are you. Im done. Im okay. We gotta get ready for our family migration yeah uncle dan, you coming too. Umm, no. Pleeeeeeeeeeease. Whoa. That did it. Here we go. Migration is. We have a number two situation. Can we land . There is no way were landing. Are you sure no ones watching . Gwen mallard do it now or we leave without you. Ok, ok. Weightloss drugs skyrocketed this year in popularity. Up more than 50 yeartodate. Our next guest says weightloss drugs will likely dominate the discussion within health care as Companies Like roche and astrazeneca will get into the race. Joining us, emily field, barclays head of research. Emily, anything that you see that could slow this train down . Good morning. I mean, i think what were most watching closely on our side is really supply. Just because both eli lillie and nova nordous. Demand unprecedented. Think how sale oos involve in 2024 dictated how quickly can they make these drugs . Trying to ramp quickly as they can but thats what people will watch. How much can they produce to meet demand. What do you see at the Addressable Market . Some as high as 1 100 billion i sales by 2030 . But us in that camp. 100 billion for the obesity market by 2023. Within the next decade from this year and think thats a matter of new drugs coming on the market from nova and lilly and other competitives will eventually make it and expanding as companies launch outside the u. S. Market. Weve sooner a lot of pharmaceutical dealmaking even in this time of year, which traditionally hasnt seen much in the way of announced deal. Scott gottlieb put it on twitter yesterday saying he thinks its in spaces there are natural barriers to entry often owes to formulation, manufacturing complexity. May not be coincidence. Well see a bid put under these platforms as patents are eroded by policy mistakes. Do you see that continuing to be a key driver of ma . M a . If not what will be a catalyst for dealmaking . A great question. Sort of this diabetes and obesity space asked all the time why are nova and lilly so far ahead . Due to factors underinvested in the space. Obesity a graveyard for development for a number of years and now lilly and novo in front. Such a big market a Company Really cant be out of it completely. Seeing Companies Like roche and astrazeneca weigh in. Baffling, though. Look at the obesity crisis in the United States alone, the fact that anybody could think that that should be a graveyard in terms of pharmaceutical development is jawdropping. Then, meantime, i know youre looking to see more data on, then how these drugs, have an influence on sleep apnea or liver fibrosis or chronic kidney disease. In other words, if youre solving an obesity problem, there is effects on other Health Outcomes as well . Yeah. Exactly. Thats the key to why we think this market is going to be so big. Because both companies are producing data to shows these arent jut vanity drugs but help with so many healthrelated conditions. Novo earlier in the year showing 20 reduction in highrisk population of having a heart attack or stroke and data just like that sleep apnea, liver, kidney disease, all coming in 2024 thats going to build this notion that, you can pay for these drugs and get a return. Emily, ive seen a report that people who have report that people who have critical conditions that require some of the drugs using these weight loss drugs cannot get those drugs. Is there any danger of a regulatory or a move by government that would stop some of this use of the drug for, i guess what you might call voluntary reasons rather than those and provide and get those drugs available to people who need them for critical conditions. Yeah, we have seen that particularly in the drugs that are meant for type 2 diabetics. Novo and lilly work closely with the regulators to ensure that the right patients are getting the drugs, and we think were going to continue to see that evolve as supply comes online, but the companies are certainly playing ball and have very good relationships with the regulators, so we dont see Regulatory Risk to either of these companies. Yeah, it seems like that will be a key story to watch for in 2024. Thank you, emily. We have some news just coming in this morning. The New York Times suing openai, the creator of chatgpt, and microsoft for copyright infringement. The times says millions of its articles were used to train chat bots that now compete with the times as a source of information. The paper says the defendants should be liable for billions of dollars in damages. This is microsoft is an investor in openai and has incorporated the technology into its bing search engine. Potential big story. I dont know how they thought they were going to get away with it. Youve seen concern. The New York Times is maybe the biggest name in journalism so far to come out with this, but weve seen the concern from the actors and the writers when they were making sure that a. I. Protection was written into the contract. Oh yeah. Exactly. My wife found out that her novel was one of 30,000 ingested into a large language model. Does she get paid for that . Should she get paid for that . I dont know the answer to that. The New York Times is saying, yes. Very strong copyright laws in this country. Except when theyre broken and nobody except when we have to adapt to new technology. Right, exactly. Coming up, what to watch ahead of the opening bell on wall street. Well be right back. Rylee from rylees realty hi this listing sounds incredible. Lets check it out. Says here it gets plenty of light. And this must be the ocean view . Of aruba . Huh. This listing is misleading. Well, when at t says we give businesses get our best deal, on the iphone 15 pro made with titanium. We mean it. Amazing. All my agents want it. Says here. inviting pool. Come on over too inviting. Only at t gives businesses our best deals on any iphone. Get iphone 15 pro on us. the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. We just got an order from dinosaur, colorado. Start an easy to build, powerful website for free with a partner that always puts you first. Start for free at godaddy. Com little more than half an hour until the opening bell on wall street. Joining us now, Catherine Rooney bara from stone x. We have had so many insiders today talking about whether were too optimistic, whether the optimism of the holidays is bleeding over into the new year, or whether theres cause for concern that after such a big runup in the markets, that were kind of overdue for some big pullback. Set the scene for us. I heard a phrase today, weaponized fomo. Theres indiscriminate buying now. Everyones very positive, expecting that the fed cuts more than 150 basis points. What i would say is, fine, keep your long positions, but hedge them. The vicks is very low. You can get cheap puts, and i think it make sense. If youre going to stay long and overweight the magnificent seven, overweight qqqs, overweight s p market cap, i would say, start to take a hedge position, and that doesnt have to just be buying puts. That can be buying gold, tips. This is the just in case trade that i think is cheap right now, and i think is prudent. The interesting thing about a weaponized fear of missing out is that were seeing the s p only half a percent half of 1 from a record high that we havent seen in two years, and you know, the psychologists in some of these advisors say people dont like to buy when you hit that peak, that if they are not in it already, now is not the time that theyre getting that they feel like they want to get in it. Do you think that thats the fear of missing out overwhelms, then, the fear that ive already missed out . There could be that, but i do get a sense that there is this still this a. I. Trajectory that everybody wants in, so the tech sector is bvery strongly held especially in real estate portfolios, but what i would say is, be careful with that. If the fed doesnt cut as much as is currently priced in, then you could see some headwinds, and some serious ones on cyclical sectors. Another interesting dynamic of 2023 is that your traditional stocks and bonds portfolio worked, about 17 this year. Is that still going to be something that carries over into next year, especially as we look at just the prospect of rate cuts and all sorts of other cashshifting trends that took place this year . So, i like fixed income, but the biggest headwind or risk to the fixed income space is positive correlation and the continuation of positive co correlation. I doubt that continues. Its historically very unlikely to continue. Its an anomaly. Its an aberration from Financial Reality that you have that positive correlation, and the reason that you had it is because of high inflation. Inflation is coming down, whether it continues to come down because of immaculate disinflation or because of recession, i think thats still to be determined, but the fact is, i think, that the negative correlation will return, lending additional credibility to a 60 40 portfolio. How much of your clients money right now is in oneyear treasurys maturing in february, march, and april . How much right now is in money market funds . Yes. And what are you telling them to do with that money when it matures . If bond yields continue to move lower for good reasons rather than recessionary reasons, that money is going into equities. Boom. Dont pass go. Dont collect 200 in a money market fund. Just go right into equities. If bond yields move lower because the u. S. Consumer rolls over, which i think is an underpriced risk for many reasons, thats not good for equities. So, i my advice, steve, is to hold on to those juicy twoyear treasury bills that outearn the s p 500 right now, have the nice, hefty allocation to fixed income, you know, the steepener trade youre saying, take those oneyear and roll them back into ones and twos . Look, i think it makes sense. I think the fed is going to be cutting. I think steepeners make sense right now, and i think having a hefty position in fixed income is a good bet, especially if we get this negative correlation returning. But not in the money market fund. I think in you should have a hefty cash position, and youre going to roll it into shortterm duration fixed income, yes. Kathryn, thank you very much. Thank you so much. Were going to take one more check of the futures market this morning. Where are we at now . Is it at the big board now . There it is. Are we going to make that record today, contessa . Are you feeling it . If youre looking at only need 0. 5 , dont you think that everybody goes to buy just to see it . Lets take collective action. Join us tomorrow. Squawk on the street coming right up next. Good wednesday morning, welcome to squawk on the street, im sara eisen with scott wapner live from post nine of the new york stock exchange. Carl, jim, and david have the morning off. Take a look at futures, improving throughout the morning. Getting a higher start, at least, if you look at s p and nasdaq futures, both pointing higher. Dow futures, unchanged. Our road map begins with the stock market momentum on wall street. The s p 500 within 0. 5 of a record closing high. Also ahead, tesla joining the december rally. The stock doubling year to date ahead of the companys quarterly