Transcripts For CNBC Squawk On The Street 20131226

3 here. Overnight in asia, the nikkei hit and held 16,000 for the first time in six years and then hong kong and europe are closed. Happy boxing day, by the way. Our road map begins with the markets. Today looks to be yet another record day for stocks. All the major indices set to open in positive territory. Plus, call it a shipping nightmare. Thousands of packages were missing on Christmas Morning after ups and fedex reported extraordinary delays because of hive demand at the last minute. And what does history tell us about Market Strategy for 2014 . Your play book ahead in just a few minutes. First up, though, stocks poised to open higher after coming off of record closings on tuesday. A gain today would be its sixth straight, something it has not done since a tenday winning streak in march. Of all days on the calendar, the s p is likely to be up today, 79 of the time since 1945. This is the start of the official santa claus rally, isnt it . On average a gain of 1. 6 . So last five of the year, add the couple other for Northeastern University year and its that sweet and short rally for today. David, youre very quiet. Well, you guys are on top of all the stats. Im just listening and taking it all in. So i only have a 22 chance of losing today. Thats pretty good. Compared to the rest of the year it is. In asia, the nikkqu nique kie s p has had doubledigit moves in five of the past six years, including this year. Its been a time of volatility. The nasdaq, by the way, almost 17 from its record high. The record high that we thought for a long time would never be reached again. Less than 20 away. Oh, wow. Of course i think we hit that in march of 2000 if im correct. Thats amazing. What are we up 26 on the dow in. Plus dividends. Its not a relay many people are going to be focused on that 10year yield now. We almost reached 3 . I guess it was earlier this week. And we will see what that holds for the new year. Theyre almost there in 3 . But in holidaythin markets, if you get gentle selling, you can have more bang for your buck on the yield. We should bear that in mind if we get to 3 . Consumer spending the best since june. Durables up 3. 5, the revision to gdp, the jobs number that was gone. And then with two weeks from tomorrow we get the jobs number. This claim number may make you feel a little bit better. Except this time year the seasonal adjustmentes they make, it not as solid as it may be. Dont forget that saturday 1. 3 Million People on longterm employment again fit is it forces them back into the you raising your gdp weve sent so much time agonizing on where weve been and at some point you should sit back and go, wow, a lot of people got richer by what happened in the stock market. Not enough people. I thought your comment before christmas was you thought the most important business story of the year, rising in equality, every telling. Gabe gutierrez is in atlanta and he has the latest for us. Gabe. Reporter david, good morning. Ups brought in extra workers overnight to sort some of those packages and already this morning weve seen fedex and ups trucks hitting the road trying to deliver those late packages and calm those angry customers. Both companies are apologizing and blaming bad weather and increased demand due to soaringline sales. But that explanation isnt sitting well with a lot of their customers, many of whom are sounding off on social media. This morning fedex released a statement saying the demand was unprecedented and that the shorter Holiday Shopping period this year between thanksgiving and christmas was just overwhelming. Fedex was expected to hand balance 275 million packages during that period. The vast majority of them with no problems. But again, fedex and ups hitting the roads this morning trying to deliver those late packages and trying to calm those angry customers. Gabe gutierrez is joining us from atlanta. For all the stories weve had to cover retail this season, you cant go to target because you get your data stolen and now its hard to trust a company with their guarantee. We still dont know how many packages are late. They called it a small percentage and then they got backlash for saying a small percentages, making those customers who didnt get their packages feel like nothing. And amazon giving gift cards to those affected. Its tough for them to gauge the highest demand periods. They dont have that many years of data to go on. Perhaps they did not do a good job of figuring out exactly when that was this Holiday Season. It obviously speaks to what we assume and know is growing use of the internet for all sorts of retail. We did invite ups on but they didnt want to come on and talk about it. I didnt realize that one in three packages that are sold online are actually returned. Normally. So after a season like this when god knows what the returns are going to be over the next 48 hours saying its still not too late. Well deliver to you. Its they quote a ups driver as saying this is the worst Christmas Ever. Just sort of puts it in some perspective. And ups is on the cover of business week this week, they call him mr. Peak, the guy whose job it is to make sure that it was a peak. Laura, its great to see you again. Thanks for being with us. Thank you, carl. I know you dont cover amazon or ups for that matter but how does it affect the consumers willingness to trust some retailers . I was happy to hear that story because a couple of my presents were late yesterday and that sort of validates it. I think the ease of shopping online will make people continue to shop online. Its important not to overestimate how significant it is. Online shopping still is about 15 of retail sales. Is there an issue withline shopping continues to gain a bigger share of all purchases . The good news for retailers and their landlords is there was a natural slow down in construction on retail centers, new sent teres after the downturn. So we havent seen the overbuilding that characterized the 90s and earlier in the 2000 odds. We will see fewer new stores and more online growth over the next several years. Laura, how do i square what you just said with the fact that youre now saying 15 of retail isline . Presumably thats off the top and hints at overcapacity. We think that growth has slowed down in new stores and will continue to slow down. We are seeing more retailers who are only ecommerce. I think even strange categories. When i started following furniture 15 years ago, we thought that would never go online. We will see fewer new stores being built, some chains shrinking but theres always new retailers are that. Laura, can you cut through all the promotional noise everybody is eseeing and address where we are on margins at the moment . What is your perception of how profitable the sector has been for the retailers. We saw lots of retailers trying to create an early black friday. They were successful and this we think Profit Margins are going to get squeezed consumers tn to spend on their homes and on their cars. Where does that leave you with potential stocks to look at . Were only recommending 4 stocks over 19. We like urban outfitters, and we think anthropologys outlook has been strong. We like lumber liquidators. Theyre really tied to house related spending. Depots a lot on the leless. How many active underperforms and sells . We just upgraded tiff any. We finished losing money because i think their gross tough to have a lot of upd performs going into the new year well. Thanks for that. Walk one of their execs, Vice President of Product Development and design and systematically over the year had been taking one or two about 160 pieces over the course of a couple of years. A year incarcerated doesnt seem very long, does it . No. When we come back, which stockings are set to be buys in 2014 . Well talk about that question. And social media stocks. Twitter is up again in the premarket this morning. Well talk predictions what to expect of those guys. Can the dow make it straight for the First Time Since march . Back in just a moment. [ male announcer ] for every late night, every weekend worked, every idea sold. You deserve a cadillac, the Fastest Growing fullline luxury brand in the United States. Including the all new 2014 cadillac cts, motor trends 2014 car of the year. Get the best offers of the season on our Award Winning products. Like a 2014 ats and srx. Hurry in, offers end january 2nd. announcer at scottrade, our cexactly how they want. T with scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottradeproud to be ranked best overall client experience. The markets in the midst of a record rally. When we open, the likelihood is well again push positive momentum into record territory. Happy holidays, guys. Thank you. Happy holidays. Chad, let me kick off with you. This is the best performance on the stock market broadly for 16 years. And we should celebrate that. When people get their 401 k statement in two or three weeks time, what should they do . For many people they will have been made whole financially on the market but at the same time they will remember the turmoil. What should their kneejerk reaction . I think the kneejerk reaction is to stop and not have an immediate reaction. The prudent thing to do is to look at your risk and balance it with how much equity and Bond Exposure you have. And get back to rebalancing your portfolio because youve had such a tremendous run within equities. It doesnt mean were calling for this dramatic decline in the market. We believe that gdp and Economic Growth will be much better than consensus at 3. 1 . We do believe the market through the next quarter could go through turbulent times. Thats why were recommending a rebalance because the federal will. What are you talking about . For many people bonds are going to be quite dangerous if the fed is going to upset the apple court. Well, you know, were expecting that the long end of the yeels curve to move to 3. 5 basis points, what reballing for us would mean a of 0 40 plit split. Look for good quality bonds. We would probably shy away from the lower end quality. Weve had a good run in those bonds. We dont think theres very Good Opportunity or very good up side from some of these inflexion points. I assume you think this late year runup in some of the energy names is going to bleed over . Yeah, you look at that group, you look at the industrials. Were still in maybe a middle part, if not an early middle part of the whole economic recovery. And the stock market thats moved like this has really not touched an inordinate number of names, particularly in energy. The market doesnt generally peak until everything trades at 8 or 9. When you look at where the defensive names are, we should all be pokes post to these kind of names and stop worrying about the next thing that will happen globally. Employment better gets better and better. Gdp numbers are surprise bug theyre just what you would expect to see at this point in the cycle. So energy should be one of those great areas. All that said, chad, i see ibm on your list, the only dow component not to have a green arrow for the year. Does that leave us with discussion on whats not ordinanorde ordinan ordinanorde expensive. Investment spending on technology for the last five years has been below gdp growth rate. We think that in 2014 thats going to come back and the resurgence of mega cap tech will happen. Ibm, great company. We think 220 on a price target. You could also look at troubled and you can make good money on these companies and we think 2014 will tlb opportunity. Thank you. What does history tell us about what your Market Strategy should be in the new year . Well take a look inside the 2014 play book when we come back. Futures looking pretty good here. The dow setting up for a best gain since 2003. The s p, you have to go back to 97. A lot fror squawk on the street still ahead. A lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. To help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Take a look at futures this morning. Theres a degree to which traders are shaking their heads, yes, volume is light but were seeing the classic santa claus rally. Futures for the s p up, and were getting ready to close the books on a banner year for investors. History suggests you should keep riding the wave into the new year. Dom . If you want to be in a market thats up like this, it may pay to stay in the market the following year. The reason why is because since 1950 there have been 17 times when the s p 500 has risen by at least 20 like we have this year. Now, in 14 of those 17 times, the s p 500 actually finished higher the following year. Again, 82 of the time stocks extend that big run higher. Now, the percent returns are even more impressive here. If you look across all of those 17 occurrences, the following year the average gain really it comes to at least maybe 11ish percent now. When you do have a nice big run like weve had here, the average for all years is is 11 . If you only look at the 14 positive times when even better if you look why investors might be buying it, it might be because theyre expecting a huge probability move here. Thats the reason why, carl, some investors arent surprised about the nice buying trend. Its taken you. Weve just lot the shot. The truck apparently had build o out. Still way too low, though . Thats right. Youre coming from a company thats much smaller than the u. S. You can send it to juneau, alaska for 49 cents. Yes, thats my point. The opening bell just a few minutes away. Dont go away. 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The big question moving forward is are you going to get that volatility back next year . Weve had very few 3 moves on the market throughout 2013. As the federal moves to the sidelines, will the volatility increase and volume increase . 47 records so far for the s p. If you were to take out some of the lay years in the 90s, its toying with data, youd have to go back to 1975 to find a better year for the s p. Extraordinary. Extraordinary. Weigh and measure. With that, lets get to the opening bell. Some hubbub in the journal about the valuation of yahoo . Theres the opening bell. [ opening bell ringing ] to celebrate the new era, pin stripe bowl taking place this weekend. Over at the nasdaqs the veteran artist program, a nonprofit for military veterans. Tmobile was moving at about 3 on the market. Whats your take . Were putting together a little report on it, my socalled faber report. Ill have a bit more of a report for you on that in a member and weve talked a lot about a great deal of speculation about cable and wireless. If youre watching anything on cableowned wireless, may want to keep your eye on tmobile. We all know the chapter that blackberry is now in. John chen, the new ceo, a partnership with foxconn. Giving up the fight to bring up that stock. Probably a bit late to have sold that much stock. Well see. Interesting response, though, given how terrible the quarter was from those investors who are at least left for sort of kreeg when you have what is add 4. 4 billion loss and yet you get a positive reaction in the market, at least there is some confidence i think it was the risk sharing, the independent dethat foxconn would essentially share some of the risk. Did want to look at amazon shares. Every year the company puts out a press release right after the holidays giving us this list, an interesting list of just how much of everything it sold and how much stuff is, therefore, headed for a landfill near you. But they did have some interesting numbers, particularly on prime memberships. 79 you can get Free Shipping within i think its two days, you also get the instant video as well. They had so many people added during their peak Holiday Season in terms of prime, that they actually cut back on the availability of the servers for a while. They limited new signup to speak service. Tell that to ups. That may be one reason were seeing the problems of ups and fedex with deliveries. They also go into a long list of just how much of everything they sold. They sold i know rainbow looms is one of your favorites probably, im sure in carls household he may be familiar with all over the place. All over the place. Carl, they sold enough of those to stretch around the circumference of the earth. That is the actual bands. Again, its a conversation, isnt it, about volume. It not a conversation about margin. Is predatory pricing illegal in this country . The idea that you set prices so low as to push people out of business or create a barrier so that others wouldnt come in . I bought a television from amazon. I cant believe they actually made any money on the price that i got it for. Is that predatory pricing against best buy . You could argue potentially it was. He doesnt need to turn a profit here. Theres no monopoly on that. They can choose to do what they want. Its not as though theyre a foreign supplier coming in and dumping this kt did they believe they can turn on the margin shift and enrate you have to if youre going to go get that kind of multiple with this stock. Speaking of amazon, one of their main vendors. The hash tag is ubs take a look at twitter. This is going to be a talker for most of the morning. Up another 3 in the previous market. I think thech have finally hit 2 and youre talking bm 73 people just want to show they got a piece of this stuff. That is shocking. That really is shocking. I took a few days off and i had to admit i had not taken a look at twitter shares or realized they had moved up that appreciably. I was having conversation at the mid 50s level with many people who questioned that valuation at that level. This is truly extraordinary and will only heighten the tension as they actually report their First Quarter, not that far from now. Their First Quarter as a Public Company i should say. Absolutely. Lets get to mary thompson. Shes watching the floor with the dow up 55. Hey, mary. Hey, carl. We seem to have broadbased gains as the market continues its run. The santa claus rallynd way. The first two of the new year getting off to a strong start in tuesdays shortened holiday session. And the dow fin, at another or finishes to the upside today, it will be its 50th record close of the year. If the s p closes higher, its 44th high of the year. Today were watching retailers in the wake at the end of the official Holiday Season. Take a look at some of the brick and m and mortar retailers 37 take a look at the delivery companies, fedex and ups of course caught up because the weather delays and an online surge in latelate not the dow industrials, the s p, the russell 2000 all finishing at highs and continuing to move in early trade. Were also watching theyearold on the 10year continues to flirt with that 3 level. A number of people watching that in large part because they think that could derail this rally weve seen. The last time it hit 39 level was back on september 6th. Before bu before that, we havent seen those levels consistently since 2011. Today a little bit below that. We do want to touch on the muni bonds, having their worth year since 2004. The barclays up there. Of course we did have data out of china today, it raised its growth estimates for 2013. Still below 2012 levels. Notless this is helping to give a pop to copper in todays social, which is now trading at multimonth highs. Back to you. Thank you. Let send it up to the nasdaq. Good morning, sheila. Good morning, siemor opini opiniopinio opiniopinio opinion good morning, simon. Take a look at amazon, continuing to trade above that 400 a share level. You guys were talking about those prime customers. Holiday sales are up more than 20 . But ef bay is a big loser this morning, in fact the biggest loser here at the nasdaq, pointing out that holiday sales for ebay only growing about 10 . So a big dropoff from the 30 gain it saw last year. Social media continues to be a big focus. Just take a look at twitter. Facebook continuing to hang out in that record territory. Were also seeing grip, linked in and zim door ra. Blackberry bust. Finally i do want to mention the momentum stocks. We are continuing to see gains in those stocks today. Tesla the biggest winner here at the nasdaq, micron technologies also in the green as well. David . Theyre gunning the winners this year for sure. Lets come back to a bit of telecom work, if you will. A lot of the media that follows these things on a variety of reports, last week we had reports that softbank, which controls sprint was fining up financing to and we have reports out of japan that the two companies are in taebs. They would tell you theyre deep in talks. Theres been no secret made on the man who controls soft bank and therefore sprint, and therefore to do that would be looking at t mobile, controlled by deutsche telekon. You have a lot of other parties involved in these things. He tried. The first talks that took place between sprint and. What can i tell you at this point . Again, no secret hes been talking off and on to the germans who control tmobile for some time, yes. Increased beyond social niceties of late. That does eem to be the key here is there is no real deal on the stable as yet. And most importantly, from what i am hearing the decision at deutch tell come have interesting it did emthis is a company that did agree to try to found itself to at t until that deal was pro funsed dont forget, a new ceo taking over at simon, you may have been able to help me pronounce his name, im going with hottges, soft g. Many argue, simon, it is Telecom Consolidation in europe that really will be the key next year given all the providers there for so many people the regulatory morass thats been created and 10, 12 years ago you were a was ahead and now it is far behind in part because of, many say, a lack of consolidation. Hottges is how you pronounce it. Thats all you got for me . No, no, no. Vodafone may come in on a defensive move unless it wants to sell to at t. At t may have its own issues with the nsa. Thats a real issue amongst european retailers. Some people say half of soft bank ebidta for the past year . They would not be in a position to pay the type of fee that at t did. Theres a lot questions here, carl, when you look at it. The key, though, is are they willing to go down the road to really entertain. Are they willing to go down that road yet again . Because when were not anticipate softbank would be able to come anywhere near the monetary damages, if you will, that at t was able to pay to get them to agree to a deal. Listen, the companys been performing well, which again goes to this point as to why you might want competition from the dno cme. Good morning. As you look at the charts, it did touch 1. 75, the psychological level. At one point the 10year note did touch 3 intra day but didnt stick at that handle. Many traders believe were going to be a lot more aggressive. When the long end starts to move through those levels, a lot of eyes are going to be focused on what that does to the yield curve. The 5 to 10s have tapered off a bit. The flattening has stopped be, even though the biggest of the year have been mostly steepening. Let switch girls to one marked and thats the and any trade pairoff with a cross with the yen. Look p i euro yen, the pound yen, i could put any number of currencies against that and see the same damage. In the u. S. , were hovering to 62month highs. But the real interesting aspect here is that many traders doesnt believe of that of you, ca carl. With the palout from ups and fedex today, do amazon and ebay have runs to worry . Well talk about it when squawk on the street comes back. So you can see like right here i can just. You know, check my policy here, add a car, ah speak to Customer Service, check on a claim. 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The delivery problems at ups and fedex are putting them with question as well. What do you think happened here . We had a shortened shopping season and a surge in online demand, particularly accelerated by mobile devices. I think mobile contributed about 40 of all Internet Sales and i think you had people trying out purchasing Products Online via mobile devices and logistics werent there to support it. It sounds like a mix of weather. Maybe it leads to what fedex said in the recent guidance pap lot of their forecasting models might not have been as sharp as they otherwise would have been because the calendar was a bit of an outlier this year. I guess so but i think we all knew we were going to be dealing with six furs days. This secular shift from offline to Online Retailers, some of these Companies Got ahead of that. The companies that got ahead of that trend, the internet secular tend and the mobile kicker on top of that, they delivered well this Holiday Season and i think the stocks today at least for amazon supports that. One key of course to your point, more than half of a amazon customers shopped using a mobile device this holiday. Where are we going on that . Are we going to get to 100 usage on mobile . I dont know about that. Were clearly expanding. Across the board youre dealing with Online Retail sales being done by mobile devices. Thats why you had that lastminute overflow that some companies werent prepared for. It a positive trend for those names that got ahead of the curve and i think amazon is one of those countries. Id like to know what sort of margin you think amazon is el selling the really promosal stuff at . What happens if normally one third of Online Purchases are returned and an enenvironment when are you accelerate purchases so amazon has to discount at a loss on those items . That could very well be the case. As you know, the advantage of the Business Model and investors that the stock have that give them high are. If this season theyll be running at very thin margins. This company spent a lot of money building out Fulfillment Centers to get ahead of this demand. I think were going to start seeing leverage and margins rising. Mark, i dont have my notes in front of me money do you cover twitter . Yes. I thought you did. What do you have make of this . Up from 55 in the last week. As an analyst, this is an awful fli tough pick. We have a buy rating on the stock with a 6 we have a company that has a comp out there, this company facebook, thats got 50 ebidta margins and this company is only at 7 . Investors are looking at this correctly thinking it going to do 100 Earnings Growth over the next three years. Getting at the actual fair value of the stock is very difficult now. Its an awful small buy for us. What happens when you have limited check floats come out that have checked a lot of boxes . Mark, thanks a lot. Well see you later. Still to come on the program, colorado is issuing licenses for Recreational Marijuana businesses just in time for the new year. Next on squawk on the street. Of the year s at the lexus december to remember sales event. This is the pursuit of. [ male announcer ] this is george. The day building a play set begins with a surprise twinge of back pain. And a choice. Take up to 4 advil in a day or 2 aleve for all day relief. [ male announcer ] thats handy. All these fedex and ups issu issues give us our tweet question this morning. Tweet us and let us know. And coming up, well talk to a reit that operates the largest portfolio of neighborhood shopping centers. Thats up next on squawk on the street. T follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. The energy in one gallon of gas is also enough to keep your smartphone running for how long . 30 days . 300 days . 3,000 days . The answer is. 3,000 days. Because of gasolines high energy density, your car doesnt have to carry as much fuel compared to other energy sources. Take the energy quiz. Energy lives here. Sorry to interrupt, i just want to say, i combined home and auto with state farm, saved 760 bucks. Love this guy. Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] bundle home and auto and you could save 760 bucks. Alright, mama, lets get going. [ yawns ] naptime is calling my name. [ male announcer ] get to a better state. State farm. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. First we begin with a look at the markets. Joining us, alan lance and kenny polcari. Dow is up another 70 points . Its up another 70 points. You have the path of least resistance is higher now, right . Theyve thrown everything negative at the market yet the market continues to march higher. I think it is that absolute santa claus rally coming right to fruition, right to the end of the year. Not on a lot of volume. You cant get two excited because a lot of participants away. Extremely low value. The nasdaq lagging, though twitter occupies a lot of headlines as they shoots up to 70 a share. I still dont think its too bad. I think you might get a rush into the market early 2014. Much of these gains have been multiple expanses for this year. If we dont get the corresponding earnings and guidance into next year, you dont see the pullback or the market could get too frothy. Right now theres pockets of opportunity like we spoke a year ago, year end, theres still a lot of areas and stocks that havent moved and offer great potential. Such as . What do you like here, alan . We came out with our favorites for 2014, kelly, and denberry, dnr, has technology to enhance the production and efficiency of oil wells. I think thats a company that can do exceedingly well. Compuware, they have like m a activity as far as passed on an offer at 11. You can still buy that stock around that area, yields 4. 5 while you wait. Our best buy pick of last year did really well. Now we got weight watchers. It might take two, three years. We didnt think best buy would triple or quadruple in a year. Weight watchers if you have a twothree year time frame will be good as well. You think there should be some pressure on the market yet the market doesnt really feel it yet. It doesnt really feel like it wants to go lower. I think thats year end. If we break 3 and start trading above 3, youll see a cap on the market until the market readjusts. Earns are coming up in february. Youll get a much clearer picture of what the next month will be, month and a half. The ratio of 2014 guidance weve gotten hasnt been great. It hasnt been great yet the market continues to march higher, which is a little bit disconcerting i think for a lot of people. I think thats why you have to see it play out when it starts happening in january. A lot of this seems to be people want to buy on the good news. The fact that the 10year is kissing 3 again today, youre seeing very little focus on it actually it would seem like because people are almost shrugging it off saving this isnt as big a deal as maybe it was last time around. Exactly, kelly. I think its a situation where people were going to have losses in their bond portfolios. Regular bonds, longerterm treasuries are going to show losses into the new year if this Interest Rate continues. I think youre going to see fixed income going into stocks. Again, its like the only place to be. Gold is done very poorly. You could still see the surge. It could get frothy, too. I would take profits into strength. Let me make one final point, kelly, were in a nevernever land where cable continues, stock markets are open but nobody is really home. It probably doesnt matter until they get back in the first, second week of january. Thats what i said, volume is so low. Alan, keen, thank you both. Appreciate. Have a good one. Ups and fedex feeling the heat from angry customers as packages guaranteed for delivery by christmas have still not reached their destinations. Diana olick has more on that from washington. Reporter good morning, carl. Youre right, a major miscalculation from ups as web sales surged the weekend before christmas and the system simply couldnt handle it. Look at the volume of 7. 75 million packages would enter its system. They handle about 45 of all u. S. Packages, but what they didnt know is online sales would jump 37 last weekend. Now, the last statement from ups was on tuesday. They said the volume of air packages in our system exceeded the capacity in our network as demand was much greater than the forecast. The spokesperson said the bulk of packages that didnt make it by Christmas Eve will get to their destinations today. They beefed up staffing last night, christmas night but their cfo told Steve Liesman what they would not have to do. He said it before the final Holiday Shopping weekend. We continue to become more efficient and use routing on the ground so we can meet increased demand. Reporter as for amazon, which relies on ups, it placed blame squarely on the carrier. Amazon Fulfillment Centers processed and tendered customer orders to delivery carriers on time for holiday delivery. Amazon is offering gift cards to those affected, as is walmart. As for fedex, which also experienced some delays, they apologized earlier in the week but today put out a statement saying theyre operating at a 99 success rate. Are you outraged, kelly, or is it one of those things . This is where my lastminute shopping at the mall paid off ha handsomely. At least youd have someone to blame, the dog ate my homework. Sorry, they didnt make delivery. Coming up, the ceo of Kimco Reality Corp will join us when squawk on the street comes right back. Its as simple as this. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. It is the day after christmas. Some call it boxer day. People are heading to the malls to use those gift cards or bring back gifts. Julia, is the mall open at 7 00 a. M. . Reporter its not open yet, but when it does open in a couple of hours, simon, we do expect this outdoor mall to be very packed because 80 of shoppers say they plan to take advantage and shop those postholiday sales according to retailme not. Many of the sales started on christmas day. Target, kohls and walmart slashed their prices online. Now, this could be another potential blow when retailers are on track for the worst Holiday Quarter since 2009 because theyre offering the deepest discounts many analysts say theyre ever seen. Massive, massive discounts. Rbc Capital Market analysts warn that shoppers will no doubt balk at paying full price again. Retailers are hoping people will spend more than the value of the card. To boost december sales numbers, retailers need the cards cashed in soon. Holiday shoppers are expected to spend 163 per gift card. But on the down side, 60 billion in gift returns are expected. Thats roughly in line with last year but with nearly 15 online sales growth, a lot of those returns will be simply mailed in. Fedex says it expects return volumes to jump 28 in january and when it comes to returns, nearly 6 of holiday returns are done fraudulent. So retailers, many of them are trying to clamp down. Thats a stunning statistic. Thanks, Julia Boorstin this morning. With us at post 9 this morning is david henry, the ceo and vice chairman of kimco reality. We know traffic is going to get busier at julias live shot today. When they come out and say traffic is down 3 , what do you say . I say the jury is still out. Most researchers, including the International Council on shopping centers, National Retail federation still feel sales will be between 3. 5 and 4 above last years levels. People are stunned at what best buy was able to do from what looked like a weakened position. What do you think the lesson is from those guys . They did a terrific job. One of the nice things they did was the joint venture with samsung. It brought in more traffic and it turned the whole situation around i think for them. Can you tell us what drives most of the traffic to your locations . What kind of stores this year . In our portfolio, we sell essential goods and services. Your dry cleaner is there, your restaurants, your mcdonalds, your commercial bank, health clubs, for instance, these are not particularly internet v vulnerable. What kind of halo effect, if any, is there during this time of the year . Well, theres a lot of cross traffic. For instance, when you go to your health club, youre naturally going to go on your way to your car and look at other things. Theres lots of cross traffic this time of year. Neighborhood and community sense t centers are very busy. More bradloadly, will people forever just buy more and more stuff and theres bigger and bigger shopping malls and everybodys fine or do we have overcapacity, particularly with the internet and changing taste in apparel . That capacity has to be realized, places have to close and jobs have to be lost . One of the shopping graces for the whole shopping industry, virtually nothing has been built in five years now. You have 3 Million People a Year Population increase and a positive gdp. Gradually it can absorb less retail sales. Let me ask you about kimco itself. We saw a lot of reits again get hurt and many didnt recover, including yours. What are your expectations in a highrate environment we had, especially given many sold the reits because of fierce of that very outcome. The reit Business Model is still very sound, once you get over the initial panic. Theyre hard assets, reits are very transparent. We have a very high yield. Versus an average ccorp of 2 . So its a very strong Business Model at the end of the day and i think people will basically much of the market recovered from that first fear of higher rates but reits have not started to youre going to see it. There is some initial favorable of text and they are things but the reits have consistently delivered the goods over many, many years and i think youre going to see that over time. How many do you expect retail versus pension fund demand in a reit in 2014. Real estate is in favor in general with institutions. A lot of those institutions fled five year ago. Youre seeing pension fund, Life Insurance company, sovereign wealth all come back into real estate. It can be direct real estate where they own buildings or invest incorrectly in reit stocks. I saw a report from the rand report a few weeks ago suggested that malls . General because of Online Shopping and security concerns will have to take out almost 10 of malls. Do you think thats in the ballpark of being true . I think its true. There are maybe 800 today and on track to be maybe 600, but the very best malls are doing exceptionally well. So at the very high end, the malls do provide a really Good Shopping experience but the traditional malls are struggling a bit. Theres massive consolidation. There is massive consolidation. Thank you so much. Coming up, its been a big year for the banks. What does 2014 have in store, especially in this rising rate environme environment . Well make some predictions coming up. The top of my wish list for 2014 is we have no more federal shutdowns because i think it really cause as significant problem with consumer confidence. Secondly, id obviously like to see the unemployment be below 7 , possibly down to 6. 5 because i think thats a good goal for next year. And of kously id like to see a very Peaceful World because we live in a world where world trade is important and the more disruptions that exist around the world, the more difficult it is do business. So there are my big three wishes for next year. I want to spread a little love this year [ male announcer ] this december, experience the gift of unsurpassed craftsmanship and some of the best offers of the year at the lexus december to remember sales event. This is the pursuit of perfection. Tdd 18003452550r life inspires your trading. Tdd 18003452550 where others see fads. Tdd 18003452550. You see opportunities. Tdd 18003452550 at schwab, were here to help tdd 18003452550 turn inspiration into action. Tdd 18003452550 we have intuitive platforms tdd 18003452550 to help you discover whats trending. Tdd 18003452550 and seasoned market experts to help sharpen your instincts. Tdd 18003452550 so you can take charge tdd 18003452550 of your trading. So ally bank really has no hthats right, no hidden fees. S . Its just that im worried about, you know, hidden things. Ok, whys that . Well uhhh. Surprise um. Well, its true. At ally there are no hidden fees. Not one. Thats nice. No hidden fees, no worries. Ally bank. Your money needs an ally. [ male announcer ] what kind of energy is so abundant, it can help provide the power for all this . Natural gas. More than ever before, americas electricity is generated by it. Exxonmobil uses advanced visualization and Drilling Technologies to produce natural gas. Powering our lives. While reducing emissions by up to 60 . Energy lives here. Welcome back. Well, 2013 has turned out to be a pretty good year for the big banks. Will it continue, though, in the new year . Kayla tausche joins us with her predictio predictions. First lets check the scorecard to see how she did in 2013. First she predicted big personnel changes at jpmorgan. That proved correct. We saw jamie dimon realigning. Next she predicted investment banks will change face. This one not so much. Perhaps one to watch in 2014. And she predicted siti will say sayonara to its bad bank. This one well say is half correct. Lets have a look at her predictions for the upcoming years. Reporter frustrated, customers will start flocking to less Traditional Bank accounts, brooks and mortar banks already under assault will find customers harder to come by. As the fed starts to taper, yields will rise, bond prices will fall and bankruptcies will increase as refinancings will get harder to come by. Banks wont take losses yet but alarm bells will ring. Jpmorgan will pay a strikingly large fine but it wont be the only bank to do so. Nearly a dozen other banks are being investigated across the country. Look for another wave of cases to pop up after the new year and keep a close eye on bank of america, citigroup and goldman sachs. For cnbc, im kayla tausche. And make sure to tune in today and tomorrow for plenty of more predictions and on the web at predictions cnbc. Com. On a day when investors are taking stock in retailers, one that hasnt been getting a lot of attention and maybe should, bed, bath and beyond just shy of about 80. The retailer is up over 1 so far today. Straight ahead, new data that suggests the countrys top earners could be paying hundreds of thousands more in taxes this year. Well find out how these earners can alleviate the shock coming up. My wish is to take the politics out of the economy. At the end of the day, if we could get politics to stop driving the direction were going in terms of regulation and legislation and start focusing on what really matters in terms of job creation and getting the economy back on track and let the economy heal itself, i think were all going to be better off. [ male announcer ] heres a question for you the energy in one gallon of gas is also enough to keep your smartphone running for how long . 30 days . 300 days . 3,000 days . The answer is. 3,000 days. Because of gasolines high energy density, your car doesnt have to carry as much fuel compared to other energy sources. Take the energy quiz. Energy lives here. Take the energy quiz. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. About an hour into trading, nike, intel and exxon among the biggest blue chip winners as the dow aims for a sixth consecutive session of gains. New data from mastercard shows u. S. Holiday sales coming in better than last year. Up 2. 3 compared with an increase of 0. 7 a year ago. And the average 30year fixed Mortgage Rate ticked up to 4. 48 . High income earners could spend a whopping 220 million more in taxes in 2014 or is it this year . The extra 250 million is that what theyre spending in 2014 or what that your spending this year . Its what theyre going to be spending this year. We looked what the theyre going to be paying in 12 and whats the main increase for the average . One is a 39. 6 tax bracket. The other is 3. 8 on net Investment Income on dividends and Capital Gains and also i was very surprised because most people dont like the alternative minimum tax, amt. You really want to be in it this year because youre paying a less rate. If youre at 39. 6 , youre better off paying 28 . The difference, though, is when youre in alternative minimum tax, you dont get all your deductions like state Tax Deductions when youre past that threshold. You maximize your state Tax Deduction so youre in the 28 bracket, thereby reducing your overall rate. Sounds so straight forward. So how do you make this better and less painful . First of all, you have to plan for a twoyear period. You want to understand where youre going to be for 2013 and 2014. Then when you look at the years, you want to see are you coming up any of the thresholds . If you are, you my want to accelerate income into the current year or to the subsequent year. Is there sufficient withholding tax on those high earners . The flow each month, every couple of weeks, is that taxed at an appropriate level or will there be payback . Many who are higher earnings have prepared to be just the amount to be safe, avoid penalties. This year when their bill is due in april, theyre going to actually more more than what i believe they are. So people are aware of the changes but i dont think theyre prepared for the changes. If i tell you theres a 7 increase, but when you say it a quarter of a billion dollars, thats more impactful. Are you seeing an uptick in audits, in longer review times to get your check after you file . It depends. We do see an uptick in audits but theyre more paper audits where youll get some questions about certain deductions. Its important to make sure you document accordingly. And the gains weve seen in the equity markets this year, i imagine a lot of your clients, facing a hefty tax bill. Absolutely. There is been reports that charities are really seeing a surge at the end of the year. Yes, charities is a good way of planning. Most people dont really effect the deductions the way they should in terms of charity. For example, lets say you have an appreciated stock with the runup in the market we have and your basis was 10 and now its worth a hundred. Effectively you should be gifting the appreciated stock. What will that do . One, you wont pay a tax on the 90, and, two, youll get the fair market value as a deduction on your return. What people sometimes do is they dont look to their investments you get the fair market value on your own return . Thats incredible. Isnt the tax code a beautiful thing . You want to encourage charitable giving, thats one way to do it. Have a good one. You, too. As you know, the cruise industry had a rough year. Can the industry recover . More on that after a short break. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. A second new big arena could be coming to the strip in las vegas. Jackie robinson said he wants to build a 1. 3 billion stadium on the site of the gaming corridors old water park. The 22,000 seat arena would be in addition to the one being built on the other side of the strip by mgm resorts. The players says the project will be privately funded with construction starting next spring for completion in 2016. John is the gaming, lodging edit editor. Good morning. Good morning. If i had a dollar for every time ive heard theres a new casino and resort project in vegas, i probably wouldnt be sitting here at this point. Genting has pr genting has proposed one on the strip and vegas is still waiting for a sports team as well. If you think about mccau, gaming revenue has been a phenomenon. That really is the focus for the gaming industry at this point. Let me ask you about the cruise stocks. Has carnival turned an important corner here with the results here . I know you upgraded the stock. Is Arnold Donald changing what is a 30 billion business . We did recently upgrade to outperform. I would point out i think theres probably hundreds of millions of cost potential within the carnival structure. If you think about their businesses, theyre run them really separately over the years. They have 10, 11 different brands. If they can consolidate hes not saying hes going to do that. Hes still 30 owned by mickey aronson. I think they acknowledge there is a problem, there is an opportunity. Ive never seen a market share leader, 40 of the market not take some of the cost cutting opportunities they have shied away from historically. And the amount that retail capacity has come down in the last 30 years, at least in terms of the number of shopping malls. Thats not the case when it comes to casinos. It seems as though every time you turn around theres another state competing with vegas and how much overcapacity is there in this industry . Were starting to see supply come out of the market. Cesars is going to acquire the bankrupt casino in Atlantic City and close it. You think about cruising, we havent seen any pricing growth in over ten years in this business. They just put a graphic up on the tv screen saying marriott was your top pick. Is lodging sexy . I think curtis put a note out saying you could get 25 , 30 gain over the next 18 months, is he right . Its a really steady eddie story. Revenue per available room declined 30 . If you believe the u. S. Economy is getting better, were going to 3 to 4 gdp, there is real Pricing Power. The. I see you cover vail, im from colorado. They have a lot of great powder. I read theyre struggling with the legalization of marijuana and their Family Friendly image. Do you like them . Were still very bullish on vail resorts. We see a lot of Pricing Power. I dont think thats going to overlap with whats going on in those markets. They have great Pricing Power and visibility. Are you going to vail . I might be sneaking out to a ski resort later this month. Joel simkins for credit suisse. Its been a big year for elon musk. Our phil lebeau looks at why hes one of the most influence people. Reporter elon musk is in a hurry. Hes challenging conventional wisdom, showing the world cars can go electric. He has brought to the american consciousness a thought that in fact electric vehicles can exist. Reporter not only exist but sell in big numbers. More than 20,000 this year, attracting buyers will unique styling and the allure of almost 300 miles on a single charge. In some respects tesla is the equivalent of the moon shot. He and tesla are changing the paradigms of the industry and interestingly enough the industry is learning some lessons. Critics said musk wouldnt tern a profit but tesla has. Tesla is building a recharging network coast to coast. And critics said tesla is a onetrick pony but musk has already lined up orders for the crossover suv model coming out next year. I personally believe hes going to run out of more money and needs more product. Now hes changes the way autos are sold. Tesla is Opening Stores in malls where it can sell directly to buyers. Auto dealers have been fighting musk saying hes a threat to their companies and in some cases theyve won, blocking tesla from selling directly to customers in certain states. But just a few years after a few considered elon musk a quaint little story, musk is making many of those people think twice. He certainly has to be happy about tesla shares, up 22 in the month of december. Which if you put tesla in the s p would rank it number three for the month to date. Talk about a comeback after visiting 130 not too long ago. Its been wild live volatile. Wildly volatile. And its interesting, they werent afraid to come out and say were not always sure this is efficient and rational, but you should buy our cars. But both are those are great businesses for 2013, arent they . They changed our view of electric cars certainly of what Online Television could be. The technology in netflix, extraordinary. I was explaining to my cousin that netflix used to send you a dvd in the mail. That sounds ridiculous. A former envelope company. Unbelievable. And as the race for the best performing stock of the year happens, no one is going to catch netflix. Best buy has got to be up there. It third but netflix up 310 , by far the number one gainer on the s p. On the s p, right . Tesla is up 360 . Yes. You do wonder how much musk has benefited from the u. S. , tesla or solar city. Im sorry, thats a tradition in this country. Look at boeing. True. Im talking about from the Energy Department you know, various green initiatives that he is a part of and has taken advantage of. And its one thing to favor an industrial leader. In other words, to marshall state resources to make sure boeing is the premier aircraft its another thing to basically could exist without that help. Its going to be an interesting story in 20134. Does anyone buy them . More predictions that gm will guy them, a its fanciful. I think more interesting is the you have big Rich Software pioneers who went into robotics and the fact that their friend so therefore tesla fits into that for someone for the point that you made. So much convergence. In less than a week that Rocky Mountain high could be for shale in more than 130 marijuana shops in colorado. How much green does the state intend to make on this business . Well take a quick look and squawk on the street will be right back. E lovely city of boston. Cheers. And seeing as its such a historic city, im sure theyll appreciate that geicos been saving people money for over 75 years. Oh. Dear, ive dropped my tea into the boston harbor. Huhh. I guess this partys over. Geico. Fifteen minutes could save you fifteen percent or more on car insurance. announcer scottrade knows our and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. [announcer]. If you think the best bed for one of you might be a compromise for the other one. [woman]ask me about our tempurpedic. [announcer] theyre sleeping on the newest tempurpedic bed. The new tempur choice. [man]two people. Two remotes. [announcer] firmness settings for the head,legs,and back. And with tempur on top,that famous tempurpedic comfort comes any way you like it [woman]ask me about the lumbar button. [man]shes got her side. And ive got my side. [announcer] tempurpedic. The most highly recommended bed in america. [woman]dont touch my side welcome back. Markets are rising for the sixth day in a row now. Lets get a check with how commodities are doing with Bertha Coombs over at the nymex. We have a flat trade, its been a mix. We dont have data today. The Energy Department will release the data tomorrow, delayed because of the holiday. Ahead of the holiday we did get bullish numbers from the American Petroleum institute. We doo see crude rising by about 700,000 barrels but a biggerthanexpected draw on gasolines. Nymex from cushing, oechl, according to api. So well see if that holds true tomorrow. For the year, nymx has crawled out of the red, and nymx is up about 7 1 4. Its bounced quite well since hitting the year low last week. A number of traders say what were seeing here is a bit of short covering, some of the folks squaring their positions as they look to the year ending. They expect that to continue through next week. Yeartodate, though, of course, gold is down 28 . It certainly has not been a very good year for commodities or for the metals in particular. Theyve been hit hard after having a fairly good run so far this century. Carl, back to you. Happy boxing day. I guess now we call that the day that the boxes that were supposed to be delivered before the holidays arrive. Yeah, i wonder what they would say in the u. K. Or hong kong about u. P. S. Thanks, bertha. Lets get to the cme and get the santelli exchange. Rick . Good morning, carl. This is the time of year were supposed to look back, think, ponder, and look forward, and strategize. So lets look at various areas of the globe and see what we can come up with. The first place to start is china. For the last couple of weeks, theres been a lot of concern and interest in monitoring the short Interest Rates in china, because theyve been moving higher. Even though the big story on Christmas Eve was that. Of the short rates had moderated, if you look at chibor or the chinese repo, at elevated rates. The controllers in china are definitely as worried as any Global Leaders regarding whether to feed the beast in terms of keeping things liquid and shortterm credit is key in that. But the issue is, no matter how concerned they are, theyre much more concerned about generalized unemployment, so they might take a good game, but look for the money to keep on rolling. As far as europe, a lot of talk about how things are positive in europe, and there are some positive things in europe. But lets look at areas that arent so positive, maybe theyre not big, but still canaries in the coal mine. Lets look at greece. It will be in the headlines a lot for next year, but in a different way. Lets look at a moratorium on foreclosures. It continues from 2008. Why is that important . Because there are a lot of issues not fixed in Southern Europe overnight. And when you look at the high Unemployment Rate outside of germany, that is a concern. These issues will not disappear in any timely calendar fashion. The next category has to be the u. S. , and our speed is impressing the world. But one area, phil lebeau, the car guy, the car sales have been instrumental in fixing the psyche of manufacturing and the overall u. S. Economy, but we all know that the obsolescence of vehicles played a big part in that. We see the growth in subprime auto lending and we see all of the consumption in many ways at the expense of other areas. Like apparel to name one. Is that dynamic telling us something we choose to ignore . Last but not least is japan. Japan seems to be where all roads lead for conversation regarding strategic trades on this trading floor, because as confusing as the first three areas are, it seems a weak end and the moral of the story, looking to the u. S. , in my opinion, the biggest trading issue for 2014 isnt going to be on this wonderful trading floor, its going to be in voting booths in november of 2014, because i really think that we are at a stalemate in many ways, like entitlements and like some of the big issues that the recent budget swept under the rug. But firsthand experience is going to make the 2014 elections big, and maybe itll make third rails disappear that politicians need to be honest with all of you out there that we have a whole lot of work to do and were certainly not making much progress doing it. Simon, back to you. Thank you very much, rick. In the meantime, keep the tweets coming this morning. Shipping giants u. P. S. And fedex are on the naughty list after failing to deliver some packages by their christmas deadlines. So we want to know who should fedex and u. P. S. Asked for help to deliver the packages on time. Tweet us squawkstreet. Well read some of the answers of this quick break. [ male announcer ] heres a question for you where does the United States get most of its energy . Is it africa . The middle east . Canada . Or the u. S. . The answer is. The u. S. Most of Americas Energy comes from right here at home. Take the energy quiz. Energy lives here. At bny mellon, our business is investments. Take the energy quiz. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Youd do that for me . Really . Yeah, id like that. Who are you talking to . Uh, its jake from state farm. Sounds like a really good deal. Jake from state farm at three in the morning. Who is this . Its jake from state farm. What are you wearing, jake from state farm . [ jake ] uh. Khakis. She sounds hideous. Well shes a guy, so. [ male announcer ] another reason more people stay with state farm. Get to a better state. With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. U. P. S. And fedex facing angry customers after failing to deliver packages for christmas. They cited bad weather and unforeseen demands. It does bring us to the squawk on the tweet. Whom should they have asked for help . Ron writes, santa claus, his ontime record is pretty good. Jason says u. P. S. And fedex should have asked the amazon drone, aka, fred the flying robotic express delivery. Ive seen fedex ask the usps to help deliver, but is that quicker . Probably not. It brings us out of rockville, maryland, with a truck that tipped over, with mail flying around. Not the thing you want to see. Although if the christmas cards arent there, you probably mailed them too late. Thats a tough one to blame on the mail truck. Christmas doesnt actually come as a surprise in the calendar. It is possibly if you do your stuff early enough to avoid all of the delays. Its not a surprise that Christmas Falls on the when did you finish your holiday i went back to the u. K. In november and delivered it then. Job done, thank you. You know . Looking at twitter, this will get your attention, 34 trading sessions as a Public Company, and they are zeroing in on a 200 gain from their ipo. As we said earlier, 55 stock a week ago today hit 72, and people have said, david, small flow, people want to paint the tape, but that is a move. That is a move. It is a move, mark earlier, the analyst, who maintain as buy of some type on it is sort of what he said. Look, were talking about a company thats expected to do about, what, 1. 1 billion in revenues . Say that again. Because there are a lot of people, david, who look at this, it doesnt have a Business Model. Its built on nothing. And yet, in fact, they do. Tell people about it. They do. Thats revenue. Thats a revenue number. Its not that large a number. The capitalization, roughly 40 billion, the multiple to sales a 2014 number. All depends on user engagement. Were all still tweeting. Well, there you go. And mobile. And a lot of check boxes to refer to mark mahanenys comments, but the valuation is extreme by any measure. The 10day yield, did it kiss 3 . Did it not . Its very close at 2. 996. You can see its continued to grind a little higher throughout the course of the morning. Well see when that has an impact on equities, if at all. An interesting question for 2014 is how does the fed respond if they wake up and see the 10year at 3 and the impact that it has. Guy, well see later on. No, no, europe is closed. Were you quick to correct me. Hundreds of thousands of people will switch off, sorry, no europe close. Okay. Enjoy the afternoon. If youre just joining us, heres what you missed earlier on. Announcer welcome to squawk on the street. Heres whats happened to far i kind of feel for u. P. S. , you know, all these people, all of the onlines, you think they should have prepared for this. Theyre overwhelmed. You know, a lot of weather, flights being cancelled, this meant that some didnt arrive before christmas. The new normal is going to be the old normal. That were going to have growth of north of 3 for a few years and that were going to see the market slowly normalize and the equity market is anticipating that, and thats one of the reasons we had a good year this year. 338,000, so a drop from 380,000. Are you raising your gdp forecast for next year, samen . I do think that i was thinking about it, perhaps you should sit back and go, wow, a lot of people got a lot richer this year as a result of whatever happened in the stock market. Yeah. Unfortunately, not enough people, obviously. [ bell sounds ] theres the opening bell. What i hear in the decision at deutsche telekom, yet to be made if it has interest in selling out of the u. S. , but tmo has been performing fairly well. Most researchers, including the International Shopping centers, national federation, still feel holiday sales will be 3. 5 , 4 above last years levels, which is pretty good, at 3 above the previous years levels. Right. Good thursday morning. Were live at post 9 at the New York Stock Exchange with a check on the markets. A lot going on. The dow is up 57 as the market has looked Pretty Healthy all morning long. S p 1,837. Sand shares of blackberry dipping. He had previously indicated he was considering a bid to buy the troubled smartphone maker. Shares of tesla rallying. It extends large gains from tuesday, which came after the affirmation of the top safety rating. Tesla was recently under fire after the series of car fires. This year, shipping was the grinch that stole christmas. Thousands of people will get the christmas presents late. Plus 2013 was not the best year for microsoft. Steve ballmer said he would step down after decades of the company. Demand from the new windows 8 operating system was weak at best. Why are analysts still buying the stock . Well ask one of them in a few minutes. Theres green beyond the mountains. Starting january 1st, businesses in colorado will be able to sell marijuana legally over the counter to anyone aged 21. The editor of high times will join us. It was a Holiday Shipping debacle. Thousands of christmas presents will arrive late after a surge in orders overwhelmed u. P. S. And fedex. Diana olick is live with more on that. Good morning, diana. Reporter good morning. Carl, it is a black eye for brown, an unexpected surge in web sales last weekend caught them unprepared. Take a look. U. P. S. Had predicted 7. 75 million packages would enter its system over the holidays. They handled about 45 of all u. S. Packages. But what they didnt know was that online sales would jump 37 last weekend as consumer sales fell at the malls. Now, the last statement from u. P. S. Was on tuesday. They said the volume of air packages in our system exceeded the capacity in our network, as demand was much greater than the forecast. So the trucks are rolling again for u. P. S. This morning. They beefed up staff last night, exactly what their cfo told Steve Liesman they would not have to do. Of course, he said that two weeks ago. We continue to become more efficient and use technology on the ground for routing and scheduling, so we can meet increased demand. Reporter so the question is, how much will this hurt Online Retailers like amazon, who rely so heavily on the carriers . I think that the ease of shopping online will make people continue to shop online. Its important not to overestimate how significant it is. Online shopping still accounts for only about 15 of retail spending. So most people still hit the stores. Reporter now, amazon placed the blame squarely on the carrier. The latest statement from amazon, amazon Fulfillment Centers processed and tendered customer orders to delivery carriers on time for holiday delivery. Were reviewing the performance of the delivery carriers. Amazon is offering gift cards and they apologized earlier this week, but today put out a statement early this morning, saying they were operating at 99 success rate. Guys, i have to say excuse me i ordered this item for delivery by december 24th, and i tracked it earlier this week. It arrived on my doorstep 20 minutes ago, fedex. Happy boxing day to me. Back to you. Diana, thank you for that firstperson reporting. Diana olick in washington. What does the shipping trouble mean for the retailers . Lets ask jamie katz to talk more about this. Great to have you. Good morning. Good morning, thanks for having me. I cant decide if this is good for bricks and mortar or just a sign that theres so much demand for online that they cant keep up . Well, you know, i think this caught a lot of people off guard, and because of the shortened Holiday Season, a lot of people realized at the last minute that christmas was right around the corner. The retailers were offering lastminute shipping. So everybody sort of jumped on the bandwagon and at the expense of u. P. S. And fedex. Jamie, two things strike me, the one is whether it is mobile. It seems like people dont want to go out to the malls, more likely to order online. And mobile make it is easier to do that. Is that part of what hit these guys here . I think so. I think the weather, particularly across the midwest, was pretty nasty over the last week, and people definitely feel more comfortable shopping at home, particularly in light of the black friday violence you see o on the news, in the press, so why not sort of shop at the leisure and convenience of your own home . Also seems like the downside of big data, right . Because as these trends shift, people more likely to order online, because they got their phones in their hands, that wasnt necessarily the case a year ago, so folks like u. P. S. And fedex cant predict exactly what people will do last minute, right . Yeah. But it sounds like from, you know, what the kcompanies are saying, theyre able to reallocate maybe in years ahead the fleet necessary to get the shipments there on time, and perhaps maybe they just didnt take into consideration they had a number of fewer days in the calendar this year. Your general thesis, i think, on the space, is described as retailers with who have a differentiated product, like a homebuilding retail, Something Like that, or specialized knowhow, will do well in this environment, but there seems to be so much commoditization of, say, apparel, when is that going to wash out . Are we going liquidity doesnt seem a problem near term. When do we see firms go under . Do they have to go under right now . What they have to think about is rightsizing the store base and maybe using the stores as a better Marketing Tool for what the online channel is offering to them. So as more volume goes through the ecommerce channel, do you need as many locations . Do there need to be 900 or 1,000 American Eagle American Eagles or aeropostales or abercromb abercrombies, or can you trim that number pretty materially and moving more volume through the ecommerce channel, where margins might be a little better. Jaime, i got an email from my inbox from banana republic, 50 off. Is it a bad sign when we see those kinds of emails after christmas . I think it was pretty surprising. Last night online, i saw anywhere 50 to 70 off across a number of retailers, including the Department Stores were having a number of miscellaneous sales. So i think christmas kind of snuck up and the amount spent maybe wasnt as high as they originally hoped for. Theyre trying to move inventory out before the new season merchandise comes in. Meanwhile, we have the target news to take care of. Officially now the second largest breach in retail history. We got the secret Service Looking into it, the d. O. J. , a half dozen lawsuits facing them, and now word that potentially encrypted p. I. N. Data may have been hacked. But we look at past breaches and its hard to see where it pinched on earnings. Whats the longterm fallout . I think it will be interesting to hear where the breach was. If there was enough security and another way they found a way around it, or target didnt do what they were supposed to do to protect the consumer and i think thats going to determine sort of how the fallout works for them. If it was not on their own accord, and it just was happ happenstance, then theres nothing they could have done about it. Were told they run one of the strongest front ends in retail, and yet this happens to them. Thank you for your insight, jaime. Thank you for having me. 2013 was a year of upheaval across the globe. There are riots in several countries. As we move closer to the new year, what places should you be watching overseas . Well get to that answer in just a moment. First, Rick Santelli, sir, what are you watching today in the bond market . What everybodys watching 2. 996 . The big question of whether we touched 3 . That shouldnt be the big debate. The debate how will higher Interest Rates affect the trading going on in equities . Well have another old bond guy to discuss that with, jeff killburg, aka killer, at the bottom of the hour. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. Tdd 18003452550 at schwab, we can help turn inspiration into action tdd 18003452550 boost your trading iq with the help of tdd 18003452550 our live online workshops tdd 18003452550 like identifying market trends. Tdd 18003452550 now, earn 300 commissionfree online trades. Call 18886282419 or go to schwab. Com trading to learn how. Tdd 18003452550 sharpen your instincts with Market Insight from schwab tdd 18003452550 experts like Liz Ann Sonders and randy frederick. Tdd 18003452550 get support and talk through your ideas with our tdd 18003452550 trading specialists. Tdd 18003452550 all with no trade minimum. And only 8. 95 a trade. Tdd 18003452550 open an account and earn 300 commissionfree online trades. Call 18886282419 to learn more. So you can take charge of your trading. [woman]ask me. [announcer]. If you think the best bed for one of you might be a compromise for the other one. [woman]ask me about our tempurpedic. [announcer] theyre sleeping on the newest tempurpedic bed. The new tempur choice. [man]two people. Two remotes. [announcer] firmness settings for the head,legs,and back. And with tempur on top,that famous tempurpedic comfort comes any way you like it [woman]ask me about the lumbar button. [man]shes got her side. And ive got my side. [announcer] tempurpedic. The most highly recommended bed in america. [woman]dont touch my side welcome back. Take a look at the industrials sector, one of the strongest performers in the s p 500. Morgan brennan has more on this. Hey, morgan. Hey, thanks, yes. Industrials second strongest sector in the s p 500 right now at the moment. In that were seeing strength among defense companies. Three defense stocks hitting alltime highs. Theyre all up around 1 as the stocks add to strong gains this year. Kelly . All right, morgan, thanks very much. As you all know, 2013 was a tumultuous year across the war with the war in syria raging, riots in turkey, syria, and what are the potential flash points in 2014 . Michelle carusocabrera has already worked a long day, back at hq. Hey, michelle. Yeah, well start here in the United States with puerto rico, because of its status as a National Territory has similarities to an independent sovereign nation. Theyve been priced out of the market. Theyll need to borrow before the summertime. The question is, how much, and will the markets lend it to them at a decent enough rate for them . If not, theyre going to be in trouble. Theyve done massive teacher pension reform signed into law today. Well see if that calms the markets about puerto rico. Brazil in march, its where well see the worlds cup. Remember, weve had issues with stadiums collapsing in brazil, because of such a rush there. They are so behind schedule. Because of the money spent on the world cup and the coming olympics, there have been big protests in brazil about the terrible infrastructure in the country, and what kind of impact will we see there. Plus, elections next year, as well. Lets move on to turkey. This is another big hot spot just today. We have seen the lira in turkey fall to a new low against the u. S. Dollar. Theres a huge corruption scandal. 10 ministers in the prime ministers cabinet have been replaced in the last 24 hours. It seems to be ongoing. The central bank has been trying to support the currency, but they could face potential currency crisis, because they have a large current account deficit. Libya, egypt, iran. Do we need to say more . This is all related to the tensions in the middle east. Libya, are they ever going to be able to control the country, that way the warlords do not take over the Oil Production supplies . Egypt is living on handouts from its neighbors. It needs to do something desperately when it comes to subsidies it pays for food and fuel. Theyve got to do something with their budget, but the question is, what will it be and will that lead to more massive protests as weve seen. Iran, were waiting to see what happens with the outcome of the negotiations related to their nuclear program, which could or could not lead to more oil on the international markets. Russia. The olympics in february. Perhaps some of the most interesting olympics weve seen in a long time, politically, maybe since the last time the olympics were held in russia for the summer games in moscow. Whats going to happen there . Lots of concerns whether there could be terrorist activity, and what putin will do to show off his strength . And were watching china. Will they liberalize Interest Rates because theyre fixed now, they cause distortions when it comes to property prices, people chasing yield, in dangerous parts of the market. They promise to do that. Will they finally achieve it . Japan, of course, is abenomics going to work . Kelly, back to you. Michelle, the nikkei and the dow seem to be in a race. Yes. Thank you so much. Michelle carusocabrera. 2013 has been a year of transition. Meanwhile, for microsoft, after troubles of a window law enforcement, news that Steve Ballmer will retire, but the stock continues to move to the upside. Why are buyers still buying it . Well ask one of them in a moment. I still havent found what im looking for to help secure retirements and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. On the ground, in the air, even into space. We repaid every dollar america lent us. And gave america back a profit. Were here to keep our promises. To help you realize a better tomorrow. From the families of aig, happy holidays. The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. Anbe a name and not a number . Tor scottrade. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. From twitters ipo to the growth of other social media sites like snapchat and vine, 2013 showed social media isnt going anywhere, and its becoming more prevalent than ever. Julia boorstin has her predictions for the new year, but first, lets check the scorecard and see how she fared in 2013. The first prediction . Facebook will grow gang busters. This would be correct. Mobile ad revenue helped Facebook Post over 2 billion in revenue in q3. She also said retail will become more social and soes platforms will embrace retail. Correct. Walmart leveraging facebook, toys r us, pushing hard on youtube, and also pinterest. And julia said linkedin will dominate business networks, and also correct. We saw it double this year. So 3 for 3, julia, not bad. Can she do it again in 2014 . Lets see. Social Media Companies will become more prevalent next year, and as their popularity soars, consumers will become more aware of how social media impacts their lives. 2014 will be a mobile Tipping Point. Both facebook and linkedin will start earning well more than half the revenue from mobile devices as twitter already does. All companys social acquisitions will be on mobile. Meanwhile, social giants will target ads on mobile devices. The more time people spend sharing with social tools the more privacy will be in the spotlight. Companies will offer more tools that give consumers more control about how and with whom theyre sharing, like snapchat or instagrams new direct service. Expect consumers to push for far more transparency on how personal data is used and shared. And 2014 will be the year of social shopping. Get ready for pinterest to launch the first revenue model, startup to take off. As consumers increasingly turn to their peers to inform shopping choices. Julia boorstin, cnbc business news. And Julia Boorstin joins live right now. Julia, interesting picks. To what degree is m a going to cloud the picture in the next year . Well, i think we will continue to see a lot of social m a. I mean, we saw it in across a range of industries, even apple buying socialrelated companies. I think whats going to be interesting is with Companies Like snapchat. There were a lot of companies that tried to buy snapchat like facebook and google, but they passed up on being sold. Well see the smaller socialrelated companies being purchased and the ones that feel like they have a lot of traction and a lot of users, those are the ones that may turn down those offers, hoping to eventually go public. A gutwrenching call for some of the entrepreneurs. Finally, weve been through facebook last year, twitter this year, whats the next big social ipo. Well, heres the thing, carl, i dont think well see a consumerfacing ipo like a twitter. But i think a lot of the startups that will go public will have social be a key part of them. Theres a company that you may never have heard of, because its a data company, a datacrunching company, but a lot of the data crunches is social data. Air b 2 b, another company thats expected to go public soon. Carl . Yeah. Meanwhile, a ton of buildout to support all of the data back and forth. Julia, thank you so much. It has been retail this Holiday Season, it seems like a microcome of all of this. 2013 has been the year for the tech giants in 2014. Shares of microsoft have been on a tear as investors are hoping for a turnaround. Brad phil is an analyst with ubs, with a buy of 40 price target. Brett, welcome. Perhaps you can tell us why people keep buying microsoft despite the headline troubles . Good morning. Microsoft is cheap relative to the tech names. Everyone has been focused on the consumer business, but the reason we were buy rated all year was based on the commercial business. That business is outgrowing its peers s. A. P. Aip, theyre growing faster. So relatively cheap, good commercial business, close to 60 of their business. And then, i think the change of the ceo guard, that is obviously had an impact as the street looks for a new ceo to come in and give microsoft more direction in the cloud as well as mobility. So i think those are a handful of reasons. Brett, im wondering how much of this call of yours is based on valuation excitement that you expect. Theres a number of ways this could go sideways. If the p. C. Continues to decline faster than cloud, profits materialize, that could be a problem. Theyve got the whole nokia integration to contend with. Is it going to be based on fundamentals that theyll hit the 40 bucks, or is it going to have to be excitement . Were almost at 40, so its approaching our target very rapidly. The stocks up 40 year to date. The outlook for 14 is microsoft wont have the same type of concern we had last year. So we think it will be more pressured. I think if you took a 13, 14 multiple on microsoft, and youre still looking at potentially, you know, between a 40 and 45 stock, and it really depends on now what the ceo does, so we think the stock is rangebound until you get the announcement early next year. Obviously, the streets disappointed they didnt get that done this year. So, yeah, a lot of its been multipledriven, and then the hopes of the new ceo. Brent, based on what microsoft has been saying recently, how convinced are you that bing really is a key part of microsoft Going Forward . Or do you see it as something they could potentially talk about spinning out . We hosted the cfo of the search business with our institutional clients just one week ago. They are staying in search. They will not sell the search business. If you pull up your email every morning, you look at your mobile device, you search through it. You go to the web, you search through it. Through the xbox, you search through it. So search has permeated every major application that microsoft built. So we think theyll stay with search. Its a critical component of the core enterprise structure. So i dont think youll see that. I think the xbox, you know, has been talked about, as well, being spun off. Obviously, thats been a bright spot this Holiday Season, especially in the consumer lineup for microsoft. Its really difficult for us to see right now specifically search getting sold altogether. Theres components that they could potentially look at deemphasizing, but the key point is theyre spending all of their cap ex dollars on the cloud rather than on search. So their actual losses are a lot better than i think investors think. All right. And well see if they hit that 40 that you were just referring to, brent. Thank you so much. Appreciate it. Have a good one. Thank you. You, too. Youve been watching the 10year yield all morning long, and there it is, right on the nose, 3 yield on the benchmark treasury note. Something that traders have talked about for a long time as a Tipping Point for equities, which yeah, not so much, by the way. The dow is close to session highs, up 66. And the biggest gainer on the s p, pulte home. No kidding . Yeah, a little counterintuitive given the talk about Mortgage Rates. And the dow, home depot up 1 , and it goes back to the point where the fed wanted to exit and the markets wouldnt let them. This is not one of those times. Yeah. Lets see in full session today, we have the afternoon to get through, thats for sure. Jon, thanks. A great year for the nasdaq, rallying to levels since the tech crash in 2000. Well look at this milestone and what it means for tech. Did you know the nasdaq is within about 17 of the alltime high . Unbelievable stat. Thats after a break. [ tires screech ] chewleys finds itself in a sticky situation today after recalling its new gum. [ male announcer ] stick it to the market before you get stuck. Get the most extensive charting wherever you are with the mobile trader app from td ameritrade. Theres no european close because europe is closed today. Lets get to mary thompson. Hey there, carl. The dow, a little bit below its best levels of the day, still at 66. Intel leading the day in what is a lightvolume session. We have about 600 million shares trading hands at the big board, and typically at this time, about 1. 1 billion shares trade hands, but thats no surprise given it is a holiday week here on the New York Stock Exchange. Take a look at a twoweek run of the Dow Jones Industrials average, because were on track for the strongest sixday move for the blue chip average, since march of 2012. And as you guys were mentioning, about 5 or 10 minutes ago, the yield on the 10year hitting that 3 mark. A number of people saying this would be an Inflection Point for the market, and they expected the stock market to turn south. That hasnt happened. Once it hit the 3 mark, the market moved a little bit higher. Again, still trading just below its highs of the day. Look at the retail index, because mastercard came out and said spending polls show that christmas sales or holiday sales this year up 2. 3 from last year. Breaking out the data of some of the different segments that mastercard follows, they said jewelry sales were strong, and thats reflected in the mood were seeing today in some of the mid to lowerpriced jewellers, signet and zale, tiffany has moved higher. They say, actually, luxury sales this year were flat, and thats a surprise. A number of people saying going into the christmas season, luxury sales would be among the stronger groups. Quick check of the delivery on giants, because weve been watching them all day. A mixed bag as all of the delays happened right before the christmas holiday. I want to point out one thing about the homebuilders. They are very strong today, strongest performers among the weak. When you continue to see good data like the jobless claims like we saw today, even in the face of rising rates, its giving a gift to this group. Back to you. Yeah, it certainly is, mary. Thank you so much. The nasdaq participating in todays rally. The index sitting near levels it hasnt seen since the year 2000. Jon fortt, we were just talking about this, but who would have thought wed be sitting here watching this index, and when you overlay it with the nikkei, never had a crash and yet here we are in. This takes me back to, though, is september 2000, the last time we saw levels like this. I was a cub tech reporter, newspaper reporter in silicon valley, and at the end of september, apple put out this disastrous Earnings Report which saw its stock sliced in half. I thought you would say the ipod, because it was around the same time. A little later, yeah. This day, when apple stock was sliced in half, the 29th of september, bargain of the century, if you bought it on that dip. It became clear to those of us covering it, and silicon valley, the boom days were done. Some were saying it was just app apple, but all of the other stocks really started tanking and we were in for a couple of years of darkness investmentwise. So its interesting that weve gone back to those more heady levels of september before we had that big dip in apple and others, kind of like were in a mobile cloud world now, very different from the dotcom days. And the components are different. If you look at the biggest components of the nasdaq today, its a lot different than it was. A fewer number are contributing to the biggest percent gains, and apple being one of them, telling you that nasdaq is not the same one as it was. Is there a good tell in your mind . Is twitter a good tail . What does its valuation tell you about the europe head . One of my predictions that i think weve already seen on cnbc is that either google, amazon, or samsung is going to have a rough go stockwise in 2014. I think weve got some names that are perceived as invincible that wont be so invincible in 2014. Twitter, i didnt include. But there are a number of names why didnt you include twiter . But you did include some of these if we can call them older, more mature names, that have been performing so well . I think twitter, with its huge audience, huge buzz, could come up with an entirely new business that could keep investors excited about that stock. Weve got their main product. We think we know what twitter is all b they came out with vine, which opened up new possibilities for them in video. They could do that again. I think we see where some of the other heavyweights are headed. They dominate huge areas of tech. But already, their valuations are pretty heady. One of them could well take a fall in the coming year. Well see. Jon, thank you. Coming up, weve got some more on markets. First, we want to get to Rick Santelli for his take on the 10year at 3 , in chicago. Yeah, absolutely. I know we save the confetti for new years eve, but really we should have some. Make sure you mark this on your calendar, 11 34 40, at least based on my clock, we touched 3 for the First Time Since september 5th. And this past thursday, we also touched something that in this case weve never done before, and that is heres the feds Balance Sheet last thursday, released every thursday. And it was a little over 4 trillion. Yes, 4 trillion, four with a t. And of the holdings, 2. 2 trillion in treasuries, and 1. 5 in the securities, and then those at the top level. Killer, thats a heck of a number, before we get to that, your thoughts on touching 3 . How significant is it really in the big picture . In the big picture, its about the velocity. Weve talked about this. I cut my teeth in the 30year bond pit, fortunate to meet folks like yourself, but now, were seeing a Balance Sheet. You think people are swollen and bloated from the holiday meal yesterday . We saw 600 million Balance Sheet precrisis to 4 trillion, going to 5 trillion. Right now, this is a critical, imperative time for the bond market, and it will dictate where the stocks go for next month. Everybody wants to bring up that word vigilantes. But i have to tell you, its not the dynamic it used to be. Killer, treasury traders arent going to take a position to try to put what they believe is a higher rate spectrum in front of the world if its not profitable, are they . Agreed. Agreed. Youre seeing the bond vigilantes, yes, getting some wind in their sails, but in the end, maybe giving too much credit to the fed, letting the rates come up, it will bring equities back and bring balance back to the market. Weve not had balance in how many year, rickster . I dont think you can have balance when you have a Balance Sheet like this. Thats my opinion. Lets take it to the next step. The conventional wisdom out there that theres going to be this huge second wave of buying in stocks, because most of the crazy people in the fixed income sector, or the treasuries, or money market funds, the tbills, out of their mind, giving up the roost, and all of the money goes into equities. But they are committed to this position. They know everything thats being said about them. And just because they might pick up the phone and lose some of their mutual fund positions, hence the fund sells, and thats the onion peeling back that moves higher rates, i dont think theyll move the money much further away, meaning i think theyll stay in the Interest Rate complex money funds or mattress before they go into stocks. Agreed. And i think you hit the nail on the head. Everybody talks about the next move up. We dont see it. 3 , 3. 25 on the 10 year, that is impactful, and it will cool off the stock market. I dont think it will continue on. Youll see rates cool off, but volatility coming the next month or two as we digest this move. Well, my final thought is, its just so normal to say that Interest Rates will cool off their selling, pushing rates up, if the impact on the rates is selling. But in the end, there might be an Automatic Process of less management and the spring might push it up more than they think. Your final thought . The bond market used to be wild back in the 90s, and it could get wild again in 2014. So says killer and a lot of traders. What will the market say . Thats the big question. Back to you. Gotta wait and see, thanks a lot. Rick santelli. A lot of people upset after major dough lays at u. P. S. And fedex left thousands of packages undelivered, so is this delay bad news for the shipping giants . The most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. 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[ male announcer ] how could switchgrass in argentina, change engineering in dubai, aluminum production in south africa, and the Aerospace Industry in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 70 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back. It wasnt such a Merry Christmas for some people who didnt get their fedex and u. P. S. Packages in time. Both of the delivery giants experiencing delays. Donald broughten is managing director at Avondale Partners covering both companies, and he joins u. S. With more. Welcome. Thank you. Glad to be here. I cant help but notice that even though both companies are affected, fedex is up. 7 , and u. P. S. Almost turning positive. At the end of the day, if they dont have the supply capacity, isnt that fundamentally a positive sign for the companies, talking about demand . It is. It is. Thats the real core. Indeed, theres going to be some disruption, some disgruntled customers, and indeed it will be a loss in revenue for those packages for which they guaranteed the delivery or the package was free. But overall, this is a the ecommerce version of a stockout. You think about it, it used to be, you know, you couldnt get the tickle me elmo doll, well, too bad. Right, right, thats a great point. And now its the trucks that are fighting traffic as opposed to you fighting people in the toy store aisles. Exactly. Its the ecommerce equivalent of a stockout. If you think about it, its been 0 5, 06, we talked about large stockouts at the brick and mortars. Do they pick, for example, why is fedex doing better today . Is there a sense that fedex may be at a disadvantage here, that they might have to make longerterm investments in the business to make sure this doesnt happen again . That may be the case. Certainly weve heard a lot of about u. P. S. s problems. Weve not heard that many about fedex. Maybe their service was better, their Service Failures were fewer, or maybe theyre being more mute about it, we dont really know at this point. The point is this is a highclass problem to have. You know, what retailer out there wouldnt love to say, gee, i have so much business i cant deal with all of it. Well, im not sure i understand what youre saying, but there is some cost to the publicity theyre getting today, donald. I wonder if you think their contracts im not sure where the terms go, how far out it goes, or if the business with amazon, for instance, could be at risk, at all . Well, i think the business with am sdplon is always going to be a jumpoff, that fedex and u. P. S. Will compete for it. But its fedex and u. P. S. That will deliver ecommerce. There arent competitors in that space, other than the two. So while there will be ongoing healthy competition between the two, no one else can replace what they have. Donald, what does this say about the future of this business, though . We know am glazon is figuring o drone delivery . Do we see retailers buying up even smaller Package Delivery companies to ledge . Do we see m a in this space . What do you think happens . I would say that Drone Deliveries are video phones. Right. It was really cool in 1950 and 1960, and we dont still really have them. If you put facetime aside. Theyre more a gimmick than they are a reality. The reality is if you look at the massive infrastructure, the fixed cost infrastructure that it takes to do what fedex and u. P. S. Do, despite the loss of revenue on packages theyve had a return the amount on, thats underlying that is a totally huge number of packages, volume that supports that. Which is my point. Which is my point. Yeah. Doesnt that make them an attractive takeout target for somebody who thinks they can make it happen more efficiently . If you can replicate what they replicate, if you have an extra 100 billion in your pocket, go ahead, take them out. But i think were talking about companies that are too big for that to be a reality. The only person that competes with this is the originator of the overnight delivery, getting everything done, and, of course, santa has suggested to both of them, get a bigger sleigh. Well, i think we know someone with 100 billion sitting around, so maybe apple will take them on. Thanks, donald. Thank you. Have a great one. There are synergies in that Business Model. Thats darch story. Speaking of u. P. S. , a lot of customers took to social media to voice their outrage. Is the upsfail. Lets talk about the big oops. Not all u. P. S. Packages supposed to arrive under the tree made it, as you guys were talking about. And as you can imagine, there are plenty of customers who are outraged and voicing their frustration. So much for amazon prime and guaranteed twoday shipping. U. P. S. Has had my package in town for two days and didnt deliver. Traci tweeted her frustration on christmas day, saying the u. P. S. Conversation with Customer Service last night, yes, your package did be delivered tonight. Reality . No delivery. And u. P. S. , add me to the list. Christmas was ruined by you. If you cant deliver, dont say you will, and charge. So, guys, clearly a lot of angry customers out there. You have to wonder what u. P. S. And other shipping companies will do to ensure the mishap doesnt happen in the future, especially as more people do shop online. You got that right, seema. Thank you. Colorado residents get ready for a hazy new year. Starting january 1st, businesses in colorado will be allowed to sell marijuana with approval from the local government. So will legal weed spark big sales in 2014 . Well ask the senior cult vase editor at high times after a short break. Whats in your ear . Oooo a quarter check for more well, i guess i can double check. My watch [ male announcer ] it pays to double check, with state farm. Colorado has now issued more than 300 licenses to marijuana businesses in preparation for a january 1 start date for retail pot sales, as 2014 rolls around will the Centennial State see the budding economy go higher . Lets bring in danny danco, joining us this morning at post 9. Great to have you back. Thanks for having me. You think of all of the states in this space, colorado is essentially setting the tone, teaching others how to do this . Yes, theyre certainly leading the way. Washington, also, has recreational sales coming up. But, yes, colorado has had the medical and now shifting into recreational sales. What have they done right . Is it the regulation . Is it keeping it out of the hands of minors, the taxation policy . Its all of that. Its practicing best practices and just trying to make sure they stay within the guidelines that the federal government set for them. And so, the big thing happening here is the ease and availability in terms of it being offered in the retail environment, correct . For adults. Anyone over 21 will be able to purchase marijuana over the counter, and were were hoping that will also help keep mare juan in out of the hands of children. What kinds of establishments are these, because i think i remember talking to someone a couple of months ago, that called them stores . Now, theyre dispensaries, but soon theyll be buying centers. Theyre a special kind of dispensary, right . Do you have to be 21 to walk in . Can anyone walk in, but you have to be 21 to purchase . Now you have to be 21 to purchase. Prior to that, you had to have a medical card from a doctor, a recommendation. Hmm. Theres a big debate, i guess, at least in colorado, about where exactly you can light up, right . I think the language is, you can smoke it in private. But were beginning to see stories about ski resorts, worried about people actually smoking in the lift line, which i think would not be kosher with state law. Is that correct in. Yeah, i mean, the laws are being figured out right now where people can consume, but the fact that theyre no longer being taken away to prisons and separated from their families is really the most important thing. And the minutia of whether they can light up on their front porch is kind of will be decided. And are there any rules about where you can open these dispensaries or any special requirements, any licenses you need in order to own and operate one . Yeah. Theres a very rigorous a application process that someone has to follow and apply and show that they have proper security and proper practices they have to use. Anytime a new industry springs up, there will be bad players. This is the wild west. How much are high times . How much are you looking at for players that try to do fraudulent businesses, well see this begin to creep into the equity market, penny stocks not on the up and up. Is that going to be a problem . It is a problem. There are pumpanddump type operations. We had a hightimes growth fund where were trying to link together investors who are interested in investing in this business with companies that are legitimate, upandcoming companies that need investments. So thats one thing were looking into, because we have a 40year brand in this, since it was far more in the underground. You know, we understand the business, and we hope to lead it into out of the a new part of this will reflect on your name, too. Of course. What is the biggest risk here . The client the tide of history is clearly turning in favor of more legalized marijuana. What is the biggest risk in terms of the rollout that could put an end to that . We view the biggest risk being a federal crackdown or a change in president ial policy that would be basically a larger crackdown in 2016, or even in 2014 depending on midterm elections. Where they stop saying, well let the states sort this out. Theres some sort of federalization of the law, right . Right. We view that as unlikely, but also one of the risks that people face in investing in this industry. True. I have a feeling well have you on more and more, dan. Thank you for coming by. Thank you for having me. Joining us from high times. And shipping giant u. P. S. And fedex on the naughty list this year after failing to deliver packages by christmas. We want to know who should fedex and u. P. S. Have asked for help to deliver the packages on time . Tweet us at squawkstreet. Well get to some of the answers after the break. Secure retiremes and protect financial futures. To help communities recover and rebuild. For Companies Going from garage to global. 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[ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. U. P. S. And fedex on the naughty list. The Companies Cited bad weather and unforeseen demand swamping vehicles. It brings us to this mornings squawk on the tweet. Who should they have asked for help to deliver packages . Bob writes they should develop a mutual assistance agreement. Ted writes, the best buy geek squad. And noah writes they should have asked the ghost of christmas past, when we used to actually shop for gifts and deliver them ourselves. Nicely put. And andy says, maybe they should have hired uber to deliver the gifts. We know the rates they must have charged, 10, 15 times. Yeah, two or three ex. Theres a lot to watch this afternoon. Dow is up 70. Twitter continues to be a topic of discussion. I think the last good stat i saw on it, was if you put it into the s p, right, it would be in the top 20 right around the valuation of target exactly. 39. And the top of drudge. Once again. 40 billion. And the 39 or the 38, 39, 40 billion, as you say, the same size as a target. Speaking of a target, another stock thats moving today. Fire ride. They do a lot of cyber security, obviously in light of the secondlargest card breach at target. There will be a lot of focus on businesses large and small, and its up better than 5 . And also worth watching, before we send it to headquarters, General Electric is closing in on a 30 plus dwayne for the year to date. In fact, well make it 32 at these levels. Thats going to make it the best year since 99 when it was up 51 . Thats going to be a hard record to break. A year when their exposure as an industrial helps rather than hinders. This year end will be nutty. The next few days will be interesting to watch. Charities will be loving it. See you later on. Lets get back to headquarters and melissa lee and halftime. And we are halfway through the trading day. Heres what were following for you. Buyer beware. Citi Group Unveils the top new buys for the year. Find out why he says its time to get defensive. Zero to hero, can the only loser turn things around in 2014 . We have a big debate on big blue. First, shipping delays. Who cares . Fedex and u. P. S. May have stolen christmas, but investors dont seem to mind, with amazon off an ontime high. Is the Online Shopping news good news