Transcripts For CNBC Squawk On The Street 20171228 : compare

were they up, you ask? let's take a look. yes, spain and italy, i always like to see the ftse over in the uk, wilfried's home, the only one that is up this morning. >> the big outperformer this month as well. playing catch-up for the year more than any other specific factors. but it's been a good month the rest kind of flat for the month. >> let's take a look at the ten-year yield and of course, oil oil important yesterday. having climbed above that $60 mark for wti you can see it's slightly below. let's call it not much of a move this morning, flat or so and 2.42 on the ten-year note yield. let's get to our road map this morning. in it, it does start with those two trading days that are left for the year u.s. futures are pointing to a higher open, buoyed by gains in the utility and real estate sector >> and the cryptocurrency tumbling after new regulation talk in south korea. and it's the year of the global ipo, 2017 saw the most companies going public since the financial crisis a lot of them right here on the nyc from china certainly, we've got a whole spate of those let's talk broadly, though, about stocks right now, as you saw, poised to open with some gains, one day after all three major indices broke what was a two-day losing streak. the dow and s&p are on track for their best year since 2013 meantime, bitcoin is moving lower after south korea imposed new restrictions on the cryptocurrency trading that was to kucurb speculation south korea had been a very large market in terms of demand and volume for the cryptocurrency as late >> it's been risk factor number one with all of these trades, that regulators might not not necessarily like the fact that you have kind of a rogue digital currency out there so you've had these shake outs before in bitcoin. it's obviously where a lot of the volatility hounds are going toward, because stocks have been so placid. bonds have been range-bound. and people just like the tradability of it. and when it comes to equities, i think if there's any suspense right now, it's does the s&p the get to a 20% gain for the full year, we're a few basis points away with dividends you're already over 20% a very good year, no matter how you put it with stocks and i think it's just kind of coasting to the end here. >> and when you mention that in terms of whether we get to 20% or not over the course of a year, over the last month, we've all kind of tempered the enthusiasm of the u.s. rally, saying it's been a global rally, but that still leads the pack in terms of developed markets around the rest of the world and actually kind of leads it more significantly than you think. double-digit returns for france and germany, for example, but only just, the ftse 100 playing catch-up this month, but still in single-digit performance. that u.s. performance is the standout of the bunch. coming back to bitcoin, it was down about 14% in the last 24 hours, 7% early this morning it's off 27% since its high when it neared 20,000, but it is still actually above that 22nd of december nadir that it pulled back on. it's still a point of stability and recovery of the last week as a whole, even if the last 24 hours has pulled back. as you mentioned, that threat from government clampdowns should be the real kind of risk factor and it hasn't led to too big a pullback -- >> if you dial back a few weeks more, it's 8,000 around the end of november. >> right >> clearly, it had this liftoff. you have the listing of the futures. it had this huge legitimate and i this huge welling up of interest and now it's starting -- >> it began the year, what, around 1,000 >> i believe that's the case >> wilfried, it's interesting, you were commenting on the uk market making up some of the gains. i haven't looked at global yields in a while. i can remember having looked at these in years past, where we were talking about negative yields we're clearly out of that. but as we head into next year, with our own ten-year at 2.4 with the prospect of rate hikes next year, perhaps an overheating economy given the stimulus that's being added as a result of that tax bill, what are your expectations when it comes to overseas and what's going to happen there? imagine that, 0.409 on the german ten-year. amazing. >> amazing, exactly. super-high yield you can get there. but i've been surprised in the second half of 2017, we haven't seen a bigger reaction in terms of either yields rising, because risks are higher, or the euro falling because risks are higher in terms of political reaction in europe. everyone thought, as we went through the french election and macron's victory that this initially sort of marked the turning point that now politics get better but i think actually it was the peak of politics getting better. and since then, the second half of the year, political risk has ticked up again and we've got some elections to get through next year. i think there's a surprise we haven't seen more of a divergence in yields across political europe they're all anchored by that german yield and if you talk about corporate spreads, as well, still very, very narrow in europe. and when you think about the pullback days in european equity markets, corporate yields don't flinch and again, that highlights to me the effect loose policy still has in europe. ecb policy, very much supporting things yes, growth picked up, that's very exciting, and yes, it probably will continue through the early part of last year. but have we had a big structural improvement or a cyclical bounce supported by policy. we have to wait and see. right, the market rally continues as 2017 comes to a close with two more trading days joining us now are paul christopher from wells fargo he's head global market strategist and john solstice gents, thank you very much for joining us john, i'll start with you, if i m may, you've been seeing a lot of clients recently and many are concerned about the longevity and breadth of the market rally we've already seen in the u.s. >> yes, without a doubt they are, and that's both institutional as well as private investors. we always remind them, there is no expiration date on a bull market what usually occurs to end a bull market, is interest rates move too high, whether via monetary policy or market expectations in this case, we're not seeing that this market remains driven on fundamentals so we urge them to continue to remain good broad diversity and the u.s. getting better. >> paul, what's your top sector pick in the u.s. >> paul? >> yeah, industrials would be among the top. we also like consumer discretionary. but industrials gets the extra nod, because of tax reform and especially if we get infrastructure as the president is hinting, that would give industrials an extra boost as well i would throw financials in there, as well >> we continue to focus on the politics of course, we've got the tax reform bill. you mentioned infrastructure we look to the mid-terms if the democrats won back congress, would that be bad for markets or does it actually not make too much of a difference. >> well, it will probably take away some of the expectation and anticipation of extra juice, extra stimulus, maybe extra infrastructure spending. but it probably does leave in tact, we think, the general upward trajectory of the economy going forward. and we think inflation will remain benign and the fed will remain gradual so the elections by themselves probably not a game changer for the markets next year. >> john, talk to me about your view on retail, both this quarter itself and how spending seems to be stacking up. and the valuations more broadly of the sector. >> well, i've got to say, one of our overweights has been consumer discretionary, so of course that encompasses retail within that. and it's been doing very nicely here in the second half of the year the results for the holidays look selective it depends upon, in terms of traditional retail, it depends upon the managements of those companies, the ones that are more creative, the ones that understand the marriage of bricks and mortar with electronic sales or digital sales. and looking ahead, we've got to think consumer discretionary likely has more to move, among our favorite sectors for the last, oh, gosh, nearly two years have been industrials, materials, consumer discretionary, technology. and we added health care last january to our outperform rate but with consumer discretionary, we think the economy improves, people continue to feel more secure with their jobs, even with wage growth relatively modest, we think consumer discretionaries is very well positioned and includes, of course, airline travel, and a variety of especialty retailers, auto sales, things like that >> paul, a year ago, if we were sitting here, we heard a lot of the outlooks that, you know, people thought were going to be the themes of 2017, such as a populist wave, a risk there in european elections, such as, was the dollar going to get too strong for growth. and i don't think a lot of people expected those megacap growth stocks to be the leaders. as you look out to 2018, anywhere the consensus seems very vulnerable to a big surprise like that in the coming year >> yeah, i think your point earlier was correct that we may have seen the peak of the retreat in anti-populism or in the retreat of populism with the macron election and that european populism is still very much a risk. we see that in the italian elections going forward. you see catalonia still an irritant out there and a possible source of volatility. so, yeah, politics is our main risk for next year and it was our main risk for this year. it just didn't quite work out to be quite the negative that we had anticipated. >> john, in terms of energy markets and oil prices in particular, great run, of course, this week. will that hold, as we look into 2018, that close to $60 a barrel level for the wti? >> well, we would have to think that it's a delicate balance here at these levels, as long as both opec and u.s. oil producers can keep restrained in terms of their production, as demand increases, as the global economy improves, we should see oil prices remain firm and perhaps rise gradually higher. that said, we think the ultimate cap on oil prices is the fact that you can find more of the stuff around the world than ever before you can get more out of it, out of the ground than ever before, more efficiently while at the same time, the end user becomes more efficient in using it whether it's business or the consumers. so, ultimately, we think there's a cap on oil prices here, but we do think this high 50, 60 level could be maintained for the foreseeable future >> gents we'll have to leave it there, john, paul, thanks very much for joining us. >> happy new year. >> yeah, happy new year. >> and to you. when we come back, a lack at the busiest year for global ipos in a decade along with the gainers and quite a few laggards out there as well. take another look at futures here as we're about 20 minutes away from the opening bell we've got more "squawk on the street" for you live from post nine right after this. is welcome back the global ipo market experienced its best year since the financial crisis, almost 1,700 companies floated in 2017, according to deal logic. that's up 44% compared with a year ago and marks the most ipos since 2007 in the u.s., companies going public raised $49 billion, more than doubling 2016 levels. and guys, of course, this report coming together, i guess we've kind of known throughout the course of the year, ipos have been pretty solid, but it's a good market to know quite how solid. and the other factor that's really delivered in the fourth quarter is some of those big m&a deals, as well m&a volume had been high throughout the year. but really arriving late in the year >> i would say it's a bull market, belatedly acting like a bull market. these are the things you would expect to see. it's interesting we're still talking about highest since the financial crisis, for a lot of these metrics. well, it should be, right? we have $100 trillion in global market cap so we've raised $200 billion globally in ipos that seems like kind of the minimum you would expect >> you know, last year was, '16 was a disappointing year we talked about it this year didn't feel particularly busy. >> only a quarter of it was here in terms of proceeds >> which is a great point. and what was here seems so often to be coming from china. you simply couldn't get away from the fact that when we would have one, oftentimes, it would be a chinese company, perhaps a lack of some transparency there, not clear exactly how they've performed. and some of the names that we did follow closely came out of the box and did not have the best of performances, either snapchat, of course, amongst them >> it seems investors -- i mean, they're receptive to the right idea and the perfect price but it's not as if there's a real kind of grab for every deal that comes out there the aftermarket performance is not guaranteed and everyone's indexing now. and there's just less money in that tactical, let me find the next great idea kind of stock. >> and when you see how a snapchat performed, it will be interesting to see if an uber or something you could compare similarly in terms of valuation, possibly similarly in terms of shareholder investment rights, voting rights, in terms of one of those big, big ticket items could hold up next year. either way, whether we look at the ipo volume or the kind of big boost in q4 in terms of m&a volume, this is good for the investment banks and i think it will continue to be next year, as well. and they do benefit when it's a chinese company as well. because they're on the tickets of those as well so i think that is an area where it's not all of the pie for some of the big banks, but it's important for -- >> but volatility is if not more important, when you're talking about fixed income, currencies, and commodities. and i know you follow these companies closely now. that is where they have lagged to a certain extent. and the volatility has hit the likes of a goldman sachs we can sit here all day and talk about capital markets activity or ipos, it does add up, but oftentimes, not nearly as much as the profitability from those other businesses >> and goldman sachs totally relying on investment banking saving them this quarter they slipped down the tables elsewhere, in trading, as you rightly said the other thing, as well, for these m&a deal, regulatory risks remain a huge issue. those are those big one-off, black or white binary paydays for those parts of the business. >> yeah, m&a, we're all going to be paying attention a few months from now, as we pointed out, march 19th, when we see time warner and at&t in court, if they make it there, which seems to be a likelihood and we did end the year with disney/fox, which from a volume perspective was very large we had a lot of deals, but not a lot of o large deals, until towards the end. broadcom and qualcomm yet to come, yet they count the announcement as even though -- >> you get credit for it, don't get the check. >> who knows if they'll actually be table to complete that deal that's a long way from anywhere near given the hostile nature of it all right, up next, we're going to be talking to art cashin and we'll ask him what to expect from today's trading session as we count you down to the opening bell one more look at futures as we're about ten minutes away from when we get started for trading on this thursday, the 28th of december for your heart... your joints... or your digestion... so why wouldn't you take something for the most important part of you... your brain. with an ingredient originally found in jellyfish, prevagen is now the number one selling brain health supplement in drug stores nationwide. prevagen. the name to remember. right in the heart of the was in his financial crisis, and saw his portfolio drop by double digits. it really scared him out of the markets. his advisor ran the numbers and showed that he wouldn't be able to retire until he was 68. the client realized, "i need to get back into the markets- i need to get back on track with my plan." the financial advisor was able to work with this client. he's now on track to retire when he's 65. having someone coach you through it is really the value of a financial advisor. all right. we're about 8 1/2 minutes before the opening bell let's get to art cashin here, get a sense of what we can expect we have not had that santa claus rally. >> we're on the launch pad >> we don't have a lot of time left, right? >> we're right in the middle of it it will be today, tomorrow, and the first two trading days of next year. so we've got some room the fact that we had a little bit of a rally yesterday brought us back closer what we've got to do is get higher than last thursday's close. and we're certainly on the launch pad for that, if they can hold these gains, we'll be right there. not much of a rally, but at least a little bit of one. >> it's been the rule. i mean, the rallies, if you look back on a daily weekly basis, this year, not been much of one, right? you don't see a lot of 1% moves. it's not taking the upside in these big bites that previous types of markets have. and i just wonder if that's the kind of environment, the characteristic that can be sustained for much longer into next year. unless -- it's the kind of thing that just goes that way until something comes along and changes it >> i think the rally all year long was, as you say, was rather anomalous. usually think they get there, you're going to get a short squeeze, you're going to get a real rush in, and as you say, it's been moderate volume, just kind of nibbling away rather than taking any great big gulps. but we'll take it. you know, record close is a record close, whether they come at high volume or not. >> it's also, we're looking like nine consecutive months of gains for the s&p and the dow, which is, to your point, that consistency. art, in terms of volume as we enter the end of the year, yesterday about 70% of the 50-day moving average. is that pretty high for this time of year or kind of what you would expect >> well, this particular week, you know, between the two holidays, between christmas and new years, kids are out of school, parents usually have christmas at home and then kind of sneak away to the ski slopes or maybe to warm weather or go wherever so the attendance is light you can see it around here, a lot of people have taken some time off so, you know, it's not what you really would like. you would like to see a little bit more volume. having done this for five decades or more, the old lesson is, volume equals validity and when you get things in very light volume, that, by nature, makes them slightly suspect. but as was just pointed out earlier, we've had a whole year's worth of that so i guess that's a new stage. >> expectations for the new year things we should be keeping an eye on >> well, obviously, you want to watch politics, see if they get any cooperation, if they can get another continuining resolutiont keep the government running for a while. but we'll be back to nail biting very shortly we'll see if this proposal on infrastructure, if whatever comes up, develops any bipartisan nature. and of course, there's always geopolitics. you know, europe is still -- brexit is unresolved and you have things like the catalonia vote coming in there's a feeling that the european union is still under stress to come apart so that could be a key factor to what's going on. >> art, thank you. as always. art cashin joining us there. we have the opening bell a few minutes away re." with us on "squawk on the stet i put everything stetinto my business. and i had all these points from my chase ink card. so i bought ingredients, utensils, even made custom doughnut cutters. wow! all with points. that's how i created the ripple. the doughnut, in a doughnut, in a doughnut. suddenly, it's everywhere. i mean, it really took off. what will you create with your points? chase for business. make more of what's yours. you're watching cnbc's "squawk on the street. we're live from the financial capital of the world we're going to get an opening bell in less than two minutes here we're joined by wilfred frost and michael santoli. i always think europe when i look at you, weilfred so will global rates have to tighten to any rates overseas. given the european economy has been very strong this year, in addition to our own. >> absolutely. and i think the risk in terms of people who are hawkish expecting more tightening is that we haven't seen the european economy perform in any way, when that stimulus has been taken away so, there's still, you know, a good couple of years behind the u.s. i would say on balance, the risk is that the u.s. does more tightening than people expect than the ecb does. we have that flirtation in the middle of the year when the ecb changed its rhetoric on this but we're still a long, long way from tight pening. >> the ecb today still has this report saying, very specific about the inflation target they're trying to achieve. >> and that's a crucial point. and we don't mention that enough the mandate for the ecb is one mandate. it's inflation and we haven't seen any inflation yet stateside, clearly it's dual mandate and unemployment is very encouraging. i think there's still a long way to go on that. and if we do still see yields continue to rise in the u.s. on the short-term, we're going to have factors that -- >> yeah, we should point out, the japanese have been trying to generate inflation we did get some positive economic data, and there was a small sliver of headlines out of the bank of japan overnight. doesn't mean much, of course >> yeah, we had the minutes from that meeting a couple of weeks ago. nothing new, but we had seen the en a little bit stronger today, and that's why the nikkei is down -- >> and here's the opening bell for us >> take a look at the s&p realtime exchange back at our headquarters in englewood cliffs, new jersey probably going to end up being more green than red on that board. over here at the big board, city harvest which organizes food drives to help homeless in new york city did the honors and over on the nasdaq, the salvation army serving those in the -- all right, a couple of days before we wrap things up for what has been a very strong year, as we pointed out so many times for the broader indices. only the nasdaq, i guess, right? 2013, best year for both the dow and the s&p 500. nasdaq has had a couple of years better, i believe, since then. >> than 2013 >> for the s&p, 2013 was up just about 30% in total returns easy to forget that, in fact, you had one of these types of years, with only a little more volatility in 2013, despite the fact the fed was stopping qe and all the rest of it a lot of times, it does kind of confound the consensus i think as we get to the end of the year, you kind of assess where we are in terms of the market and tin dhe indexes the s&p had a piece about an unintended risk of owning index funds is that you're very heavily exposed to tech. these indexes are performing exactly adds they're supposed to the market is right now in the u.s. is almost 24% technology. tech has done 38%, almost, year-to-date so that's obviously gotten you very overweight. and we're going to have a reshuffling of those sector definitions and all the rest of it but nonetheless, what's more amazing to me is the emerging markets. the emerging markets index is even more in tact. 28%. because of all those chinese etech companies that have done so well. it's this interesting thing. maybe we're in a world where tech is just business. it's not as if they're some separate animal we have to worry about. but this is what happens by the end of bull markets, the stuff starts to get a little bit lopsided >> on the end point, as well, the weaker dollar this year has been a big factor. your tech point is fascinating in terms of the percentage makeup of market cap you look at the stocks 600, the broader index of europe, it's only about 7 or 8% that's why you see the eu pushing back, the regulators trying to push in a bit. there's just not been the innovation that silicon valley has enjoyed over the last decade in terms of tech, apple piece top of the pile. it's up half a percent interesting, that comes on the day we hear about tim cook's pay package up to 47%. but still, relatively low in the grand scheme of things when we consider the market cap and share price. >> get a reward of restricted stock a couple of years ago that evaluates his compensation, his cash compensation, though, what, 12 million bucks >> 12.8. >> yeah, is lower than -- >> restricted stock was given in 2011 it just vested this year i think that, clearly, is a nice payday, but it's not based on this year's performance. >> 89 million ain't bad. >> the 12.8, relative to their market cap, their annual revenue, and most importantly, probably, the performance -- >> i think it's like 2% of daily revenue. >> right >> honestly, for the company >> and the stock is up nearly 50% this year. so he kind of deserves that. interesting, also, to see a couple of the banks up this morning. clearly, yields move quite significantly south yesterday on that consumer confidence data. they're picking up a little bit today. they're not eradicating all of that decline yesterday but the banks up a little bit -- >> i can't tell you, wilfred, how many strategists we've had on over the last few days, we've had a lot of them who seem to be very positive on the financials heading into next year, for a variety of reasons >> i think it makes sense. the broad point, on a p\e ratio basis, still under the median average for the s&p. we think they've had that great run, which they have the index up 17% year-to-date. but in terms of a p\e basis, they're still undervalued versus the rest of the s&p. and if we do still see more fed fund rate hikes, you could see that that valuation could improve, as opposed to other sectors you'd expect to come down you have regulation and tax cuts, you know, they're well-supported, despite having had good runs already. >> i'm kind of with you, david, on the sense that it just seems as if it feels too easy, right that you could be playing checkers and buy the financials and don't have to worry about playing chess, because of all of these inputs but on the other hand, the sell side analysts are not overly blush about the stocks in terms of price targets >> i would say two more points on a sector point, yeah, it seems too easy it's done well already 2017 has seen a lot more individual stock differenceuatidifferenceatio differentation than 2016 saw bank of america is up close to 20%. wells fargo is down there near goldman sachs' return at about 11%. there's been stock differeation. this is an interesting more one to three of you for the banks. could this become a slightly more boring, yielding sector going forward. clearly, they've been pouring out the buybacks so far, but as share prices rise, dividends become a more attractive alternative. and that could open them up to more income-hungry, boring investors. >> and they will also be a beneficiary of tax reform as will the vast majority of companies here in the u.s. but the banks among them and toll your point earlier, if we get higher yields, the net interest margin, which we so often focus on conceivably will be a beneficiary for them as well >> and the flattening of the yield curve doesn't help them. and that's a longer term versus shorter term point if you get three more hikes next year, you need a steeper curve longer term. regulations are big swing factors, as well particularly for the investment banks. the volcker rule, any relaxuation on that is very encouraging ooms for the investment banks >> we started this conversation this morning about technology in particular sometimes it is worth just stepping back to marvel at the size of these -- of the market caps and the accretion that has taken place. with apple at almost $900 million in market value, amazon at $570 plus billion in market value, facebook at $520. >> alphabet is 750ish. >> 730, 740 billion. i mean -- >> it is amazing >> it's amazing. those numbers are staggering >> the size and the dominance. and you do wonder if, you know, if there's an implicit vulnerability there. because what the market is saying is, these companies long-term can't lose like, it just is going to be automatic growth from here and if the market is anything close to right, you would imagine there's going to be pushback on that interesting, yesterday, there was a lot of chatter around this buzzfeed report about digital ad fraud and just the volume of money that seems to be spent on ads that are never viewed by anybody and you have basically fake traffic it's not something that's penetrated the consciousness of the investment base of these companies, because it's not really that big a zpeel the advertisers seem to know on some level, a lot falls through the cracks but if it started to be really questioned about, just the efficacy of digital -- think of the market caps that are being supported implicitly by detail advertising. >> another point as well on the market caps, compare it to some of the media companies you know so well and the market caps that haven't reacted to that. but also, the telecoms companies, as well and i think, if you look at two big potential head winds for the f.a.n.g.s for 2018, one is regulation potential are they going to start to be viewed as a media company. with will that allow traditiona media companies to play catch-up but i don't think net neutrality has been focused on as much. we didn't see much reaction. that's a big pendulum whose -- >> that's right, comcast, seen as a beneficiary of net neutrality going away. at at&t, which as we pointed out, on the cusp of trying to buy time warner, and will have to fight it out in court. and verizon, which has come back from a horrible year to be basically flat on the year so, to that extent, i don't know if it's been a reaction to net neutrality or simply to a number of other tailwinds >> it seemed like a combination of net neutrality and the fact that just the laggard groups you know, telecoms and energy seem to have in december really come back a lot. i don't know if there's more of a fundamental basis for it beyond that, except, this has gotten too beaten down, it's too cheap. there are companies that look similar in terms of business dynamics >> i know, that stock had been down as much as 17 to 18%. it's a fairly widely held stock with a strongyield >> i also wonder, it hasn't really top of mind risk for verizon, just in a background way been, well, they're going to go out and do some big, silly deal if all of a sudden anti-trust looks tougher and you're challen challenging at&t and time warner, does some of that risk get diminished >> i think you're going to, as the new year gets underway, continue to hear and feel that same kind of sentiment, which is -- and to the point we were making earlier and wilfred was making and is really embodied by rupert murdoch's decision to turn tail and sell lots of his company, that the big guys, facebook, alphabet and amazon are simply so dominant that you've got to do something and that verizon with at&t conceivably going to be a lot bigger in media. we'll still feel that pressure there's not that many properties for them to choose from, to try to launch a larger attack here they had talked to charter somewhat extensively, that's not media, that's distribution but they've thought about the likes of, at least previously, a bit of time warner or cbs or viacom you know, is there anything out there that could give them that kind of oomph beyond umpf, which right now is aol and yahoo!. >> what do you think about the idea that there's a agreement between fox and disney, that one or two of those assets could still be cherry picked off by someone else or do you think it's done and dusted, locked and loaded? >> i think they've got our deal. the question is whether our parent company, comcast, is going to try to exert leverage in some fashion to put itself in a position to own something. that's a hard road to go down. sky does present at least one opportunity for comcast to compete or create problems, given that they will only be taking on the 39%, the 61% ownership is still in question in terms of uk regular urtors ad fox will have to complete that prior to disney owning fox but we'll see. it's not done yet. >> i saw quite a few of the sky presenters at a party in london over christmas and they are all just up in the air about it they don't know which way it's going to go. and of course, they don't have any better answers than us but they want certainty moving forward, i'm sure. whichever buyer it is, they'll be pleased, once it gets done and dusted >> we will see for now, let's get to bob pisani, who's on the floor tell them what's moving today, bob? >> hello, david. happy thursday, everyone the important thing, a little more stability in some of the tech names it's been a rough month for them let's take a look, semiconductors, generally open to the upside. better over in asia, as well consumer discretionary has been strong retail and home builders, forget about it banks, mixed energy had a pretty good month overall here i was looking at some of the apple suppliers over in asia, so hon hai had a horrible month overall. you can see, up here, but it's been down a good 20% overall in the month since the end of november so bouncing a little bit there so stability semis overall this month, yeah, the apple suppliers have been weak, so skyworks and broadcom have been weak, qualcomm, but it's been mixed elsewhere and in the last few days, it's generally been much more stable. not more stable than the home builders, because they've had a fantastic month, fantastic year overall, opening up again today, fractionally, but most of the names, got to be up $50. and the home building index, there's an etf for that, up 20% in the last quarter. put up the itb for me from taxes. but overall, you're seeing a boost from a number of factors that, look at that, 20% move in this quarter for the home-building index. we've had a record year. throw in the tax help, you have low rates from the home builders, you have a limited supply you have, finally, slowly growing, not growing fast enough, but household formations and the public builders control a very large part of the market. maybe 26, 27%. you have a handful, 7, 8, 9 of them control more than a quarter of the overall home building market that gives them a tremendous competitive advantage. let's move on and talk about bitcoin for a moment w we see it bouncing around, mostly to the downside we've heard about the korean government now saying they might implement new rules to regulate cryptocurrency training. they're talking about maybe prohibiting anonymous trading accounts and giving authorities the ability to shut down exchanges. so, look, we've gone from 10,000 to 20,000 to 11,000 to 15,000, all in the space of a month here it's important to note who's doing the trading in bitcoin and almost 60% of it occurs over in asia. it's between japan and south korea. this is the last 24 hours. the u.s. is in second place in terms of where it happened so bear that in mind what you can guarantee that you're going to be seeing is a lot more regulation coming you're going to be seeing more talk on regulations of cryptocurrencies in general. remind now about who regulates bitco bitcoin. the futures market is regulated by the cftc. it's often said that the cash market is unregulated. and while that is technically true, it's not completely true so, for example, for exchanges, coin bases, for example, is licensed by the state of new york and there's other common law, common law fraud statutes and money laundering that may come into play here so we're going to see a lot more regulations on the state and local level in 2018. d dow's up 46 points guys, back to you. >> thank you, guys bob pisani the chicago pmi is due out in a few minutes. rick santelli is at the cme in chicago and we'll send it there now. >> good morning, david let's go through some charts awaiting that pmi number look at a three day-of t-day o e october 1st of tens clearly shows, we gave up a little ground after the spike, but still holding a good deal of the gains. it's a bit different on the short end in europe. look at june 1st of '17 start of the shots. that's the last time it was trading at these areas remember, it's getting less negative, it's selling off but we're very close to extending that all the way back to june of '16, very close, as you see on that zoom november 1st of bunds, you know, the long end of the market not acting as nearly as sellish, nearly as rate-popping as it was at one point, but it is holding above 40 remember, it closed to 20 basis points finally, the last to charts both mid-september last year, the last time the dollar index was down at these levels and if you pop it out and look, we're getting ever close to 19.5, so the market is comping on its strength to mid-september 15th of 2017 now let's get to that chicago pmi. this is the december read and the number is 67.6 this is huge the high water mark of the year was 66.2 in october. that was the best since march 11 when it was 68.6 so that's what we're comping to. a very solid number. basically, we have two numbers this year that are huge, but that's more huge, considering how far back it goes and it does, in many eyes, give some momentum to some of these regional aspects of purchasing manager survey and of course, we'll await the national number to see if it carries over with the same amount of strength and by the way, sequentially, at 67.6, follows 63.9 wilf, back to you. >> rick, thanks very much for that and we did see a nice little jump in the equity markets now they're back up again about 0.10% or .20% if you're looking at the dow next, we'll look at whether ge can rebound in 2018 as this new ceo implements his turnaround plans. "squawk on the street" will be right back general electric is set to close out this year as the worst performing dow stock it is down a whopping 45% this year yeah, i was just checking. but with a new ceo at the helm of the company, is there a brighter 2018 in store for more, we're joined by john inch of deutsche bank, who is an analyst who has been covering deutsche bank for 20 years >> 20 years. >> an interesting 20 years, to say the least, and the most interesting if not the most painful for shareholders. >> i would say that this year is the culmination of ge having brushed things under the rug for decades. all of a sudden, this has finally come home. the ceo and cfe departed and it's hard to see how there aren't massive lawsuits that ensue. >> massive lawsuits? >> absolutely. these have already started, class action litigation. >> let me go back to your point. you were talking decades is what i think you said or many years of pushing things under the rug. even back to the time of jack well were? >> he handed immelt a tough hand the company continued to propagate the upside driven by ge capital ge capital lies at the heart of a lot of the company's problems and today sitting on billions of liabilities. >> the long-term care is an interesting point and one we discussed a bit with flannery. but ge capital is gone they sold it as is so often the case. >> but they retained the liabilities. the tax rates were minus 4% in the third quarter. almost every other company in america wins through corporate tax reform ge is a big loser is,ing forced repatriation >> you don't see 2018 in terms of as a rebound year for this company? >> not at all. it's going to take a very long time to turn the ship around the company is going to be challenged to negotiation firing thousands of workers how is it going to grow under those auspices it's going to suffer distraction costs and being forced to sell prized assets like rail, the lighting business which it's tried to sell in the past, baker hughes we think is on the block this year. >> this year you think it will be on the block? what is the ownership, 60% right? >> 62.5% pop we think that 2018 could be the year they dump baker hughes theoretically rail and baker hughs at the bottom of their cycles now would not be the optimal time to sell these properties. they buy high and sell low. >> we criticized immelt for many years in terms of buying and selling at lows and highs. one thing a lot of people seemed to miss was the inability to the execute some of the key businesses, power being the chief one. did you have a sense how badly things were going there? >> it's turned out to be probably as bad many who were fairly bearish perceived or feared it's going to be surprising to a lot of people from the outside ge is a big complicated company. they masked their results for years, propagated the fact that everything was great all the time it was difficult for outsiders to pry in to see what was happening. i'm not that surprised a lot of people are surprised but i'm not that surprised. >> the stock sitting at around $17. cash flow generation any metric we might use to try to value it. what are your expectations for next year? >> firstly, i think the earnings are coming in around a dollar. 2019 is not going to be a better year the earnings will come in after they sell and baker hughes somewhere around a dollar. the stock looks worth $15. ge capital could have net negative value the dust hasn't settled on this thing yet. they might have to cut the dividend again that's not clear the cash will be volatile. earnings are what to watch ge still suffers from aggressive accounting and never addressed that as part of the transition all that is still out there and probably has to be dealt with over time not to mention all the restructuring. this company is juggling a lot of balls >> it is we'll follow it closely in 2018. they'll be happy to get through the this year i would assume at least with the stock down 45%. john, thank you. >> happy holidays. >> john inch from deutsche banc. >> how the new tax law will impact you and when. 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plus, which states will benefit the most from the new law. >> bitcoin falling sharply again today. what's next for the cryptocurrency a very formal good morning to sarah and samuel who i believe are watching at home this morning. >> are they? >> they are, probably watching listening to pre word but sending their best wishes. >> i'm happy to have you guys. i miss her. >> so do i >> both fellow co-anchors of hers >> that's right. i miss her more. >> well, yeah, she needs tough treatment. >> all right, let's get to our blockbuster 2017 rally this morning. all three major indices on track to rise for 11 of the 12 months this year, the first time ever at least that's happened for the nasdaq joining us now jason hahns, bmo large cap growth fund and the head of u.s. rate strategy let's start on rates i was questioning wilford earlier in the morning about it in terms of global rates we have a 1.5 trillion stimulus you could argue via the tax bill coming into our economy over the next year or so. and we're already at growth rates we haven't seen in awhile. are we not taking into account what could be a significant rate rise next year. >> i think so. 1.5 trillion stimulus is 1.5 trillion in deficits over the next ten years. that implies a decent amount of increases in treasury supply over the next several years. as the way the cbo looks at its debt to gdp ratio, we're at 77% debt to gdp. that's expected to go up to 90, 91% over the next ten years. add to that $1.5 trillion in excess deficits, you're expecting substantially more treasury supply over the next several years. >> have treasury yields been tightly linked to u.s. deficits? if we look to when yields were their lowest, it was close to when we had trillion dollar annual deficits. >> absolutely. what will push yields higher is what happens overseas ie with the ecb tapering asset purchases. that will start support higher term premiums in the u.s >> we're at .467 of right now. how high could it go >> we have a forecast for the end of next year close to 85 basis points that's a meaningful rise there's going to be tapering of asset purchases starting january, again, in september there could be another leg down in asset purchases and they could phase out purchases by the end of next year or early 2019. >> jason, from fixed income to equities, give me your sense what your expectations are as we head into next year, as it relates to of course, the large cap technology sector that has been such an engine behind our overall growth in the marks this year. >> good morning. thanks for having me we think long-term, we like the technology and kind of the secular growth story we see in the markets. however, just given that run, the tech sector up almost 40% year to date and just given that run and the valuations that we're seeing in that sector right now, we wouldn't be surprised to zerotation next year kind of out of last year's winners including tech into some of the more value oriented plays in the market. we really see tax reform as being the catalyst for that rotation, that value space tends to be more focused on the u.s. focused companies which will probably be the biggest beneficiaries from the tax reform. >> and jason, that's why you like bank of america is it despite the fact that bank of america outperformed so significantly already this year? >> that's exactly right. it's been a laggard for a number of years before that we believe there's still a ways to go with bank of america on top of the tax reform. they've done a nice job restructuring the business and balance sheet post the crisis. and tax reform will be a big benefit for bank of america. and we do believe there will be ongoing deregulation in the sector which will provide a tail wind we saw some of that deregulation coming into effect when b of a announced they would increase their share buyback above plan earlier this month. >> when you look at the way the treasury yield is set up going into 2018, what does it tell you about the market's expectation how much longer this cycle has if we are not able to see ten-year yields going up if the fed tightens, the market saying recession is on the way in a year or so >> i agree with you. a year or so is too soon we very pencilled in for the end of 2019 to early 2020. but the flatness of the curve to me is concerning what that's telling you is that the fed doesn't have that much longer to go in this rate hike cycle. maybe three times next year but after that it's going to be a struggle if the curve continues to flatten at the pace it's flattening right now the bond markets tend to be somewhat forward looking in the sense if we start seeing the curve flatten out a lot by the end of next year, then the markets are going to start looking forward to the recession potentially into 2019 and start to -- and yeeds will start to decline by the end of next year. >> jason to the extent rates going higher is a real threat to the market, is it one you take seriously? ooh. >> we do take it seriously we believe it's a lower probability event just given we think the fed has done a nice job telegraphing policy going forward. i think the market's appropriately priced in the risk we think higher rates and potentially inflation longer term could be the risk that's the thing markets aren't pricing in right now we don't see the that as a near term problem >> jason, talk us through the buy case on another pick, walmart. a stock that's already had a good run this year. >> walmart's had a very nice second half of the year. when you think about retail space, there's been a huge divergence between online and traditional brick and mortar retailer when you think of companies that could compete with amazon, you have to think who else has the scale and the capacity to compete with amazon. walmart would be at the top of that list. walmart's done a great job over the past couple years enhancing online press tons try to compete with amazon. their online inventory is up significantly year over year online sales growing rapidly they've been able to figure that business out post the acquisition of jet we've seen a lot of interesting things with their business model in terms of trying to compete with prime, trying to make prime look expensive and really take that business back from amazon and also offering discounts to for instore pickup to continue driving traffic into the stores. we're seeing that with increased traffic in walmart stores for every quarter the past three years. i think walmart is sitting on all cylinders right now. >> finally will, yields will peak at 2.8% is what you see >> we have it at 2.7%. we're thinking it could go up to 2.8% by the third quarter. given our outlook for recession the end of 2019, we think the bond markets will be forward looking and yields will decline by 270. >> thanks to you both. >> thank you >> thank you. it has been a pretty big year for ipos. 2017 saw the most global ipos since the financial crisis bob pisani joins us now with more. >> 1700 globally up over 40% from last year we care about the u.s. it was good. we're up about the same, about 50%. 160ipos here in the united states that was a nice move up. ipo activity, 170 back in 2015 certainly that's good news here and the largest since 2014 by sector, health care 29% technology 24% half of the business essentially is biotech and tech stocks overall here as you can see. i expect more financials and more energy in 2018 because, well, we haven't seen a lot of them recently. a lot of regional banks could ipo. winners and losers notable winners. it's quite important to note that you had home apparel companies, home companies and apparel companies like canada goose and stitch fix who would have thought they would be big ipo winners they did make it on the list the losers blue apron got all the attention. very important chinese ipos did not do well. chinese microlenders notably underperformed that was a bit of a surprise overall. ipos in 2017, here's what's very important. they did getter than people expected overall after what happened in 2016, a lot of people were unhappy with after market returns investors said we don't want the high prices, lower the prices and they did so after market returns as a result were much higher. you can see this in the ipo. 60 of the most recent ipos in the last year, year and a half we're up 38% on the year, much better performance before. how about 2018, there's a whole raft of possibilities. pretty good numbers. the big sandwich shop is on the list fruit giant dole foods, the usual tech you know corns are possibilities, lyft, dropbox, airbnb are floating out there. the saudis say they're on track for a listing for saudi aramco talking about potentially 5% that could raise depending how much they valued it, $100 billion. it could be worth $2 trillion. we don't know. that had be the biggest ipo of all time back to you. >> that would be the big one bob pisani for us there. when we return, the top states for tax cuts which states will benefit the most from the massive gop bill set to go into effect in just a few days later in the show, the wild ride for bitcoin continues the cryptocurrency dropping another 10% after south korea announced plans to impose stricter regulations. what it means for the market after the short break. 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the new limits on deductions for state and local taxes and mortgage interest expire in 2025, too. one benefit is retro active. you can apply the bigger deduction from medical expenses to build from the start of this year but it only lasts through the end of 2018. there is one important change that won't take effect till 2019, the repeal of the individual mandate that changing will be permanent. for companies, there isn't much time to start complying with complicated new rules like the limits on interest deductibility begins on january 1st. after four years, the rules become more restrictive. repatriation rates kick in right away companies have eight years to bring back all of their deferred income one benefit businesses lose is the ability to fully expense r&d. that doesn't take effect till 2022, then they'll have to amortize costs over five years on the flipside, companies get to write off the full cost of capital investments immediately under the new law. they can take advantage of that for five years before it gradually gets phased out. we'll see if congress expends that tax break or any of the others as they promised to do. back over to you. >> ylan thank you very much. the new law set to shake up the battle between states is attracting businesses and jobs scott cohn is out in california with a look which states stand to benefit in the top states for tax cuts overall hey, scott >>ing this factor in sanger, california, outside fresno is a tiny slice of what is at stake here this is initiative food, had the nation's third largest baby food manufacturer less than a year and a half ago, their facility here burned to the ground they were faced with a decision, rebuild here or move some else no shortage of states came calling. those states are still calling today. as you can see, they stayed put at least for now with the help of well placed state incentives. the tax bill comes with all of its breaks for capital expenditures comes at an ideal time for rebuilding. but the states now, other states see an opening here with the tax bill it's potential impact on high tax states like this one local officials are keeping a brave face for now. >> i say bring it on i'll tell you, is that people want to be in a state where there are 40 million customers and the only place that that is available is in california >> well, that kind of thinking is about to be put to the test according to our analysis, the data that we compiled during our 2017 america's top states for business study, california is among the most vulnerable states we're looking at states with high taxes and workers available to be poached away by other states also on our list, new jersey, new york, ohio and to a lesser extent minnesota. the winners in this scenario are states with competitive tax structures and shortages of workers. colorado, south dakota, utah, new hampshire and indiana. remember, in this environment, workforce is everything. states that can attract the best and the brightest are going to win. states that do anything to send them packing do so at their peril. guys >> scott cohn, thank you important story we'll be watching as we see the real impacts of this tax change when we return, why home depot and a chee competitor are hitting all-time highs at the end of the year. first it is the second to last trading day of the month we are up on all the major averages we've got a lot more "squawk on the street" right after this working as an emt in a small town usually means hospitals aren't very close by. when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. there's nothing worse than when we're responding to the hospital, and the hospital doesn't have the right specialist. evaluating patients remotely, by an expert, is where i think we have a potential to make a difference. robots can do a lot in medicine these days, but they can't think. they're still machines. for nuanced decision making, we still need humans. we would save a lot of lives if we could bring the doctor to the patient. verizon is racing to build the first and most powerful 5g network that will enable breakthrough innovations to take place. as we get faster and faster wireless connections, it'll be possible to bring those capabilities to more remote sites, and be able to operate on a patient in a way that was just not possible before. when you think about underserved areas, you tend to think of remote locations. but the reality is, an underserved area is anywhere where the person that you need, who has the expertise for the problem that you have, is nowhere near you. low latency is crucial for things like surgery, because the response time has to be immediate, it has to be real. i could put on vr goggles like these, and when i move my hand, the robot on the other side will mimic the movement, with almost no delay. who knew a scalpel could work thousands of miles away? (dr. vasquez) it's going to be life-changing, and life-saving. ♪ let out your inner child at the lexus december to remember sales event. lease the 2018 nx 300 for $319 a month for 36 months. experience amazing at your lexus dealer. ♪ welcome back bitcoin taking a hit amid regulatory concerns after a noteworthy rally over the last month. the digital currency down about 6% right now for more on the cryptocurrency's roller coaster ride and impact on the markets we're joined by chief current sit strategist wolfgang before we get on to your specific views on bitcoin, can you first differentiate for us the difference between a digital currency and a cryptocurrency? >> well, yes, i absolutely can cryptocurrent sits basically are leveraging cryptology or security in order tore frame around blockchain technology and then these blockchain technologies such as bitcoin actually create their own exchanges. digital currencies really are doing the same thing but in my opinion they'll be issued by the governments. that's where the big difference is the governments will leverage cryptology and blockchain technology, as well. >> and the main benefit i guess of both that you argue is quick and swift payments and you don't need to have a cryptocurrency to do that. you can have a digital currency. >> that's correct. the benefit of what the bitcoins and other 130 whatever exchanges have done is they've taken a time and b cost out of the market there was an inefficiency there. you transfer money from one bank to another can take two days and it's going to cost you $30, $50. now it's going to cost cents and will be immediate. that's what the united states government, for example, will have to do >> and how far away are we from a central bank major global central bank issuing its own digital currency in your eyes? and if and when we reach that point, is the writing on the wall for various cryptocurrencies like bitcoin? >> absolutely. so putin came out and said actually in january of next year so in a month, he's going to come out with a cryptoruble. that's probably the first, the announcement of that the chinese are working on it. canada, uk are working on it and the united states has been working on this since 2013 and they came out with a fed paper in june of 2016. i actually expect that the united states, the fed is going to issue in the next 12 to 18 months a cryptocurrency or as i call it the digital dollar >> wolfgang, do you think that these various sort of sanctioned digital currencies are going to take demand away to the extent that it exists right now for the popular cryptocurrencies is it just a matter of more supply or the people likely to think bitcoin is going to be a valuable asset not interested in anything else? are we talking about two separate worlds here into we are. so what i knee is and i talk to a lot of cfos and treasuries of corporations an as we help them understand and manage these currencies what they're saying is corporations -- remember, that's a $5 trillion a day market and the corporations are roughly 40% of that market, so roughly $2 trillion and they're saying we can't get involved in bitcoin but we like the idea of bitcoin or others. we like speedy transactions at a lower cost how do we get involved in this they're waiting for the governments to issue those digital currencies so they can take advantage of those two things without getting involved in highly volatile and i would say one would have to agree that highly speculative if you're looking for a month going from 9,000 to 17,000 back to 14,000 today, 6, 7% losses, it's too speculative for corporations which are one of the largest players in the market of currencies because they need to do it it is not out of speculation they need to convert from one currency to another. tes they're waiting for the digital dollar >> wolfgang, stepping away interest bitcoin, what's your view on the tax reform bill and in particular, the impact it's likely to have on the u.s. dollar. >> i feel that we're going to start 2018 in a very positive note in the united states. tax reform one more thing more positive news for the u.s. dollar i envision we're going to see a stronger dollar. we're going to havestronger growth we're already doing better there, as well so what the president trump is doing at the time is what he said he would do which is trying to help get the economy moving i think we're seeing that. i think it's going to reflect in the dollar you add to that that the fed is going to start increasing interest rates, as well in a controlled fashion that's going to create even more interest for the united states dollar and overall, you'll have strengthening in the dollar, but be careful the volatility we did not have as much in 2017 i think is going to start creeping back into 2018 with higher volatile markets >> okay, wolfgang, thanks for joining us this morning. wolfgang koester of fire apps. >> coming up, stick around for squawk alley when stephen levy will join us with tech predictions for 2018 and the answers to some of our own julia boorstin's questions on next year's outlook for social media stocks of social giants will step up in 2018 expect facebook to spend big on sports and tv shows. facebook's failed $600 million bid for cricket indicates demand for sports rights and it will double down on programs for its watch tab to compete for tv viewers and ad dollars while snap to avoid getting crushed by instagram will embrace its relationships with media giants including nbcuniversal expect even bigger changes to battle bad raps, even if it means eating into the bottom line in focus it, twitter for trolling and bots, facebook for enabling russian manipulation of the election and youtube for violent and extremist content. they will prioritize transparency and crack down on anything misleading or false to hold on to users and avoid regulation. >> social apps will get smart. they'll use voice recognitioning to order products, augmented reality for search and the ability to buy anything you see on an app. imagine speaking with a messenger customer service bot, buying clothing on instagram without leave aginfluencer's post or shpi ifrnd snaps and stories. "volatile markets." something we all think about as we head into retirement. it's why brighthouse financial is committed to help protect what you've earned and ensure it lasts. introducing shield annuities, a line of products that allow you to take advantage of growth opportunities. while maintaining a level of protection in down markets. so you can head into retirement with confidence. talk with your advisor about shield annuities from brighthouse financial established by metlife. hi, i'm kayla tausche. here's your news update. if you live anywhere from the rockies to the east coast, it is freezing outside arctic air mass is covering most of the country bringing with it temperatures that are 10 to 25 degrees below average. and unfortunately, it's expected to get even colder as we head into the weekend. isis is claiming responsibility for a deadly attack in afghanistan. an unknown number of suicide attackers set off explosions outside a shiite muslim cultural center in the capital city of kabul. killing at least 41 people. despite a last-minute lawsuit filed by republican senate candidate roy moore, alabama's secretary of state says he will certify this month's special election results officially naming doug jones as the winner moore has yet to concede. dramatic video cam shows the heroic efforts of two wisconsin police officers as they race to pull passengers from a burning car. the officers were on patrol when they saw the car hit a utility pole before bursting into flames thank goodness they were there that's our cnbc news update at this hour. back to you, david faber >> thank you, kayla. ubs's art cashin has had a more than respectable track record and predicting major market trends bob pisani took a look at his calls over the last several years. >> it's a tough business being a market prognosticator. art cashin has had a respectable track record over the years with more hits than misses. as we enter 2014, the 5-year-old stock market rally copied. but he was already thinking profit earnings and margins were starting to top out. >> they have cut and diced their way down to record profit margins followed by record profit margins, followed by record profit margins. now, that can't continue my 50-year history tells me profit margins revert to the mean. >> the profits recession did indeed come but not till later that year and into 2015. going into 2015, his biggest worry was china. >> the people's bank of china is very concerned, and they are looking at doing something to stimulate almost a way to, i don't want to use the word force lending but really promote lending as well as they can. and they have problems in shadow banking and problems in real estate and they'll have to work their way through that. >> right again china was the biggest story in 2015 rocking the investing world in the late summer with a surprise devaluation of the yuan that caused a 10% drop in the s&p 500. into 2016, the big story was oil. predict agimminent bottom after it dropped more than 6% but cashin was still not convinced. >> my gut tells me it will stay low probably through the first quarter of next year maybe further. >> he was right. oil continued to drop and bottomed right in the middle of the first quarter of 2016. then began a slow crawl back you don't hit it right all the time last year, cashin was concerned about the wave of populism that might sweep through europe after trump's election. >> it wouldn't take much to get the italian government fully destabilized we could be back to the club med problems with the banks, greece is not far from returning to crisis again so you can say i've seen this movie before and nobody dies but it's a slightly different movie this time. >> it didn't quite turn out that way. while the parties did gain in european parliaments, populists were turned back in top leadership positions through europe still as far as predictions go, three out of four isn't bad. >> all right let's bring in bob for more. he's pretty good on this stuff. >> we all have been covering this for years and stock market prognostication is a terrible game most of the time people are wrong. it's shocking how bad predictions are. the fed's own track record is terrible i've watched art's interviews with me the last seven years now, last week, and i'm surprised how many hits he's had. much more than i think the average. by the way, for this year, he said we're likely we're not going to get corporate tax relief till the very end of the year he said that in 2016, december 2016 that was bold because everyone was thinking this is going to happen in february and he was right he said if there's any hiccup along the way and it doesn't look like it will happen, the market will have a major problem and it did twist and turn. that was the number one call last year what would happen on taxes. he hit it right overall. >> he's kind of isolating themes that maybe people aren't paying enough attention to. he's not giving you a target for the s&p 500 which is a fool's game so i guess what's preoccupying him now. >> he is again -- he had another prediction right last year he said the fed will become preoccupied with deflation, not inflation. we were all talking about inflation. we've been talking about it for two years. he was right he still thinks it's going to be an issue for 2018. that's a bold prediction we've seen the short end of the curve move up dramatically you've been talking about that, mike, much more than the ten-year the yield curve flattened in anticipation the fed was going to get more aggressive yet, we still haven't seen things happening on the inflation on the ten-year end. it's an controversial issue. >> on the european politics, i didn't quite get the call for this year right saying maybe that was a bit delayed and there's still a lot of questions in european politics to come next year. >> i don't know how you feel about it i was surprised how smooth this was this year in some european politics greece quiescent brexit got a lot less concern as we went further into the year. we saw european stocks rally the ftse 100 rallied dramatically in december as it looked like the prospects for more favorable brexit terms improved overall and the european profit picture improved in 2017. >> bob, as we look for the last couple of trading days here, how are we shaping up? >> the important thing is nobody's there's concerned about the santa claus rally. the big issue is, do you believe in the global growth story, number one, do you believe that earnings are not topping out in 2017 if you do, then it's very easy to argue that at the very least, we're sideways in the market and possibly a lot higher in 2018. >> bob, thank you. >> a pleasure. >> look forward to being with all three of you. >> always a pleasure. >> of course >> many years we have been together, you and i. >> not too many. >> 26 i think. >> stop right there. just stop. no, no, 24, 25 >> david. >> the odometer is flipping over >> well, with only two more trading days left in this year, let's take a quick look where the markets stand at the moment. sitting on modest gains in the dow and s&p 500. nasdaq just below the flat line. bob says nobody's concerned with the santa claus rally. the s&p 500 is about a point below where we would have to be flat for the period but there's still a few days to go there when we come back, yahoo's former ceo will tell us what to expect from tech income 2018 more on quk t see"sawonhetrt" right after this ai, ai, and respond 60 times faster. it lets you know where your data lives, down to the very server. it keeps your insights from prying eyes, so they're used by no one else but you. it. is. the cloud. the ibm cloud. the cloud that's designed for your data. ai ready. secure to the core. the ibm cloud is the cloud for business. yours. your insurance on time. tap one little bumper, and up go your rates. what good is having insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782 on home and auto insurance. call for a free quote today. liberty stands with you™ liberty mutual insurance. your bbut as you get older,ing. it naturally begins to change, causing a lack of sharpness, or even trouble with recall. thankfully, the breakthrough in prevagen helps your brain and actually improves memory. the secret is an ingredient originally discovered... in jellyfish. in clinical trials, prevagen has been shown to improve short-term memory. prevagen. the name to remember. welcome back late get over now to the cme and rick santelli for the santelli exchange hey, rick. >> thanks, wolf. like to welcome one of the last guests of the year that will be reserved for tomorrow i'm going to call you ab it makes things easier. as i look at the market, we're not making new highs but we're darn close all the equity markets have had great runs especially late in the year what's going on with hyg the atf is barely up on the year versus the lqd or the mub which is munis the spreads on the barclay spread they're well behaved. what's the deal? >> we seemed starting the fourth quarter high yelled spreads being pretty range bound not participating. it's two things. the first is tax reform. we're sorting out what some of the deductibility issues are. >> treated much differently. >> the market is sorting that out. the second thing with some of the earnings for big issuers in the telecom space and health care space they disappoint. there's fundamental risk going on but your point that this equity high yield divergence will continue the next year because of where yields and spreads are. >> traders and our viewers are very savvy and always looking for an edge. do you think after your description of what's happening potentially part tax reform impact, after 2018 begins, is that dynamic going to end and the relationship get more normalized >> yeah, i think high yield will be capped in returns for the year future. it's going to be capped until we see a rise in rates which makes the overall yield levels high yield better or widening and credit spreads for the general market. >> on the back end, will supply make a difference? if you look at tax reform and figure if i go to the capital markets i can only write off a much smaller amount of interest, ultimately that's why the supply might have surged also creating this dynamic at the end of the year but less supply could reverse that. >> exactly on the supply issue, we're seeing that in the muni market right now. >> i only saw data to mid-december it was robust. >> this is a phenomenon, this tax reform issue is impacting a lot of pockets in the market it's not going away. >> back 10 or 15 years ago, if you talked yield curve, people wouldion you now, you can't go an hour without mentioning the yield curve. it's been all about flattening, fed tightening on the back end, isn't it going to be more challenging it depends how many rate hikes for next year, what mario draghi your thoughts. >> the curve is going to have a hard time getting a big steepening move till we see changes from the bank of japan it's creating this foreign demand because of where low yields in foreign countries. the second issue is if the fed -- we've been in the fed hike environment the fed's hiking in a noninflation environment we can get a curve steepner next year if the inflation dynamics change or the fed decides to pause at some point next year. till the foreign demand changes, it's going to be hard we think to have the big steep end. >> in lieu of that, i always anticipated the steepner would have a schork absorber for that effect let's be real here mario drag gil is still buying a boat lead even though he's going to cut back in 2018. is there anything going on you think is not priced right? in other words, have investors waited too long to sell in lieu of that or is it the fact between those two central banks, there's still enough horsepower to distort the long end? >> there's still enough horsepower the fundamentals aren't arguing yet for the ecb or bank.japan to change that policy so that's the issue. but the other issue -- >> fundamentals through the rose colored glasses. >> inflation dynamics they're looking at. >> many would still disagree they should have done it at all. i see what you're saying. >> the other issue is the dollar euro is up 10, 12% of the year that is a shock absorber for the system, as well. some moves that could have happened out of the ecb are going into the current sit markets. >> the dollar index ending year so weak. our central bank is doing all the right things those are only markets, too. just because something down the road in the future is priced certainly doesn't mean it's going to happen. >> the markets expect a continuing robust demand for dollars next year. luke you say, the markets predictions and don't have to be right. >> do you think repatriation will be a big boost to the market. >> no, but the tax law is complicated. the issue of too. >> ask the people waiting in line in dupage county to prepay property taxes a.b., a pleasure to talk to you. happy new year. >> thanks. >> back to mike santelli. >> thank you very much for a good discussion on fixed income all around time now for a closer look at oil and metals prices. >> oil prices haven't been able to get a boost after breaking $60 a barrel earlier this week the oil is still on track for a positive month higher by 4% as we wait to see when the libyan pipeline that exploded goes back online the estimate is still for repairs to finish by next week meantime, copper continues its march higher on track for 16 straight positive sessions on pace for its best year since 2010, up 30% here in 2017 on the back of upbeat chinese data. that's been the main catalyst. the move in copper helping the broader markets in latin america. check out argentina and brazil stock markets there seeing new highs on the back of this move in copper. gold meantime, hitting a one-month high the next level to watch on the technical side according to traders is $1300 lastly, natural gas prices spiking on the back of cold weather which we are seeing here in the east coast. higher by around 6% today. in the meantime, bundle up back to you. >> seema, thank you very much for that when we return on "squawk on the street," is it a good idea to prepay your property taxes before the new tax bill takes effect in the new year we're live in greenberg, new york, with the answer. first look at the biggest winners and losers for the dow this year. in fact, the individual withiners and losers going up more than 90% for the year today as you can see both down .0.2 of a percent. >> broadermarkets, the s&p is flat as is theasq. nda more "squawk on the street" when we come back (nadia white) the moment a fish is pulled out from the water, it's a race against time. and 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(dennis woloshuck) if you have a sensor that can keep track of your product, it keeps everybody kind of honest that way. who knew a tiny sensor could help keep the food chain safe? ♪ ♪ ♪ welcome back i'm seema mody stocks trading higher this morning with industrials standing out as one of the worst performing sectors, down less than a percent at this point jb hunt is leading the sector to the downside, off 2% today after the transportation services company lowered expected earnings for the current quarter. jb hunt now expecting to earn between 77 and 82 cents per share. those figures include a 21-cent charge of one-time related charges, according to the company. you see that stock down just about 2% mike, sending it back to you >> seema, thank you. home owners lining up to prepay property taxes before the end of the year and the implementation of the gop tax bill joining us in westchester with more on this, and he has a special guest. eric >> that's right. you can see behind me a lot of long lines there's actually two different lines happening here the first is for people who don't know how much they pay for next year, they are getting that bill, then going into a different line around the corner that you can't see right now, and that's where they actually pay. as we know, the irs just yesterday said the only property taxes you can prepay are the ones you were assessed this year and the ones you pay this year that's why everybody's rushing into the doors here. they do not want to take a chance by trying to mail it in and some towns are allowing you to pay online, but most people want the receipt that's what we're seeing behind me a lot of the people i talked to said they didn't talk to their tax planners, they are just coming down and prepaying and going to hope to see what happens. joining me right now is paul finer, the town supervisor of gre greenberg, who put this together in the last 48 hours to get these people in. thanks for joining us here >> thanks very much for inviting me >> let's figure out what is happening. the westchester county executives said they are not going to give tax warrants for next year. so what is everyone paying >> well, people are paying the town and fire district taxes, the greenberg town board had a special meeting a few nights ago and basically issued a warrant for the town portion of the 2018 taxes. so people are now able to prepay the town portion and the fire district portion, and we took a very conservative approach we're not accepting school taxes, because they have not been assessed. school budgets come out in may residents of the villages can't pay the village portions of the taxes if they live in the village, so -- >> a lot of taxes. you just mentioned town, village, school, fire. how many different taxes are there, and is this why people are getting so confused with everything >> it's very confusing, but we know that the town board approved the town budget, the fire districts approved the fire district budgets, and we've issued a warrant, so anyone who prepays is in compliance with the irs and the federal laws >> are you talking to the irs to get guidance on what you can do here >> i've been in touch with the governor's office. constantly since this past, you know, friday the weekend, christmas day they called a few times, nonstop. they put me in touch with the council to the new york state taxation office, so we feel we're doing everything humanly possible >> what about people who might have paid too much a few days ago, then found out what the irs said are you getting people who say i want a refund, i overpaid? >> we basically only collected what we were authorized, so we did not accept the taxes from the school district or the county like other jurisdictions did, so people won't be entitled to a refund, because they did not overpay. >> can people who come in today, can they be guaranteed the system is going to be able to withstand these people coming in and they are going to get a receipt that said they paid in 2017 >> everybody who's waiting in the cold, and maybe we'll use some of the money to put a heater system, you know, here. anyone who's here, they will get a receipt, you know, from the town and we also just a few minutes ago set up a system where people could pay online and through the online system, it will tell people exactly how much they could pay. >> do you have an estimate for how much money has been coming in already over the last 24 hours? >> it's been a lot i don't have an estimate, but i know it's a lot, because yesterday i couldn't even get, you know, to my office, there were so many people. and i just have just from yesterday, hundreds of calls that i have to return. last night i was up until after 10:15 just returning calls i started about from the morning and was on the phone almost nonstop. >> awesome thank you so much for talking to us here. >> thank you very much >> town supervisor of greenberg, new york back to you in manhattan >> eric, thank you very much appreciate that. let's get a quick look at the markets before break modest gains building a bit. the dow up 53 right now, just about at the highs of the session. leading sectors, telecom, financials, and tech the energy stocks also retain a bit. you have natural gas prices on the rise, as well, thanks in part to that cold weather. 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