interest rates come down. i recommended home depot a couple weeks ago. total revenues will grow, market share take. >> fun fact. that was a "squawkbox" trivia question this morning. that's going to do it for us. "the exchange" starts right now. ♪ ♪ thank you very much, frank. welcome to "the exchange." i'm kelly evans. here's what's ahead on this friday. it's been a record setting and head spinning week for markets with the dow hitting new all-time highs. but this morning, new york fed president john williams warning not to get carried away with rate cut hopes. we'll ask our guest what he thinks on this. two screaming buys for 2024, india and bitcoin. our guest is here to make his case. if you're worried you missed out on the home builder rally, our guest says there's more upside ahead.

he'll tell us how much he thinks. we begin with the major averages trying to stream together seven straight weeks of gains. fed chair jay powell adding fuel to the rally. but stocks giving up some gains, as fed john williams walked things back a little earlier today on cnbc. >> we aren't really talking about rate cuts right now. we're very focused on the question in front of us, which as chair powell said, have we gotten monetary policy to a sufficiently restrictive stance in order to ensure that inflation comes back down to 2%? that's the question in front of us. that's what we have been thinking about for the past five months. i think we'll be continuing to think about that for some time. >> joining me now are the co-head of investments at thornberg, and chris murphy, from susquehanna. ben, what do you make of williams' comments? >> hi, thanks for having me on

the show. if we're able to cut rates and avoid a recession, this current fed administration is going to go down in history as one of the most successful feds of all time. so let's see if we achieve it. but i think it would be a great outcome. >> why is he telling us they're not thinking about that yet? >> just because i think the other side, the left tail is if we cut too soon, and inflation reaccelerates, which is not a zero percent risk, then we look a lot like the 1970s. you go from being a hero as a fed, if you achieve a soft landing, to being one of the worst fed presidents over time. if you reignite inflation on the other side. >> chris, i think it's telling the market action today where we started in the red after those comments, but we fought back into positive territory. >> yeah. i think so. you know, there's enough chasing left into the end of the year.

you don't want it to be underinvested. what do we really expect him to say this morning? i think the market obviously judging by its reaction earlier this week, maybe got a little bit ahead of himself. so i would expect the next, you know, fed person to come in and try to tamp things down a little bit. so not a surprise at all. >> i should clarify, the dow and the nasdaq are positive. the s&p and the russell are negative. chris, we're heading into a big event on the market close. they say it's the biggest option expiration ever. should i worry about that, is that an opportunity, a risk, a fact, a quirk, what? >> i think it's more of a nonfactor at this point. the reason being, we're really concerned -- we think that the expiration has a big impact when the market stays kind of in the same spot like it did for the second half of november and beginning of december, and a lot of open interest builds up right around where the market is actually trading. that was kind of the talking

point for a couple of weeks heading up into powell a couple days ago. now, what you have is a situation where much of the open interest, all of the puts, most of the calls, are below where we're trading right now. so they're not having as much of an impact. >> so because of this market move, maybe it's a little consequential than it would have been otherwise. chris, let me ask you about the vigor of the move we have seen. what other metrics do you look at? do you see signs that we're joef extended or do you see signs that after a move like this you want to keep positioning and give this rally some credit? >> no, we're definitely seeing signs that we're overextended. with the options talk, we're looking at the volatility priced into the upside, compared to the downside. that's hit some pretty extreme levels, especially in the small caps. really, most other times we

would be say thing is a time to pause, this is a time to re-evaluate. how often do we go through one of the fastest hiking cycles of all time, and then pivot? that doesn't really -- this is kind of a rare time. so some of those normal contra indicators we will be banging the table on are not really talking about as much right now, because as we know, the commentary out of the fed, that trumps everything. >> let's highlight some of those things on the screen, chris, with the small caps in particular. they have gone from a 52-week low to a 52-week high in a record period of time. >> fastest all time. one thing to keep in mind, for all of this year, positioning has mattered. how much have we heard about how all the hemg funds are in the mega cap tech stocks and left the small caps for dead. and now all of a sund wdden we a situation where we have seen the small caps come to live.

we will be looking at the options, and saying do we know if it is going to outperform like it has recently? we have no idea. but we can set up structures in the options where we're there, if it happens. but we're not, you know, the last one in chasing another head fake in the small caps. >> ben, what about you guys, how are you thinking about the market after the strength of the move that we have seen? >> yeah, it's been a really strong love. there's a response sort of after the rate hikes end, the market tends to go up. well, the last rate hike was in july, so we're already, you know, four, coming on five months past the rate hike. i think that really drove a lot of stocks higher. that said, repositioning portfolios perhaps away from some of the winners of 2023. it was a very narrow market. we can see that broaden out, so maybe trimming some of those

winners and some dividend paying stocks. >> all of that said, you know, moments like these we tend to look back in retrospect and say just when everyone thought the coast was clear, the economic data has been better than expected, the signals from the fed have helped fuel the rally. anything, ben, that -- it's hard to say do you expect to unexpected, but do you sense we'll have mean reversion and some concerns that are perhaps delayed will come back to the fore in the next few weeks? >> i think the coast is never completely clear, so the right investing approach is to have a margin of safety in your investments. whether that's a valuation safety or a business model mode, we think it makes sense to find those companies that have durable businesses, durable cash flows, and good dividends. >> i know schwab you think is one of them. there's like a fan base for schwab at this point. galaxy entertainment, a name for people to sort through if they

want to look for some individual names that might have that margin of safety. we'll leave it there for now. thanks for joining us. >> thank you. >> thank you. some of the biggest action this week has been in the bond markets with the ten-year yield plugging, and now down more than a full point from its peak above 5% not even two months ago. let's get to rick san tetelli w more. >> it's been a huge week and an exciting day. if you look at an intraday of tens, look at that spike at 8:30 eastern. it didn't last long. that spike was new york fed president williams on our very own cnbc with steve liesman, and it definitely popped rates periodically. why? because he was playing the bad cop. who was the good cop? that was jay powell yesterday. when, during the press conference, he said really what this meeting was about is rate cuts. from that point forward,

everything changed. if you look at a one week of tens, you could really see -- let's go to the dollar index first. the dollar indecision popped nicely too on john williams at 8:30. on one week of tens, we're down 30 basis points on the week, even though we're roughly unchanged on the day. and fed fund futures, what do they tell us? they tell us that the next meeting or the next two meetings, that we could try to grapple with define bring the market is, where the fed is. one thing i can tell you, today's fed fund futures, generically, one year out it is being much less generous on rate cuts. because the price has fallen from its big spike up when powell yesterday played good cop. then it started to sell off when? yes, 8:30, when president williams was talking to our very own steve liesman. grant it, there's still some easing built into next year, but a bit less than there was, and

therein lies the strategy, kind of asterisks. the market is definitely euphoric at this time, but in the end, it will be about how the data and inflation tamp down in the future and how much bad cop fed speak we see pushed at us to try to control the optimism in the markets. back to you. >> rick, i guess what would you say as we start going through the 2024 outlooks? what are you most hearing in the bond pits about this move? is it too far too fast, or is it hey, look out below, maybe 3% we start talking about? >> you know, i don't know if people are going to like or dislike my answer, with but the thing on everyone's mind is 2024 politics. many understand whether it's the elizabeth warrens or all the different congressman that have a huge interest in how the economy turns out, how inflation

and bibidenomics and everything that will play out with the election, everybody will be monitoring it, and there's going to be a lot of pressure to keep the economy looking good. will that affect the fed or the decisions or the votes? that's up to you, but that's what traders are talking about. >> i guess we could say -- what would you say, on the margin bearish for bonds? >> you know, i would normally say that it would be, but i would be relegated to the longer maturities. i think indeed we could argue about timing, but there are going to be cuts coming. i think the short maturities and the yield kufcurve are going to in play. the real rates is most likely going to stay on the north side of 4% after the euphoria of this move wears thin. >> we'll have more later on, rick. thank you very much. also coming up, the vanex ceo is here.

we will ask him where he sees the biggest opportunities and risks and look at how the 2023 calls turned out. and 'tis the season for a check on the health of the supply chain. we have team coverage tracking one care bear from the factory to the toy store. dow has turned positive by 15 points. nasdaq is up a tenth. s&p still down six. russells are the weakest player today. "the exchange" is back after this.

welcome back to "the exchange." it's not just apple who is betting big on india lately. the i-shares endia etf is up 8% the past month as investors seek alternatives to china. bitcoin is covering near the $42,000 mark amid speculation. both of these are my next guest's screaming buys for 2024. joining me now is jan van eck, the ceo of van eck. welcome. >> thanks. >> we haven't had a chance to touch base with this. when did you get into bitcoin? this is a really big thing for you and for the firm and everything. >> yeah, 2017. so we were the first established etf player to file for a bitcoin

related etf. >> what drove it? >> you know, i was in gold. my dad started the firm with the first gold fund in the united states. so value investing is in our dna. i thought what is this bitcoin thing? i thought we've got to do the deep dive. so i listened to the podcasts and i said this is going to be an accompaniment to gold. i told people, that was in 2017, it was $3,000. bitcoin is up 10 x from now. remember china? part of large parts of china were undeveloped and unindustrialized 30 years ago, but things changed. so i think bitcoin is the obvious asset that is growing up in front of our eyes. >> i watch it and i concede it has behaved remarkably like gold. you do think well, there could

be some new thing that comes along. bitcoin was innovative. there could be a new version of this down the road that takes people's interest. and number two, the jamie dimon critique, that there's so much nefarious stuff associated with it. >> there's a lot of political risk around it, absolutely. but there's 50 million users of bitcoin. so it's got network effect. i think it's impossible for me to imagine some other, what i call it internet store value that's going to leapfrog bitcoin. so that's number one. as far as the criminality and all that kind of stuff, you know, listen, don't throw the first stone if you're associated with the bank or any financial institution that's never been involved with criminals in one shape or the other. i'll leave it at that. >> let me steer it back to safer territory. for 2024 in particular, some have been scratching their head at the behavior of bitcoin and

gold. what is it that they are trading off of, and what tells you that you think this is your gut, that bitcoin itself will outperform? >> it's the macro. so you just -- stories of value that don't generate interest, which is why the investors like warren buffett don't like them at all. but they behave in relation to interest rates like you said. that's the big cycle. and interest rates are head down directionally speaking. so the macro behind bitcoin and gold are very strong. they both peaked in 2021, they've been rally thing year. obviously, bitcoin way more than cold for different reasons. >> now that bitcoin has grown up, if you look at gold's performance in the 2010s, it was okay. if you think we're going back to low rates, has bitcoin made the big gains and now trading water? >> no, because it's growing up. it's like a child that's growing up. so you can argue about it being

a bubble. no bubble -- so a bubble in 2017, but then it hit all-time highs in 2021. so nothing has ever been a bubble that's outperformed itself. so i fully expect in this cycle, and you have this happening thing happening in april, which is great for bitcoin. i expect all-time highs in the next 12 months. >> so you guys are amongst those to have the first or one of many coin etfs. are are they going to approve it, one at a time or a batch all at once? your ticker, i have to say to your credit, is hodl. >> we're very happy with the ticker. i very much expect it will be all one day. because that's what happened with et hervegs erium futures. they said from a policy perspective, no, let everyone start at the same time. >> quickly let me move through the rest of this. you love india.

you don't think that trade has run its course. i don't know if you want to talk about anything else in terms of our markets or your sense of how stock also do here or if it's a rotation. how else do you see the year playing out? >> we have a macro, as a firm, we think macro, meaning what are the big trends that are happening out in the world? you know, we do a lot of emerging markets investing. china grew tremendously in the last 30 years, but that's over. if you look at the next ten years, however, india is definitely the best structural story in the world. you know, to simplify that story is the -- there are two companies that effectively own the mobile phone market. so access to the internet. so like to oversimplify investing, if you just bet with the internet over the last 30 years, that's been great. pick those two big india countries, because they're building the software on top of the hardware. so you can buy them in etf form.

we have one. but i think it's a great structural story. i don't know about '24. i use '24 in air quotes. it's the high conviction over the next three or ten years, because the indian market can be expensive, kelly, so you just want to watch out for that. but still, from a longer term perspective, why not own that? >> we'll leave it there. what were your predictions for 2023? >> sideways market, which was pretty good. it was great until the beginning of november when the fed did its pivot. >> and now for 2024? >> be invested. the only time you want to be in cash is before the fed starts hiking. don't try to time the markets. >> jan, thanks for coming in. jan van eck. we have some more fed speak to bring you. the atlanta fed president saying the fed can start cutting rates in the third quarter of next

year and expects the inflation rate to be 2.4% by the end of 2024. john williams earlier said it was premature to be thinking about rate cuts. we're looking for the market reaction. not much of one. coming up, we'll speak to the head of one company with a unique view on the supply chain. he works with retailers and sees one specific category standing out from the pack. we'll tell you which one, later on. stay with us.

all right. 60 seconds to draw the perfect gift. what's it gonna be? a bottle of don julio, 1942, delivered. delivered with drizly. gifting without the guessing. drizly.

welcome back to "the exchange." lawyers for the suspect accused of killing four university of idaho students last year granted access by the judge to the off-campus home where the murders took place. bryan kohberger's defense people was at the house on thursday and was expected to be back there today. the home is scheduled to be demolished next month. prosecutors are seeking the death penalty. kohberger has pleaded not guilty. lufthansa will resume flights to tel aviv january 8th. the airline stopped all flights

into israel after the hamas attack on october 7th. the number of homeless people in the u.s. has surged to the highest level on record. the department of housing and urban development said today the number reached 653,000 earlier this year, as pandemic aid dropped off. h.u.d. reports that rising housing costs, limited availability and the opioid epidemic were contributing factors. kelly? >> bertha, thank you. coming up, what one toy's journey can tell us about the health of a post covid global supply chain. our team is tracking its every move. jane wells is at the port of los angeles. pippa stevens at a warehouse in new jersey. and courtney reagan is at the american dream home from not too far from here. and eunice yoon is in china where it all begins. >> the journey starts here, and this factory in northwest china

where 1 million care bears are produced every month. in our latest check of the supply chain, we go from factory floor to store shelf, next. trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos, webcasts, articles, courses, and more - all crafted just for traders. and with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching and more time learning. trade brilliantly with schwab. ♪i'm hearing different ways for me to screen for colon cancer.♪ ♪it's time to use my voice,♪ ♪i've got a choice, more than one answer.♪ ♪i sat down with my doc.♪ we had a talk. ♪knew just what to say.♪ ♪i asked for cologuard and did it my way.♪

cologuard is a one-of-a kind way to screen for colon cancer that's effective and non-invasive. it's for people 45 plus at average risk, not high risk. false positive and negative results may occur. ask your provider for cologuard. ♪i did it my way!♪ rylee! from rylee's realty! hi! this listing sounds incredible. let's check it out. says here it gets plenty of light. and this must be the ocean view? of aruba? huh. this listing is misleading. well, when at&t says we give businesses get our best deal, on the iphone 15 pro made with titanium. we mean it. amazing. all my agents want it. says here...“inviting pool”. come on over! too inviting. only at&t gives businesses our best deals on any iphone. get iphone 15 pro on us. (♪♪)

welcome back to "the exchange." two years ago, when covid was still raging, cnbc tracked the care bear from the factory to the store shelves. now it's time to do it again to see how the global supply chain has or hasn't recovered. our reporters are stationed at the most critical points of this perilous journey. jane wells is on the west coast at the port of los angeles. pippa stevens is at a global logistics warehouse in new jersey. and courtney reagan is just outside manhattan. welcome to all of you. jane, what can you tell us?

>> well, kelly, this ship left china december 1st and being unloaded. it's now faster and cheaper to ship to the west coast. two years ago, there were 65 ships anchored waiting up to ten days to be unloaded. now, there's practically nothing. ships are coming right in. two years ago, shipping a regular container cost $20,000. that's pack to $2,000 or less. and one unloaded, getting the containers on a truck or train are back to prepandemic levels. >> the average import container is sitting on our docks about three days before it leaves to go to its distribution center or store front. that's normal compared to the way it was back in 2019. >> you know, the west coast is maybe gone from too many ships to too few. this place used to handle all of half of cargo coming into

america. that's down to a third. but the winds may be shifting back. the water levels are so low at the canal, many ships cannot get through, and cargo container levels are going down on the east coast and rise again here in the west. back to you. >> that's super interesting. that's a big inflection point. we had so much coverage of the fact that traffic was migrating to east coast ports and now it's moving back out west. >> yes. for the full year so far, it's still down here, up in the east. but starting in september, you started to see those monthly numbers shift. for the latest numbers from new york and new jersey, container levels are down 6%. they're up 19% in l.a. and up 24% in long beach. >> jane and the care bear, we appreciate it. and with that care bear safely -- this is no ad. i had to look up who makes the care bear. it's cloud co entertainment.

pippa has the next leg of this little bear's trip. she's had a logistics company with the state of trucking. what is the state of trucking these days? >> well, you heard from jane how supply chain bottlenecks have eased, and the same is true on land. it's now cheaper and faster for toymakers and retail partners to move items from the port to a warehouse, like this one in burlington, new jersey. then to store shelves. that's good news for shippers, but bad news for the freight industry, which is also getting fewer orders. so there are too many trucks and not enough demand. contract freight volumes are down 6% year over year, and in the spot market, it's down nearly 40%. that's pushed down price per cargo. spot rates are $1.20 today, down from $2 per mile in 2021. so essentially, truckers are

transporting fewer things and getting paid less for what they do move. executives call it a freight recession, and with the number of truckers, including giant yellow, going bankrupt. diesel prices have pulled back, but it's part of the so-called surcharge covered by the shipper. in other words, the manufacturer or retailer benefits from that drop. so the bottom line here, transport costs are way down. so whether those savings are passed along to the consumer in the form of a cheaper care bear, that's ultimately up to the retailer. >> that's interesting, because we heard a lot about how bad the freight and trucking recession is. it sounds like you're say thing's too much access capacity. >> from what i've heard, there is more pain to come in 2024. we're likely to see more bank result sis. of course, the market got a little out of whack during the pandemic, because when truck rates were high, we saw a lot of new companies come into the market to try to take advantage of that. so what we're seeing is that the

spot market especially is now declining. they are sort of the first ones to fall. they are more sensitive to market head winds, because among other things, they don't have the fuel surcharge contracts. so they are covering that type of expense. so likely more bankruptcies there. but once again, this is a normalization of a supply chain that got ahead of itself during the pandemic. so while it's devastating for the trucking industry, it is a return to normal in terms of prepandemic levels. >> i heard a lot of people say it's easy to bring a trucking company online. a lot of people did, and now we're right sizing back to normal. pippa, thanks. so i said this was made by cloud co entertainment. they explained it to me. boca raton based company, by the way. the bear is off the truck, heading to shelves, and the pricing picture could -- how much dothey cost? courtney reagan is at the mall to find out. what can you tell us?

>> reporter: so this care bear has traveled between 32 and 35 days from the time it left that factory in china to getting to a store like this at the american dream mall here in new jersey. two years ago, that same journey took more than twice as long or more than two months. transportation costs at the time were nearly a quarter of the total cost of this bear in 2021. now it's just down to 5%. >> compared to october '21, it's night and day. everything was out of balance. every step in the supply chain. we're just seeing less pressure on the manufacturing cost and the transportation costs. a little bit more pressure on other areas of the supply chain. and also our customers are looking for more value. so we're being squeezed a little bit. >> two years ago, basic fund had to add transportation surcharges to retailer's bills. those are now gone.

but there is now toy deflation. consumers are looking for lower priced toys. retail prices are lower for this 14-inch care bear, around $15 from $17 to $20 in 2021. so that's 12 to 25% less, much less than the 2% deflation that we're seeing in the overall toy category over the same time according to the cpi indecision. the average spend of the toy consumer is going down. last black friday, the average spend was $36 per basic fund toy. this year, it was just under $22 per toy. which he said is leading to more but less expensive toys under the christmas tree. he said look, there's a lot of deals on toys this year. kelly? >> that's fascinating. that's a much bigger change than i expected. that is a significant drop, so it tells us why the message on the retailer was more down beat.

>> potentially. i think, look, where there's a lot of talk about inflation, deflation, where are we? we have to remember it's very category specific. we're still not seeing deflation in consumable food items, but we are in things like toys. so like i said, the overall toy category, prices are down about 2.2%. if you look two years ago, this past november from two years prior. but for this particular toy, down much more than that, between 12% and 25%. so i think we just have to be careful, because there are a lot of nuances when we talk about pricing. remember, retailers have the disc discretion. they decide what they need that profit margin to be. on amazon, care bear is about $9.99, so on sale even further. >> wow, down from $25 a couple years ago. i wonder if baby shark discounts are as much. courtney, thank you very much. bring that one home maybe. courtney reagan, appreciate it. let's hear from a company directly involved in this process of connecting international buyers and

sellers. united national consumer supplier helps retailers find buyers in overstocked goods. they connect a vast network of suppliers handling all of these deliveries. they have macy's, walgreens, and even amazon has customers. let's bring in brett rose. brett, great to have you here. welcome. >> nice to see you again, kelly. sorry i didn't bring my care bear. >> why we chose the care bear to make this journey. i notice the company had tonka trucks. what can you tell us, is toy deflation everywhere, or are the hot items still holding price? >> look, the hot items are always going to hold price. she was spot on in discussing the fact that it's really category based. we're two weeks off of an almost $10 billion black friday, up 7.5% from last year. we're two weeks off a $12.5

billion cyber monday. retail is doing really well, and this is going to be one to have greatest holiday shopping seasons. >> this is the conundrum, which is on the one hand, this care bear, you can get it for $10 on amazon from $25 a couple years ago. and then the aggregate numbers are still continuing to grow. so there's pressure on each ticket item, but the consumers are spending more than last year? >> the consumer is really smart, because they are shopping with this. there was 120 million consumers over black friday that walked into a store. listen, i think there's no denying the strength of amazon and other online retailers. but brick and mortar is still alive and very well and driving. >> which items are in short supply and which are overstocked? >> yeah. so it depends on the day of the week.

there's a short supply this year of seasonal. i think coming off the covid cliff, retailers kept it very tight to the cuff. you see a lot of empty spaces on shelves with merchandise, regardless of the holiday season, the holiday that you celebrate, there's a shortage right now. there's no shortage of toys. there's a massive influx in the market. >> why is there such an influx? >> there was a lot of inventory left over last year. the street panicked with the high inventory levels. so brick and mortar retailers pulled back a lot of orders, which caused a huge glut in the market, toys, houseware, hardware, really higher levels than we saw in the past. but it's ended up spilling over into the off price market. and if there's one thing we learned, especially this holiday season, is hoer prices, care bear is a great example, that's what drived the consumerism. so the extra goods in the market drove the price down and stayed ahead of inflation, which

translated into a great opportunity for the consumer. despite higher prices, certain goods stayed at or below the normal market. >> how is the arrival of apps like temu affecting the supply chain and the retail kind of network that you have been involved with? >> it's not. there's always going to be a new app. some will have staying power, some won't. i think the one thing that a lot of brick and mortar retailers did during the pandemic is really morephed into the multichannel experience. apps like that are competing with walmart, target, and others, who have all now have a great online app presence. >> i would have thought the sheer amount that people are ordering straight from the factory in places like temu is a different experience that they run lean inventories. it would seem like it would undermine a business like yours do, trying to connect goods to where they're most needed and things like that. >> there's always going to be a

need to walk into a store or a mall. you know, my mom's a great con consumer. he will never buy anything offline. she wants to see it and maybe consummate the deal online on her phone, but she wants to know what she's buying. that's what you give up when you use those apps. >> brett, appreciate you joining us. thank you. >> happy holidays. >> brett rose with uncs. high yield bonds saw their seventh week of inflows. that's the longest creek since september of 2020, and that along with better credit techny calls moved the needle on the bull/bear indicator nearly a full point. ten is extremely bullish, so not there yet. and reports of 79% of s&p stocks are overbought as of wednesday. that surpasses last december's reading. we're exactly a week away now from the one-year anniversary of the dow's 52-week low.

we'll get a check on the biggest movers, next. (sfx: stone wheel crafting) ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪

what is cirkul? cirkul is the fuel you need to take flight. cirkul is the energy that gets you to the next level. cirkul is what you hope for when life tosses lemons your way. cirkul. it's your water, your way. why are we the only birds heading this way? [ screams ] we're trying to get to jamaica. stay close and... everything will be all right.

i'm ok. i'm ok. welcome back to "the exchange." markets right now, dow is back in negative territory by 50 points. it was up 50 at the highs. the s&p, down a quarter percent, is still on track for its seventh straight weekly gain, the longest win streak since 2017. the small caps today are pulling back, but outperforming the major indices, and the russell 2,000 is up more than 21% versus the s&p 15% gain. we mentioned that the 48 days from the russell's 52-week low to its higrked the shortest turn around time in the index's history. there you can see the moves. an extraordinary turn of events. financials are also underperforming, on pace to break a six-day win streak, the

longest in a couple of months. after hitting a 52-week high yesterday, it's still on track for its sixth weeklygain in the past seven, on the back of lower interest rates. coming up, this name up nearly 43%, touching a record high yesterday. and bank of america says it's got more room to run. if you know it, you can tweet me. we have the analyst who sees more than 16% updeernesi he xt on "the exchange."

>> welcome back, everybody. quick news -- tonight docusign. wall street journal reporting it's exploring a sale in what the journal says could be one of the largest leveraged buyouts in recent memory. docusign's market cap is more than 11 billion dollars and talks are reportedly in the early stages, as -- reporting the shares are jumping -- 10%. meanwhile, every time you think this trade is over, the home builders keep rallying. -- and we are -- all hit fresh record highs yesterday. boosted by the feds stoppage projections. although they were down today, granted. -- the biggest lag or after issuing a week first quarter outlook on profit margins. but my next guest says the home builders have a more room to run -- in a tree itself, by the way, is saying that half point drop

in interest rates this month could bring more than 2 million buyers into the market. joining me now is rave judges -- senior home builder analyst. thank you for coming in. it's good to see you, welcome. >> great, thanks for having me. >> so, where do we begin? you know, is this the tippy top of the trend, now that the fed pivot is fully priced in? or, you know does history suggest that builders will have room to run? >> yeah, so we think that they still have room to run from these levels. like, home builders have done really well this year, but a lot of that has a reflection of where we start at the year. the valuations were really depressed. we started the year, all of the home builders were trading at one times the book value. if you look at the increase of the stock prices this year, it's still putting us in a range where they traded historically [inaudible] slightly above the long term average. >> where are we on valuation, book value, for instance, now versus historical's? >> yeah, so the long term average is probably around 1.6 times. we are only at 1.7, 1.8 times,

even after that rally. that is with a backdrop of stronger than normal fundamentals. so, we think roe's next year, return on equity. that should be well above cost of capital, which tells you that the re-rating could continue, as we go into next year. >> although when you taste me that they are already trading above their historical average, about value i go oh, well then they're fully valued. but maybe, to your point, in these kinds of environments where they can generate that kind of earnings power, then they should just fight to trade it one, two times? >> we think it's closer to two times and i think there's a few factors here. first, the fundamental backdrop for the housing market is getting better. partially supported by an outlook for lower mortgage rates next year. second is a lot of the home builders have shifted more and more of their business towards an asset like model, where they're generating a lot more cash. >> getting rid of land, stuff like that? >> right, they're buying land through option contracts, which increases their return on equity and then cash flow, that is freeing up cash that they can use to return to shareholders. and then we're going into next year again, home builders have

record low debt to capital ratios. so, extremely strong balance sheets. again, -- a lot more cash that we can be returned to capitol. >> it's interesting because one of the headwinds that i like to think about is, well, could lower interest rates, while they're helping right now, actually help reverse the market away from the builders, more towards the existing home sales market, where there's been no inventory at all? and therefore, kind of take some of the steam out of the trade? >> right, it's a great question. when we think a lot about, to your point, existing home inventory is historically tight, and that's partially why we've seen new home demand hold off a lot then existing home sales. even as interest rates have stayed high. our view, the -- supply that potentially gets created from people listening their houses, take advantage of lower mortgage rates, gets more than offset by lower demand. but by higher demand. a good example would be just every hundred basis points decline that we see in mortgage

rates, increases or lowers the potential mortgage payment by $300 for the average respective home buyer. so, you're going to have more renters that are going to enter the housing market, as rates come down. so, more demand than that actual incremental supply that's coming on. >> so, you kind of look at that favorable liza grew but are there any, in particular, that if people want to say well, i don't know about the group, but maybe give me one or two, you think especially outperform? >> the two that stand out to us would be, i, pulled her group. one, they're shifting a lot more to an option model, more asset like. second is all of their excess cash flow, they are buying back shares with. so, we think they have a big reading opportunity, as they shift more of this asset like model. then the second is toll brothers. they trade really cheap valuation, relative to the group. despite a return on equity outlook that's better than average. >> is there any way in which is option like model, or as you put it earlier, using options to purchase land or have that possibility. is there any way this could

backfire? like, what would have to go wrong in which they all look back and go well, it was the wrong thing to do? >> so, there's a trade-off from using more options. the margins are little bit lower. you have to compensate the land developer for holding on to the options longer. so, there is a price trough, but the net improvement in return on inventory, because you own the land for a lot shorter period of time, generally offsets the higher cause -- >> what would you say are your biggest concerns either for the group as a whole are there couple things you think are little bit more weekly positioned? >> macro is always a whisk, right? these clearly are soft landing winners, that's that narrative has shifted. the market. we've seen the home builder trade work. so, there's always macro risk. if there's no landing and great go back up, that could be a challenge. and then from when you think about the industry perspective, capital allocation is really important from here. you have record large cash positions. if home builders just have that

sit on their balance sheet, that actually dragged the return equity, as we go into next year. or if they buy too much land, they don't buy back enough stock, >> should they all just buy back more shares or hold on to that capitol? >> it depends on what return they think they can get on land. you don't want home builders stretching their underwriting standards or reducing their underwriting standards to make them land purchases pencil out. you would prefer it as long as they can underwrite land to over 20% of return, they should buy more land. any land, any cash beyond that should then go into share purchases. >> fascinating. you've jumped into a lot of biting into this space, ray. thanks for joining us so much talk about it, we appreciate it. >> great, thanks for having me. >> -- with bank of america. that does it for the exchange, everybody. but don't move because next on power lunch, the interest rate on your cash savings has increased nearly tenfold since the bed started its hikes. but with wednesdays -- how has that come to an end? we will discuss. steve liesman is in for tyler,

again, and i will join him on the othesi oth pgr.r def isroam the othesi oth pgr.r def isroam when it comes to ai, there's something big happening. the smallest things are creating giant revolutions... at world wide technology, we're at the forefront of ai. with our one of a kind ai proving ground, cyber range, and full stack approach, you can build, test, protect and implement ai solutions that deliver for you and your customers... in a big way. world wide technology. together, let's make a new world happen.

when you think of investment risk, do you consider climate risk? changing weather patterns are impacting the way we live and the value of businesses large and small. this can mean disruption to supply chains, changing demand for products and shifting regulation. what does this mean for your business, your clients, and your investments? ice offers data and markets that can provide critical insight. manage your climate risk with ice. >> welcome to power lunch.

i'm steve liesman alongside kelly evans. in for the irreplaceable tyler matheson. mark it's getting a reality check this morning after his soaring to new highs on hopes the fed would cut sooner rather than later. the feds john williams tell me, not talking about rate cuts right now. let really, anyway, that's what he said. >> that was a great interview today. we will talk a lot more about it. all three future averages are still on pace for the seventh week of games in a row. what are traitors as, with a rally like this, some have gotten ahead of themselves. we will get his take on three names with new games recently. give you a quick check on the market action. we were just referencing. that was down 60 points at this hour. s&p down a quarter percent. nasdaq, trying to see positive in danger of giving up those gains. apple, hitting an all-time high today. although the stock is still underperforming the broade