>> they have nice corporate offices that look like global investment firms some of these family offices which are billions of dollars, they look like investment banks because they essentially are but just for one family. >> if it quacks like a duck, looks like a duck, it's a robert thank you very much. >> it's a family office. >> that does it for the exchange while the family offices hunt for private companies, "power lunch" is hunting for bargains we have quality names including blue chips at incredibly low valuations "power lunch" begins right now >> all right, kelly. i'm going to see if i can walk like a duck. welcome to "power lunch. i'm docknic chu in for tyler mathisen here's what's ahead. federal prosecutors minutes away from discussing the charges brought against sam bankman-fried, sbf, eight criminal counts including securities fraud and money laundering, the s.e.c., cftc

filing separate complaints on their own as lawmakers on capitol hill call it, quote/unquote, old school fraud. >> plus, peak inflation. a key inflation gauge posts its smallest monthly advance in a year what that means for the stock market, the fed, and rates ahead of the central bank's big policy meeting tomorrow kelly, i'm going to walk backwards. >> thank you hi, everybody. the strong rally on wall street evaporating. the dow was up 707 at the high, up 88 now, the s&p up 25 and the nasdaq up almost 1%. huge reaction to that inflation report the cpi rose only 7.1% from a year ago, less than what people had been expecting used car prices fell nearly 3% for the fifth straight monthly drop energy prices down 1.6%. but shelter costs which make up about a third of the cpi, continued to rise up 0.6%. let's get right to bob pisani. he has a look at the fizzling rally and why this report didn't

do more to support a sustainable rally. >> there were a lot of people buying at the open let me show you the major indices today. the high print was the open. we hit 4100 on the s&p 500 and essentially just dribbled lower from there we're still on the upside here, but we were, again, 80 points higher dow has been weighed down by defensive names like united health, mcdonald's, procter & gamble nasdaq has been helped by a strong day for the big caps. nvidia, meta bouncing back, amazon has been strong, alphabet has been strong, lam research, some of the other chips strong today. what's weighs down things? travel is tough. jetblue had an interesting comment saying demand may be waneping and that's hitting the airlines and some of the other travel names like norwegian cruise line. those are the bigger decliners another new low also a big name, tesla. big cut in half this year, essentially. this is a two-year low for tesla. we know all about the problems

with the shanghai plant reducing some production there. so what about that rally what happened? here's where we are now, there good news, and kelly laid it out for you. the important thing is we have falling inflation, the dollar is at a six-month low this is where the market wants the indices to go. the focus was inflation in 2022. i'm getting bearish comments about an earnings decline in 2023 i think that's really what's going on the focus is on the extent of the recession. people are reducing their earnings estimates, so it's hard to buy into the inflation is coming down story if you're worried about the earnings situation. back to you. >> bob pisani, thank you very much we appreciate it >> high yield bonds having the opposite reaction as stocks right now falling after the cpi report and now climbing back rick santelli is tracking the bond market action for us. rick >> yeah, they fell to the subbasement and they're climbing back all right they made it up to just the

basement come on, two-year note yields are down 15 basis points let's look at an intraday of two-year note yields look at that drop we had and certainly they're crawling back but as i said, even at 4.23, its current level, it's down over 14 basis point. it looks like we're on pace to close at the lowest yield since the 5th of october, let's call it nearly a little over two months, and we all know that today's inflation numbers were definitely cooler than expectations but who is kidding who here? 7.1%, and then core year over year, 6.0%, warm to history. fed meeting tomorrow gee, i wonder why stocks gave up ground believe me, warm history is important, but ultimately, the fed is going to do less and less and they'll have the ability to see how its movements, its rate increases will affect markets and financial conditions, not a bad way to go. and if you look at fed fund

futures, boy, did they rally here's an intraday of may next year where picked may because that's the last contract where prices keep going down. if you open that up to the end of october, it's on pace for the best close, highest close in 1 1/2 months, which implies the rate is well under 5 percent, and finally, 30-year bond auction tailed three basis points ten-year auction yesterday tailed ten basis points. on the two-year chart of 30-year bond yields, if you're looking to investor interest in showing up to the long dated auctions, boy, has it changed. they showed up in droves not so much anymore. back to you. >> rick, can i follow up you mentioned the fed fund futures right now. earlier today, on the heels of that cpi data, we did see a movement that would imply that so-called terminal rate, the finished rate at which the fed ends the rate hiking cycle, closer to 4.75% to 4.8%.

that's lower than it was before. can you take us through the machinations there if in fact tomorrow they raise by 5%, that implies not much left for the rest of the year in regard to rate hikes >> in the near term, there's very little change with regard to obviously tomorrow's meeting. but what the market is trying to grapple with is investors by buying fed fund futures and speculating, they believe that we're going to continue to see the fulcrum or the pivot, where contracts and fed fund futures keep going down in price, which means more fed to start moving back up. and it's been rolling. it rolled from july to june, now it's back to may and what i ultimately see is not that the markets are going to tell you exactly where inflation is going to go, dom. what the markets are telling you is that investors don't believe it's going to go as far as the fed does >> bingo thank you, rick.

rick santelli. our next guest says the cpi report won't impact the fed's decision tomorrow, but he expects smaller rate hikes in the months ahead mark smith is portfolio manager at wells fargo advisers. that's pretty consensus, wouldn't you say, or do you think they're going to have the slam the brakes even harder? >> good to see you again i know you have small kids if you go on a road trip, one question you get is are we there yet? we're not there yet. when you look at c pirx, we're going in the right direction, we're not there yet. when i look at, where do i find that on the cnbc.com website. i saw a chart from 2020 to see where cpi was before the pandemic, at around 2% we're at 7%. we're not there yet. so the fed is going to have to continue to act. and i don't think that there's going to be a slowdown until we get the c ppi numbers in a more normal range >> mark, here's my only issue --

i obviously, no one wants them to stop before they're done, but cpi is going to be the last place. it's so lagging, once the data shows up, you're months behind the trend. so if the market is telling you it thinks cpi is already going to be 3% by next fall, can't the fed -- shouldn't the fed look at that with some confidence and say maybe all the tightening in the system already is going to get us to that goal and if we keep going we're going to go too far? >> that's a great point, but unfortunately, jerome powell has to make sure that we're there. and he can't try to have any guessing games here because what he's going to do, he's going to lose confidence. we're hearing he lost a lot of confidence when he said where we were with inflation was transitory he got that wrong once was a little late to the party there. he doesn't want to make another mistake there so i think he's going to continue to go and have rates go up.

i think he has a mandate there based on all the numbers that have to do with inflation regarding to rent and energy it's down but it's still nowhere where we were in 2020. >> we have some breaking news on ftx, if we can jump for a moment the southern district of new york is holding a news conference right now, i believe outlining some of their charges. let's listen in. >> the dedicated prosecutors of this office, and our partners at the fbi, sec, and cftc have been working around the clock to figure out what happened and to begin the process of seeking justice. this morning, we unsealed an eight-count indictment charging samuel bankman-fried, ftx's founder, with a series of interrelated fraud schemes that contributed to ftx's collapse. i authorize these charges last week wednesday a grand jury here in manhattan indicted mr. bankman-fried last week friday.

we obtained a warrant for his arrest and that arrest was executed yesterday in the bahamas. let me be clear, my remarks today are going to be limited. that is by design. this investigation is very much ongoing, and it is moving very quickly. but i also want to be clear about something else while this is our first public announcement, it will not be our last the indictment has eight counts but effectively, it outlined four different areas of this conduct. first we realize that bankman-fried defrauded customers of ftx.com, the cryptocurrency exchange he founded. second, he defrauded lenders, his proprietary hedge fund thirst, we allege he defrauded investors in ftx, and he violated campaign finance laws now, let me say a little bit

more about what we allege in the indictment first, we charged that from 2019 until earlier this year, bankman-fried and his co-conspirators stole billions of dollars from ftx customers. he used that money for his personal benefit, including to make personal investments and to cover expenses and debts of his hedge fund, alameda runch. secondly, and relatedly, we charge that bankman-fried lied to alameda's lenders about the source of the money he was using to pay those debts third, we charge that earlier this year in the midst of the crypto crisis, bankman-fried lied to investors in ftx to the fact he spent billions of dollars in ftx customer money to alameda. and fourth, we charge that bankman-fried violated federal campaign finance laws by causing tens of millions of dollars in illegal campaign contributions to be made to candidates and committees associated with both democrats and republicans. these contributions were

disguised to look like they were coming from wealthy co-conspirators when in fact the contributions were funded by alameda research with stolen customer money in all of this dirty money was used in service of bankman-frieds desire to buy bipartisan influence and impact the direction of public policy in washington. to anyone who was watching this or hears about this prosecution, if you believe that you have been a victim of these schemes or you have information about the conduct that we have alleged in our indictment that we have unsealed today, please let us know to any person, entity, or political campaign that has received stolen customer money, we ask that you work with us to return that money to the innocent victims and to anyone who participated in wrongdoing at ftx or alameda research, and who has not yet come forward, i would strongly encourage you to come see us

before we come see you now, let me say a word about our partners at the fbi, the s.e.c., and cftc the women and men of the fbi are some of the finest public servants in this country and they have been with us since day one in this investigation, and there is no one, no one better to work with. i want to thank the brilliant lawyers at the s.e.c. and cftc this investigation is complex and it's sprawling we embrace that kind of challenge here in the southern district of new york and we always want the cftc and s.e.c. by our side when we're doing that and finally, i want to thank the career prosecutors from my office handling this case. nicolas rose and danielle sassoon and their supervisors, the chiefs of our securities and commodities fraud task force i want to acknowledge the contributions and hard work of the prosecutors from our money laundering and transnational

criminal enterprises unit including samuel raymond and their chiefs and i want to acknowledge the contributions from the chief of our public corruption unit, rebecca donaleski. this should be very clear but it's an all hands on deck investigation here at sdny and i couldn't be prouder of the team i'm privileged to lead and i want to invite up to the podium fbi assistant director in charge, michael driscoll >> thank you, damian so thank you all for joining us this afternoon for this important announcement this case came together at great speed in such that it's only possible to be standing here today through tremendous coordination and cooperation from many people and agencies. as the indictment today alleges, bankman-fried knowingly defrauded customers of ftx through the misappropriation of customer deposits to pay expenses and debts of a

different company. in addition, bankman-fried executed deliberate transactions designed to obscure and disguise the misuse of customer funds he preyed on his customers, victims of this case, abusing the trust placed not only in his company but in himself as the lead of that company we are determined to help the victims of this case get a sense of justice and we will continue to make every attempt to recover as much of their funds as possible if you're willing to deceive customers and attempt to hide your actions, we will be persistent in pursuing you and insuring you are brought to justice. i want to thank damien williams and his team at the southern district for their cooperation and partnership on this case i also want to thank our partners at the s.e.c. and cftc for their outstanding work a word of thanks to the foreign operations group for their logistics and resource assistance over the past few

days our field offices in boston, miami, washington, d.c., and our office in bridgetown fbi headquarters components that worked on this case from criminal investigative division, our surge team crisis incident response group, and our international operations division and of course, the special agents and forensic accountants from our securities fraud squad as well as the money laundering squad. the justice department office of international affairs has been an important partner in this, and of course, as damian noted before, his team in securities and commodities fraud, money laundering and transnational enterprise unit has been a true partner in the case. i also want to thank our international law enforcement partners these kind of cases do not happen without that kind of coordination, and i specifically want to note the assistance provided by the royal bahamas police force i want to be clear this case is about fraud

fraud is fraud it does not matter the complexity of the investment scheme, it does not matter the amount of money involved if you mislead and deceive to take what does not belong to you, we will hold you accountable. and i would like to thank everyone who has been working on this case for helping us adhere to that principle today. thank you. >> good afternoon, everyone. i'm the director of the s.e.c.'s division of enforcement. today in a parallel civil complaint, the s.e.c. filed charges against sam bankman-fried alleging that he orchestrated a years-long scheme to defraud equity investors in ftx trading unlimited, a company he cofounded and led as ceo until its collapse last month. as alleged in our complaint starting in 2019, and continuing through november 2022, bankman-fried raised more than

$1.8 billion from equity investors on the basis of lies you see, ftx operated behind a veneer of legitimacy that bankman-fried created by among other things repeatedly touting to investors ftx's top notch automated risk controls that he claimed protected customer assets and by repeatedly claiming that those assets were at all times safe, segregated, and secure but as we allege in our complaint, that veneer wasn't just thin. it was also fraudulent because in reality, from ftx's inception in 2019, bankman-fried began secretly and improperly diverting ftx customer funds to his crypto hedge fund, alameda research, and as alleged in our complaint, he misused those funds to make undisclosed venture investments, real estate

pur purchases and political doations his claims about the sophisticated risk controls and other customer protections were simply bogus similarly, his representations to ftx investors and trading customers concerning alameda were also part of that carefully crafted veneer and were similarly false and misleading he frequently claimed alameda was just another customer with no special privileges at ftx, but in truth, bankman-fried directed that alameda be except from the risk management measurements he touted to ftx investors and customers. he also provided alameda a virtually unlimited line of credit funded by ftx customers and he also diverted billions of dollars in customer funds from ftx to alameda bankman-fried's entire house of cards started to crumble as crypto asset prices plummetedi

may of 2022. and as alameda's lenders demanded repayment on billions of dollars in loans. but to continue propering up his empire, we allege that bankman-fried diverted billions more in ftx customer assets to alameda, even as it was increasingly clear that alameda and ftx could not make those customers whole. in fact, through the summer of 2022, he diverted hundreds of millions more in ftx customer funds to alameda which he then used for additional venture investments and for loans to himself and to other ftx executives all the while, he continued to make misleading statements to investors about ftx's financial condition and about its risk management and even in november 2022, faced with billions of dollars in customer withdrawal requests that ftx could not fulfill, bankman-fried misled investors from whom he sought still more money to plug the multihp billion dollar holes he had

created. his brazen multi-year scheme finally came to an end when ftx, alameda and their tangled web of affilulates filed for bankruptcy on november 11th, 2022 that collapse has had far reaching consequences for ftx customers, for its investors and for its counterparties and our investigation into those individuals and entities involved remains ongoing one immediate takeaway from today's announcement should be that non-compliant trading platforms pose dramatic risk to both their investors and their customers. among other things they don't provide them with the same robust level of disclosures and protections against fraud and conflicts of interest. that's what traditional u.s. registered securities exchanges provide. so it's imperative that non-compliant platforms come into compliance. as chair gensler has made clear, the runway is getting shorter for them to come in and to

register with us and for those who do not, the enforcement division stands ready to take action i would like to recognize the incredible team from our crypto assets and cyberunit and across our unit responsible for today's action devlin su, david brown, brian huckrow, hasha saleema investigated this matter under the supervision of amy heartman, jorge brennan, and david hirsh, amy burkehart and david daddio will lead the litigation under the supervision of ledan stewart and olivia che and i want to commend our leaders under damien williams and our partners at the fbi and cftc this is another strong example of the collaboration you see before you this afternoon. with that, i'll turn it back to u.s. attorney williams thank you. >> i would like towelcome in

gretchen lowe from the cftc. >> good afternoon. i'm acting director gretchen lowe of acting director of the division of enforcement. thank you so much for the opportunity to speak today today, the cftc filed a complaint against sam bankman-fried and his companies ftx and alameda, charging a fraudulent scheme that dates back to the launch of ftx.com exchange in may 2019 as cftc's complaint specifically charges defendants with fraud by misappropriation of customer funds as well as false statements to the public, customers, investors and congress about the handling and security of those funds. as alleged there are over $8 billion in customer losses that we have ascertained as of today. the rippling consequences of defendant's fraud are vast and have din significant damage to

the asset market the cftc charges at bankman-fried's direction, ftx customer deposits intended to be used to trade digital asset commodity future swaps and other products were not appropriately segregated by ftx. instead, customer funds were held in alameda accounts where they were commingled and misappropriated for a variety of unauthorized purposes such as use in high-risk investments and other digital asset nterprises political contributions and to purchase luxury real estate. as charged, the fraudulent use of customer funds by bankman-fried and his companies were inconsistent with the touted ftx terms of service and contrary to numerous statements made by public statements made by bankman-fried the cftc also charges defendants created features in the underlying code for ftx that allowed alameda to have

essentially an unlimited line of credit on the exchange defendants also provided alameda with unfair trading advantages including quicker execution times and an exemption from ftx's auto liquidation risk management process this massive and costly fraud was in the connection with interstate commerce and as alleged including bitcoin, ether, and tether which are the most widely traded digital assets in the world. bitcoin and ether also underlie derivatives contracts on cftc designated exchanges lastly, standing here today with the u.s. attorney's office at the southern district, fbi, and the s.e.c., represents yet another stellar example of the importance of federal regulators and federal criminal authorities working collaboratively and effectively with each other to achieve justice. the teams worked quickly and tirelessly to obtain compelling evidence and to begin to hold

those responsible for the collapse accountable, all within a very short timeframe thank you to all at the sdny, fbi, and s.e.c. for your cooperation and thank you to the cftc team. supervised by deputy director robert howell and chief trial elizabeth pendleton and many others at the commission who supported the work i am proud of your hard work, your dedication to the mission of the commission, and for always acting in the public interest thank you. >> happy to take some questions. [ inaudible question ]

>> you can commit fraud in shorts and t-shirts in the sun that's possible too. i think that addresses the last question in terms of whether we're going to bring charges against anyone else, look, i can only say it this clearly, but we're not done extradition is ongoing in the bahamas. i don't have anything to add on that next question. >> all right, that was damien williams, the u.s. attorney for the southern district of new york, holding a press conference on sam bankman freedz, leading a team that includes the fbi, there securities and exchange commission, also the commodities trading commission let's bring in kate rooney who has been reporting extensively on this, along with michael, a criminal defense attorney and a

former federal prosecutor himself. michael, i would like to start the conversation with you. this was a very big team effort, as it often is in high-profile cases like this. i wonder if you might take your expertise as a former prosecutor and break down for us and our audience what exactly the role each of these people plays, the s.e.c., cftc, doj, fbi, all of them, and how they're going to move forward in this kind of case >> there's certainly collaboration amongst the regulatory entities, the cftc and s.e.c. with the united states attorney's office for the southern district. however, the southern district really takes the lead because they have the access and the ability to use the grand jury, which allows them the opportunity to hold proceedings secretly in fact, this ultimately was a sealed indictment, and i expect

there will be ongoing portions of the investigation that will remain outside of the public's view so the cftc and s.e.c. play a very important role. however, it's the u.s. attorney's office that takes the lead in these types of cases >> okay, so kate, was just in this hour, 24 hours ago that we were asking you about why sam bankman-fried was appearing virtually in front of what was supposed to be his appearance before the house committee involving the investigation into ftx, and we kind of know why, because we understand that he's going through an extradition process right now in the bahamas. can you take us through what the movements have been like so far and what exactly has been said in today's hearings with the current ftx ceo who is in charge of kind of reorganizing everything >> sure, we just heard from the acting s.e.c. director that this started last wednesday the charges were approved. it's a longer process, sam

bankman-fried was eventually arrested last night in the bahamas so that was in coordination with u.s. law enforcement. so it makes the idea that he may have been nervous about an arrest if he had come back here on u.s. soil, especially relevant, and that's what we were hearing from legal experts for the reasoning behind a zoom hearing testimony versus appearing in front of congress in person, which we did not see today. sam bankman-fried for obvious reasons did not testify. we did hear from john wray, who is now the ceo of ftx and in charge of restructuring. he took a very calm and tense tone, really did not part his words at all he said that -- talked about mismanagement, talked about some of the issues that went on at ftx, and it really did align with what we heard from those multiple agencies who seemed to be working quite closely and coordinating on this effort. we also just heard essentially that they haven't said if they're going to bring charges against anyone else but they say

they're not done sort of a call to action if anybody had information, if anybody wanted to go and work with law enforcement, or they said if you were a part of this, and you haven't reached out to us yet, make sure you do before we reach out to you. so there was a little bit of a warning shot there, and a shot across the bow for those who may be involved and may have not spoken to federal prosecutors yet. >> michael, there are some reports he may fight extradition. what are his odds of success >> his odds of success are absolutely none. he will ultimately be extradited, but the process does allow for delay. it's a process that can take anywhere from 12 months up to three years because there are numerous appeals that are built into the extradition procedures that just are rampant with delay. so unless he agrees to be extradited and waives his extradition rights, he's not going to be on u.s. soil for a

while. >> michael, we know that he has not waived those rights. so he is going to fight this in court in the bahamas right now and so if this really is a one to three-year process, what exactly does that do to the momentum of the investigation or does this give law enforcement in the u.s. even more time, more more time to build up a very solid case against sbf >> first of all, he can waive his extradition rights at any point so we'll have to see how that plays out ultimately slowing down a case like this where you expect at some point there will be other pleas that will be reached and other people will come forward and be charged is going to be a benefit for the prosecution. >> a benefit for the prosecution, so do you think he would be a flight risk >> i think any judge is going to look at him as a flight risk given the fact that there are billions of dollars of assets that are still unaccounted for that could be anywhere in the

world. there's really going to be no bond condition absent placing him in custody that's going to assure that he is going to reasonably appear in manhattan >> kate, one of the other complicating factors in this, and something that cnbc has been reporting on, is the relationship between the bahamas law enforcement and the courts there versus ours here there's a great story up on cnbc.com right now detailing the near quarter-billion dollars worth of real estate that sam bankman fried and ftx had amassed in the bahamas and how there's a battle brewing between the bahamas courts and delaware courts here in the u.s. with regard to the bankruptcy of ftx. how complicated does even the cross border and cross legal system process become given what's happening right now with sbf and this particular slate, if you will, of charges? >> in the beginning when the bankruptcy filings started, that

was one of the big battles, was whether it was going to be chapter 15 in new york, which would have allowed and acknowledged more of a global structure and more oversight in the bahamas for unwinding this, versus chapter 11 whichented up being the outcome. it's all happening in delaware, but we have had pushback from the bahamas. they challenged what john wray said earlier when he was testifying they do seem to want some sort of oversight, including like you mentioned, real estate clawbacks and they have said we're cooperating on the arrest, but they want some ownership over this he may have very well violated laws in the bahamas as well, so you have dueling jukz jurisdicts that makes it much more complicated and legal experts, you talk about analogies or a madoff or theranos situation or enron, that those are complicated, but they don't have the cross border aspect.

they don't have the cryptocurrency aspect, so that muddies the water a little bit in terms of unwinding all this, the fact it's not only in the bahamas, it's antigua, and 130 or so affiliated entities, all over the world, europe, africa, you name it, this company had tentacles in every jurisdiction you can think of >> what did you make of his strategy to use this media apology tour to garner public support or forgiveness, and what do you think is likely to happen from here if we are no longer perhaps going to hear from him the way we have or maybe we will >> well, first of all, what i thought of it was, it's kind of the, you know, the emperor has no clothes it was a fictional attempt at some form of contriction, but as we know, these cases are built not only on the ridiculous statements of the individuals who were the targets but also upon evidence of the actual criminal acts.

and as mr. wray outlined this morning before the committee, this was a company that had no true governance, there were lies and deceit that i'm sure multiple witnesses and electronic emails are going to detail, and despite mr. fried's protestations, his strategy was doomed for failure from the start. >> and michael, before we let you go, from your expert standpoint, having been a federal prosecutor at one point, if you look at this case as it's developing, we don't know the full details yet, as it's developing and put it face-to-face with, say, bernie madoff, or put it next to enron and some other high-profile fraud cases, how big is this how does it rate compared to other frauds in u.s. history >> it certainly rates amongst those cases in terms of the amount of loss we're dealing with and i think the important message is, as has been said, this is a fraud case it's not really about the

crypto per se. it's an old story that's been written before this is about lies, deceit, and political influence. >> all right thank you very much. kate rooney as well for her reporting. >> ahead on "power lunch," inflation finally cooling off, perhaps. rate hikes could be slowing down, maybe. both benefit housing and home builders, but which of these names is the best bet for investors? we'll take a look at some heof t big ones up next and debate it keep it here has already been born. it could be you! wow. really? of course, you'll have to eat your greens, watch your stress, wear sunscreen... but to live to 150, we're developing solutions that help doctors listen to your heartbeat while they're miles away, or ai that knows what your body will do before you do. cool. introducing elevance health. where health can go.

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...comes the legendary cat with 9 lives. hmm, hmm, 8 lives. 7, 6 5, 4 3, 2. you are down to your last life. i am not really a math guy. rated pg. welcome back to "power lunch. let's get a check on the markets as we're seeing some big swings today. the dow was up more than 700 points at the highs of the day, but then as you can see, briefly dipped negative, down about 114 points at its lows now a diverse group leading the nasdaq 100 moderna is soaring on clinical trial results for a vaccine tied to skin cancer docusign up 40% in a week or so. match and meta platforms also with nice gains so far today checking on the bond market. yields moving opposite of stocks falling sharply after the cpi reports and rebounding throughout the course of the session. the ten-year yield sits at around 3.5% but climbing

steadily through the course of the session, and the price of oil up about 3%. the dollar falling on signs inflation is slowing down. a weaker dollar makes oil cheaper for other currency and international buyers which could possibly boost demand. >> thank you very much time now for our home builder bull fight the sector has been rallying amid a pullback in interest rates. lennar and meritage homes up with about 20% in the last three months which of these two home builders will bring you a bigger profit here with the bull case for lennar is ken ziegler. joining us with the bull case for meritage homes is steven kim, home builder sector analyst with evercore isi. great to have you. and ken, why don't you kick things off here? >> thank you for having us just to set it up, in contrast to our prior bear thesis, we think the stocks in general have largely derisked versus the

market for now and that's consistent with our framework, which uses data since 1962 and the key point here in a highly correlated group and how we avoid being affirmable, we use a quantitative framework avoiding adjectives and longer term factors like demographics, supply, that really miss a lot of the stock catalysts so the book value is derisk versus the market. pressure on earnings in the multiple we lick lennar for three reasons. it has a high trailing return on inventory, a low net leverage versus peers and it's that simple that to relative call, it's been working, but we think as today highlights in the market, there's a lot of sensitivity around rate forecasts. >> i would never think of you as a perma bull because you were much more bearish. and as i recall, you said don't

buy the builder ers until the f tightening cycle stops >> good memory we have changed the nuance of the call, as many of our investors, pms, really try to outperform the s&p analysis back to 1962 looked when the groups risk versus the market largely abated versus the overall cyclical returns so the timing of the market in terms of the absolute stocks are avoided by reflecting the investment process of our clients. >> okay. so again, to be clear, you are a bull on lennar, and steven, you're more focused on meritage. do you also like lennar or think that meritage is much more attractive here and why? >> i sure do i sure like lennar as well i think ken is going to look real smart here in about three,

six, and even 12 months out if he keeps his call. we actually have probably a higher target price than ken does on lennar i absolutely agree with what he's saying on lennar and the group in general i will say, though, when a group like the home builders comes into favor, a lot of times it's some of the smaller cap names that get overlooked. and they can actually have bigger moves and so meritage is one that i do think has a lot of virtuous qualities. a lot of the things we like about lamar, for instance, low leverage, a business model that goes for afford blth and does spec bulding with focus on efficiencies these are things these two companies share. what's different, though, is their valuations meritage trades at a significantly lower valuation and trades below its book value. and as a result of that, when this group, we think, comes into its own in 2023, we think that

meritage will probably have a bigger move. i have an over 50% return potential over the next 12 months that i'm rojecting for meritage >> it's dom here if you could tell us, lennar, meritage aside or maybe included, we know home builders by their varbusiness are geared and more levered toward the interest rate market i wonder if you could tell us and our viewers which home builders in your coverage universe are more sensitive to interest rates than others on a relative basis >> i don't actually believe that there is a significant difference for most of the builders i would say perhaps toll brothers might stand out as one that is less sensitive to interest rates, just by virtue of their luxury buyer. that being said, i think that what the problem is that has been sort of keeping the valuations on the builders is this general overarching concern that home builders across the

country are going to go down on the order of 20% or more that is something which is in our view not going to happen i have been pretty clear that i think that is not in the cards and that's been an area of disagreement, we believe, for the group. as 2023 comes into view, and we think that it becomes clear that you're not going to see that, we think this whole group will benefit. a key part of that, of course, is going to be market trades i would point out that the spread of the 30-year mortgage rate over the ten-year yield is incredibly wide. and could easily contract 50 to 100 basis points and still be above normal that would bring your mortgage rate into a five handle territory, and i think housing demand would really rebound well in the spring if that were to happen >> that's exactly what diana and i were talking about last hour, although i don't know if qt interferes with those prospects. on the stock picks there are any names you wouldn't be as positive on here and if so why

>> well, we have a framework for the home builders called kis we try to keep it simple and we simply rank the top five highest return on inventory builders of which meritage is one in the smaller cap space i think if you look at the low return builders, kb, toll, taylor morrison is more of an aggregation of its prior m&a history. so operationally, while the smaller cap are trading as a discount, historically that's tied to less clean operations which the best way to look at it is in terms of leverage, and meritage does stand apart from its $3 billion market cap peers in that regard but we think investors buy stocks relative to the s&p we think builders are set to outperform on a relative basis and then into the eventual cyclical bottom of the group,

timing unknown >> gentlemen, a bull fight and i was kind of dressed for it >> humane fight. >> no one is getting stabbed at the end. ken and steven, thank you both very much for your time today. all right, coming up next on the show, pouring some out for sinking valuations we're breaking out a special edition of the three-stock lunch. trading three names that have seen their valuations absolutely asd isear. those trades coming up after the break. i promise - as an independent advisor - to put the financial well-being of you and your family first. i promise to serve, not sell. i promise our relationship will be one of partnership and trust. i am a fiduciary, not just some of the time, but all of the time. charles schwab is proud to support

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welcome back to "power lunch. time for the three stock lunch forward pe edition we're trading three names that have seen their valuations slashed this year. tesla's forward price earnings ratio sitting near 30 after beginning the year at more than 100 times next year's expected earnings that's less by the way than chipotle, which trades at 37 times forward earnings listen to this one meta is down to 17 times forward earnings now cheaper than mcdonald's, which trades at 27 times forward earnings and then jpmorgan also historically cheap at least from that perspective as the financials can't catch a real tailwind here, trading at ten

times forward earnings but it does trade at a premium on a book value basis. so kind of depends which way you look at it let's bring in delano saporu, ceo and founder, cnbc contributor. thank you very much. let's start it off with tesla. this is pretty big this is not a call on whether it is a buy or sell from my standpoint, but itcatches someone's eye when you say it was 100 times forward earnings and now it is 31 times what does that say for you are you a buyer or a seller? >> that is attractive and it does catch someone's eye it caught my eye at the beginning of the year, but now if you look at that trade map so far, i think part of that is the macro environment, part of that is production costs, production cuts over in shanghai. so, i think when i look at it now it is an opportunity when the valuation has gotten a lot better look at the industry, we know that there is a push toward

electric vehicles. tesla is the biggest brand name, biggest market share in the u.s. in that area even if that competition picks up, i think they'll bode well. i think expansion and production in europe is getting better. so i like it here. i liked it earlier i like it here i think you can hold if there are opportunities the next couple of months there might be to buy here as well. >> i look at the 29.8 forward, used to be over 100. remarkable meta, which has long been kind of a value stock if you want to call it that, it is near its cheapest level ever now, 17 times forward earnings estimates. >> yes, cheapest level, hasn't done well year to date the last month or two it bounced a little bit saw that because of loud restructuring happening at meta and investors did like that. they still have head winds when it comes to competition at address the privacy changes seen at commercial ad spend will come back

e-commerce side. but, you know, overall, this is a hold for me. i think if you look at it from the topdown, you have an area where they have the biggest family of assets, over 4 billion users on the platform. i think ad spend comes back in the late half of 2023. and we see a company that has been speeding out profits rather well for a decade. so i think that continues, but the head winds they have to get through first. >> that's the call on meta i want to take the final name here, it is jpmorgan chase now trading at forward price earnings ratio of 10 as the financial sector continues to suffer this year now, i will point out that at a discount valuation from an earnings basis, many traders and investors look toward book value. this still does trade at a premium to book, more so than others trades at 1.4 times book for comparison bank of america trades at book value so, is jpmorgan of value at this level? >> i think, you know, looking at

the price action relative to the tech names we mentioned, the tell say little bit better one of the areas i like is the consumer banking side. you're talking about the interest rate environment we're in right now, a lot of it could be a better fit for their banks on the consumer banking side if they have higher loans they're getting higher interest on and if you look at the lending and asset, deposits increase on the side for jpm, that's the things i like i know what the capital market dried up, m&a dried up look at jpm and bank of america, they have done well on the consumer banking side. that's the thing attractive here whether it is a better valuation, maybe not as crazy as the more attractive other valuations, but it is one you can potentially buy if you look to hold on to something that could potentially have a tailwind going into 2023 based on the interest rates we have right now. >> a lot of traders pointing toward the outperformance in jpmorgan over other big money center type things delano saporu, thank you for

tesla, meta and jpmorgan see you next time around. coming up next on the show -- kelly -- >> no, please. we're working to survive the company's once robust cash reserves are dwindling if wework doesn't turn a profit, it could face bankruptcy you'll want to hear this - [narrator] if your business kept on employees through the pandemic, getrefunds.com can qualify you for a payroll tax refund of up to $26,000 per employee, even if you got ppp.

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welcome back to "power lunch. let's check out shares of wework flat, down 50% in the past three months and it is currently just under a $2 stock "the wall street journal" is reporting the company's cash reserves dwindled leading to the possibility of default on some of the debt. their losses were backed by softbank, the journal says has put $10 billion into back those losses the market cap right now, just under $1.5 billion. >> amazing some high flyers at one point private markets or otherwise. i think of carvana now, also been smoked. taking a beating there as well. before we go, let's look at the yield curve. we got to talk rates, right? let's show you what's happening with the two-year, ten-year spread, looked as one of the p barometers of benchmark gauges for the economy. at one point it was minus 80 basis point handle, the lowest since -- or most inverted since 1981 we know what happened recession-wise in the '80s

second is a three-month ten-year, which is a better indication it is a fed meeting day tomorrow and all these rates will be hugely in focus. >> do they have to cut by that much >> i'm looking at the two-year and three-month, a lot of people parking money there. >> it is going to be another busy one dom, thanks. thanks for watching "overtime." >> "closing bell" with sara eisen starts right now. >> thank you stocks are well off the highs. we lost a 700 point rally after the initial pop on cooler inflation data this morning. what does it all mean for tomorrow's big fed decision? this is a make or break hour for your money welcome to "closing bell." i'm sara eisen look at where we stand now, s&p up .6%, well off the highs the nasdaq, still positive, up a percent. so you're seeing the most strength in technology if you break it down by sector, energy is in the lead today, communication services right behind real estate also doing well. what is negative consumer staples at the bottom of the pack and