final trade for us >> microsoft continues to be an anchor for investors that want to expose you to the cloud and software, growing clothes, and it's a great name to put away. >> yeah. so that's among those big tech names that are up today. it's up about 2.5% i'll see all of you in overtime a little bit "the exchange" is now. thank you, scott hi, everybody, and welcome to "the exchange. i'm kelly evans and here's what's ahead this hour stocks are higher today, erasing nearly this week's dow and s&p losses but with the two-year yield at 4.4%, are short-term bonds a better bet we'll discuss the new alternatives to stocks plus, goldman warning that china's earlier than expected reopening could disrupt the supply chain further we'll dig into the potential economic fallout and when the recovery could actually take

hold it was the worst year for po ipos in more than three decades. first, we begin with this rally. let's get more from bob pisani down at the new york stock exchange bob? >> hello, kelly. today it's time to play, let's turn all of the trends upside down take a look at the major indexes. what has been the big leader all month in terms of the major indices that are outperforming it's been the dow industrials. was up today, but underperforming, it's the dow industrials. what's been the big laggard all month in the major indices it's the nasdaq. what's the big leader today, it's the nasdaq. by the way, 38.55 on the s&p, that would be the highest close in two weeks since the middle of december so, again, keeping with the theme, turn the market upside down, what has hit new lows? what major big cap stocks have hit new lows this week, tesla, disney, apple, paypal, ford. what's leading the s&p 500 today on the upside, tesla, disney, apple, paypal, ford.

don't you like it when this happens? herd mentality is not dead on wall street. also, let's flip that around what has been the leadership groups all throughout the month? largely, pharmaceutical stocks like merck hitting new highs and consumer staple stocks like campbell's, kellogg's, hershey has all outperformed ways underperforming, kellogg's, hershey, and merck again, herd mentality on wall street a lot of people say the santa claus rally is dead. as of now, the santa claus rally is very much alive remember the santa claus rally is the last five trading days of the year and the first two of the new year it's seven days. we're four days into it. so what matters is what happens on january 4th at the close. you have to close above 38.22. that was the thursday close. look at that we're well above 3822 right now. if you add one 1% or so, you get close to 3860. we're essentially at the santa claus rally. the bottom line here is, it is very much alive.

by the way, kelly, we are now a little bit below 20% decline in the s&p. and that's kind of like a line a lot of people are talking about. very rarely do you have down 20% years. we're right on the cusp of that one. kelly? >> bob, stay right there with us our next guest says he's bracing for 6% interest rates from the fed next year, and that it may be decades before we see zero interest rates again so how do you invest let's welcome in ryan bellinger, managing principle at calero advisers this is about this idea that there is an alternative to stocks and a number of major investment people tell us, short-term treasury bonds look pretty good here that number keeps growing. >> yeah, certainly nice to be with you again, it's been a really tough year the worst year for bonds on record, as bob just mentioned, down 20% or so in the s&p 500. that's the worst since 2008. so i think everyone is just really looking forward to getting out of 2022. and seeing what 2023 might bring as far as the investors.

>> right, but i think you're even more hawkish than some of the hawks here very few people think that the fed is taking the fed funds rate all the way up to 6% why do you think they will do that >> i think some of this inflation is just a lot stickier than people might think. historically, they've got to bring their fed funds rate above where the cpi is going to be living and so if we get a couple of bad reads in the first couple of months, inflation is a little bit more sticky than we think, they've been determined to crush the demand side of this economy. so i think they would have to bring rates up a little bit higher than people think not drastically higher we've already come a long way. but i think the bigger prognosis is that the rates will be higher for much longer than people think. so we're going to hang out in an environment with rates at 4.5 to 5% for potentially years, because i don't think the fed wants to repeat the 1970s mistake of lowering rates too

early, and then seeing inflation spike back up again. >> listen, you're a wealth management firm. your clients are trying to protect, if not grow their wealth if you're thinking as hawkish as you are, where are you putting client money i can't imagine it's in the stock market >> we're long-term investors we have an allocation to stocks. we are not market timers and so, you know, maybe we take our stock allocations down and get more defensive we invest in dividend-paying companies and we are kind of avoiding the no-growth, no-profitability companies but to your earlier point, treasury is at 4.5%, those look pretty good. the biggest mistake investors are making right now is they've got tons of cash sitting in bank accounts that's yielding a quarter of a percent they're leaving so much money on the sidelines by not putting their money in some treasury or at more of a high-yielding money market that's a huge opportunity that

some investors could take right now. >> sure. quick last one, i want to bring bob back in, ryan. but even 4.4%. if you think they're taking the fed funds rate to 6%, 4.4 doesn't make a whole lot of sense. >> yeah. i think we'll have to wait and see. i mean, i'm hopeful that we don't. i'm an optimist at art we're in the business where we need to tell people what they really need to hear, not what they want to hear. we're fiduciaries and it's prudent for us to recognize this is a very difficult investing environment, it's unprecedented. the fed has never had to take inflation down and soak up 10 million jobs from an economy so, you know, we are unchartered here and i think it's best to protect your capital and 2023 might end up being a good investing opportunity. >> so let's bring in rick

santelli he's got the results rick, how'd it go? >> this was not the best of breed. this was the worst of breed. i gave the auction a d-plus, dog plus 35 billion seven-years, kelly. the yield at the dutch auction, 3.921. the problem was, that was about a basis point higher than when issued market higher yield, lower price. when you're selling, you want higher prices, not lower prices. the metrics were all a bit below average. what caught my eye was the dealers took about 13.8% last 120 billion of treasury supply bob pisani, what do you say about this idea that there is an alternative now to stocks and what are people saying about it km. >> there is. i will make this very simple when the risk-free rate of return is 4%, you have to have well above 4% to own stocks to justify that let's say the equity risk premium is 3%, 4%, that means you have to expect an 8% return to justify the risk of having

stocks over bonds. a lot of people don't think that's necessarily going to happen long-term, clearly, the market generally tends to reverse after 20% down years that doesn't happen very often the following year, most of the time you're made whole this may be one of those exceptional circumstances where the combination of the russian invasion, the covid fallout, and the fed higher for longer may create an extraordinary situation. very difficult to figure out 2023 >> well said thank you, all, we'll leave it there. bob pisani, rob bellinger, and our rick santelli. companies that took out trillions of dollars of debt will be racing to refi that in the new year and have higher interest rates and recession worries. >> debt makes downturns worse and wall street is keeping a close eye on corporate debt and what the fed does next year with the 2008 financial crisis. so there is a positive here to an extent. so-called rollover risk, the

amount of debt coming to you next year is a relatively tame $1 trillion in an investment grade and high-yield paper that needs to be refinanced about 10% of the $10 trillion corporate bond market. the bigger problems you can see, 24 goes up by 30% and especially then in 25 and 26. john giordano tells me high yield and investment grade are in decent shape and that doesn't mean there won't be pockets of pain we'll be paying a lot of attention on how companies manage earnings and cash flow. that's because rollover risks is only one of the concerns, depending on the depth of any potential downturn, earnings could come under pressure. issuers have to pay both higher rates and a premium on top of that, because of default concerns there's already a healthy default premium that's built on to rates, yields on the l lowest-rated junk bonds have doubled. investment grade yields have more than doubled. daniel iveson with pimco tells

me, when you enter recession, you never know if it's mild or not and you have to be real cautious about the most economically sensitive sectors of the market. so pimco prefers these less sensitive sectors to -- that are cyclical, less cyclical, that is, to downturns utilities, wireless towers, aerospace, food and restaurant some technology, but they mentioned specifically mission critical software. the optimistic scenario, the fed begins to cut rates before 2024, when the cliff of rollovers comes due. the current high level of rates that the street is preparing for a worst-case outcome and if your last guest is right, kelly, a 6% fed rate, there's going to be blood on the streets. >> can you imagine the other interesting thing about this, steve, as we're all talking about how there's an alternative to stocks, you're basically highlighting a concern here, you know you go into corporate debt, you better be pretty sure that they'll be able to meet all of

these obligations. >> i think that's right. kelly, one way to think about it is there is no -- the only risk you have is the uncompensated risk that you take if you go out and buy a junk bond, you know, and you're going to get 15%, well, you have to ask yourself, are you compensated for that risk? if you go buy a corporate bond and you're going to get back 5, 6, 7, 8%, ask yourself if you're getting paid for that risk there is one little bit of potential silver lining, that if you'll squint with me, kelly, you can maybe see it with these high rates right now, right, there's not a lot of issuance coming. so the idea is that you're going to have less paper being issued, so with less supply, you might have tighter spreads and you might end up having a little bit extra on your returns because of that lower supply. >> really interesting point. it's not just the current factors, but what debt they might or might not take on here, as people think about going in steve, thanks. we always appreciate it. great reporting. our steve liesman. coming up, 2022, a year to

forget for the ipo market? but will 2023 be any different we'll look at the deals and de-listings that could be on the way. but first, will the fallout from china's latest covid outbreak put its economy and relationship with the u.s. under a new strain one of the foremidost experts joins us next. the dow's rally is now 370 points to the upside look at the nasdaq, up 2.5%, trying to preserve that santa claus rally like bob pisani said 382 on the ten-year, the exchange is back after this.

welcome back to "the exchange." china ripping off the band-aid after nearly three years of a zero covid policy. and goldman sachs is warning the reopening is maybe too fast. it was at least much faster than people expected, and goldman says will cause a short-term strain on the workforce and the supply chain so what kind of global impact will it have inflationary, deflationary, will the economy handle it. joining us is nicholas lardy great to see you what do you think is going on here kelly, i agree they opened too fast i think the zero covid strategy could have been a good short run strategy to buy time to get a

vaccination program, you know, covering more than 1 billion people, to build up their hospital systems, so they could deal with infections but they stayed with the zero covid way too long and they didn't take advantage of that, period, to do the vaccinations and build up their medical system so they're in a very, very difficult position now with massive numbers of cases obviously, mortality going very well up and obviously, there'll be negative effects on the workforce. a weak recovery in 2023. >> so, in the goldman note, they say that china is likely to see weaker growth momentum because of the front-loaded exit wave, temporary labor shortage, increased supply chain disruptions. do you agree with all of that? and is it going to be an effect we feel here at well >> i largely agree i would put much more focus on household consumption. household consumption has been

very large this year, largely because of massive lockdowns people couldn't leave their houses, they couldn't go on vacation, they couldn't go to the movies, et cetera. and now, they don't want to leave their houses, because they're afraid they're going to get the disease. i think consumer spending will continue to be very, very weak and that will be a problem i think that will be a bigger problem than the disruptions of the workforce having an adverse impact on production >> bweak chinese consumer being one of your biggest concerns and for investors who say, i always bet on the chinese consumer, i'm betting on them ordering things online, maybe they'll have to turn to the internet to fill in this gap a little bit if they're waylaid by covid. how long do you think this lasts? an economy that maybe grew 2.5% this year, no matter what they say, what kind growth do you think we're talking about for 2023, now that they're pursuing this version of reopening? >> it's very difficult if the covid surge is restrictive to the first quarter, maybe even the first

half, they could still get, you know, 3, 4% growth in 2023 but if it goes on much longer and especially if new variants emerge, you know, then we could be looking at something in the 2 to 3% range. >> which would be a huge disappointment there are a lot of things from global economies to stock markets, bond yields, exposed stocks that are rallying on excitement over this reopening, nicholas what would you say to those investors? do you think that's correct, that this will be a big year in terms of an economic boost coming from china? or are we getting our hopes up too much >> well, i would be a little bit on the skeptical side. some stocks have surged largely because of policy changes with respect to platform companies. but, you know, long-term chinese stocks have been a very poor investment, substantially underperforming u.s. stock markets and markets of most other countries. so, they're up a bit now, but over time, the returns on the

chinese market have been down substantially. >> yeah, maybe we can show a ten-year chart, for instance, of the shanghai composite it will illustrate what you're talking about. so you're concerned about the chinese consumer and some weakness there into next year. for those in the u.s. who are wondering about whether this will disrupt global supply chains all over again, affecting all kinds of businesses, consumers and inflation, do you think we're likely to see that effect >> well, i'm not sure that will happen china's export growth during the three years of the pandemic has been relatively strong, stronger than most other countries. so they have continued to supply a very large quantity of goods to the international market. and we read about, you know, companies that are having trouble producing in china, but remember, china's a huge country and not every place gets locked down all at once so china actually was a very strong supplier to the international market over the last three years, even though they had significant shutdowns and closedowns

so even if there is some disruption in the labor market, i think china's exports will probably hold up pretty well they're going to be weaker in any case, because europe is going into recession, the united states might soon be in a recession, so the external demand is likely to be weakening, which could be a more important factor than the slowdown in production in china. >> yeah, a great point we're showing these ten-year stock charts that shows the shanghai composites down during that period, have been 5x outperformed by the s&p 500. the large cap chinese stocks are also negative during that period of time. at what point does it become a better place for investors and what does this all say to you about the hold that president xi has on the economy i think we'll have to wait and see. hopefully we'll see some rumgs of basic economic performance that has been on hold or in retreat the last few years i think that would tend to give a boost to economic growth

medium term. and that would improve the performance of chinese companies and make china more attractive investment option. >> all right nicholas, thanks for your time today, as always great to check in with you >> thank you, kelly. >> nicholas lardi with the peterson institute don't miss tonight's special "taking stock," it is focused on china in 2023. a closer look at the fallout for covid, the landscape for the year ahead that we were just discussing kyle bass will be part of this special tonight at 6:00 p.m. eastern. still ahead, tesla rallying despite the street's top analysts slashing his price target by 25%. we'll tell you why he's calling 2023 a recent year for the ev market plus, the airlines are under pressure from washington after canceling thousands of flights since last week. are the struggles a warning sign that capacity can't keep up with demand we'll explore. and as we head to break, take a look at the dow heat map only two stocks are in the red today, and they're boeing and merck. disney, salesforce and apple,

which apple has been having chsu a tough stretch today has been leading the down higher. "the exchange" is back after this

welcome back to "the exchange," everybody going to leave it unbuttoned this time. the dow is seeing a pretty nice rally today. we're up 416 at the highs. the nasdaq is leading the way with a 2.5% gain let's talk about some of the movers as we ponder the santa claus rally. the streaming names catching a bid today. these have had a tough year, but look at warner brothers discovery up 7%, netflix up nearly 5% to 90. got a double upgrade from sell to buy and paramount is among the top s&p performers as well disney, the best stock in the dow, it's up nearly 4% payment and fintech names also

outperforming, a bit of a countertrend move here affirm up 7.5% toast and block up nicely, as well these names still on pace to close out their worst year ever. affirm and toast just went public last year paypal and bloc seeing their second straight year of losses the only two negative years they've had since debuting in 2015 and we've got to check out shares of apple, bouncing back from their lowest level since june of 2021, and they're holding on to that $2 trillion in market cap. still below 130, pre-pandemic, i think we were around 80, but still a nice 3% gain for those beleaguered shareholders today let's get to frank holland now for a cnbc news update >> here's what's happening at this hour. the department of justice is suing amerisourcebergen. prosecutors say civil penalties could total billions of dollars. amerisourcebergen says government lawyers cherry picked data from five pharmacies out of tens of thousands that it supplies brazil's incoming president

desilva has chosen someone who works to protect the amazon's environment minister maria silva returning to the post that she held from 2003 to 2010 during that time, she set up programs that sharply curtailed deforestuation, but drew criticism from businesses seeking to expand into the amazon across america, nearly a thousand small towns and cities are losing their designations as urban areas starting today the census bureau is reclassifying them as part of rural america. about 3.5 million people are affected rural and urban areas often qualify for different kind of federal funding. >> frank, thank you. coming up, the renaissance ipo etf trading near its lowest level since the start of the pandemic we'll look at the deals and the delistings that could be in store for next year. and can you guess how many ipos raised $1 billion this year? tweet me your gues guesses @kellycnbc, and we'll tell you after this quick break. with billions of passengers taking millions of trips every year?

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welcome back to "the exchange." 2022 was a grim one for the ipo market check out these ugly stats not only did new deals struggle to get out the door with proceeds down 94% from the

previous year according to ernst and young, but no deal raised more than $1 billion the answer to that question was zero even for the deals that got done, "the wall street journal" estimates one in four ipos could end up being delisted. joining me now to discuss is the brave man, duncan davidson, partner at bull pen capital. you're a straight shooter, duncan great to see you again how bad is it out there? >> it's as bad as i've seen since 2001 i don't think they're coming back quickly a few may test waters, but i wouldn't expect ipos to really come back in the tech space until the end of the year. >> what does a company like insta cart do if they feel like the door has slammed shut? >> they've gone from 40 billion down to 10 but they're running into a psychological problem. which is, if 2022 taught us anything, it's that unicorns really are mythical. so they want to drop to 3 or 4,

a 90% cut, they probably really believe they were really worth 20, 30, 40 billion and they're not going to do it i don't think they'll drop it enough to make this attractive to the sellside, to the ipo bankers. >> sure. but i'm thinking about it more from, you know, does this company try to sell itself don't you run into an employee problem at some point? they're emblematic of something across the tech landscape right now, which is all of these companies that started up with stock options, all the rest of it are now facing a reckoning of, there may not be any exits for at least a couple more years. >> well, we face that if venture capital, but we're willing to wait out out and get the right value. make sure you have a real business for the employees, you do what instacart's being done they've been doing 409as, which has dropped their valuation down to $10 billion and they can go through a process to re-price the options. they may have to do it at another time to keep people involved and incentivized, but we'll see. >> so they will find, as you

say, and we've heard from people saying for these companies, they're being told, make sure you have a couple of years of liquidity at your fingertips, because you might need that in order to keep going into cash. you can't necessarily look to keep raising from the outside. for the ones that did get through the door and are facing a delisting, companies like oakley, the level we're looking at here is about $2 a share. i was looking at compass, the real estate company the other day, they're at about that level, what happens if they get de-listed? >> well, not much. it's not much worse than just having the stock drop down to little penny stock levels. after the dot-comecom thing, i two company involved that wented through this one was the first company i started, covad it was worth $9 billion in 22000 but it had $1.5 billion in debt. it collapsed and they didn't worry about it and eventually they got rolled up by a p\e firm and survived as

a business when i joined a venture fund, i was put on the board of a company called a gsl net which was a junior cousin to covad and when i came to the first board meeting, i was shocked they were all trying to get relisted and avoid delisting do you remember the amex, the american exchange? they were trying to go to the nasdaq, the amex well, they were fiddling while cash burned and they went out of business so just don't worry about delisting. you could try a reverse offsplit, but if you get the delisting notice, it's really too late you can look at embark, embark tried this last august, september, the stock went up for a bit, but fell back down again. they were around $2. i don't think that works either. just focus on the business >> and private equity, you mentioned in the past, is this an opportunity in a landscape where they could end up -- i doubt, how quickly are they going to move? does anyone want to move right now or will they wait many, many months' time for the dust to settle here?

>> i think we'll see a lot of bargain basement snapping up of companies on the p\e side you'll start seeing that increase in activity mid-year to the end of the year. and, you know, these companies are going to be bought at such a low price, but at least the business survives, the employees survive, and who knows may come back to do something special. >> sure, although it will probably be five or ten years before we know if that's the ca case we'll talk next hour about san francisco, the loss of commercial tenants obviously, so much of these new companies and in this activity was focused this this region what are the knock-on effects from all of this you went through the last kind of winter before the collapse of dotcom what kind of period are we talking about now? >> if you go back to the nasdaq drop from the peak in 2000 to when it bottomed, it was about 30 months, 31 months i think it really didn't start

coming back for three years. if we go back and look at the peak of the "options action," it was november last year so we may have two years to go what does it do for san francisco? the barrier is pretty resilient. i know people won't go, but i don't think those places will survive as well during this win winter >> so you think florida, austin, the places where talent came to escape san francisco will not make it out as well as san francisco itself here? why? >> the data already shows that the data just shows that we're sort of bouncing back a bit. people go there expecting certain things, but they're a much smaller cluster of density than we are. >> so you think they'll end up crawling back desperately. >> i think this area will bounce

back first and bounce back pretty strongly. >> so final comment. if you're likening this to what we went through in the early 2000s, that was a three-year period of decline for the nasdaq let's say we're through year one, what is your advice for investors that might be watching who maybe lost a bunch of money on some of these ipos and are trying to figure out, do they double down now, never try to trade stocks again >> there was a whole sort of different model from 2000. where we looked forward and not back one choice is to go to the fall and really good companies. companies that are probably profitable some of the ones you listed are companies that are very solid companies. you might want to play the right p.o. or wait for them to come out and see if it dips and buy the dip. because these companies are real companies. but otherwise, what you do is you look forward what is the next generation of tech that's about to come out. let's see if i can play those companies. done go in the middle.

by the middle, i mean the highly speculative companies that were glorious during the company. don't go there that's the part of the market that you want to stay away from. >> this is great final question, if i think the likes of the gt are the future, what do i do as an investor, and are you getting similar questions or thinking about that yourself right now >> first of all, you short google, because it's a big threat to them they're already trying to take steps. no, i think what you're seeing is that ai is now becoming real, but not in the way people think. it's not some kind of terminator or super intelligence. it's a tool. we see ai being added to la sasse companies. one way to think about it, how do we auto mate a business process using ai and make some place much more productive than it was before. this is happening across the supply chain in a lot of businesses go there gpd is interesting technology, it's scared a lot of people in

the teaching community you can now just get your essay printed out and it's pretty well written. i don't think that's where the big threat is. i think the big threat is for things like customer service, customer support you can have much more automation in those areas about answers to questions than you could previously and so i would not go into the normal area of those type of companies right now. i would look for new companies that come in and really automate, super automate, like response to customers complaining, with a very catchy. >> maybe they can start with southwest. and be a template. >> no, i don't think they can solve their problem. they have a much deeper problem. >> duncan, great checking in with you thanks for bringing your history and experience to bear on this we appreciate it duncan davidson with bull pen. still ahead, southwest scrutiny lawmakers turning their sights on the cancellation and their cancellation chaos with the

white house pressuring the carrier to compensate passengers for incurred costs but bookings holding ceo ben fogle was on squawk on the street today and he issued his warning about increasing those payouts to travelers >> in europe, if you are delayed a certain number of hours, or if your flight is canceled, you are given certain types of compensation in the u.s., there are no laws that give that same kind of benefit that we do get in europe we want to have a system that gives that type of compensation, it's going to be more costly the ig ctsflhtos are go up to spread those costs around. if your company actually practices the values that it posts about, then, yeah... you're on team earth.

welcome back southwest has canceled nearly 1,600 flights over the past week the company says they plan to return to normal operations tomorrow, but have already canceled 39 flights, according to flight aware, and they're facing increasing scrutiny from washington maria cantwell, chair of the senate commerce committee said they'll investigate what went

wrong. transportation secretary pete buttigieg has promised to mount an extraordinary effort to ensure customers are compensated for any incurred costs could southwest melt down's spark new rules for carriers maybe something rivaling europe's passenger compensation model? joining me now to discuss, cnbc's airlines reporter, leslie joseph i didn't realize europe had this system how does it work >> they have a much lower bar, essentially, to compensate passengers when things go wrong, when they're delayed and the united states, our protections are pretty weak. things have to go very wrong and it also has to be the fault of the airline weather does not count so it was one of those things. the u.s., however, you are entitled to a cash refund, if the airline does cancel your flight, they might offer you a credit this is something we saw in the beginning of covid when they were slashing flights left and right, so you are always entitled to get that refund. when you're trying to get home for christmas, you probably want to get on your way and see your family >> at least they can compensate me, if i have to stay in a hotel.

how much money could southwest be talking about in terms of facie ing payouts here >> we don't know exactly how many passengers were affected. but to give you an idea, they had a similar issue in february of 2021. that could cost you about 75 million. we're talking about a week later since this started it's also christmas. fares were higher. those will be higher fares to refund passengers. costs of hotels are much higher, and there are just so many more passengers traveling now than there were last year we're going to hear about this i'm sure there'll be an 8k any minute >> one of the interesting things here is that gary kelly, the prior ceo, was a lauded figure, you know, throughout the industry, throughout the business world, he only stepped down was it last summer for the new ceo to take over so as hard as we want to be on the ceo to say, how could you possibly have these horribly antiquated systems in place, does gary kelly have to shoulder some of the blame here as well it sounds like these are systems that have been in place for this company for literally decades. >> that is true. we've heard from unions that have been saying, these systems

are very hard on our employees we're talking flight attendants and pilots there have been warnings to those executives that we've heard about that weren't heeded. those employees that have been stranded, some of them sleeping on cots and airports are very upset about that bob jordan is the new ceo and took the helm earlier this year. he's been at the company for a long time. a lot of the top executives there, with the airlines, tend to stay with the company for a really long time but they're going to have to take a very close look at their systems currently. >> there's no way -- >> what to invest in >> so they're facing they have to compensate people, they're going to have to upgrade their systems. apparently, it was a point of pride that they would sort of say, yeah, we operate on this super low-cost model, and that allows us to have higher earnings, a higher stock price it's the culture of the company, this kind of, we don't have to be the whiz bang latest thing. now that's come back to haunt them >> absolutely. that's a great point sometimes the cheaper thing ends up being more expensive. and in aviation and other

businesses, it seems to always take a crisis to spur some of these rules, whether it's consumer protection, safety, or things of that nature. it does seem to have to come to that point like, we've seen people stranded all over the country to actually kind of spur some movement there. >> do you think we will get new rules from washington on this now? >> it is possible. the rules that we have, you know, like we were saying, are pretty weak at the moment. there are proposals out there, at least to provide more transparency of fees airlines did get of change fees. southwest hasn't had change fees they were ahead of the curve on that but when airlines were very desperate, they got rid of change fees during the pandemic. for most standard economy sand p tickets. but we could see rules -- these things tend to take a long time. we're talking months it took them years with the emotional support animals. this is a big issue. >> oh, to be back in the days when ostrich on the plane was the biggest thing we had to worry about in this industry here's a quote from the ceo. i think our growth outstripped the tools needed for the

complexity this was in november before all of this hit. it's not like they didn't know >> they knew something was coming they've been warned by employees. they knew they had to make these investments. and this is just going to spur it along unfortunately, it's coming at the speexpense of all of these people this happened during the holidays it's a very emotional time it's a trip that essentially you have to take >> to the point we were making yesterday, you know, it's not like people have that much choice about airlines. you kind of have to fly the one that is where you live and it reminds me of the regulations that require more regulations. i don't know -- can we just open it up? does it have to be this way. this entire system, can consumers have more choice >> what we're seeing now is potentially even more consolidation with jetblue trying to acquire spirit airlines that's going to be something -- what happened here is going to be something that the doj is going to take a very close look at when we're looking at that combination. but, yeah, it takes sort of these events to kind of think like, oh, there are four airlines that control about 80%

of the domestic market southwest is the biggest domestic carrier that we have. >> leslie, thanks. we appreciate our leslie joseph for the latest on southwest skee cancellations, head over to cnbc.com still ahead, elon musk telling employees not to be bothered by the stock market craziness, but it might be pretty hard to do. shares from gone from 403 to 108 this year. market cap, $1.2 trillion in january, now $376 billion. what the slide could mean for the whole ev industry. we've got those implications next

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tesla springing back today despite a price target cut from one of the most bullish analysts on wall street morgan stanley's adam jonas cutting his price target jonas acknowledges that 2023 will be a reset year for the ev market as supply starts to outpace demand musk addressed this in an email to employees saying don't be too bothered by the stock market craziness. long term i believe very much tesla will be the most valuable company on earth one question lingers -- will musk keep his pledge not to sell more tesla shares to finance twitter?

he sold $23 billion worth of shares already now barron's is reporting musk has experienced his first margin call for his twitter loan. with high rates putting pressure on the auto space and senator manchin urging the treasury to pause implementation of the ev coronavirus vaccine credit, what does the industry look like? michael, welcome what do you think is going on with demand? >> i see it still heavily in favor of people looking for vehicles you don't see too many evs on the lots of car dealers these days, and we're seeing just amazing products starting to come out and trickle into the marketplace. we're seeing exciting times for the ev market ahead of us. >> it's been a tough year for the performance of blink, tesla, the ev space as a whole. do you attribute that to fed tightening, or is it the fact we are going to see more supply than demand next year?

>> without a question, it has to do with market conditions. if you look at the ev industry, the infrastructure side of the business, we have a lot of money being thrown at us by governments not only in the u.s., worldwide. that's what's going to drive the demand for charging infrastructure to be deployed. what's impacting the cars right now is high interest rates it's a big-ticket item people are slower to make that move today until they see where things settle out. ultimately, it is not a charging station -- we're growing by leaps and bounds >> if manchin or if the rules, if they pare back this ev incentive, how much would that change your forecast for year? >> it doesn't much you know, we focus really on level two charging stations for commercial markets, retail, multifamily residential, fleet business especially. it's much cheaper to operate an ev than it is a regular engine car. fleet operators across the country and the globe are realizing this

they drive a tremendous amount of car purchases those cars need charging stations that's what we do, supply the charging stations. so if we have short-term conditions because of market conditions, inflation, ultimately you're going to have to have an ev after 2035, 2045 and 2050 globally. whether there are short-term gyrations, one ev producer or another, that doesn't impact blink charging infrastructure because ultimately all these cars are going to need to be fueled and that's what we do >> absolutely. when did you see the biggest increase in demand v for evs? was it when gasoline prices spiked back in june? >> across the board. you saw a lot more interest when gasoline prices spiked you know, people are looking at this and saying, hey, is it a cost perspective is it something that's driving evs as per electricity the cost to operate an receive

much, much cheaper at $4 gas, you're talk about 10, 12 cents on the dollar to travel that same mileage using electricity versus gasoline. so gasoline would have to come down, you know, to $2 or below before it really would impact the cost of operating the cars on a daily basis you know, i'm an auto enthusiast the reason i got into this business 14 years ago is because evs are a better product they drive better. they're much cheaper to maintain they have a lot less moving parts. you don't need all these fuels in them. and the cause of the impact, the environment. it's a win-win situation when you're an auto enthusiast, you realize you have to spend a couple million dollars for an internal combustion car to compete on it on a performance basis. >> yeah. >> the most powerful car on the road today is an electric car. they drive much better they're much lower in driving, not so much noise. the amount of heat they emit is

much lower people don't realize how much the environment is impacted by the heat of these vehicles so when you take and add it all together, the digitization of the automobile, the end result is evs and people are starting to see the benefit it's not only environmental. it's driving capability and literally everything in between. >> sure. absolutely it wouldn't hurt to maybe get a nice cut on the tesla. i take your point about the couple million-dollar options but for the mass market car. we'll have to leave it there, michael. >> if you look at the lower end like the bmws or mercedes, the teslas are actually cheaper than their internal combustion engine the most important thing is blink is an infrastructure side. we're the shovels, you know, and we're there to fuel every single car whether it's a tesla, a cadillac, a hyundai, kia we make charging struck which are for every single type of car. >> michael farkas with blink

wshitaylor morrison, 40% off the lo ts year more on the home builders after this break

mortgage rates are up and home prices are down, so what does it all mean for real estate in 2023? let's ask diana olick. diana? >> well, kelly, it means we're already in a winter housing freeze and it's likely to get worse. there had been a glimmer of hope earlier in the month that the recent drop in mortgage rates might bring some green shoots, but rates have shot back up again in the past week, now up about 50 basis points to 6.54% lower rates throughout november didn't help. two reports showed buyers backed away even further, first pending home sales dropped a wider than expected 4% month over month and were down almost 38% year over year to the lowest rating in 21 years when the realtors started this survey with the exception

of course of that one-month start of the pandemic. another report from redbin shows shares of luxury homes were 38% lower for the three months ending november 30th compared with the same period last year that's the biggest decline since they started tracking a decade ago. so lower prices are not helping much another read this week from s&p kay schiller showed prices nationally in october fell for the fourth straight month. they were still just over 9% higher than october of last year, but that annual gain has been shrinking quickly and is now half of what it was in june. where does that leave us in january? kind of in a weird spot. there's very little demand from buyers but also very little supply to entice them back to a slightly less expensive market >> diana, thank you very much. diana olick. that does it for "the santelli exchange" -- "the exchange." "power lunch" begins right now >> welcome to "power lunch," everybody. i am brian in for tyler once again.

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