welcome to "squawk on the street." i'm sara eisenh carl quintanilla. jared bernstein with us. a look at the economy, where it's been, where it's headed and how they plan to sell bidennomics to the american public. and the state of the credit market josh friedman of canyon partners is with us where he's putting his $24 million to work and where he sees cracks forming in the lending space. we'll get a check on the market s&p and nasdaq riding a five-day win streak

a little setback today, but obviously a lot of important microdata points, as sara pointed out earlier, between the retailers, nvidia tonight, ten-year below 4.4, and the dollar below 104, almost 103 has big implications for global currencies >> it helps with liquidity that with the ten-year, which is still being bid on the back of a strong auction yesterday for 20-year debt, taken as good news and this overall view that the soft landing is intact the economy is weakening, but not too much where we have to revise earnings estimates into a recession. that is the trend. the question is how much more room is there to rally because we're -- if mike santoli were here, we've seen quite a runup since the fed decision of 8% on the s&p and we're within 2% away from an all-time high -- two-week high. >> nasdaq 100 hitting two-month

high record highs in a bunch of well-known names not just chipotle, hilton, but microsoft and nvidia that's why some would argue nvidia is going into this print a little bit hot. >> which is why it's still a little lopsided market where the big cap tech and nasdaq are doing so much better than the rest we look for signs of broadening out in the rally we're seeing some of it. transports have been acting as a cyclical tell as a group utilities have been acting worse. a lot of people looking at that relationship even right now with the selloff, materials, health care and financials are all green despite inflation easing, consumers are still seeing higher prices from before the pandemic the most recent nbc news poll shows only 38% of registered voters approve of president biden's handling of the economy. joining us live from the white house, chair of council of economic advisers, jared bernstein. why aren't you getting credit for the soft landing >> well, look, people have been through a ton over the last couple of years that you just

mentioned. obviously 100-year pandemic, you've had invasions, the war in ukraine, horrific events in israel and gaza. look, at the same time, back there in feb 2020 we saw supply chain snarl up and unleash a global inflation that took prices to a 40-year high we took quick action when we got here, particularly on the supply side supply chain disruption task force that i was a card-carrying member of helped to coordinate some of our work in the ports. if you now look at indexes of the health of the economy supply side, they're back to where they were pre-pandemic and goods inflation has been flat or negative by the way, gas fits into this discussion as well it's down for 38 consecutive days, down$1.70. you fill up 15-gallon tank with $1.70 breathing room, that's 25 bucks of saving.

do that a few times a month and it helps the bottom line we think some trends are moving in the right direction, but no question we have more work to do. >> you passed the american rescue plan act, which is $2 trillion of extra stimulus at a time where the economy was already rebounding and many on wall street would argue we did not need that that fueled inflation even more. that's part of the record, too. >> i'd push back pretty hard on that in the following way. i just mentioned how global supply chain snarl-ups contributed to the global inflation. as you know, inflation peaked at over 9%. now last seen inflation is down two-thirds from that peak, about 3.2% last seen now, that has occurred, you just said this yourself when you talked about a soft landing, that has occurred while giving up almost nothing on the demand side of the economy. the labor market remains tight this was joe biden's message to his team we want to ease inflation without giving up the tight labor market if you have a tight labor market

and inflation down by two-thirds, that tells you that it's largely a supply side phenomenon that contributed to that disinflation. people call it immaculate disinflation i think it's the normalization of supply chains by the way, when you're talking about the rescue plan, ask yourself why this economy is doing better than any other g7 economy. one reason is because the president got shots in arms and checks in pockets to an ample -- >> that's not enough. >> -- to get us to the other side. >> no question, we got a bigger jolt of stimulus there are also questions now about how much debt we have to issue next year and whether there are going to be any buyers on the other side. >> that's a great question, an important question there we have a real responsibility to pass the president's budget, which has $2.5 trillion of deficit reduction. we are acutely aware of the dynamics of debt in a higher

rate environment and are actively and aggressively proposing measures to do something about that since the president got here, of course, he's engaged in significant deficit reduction, most recently in the fiscal responsibility act, which took $1 trillion off the ten-year deficit. >> jared, i'm sure it's not a surprise to you that a lot of the public is not just looking for disinflation or slower inflation, but actual deflation, roll back of prices back to whatever, 2019 levels. is that something you would welcome or do you lean on the historical relationship between that and falling wages and recessions >> right yeah, i think a broad deflation is historically associated just as you said with a far weaker economy than we have and that we'd want to see i think in areas where prices went up, you know, really a great deal and were highly elevated, there you want to see prices come down not just disinflation but deflation. let me hit you with a few numbers. airline tickets down 13% over

the past year. car rentals, 10% eggs, 22%. thanksgiving dinner, to be topical, down 4.5% with turkey down about 6%. that's deflation that is lower prices in those areas. we don't want to see a broad deflation because that associates with, you know, a widespread deep weakening of the economy. but in areas like used cars, down 7%. used cars and trucks those very elevated prices, yes, they have come down. we like to build on that progress >> where is the balance right now between deposit externalties of lower energy, lower gasoline, and refilling the spr as it gets closer to your target zone >> in fact, some of that is ongoing. you're right, we have kind of a strike price, which is about $20 lower than those barrels were initially sold for they were sold for over $90 and the president's refilling

prices, you know, in the '70s. so, that is an ongoing project i know the thing with the spr is you don't turn a switch and replenish is right away. it's a gradual process and it is ongoing. >> so, what are your goals for the next, i don't know, 12 months or so there's not a lot of room to do more fiscal as the economy is about to slow? 4.9% gdp growth in the fourth quarter. i don't think anybody expects to continue. >> i think we already talked about one of them, which is recognizing imperative of fiscal sustainability we're going to fight for a budget that not only has significant deficit reduction but that does so by introducing fairness into the tax code the other side, people arguing about this, they want to cut taxes by trillions for the richest americans, the richest corporations president biden thinks that it's just patently unfair so, there we can do more responsible fiscal policy while enforcing a fairer tax code. i mean, we saw this in the way the republicans have already

wanted to cut support for the irs, which we seem cbo score this leads to higher, not lower deficits because it facilitates tax cheats by the very wealthy that's not something this president is going to allow. fiscal responsibility continuing to implement our agenda of the legislation that this president managed to pass. the inflation reduction act, standing up domestic production of clean energy, of chips, of semiconductors, continuing to implement the infrastructure act. we have a great agenda in terms of bringing down costs, improving the economy supply side, helping to provide real relief for american households >> what do you expect on the labor front to happen during election year, because we are starting to see the job market cool down, elevated jobless claims we expected that at some point it's happening how do you prevent it from getting too much worse so we start to really feel a recession? >> i think the right way to think about that is to kind of

think about the basic hydraulics of the macro economy we had gdp growth rate of 5% in q3 let's say q4, according to some bean-counting exercises i see online gets you somewhere in the 1 to 2 range that's still above trend growth if you average over the second half something in the 3% range. as long as you're growing at or around trend, you expect the unemployment rate to stay about where it is. i think that's the conventional forecast from, say, blue chip. so, look, the president a while ago talked about how once the economy settles into a morsteady, stable growth trend, you're not going to see 300, 400,000 jobs numbers you'll see numbers closer to what we saw october, numbers in the 100 to 200k range. that's the break-even number to keep the unemployment rate where it is and that's what we company. >> jared bernstein, thanks for talking us through

chair of economic council of advisers. >> more after the break with td cowen president jeff solomon why he sees one more rate hike and why nvidia's numbers matter so much to the market. wee ceo of abercrombie & fitch wi u 'rback in a moment schwab. bringing you an elevated experience, tailor-made for trader minds. go deeper with thinkorswim: our award-wining trading platforms. unlock support from the schwab trade desk, our team of passionate traders who live and breathe trading. and sharpen your skills with an immersive online education crafted just for traders. all so you can trade brilliantly.

the power goes out and we still have wifi to do our homework. and that's a good thing? great in my book! who are you?

no power? no problem. introducing storm-ready wifi. now you can stay reliably connected through power outages with unlimited cellular data and up to 4 hours of battery back-up to keep you online. only from xfinity. home of the xfinity 10g network. a lot of attention on dick's and lowe's, and take a look at burlington, surging after beating expectations margins showed improvement nice 20% move up today >> indeed. when it comes to the outlook for the fed, right now the consensus says there's just a 3% chance we get one more rate hike to close out the year our next guest is among that 3%, sees a harder than expected in the cards. bullish on opportunities across tech, staples, health care and industrials. joining us, td cowen president jeffrey solomon. great to see you, jeffrey.

>> nice to see you, too. >> i wonder if you're looking for a hike in december or maybe early next year? >> listen, i don't think it's going to happen. i think they should do it. that's what i've been saying when i was on last time we talked about the fed being higher for longer. i think the fed is on a singular mission to eradicate inflation the best way to do that is take one more hike, do it at a time when you can do it i think the later in the year it gets next year, the more difficult it's going to be for the fed to do that because it's an election year generally speaking, the fed likes to have itself set before election years occur if it were me or jerome powell, i would do one more just for good measure and ensure that some of the early trends we're seeing of cooling inflation continue to make progress. >> it would be symbolic in your view, yeah >> i don't know that it's critical but i think the fed keeps looking at the '70s and recognizes there was a period of

time when the fed took its foot off the gas and inflation came roaring back at the end of the '70s and then we went through the paul volcker years i think that actually is definitely on the mind of fed officials. you can see some of the comments they've made over the past month or so. including chair powell's comments, which he made, which was to try to talk inflation down. >> i don't know, jeff, aren't things slowing on their own now after five under five basis points in a year and a half? isn't that already happening >> you know, they are. i want to see some more things continue to go, to validate that trend. certainly we'll be looking at holiday and consumer spending, but there's things like travel, which have continued to be -- continued to grow meaningfully i think if you take a look at housing continues to grow. there's still some work to do.

ultimately at the end of the day, this is going to be about unemployment so, you're going to need to see unemployment tick up before the fed can probably have sort of -- sound the all-clear, if you will, on inflation >> what about the capital markets, if you're looking at that as a guide to how much the fed hikes are weighing on overall markets and activity, what are you seeing right now? >> yeah, well, i mean, listen, it tells you that the fed activity has actually had a chilling effect on capital markets, at least in the equity capital markets. we haven't seen much in the way of ipos. the equity rally has been very narrow i guess we call them the mag man stocks now if you take a look at those stocks, it really has driven most of the results. it's great to have the nasdaq up 36% or so for the year, but it hasn't translated for the vast majority of stocks you know, certainly the midcap stocks and small cap stocks. generally speaking, that's where ipos are coming from i would like to see it broaden

out a little bit i think when the fed ultimately declares it's really, you know, having the pivot, there will be a bunch of companies trying to access the market at that point. >> the idea that nvidia's earnings are important to the market is not novel, but you actually say it does actually have -- it will be a fundamental comment on the buildout of that business following their guidance earlier in the summer. >> yeah, listen, it's a bellwether stock we've had bellwether stocks before and nvidia is zeitgeist. it's done an amazing job and i think about the transformation that's occurring in our economy this is the most exciting thing we've seen maybe since 2008 with the advent of the iphone and so you had real -- there's some very real reasons why nvidia is a stock we should be watching because it's a knock-on effect for everything happening in terms of investment in a.i. and on a near term basis, the

trend is your friend and things will continue to rally but let me be real clear those are mostly passive flows i do think we can see year-end selling in other areas where people have losses if you had a balanced portfolio, big gains in some of these names, you're likely to see a real bifurcation in the market between now and the end of the year as people do their tax loss selling and things va haven't done so well. >> you're going to get hate mail for calling for another rate hike from your investor buddies, any levered companies. it's not what wall street wants to see for the holiday season. >> listen, i mean, people can send me hate mail if they want i genuinely think long term it's a better thing i was big supporter of chair powell's move in 2020, to go to zero quickly i think that's important but let's be really clear. these policy tools are blunt force instruments. and the fed has never actually

really ever, you know, engineered a soft landing. you know, i would say so probablyisticly this time could be the first you have to be realistic about these things to me i'm a longer term investor we have a lot of things to be doing in this country to grow domestically there's a lot of opportunities for people to be investing longer term. if the fed can really nip inflation in the bud, they should do it because that's going to be good for long-term growth that's what i'm focused on people can hate on me now but long-term i expect to get some thank-you notes. >> have a great holiday. it's good to see you. >> you, too. enjoy, everybody. >> thanks, jeff. thanksgiving week, big week for the nfl and the league appears to be maintaining its dominance as investments in streaming ramp up. we have that story next. watching shares of lowe's in the red today. they cut sales and earnings

outlook saying the company felt, quote, greater than expected pullback by consumers on big ticket purchases with gold bond... you can age on your own terms. retinol overnight means... the smoothing benefits of retinol. are now for your whole body. plus, fast-working crepe corrector diminishes wrinkled skin in just two days. gold bond. champion your skin.

welcome back it's a big week for the nfl and for amazon as the league continues its digital push our julia boorstin is on the field at sofi stadium and joins us with the latest hey, jb. >> hey, carl we're more than halfway through the season and media and tech company's investments continues to pay off with ratings boosted

by high profile match-ups and perhaps by less competition from scripted television, thanks to hollywood strikes. total nfl viewership is up 6% through week ten compared to the same period last year. that's partially driven by amazon, 26% ratings gain from inaugural season last year that stat is through week 11 >> it's only the second full year of thursday night games on amazon our hope and our bet was that if you pick the right partner, you can stream at scale and start to get what have been known as television-like numbers for nfl football and they are approaching the numbers that you used to see on broadcast for "thursday night football." >> and in just a few days, amazon will stream the league's first ever black friday game >> black friday for amazon is -- it's their super bowl. that is something they have really leaned into for years they own black friday. so, this intersection of

football and what amazon does on black friday seemed like the perfect way to deploy it >> it's not just amazon and the broadcasters abc, espn, fox, cbs and nbc that are benefiting from the nfl's ratings gains. this is alphabet's youtube's first year with rights to sunday ticket while they won't disclose subscriber numbers, sunday ticket has been credited with help boost youtube tv subscriber growth by nearly 50% and the nfl tells us its streaming service, nfl plus, has nearly doubled its subscribers in the second year and looking to next year, the league is planning more international expansion. they're reviewing brazil and spain as potential sites for new games. and sara and carl, i did also ask brian from the nfl about the league's partnership with x amid all of this backlash to elon musk he told me that the league does have a content deal with the company. for now, they are committed to it guys >> that's interesting. a couple of thoughts, julia.

one is the way in which the european games essentially make football your entire day from the moment you wake up to the moment you go to bed the other is something not even the league could have designed and that is the number of games that either switched the lead from the half to the end or are decided by less than three points >> yeah, i mean, there's this -- the question of these match-ups being very exciting and also the fact that the audience now is to the point you made about the international games, has become so much bigger obviously, the nfl is so popular here in the u.s. they've had success with the games in london and in munich. the question is just how big and how global can the audience for the nfl be i think it's interesting to look at the strategy of creating content like these docuseries similar to the drive to survive phenomenon we saw with f1. the phenomenon of using docu series to expand the audience and use series that get people involved in the characters and

the game to say, hey, maybe you want to tune in or maybe you're outside of the u.s. and want to watch this sport that you never were that interested in before using all these different pieces of the equation together to grow the full audience for the nfl. >> netflix and f1 were a template for that, growing the audience it was virtually nonexistent before that. >> exactly >> thank you, julia. julia boorstin on the field today. time for a cnbc news update. leslie picker has that for us. north korea appeared to make third attempt at launching a spy satellite into orbit the japanese government issued an emergency warning for people in the south to take cover from a possible missile which was believed to be the satellite it came after north korea told japan it would launch after two previous failed attempts. a georgia judge will hear arguments that bond should be revoked for trump's codefendants

the district attorney said harrison floyd violated bond conditions by trying to intimidate witnesses through posts on x floyd's attorneys say he was simply exercising his right to free speech. the rolling stones are hitting the road they announced a north american stadium tour today that kicks off next april in houston. it comes after the band released its first original album in 18 years last month tickets go on sale december 1st. my guess is you are marking your calendar now. >> sponsored by the aarp, for those who love them. coming up after the break, the ceo of abercrombie & fitch, up 200% for the year we'll break down the quarter and the state of the consumer when we're back in a minute

amid a slew of retail misses, there was a big upside surprise ak the stock is still down, the move doesn't detract from a more than 260% climb over the past year joining me now is abercrombie & fitch ceo fran horowitz. good to see you. >> good to see you, too, sara. thanks for having me. >> where is the momentum coming from in this business where it's a bit of a tough slog for retailers right now. >> we're so excited with the quarter we reported this morning. what we're seeing is success across both of our brands and we have incredibly balanced success across brands, genders, regions, across channels. it's exciting that it's all working right now. >> i guess the question for

investors, is it sustainable you did raise guidance but the stock is lower today why? >> it absolutely is sustainable. this quarter and this year-to-date, what that represents is years of hard work by the team. we have fundamentally rebuilt this company we have a playbook that is working. we talk about our inventory, how lean and mean it is, the ability to chase product is what's driving a lot of our results it's a muscle we've built into our team they're doing an excellent job at it. >> better inventory definitely part of the story. what about for growth going forward, geographically and across the brands. what does that look like in the coming year? >> lots of opportunity we mentioned in our investor day last year that we have a big opportunity internationally. now that we've had two quarters. we're seeing an inflection point where they are beginning to grow we've been talented teams, and we've exported our playbook. if you look at abercrombie

specifically, what we've been able to do is take that brand from jeans and t-shirt brand, expanded categories and expanded the age and that's helping us win. >> what do you think some of the most surprising or important style choices the consumer will be looking for next year are going to be? >> we're excited about the fact that we're seeing a balance across our assortments our tops, our bottoms, our dresses, sweaters. we're seeing wins in a lot of categories we made a big effort to expand beyond denim and we're seeing the consumer respond to all these non-denim bottoms, whether it's trousers, loose fitting bottoms, utility pants, all of that is working for us we developed franchises over the past couple of years that are continuing to grow such as our wide pv, our personal best, our active brand that's been about 18 months in the building. it's continuing to grow. we're also seeing our dresses, our best dressed guest

collection expanding to grow. >> it's been a while since we were talking about real supply chain, freight, challenges in retail but are there lessons from that period that are still in use right now >> oh, absolutely. having lean inventory and making sure that you have an agile supply chain and sourcing team is absolutely the way to go. our inventories are down 20% what the team is doing a nice job of is testing, learning, reacting, chasing the business it's the best way to do it. >> what about the promotional environment, fran. we heard this morning from coles. i think they used the word aggressive promotional environment into the holiday season what does that look like for you? >> the fourth quarter is the most emotional time of the year. we have to focus on what's working and not working within our business we promote on what's working and not working in our business. we sit down and analyze and assess the business. with the inventories where we

are, we can control our promotions we're excited about competing in the fourth quarter you mean you can be less promotional than your competitors? >> we've been less competitive holster is a great example of that 2022 was a tough year for teen retailers and we had more inventory and now our inventories are in line so you can control those promotions >> one thing that keeps bublging up from the retailers is the idea that the physical store is more important, gives the shopper an experience. on the other hand, you have to balance the merchandising and the shrink, i guess, to some degree how do you think about story growth versus whatever growth you have online? >> for us, we say stores matter because stores plus digital is omni omni is magical. we're a net store opener last year and heading into this year. we have a new strategy in our stores as well

hopefully you have a chance in new york to see three of our new stores we have neighborhood stores in areas like soho and flat iron as well as places like greenwich avenue and greenwich, connecticut. the brand where it is today, we probably never could have opened those stores several years ago >> and does the commercial real estate back drop right now offer you bargains on that front >> we have a very clear strategy they have to be the right size, right location, right economics or we simply don't open the store. >> hollister growth, you mentioned it was a strong back-to-school season, which we did not hear universally, fran who are you taking share from? is it that you're in a sweet spot in teen apparel right now or is you're taking share from your competitors >> yeah, sara, it is a share game out there we are taking share because we're staying close to our customer we heard loud and clear from them in 2022 what was working

and wasn't working obviously the opportunity to chase into winter is helping us. expanding our assortment as bottoms go, being much more diversified. things that are working for the third quarter. staying close to that customer >> finally, fran, some of the analysts on the front, they cite this sa phenomenon called need now, buy now, meaning you really buy the stuff you need in the near term. on the other hand, you get commentary from the likes of walmart that say, maybe you get some deflation on the grocery side, gives you added fuel on the discretionary side which do you think is the more powerful phenomenon right now? >> what we see from our customer, i mean, he and she are very much aware now consumer particularly, if you think about abercrombie adult, that consumer is thinking about their next weekend, their next event, their next date, whatever it might be, and they're shopping to make it

real-time shopping hollister shops more for the season that's why you see a spike for back-to-school and the holiday season. >> we appreciate you coming on to talk through it another really strong quarter. >> looking forward to fourth quarter. have a good one. >> thank you, fran horowitz. before we go, the mclaren partnership at f1, i noticed it in vegas every retailer needs to get into f1, is that the takeaway to stay cool >> the takeaway is our team has done a terrific job designing a partnership with them and we're really proud of the product. >> i was surprised to see that one. i didn't know about it fran, thank you for your time. >> thank you have a nice thanksgiving. >> you, too. see, it all comes back to formula 1. meantime, canyon partners josh friedman joins us after the break. we'll get his take on the markets, the fed, where he's beginning to see some cracks in the credit market. and the programming note, speaking of f1, the latest documentary "inside track: the

business of formula 1" available as a special podcast series, all those brands getting in. you can check it out now by following the "squawk on the street" podcast wherever you st lien

let's dig deeper into the state of the credit market on the consumer side we heard yesterday from the new york fed that in october reported credit rejection rates increased to just over 20% in 2023, up 2% from last year on the business side, there's outstanding commercial and industrial loans during the weekending november 8th, they say their biggest one-week drop since so will con valley bank collapsed in march with funding conditions continuing to tighten, where are there opportunities in the credit world joining us at post 9 is canyon partners co-founder and co-ceo, josh friedman. great to see you, especially on set. welcome. >> thanks. happy early thanksgiving. >> the market has been throwing a little bit of a party over

this idea that the fed is done raising rates. do you buy that? >> i think the market has consistently overreacted a bit to whatever the fed chair says i think in this case half to all of the stock market action has been since the fed chair's last two pronouncements interest rates have gotten tighter, et cetera meanwhile, there's an increasing backlog of credits that are not easily refinanceable, if at all, even in this environment, that we're starting to see some signs of slowing job growth, labor costs are threatening margins. we're seeing that consistently i think the market's a little ahead of itself. >> on the idea the fed is done or the idea there's not going to be a recession >> i think on both i think higher for longer would be my bias it's hard to make a living predicting interest rates. i've said that before on this show but if i had to bet, i would bet every time the market strengthens it gives the fed license to keep rates higher a little longer and be more sure

that they've done what they want to do with respect to inflation. and i also think wringing out the last bit of inflation is awfully difficult when people have a job and there continues to be a big backlog of federal spending that hasn't actually hit the market yet but waiting to be spent in 2024 and 2025. >> what is the credit market telling you on that front? >> the credit market is telling you that rates are coming down high-yield market has tightened dramatically in the last several weeks. i think there's an enormous gulf between what's in, say, the high-yield index and what are deemed to be relatively high quality credits and the rest of the credit world, which are not necessarily high-quality credits. and that's really the story of where i think the action is in the credit markets today >> where are the opportunities for you, for canyon?

>> i would say it's a combination of more complex private credit, capital solutions, and helping work with issuers to try to fix their balance sheets that are overleveraged, as well as just identifying opportunities where credits carry a very high level of leverage but working hard to figure out how to lower that we just saw within the last few hours a merger of momentum with jacobs engineering that is a stock deal that will substantially deleverage the balance sheet. that alone creates value if your cost of debt drops by 500, 600 basis points, that is very, very material. the bonds went up quite substantially on the potential for this deal to happen. i suspect they're not trading at all right now. but it's an example of the big gulf between sort of acceptable, sustainable leverage and unsustainable leverage i think right now the world is still populated with many, many companies, many real estate

assets, even structured credit where things are not refinanceable in the current capitalization even in the current slightly better interest rate environment. >> do you think that explains why the russell is underperforming s&p? it's one of the biggest underperformances in several decades. is the picture that much different for smaller business >> it's hard to know if people think the s&p is dominated by growth companies that, therefore, will eventually grow into the value as opposed to companies that are maybe a little more susceptible to the ebbs and flows of cyclicality and the cost of higher interest rates which are significant on smaller companies that are more debt reliant than growth companies that don't carry around a lot of debt that's certainly a factor. >> how would you characterize, among the big cap companies, their ability to reinvent, drive productivity, get their balance sheets in order ahead of whatever drama we may see?

that's one of the big arguments for the s&p 500, for example >> i think some of the s&p companies carry so little debt, they're on the good side of that equation and the penalty associated with having an unsustainable debt burden is enormous right now and whether that's in the public sector company, as you say, smaller or midcap companies or in the private sector, and remember the private sector has been where all the growth has been the number of public companies has shrunk dramatically over the last few years the buyout firms have had enormous influx of capital, much of what they spent and they levered those companies. those balance sheets have to be addressed. they're starting to run out of gas in terms of the time between now and maturity and they're starting to see the effect of floating rate death with high sofa rate where they didn't fix the rate so those balance sheets need to be repaired. some will be distressed, some will be simple equity influgss, some will be horrible

interactions between the issuers and creditors. some will be horrible interactions between the creditors and other creditors. we'll see a lot of variety, but the list is very long. it stands out in very sharp contrast to the companies that have easy balance sheets and low >> 2024, what is the level of distress or default rates? >> it will creep up to more normal levels in the 5% plus area, but i think more importantly there will be situations that work out themselves outside of default but with sort of a non-default default where certain people agree to exchange equity for debt, sponsors put in money in exchange for deferal, defer, et cetera there will be endless varieties and the creativity applied here is very broad spread and many

buyout firms are familiar with all of the alternatives that face them. it may not show up in actual default statistics so there will be a lot of what i call non-default defaults >> but no more covenant light, right, or is that what you're talking about? >> you have to avoid the crowds. the standard uni tranche lending is pretty crowded. there aren't that many new transactions taking place, half a trillion dollars sitting on the sideline you can see weakening covenants in some of the newly created buyouts where that's the mode of financing but in the balance sheet repair situations, most creditors view that as an opportunity to substantially tighten protections around securities >> really good to get an update from you on your world thank you so much for coming by. josh friedman, ceo of canyon still ahead, the drama over the shake-up at openai continues and now the focus is turning to

the company structure and governance we'll dive into that after a short break.

in order for small businesses to thrive, they need to be smart, efficient, savvy. making the most of every opportunity. that's why comcast business is introducing the small business bonus. for a limited time you can get up to a $1000 prepaid card with qualifying internet. yep, $1000. so switch to business internet from the company with the largest fastest reliable network and that powers more businesses than anyone else. learn how you can get $1000 back for your business today. comcast business. powering possibilities.

a central theme of the openai saga has been the startup's governance structure a nonprofit board with a mission to benefit humanity overseeing a for-profit arm backed by microsoft. our deirdre bosa digs into why that may be typical silicon valley in today's "tech check. carl, when you cover for-profit companies and stocks that settle every day like we do on cnbc, openai's nonprofit structure is a novel and

high-minded but untenable concept. it is silicon valley in a nutshell investors and entrepreneurs have done things differently here, operate on disruption and world-changing ideas, many of which don't work out openai was the latest lit racial founded on the principle that what they were working on was so important the stakes and consequences so high, that they needed to be unconstrained by a need to generate financial return they had to serve, as their charter says, humanity first weeks ago sam altman said, quote, it doesn't make sense to try to shoehorn us into a company from the last generation of tech, because this is just like a different thing so in that quote altman is explicitly saying openai should not be part of a company like microsoft, but, over the years, some of openai's high-minded principles were compromised. it listed among its technical goals the commitment to openly share plans and capabilities along the way and share more of

its governance structure we still don't know why they turned against altman in the first place, so he and others may have decided being a traditional tech company, making money, answering to shareholders, would keep them more in check and accomplish what they wanted to accomplish this is an idea that nadal spoke to last night. >> i've always sort of subscribed to that idea it is to drive profitable solutions to the people on the planet the license for microsoft, yes, we have to generate profit at the end of the day we have to create solutions that are useful and are real solutions to challenges of people and planet. >> so in a way, guys, this openai saga isn't all that different from the tech of the past silicon valley bank believe it had operated in a unique space, but it answered to interest rates at the end of the day.

sam bankman-fried, the promise of silicon valley, and the desire to believe in these world-changing ideas is appealing, and it has created the largest companies in the world, but it doesn't always deliver. and openai is looking like a case where sort of its missions were at odds it started as a nonprofit but then it wanted to be a startup with hyper growth and lots of investment from big tech companies. that was at odds with the mission it began on. >> everyone is kind of scratching their head over the non-profit governance model, deirdre. how widespread is it and why didn't we give it much more attention until now? >> we have been talking about it, at least in silicon valley anthropic is the other darling generative ai startup, but i can't call it a startup because it's a nonprofit, and it was born out of the idea, remember, one of the founders of anthropic came from openai, and he didn't think that they were doing

enough, that they were altruistic enough. this has been born out of the generative ai space and given coverage because of the technology and has the capability of, in the worst case, destroying civilization. so whether you believe that or whether you think that's a g guise, they were structured this way. a lot of people in the bay area in tech believe that still stands, that it was trying to accomplish something really special and are worried if it just goes to microsoft, you take some of that away. >> we know the origins of airbnb, there was a debate whether or not to take it into a craigslist or corporate giant. you have the different opinions of the board and management and that's coming to light the last 24 hours as well >> i guess it goes back to the idea everything new just old again, do the structures work out or this question about

capitalism satya nadella was talking about. that only works if we serve culture and humanity needs as well that will be debated here. >> maybe you can serve humanity's needs without being a nonprofit. deirdre, thank you deirdre bosa and then can you raise money and keep investors happy >> exactly we'll get nvidia tonight and talk about it in the morning let's get to "the half." carl, thanks so much welcome to "the halftime report." i'm scott wapner front and center this hour, the countdown to nvidia earnings, what's really at stake for that stock and for the tech trade at-large the investment committee on the case joining me josh brown, stephanie link, amy raskin, jim lebenthal. a lot of nvidia shareholders today, which is a great thing. let's check the markets. we're in the red we've had this winning streak for five days in a row for the nasdaq, look at the 10-year note, 4.40 josh, let's start with you