decline, we just need to consolidate these gains. >> we do get pce, which is the fed's favorite inflation metric. we get that in the morning. we need to see the actual number. we'll take you through the final stretch on "closing bell." "the exchange" begins right now. welcome to "the exchange." i'm kelly evans. here's what ice ahead. the soft landing outcome looks fully priced in now as markets trade near all-time highs. while some say it's time to question that consensus, there are three bullish catalysts that we could get come january. we'll reveal what they are and whether they're priced in already. plus, it's the potential media merger everyone is talking about, but one guest says it's a big mistake. he has a different idea and says it would make media investable again. stick around to find out what that is.

he was early and right on a non-office reit that's at 40% this year. our analyst is back with a different name that he's bullish on for 2024. but first, stocks are rebounding from yesterday's late selloff. the dow, s&p, and nasdaq all higher. and bond yields are lower after softer inflation and gdp data this morning, with markets expecting a dovish pce print tomorrow. while everyone talks about the santa claus rally, there are three catalysts in january that could keep this market moving higher. here to explain are kevin mon, cnbc's very own dominic chu, and we're joined by stephanie roth, chief economist at wolf research. welcome one in all. dom, outline some of the maybe positive surprises around the corner. >> one or two of them are kind of consensus ones that are happening carrying over into next year. one is maybe a contrarian type play, opposite of what we saw. point number one is the world's

second biggest economy, china. it's been an underperformer, they've had economic problems no doubt about it. but could there be a scenario where the economic data shows signs of life? we saw it with regard to tech manufacturing. that could be a big point there. the second one is about an earnings catalyst. right now, the consensus is for fourth quarter earnings growth in the s&p to be about 4.7%. not bad, and we saw better numbers in q3, as well. that could be a catalyst. remember, earnings season starts in a couple of weeks after the new year. number three, and this is an interesting one, because it's just seasonality. november, december, january, have been good months for the stock market overall. if you look at data, over the last several decades, on average the s&p 500 is up about 1.1% for the month. it doesn't seem like a lot, but it's a good performance.

>> 12% annualized. >> in fact, the nasdaq is the best month of the year for the nasdaq overall. it's up about 2.7% during the month of january. so we're talking about seasonality, maybe china, earnings catalysts, three potential ones that could push the market higher. >> kevin, is that priced into this goldilocks outcome in the markets? >> i do. i think the overall macro theme for 2024 is going to be an expansion for the rally for the rest, if you will, beyond those seven large cap technology stocks. >> like the steve case thing, the rise of the rest. >> very well said. for that to take place, we need to move past the end of this rate height cycle and now we're getting interest rate declines. that will happen once the economic slowdown comes to fruition. we learned from the fed last week they're forecasting economic growth of just 1.4% next year. and growth staying below 2% for

the next three years. so they're going to have to cut rates probably sooner than many are anticipating by more than many expect. that leads to opportunities. >> that's the perfect opening for stephanie, because she's -- i think six rate cuts priced in now, but you're thinking maybe we only get three next year, is that right? >> that's right. if we get six rate cuts next year, that would be -- three rate cuts, it's certainly more consistent with what the fed is saying, that would be an environment where inflation is coming down, closer to 2%, which it already is. and growth is remaining okay. so that would nmean the market would have to push out the rate cuts. the market is only expecting the fed to get back down to a little above 3%. we expect the fed will cut down towards that 2.75%. so that's where the rally and the ten-year could come from. >> so you're thinking fewer rate cuts but a lower terminal rate?

>> exactly. >> when are the rest of the cuts coming, 2025? >> exactly. we think it will be a more modest cutting path until they get back down towards 3% in the next couple of years. >> so there's the stephanie scenario, fewer rate cuts next year. what would that mean for the market? is that benign? s >> unless the fed stays too high for too long and pushes us into a period of recession. right now, according to the chart, they have 75 basis points in cut next year, 100 basis points in cuts in 2025, and another 75 basis point cuts in 2026. i think they'll pull one of those rate puts further into 2024, which the market is already pricing in. >> and that's because you think inflation is giving them that space and you think we're going to get a slowing economy, so as

you said, i'm hearing slowing economy, rise of the rest in terms of stocks. just explain how investors should be positioned in that environment. >> for the next six to nine months, a little bit of defensive positioning may be worth it. lean into investment grade bonds, preferred securities. but once the feds start cutting, look to those areas that were beaten up the most in 2022 and haven't recovered yet. you know i love artificial intelligence. i do believe it's transformative. there will be investment opportunities in ai for years to come. but what's been lost is the importance of cybersecurity. in fact, ai may only fuel the potential and the success of cyber attacks. so look at names such as cyberarc, crowd net. they can provide investment growth for years to come to accompany the artificial intelligence play. >> dom, what would you add? >> i would say what's curious

about the economic narrative right now that i found this morning, when you look at the gdp data and the consumer focused stats, what it could indicate is that we are seeing a validation of the slowing trends and inflation. if that were the case, that would make the case for perhaps more than expected rate cuts coming in the coming year. now, if they're going to happen in march and aggressively, that remains to be seen. i think the consensus has shifted towards perhaps multiple rate cuts, but ones that don't start until the second half of the year, because you see a slowdown in the economy in the second half of the year, and then into 2025 when things pick up again. >> maybe if i could put it this way to borrow the language from yesterday, the real question is whether these are victory or defeat cuts? are they cutting from a place of victory because inflation came back down and the business cycle remained in tact, or a place of defeat where the jig's up and

the economy is going into recession? >> they will likely be cutting because they have victory. today, we got a downward revision to core pce. tomorrow, we'll likely see inflation below 2%. so it very much achieved victory in a lot of ways on inflation. they're not all the way there yet, but we're very close. we have a balanced labor market. and again, wage inflation is around 4%, but it's likely that will continue to cool down. it's been an impressive rebalancing in the economy, and there's likely to be a little more to come in the next couple of months. >> kevin, what would you say is your most out of position consensus when you look into 2024, the thing that you feel most uncomfortable being out of sync with? >> my biggest concern is the fed surprises us once again and keeps rates too high for too long. they're forecasting 75 basis

points in cuts next year, up from 50 points a few months earlier. but there's a wide range of difference in opinion among the fomc voters. what if, in fact, we go into this presidential election race and the balance of power shifts dramatically. that's a lot of euncertainty. what if these geopolitical conflicts escalate further? that's for a lot for investors to think about. so some defensive positioning is warranted, but i believe we'll achieve a relatively soft landing, inflation will continue to moderate, interest rates will come down, marking good days ahead for stocks and bonds. >> a year ago, the fear index was at 39%, extreme fear. yesterday, we were in extreme territory. but still, consensus view, as we mentioned circling back, for a

soft landing and everything is going to be all right. >> if you look at some of those indices, not just fear and greed, even if you look at the volatility intex,dindex, there expectation that things are not cratering for any time soon. >> exactly. and somehow around the corner, something is going to lurk. i was thinking about that. >> the unknown unknowns. >> exactly. thank you all. we appreciate it today. the dow is up 107 points. coming up, one of our next guests calls a potential merger between paramount and warner brothers a long-time survival move, the other calls it a mistake. we have the latest coming up. plus, the fire sale of signature bank's $33 billion cre loan portfolio wrapping up yesterday. we have a breakdown of the winning bidders, and we'll hear from the man who started

commercial lending at the failed bank. as we head to break, here is a glance at the markets. the dow up about a quarter percent. the s&p up 0.4 to 4716. the nasdaq adding more than half a percent as interest rates have come down. "the exchange" is back after this. (sfx: stone wheel crafting) ♪

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welcome back to "the exchange." warner brothers discovery is reportedly in talks to merge with paramount global. shares of both are lower today, but my next guest says the merger shows a touch of december pr -- desperation, but might be necessary. joining me now is tom rogers, founder of cnbc. tom, always good to see you. welcome. >> thanks. great to be here. >> so smacks a bit of desperation. do they have any better options? >> well, they may not. while this is not a panacea, it may be the best move both companies can make. you have these legacy media companies now that are slashing their streaming content and marketing, raising price. it's not a great formula. they're trying to cut costs as best they can with their legacy media properties and hope for the best. but that hope hasn't come true. core cutting is accelerating, ad

sales are getting worse, and overall, legacy media is declining faster than their streaming services are growing. so both have an incentive to do it. paramount only gets less valuable as they sit in this current mode. warner is certainly capital constrained given its debt. it was always a story here from the beginning of warner discovery merger that there was another deal in store for warner once its ability to do so when its tax situation gets clear next year. neither of them have a profitable streaming business. it's out there that it's profitable, but that's when you count the satellite and legacy stuff of hbo. so they both have a streaming issue. shooting one of these, and having one strong er combined streaming service adds more value, originals being a great

currency for engagement with consumers today. >> sure. >> there's a very good synergy story here in terms of cost, both on cable networks and news operations. discovery has proved that it knows how to get those synergies. but synergies are not a stock story. obviously, they have captured all the synergies and the stock has performed terribly since the merger. so an open question, whether this is going to do anything for the stocks near term, i kind of doubt it. whether it is a long-term play that maybe the best option is maybe a better way to look at it. >> so that's -- what would the next move on the chess board be? maybe wbd sees an opportunity because paramount doesn't have any other great options. again, we're showing their net debt, so that would be significant for wbd to carry. what would be the next move?

>> well, there's some immediate issues that warner brothers has to worry about, which is the nda sports rights, with cable operators, which is the guts of the legacy business revenue stream. take a real hit if they do not tap through the nda. that's going to be a next-year issue. this deal wouldn't be closed by next year, obviously. this would be something they're putting together the pieces of a merger in 2026, which is a long way off, given how netflix and the technology streamers are going to be going full speed ahead while this creates a lot of disruption. but it would help warner tremendously to have a broad cast network, along with its cable outlet, to be able to navigate the sports world. it would help both companies to have some greater scale.

paramount alone with the nfl has $2 billion a year that it's got to be staring at. so there's some real value here for both companies on the sports front. but i think the way to look at it in terms of next moves is, if they don't have better moves, this is really how do you survive for the next five years? streaming is growing, how do you look forward five years from now to be one of the top three survivors that is when screaming has gotten to a point that it is the de facto way for everybody to watch television that you've navigated the very choppy waters between now and then to survive as a much stronger company than you might if you go it alone. so i think that probably is the way to look at it in the meantime, it's doubling down on decline of legacy assets, which is obviously a very risky

strategy for the near term, but maybe the testbest opportunity these players in the long-term. >> tom, thanks so much. we appreciate your perspective today. >> thanks for having me. >> tom rogers. my next guest says a merger would be a mistake, but he does see value in a potential partnership bundling their content. doug, you disagree with anything tom just said there? >> umm, no. i think he said things i agree with. i think it would be a move somewhat of desperation. i think one thing he didn't discuss is the fact that any merger between warner and paramount would have to go through sharon redstone. she has a controlling voting stake in paramount. ultimately, she would have to be convinced that this would be the

best for her. >> doug, let me just ask you that quecstion. i've been hearing about this for ten years, and the valuation of this company is crumbling before our eyes. what is she holding out for? >> that's a good question. i think -- i was thinking in terms of right now she's rich and she's a media mogul. and if she sells the company, he's just rich. there is a lot of cycle benefit to being a media mogul. so i think if she sees a future for paramount, right, that it continues to exist, and i don't think that's a far-fetched scenario, she may not want to do the deal. if she doesn't see a future, then you you would rather be rich than not rich. so she might be convinced to sell. but this is the other part. warner can't afford to buy paramount right now. i think they're at least two

years away from being able to contemplate that. so this is a stock for stock deal, which, you know, isn't necessarily as attractive if you are looking to exit. warner -- sorry, murdoch sold his stake in fox entertainment to disney. the scripps family sold their family to discovery. these were sort of -- we're selling, we're out deals. we're going to accept a piece of a larger merged company. there's the other issue, which is, you know, given that people currently in charge of regulation in our country, the odds of this deal goes through unchallenged, you would be consolidating two of the major five film studios. >> which is ironic, given they both have a crumbling market position, but i guess it goes back to some of the issues around, you know, legacy broad band. >> yeah, look, warner is still going to generate $5 billion in

free cash flow. that's about as much as netflix. you can say warner is going in the wrong direction, but this is still a very profitable company. you know, no one forced them to put $50 billion in debt on their balance sheet. you know, it's not necessarily the job of the government to say, well, we need to merge these companies because of decisions they made in the past. it's not clear these companies are going out of business by a long shot. i don't think in the near term either of them are. you know, i don't think there is a big call among most of the people in this country for more media consolidation. you know, tom mentioned the three survivors. i don't know that getting to a scenario whether it's three distributors of entertainment content is a place we want to be in. if you think joe biden may lose in 2024 and you could have a republican president instead,

i'm not sure that makes it all that much easier. under donald trump, you know, they did challenge the at&t/time warner merger. this is probably more problematic than that one. >> very interesting. >> so the regulatory hurdles here are significant. if you are looking to a solution that has a very uncertain outcome when you are putting your company through potential think two plus years of not knowing what the outcome is going to be, you know, in terms of employee stability and things like that, that can be a very negative outcome. so it's not a risk-free choice here to put your company through this. >> no, i think that's well said. although given that the current prospects are probably thinking well, doug, give us a better idea. we have to save that for next time. clean up the balance sheet, give yourself some flexibility. we appreciate you joining us today. >> thank you. coming up, over $500 million in freight and thousands of rail

cars are stuck at texas border crossings after government officials closed them for safety reasons on monday. union pacific and berkshire are urging for those crossings to be reopened, but with congress leaving town for christmas, does that leave this commerce in li limbo? that's next on "the exchange."

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welcome back to "the exchange." we're a little off session highs, the s&p up almost a half percent. the ten-year yield is back up to 3.90. let's get back to dom chu. >> among some of the best performers so far today, kelly, are the cruise line operators.

that's thanks in no small part oh what happened with carnival this morning. they reported results, they posted a smaller than expected loss, better than expected revenues. what's more, it was a rosier outlook for the current quarter, as well as the full year. carnival's ceo basically said they see 2024's full occupancy already 2/3 booked and filled at substantially higher prices on a relative basis. so those shares up almost 6%. that's carrying up a rising tide, if you will, for these ships. 4% gains for royal caribbean, as well. the worst performing stock in the s&p so pay today paychex on the heels of an earnings report that was mixed. some clients out there are not seeing as robust trends out there. fewer people getting hired. demand for growth in some of these products tied to payroll processing slowing down a bit. so shares down 6.5%. >> that's interesting.

thank you for that, nugget. now over to bertha for the news update. rudy giuliani has filed for bankruptcy, just days after the former new york mayor was ordered to pay $148 million to two georgia election workers for fa falsely accusing them of helping to rig the 2020 election. a european union court ruled today that fifa and uefa, europe's ruling soccer body, broke competition law by blocking the creation of a european soccer superleague. that league would have brought together 12 of the biggest clubs in the sport. after the ruling, the company behind the super league released a new proposalfor 64 men's teams and 32 women's teams to play midweek, which could threaten uefa's champions league. stranded cargo and soaring freight prices are affecting the

global supply chain today as the fallout continues over red sea shipping attacks. logistics company kune telling cnbc there are nearly 160 ships currently diverted to other routes and carrying cargo valued at $105 billion. at the same time, cargo rates are soaring. a container from shanghai to the uk used to cost about $1900 to ship. today, that price approximately $10,000. thank god that most of the holiday gifts are all in store and on shore at this point. >> that's also why the stocks have held up better than you would have thought. bertha, thank you very much. from one logistics headwind to another, more than $500 in rail freight is halted along the texas border as a record surge of migrants look to cross into the u.s. union pacific and bmsf are urging the reopening of the two

passes to continue operations. these are big passings. union pacific alone moves $200 million a day in freight through these lines, or 45% of their cross border business. combined overall, el paso and eagle pass are nearly $34 billion, or 36% of all cross border rail traffic in the past year, according to government statistics. for the latest now on the situation, we're joined by ian jefferies, ceo for the association of american railroads. thanks for joining us. >> thank you for having me. >> i'm sure it's a challenge one, but what is the status at the border? >> right now, we continue to see the two bridges out of operation, and we understand that the federal officials are dealing with an unprecedented surge in migrant activity and the associated humanitarian crisis that comes along with that. however, at the same time, we must strike the right balance that allows for freight to move north and south across the border safely and securely. as you mentioned, union pacific

alone is seeing a $200 million hit daily of economic activity, and that spreads across our customer base. that's farmers, american businesses, that's american workers who are all being impacted by this. it's time to stop holding american farmers and businesses hostage and allow them to move their goods across the border. goods that so many people rely upon. >> if you could elaborate, what is primarily on these trains? >> well, you have an immense amount of agricultural products moving for export down to mexico. and you have finished autos, auto parts moving north and south. you have chemicals, consumer goods. every time of product that we move, moves in some way, shape, or form either north or south across these two bridges, resulting in about 40% of all straight rail cross border movements on the border. >> have we ever seen a situation like this with commerce halted? >> unfortunately, this is the

second time this has happened in just over a month. and it's something that should not be taken lightly. what we're talking about really is a handful of u.s. agents that are required to staff these brings, to keep them open. and we, again, we understand there's a crisis that needs to be dealt with. but redeploying that handful of agents does very little to support migrant processing, but really, it has a dramatic freight on movement across the border. >> my understanding is that the border crossings are also dangerous as we have seen a surge in migrants. would you have to take measures in your own hands? >> we have seen very little migrant activity coming across that bridge. union pacific stated they have had five migrant encounters of individuals using those bridges to cross. so 100% of cargo is screened

coming across the border, and also visual inspections occur, as well. so traditionally, we have a strong partnership and a very high performing system on those bridges with cbp. >> so there's not been an increase in accidents or issue there is? >> no, we do not see that at those bridges. >> so your understanding is that the authorities who might have previously been keeping those rail lines open simply had to be redeployed elsewhere to deal with the influx? >> that's why we're being told by the administration. >> when is the timeline or the opportunity to reopen those lines being given? what are the -- what are they telling you you're waiting on at this point? how long might it be? >> we have not been given any guidance on that. that's a key part of the challenge is the inability to plan. these bridges should have been reopened yesterday for all the reasons we mentioned. so we're imploring and continue to implore, along with so many other industries and affected

individuals and stake holders to reopen these bridges today. >> ian, thanks for joining us to explain the situation. appreciate your time. >> thank you very much. coming up, the fdic auctioning off more than $30 billion worth of real estate loans. we'll speak with the former chair, next. and check out shares of tesla, up about 2% today. we'll hear cathy wood talk about tesla, musk and more tomorrow on "the exchange." don't miss it. back after thi s. trading at schwab is now powered by ameritrade, giving traders even more ways to sharpen their skills with tailored education. get an expanding library filled with new online videos, webcasts, articles, courses, and more - all crafted just for traders. and with guided learning paths stacked with content curated to fit your unique goals, you can spend less time searching

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>> >> welcome back to "the exchange." 2023 started out rough for the regional banks. silicon value kri collapsed on march 10th and while first citizens acquired svb, a large chunk of assets were sold to new york community bank and the remainder put in fdic receivership, including $33 billion of real estate loans. the sale wrapped up just yesterday and saw some deep discounts.

my next guest started signature's cre mortgage lending in 2007, and originated $35 billion worth of loans with ze losses before his retirement in 2018. joining me here is george klutt. george, great to have you here. welcome. >> thank you. >> so i'm curious, first of all, given your time at the bank, were the loans that ultimately went bad loans that you originated or your team or just walk us through that. >> well, it wasn't about bad loans. signature banks took billions in deposits from the crypto companies. when those loans went bad, then it was a run on the deposits. so deposits flowed out almost immediately within days. that caused the capital ratio requirements to go below what they should be. so why did the fdic close them down? i don't know. signature bank pledged the real

estate portfolio to arrange a loan that would have met the capital ratio requirements. >> i'm glad you corrected me. when i said loans that went bad, the concern with a lot of these banks after everything was then loans that could go bad, but that wasn't the precipitating issue, you're right. it was more crypto related and then a deposit flow. so i guess the new piece of information then would be the fact that when they went to sell this portfolio and sold it at steep losses, what does that tell you about commercial real estate and some of the loans that were on the books going to way back when. >> there was no reason to be taking these discounts. i can give you specifics on each piece of it there. but they're performing loans, very profitable. and why the fdic took this step, they probably should. have shut down in the first place, we can argue about that. but why was this different?

you would normally get a bigger bank like washington mutual, that could unwind it. in this case, they could have kept the signature bank staff in place, alined the portfolio getting much more money for the loans. >> why didn't they buy the commercial real estate portfolio? >> great question. maybe they didn't want the portfolio, but they were criticized just as signature bank was criticized by the fdic that we were concentrating on too much real estate. despite the fact we had zero losses, they wanted to push the banks to diversify into other businesses. >> in that portfolio, what percentage was office? >> probably under 20%. >> really? because i could see an argument

if it were 50%, 60%, they would say the post pandemic trend, we expect high losses. but the rest of it should have been performing reasonably well? >> yeshgs, and this was a shock everybody. just it felt like it was senior management -- the fdic didn't like the fact that they were taking these crypto deposits, and it was legal. but the ramifications to the market is terrible. not only to employees and shareholders, banking, real estate industry in general, but, again,ky tell you exactly -- just a -- >> multifamily was a big part of the portfolio. >> biggest part, good land lord.

>> why didn't the private market pay -- you would have thought this was not the correct decision, it would be a gold mine for someone else to bid on this portfolio. >> it was sold at a steep discount because it was considered a disstressed sale. it took eight months to get to this point. they put it up for sale, and the terms of the structure are very bizarre. axos bought $1.25 billion part of the portfolio, but they bought it at a 37% discount. consider that the appraisals had the loan valued at 59%, yet there's a $400 million discount. make s no sense. you had blackstone, they bought $16 billion worth of commercial real estate but only at 20%

interest at a 36% discount. why not the entire thing? >> who was arranging these sales? was this a closed process? >> it was an open auction and you had to pay a fee to bid on it. but the fdic set the terms. >> did they set the prices? >> no, they didn't at all. they just set the terms. in this particular one, the fdic maintained 80% interest in the loan. would you want to be a partner with the government? >> did they retain ownership in much of the portfolio? >> oh, yeah. they maintained 80% ownership interest. another big company bought $6 billion in multifamily loans at 5% interest. >> i department mean to interrupt you, but what has your experience been like as you have seen the results and do you feel in some ways like you're implicitly being made

responsible for some of the problems at this bank because of the nature in which these sales were made, or do you think this was poorly handled? >> poorly handled. they didn't know what they were doing. the related purchase, they bought it for 69%, blackstone, one of the largest companies in the world, offered of 80%, and they didn't get the bid. the question is why? so blackstone is going to sue the fdic. >> what do you think the takeaways should be for how they handled the collapse of signature this year? >> again, it's just my experience with the government. i've been in business for 50 years, most of it in banking. the last couple of years, for some reason, the orders that came in didn't have any knowledge of the business. it was bizarre. i've dealt with them for many years with no problem. but they're not business people, and this structure, i don't know

where it came from. but for the fdic to maintain a large interest in the ownership of these properties, the big question is, where is the money going? there's over $100 million of cash coming in, where is that money going? how about the creditors, the shareholders, the bond holders? and i've heard nothing about what their plan is to reimburse those people. >> you were one of the shareholders, as well. >> i still am. >> this is not the end of the story. >> no, it's not. >> george, thanks for joining us. we appreciate it. >> thank you. >> george klett. coming up, we're sticking with commercial real estate and how much pain 2024 might bring. and the ai gold rush ctiesonnu, next. don't go anywhere. ♪

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welcome back. still a frenzy around ai shows no sign really of cooling. openai's main competitor is in talks to raise another funding round at a valuation of 20 times this spring. diedra bosa has the details. >> it is 2021-esque, kelly. this is sort of the other generative ai darling, and it was created by some founders of openai who wanted to have more focus -- according to a source with direct knowledge, the company is trying to raise $750 million. menlo ventures would be leading it with a money valuation of $18.4 billion. $750 million sounds like and is

a lot of money, but it's small compared to other funding rounds for openai and anthropic. it's raised billions from amazon, as well as google. this is a traditional move here, this is a traditional move here, because the mega

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alongside kelly evans, i'm dominic chu. stocks are rebounding today after yesterday's late day sell off. coming up on the show, we've got to ceo interviews from a couple of very interesting sectors. first, the splint ceo on cybersecurity. it seems like every day, we hear about a new hack attack. are they hackers? are these ones always going to be one step ahead of some of those companies out there, kelly? >> that's a question and the ceo of group one auto, joining