>> financials and we talked about private equity with money banks and exchanges. there is lot for financials this year. >> the adam parker playbook, healthcare, boston scientific. >> we are negative across the board and we will watch interest rates for the remainder of this day and i will see you on closing bell 3:00 eastern. the exchange is now. >> ♪ thank you very much, scott. welcome to the exchange but i'm kelly evans. here's what her head. devastating wildfires and we will speak with two people directly impacted. one mitigates risk for a living and he's now living that story. he doesn't know whether his home is still standing. plus, a former l.a. candidate and real estate developer whose own kids have now lost their homes. it's a fast developing story and we will bring you the latest. elsewhere, decades away from useful computers or nvidia ceo

undercutting the stocks by undercutting and i mean they are down 40%. we will talk to one ceo affected today who says that jensen's timeline is dead wrong. he joins us ahead to make his case. rates keep rising. tenure heating 4.3% earlier. it was just over five and we will look at why this is happening now and what the ripple effects are everything from the markets to even mortgages and housing. let's get over to the market numbers. stocks aren't as bad as i might have thought. >> they are not. rising rates and maybe general sentiment that is a little bit more coming from those record highs, but still the markets overall are fractionally lower and we are in the middle of a training range today i will give you an idea of what we are talking about. s&p 500 at 5896. one quarter of 1% declines.

at the high, we were up 13 points, so we were somewhat positive and down about 35 points at the lows of the session. we are still watching the 50 day moving average and medium- term trend line. the dow is down 2.1%, as well. 42,446, which is good for about 80 points of a decline. nasdaq composite, 1.5% and 80 points, 19,407. with regard to the quantum computing story, we will delve into the case for those stocks a little bit later in the show, just later on in the show. to put emphasis on the fact that computing, quantum computing and he with quantum among the waves that many traders and investors are actively playing when it comes to the quantum computing trend are now down roughly 40 to 50% of value off of their worst levels, but still to the downside. for instance, i want to show you how much of a momentum

story this has been. one of the big plays on quantum is up about over 776% over the last year. at one point before today, it was up to 1600% on a one-year basis. one year ago, this was a $150 million stock. at the highest, 3.8 billion, which is how much momentum. you can see it has come since mom november after the election. on the yield side, we are fighting with rising interest rates. again, the highest levels going back to april 25th at this point, so 4.675 is where we are at. we were north of 4.7 at one point earlier today. the big story on macro. is it growth, inflation or the bond vigilantes? all of these issues coming up and the narrative will be interesting over the next several months. back to you. >> great stuff. thank you very much. let's explore that questio

. what is driving rates higher? we have full coverage and all angles of this. wells fargo chief economist, steve is at the federal reserve where we will get the fed minutes next hour. working on his grade for the 30 year bond auction as we speak. diana is looking at the fallout in mortgage rates for us today. mark avalon is here with some investment. steve, let's start with you. what you think the significance of this move for the economy is? >> what's interesting is the chart that dom just drew and put a straight line right back to april. all of the relief that we got in anticipation of the fed cutting interest rates is gone. we are back to where we were in the market decided that the fed would be cutting come the summer or fall. let me just go through what we are expecting in the minutes quickly. what we call the minutes militia is coming up. look at how close it was on

cutting. we know that there was a dissent, so that is one aspect of it. we look at the outlook for productivity and the outlook for fiscal policy. those are things with the impact of productivity in terms of raising the growth rate, inflation rate and expectations for fiscal policy both deficit spending and tariffs and what the fed was talking about. we began a segment with this idea, is it inflation or growth? take a look at the difference between the change in the market outlook for inflation versus the change in the tenure. what you find is that at least over the past month, the increase in inflation expectations is only a small part of the rise in tenure. for example, since december 6th, inflation is up 13 basis points, but the tenure itself is up to. if you go back to september on the rise, inflation is more than that, but the proximate cause does not look to be the

inflation expert patients, but it's more what they call the term premium, which is the amount demanded by investors for investing over the longer- term. part of that is the fiscal deficit and part of it is inflation. part of it may be the fiscal deficit along with the outlook for productivity and higher growth, kelly. >> trying to think through this here. we will get to rick in a moment with the 30 year bond results, but how do you think the fed is thinking through this? >> they are watching it carefully and are interested in whether or not there is an issue here. i will give you an issue that is maybe raising its head in the background of all of this. there was going to be all of these financings that were going to take place from debt that came from the pandemic era. we got out of the woods on that as interest rates came down. now, it's another issue. the extent for which some of these financings have to

happen, but happen at higher or similar rates. there could be another round worth worrying about. the 30 year bond auction was top of the hour and one for the record books. the reaction is not what you might imagine. let's go to rick for more. rick? >> first of all, the yield at this auction was 4.913. it was trading 4.92%. lower yield and auction the entire price governments to seller, which is a good thing. that yield i told you is the highest yield at a 30 year bond auction since august 2007. should yields close anywhere towards the upper end of this range on a 30 year bond to 493 and 495 area, that will be the highest going back to october of 2023. if we go to the metrics, it gets an a on every level. solid bid to cover and indirect

and extremely solid, dealers take much less then auction average. they take less than 13% and 10 auction average 15% and this completes the three lanes of 119 billion and coupon supply, so as you look at the charts and see those yields falling, that makes sense. we're over the hump of supply and the concession seems to be how much higher they moved in the last several days. don't forget that tomorrow is a holiday. early closing the government cash market and it doesn't surprise me to see this run of buying pushing yields down a bit, but keep in mind that we test yields that we haven't seen in a whale and even though they are coming down a bit here, i certainly don't think the pressure of upside yields is over by a long shot. back to you. >> appreciate it very much. just returned back to some market applications, j from

wells fargo, i know we are looking at the economic side of things, but this is not an economic outlook and inflation to dynamic and fiscal dynamic. i don't mean bad, but as rates as it could be right now, what turns the tide? >> what would turn the tide is you get good news in terms of the inflation front. if you get a decent cpi print, that puts some downward pressure on yields and another thing would be on friday when we get to the deployment report and a weak employment report. people start to wonder, is the economy starting to soften here? i think it would be the combination of weaker economic growth in terms of the economy, as well as on the inflation side that could potentially turn the tide. >> you see a scenario. does the size of the deficit factor in at all to the outlook for next year?

>> sure. we're talking about it in terms of a cyclical sort of thing and near-term sort of thing. let's face it, the economy goes into a hole sometimes soon and we are not going back down to where the treasure yields were two or three years ago down below 2% or something like that, so you could get a rally in here where rates come back down a little bit, but in order to go back to those lows, we saw them a few years ago and something really bad has happened to the economy just because the fiscal deficit now and debt concerns are so much bigger than what they were even a few years ago. >> steve, the adp number wasn't that great this morning. if anything, yields went to the highs after the reporting even though it was a mess and the expectation is around 150,000. that job support will be another chance for us to test the market. >> that's right. people are calling it the no higher no fire economy. we will take a look, by the

way, at the challenger job layoffs data tomorrow morning that we will get, which will give us a clue as to what's happening. he saw the jobless claims down near a recent low just a tick above 200,000. that's a pretty big deal. we are not losing jobs, but not gaining at the same pace. that's kind of normal. the key from the fed standpoint and shared several times that the job market is not a source of inflation. in fact, the job market could be a source of disinflation through the service sector is indeed you have wages rising at a slower pace. that's a good thing. jay is absolutely right. you need something to take the offer or bring the economy of the boil in the sense that we are not -- one good part about this that is not discussed a lot and they want to see the discussion in the minutes, kelly is the productivity story that we talked about. last week, this notion that you

have this upward move in productivity. said it today what we said last week, which is that it raises the neutral rate and it does allow the economy to run hotter, but it is also a reason why the terminal rate and sense of where the tenure is should be higher for that reason and in that the fiscal deficit. if you got a little clarity about spending from the trump administration and how they were going to deal with fiscal issues, we might come up when it comes to interest rates. >> i agree. i will give you last word on that. what you think is going on with productivity? >> there has been some acceleration going on. is it because of capital spending or technological breakthroughs like ai or something like that? i'm not convinced that is necessarily what it is, but it could be what going on, a reflection of the tightness of the labor market over the last number of years. business is out there and

realize that it's not like we have workers just laying around everywhere, but we've got to do things smarter. we have to tighten up our processes, which may be what's driving the productivity numbers. >> appreciate it today for joining us. jay bryson from wells fargo and steve, we will let you go. when yields rise, mortgage rates are on the move, as well. diana brings us the latest. i can't imagine it's pretty. >> no, it is not, kelly. marching steadily higher and hit 7.71% according to mortgage news daily, which is the highest since early june. one month ago, it was below 6% and home sales were starting to pick up, but higher rates are taking a toll on mortgage demand. applications to refinance last week were down 6% year-over-year and applications for mortgage to buy a home were down 10% according to the bankers association. the realtors had been saying that homebuyers are getting

used to a new normal of higher rates, but that is not showing up to start the new year, at lost least not in mortgage demand. much of that is because homes are just sitting on the market much longer. high prices combined with higher rates are sidelining would-be buyers. the forecast for this year is that mortgage rates will fall modestly, but stay above 6% with volatility. existing home sales remained near the 30 year lows, but location matters. new home sales will remain upright. >> could we get to 5% on the mortgage rate not long ago? diana, thanks. above target inflation will force the fed to refrain from more easing and it's a myth that higher rates, joining me now is mark avalon, president of wealth advisers. this is back-and-forth that mike and i like to just about, but the market action is

significant. rates have backed up to all- time highs for the cycle and were 1800 points higher than we were in october 2023. >> that's right. the market and technology has shown that they can withstand the rise in rates. by technology, i am in cash flowing elite technology. mega cap, large-cap and leading companies and a variety of industries. which is where that phrase does have merit. look, interest rates have gone nowhere but up and tech has been relatively resilient. we heard earlier about productivity. to some extent, companies are getting wiser in the how they operate, but they are seeking out new ways and are using technology. even in a slowing growing economy, we think technology spend and capital spend will remain and that is another reason why we are resilient with our belief that technology is the best sector to be in.

>> people might find it interesting that you are doing that with etf, invesco and this is not necessarily a mag seven play, but there have been a lot of deal chatter the last couple of days. you had shutter stock with a possible deal with the uniform space. it feels like we are starting to get the drum be and that's an area that you are focused on, as well, isn't it? >> yes, it is. we are overrating and overplaying how much the new administration coming in will matter, but not in this area. we think that the market is right and we think it's going to be sustained if not supported by the incoming administration. it will be good for economic efficiencies and stock market. we know from the prior run how important that is to the trump administration. we think that stocks are uniquely poised for this evaluations and and and a related financial firms and

that is why we like the larger financial diversified capital markets, because we do believe that there will be a boom and it will be centered in those mid-cap companies across the board. are you have vanguard, as well. you like hilton and just returned to office, trouble spend and lower cost efficiency. i want to end on the defense sector over the years. this being the space where boeing has a little bit -- may be turning a corner that will help. you are not concerned by any headwinds? whatever might be coming from doge and that is an area that we keep hearing. we need to spend more gdp. >> part of my philosophy is to think about what's being said and from the trump administration and what they are going to do. cutting defense is not something they will do in a big way and they will not cut

weapon systems not in the world that we live in, plus there is a lot of proof about how technology is taking over the war in ukraine. i think we will look at companies like boeing as real leaders for our national defense. if you look at how the sector did in the last year when boeing was one of the worst in the market, it is really impressive. now they are coming off the bottom, that will be really supportive for this sector as a whole. >> thank you for your time. mark with potomac wealth advisers. coming up, nvidia is coming off its worst days of september. stocks are now getting slammed after the ceo warned that useful quantum computers are still many years away. down 37% and one of them seeing a massive run in the past year even with today's drop. it is a small company, but big part of today's story. joins us ahead to make his

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>> and safely as possible, so i could get my kids. the gridlock was incredible and once they got close to my street, which was the heart of the pacific palisades, the cards cars were stopped and people were honking with a lot of panic hoping to get people to move and there was no place for people to move. i actually had somebody tried to pick up my kids and they did pick them up, but they were stuck in the gridlock on my street. they had to park their car and abandon the car and i had to ask them to send my kids running down the street and i was running up the street into the smoke to get them and was lucky enough to get them and be able to make a u-turn and start

heading towards beverly hills to get away from the impacted area. >> you are safe, thankfully, and evacuated from the area. he told me you don't know what happened to your home and you are president of insurance solutions and you are steeped in this climate data and risk and there is a slew of risk firms putting these scores on residential and commercial real estate, including core logic. what do these mean for you and what should they mean for every homeowner in america? >> i bought this house, so kids could go to the school on the same street. i did that knowing that the score from my house was in the 80s out of 100, which is not good. it is high. it is essentially saying that there is a high amount of risk. we did that knowingly and insurance has been difficult to place. we were able to have it placed. over the years, i watched my score continue to climb. obviously and accurately now,

it has been impacted. i think these scores are really important for carriers and homeowners and people who are purchasing property to consider as they are looking at properties. it will e helpful for them to get the right kind of data, so they can figure out how to price risk and attract more carriers to come to places like california as to carriers that leave the state. >> i have so many different questions on what you just said, which was fascinating. now you are visibly going to rebuild the house and i understand what you're saying about the road and we live on a neighborhood like that for the same reason. what do you do now and what do you expect people around you two do? what is the impact ultimately going to be? will you be able to get coverage now going forward? what will happen to the pricing and availability? it's actually surprising to me that you said it was fairly predictable that something like

this would happen, because watching from afar it looks insane that something like this could happen to these neighborhoods. >> as you have been watching the risk scores climb, our area has not had a major fire since 1991. 30 years. the data was starting to show scientists that the risk continued to get worse. if you think about the rain that we had over the last couple of years and the foliage has grown with more fuel. it has become even more risky than it already was. i think the long-term prospects is that we will have to figures this out as a society. it's not just a california wildfire problem and if you think about coastal areas in texas, we have hail risk scores that are off the charts. there are so many different carriers and property owners having to contend with today

and it requires a ton of data to figure out the best ways to price these risks, so that we can get more insurance carriers to be able to write policies, so there are more competition and ability for people to get coverage. >> you do have coverage from insurers and those around you. a lot of them do, but you also know a lot of claims and reconstruction systems going on. you talked about concerns and supply chain. when you have to rebuild this huge swap of los angeles, what will that look like? >> last night, i got a video from a neighbor at a 12:00 with a house just two doors down for me that was on fire and engulfed in flames. last night, i wasn't sure. is my house going to be there or not? i have reports that my house is probably still there. i think it's important for everyone watching to know that even when you see houses that look intact, we don't know what happened on the inside with

smoke damage. the whole area is devastated. there is not going to be power to this area and it will be very difficult to live in. the reconstruction efforts that is going to be required to get specific and back up and running is that it will be massive and require contractors. some are my friends and been in space with me for 20 years. they will be coming from all over the country to try to meet demand. there will be so many structures that need to be remediated and fixed and even ones that you can't tell from the outside. >> thank you so much for talking to us and it must be such a difficult time. thank you, garrett gray. back to you. >> i was going to ask garrett, what are you and the kids doing right now? >> we are fortunate enough that we have a place in palm springs, so we got out of los angeles, because the fires were popping up all over and we were

driving through the hurricane force gusts for hours last night and it was very scary. there were fires popping up in pasadena. we are all safe and the kids are safe. maybe a little traumatized from seeing fire at their school and they saw flames and had to run through smoke to get to us. a lot to process, but we are safe and that's all that matters. the physical stuff is easy to replace or can't be replaced -- can be replaced thanks to insurance. >> you are handling it better than i would have for sure. thank you so much. appreciate you bringing that to us. garrett. has also been impacted by the fires. he is on the newsline now with more details. i don't know if you caught some of that interview, but what is your experience? >> hi, kelly. i did catch a bit of it.

the area is devastated. it's actually hard to believe, as you can see the images. so many of the homes are wiped out and completely destroyed. most of the commercial area is gone and the fire went down to the beach. you have homes along the beach and we have an area with neighborhoods that are just gone. the churches and schools are gone. what's amazing to me is that in this day and age and we have had record wins and certainly a terrible situation, but in this day and age, it's like a third world country and the fires continue to rage on. last night, the reports that i was getting from my team on the ground that were with firefighters, the reports were that the fire hydrants were not working. there was no water. can you imagine? >> have you gotten any updated information?

is that a major issue or any idea why that would happen? >> what i was told and what was reported to me that they mismanaged the reservoir supplying the hydrants and didn't refill it. when i realized that they had a problem, they could get it refilled in enough time. you have blocks being on fire and the firefighters literally had to stand there and watch things burn down. it's beyond negligence in my opinion. we've got to get the community rebuild and support the businesses. of these homeowners that have been devastated my daughter lost her home and my son lost his home. you get through all of that, because you have to support the community, but some tough questions need to be answered about how this happened and the leadership and the void of leadership. not just in the last couple of days, but the last couple of years. the public hillsides and

mountains have not been managed with the amount of brush that created fuel that was just unstoppable and to have the basic need of water. i just have to throw this out. i don't think this is the time that it should be on a global trip. the very basic needs of leadership is to be present. i think there is real questions that need to be asked about how we manage the city and the budget of the fire department was cut by the city council a few months ago. >> we have family and this is an active situation. they are dealing with power outages now and a fire spreading now. united said that they will reschedule flights no charge and no problem, but this isn't just about something that happened last night and is over.

>> that's exactly right. there are different pockets of l.a. county that have fires and it's out of pasadena area. the fire around continues to go and it's moving towards brownwood. we evacuated from our house, so it's an ongoing problem for sure. >> we will leave it there and hope to touch base with you again as it plays out in the coming days. you have your eyes on the ground, like you said. a lot of concerns and we appreciate you taking the time to talk to us. >> thank you very much. take care. >> there is the view from a couple of evacuees themselves. let's get out to nbc steve patterson in los angeles with the latest on the fire. steve? >> reporter: good afternoon. the fire is still raging and this will not stop until this wind event that we are currently in ends, which will not be for quite some time. you can see the damage behind

me. this is multiple homes that have been exposed to the fire and have gone up. we have watched some of these homes burned to the ground and we have seen the full structure and finally reduced to rubble. we are hoping this doesn't happen. firefighters putting water on this home and just a few maybe 20 or 30 minutes ago or so had just started to catch fire and the entire roof has been burned off. firefighters are doing the best they can to put as much water to doused this, so that they can put protection on the next home and you might see behind that home. that home is starting to catch and the results of this are all over the neighborhood like thi . we are right next to pasadena with the fire affecting pretty much all of these neighborhoods in this area and its block by block. you can see multiple homes destroyed across the street and you can see it gathering. we saw this home go up, as well.

this started as a structure that caught fire and just amounts to the ground, thankfully this engine got on scene, so they were able to save the home that is next to for now. i have to emphasize because of the volume in neighborhoods like this, firefighters have stretched so thin and it is difficult to get aircraft to be able to pinpoint and put air drops on some of these claims, which makes it that much more difficult. firefighters have been bouncing and you see them in this neighborhood alone trying to go from house to house, but even as they work on one pocket of embers from the wind gusts, they will carry those embers to the next roof and that will catch on fire. again, until the wind dies down, which we are still in this event, there is not going to be much to be done to stabilize this until this happens. meanwhile, firefighters continue to do the absolute best they can and they are in an emergency life-saving

protection standpoint. the homes, we don't know how many have burned. i have seen untold dozens driving around. driving through, by the way, the wind damage that we are seeing 60, 70, 80 miles per hour wind gusts and just that alone is a story unto itself and it looks like the apocalypse here. kelly? >> thank you for bringing that report. we appreciate it. steve patterson. let's get the brian sullivan for the cnbc news update. >> tough story to see you there. talks with the taliban and americans detained in afghanistan. the taliban leader telling nbc news that they are demanding nationals to be released. he didn't name the three americans who are accused of things like spreading christianity. on a similar note, the prime minister announcing cecelia is back after she was freed from an

iranian prison. working under a journalist visa was detained after an iranian businessman was arrested in italy for allegedly supplying joan parts to the u.s. and were said to be used to kill three u.s. service members in jordan potential good news around the cost of college. new research from the college board shows the average student attending in-state public university paid just over $11,600 a year in tuition and that is actually 4% lower than 10 years ago. sadly, that does not factor in the out-of-state tuition for a private school. back to you. >> it's something, but not the whole story. we will see you next hour. shares are dipping lower and asking permission to buy a huge amount of cocoa through ice futures. more than nine times the amount the exchange currently allows. the request comes at several years of cocoa shortages have

prices near record highs. they had them briefing in today's trade, but are now back in the red. coming up, quantum computing stocks lunging after a ceo says that we are years away from that being useful. the ceo of t qntheuaum computing name hoosiers about 36% today responds. that is next. n it! that's right craig. pulling in the perfect team to get the job done. i'm just here for the internets. at&t, it's super-fast! you locked us out?! and when thrown a curveball... arrggghh! ahhhh! [crashing sounds] we had everything we needed. is the internet out? don't worry, we have at&t internet back-up. the next level network for small business. ♪♪ i sold a pillow!

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welcome back to the exchange. cold water on quantum computing during nvidia's analyst day saying that we are decades away from technology being useful. >> you said 15 years for very useful quantum computers and that would be on the early side and 30 is probably on the late side, but if you picked 20, a bunch of us would believe it. we want to help the industry get there as fast as possible. >> said the same thing when he was on the other day, but it's different if it comes from huang. quantum computing names down sharply today. we are talking about 45%. granted, they have been on a massive run after google or microsoft said that google

developed the quantum chip and it shares up more than 560% in three months and it is dead wrong. that brings us to today's tech check. joined by ceo alan baratz. welcome to both of you. >> it was google, indeed. before we get to alan, a little more context. it stood at around $200 million last year and shot up to nearly $3 million after the breakthrough spurred a surge in the sector and it's now down 40% on the session. thank you so much for joining us and making the time. tell us what exactly huang, the leading authority on the future of computing is getting wrong here. >> thank you for the opportunity to be here. i appreciate it. i think that he is a very smart individual and has built an amazing company. he may be the authority with

many aspects of computing and all aspects of computing and certainly not quantum computing. in this case, he's dead wrong. we are commercial today. we have companies like mastercard or pattison group that are using our quantum computers today in production to benefit business operations. not 30 years from now or 20 years from now or not 15 years from now, but today. moreover, we have been able to solve problems on our computer in the area materials simulation in minutes that would take well over millions of years to solve on the fastest, which by the way have been massively parallel computers. they should think a little bit about that. we are solving problems in minutes and it would take millions of years to solve them

on massively parallel systems that he provides. i would be happy to meet anytime and anyplace to fill in these gaps. >> i got the opportunity to get to know him a little better over the last month or so. your approach is very different than what huang is talking about. it's limited to optimization problems and you don't play in the same field. is that correct? >> no. when we say we are limited to optimization, that is not an accurate statement. we are very good at solving optimization problems. frankly, optimization represents most of the important problems that businesses need to solve, so we are proud of the fact that our computers excel in that area. that's not the only area we play. we play materials simulation and we play quantum photography and cybersecurity. we play in a

broad set of areas. you are right. we have taken a different approach from everybody else in the industry and that is what has allowed us to become commercial today. >> what you just described sounds like what generative ai promises to do. optimization promising relations et cetera. if the wave is offering better, then why aren't you valued like a a.i. company? why is it contracting in the latest quarter? >> first of all, with respect to bookings and revenue, all i will say is that our business is actually growing nicely. i am very forward --. >> was there an exception? revenue was down 27% in your latest quarterly report. what happened? >> as i said, i'm looking

forward to sharing our fiscal 2024 financial and operating results when we report earnings. stay tuned. now, that having been said, a.i. and quantum are not competitive to one another. there are some areas where you might be able to use both systems and i talked about materials simulation, but we are so far ahead of what massively parallel gpu could do in an area that i don't even do that as competitive. when it comes to optimization, there are attempts to use it to solve optimization problems. it's not necessarily their sweet spot and that is an area where i think d-wave and quantum computers excel. that is why we are working with companies today to support their business operations. >> just to be clear, you are saying that it does play in the

same space that jensen is talking about? i know that there is different approaches to computing and the gate model. i don't want to get into that. you are saying that huang has it all wrong? >> what i'm saying is that huang does not understand what you just said. there are different approaches to quantum. the two primary approaches. while his comments may not be totally off base for model computers, there are 100% off base for quantum computers. >> we watched it back. from dead wrong to not totally correct. you walked it back a little bit. >> hold on. when it comes to quantum computing, it's dead wrong. we are not 30 years out or 50 years out, but we are today. we are supporting businesses today with quantum computers solve their heart problems. in that sense, he's dead wrong.

there are approaches to quantum computing that it will take longer to mature. >> okay, there's a lot of nuance, but we really appreciate you taking the time to come on and respond to those comments. thanks very much. >> appreciate your time. >> i had the popcorn out for that. i appreciate you both. thank you for today's tech check. coming up, private credit is booming over the past few years and over the past decade, really. everyone to public pension fundartrngs e yi to take advantage. we did get into the risks and rewards for the investors big and small, but one of the biggest private lenders blue owl joins us next. (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is.

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the global private credit mark pick market to more than $1 trillion as of last year. it has nearly quadrupled over

the past decade and more traditional managers piling in. .72 announcing a new strategy saying that credit demand continues to exceed supply. blackrock went on a $30 billion credit buying spree last year, plus the perfect first private credit granting individuals assess. lack of regulatory oversight is among them. j.p. morgan has $10 billion set aside , drop in the bucket for them to compete in private deals. let's bring in to see how ceo of blue owl capital. it is great to have you here, mark. welcome. >> terrific to be here. thank you for having me. i'm sorry about the context of the tragic fires and we have partners and lots of players with them. thank you for having me here. >> appreciate that, of course. a lot of the real estate developers that we talked to, a

lot of them say that they are turning to private credit for financing. >> one of the megatrends, if we want to use that word is the migration of more traditional asset markets into the private markets. you are hitting on one of the core themes that we see this year going forward. we have one of the best in the business and lending. the kind of lending you are talking about properties and residential packages is exactly what it provides. i think direct lending is that we will see a similar migration from those public markets into private markets offering large cap durable solutions. >> as you know, it goes where it needs to. at some point, if people can't get a loan, it will turn to private credit and say, at least this is an option. they have to hold capital. what about the private credit world?

>> we all focus entirely on credit management. the key for us is that we have long-duration capital and we use very little leverage. thankfully, we have been able to originate over $100 billion of loans and have a 10 basis point realize loss basis rate. we have losses that sound more like ig losses. however you will, the bottom line is unlike a bank, our money is locked up. unlike a bank, we don't use much leverage. most importantly, we don't have any depositors. there is nobody standing behind us. this is private capital taking on a well-managed risk in the hands of a professional investor like blue owl appeared as one of the banks in the financial ecosystem. they are complementary, but structures are very different. >> that's interesting and we did learn from long-term capital management that if you are systemically important and

i'm not saying that blue owl is lt cm, but interns in terms of size, -- that's all i'm saying. the other dynamic i'm thinking about a lot is interest rates. the higher rates are, the better investors will do, but can the companies afforded? a lot of it is floating dead? >> it is. higher for longer environment, which has been what we have anticipated candidly for the last 18 months and it's clearly the consensus as a directional matter is very good for our investors. you phrased the right question. it's very good. there is a level of interest bills and burden. they are too troubling for them to carry. we stress tested that. the thing about private credit as we run a lot of years through a lot of different environments through covid, the bank meltdowns, silicon valley bank, high rates and we have

well over five and we tested the statements as the owners of these businesses. the great news is that it works. they are durable to any current rate levels or realistic bands around them. surely, there is a version of hyperinflation and rates that would not be manageable, but i don't think we have a realistic expectation. >> the growth speaks for itself. i am waiting for the big talks. you know what's coming. maybe not in the next couple of years, but at some point you know it's coming. >> we understand that and we know that it's transparent. any regulator and the key point is that we have capital that is from a private group with another private user and committed in much term to its use. we really provide a stabilizing force and not trying to overstate this in a societal setting, but it's better to maturation and risk and put it

with private lenders. >> like any new thing, there will be a lot of questions. again, this is what is financing the activity going on. so be it. it's here to stay and it's the size of private equity. it's amazing. we've got to go. it's great to have you on and hope to have you back soon. >> i look forward to that. nice to have y moue. >> that's it for us. got to go to get to those minutes. brian sullivan will join us for powerlifting right after the break.

welcome to power lunch, everybody, alongside kelly, i am brian. stocks have turned lower. bond yields are pulling back, but they were the highest we have seen, kelly, since april. the rate spike causing stocks to sink. >> as we are saying this, we are back at 471 on the 10 year, as we get the minutes coming out right now. steve, do tell. >> the federal reserve, at its december meeting, was at or near the point, after cutting by a quarter, of slowing its policy easing. the rate cut that they did enact was seen as, "finely balanced." it was a finely balanced call, and some wanted to not cut at all. that is more than just one dissent. not everybody has the vote