health care, i'm looking for companies that have they have new exposure of 60%. >> and jpmorgan in front of earnings on friday >> all right, thank you, everybody. i'll see you in overtime "the exchange" begins right now. thank you, scott i'm kelly evans. here is what is ahead. ftx is back in bankruptcy court today. lawyers say they have recovered over $5 billion worth of liquid assets, but it still leaves them about $3 billion short of what customers are owed congressman jim himes will be back to weigh in on what needs to happen. and remember when they wanted a bailout apollo was a firm they turned to david sambur is here and we'll ask him about that and where he sees most opportunities.

and another airline mess, this time an faa outage grounding flights. we'll check in with a veteran pilot who says what we saw today is simply extraordinary. but first dom chu is glad who is not flying >> glad i'm right here in new york city and i'll be here for a while. so what we do have is a market that is generally higher and tilting toward the higher end of the session right now. it is green across the board for the three major indices. the dow industrials up about 125 points s&p still just a notch below that 39.50 level, up about 27 points or about two thirds of one percent. at the highs of the session, we were up 30 points compared to the up 27 we're at right now lows of the session still up nine points. nasdaq composite up over 100 points, 10,861, north of 1% gains there. the tech trade is being driven in part by some relative strength that we're seeing in

certain key partsof the consumer discretion 23ary trade. specifically tesla it is up 2% today, some positive headlines about its planned expansion, its texas gigafactory helping drive things and tesla shares up about 2.5% meanwhile online retail doing very well today. amazon and etsy both up about 4% and 6% and you can see about expedia and booking holdings, positive driving trade there. and then one place to keep a close eye on, it has been a lightning rod of the stock given the fallout from f tchttx coin base shares are up fractionally speaking. it did though earlier get downgraded by analysts from bank of america they also cut their target price to 35 bucks. it was 50. they think that their revenue estimates are now below street

consensus for a number of different reasons. but still coinbase still trying to find its way right now after a really tough year even with the volatility day to day that we've seen, it still lost about 82% of its value the last year hence any massive move is still coming off the low base. back over to you >> dom, thanks and speaking of cryptos, ftx telling a bankruptcy judge they have recovered at least $5 billion of liquid assets including cash, crypto and securities something, but still leaves a $3 billion hole for more on the efforts to regulate crypto, let's welcome back jim himes of connecticut. good to have you back. >> thank you >> what strikes you mostabout what we're learning in bankruptcy court >> not a lot of surprises there. the number $65 bill of $5 billi found, we'll see where that ends up if you are me, you were interested by the judge's angry response to senators who suggested that programs cromwell

might haven come flikts. but it really comes back to for us anyway who aren't in the judiciary, this really comes back to the question of it is not just ftx, right? you saw the big settlement announced by new york state against coinbase, a lot of questions about binance. it really is up to us now to act to try to put some blanket of safety, some hopefully transparent and smart regulation to avoid what happened at ftx and what is going to keep happening as long as the entities are not sufficiently supervised >> at the same time when we spoke with a couple experts who have different views on yes or no, the question of whether crypto should be regulated, one area they agreed upon is that legislation is not the right answer because it is like the early days of the internet so imagine if we tried regulate crypto now, do we just need to

let the dust settle and pick up legislation in five or ten years? >> well, i might suggest that if your expert had included somebody who lost their life savings in ftx, they might have had a different view the point is a good one in this place where i work here, i will tell you very few members of congress are fully up to speed around the technology, around the how we test, all the elements that are important. but i disagree that there is not more that can be done. we're in this weird vapor lock because the position that you describe is basically the position of the chairman of the s.e.c. gary kinsler. he said existing laws are sufficient, the problem is that people aren't complying. >> or they are not enforcing them either. certainly the s.e.c. does not come out looking great here because if ftx indeed is a security, or ftt i mean, then they are shugt the barn door after the horse has left so the best question, are they

already protected through enforcement of existing laws >> there is a lot of issues around that. and i'm not sure that gary kinsler is right that there is no sort of change in law required that is where he is. but if he's right about that, he needs more resources or he needs to uptick the rate of enforcement because you still have enemies out there coinbase which i've thought of as the gold standard of being smart and prudent about what they do just had a $100 million settlement with the new york state banking authorities. no one knows what is happening inside binance and that is not a good status quo. and as you know, ftx was not a u.s. entity. it was in the caribbean. and so it does feel like there is one way or another either through more enforcement or more clarity in the law a way to avoid people losing their life savings as they did in ftx >> i suppose the concern is that you don't solve the ftx issue which was outright theft and you enshrine crypto as part of the

financial system in a dangerous way if you quote/unquote regulate it. we're talking about ways to actually allow it to play by the ruleses. if you do that, everyone will be hustling into the space and doesn't that introduce more risk >> what you are really worried about is what you saw with ftx where people -- hopefully they have some sense of the risks that they were taking when they put their money into cryptocurrencies this is not united states treasuries hopefully they had some sense of that but they may not have what you really care about is protecting those retail consumer, the proverbial widows and orphans that might be tempted to get in to something and lose their life savings, and then the systemic risk that could be transmissible we saw massive risk transmission inside the crypto industry but it really didn't cause too much of a flurry inside the traditional banking system but i do think that in a world where $2 trillion have eva evaporated in the last year, we

at least want to take a look and say hopefully those losses are being born by people who took a thoughtful risk rather than fors a good place to put their 401(k) money. >> and i'll switch gears with you. what is your reaction to the debacle with the faa this morning? what is your initial reaction? i'm sure there is tons of people in your district affected by this >> it is infuriating and of course the american flying public just lived through a nightmare during the holidays caused largely by antiquated information technology plsystem and now the government systems go down as well. one less aon i can extract, we have mid 20th century technology so i'm happy that we passed a bill a year ago that will help but an awful lot of my -- i saw a comment by senator tez d cruz who is out of his mind angry

about this and in the congress we have to get serious about making sure that companies like southwest are motivated and it will be the market ultimately that pushes them to do so, but they are motivated to not inconvenience tens of thousands of people and that we have our government infrastructure where we need to be remember, it was not that long ago that the congress of the united states handed billions and billions of dollars no questions asked to the airlines. so to me anyway it feels like a moment for them to step up and bring far better, not far worse service than they were providing pre-covid. >> and i think they would say did the faa make the right call with grounding the flights it is certainly not their problem. >> i'm not saying that they are responsible for what happened today. today was an faa decision. but they are certainly responsible for what happened over the holidays when an awful lot of people got to spend christmas lying on the floor at o'hare >> i take your point congressman, always appreciate your thoughts. as ftx was collapsing, sam

bankman-fried was looking for funds. and even would firm that turned down his request as the platform crumbled was apollo global management joining us you no to discuss, co-head of private equity and also seema mody. welcome to you both. david, we appreciate your time here and i think the main question coming out of the ftx collapse is -- i guess let me ask it a little differently anyt that period of time? >> regarding considering for a very short amount of time financing? >> yes. >> it wasn't something that we gave a lot of thought to it is true that we got a phone call looking for financing in a short time line. like happens to us quite a bit, we welcome those phone calls but ultimately the deal wasn't able to come together >> why is that, what was it that gave you pause

>> to be frank with you, it wasn't like we did so much work, the time line of when we were approached versus when they filed was very compressed and we just never got into a substantial amount of due diligence. >> and we've seen valuations come down considerably looking at 2023, where is apollo looking too deploy capital? >> good question we like to buy stuff cheap that is what all investors should like do there is certainly more cheap stuff now than there was a year ago. so we're excited about the deal environment. however, there is not a lot of debt financing available so for firms like ourselves that have shown our ability to finance deals when they are tough and hung with still a $50 billion of debt, the industry being quite clogged, we've shown an ability, whether it is atlas

where we financed 70% of the purchase price ourselves, this creativity around sourcing, around instructing, is really going to be key for 2023 and that is going to be the theme for deploying capital. how can you get a deal done in a market where financing is really very hard to come by >> you've also grown a really robust travel and hospitality portfolio, taking atlas private, an invest him in scandinavian airlines i'm curious your reaction to the faa grounding all flights. does that change your investment thesis for this industry this year >> we're still trying to figure out exactly what happened today. i listened to your last guest. i'm sure there will be a thorough investigation thank goodness it was just a very short delay i say that personally because i actually flew home last night and i'm glad i wasn't call up in this i do think long term the

question of information technology systems, whether it is in the travel and leisure space or really any industry that we look at, from a due diligence perspective, there is a lot of antiquated software out there in america and from a risk and also an opportunity standpoint, it is something that we spend a ton of time focused on. we have a great team internally. we have an internal operations team that partners with our deal teams to help us due diligence these things and frankly we didn't spend as much time on ten years ago and it really is fundamental to basically every investment regardless of what industry. but of course also in the travel and leisure industry you mentioned venetian, and you wouldn't think that it is necessarily the most complicated property or investment to have it is a hotel and casino in one location in las vegas market, largest hotel in america, 7100 rooms. it had very, very old technology

systems. still a very great property, have record earnings this year, record months in june and july but we are spending significant amounts of capital upgrading the technology system there to make the experience better for consumers. >> sounds like southwest could be a candidate there for some improvement. where do you see when you look across the landscape of companies that could go private or valuations that have crumbled to a level in which a lot of people say private equity could be a major buyer this year, could you give us hunts of what might be in the pipeline, places, sectors we should be focused on >> sure. so we do buyouts, so buying mainly public companies, carve out transactions, things like buying yahoo! from verizon or have a knee van from las vegas sands. and then we do deleveraging transactions this is helping companies that are overlevered convert essentially debt to equity, it delevers their balance sheet

if you think about the themes for 2023 and beyond, we've moved from a world that was a wash in cheap capital and you have a chart up that is showing the spike in m and a bonds in 2021, that has been highly correlated with record amounts of cheap capital, in retrospect the peak. now capital is much more harder do by and more expensive deal volumes are coming down both in traditional m&a and lbo. so i think where we're focused is on opportunities where we could buy great a. great company at what we now think is a great price and we could get the deal done and create a financing i think will be the name of the game for 2023 the other big opportunity and that will be for 2023 and beyond is deleveraging capital. so if you think about it, we've had essentially ten years of negative real interest rates in america and real interest rates are very correlated with

defaults and so we've had very low defaults the last ten years. so many companies that had their capital structure designed for a world where capital was fundamentally cheaper and it was much more applicable than it is currently. and these are companies that will be overlevered, that are never going to on grow really into their capital structures. and this is not going to play out like in 2020 and in the gfc crisis where it was like the world was ending and there was this quick, you know, scary moment in time where businesses needed to deleverage my belief is that this is going to play out over really the next two to four years and you will have companies that are just going to reach the end of their maturity one way and they are going to need to deleverage because the market is unwilling and unable to continue to finance the companies tothe level that they were previously financed that is a huge opportunity for us historically, a third of the capital that we've invested in our private equity business has

been these types of transactions and you asked about what things we're working on we've already put significant amounts of capital to work in our current fund in this strategy and there will be deals that get announced as soon as the next month or two where you will see us do this. and it will be something that corporate america needs, we need to reduce the level of debt in corporate america. >> all right and then a question ahead of time, given your vast portfolio, do you see inflation peaking? >> we look weekly and monthly and we are finally seeing costs start to come down in most categories i think it is very welcome in some pockets we still are seeing inflation i think food is something that has been talked about quite a bit. we do own grocery stores and we are seeing product costs continue to go up in certain categories eggs is something that got lot of press that is real. i did call my partner that works on supermarkets and he confirmed

the story. but by and large we're seeing costs come down, which i think is very welcome. 2022, the story of 2022, is really valuations coming down. i think the question for '23 is what happenings to earnings and this movement from inflationary period i think to a period where maybe it is harder to keep pushing price and costs are cresting, i think the real question is what happens to fundamental demand in 2023 and do we see earnings in the market come down or not. i think the jury is out. if you look at where we are now, it is hard to say inflation has been bad for companies if you look at s&p earnings, they broke out from the trend line over the last year when we've had some inflation and if you look at the earnings for our portfolio companies especially in the travel and leisure sector like you asked about, they have been record-setting earnings. so if we were to stop where we are right now other than the impact on valuations, impact on corporate earnings i think has been a clear positive in most

sectors. and i think it remains to be seen as costs come down what happens to revenues. >> we wish we all could stop the clock right now. if you could do that, that would really be helpful for everybody. thank you for all your time, we really appreciate it >> thanks for having me. >> david sambur. and still ahead here, emerging markets outperforming the s&p 3:1 and next guest says china's reopening will only fuel that should you chase the trade and here is a look at flight aware misery map. this morning's faa outage grounding flights across the country. we'll speak to a former pilot about this fallout ahead and let's also get a quick check on markets you can seeing about the 10 year yield.

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welcome back to "the exchange." ten year auction, all eyes on yield. let's get to rick santelli for the latest what do you see? >> i gave the grade an a-minus, it was a very solid auction. 32 billion tens, the yield

3.575, which was a smidge higher -- excuse me, lower than the kreeld yield at the one issue market. that is always a good thing when you are on the sell side like the u.s. treasury. if we look at all the metrics, everything was an extreme to august bid to cover, best since auction. indirect at 67% very healthy, best since august. only fly in the ointment was that the direct bidders at 17.9 was the worst since august, but still a lofty level and once again dealers taking less than ten auction average, that is always a good thing. and in lieu of tomorrow's cpi, you don't see a huge amount of movement as you look at the intra day ten, but as you look at the markets over the last five or six days, we had such a substantial drop after nonfarm payrolls and the employment report the fact that we've been unable to jump back into that range speaks volumes tomorrow i think there is one thing you need to know, year over year core, if it is under 6%, buckle up, watch the stock

market rally big time and watch yields move aggressively lower that is my call. back to you. >> speaking of which, are we already seeing some fed speak? susan collins sounds like she could lean toward a quarter point hike >> i wonder if she has the number tomorrow. no, most traders understand that fed officials do not see early number, but i'd happen to agree with her, i think that there is plenty of information already in the pipeline that prices have decreased in intensity we all know that the service sector is a little bit sticky, but they have been coming down also and there are pockets in the service sector that will probably resist because of the labor side so we'll have to really monitor some of those first friday of the month employment reports >> absolutely. thank you, rick santelli and now with the bond yields showing signs of recession, you saw how demand was for ten years. joining me now is mark smith at wells fargo advisers great to see you again, mark

what do you think? there is an alternative to the stock market these days. where would you put your money >> until the fed figures out what they are doing and we see the numbers rise to inflation and whether we stop these hikes, i think a great place to hang out is in the fixed income world. i know it is boring, but right now with all the uncertainty, boring is good because really nice yields. i have clients going out in treasuries and god forbid cds doesn't give a dime, but almost 5% this is a great place to hang out while we find out what the fed is going to do only way we find out is by looking at the numbers and seeing how earnings are coming in, how inflation reports are coming back. all these rate hikes haven't really affected prices of homes. so i think that we still have some pain to go. >> i appreciate what you are saying that to you, it makes sense that people might be

looking toward cds it is kind of the honest way to put some cushion, what would you call it, in your portfolio not that you don't like equities you are kind of interesting in energy, maybe some of the financials as well maybe just depends on the strategy the type of client. you don't strike me as a guy who thinks that it will be a great year >> i'm just looking at 70% of portfolio managers are thinking recession. maybe not a deep one, but a shallow one. and so with that being said, what do you do with that information. well, xle i think is a great place because china isjust now reopening in the last 60 days. one of the world's largest populations. you have to believe when they are back online, the energy price should spike and you also have to look at all the different reasons why you should own financials, right interest rates going up, they are one of the few sectors that continue to outperform their valuations really haven't

come back to the degree that you'd expect given how high rates have been. so i really like the large banks and financials specifically in the u.s. >> and then finally, any other parts of the fixed income space that you would or wouldn't be looking at there is a big debate about corporate credit you heard what apollo said where they talking about the possibility for companies triggering higher defaults but it could take a couple years for that to work through so mid teen yields or stay away from it? >> it is all about your risk tolerance. but i have to tell you, if you are thinking recession, no way i wouldn't want to go and get high yield corporate debt that is the first thing that will fall. if you want yield, i'd stay in the higher quality end of things specifically in munis. but if you have 10, 15 year time horizon, let's load it up. >> all right, mark, great to see

you as always. still ahead, another rapid price target cut tech giant still has a few tricks up their leave. we'll look at what tim cook is cooking up plus major mortgage player stepping back from the market. what is driving the decision and a pulse check on the sector overall from buyers to brokers and builders

welcome back to the exchange looking for any movement after the comments from the fed, susan collins implying she'd be open to just a quarter point rate hike nasdaq still leading the way

dow up near 172. mega caps we've seen some outperformance especially in amazon, up another 4.6% today. it is up 9% since monday for its best week in two months green across the board tyler now for a cnbc news update >> and here is what is happening. the embattled republican congressman george santos being urged to resign by top leaders in the district he represents in new york one of them says santos lied about his resume and has disgraced the house of representatives. house speaker kevin mccarthy says santos will not be serving on any key committees. santos tells nbc news he will not resign house republicans have opened their long promised investigation into president biden and his family the house oversight committee has requested financial information from the treasury department and testimony from former twitter executives. the white house calls the probe a political stunt and criticized republicans for not doing anything significant to address inflation in their first week controlling the house. and government regulators

are not looking into banning gas stoves head of the consumer product safety commission made the denial after one commissioner said a ban was on the table. instead the cpsc will look at gas emissions from stoves and ways to address any health risks. as you may recall yesterday, there was some discussion that gas stoves may be linking to severe asthmatic attacks in some kids >> still feels like a move against them is coming new york is considering banning new hookups and that kind of thing. but for now perhaps a reprieve still ahead, the faa has lifted its nationwide ground stop following a system outage, but the delays continue. you're looking at a live shot of chicago's o'hare airport next guest calls the events extraordinary and he should owhe fw mmkn, lecoercially for more than three decades. ome to d bark-ery. oh, i can tell business is going through the “woof”.

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and no word yet on what exactly caused the outage of the notice to air missions system but it comes amid an already difficult time bitter cold and storms caused massive disruptions around the holidaysincluding more than 15,000 cancellations for southwest. layer the ongoing pilot shortage on top of that, it feels like a perfect storm. joining us now is a former american pilot with more than 30 years of experience. great to have you here welcome. >> good to be here >> do you think it was the right call to issue this nationwide system grounding this morning? >> well, before i answer that question, let's reassure our passengers that safety was never a major factor in this and what happened was extraordinary just an anomaly in my opinion but, you know, at this point it is incrediblethat this actuall

had to shut down the system. but the reason, these are informational notifications. so we've been talking about this throughout the morning and the afternoon, but it is called a notam which is notice to air missions and essentially it is information about equipment that doesn't work or is in-operative for a temporary period of time, approaches with higher minimums because of approach light systems that don't work, air space issues, so on, so forth. >> so you are saying these are important updates but it wasn't a life-threatening situation, which again raises the question of was this nationwide halt necessary. >> i believe it was because this is a critical part in the pilot's pre-flight notebook per se before they start out on their mission. it is very important to read

what might affect their particular flight, whether it be air space issues, problems on the ground like a taxiway closed, runway closed, that is very important and it is an faa requirement, it is a pilot's responsibility to do that. >> closed runway to me could have been a life or health issue certainly. but let me ask you this, plenty of people are saying was this an attack of some kind, a hack, could it have been a coordinated effort to target a system like this from your point of view, would that make sense, is that reasonable thing to ask about? >> well, it is a great concern, but relatively speaking, the notam system that apparently closed down air traffic control is a very minute part of that system so if it was going to be some sort of cyberattack per se, i think that it would have been on a much broader scale having do with controlling the aircraft

directly >> although if you could make a small one with the same effect >> true, but i have my doubts. i really feel just from the gut that this was a computer glitch. >> we hope regardless there is a lot of investment poured into modern size these systems. we've spoken in the past about the need to update for instance the radar. there is new technology available but our systems are a little bit behind. does this expose a larger weakness and as a pay lot, what you think need to be the most important steps? >> you bring up a good point we have the next gen system installed but we're still doing that in coordination with old fashioned radar systems, which i don't see that going away, you know, in the very near future. but it is unrepresented to what happened today for the most part could it be updated? honestly, what we need is redundant systems. so if that kind of thing fails,

do we have a system in place, a a protocol in place, albeit manual or some other computer program that can take over and prevent this from happening. >> this would be more direct concern to airlines and to their investors, do we need a system that compensates passengers better for these kinds of cancellations and delays whether caused by the airlines themselves, by the air control systems as they feel like they are becoming more frequent what do we need to do here >> in this particular case you are sort of operating in the system at your own risk unfortunately as pilots and airlines, we have only one choice and that is our air traffic control system and in this particular case obviously it wasn't the fault of the airlines if it is, then indeed the reaction should be for the airline to compensate passengers, you know, with regards to hotels and expenses and so on.

and i think our secretary of transportation is pushing heavily in that direction. >> i would think so. we'll leave it there for now, les, thanks for your time and expertise. still ahead, we're only halfway through the week and there have been a ton of headlines for apple. the stock up as well we'll look at why the shares have suddenly changed their course, next [music playing] ♪ imagine something of your very own. ♪ ♪ something you can have and hold. ♪ ♪ i'd build a road in gold just to have some dreaming, ♪ ♪ dreaming is free. ♪ accenture, let there be change. hello, world. or is it goodbye? you know, it seems like hope and trust are in short supply. [clap] now, as businesses we can blame and shame.

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shares of apple are higher despite reports that app store growth is slowing and they are looking to become more reliant on manufacturing steve kovach is back with us app store seems to hit right at their achilles' heel >> and this report came out yesterday, they put out a press release every year saying look how big the app store is, but really it is the only insight we get from apple specifically how well the app store is performing

and you can kind of -- the math is not perfect, a little fuzzy, but cnbc.com found basically it is kind of flat the spending there, and it also backs up what tim cook told me last earnings, he blamed a lot of weakness in the services to a fall in gaining spending and data a aai tracks it and th said that gaming apps were down. >> and i did see that twitch, user ship, is down as well from pandemic levels. which of course makes sense. so let's go back, recently we talked about being bearish on apple. and i said what about services spending an all the rest of it and his point was a lot of app store purchases are not subscription as a service, they are one time essentially so if you have a pullback this

consumer intending, those would be effective too it is not as if they are locked in this does illustrate that these are open to the same winds that blow the consumer one direction or the other >> exactly and you want to talk about the subscriptions, apple did say they have a new record of subscriptions. this is not just those who is you been describe to music services 900 million subscriptions is not nothing and that is recurring revenue that apple gets a slice of every time. so if you are looking for optimism in the service story, there is that. and another new headline if you are looking for optimism is that apple maps update. it might sound weird, businesses can go into apple maps, make sure their phone number is right, but you can see this laying the foundation do exactly what google does with googlele maps you are cruising downs highway and you have google maps running. dunk dunkin donuts paid for

that and so clearly there is a lot of opportunity there for them to monetize apple maps. >> don't count them out. steve, thank you very much still ahead from the latest mortgage data to homebuilder earnings, we're getting a complete check on the housing sector, that ine he "the exchange.

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i screwed up. td ameritrade. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles. that's why i do what i do. that and the paycheck. i screwed up. mhm. i got us t-mobile home internet. now cell phone users have priority over us. and your marriage survived that? you can almost feel the drag when people walk by with their phones. oh i can't hear you... you're froze-- ladies, please! you put it on airplane mode when you pass our house. i was trying to work. we're workin' it too. yeah! work it girl! woo! i want to hear you say it out loud. well, i could switch us to xfinity. those smiles.

that's why i do what i do. that and the paycheck. tons of housing headlines lately diana olick has the latest read on buyers with the mortgage apps and also wells fargo is taking a big step back. and also outlook on the builders diana, kick it off >> mortgage rates dropped sharply last week and that drove refinance demand but did little to excite potential home buyers. average rate on 30 year fixed dropped last week to $6 6.42% f loans with 20% down. the drop in rate sparkeda 5% weekly applications, but volume

still 86% lower than the same week a year ago. even with rates lower than over 7% last fall, at the current rate just 270,000 borrowers could actually benefit from a refinance. a year ago with the rate half of what it is now, roughly 7 million borrowers could have now, mortgage applications to buy a home fell 1% for the week and were 44% lower than the same week one year ago. it was the lowest reading since 2014 buyers are not only contending with higher interest rates but falling supply they may be waiting to see just how low they go. >> thank you, and the market's so bad that wells fargo is getting out of it entirely is that how we should read this stor story? >> part of it is that the market's collapsed interest rates much higher still in the third quarter, the wells fargo mortgage line was down about 60%. i think for the 4q it's more than that. that's the proximate sort of

reason then you look at sort of the bigger picture there appears bank of smamerica and jpmorgan have fled the market they consider it too risky if you remember the financial crisis in which mortgages played a key risk and role, the regulation got a lot harsher and then called it onerous as a result, they left and wells fargo stuck around at the party because they were making a lot of money on thisuntil basicall they started giving back that money in the form of fines, a series of occ fed. >> exactly, one thing after the other. >> about their performance in servicing these mortgages and in collecting and executing on the payments and foreclosures, which they had troubles. >> so they're getting out of this business. someday it will come back. it may take decades, i don't know at this point, but are they going to regret the move, or did they lay out kind of a road map for why they're going to be in better shape >> i don't think they're going to regret it if you look at their peers, it is a much smaller part of the

business on purpose. i think it's as part of a diversified universal bank, it makes sense for it to be a smaller part of their business however, what's going to be left mind is a mortgage market that's dominated by non-bank players. there are concerns about, you know, from a consumer standpoint, you know. >> less name recognition. >> and the fact if you deal with these independent brokers, are you getting perhaps the best prices on the quotes are you getting data security, and i've been told not really. >> those are excellent points. look, we've all been through this process recently, and we've had familiarity with that. you really have to know the market quite well. that's with the best information you might have the choice, the broadest possible choices for a lot of people that even is restricted and will be more so after this move let's switch to the homebuilders now, kb home up nearly 11% to start this year. seeing a small boost ahead of its earnings let's bring in ken zener at

keybanc capital markets. sort of an inflection point for the builders in the back half of last year. what's next? >> well, i think the expectations which caused the initial overselling in the group, if you want to think about it cyclically, and now the optimism versus the market specifically, you know, for today we -- you know, we've seen orders down 50% for the build to order builders, which includes kb we're forecasting roughly 35 i think it could be farther than that you think operationally the homebuilders, there's a shrinking pie that diane's talked about the question is who's going to get more of that shrinking pie i think we've seen the build to order builders by kb, they have actually been lagging the companies like lennar, a good for kb is their lower margin degradation so far is they work out a backlog.

>> so ken, there are a lot of people -- you know, we've talked a lot, especially early last year about how low the valuations had gotten. now people look at these and go, okay, the valuations are back, but they're still historically attractive what would you say especially as we have to ponder what the fed's going to do in the next couple of meetings here >> well, valuation is obviously very subjective at times, so price-to-book, you know, kb's point a, .9, we have lennar at 1.3. there is a very direct correlation between the builder's book value and the returns on inventory and that's, i think, very important as a name like npr would highlightm the reality is these companies do look different with the builders at negative leverage, companies that have lower returns on inventory you know, they still have call it 30%, 20% net leverage, but as long as the builders in a note we recently wrote, we called it

abc, always be closing that generates cash flow and helps them reset for the next cycle. >> do they all rise and fall together still in this environment, ken, or do you think there's going to be enough differentiation to even do stock picking? >> they are highly correlated. however, it's very clear that higher return on inventory builders over time aggregate market share as well as if you just look at the processes that are enabling builders, some to contract 15% some 50% the actual math behind falling 50% and regrowing is very difficult for those who have only fallen 15%. not only with their customers, but also the trade which is very important to their growth prospects. >> so finally, as we review this cycle compared with, you know, housing bubble, there are a lot of key differences that was leverage fueled. a lot of differences with the dynamics we're seeing this time around do you think earnings could be at a similar risk as to what

they were back then? >> for the builders, you know, if you'll get jd, we're roughly 950 for the year, maybe a little higher we're roughly 650 next year. i think the bias is still to the downside the builders we do not expect these large impairments. if we have impairments of 10 to 15%, that certainly seems plausible given prices it's not in our forecast, but that would certainly be taken into account with the valuations today. >> ken, thank you so much. we appreciate it. >> thank you. >> ken zener joining us with the latest on the homebuilder trade. we are learning now from canadian authorities that canada's air traffic controller says they're notam system is the same as we had an outage in the u.s. canada is experiencing an outage as well. no flight delays yet related to it of course we're monitoring it as to why this is happening simultaneously. coming up on "power lunch," you might think a consumer

spending slow doub is the biggest problem facing retailers, but theft or shrink has cost companies hundreds of dollars as well. w there's the team, and shouldn't tyler mathisen be getting ready somewhere over in -- there he is, in studio b, zoom in on the man. i'll go join him after this quick break. ayitus "power lunch" after this

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number on your screen, or visit coventrydirect.com. good afternoon, everybody, and welcome to "power lunch," i'm tyler mathisen alongside kelly e evans. coming up, two big messes to tell you about, flights and flooding the entire u.s. airport system shut down this morning because of a technology outage, and in california, a reprieve of sorts for now, but more storms, kelly are headed that way. >> yes, tyler, plus, you've seen the viral videos, thieves brazenly robbing stores while