Power Lunch - Reaction to Powell’s Big Speech 11/30/22

Episode Date: November 30, 2022

Stocks rally, bond yields drop after Fed Chair Jerome Powell signals smaller rate hikes ahead. Reaction, analysis and your Powell playbook. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

You're listening to Power Launch in progress. Welcome to Power Lunch. I'm Sima Modi alongside Brian Sullivan. Powell's saying there, smaller interest rate highs could start in December, but cautioned that monetary policy will still stay restrictive for some time, but markets are responding. Yeah, the markets are right around session highs. We were lower earlier today. All right, there are your numbers.

The Dow's up 366. S&P 500 up 2%. But look at the NASDAQ. It is taking off like a dove. Yes. I think Seema, or some faster, stronger bird perhaps. The NASDAQ is up 3%. What was amazing to watch, though, was that we'll get to the yields in a second.

It was amazing to watch Seema's right when Steve Leasman came on with the headlines, the market kind of took off. And then Steve said it best. They kind of closed the door. It went more back hawkish. It had dove just slammed into a window. But clearly something the Fed Chair said is making markets take off. Moderate pace of rate increases.

That seems to be the headline from Powell's speech there and what markets are listening to. Yeah, moderation, apparently is... They like that. Everything's good. No extreme. In moderation. All right, there's a 10-year yield. In fact, you know, we just mentioned Steve Leasbend, and because of the power of video technology, we can actually bring Steve in.

Steve, welcome. I loved your sort of metaphor at the very beginning before we heard from Powell that he slammed the window and had this picture of like a dove hitting a closed window and then I felt bad for the dove. What do you think it's what he said that's making the markets react like this, to seem his point. this moderation idea? I'll admit having a hard time with it. Me too. If the market is hearing for the first, if the market's hearing for the first time

that the Fed is going to slow rate increases in December, then I'm sorry, but I guess I didn't pay attention to the fact that the market was totally not paying attention to that idea that's been out there for a very long time. There's one area where maybe he was a bit-divish, which was this idea that two of the three components that he talks about are causing inflation, are coming down and he expects him to come down.

Those would be housing and goods prices, though he did, as other Fed officials have done sick to this idea, have serviced inflation coming down. Let me just tell you what's happened. And this is not unusual in the sense of, forget what the stock market is saying. Let's look at what rates are saying. And what's happened is the market still has 50 baked in for December.

Still, I just want to make sure that it's still the case while I'm talking, still essentially has 50 or 25 baked in for Fed. February, and then it goes on. We're still near that 5% mark, guys, and I think that's the key here. And Powell being very clear, we're going up to a level, which we feel to be sufficiently restrictive, and we're going to stay there for a while. I don't walk away from this with any change in my key outlook for the Fed, and that's it they get up around that 5% metric, and they stay there for a while. I think that's, if there's anything dovesish in this thing, I'd say, you know what, maybe it's more of a 450. call. If it was hawkish, I'd say it's a 550 call. I'm still at that 5% range. I don't see anything in here that should cause the market to think it's substantially less than 5% and substantially less for a while.

All right, Steve, stick around. Let's bring in Randy Krasner, former Federal Reserve Governor. He's currently a professor of economics at the University of Chicago's booth of school business. Randy, welcome. In addition to Powell indicating that the Fed may be slowing down its pace of interest rate hikes, He also says that there's a chance that the decline that we're seeing in job openings may not lead to a steep rise in the unemployment rate. So he's hopeful that he can have the immaculate disinflation. That is that what we can do is inflation rate down without having the unemployment rate go up very much. We've never done that before.

I don't want to say it's impossible, but I wouldn't say it's very likely. I do think the labor market at some point will crack. and basically Powell kind of said that. Jay said we really need to see some of the heat come out of the labor market. So I think they've been very optimistic to say that peak unemployment rate is going to be no more than 4.4%. I think much like I very much agree with Steve that I think the Fed is going to end with a five handle on interest rates. And I think the unemployment rate is going to be above 5%. Yeah, Randy, I mean, okay, 5%.

And then I guess the next question is for how long? Because 5% itself is one thing. 5% for 5 years is a totally different animal. So I don't think it's going to be 5 years, or at least I'm hopeful if it's not 5 years. But I do think it's going to take a while for inflation to come down, really for the reasons that J. Powell was talking about. I mean, we're starting to see some come down and step down and rents. But the way we calculate the housing services part of the inflation indices, it has a lag in it.

So it's looking at not only rents today, but also rents that have been negotiated over the last few months. So that's going to take a while to come down. And we've seen a lot of pressure in the services sector because there's such a hot labor market. And it's going to be a while before the wage rates start to come down. So that's why I think it'd probably be most of 2023 before we see inflation. starting to come down, but for some that Mr. Putin might do or some other geopolitical shock. So I'm putting those aside for the moment, but obviously there's a risk that something could go wrong somewhere in the world.

Yeah, barring those external shocks, Steve. Powell seemed to suggest that a soft landing is still achievable. Yeah. And first of all, I would like to give Randy Krosner publicly points for the concept of an immaculate disinflation. I don't know, Randy, if you take points over Zell or over PayPal or whatever, but I'd like to send you a few. And the idea that Powell thinks he can achieve it, but here's the key thing I think to come at that, which is I think an answer to Seema's question. Powell would love for

that to happen. He's been talking about this, by the way, Seema, for a long time. They can bring down job openings without increasing unemployment. That's possible. But the thing that I think you need to hear Powell saying as well is he's willing to do it in an unemacculate way. He is willing to allow the unemployment rate to drift higher, expect to drift higher, expect to drift higher, And indeed, if you read this speech with a hawkish squint in your eye, you would understand that Powell doesn't really see a way of bringing down inflation without serious slack being created in the labor market. He said that the labor supply problem is not going away. It's not going to fix itself. Retirees continue to leave the labor force at a fast rate. They ain't coming back. We have an immigration problem, which we've been talking about. By the way, there's a long footnote in his speech about the immigration problem.

And Congress is not about to solve that as far as I know. So therefore, the only way to solve that problem is for the Fed to create the slack in the labor market because it's not coming from the government. It's not coming from supply. Let's bring another voice here, Rick Santelli. Hold on, Randy. We're going to kind of just expand this until we hit the octobox. That's TV inflation right there.

Rick Santelli, let's bring you in. Somebody got my ear and said, you don't. believe the market is reacting necessarily to what he said as much as maybe what they don't believe. Yeah, no, not necessarily. I 100% think that the market is not listening or on the same track with what many of the Fed officials think inflation's going to do or they think rates are going to peak. And 20 minutes before the speech began at 1.30 Eastern, I know you read the blast I sent out. every trader I talked to

pretty much uniformly agreed they were going to wait right till his text was released and then they were most likely going to reverse the trends of the day. They just don't see the future in the same way and they look at much of what the chairman is saying

is kind of covering his butt in the future that if inflation ends up moving lower than he thinks he looks fine if it moves higher than he thinks he looks fine but that's not the way traders think. Traders are in it for the money. Yes, they're in it for the money. And the money is, if you wait until that chairman says it's all clear we've beaten inflation, there's going to be no money left to get. So, Randy, back to

you. I mean, is the market getting this wrong? Is there perception of what Powell said wrong? Well, I think they don't want to believe. I mean, I think Jay has been very clear starting at the end of July. And the market's kept saying, no, no, no, he can't really mean that. He's really not going to resist. And finally, like in Jackson Hole, he ripped up the regular speech and said, okay, I'm just going to say one thing eight times in eight minutes, and that's, we're going to keep at this thing. And the markets are still not really fully willing to accept that. So I think they're getting closer, and I think the markets now think that the Fed will get to around 5%. And I do think that the Fed's likely to end between 5 and 550, but hold there for a while.

And I don't think they understand that the Fed really does have to see the labor market crack. They have to see the unemployment rate go up to feel comfortable that the key underlying source of persisting inflation, wage inflation. What if inflation goes down? I mean, come on. What about the obvious answer here? Well, then the Fed does less, right? And then we can bring rates down. Steve?

I was just going to say, Rick. then the Fed does less. I think that's right. If it goes down, but remember what Powell said, I want to get the language exactly right. The investors' worlds aren't centered around the Fed. They're centered around the flows of capital, and the flows of capital certainly didn't correlate with the flows of words. I agree. But what I was going to say, Rick, is that Powell puts out a pretty strong litmus test here for being convinced about doing less. He says he needs to see substantially more evidence to give comfort that, inflation is declining. I'm not sure what that means. I've kind of had in my head the Fed needs at least three months in a row of serious declines in the inflation rate. I don't know if maybe he upped

that litmus test to remain it a little bit tougher this time around. Rick, I think you're right. It seems to be easy to suggest that what the market is doing is not necessarily a reaction to the worries, but they were just kind of waiting to clear a hurdle of potential risk out there before they made a trade and they wanted to trade higher. I don't know that, and I'll ask you this question, Rick. Are you hearing anybody saying something different from what Randy and I are saying, which is that we're not changing our view of how high the Fed is going here. Yeah, they are. They're changing their view. Most traders I talk to think the high yields pretty much on every maturity, maybe outside of two-year notes are already in. And they're

trading it that way. They're waiting for yields to pop, and then they challenge that. They like when Fed speakers grab a microphone. Yes. But Rick, I still see the peak rate in the futures contract for the funds rate trading at 496. That's still darn near 5%. I mean, it was over 5 this morning. It was under 5 yesterday. It still centered around that 5%. I look at where the market is right now.

Where the market is right now is all that really matters because the markets that you and I are looking at that paint that picture down the road. Okay, they're like my watch. My watch right now says 20 to 2 Chicago time. In an hour, it's not going to say that anymore. And it doesn't mean it's wrong now. Hey, Randy, I'm going to. Guys, I've got to, by the way, I'm going to hop in a little bit. I've got to go do a 3 p.m. Eastern Time CNBC Pro with Leon Cooperman.

Tune in on your second screen. There you go. Look at that. If I just vanish, Seema. It's not that Seema took me out. I mean, you could. But anyway, Randy, can we get back to the other part of this, which is jobs? For me, the most interesting thing was sort of near the top.

And they went into this idea about COVID and people, either early retirement, four million people gone, obviously alluding maybe to long COVID implications, people retiring early. Listen, let's hope that everybody out there that is suffering gets better, and that COVID slowly becomes less and less a part of our life. But as it becomes maybe less a part of the economic story, too, the job market is spectacularly tight. Jay Powell is kind of rolling the dice thinking this is going to remain this tight for a while.

I mean, what if people just start roaring back to work because their excess savings have run out? And now, now they've got to get back to work. I mean, he's hoping at some point we'll see that that there'll be more labor supply, and that will help to bring some of the wage pressures off of where they are. They are right now. I don't think we're going to see this dramatic shift because I think older workers have just decided it's too risky out there. They've seen too many people be ill and pass away and not be able to spend time with kids, grandkids. And so I don't think they're coming back in labor market.

So I think we're going to have these relatively tight conditions. And that's why I think the unemployment rate is going to have to move up. And I think the fit's going to keep at it until they see softening of the labor market. They can hope that the softening will come for more supply. but I don't see that happening, and I don't think he really sees that happening either. I guess the countdown to the November Jobs Report on Friday. We'll hopefully get some answers there. Randy, Steve, Rick, thank you.

Great discussion. Okay. It's not all that's going on today, by the way, in a very busy day. You've also got the New York Times Deal Book Summit and co-see of Netflix. Read Hastings is speaking. Let's listen in. You guys, by the way, have the Knives Out Sequel, Glass Onion, out in theaters. And apparently made a bunch of money.

We did. There's a question which is to say, should have you gone wider with that? Was there money left on the table? Lots. Lots. Lots of money left on the table. How much money do you think? Why do you think? Because we're interested in customer satisfaction on our service.

So with film, we released it typically in film festivals early to stimulate conversation and demand, right? But not to fulfill that demand, except when it launches on Netflix and everybody watches. So our week in the theaters with a small number of theaters has done exactly that. Everyone's talking about it. It's exciting about Glass Onion. It's going to be huge. And December 23rd, the whole world's going to get to see it.

And I think it'll be one of our biggest films. And so it's a promotional tactic like film festivals. And if it works well, we'll do more of it. So is there ever going to be a day where this went to 638 theaters across the country? Right, where a big release in the U.S. is 3,000. Right. Could you see a day where you would do a week at 3,000 or two weeks? Two religions. Member satisfaction, operating income.

So that's what we're focused on. So we use this as a promotional technique, so then more people watch it on Netflix, because that's member satisfaction, right? We're not trying to build a theatrical business. We're trying to get people so excited and break through the noise that everybody's like, oh my God, when is, I didn't see Glass Onion that week it was on, and everyone's talking about it, when is it going to come? And it's like, then everyone's going to watch it, you know, December 23rd.

We talk about live. That's new. That's new. That's new. That's more like being TV. I remember when Ted Sarandos famously said the goal is to become HBO fast and the HBO can become us. Well, that, we finished that one. That was back in 2013.

Oh, you finished that one. Yeah. That's more moving on from there. Look, lives going to be great for us for doing contestant shows, you know, comedy specials. We'll experiment with it. But, you know, there's a lot of speculation that we're doing that because of sports, that's not show. Like, we're really focused on series, films, and games, which all have creative risk, right? We have to spend $20 to $200 million developing a property, and then sometimes it works great, and sometimes it doesn't.

The reason I mentioned the Ted Tarandos quote is, remember, HBO's slogan is it's not TV, it's HBO. Are you trying to become not just HBO, but to become TV? and what does that mean? And the reason I say that is you're going to have this live programming. You're going to start to have more sort of broader sitcoms. You're going to have what I describe as network sitcoms, even. Procedurals and the like. It's a shift.

And I wonder what that brand means to you today, as it may have related to what you thought it meant three, four, five years ago. Well, we want the brand to be the most exciting entertainment on earth. The place you go when you really want emotional stimulation. And for us, that's around film, series, and games. Two of those were strong in, one, we're just beginning on games. And the fact that people, if you look at the Nielsen data, YouTube on TV, is equal to us in viewing. Like, there's a lot.

That doesn't mean we're going to get into the user-generated business, right? And then there's sports, and there's news. So there's a lot of things on the big screen. But, again, what we want to do is embody the most exciting entertainment on Earth, be the best creative company. And that's why Disney is so inspiring to, like, even be in the same league them because they're such an amazing creative company. Where are you on sports?

We were talking to Jan de Jassy. He's doing sports. Apple's now doing sports. No sports are you yet, or at least classically. Yeah, I mean, we're getting focused on, you know, talk to us after we're like a big leader in games. You know, we got a lot of investment to do in games. And what does that mean when you say there's the mobile gaming piece of this? You know, you're now partnered with Microsoft.

Microsoft now is selling Xbox streaming where you can actually play straight off of a television, ostensibly. Yeah, from the outside, it's odd because, again, we build on Amazon Web Services, right? That's all those services based on, and we compete with them. And that's been true from the beginning, that we compete with them and we rely on them. And then at Microsoft, we rely on them on the ad sales, we compete with them in gaming. I mean, that's normal. We're, I mean, a rounding our competitor to them in games at this point.

But, you know, we are focused, you know, partially in mobile games, and we've done some acquisitions there, which is also a new thing for us. Right. you know, three years. And we want to have, you know, incredibly compelling mobile games that are really, most mobile games have a lot of upsell. The monetization strategy is to get you to spend money to get clothing or weapons or these things. And that distracts from the engagement. And our theory is we could build games just around engagement that are like really awesome. But do you anticipate being in the gaming business on TV eventually? Sure, on TV. That's just a screen. Yeah. And we'll have,

you know, lots of games that are mobile-based. We'll have some, they're TV-based. And in the modern world, like Fortnite, it's on all the platforms. So think of it is, the screen size is important, but it's a smaller distinction. And to a degree, we would have loved, I berate our M&A team that we didn't buy Wordle,

that you guys bought it. And we would have loved to have that. It'd be a perfect mobile game for us. Obviously, you guys have strength in that. And so, you know, again, we'll compete in lots of places. How do you feel about Microsoft buying Activision? I had no particular opinion. fine, we're not involved in it.

But you don't worry about, I mean, this is a big sort of regulatory question about companies, we were talking Andy Jassy about this earlier, the idea of companies that may not actually be in a business, I mean, they actually are in the gaming business already, but may not have a overwhelming stake in a business yet, but are able to use the profits

of one side of their business to effectively get into another business. Good, bad thing? How do you think about it? Well, for society, it's great, because then you get companies that attack each other, and that creates lower prices. all the companies that are attacking us, right? And that's lower prices for consumers.

I mean, that's a big positive. So that's what you want. You want them to be aggressive. And I think about Tesla getting into trucking. They don't have to do that, but then, you know, it's like new entrance. So, you know, think of it as when companies get outside of, they're thinking about Mark Zuckerberg. So, you know, I got to see some of your display. I think the world should be saying, thank you, Mark, for advancing this technology.

I don't know if it's great for Facebook shareholders. You know, that's debatable. think? He thinks that it is. And what do you think? I think I wouldn't bet against him. I mean, it's been an amazing track record that he's had. So it's going to, you know, I think there's good odds for it. But whether it works out or not commercially, it's incredible advance.

The technology and the Quest and Quest and Quest Pro are really moving it ahead. So that's going to benefit all of us. What do you think about? The other part of that conversation was about platforming. Not just platforming people, which is an issue, but platforms like Apple. and we keep talking about it all day. Elon Musk has now gone to battle. What do you think of that battle?

You've been into that battle too. My answer will make you think I'm obsessed with the New York Times, but you and us share the same reader exemption that Apple has, where we can sign up people anywhere and they can consume on that Apple platform without getting taxed. And so, you know, our businesses have a benefit that other businesses, for example, Twitter don't. So it's not a big deal to us.

We have never had. We've got great relations with Apple and Google, but it's partially because of the subscription business model that the times that Netflix have are advantageous. No, but you like to get people to go to the website to subscribe. Correct, and that works well. But not through Apple Pay. No, it actually works well through mobile.

If you do mobile sign up, mobile web, which is what we do, it works fine. And so we have no battle, so other people, Spotify, et cetera, have big battles with Apple. We don't. Since you are a Twitter user, I should ask, and you're on there all the time. What do you think of what's going on? I'm excited. I'm excited.

Elon Musk is the bravest, most creative person on the planet. I mean, you know, what he's done in multiple areas is phenomenal. You know, his style is different than, like, I'm trying to be like a really steady, respectable leader. You know, he doesn't care. He's just, like, out there, you know? But think of a guy who's spending $44 billion. He could have built the biggest, he could have built a mile-long yacht for $44. billion. Okay. But it's like

not good for the planet. He doesn't, he is not interested. He's in for things to help. Do you think what he's doing is good for the planet? Absolutely. I'm 100% convinced that he is trying to help the world in all of his endeavors, okay? And he's trying to help the world in that one because he believes in free speech and that's power

for democracy and that there's an option. Now, how he goes about it, again, you know, is not how I would do it. But I'm deeply respectful. And I'm amazed that people are like so nitpicky on him. Yeah, sure, the blue check mark, he's making a mess of some things or not, you know, but it's like,

give the guy a break. He'd just spend all this money to try to make it much better for democracy and society, to have a more open platform, and I am sympathetic to that agenda. Well, that's what I was going to ask you about, because Dave Chappelle created some controversies, you know, on your platform. And we've been talking also about platforming sometimes hate speech or anti-Semitic speech or other kinds of speech. How do you think about that today?

Our brand is trying to be the most exciting entertainment company in the world. And Chappelle is dead center for us. He is the best, or one of the best, and that special was one of the most entertaining and watch specials we've ever had. We would do it again and again. So we clearly need to be more obvious and direct about that, which we've done since, you know, with employees and with people who care about Netflix that were about entertainment. And Chappelle is very entertaining and, you know, provocative. And again, that's the core of what we're doing. I want to go back to cost, and maybe Ben Affleck,

we were talking about how much people are going to spend, and I know you say you're going to spend the same. I wonder whether you're going to spend the same amount of money that you were spending before or even more on the same volume. It's a volume business, or do you think it shifts to higher cost projects? I'm curious how you think about the success of Shonda Rhimes and the Ryan Murphy deal. I'm also curious what you think of like the Barack Obama, Barack and Michelle Obama deal.

Or, for example, you have the deal with Megan and Harry. Those are very expensive deals. I mean, we have some very expensive deals. We have some other deals that are more speculative. We've got a wide range. The show that we just broke is with MGM television, you know, now owned by Amazon, producing for us. That's Jenna Ortega in Wednesday, Adam's Family reboot.

And it's incredible. It's going to be the biggest show. It's going to be in the top three for sure. But you think these big mega overall deals remain? Or there are less of them. As part of the portfolio overall deals. But as many? I don't know as many.

We've got lots. But, you know, that's a very, that's just like a deal structure thing. Are we going to continue to invest in stories that we think can be breakout, entertaining, and fascinating? Yes. What about the idea of not just being a distributor, Walgarden, but the idea of being what's described as an arms dealer from the content perspective, would you sell your stuff off platform? I think Sony is doing that, right? They're selling to all the streamers, and that's a great business. not in that business. We're in the business of building amazing shows and films and eventually

games and having them for our members. It's pretty simple business if we do it well. I want to open up for questions. There's a lot of people from the media industry here, and hopefully we can get to them. Let me see if we got some hands around. I see one right here in the front. I'm going to go here if we can get that microphone to him, and then we'll see if we can't take two. We were just listening to Netflix CEO, Reed Hastings. Let's bring in Julia Borsten. Julia ride ranging conversation there with our colleague, Andrew Ross Sork, and he talked about his support for Elon Musk, the idea that he continues to see MNA activity in the streaming world, and also saying that the ad-supported model, it should have been rolled out sooner versus later.

Yeah, it's just been fascinating to watch his total reversal when it comes to ads on Netflix for so many years. He said he didn't think that ads had any place on Netflix, that wasn't what they did. And here today, he continued this reversal that he's had over. the past six months or so talking about how he sees such an opportunity, not only to serve this unmet need in the marketplace, to basically help all those advertisers who haven't had access to consumers because of the rise of streaming, but also do so in a way that he thinks is going to be more effective. He also had some very nice things to say about Microsoft, which they chose to partner as their ad partner, which did surprise many people. He also was very complimentary about

about Bob Iger. He said he was ready to be a fundraiser for him joking about or saying that, you know, there was some speculation that Iger could run for president. But he thinks that Disney is going to be a big success in streaming. And he sort of foresees this future where Disney and Netflix are duking it out, Seema. And Netflix up about 9% as part of this broader market rebound we're witnessing right now. Julia, I want to get your thoughts on meta. Those shares rallying along with the rest of tech CEO Mark Zuckerberg,

also speaking at the deal book summit. That's right. Mark Zuckerberg. He started off the conversation with our colleague Andrews saying he's still very optimistic about the metaverse as a long-term play. He also said, though, it's not just about 10 years from now that capabilities in the metaverse will get stronger in the next three to five years. But he also said that meta is in a zone where right now they're operating with more discipline, that they've had to pull back and that their operational focus will be on efficiency, discipline, and rigor. He said that in addition to the economic down, down turn Apple's impact on meta's ability to target ads. Remember, of course, they made that change, has been a real limiting factor. And then he spoke about Apple again, this time in the context of questions about Elon Musk's criticism of Apple and the 30% fees it takes on many apps, saying Zuckerberg said that Apple controlling the app ecosystem is what he called problematic. Now, Zuckerberg also fielded some questions about competition with TikTok.

He said that Reels has been making progress against TikTok and that engagement is going well. He said, my guess is it's a bit better than what people perceive externally. Zuckerberg also weighed in on some of those security concerns about TikTok's Chinese ownership, saying that there are real questions with TikTok that need to be grappled with. Seema? A lot there. Meta up 6.3%. Julia, thank you. Julia Borsden.

Back to the broader market, which is near session highs following comments from Fed share, Jerome Powell. you'll see the Dow is up over 1%, 365 points. Really the NASDAQ leading the show here up nearly 3%. Let's bring in Bill Smead, Chief Investment Officer at Smead Capital Management. Bill, good afternoon. The message from Fed Chair Powell seems to be that they're ready to slow down their pace of rate hikes, but some would say that that may not be the case. What was your read on what he shared today?

Well, I think he's going by the seat of his pants. He goes along and they're trying to read tea leaves. And what he's saying is that if inflation turns down, they'll take their foot off of the neck of inflation. If you go back and look in the 1970s, that's exactly what the Federal Reserve Board did in the 1970s. They would fight inflation by tightening credit. Inflation would get better. They'd take their foot off the neck of inflation and it would pick right back up again. So, you know, his problem is that he needs the economy to be lousy, and it's hard for an economy

dominated by 92 million people between 26 and 42 to stop doing what they're doing. Yeah, listen, it's a tough balancing act. At the same time, he did say that housing inflation bill that will continue into next year. You've been a big fan of the homebuilders. What's your thoughts on this specific sector going into 2023? Yeah. He said, you heard him say, we have a shortage of houses, right? So what we love about common stock investing is we want to own a business that meets an economic need.

There's a huge need. And he talked about how much prices went up last year. That was a temporary price bubble, but it was not a building bubble. And people are still in a coma about 06,7, 8,9, and the circumstances caused by that. So I'm very positive. If you look at the 10-year treasury, the mortgage rate should be substantially lower

than they are right now, even with what's happened. And there's a bright future for these companies. It's just we don't know what's going to happen the next six months, and that's not our job. Quickly, can the market end higher from here, go higher from here? Well, there are lots of bare market rallies in bare markets. And by looking at the abrupt rally in the most decimated tech stocks, that looks a lot like a bear market rally.

Billsme, we appreciate your time looking at the NASDAQ, up 3% now, back above 11,000. Thank you for watching Power Lunch.