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Mag 7 Decoupling, A Crypto Winter & Housing's Inflection Point? 12/29/25
00:43:54
The Mag 7 is no longer a monolith. Bitcoin has pulled back 30 percent since hitting an all-time high in October, will it continue to slide? Plus, a key housing metric hits the highest level in nearly three years.
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- [02:36]
C
Yeah, you know, you so Contessa, you mentioned it. There's some, some Trading some adjusting of positions here at year end. We would look through that, look past that. We see the capex trend, the spending trend on equipment continuing to grow next year. We think that's a reliable trend. But we don't want to just play that one trend alone because as we've seen those. Some of those Mag 7 stocks can get rather extended at points. So you try to look for alternative ways, subsidiary ways if you like. Ancillary ways, for example data centers. Data centers allow you to take a position in something like an industrials or utilities which have lower price to earnings ratios. They're not as overpriced. There's not as extended as tech stocks at their worst. So that's a good place to play the trend and we think in a safer way. Emerging markets also another way to play that. You're playing into South Korea, Taiwan and places that produce a lot of the technology that's going to be used.
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B
We've heard a lot about data centers and the opportunity there from the from insurers. For instance, Aon has made it a central thesis in its last earnings report heading into 2026. The analysts seem to like it. Would you, would you look at insurers where data centers and AI are concerned?
- [03:53]
C
I mean the entire financial sector is one that we like a lot. Not just insurers, but the banks as well. With the yield curve steepening here, we think that's a good time to be playing banks and the financials overall. So yes, we would be favorable on financials.
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B
Talk to me a little bit about what we're seeing heading into 2026 with metals. I mean we've seen gold on a tear this year, silver as well. The precious metals in general. Would you continue to keep an eye on that if you're an investor or is it time to take the profits and run?
- [04:23]
C
Yeah, you seeing investors taking some profits here at year end. Nothing unusual about that. Trying to reposition some of that money going into oil. A lot of that is speculative as people try to position for the new year. But we really think the trends that have been in place will remain in place. And so the gold trend, the precious metals trend we think has a life to it. The you just want to be a little bit careful here. We would be buying on pullbacks. For example, when gold pulled back to 38 to 30 $900 an ounce. We were buyers then. We still like the precious metals, but we would buy on the pullbacks and not chase.
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B
How are you feeling right now about the consumer discretionary and the staples market. What do you think of the strength of the consumer for next year?
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C
Well, the consumer is somewhat bifurcated. You talk about a K shaped economy where wealthier households are able to continue to spend and grow their spending. But households in the lower income quintiles, especially at the very bottom, they're not really able to. So there's going to be this divergence that's going to happen. Tariffs also are an uncertainty going into next year with the Supreme Court decision coming on those Emergency Economic Powers act tariffs. So there's not really a lot for us to see in the consumer sectors where we see much better prospects elsewhere. We would rather take money from the consumer sectors and put them, put that money to work in industrials, utilities, financials.
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B
Do you think that the tax refunds do anything to change that?
- [05:55]
C
The tax refunds will be important because they'll help to restimulate spending that we think is softening now heading into the new year and heading into the winter. That spending that that boost should help get keep spending alive next year, but won't really, we think, be a real stimulus for a lot more growth, certainly not enough to out outpace or make the tech sectors look less attractive compared to consumers.
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B
Are you putting a number yet on the S&P 500? What do you expect for next year?
- [06:26]
C
Yeah, we're looking for a range year end next year of 7,400 to 7,600 on the S and P driven mainly by earnings. I think the main number to focus here is on the $300 earnings per share target we have on the S&P 500 for year end next year we think it'll be a year of broadening growth in the, in the, in the index, in this across the sectors. And we think it'll be a year driven mainly by earnings, not so much by prices.
- [06:50]
B
Paul, thank you for sharing your expertise with us. We appreciate it. Paul Christopher with Wells Fargo. Meanwhile, the Magnificent seven stocks no longer trading as a monolith and that gap could widen in 2026. Mackenzie Sagalos joins us. So explain this. How are we going to see a bigger gap between these stocks moving forward?
- [07:08]
D
Hey Contessa. So really two forces are reshaping the MAG7 trade heading into 2026. The first, the market is punishing big spenders without clear returns. Yardeni research, after 15 years overweight mega Cap Tech is telling clients to cut MAG7 exposure citing capex and talent costs, squeezing margins and slowing earnings. Hyperscalers have issued $121 billion in new debt this year, four times the five year average. A sign that the buildout is outrunning internally generated cash. And that's part of why Amazon and Metta sit in the laggard camp. Metta pouring tens of billions into Data Centers and AI hires. But its AI model Llama only has about a 10% share of the enterprise market, which is where the real dollars and margins are. Anthropic and Google dominate that spend. And without a cloud business, the payback story is basically ads. Now the second force is model convergence. If the gap between models keeps narrowing and it is distribution matters more than who trained the best model, you see that in the scoreboard. Alphabet is up 65% leading the pack because it owns the full stack chips, cloud distribution and the top performing AI model. And it's not even getting credit for Waymo. Now live in five cities with plans for 20 more fully autonomous, no safety drivers. Compare that to Tesla A 320 forward P E. That's about 10 times Alphabet. The bulls see a trillion dollar robo taxi opportunity even though Waymo is way ahead. And then there's Apple, the wild card here near the bottom at this point. But it never plays first mover. If models converge, distribution wins and Apple has 2.3 billion active devices.
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B
Contessa. So, so this is an interesting scenario. What you're saying is Google, because it owns the whole stack and delivers it right to the consumer, is set up to be in the starting position. You would think that Microsoft, as it's on our computers at work and all of the like, is similarly situated. Is it possible that Apple has the rest of the stack and just hasn't shown us all its cards?
- [09:14]
D
Well on your first point about Microsoft, the two places where it's lagging Google strategies on chips and, and having its own competitive in house LLM. So it has Maya, which is this effort at in house silicon, but it's not competitive in the way that the TPU is. And they also have just been relying mostly on OpenAI's models newly in partnership with Anthropic. Now to your latter point about Apple. You know, kind of coming into the game a little bit later, there is a report that they might be teaming up with Google using Gemini as part of their Apple intelligence rebrand in 2026. And that's really what people have been waiting for. And they haven't been playing this hyperscaler spending game. They only put in $3 billion in terms of infrastructure spend in the most recent quarter. So they're not trying to win on that front. They don't have a cloud business, but they sure do have distribution nailed down, and that could be where they become a very competitive force in 2026.
- [10:03]
B
Why do you think that investors are beginning to lose patience with the amount of money, the amount of debt that is concerning AI and data centers and the investments here versus the payoff? I mean, it's so big and there's so much speculation about this time. It really is different. Why the rush to see those profits?
- [10:24]
D
Part of the problem has to do with a reliance on single customers. So Oracle has really become the poster child for why debt might be problematic. And that has to do with the fact that the vast majority of its backlog comes from a deal with OpenAI to the tune of $300 billion. And so they are committing to this kind of infrastructure buildout before any of this capacity comes online and before OpenAI has paid its bill. And we're also seeing similar numbers show up in backlog for Microsoft, for example, as part of its reorg with with OpenAI renegotiating the terms of their commercial partnership, they get $300 billion worth of committed spend from OpenAI to Microsoft Azure. But the concern is, is that OpenAI is committing to a lot of different partners north of $1.4 trillion in compute commitments, and it doesn't have either the revenue or, or the, you know, the next round set up to be able to facilitate that spend. And they also haven't lined up their debt to be able to pay these compute bills.
- [11:18]
B
Mackenzie, great to talk to you. Thank you for laying it out for us. So clearly, if the Mag 7 stocks are getting ready to decouple, which names could be a best bet for 2026? With us now is James Chuckmuk, portfolio manager at Clockwise Capital. James, it's great to talk to you. So Mac did a great job there of sort of laying out why we're going to see this big gap widen. Which of these companies do you think is still set to take on the debt and still demonstrate to investors that there was a reason to get in?
- [11:53]
E
Yeah, I mean, we own pretty much all of the max seven and then some. But at the same time, you know, we're looking at where do we want to be overweight, where do we want to be at parity and where do we want to be underweight? And really, it's just three stocks that we continue to be overweight. That would be Apple, that would be Broadcom, and Micron, which is not in the MAG7, but it is part of the NASDAQ index that we're overweight on. So we do think we got to take a step back and look at what are the growth assumptions as you look into next year. What are the margin assumptions as you look into next year? I know we're Talking about this $300 earnings number for next year for the broader S and P, but at the same time, that number really hasn't changed from a year ago. You know, the earnings expectations have largely been intact. And I think this multiple surge that you've seen in the market is largely a function of overestimating on the, on the performance relative to where we were post Liberation Day versus where we are in an absolute sense. So, you know, we do think that there continues to be opportunities in tech, but you got to be much more surgical as you decide on it. And you know, there's this theme about broadening out. But you also got to keep in mind that the broadening out companies are much more cyclical in nature versus the mags 7, which are more secular.
- [13:12]
B
Then what do you think drives the growth for 2026?
- [13:16]
E
Yeah, we're looking at more of the underappreciated kind of where the relative valuations really haven't outperformed sectors like Staples, sectors like communications, real estate, potentially. And we think that those are areas where you could see the multiples actually expand. I think the tech trade continues to stay alive and well for the sole purpose of that liquidity will continue to be the fuel to the engine for 2026. There's no signs of that liquidity, at least from this administration, drying up anytime soon. Obviously you have the deregulation on top of that, but at the same time you have to look at, you know, the equities market is a sentiment gauge, but you have the fixed income market, which is a more of a fundamental gauge. And you know, that continues to show signs of worry with rising yields. So, you know, we think 2026 is going to be much more challenging than 2025.
- [14:13]
B
When you're talking about what happens with the Fed and whether there's going to be more support put into place, it looks like there's a lot of investor pressure for the Fed to reintroduce more liquidity to, to have capital flowing more freely, do you anticipate that that happens with a change of leadership?
- [14:34]
E
Yes. At the end of the day, I think it's a political game and there will be a downward pressure and dovish pressure on interest rates. But what you got to keep in mind at the same time is that, you know, interest rates don't Won't necessarily work the way that they have been historically from a stimul, stimulatory standpoint because of the, the structure. The unemployment increases that we're seeing in unemployment are more structural in nature as a result of AI. So are we really going to get that rehiring, that stimulus, that growing investment in place as a result of lower rates? I think that's a big question mark. But I think the tilt will continue to be dovish. I think the repo markets will continue to see a flood of activity and the money will keep pumping. But the question is, you know, you're at 25 times, you know, 23 times on a forward basis. You know, it is elevated. Yeah, growth rates, I mean, you saw what happened with Nvidia with Broadcom results, you know, with growth slowing down. What can happen to these multiples and the point of concentration? You have half the NASDAQ in the top 10 and 40% of the S.
- [15:38]
B
And P. Are there, are there names or sectors that you don't want to be in for 2026?
- [15:49]
E
We're underweight, mostly financials. You know, we think that that trade got ahead of itself. I think a lot of it is priced in at this point. So that's not a place that we're going to be overweight. Now I would caveat and say financials that have exposure to lower duration, lower, shorter duration, interest rates I think could benefit. But the ones exposure to longer duration we're not really in. So that's one sector that we're not, we're staying away from, at least over the short term.
- [16:18]
B
James, thank you for sharing your perspect with us. James Chuckmuck, Happy New Year.
- [16:22]
E
Thank you. Happy New Year.
- [16:23]
B
Coming up, it has been a volatile year for crypto with bitcoin swinging from 126,000, remember that down to 74,000. Are we in a crypto winter? It's not like Game of Thrones winter is coming. Our next guest says don't throw out your warm jacket just yet. He explains ahead. Plus finally some movement on the housing front. We have the numbers and whether this could be the start of a real turnaround. We're back with the exchange right after this.
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Welcome back. Stocks closing out the year near record highs. But for bitcoin, whoa, what a different story. It hit an all time high of 126,000 in October, but has pulled back 30% since then, raising questions of whether this is a crypto winter. Joining me now, Brett Knobloch, who's the head of digital assets research at Cantor Fitzgerald. Brett, good to see you today. Are we in a crypto winter? If so, how long does this last?
- [18:46]
A
It's a good question. I think the jury's still out a bit. I think crypto winner is very similar to inflation expectations. If everybody believes inflation is going to increase, inflation inherently then increases. Whereas it's similar with a crypto winner. If you think we are in a crypto winner, it's like a self fulfilling prophecy where the marginal buyer of say bitcoin kind of goes away, there's more sellers, price goes down and then the calls for we're in a winner kind of pick up if we are in a winter. I think if you look at the previous kind of cycles, the peak to trough duration is about 364 days. We are 85 days into that. But I think there's a lot of positive momentum that suggests that this might not be a crypto winner. It could just be a pullback. We've already had three 30% pullbacks this cycle.
- [19:36]
G
Right?
- [19:36]
A
We have the Fed is cutting rates. You know, the past two winners have started with the Fed raising rates. We have no real black swan esque events. If you go back the past couple of cycles, you had the Mt. Gox hack, you had FTX bankruptcy. We haven't really had anything. I would say, you know, blowing up in the, the ecosystem so far to be that black swan event. And if you look at peak to trough pull down, you know, I don't think we're going to have you know, a 75% pullback which is what the previous cycles have had. We have a ton of, I think, you know, regulatory support, you know, people in government kind of supporting crypto, not just in the U.S. but across, across the world. So I think if anything, if we are in winter more than, you know, half the pullback has probably happened. And you know, I think this, you know, duration is going to be much shorter. So the cycle, you know, isn't going to be a full 364 days. I think maybe it could be a few months but you know, the next couple of months are going to be important to see if we are in winter or not.
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B
Okay, so a brief winter is better than a long cold, hard fog. Micro strategy has this massive investment in bitcoin. You point out that its break Even point is 75,000. What happens if bitcoin hits that level?
- [20:54]
A
Nothing. I think there's a lot of FUD out there about if bitcoin goes with the break even. They're going to be forced to sell and people are going to want to sell before strategy is forced to sell. There's nothing out there that's going to force Michael Saylor to sell their bitcoin. You know they have you know, 8 billion of convertible notes outstanding. They have, you know, called another, you know, just over 7 billion of preferreds. They have a cash balance for their USD reserve totaling more than 2 billion. That's more than a couple of years of dividend payments for the preferreds. And they have a bitcoin position of call it $60 billion. So there's, there's no debt that's going to force them to sell. I don't think you're going to see strategy sell and I think that in itself could help maybe be like a near term bottom is if we do get to their break even, if they do not sell then I think that could bring some confidence back. I think it's a very low probability that they do sell bitcoin and it's not like it's never traded below the break even. I think in my note I outline would have been 22 to 23. There was a four to five month period where bitcoin was below the break even.
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B
Yeah. Where bitcoin is concerned you're reminding me a little bit of FDR in 1933 who said the only thing we have to fear is fear itself. It sounds like you're saying that about Bitcoin. I want to ask you about the prediction markets. You may know I cover gambling and the threat by the prediction markets to gambling has been very much covered. I'm curious as people pile in, I mean, you're looking at the volumes up 200% this year, especially when it comes to trading on sports. All of this is still in a regular regulatory quagmire and being caught up in federal courts. But you've got DraftKings and FanDuel and Fanatics jumping into the predictions market. You also have Coinbase and Robinhood in it to win it. If you believe in predictions markets and where they're going, which would you rather? Would you rather Robinhood and Coinbase in sort of that financial crypto arena or the sports betting guys who have these massive databases of people who like to wager on sports?
- [23:04]
A
I think I don't cover the sports book, so I'm maybe not going to opine as much on them. But from a Coinbase and Robinhood perspective, there's no existing business that's going to be cannibalized if more of your business goes into prediction markets.
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G
Right.
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A
I think Robinhood specifically, we could be sitting here in two years and prediction markets could be its biggest business. Right? It is the fastest business. It has grown from 0 to 100 million. It's already at a 300 million run rate. That's like 2 1/2 x the size of how much revenue generates from trading equities, which is what Robinhood got started doing. So in a couple of years this could be doing north of $1 billion. And at that point it would be one of the largest segments it has. And it's not cannibalizing. I don't think, you know, any other part of their business, whereas a DraftKings or FanDuel.
- [23:48]
B
What if they can't do sports? Like, what if sports are out of it? If the courts weigh in on this, Former New Jersey governor Chris Christie has told me he thinks this very well could end up in front of the Supreme Court. Can, can this still be big business without sports?
- [24:05]
A
Yeah, I think I. I think it's giving everybody a platform to bet peer to peer with lower fees. And I think users are going to gravitate to the place where they can trade on what they want to trade with lower fees. Obviously sports are big and that would be a dent, but kind of look bigger picture out. Like look at the insurance industry, right? Like, I think prediction markets could be A place for you to price risk for your own house for, for example. So the market is much bigger than sports. It's just sports are where a lot of margin is today and naturally that's where they've kind of gone to outside of politics, which is really the first subject that they went into.
- [24:41]
B
Yeah, that potential for prediction to disrupt the insurance industry is I think, and probably something that deserves the kind of attention that the disruption to the sports betting industry is getting. Bret, it's a pleasure talking to you. Thank you.
- [24:58]
A
Thank you, Contessa.
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B
Coming up, new year, new ways for the government to gum things up. The deadline is coming fast for government shutdown. We'll have the latest on that and the other issues on the congressional to do list that could affect your money next year. And as we had to break, check out some of the biggest losers on the NASDAQ 100 today. You've got Applovin leading the declines at 3%. Tesla is off by more than 2%. We're back right after this.
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To think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power players. New episodes every Tuesday, wherever you get your podcasts. Welcome back to the Exchange. Let's take a look at markets right now, which are all in the red. The Dow is off by half a percent and the S&P 500 nearly the same. The NASDAQ composite six tenths of a percent lower. And the Russell 2000 the same. Here are some of the movers this hour. You've got Digital Bridge Group jumping after Softbank agreed to acquire the company for $16 a share in cash. Those shares up 9%, almost 10%. SoftBank is up just fractionally. SoftBank CEO says the acquisition will advance the firm to become a leading AI platform provider. Shares of Lululemon are in the spotlight as the company's founder Chip Wilson launches a proxy fight at the retailer trying to remake the company's board. Those shares are up one and a quarter percent. Wilson nominated three candidates to the board and said this current board just lacks the skills needed to redefine the company and begin the next chapter of success. Lulu is down 45% this year and the metals and mining names are tumbling as commodity prices fall. Today, Newmont is the worst performer in the S and P. It's down 6%. You've got Freeport McMoRan down by 2.5%, BHP down by 2.2 and Rio Tinto down by 2.3%. Copper is also lower by 2%. Let's get to Washington, D.C. where lawmakers will start this new year with a familiar test. They should be good at it by now, trying to avoid another government shutdown. Emily Wilkins joins us with the latest. Do I sound skeptical, Emily?
- [27:57]
H
You do sound skeptical, Contessa. And to be fair, you know, it's a new year. It's an old issue. Can Congress fund the government ahead of the next deadline, that is January 30th, but where funding for most of the government will run out? There's already been some difficulty in moving some of the individual funding bills they had hoped to do. Some last month didn't happen. However, several Senate Democrats that I spoke with said there's less of an appetite for shutdown this time. Senator Peter Welch said Democrats have already been successful at putting health care costs in the spotlight. And even if the tax credits are.
- [28:30]
B
Expiring, it's a different time frame. And the reality is that shutdown came.
- [28:37]
C
Where there was a real urgent issue.
- [28:39]
B
To get health care on the front and center of the agenda. I think we accomplished that. So I haven't heard people talking about another shutdown.
- [28:49]
H
Now, health care isn't going away as an issue. When the House gets back, rank and file members will force a vote on a three year extension of the Affordable Care act tax credits. Now, while that bill is expected to pass in the House, senators of both parties said it's unlikely to continue in that chamber. However, a bipartisan group of senators are working on a potential plan to reopen those exchanges and bring back the tax credits in a limited capacity. Now, there are a few other issues that could cross the finish line next year. Right before break, talks ramped up about crypto regulations bill and Congress is going to need to move on a bill for critical funding for highways, roads and other infrastructure. Now, some are hoping that that bill can also be used to pass permitting reform, an issue not just for infrastructure but also for data centers. However, permitting reform hit a roadblock last week when two Democratic senators key to the process said the talks are now on ice after Trump halted work on five offshore wind farms.
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B
Contessa, okay, so last week you did a great job laying out what looks like a historic number of resignations or retirements from Congress. I'm just curious, when you're looking ahead to midterms and it feels like, you know, you've got the government shutdown deadline in January and probably after that we start into serious campaigning, how does the, how does the midterm elections factor into what gets done this year?
- [30:17]
H
I mean, Contessa, the name of the game right now really for both parties seems to be affordability. That was the big lesson learned from the elections that we did see in November. That's why health care is still continuing to be a part of the debate, even though those taxes credits expire at the end of the year. And that's also expected to be the way that lawmakers approach various debates and issues that they have that are going to be coming up within the next year. But of course, Contessa, as you and I know, when it's an election year, it is very difficult for Congress to get anything done aside from maybe a few messaging things from the party in charge. So maybe don't expect a ton of legislation in this upcoming year, but expect whatever they do do to try to go ahead and tie that to the affordability because that is going to be the main push for this upcoming midterm.
- [31:01]
B
Yeah, it does. It always makes me wonder, like, why elections every two years are a thing when if you want things to get done, they need a longer break and less focus on being reelected. But that's a conversation for another day. Emily, thank you. Let's get to Seema Modi now for a CNBC news update. Hi, Seema.
- [31:19]
H
Hi, Contessa. Here's what we're watching at this hour. The state of California has dropped its lawsuit against the Trump administration after it withdrew $4 billion in funding for the long delayed high speed rail project. The Transportation Department cutting the funds in July, saying the high speed rail authority had no viable plan to complete it. The authority said it would focus on other funding sources. The project is expected to cost more than $100 billion. A federal judge canceled the trial of Kilmer Abrego Garcia and scheduled a hearing for late January to determine whether he is being vindictively targeted by prosecution prosecutors in the human smuggling case against him. Garcia has become a flashpoint in the immigration debate over after being mistakenly deported to El Salvador before eventually being returned to the US and there's a new celebrity billionaire. According to Forbes, Beyonce has reached the milestone, joining her husband Jay Z, along with Taylor Swift, Bruce Springsteen, Rihanna and the billionaire musician club. Much of her wealth comes from her music catalog, which she almost completes control, completely controls. But also that mega concert tour she had this year which grossed $400 million. Contest yeah, it's a big moment.
- [32:25]
B
Those concerts really are going to be a bigger and bigger driver, especially because experiential spending is holding up even when people are pulling back on other areas.
- [32:34]
H
So I like what Ari Emanuel said recently about how AI is going to automate so many of these simple tasks for you and I that we're going to have hopefully in, in this ideal world, more time for entertainment and and.
- [32:46]
B
Hopefully the jobs that can fund the tickets, they're not cheap. Sema, thank you. Coming up, our trader tells us whether he's buying the dip or fading the trade when it comes to the metals rally. Also, he gives us three names he's adding to in 2026. Everybody loves a listicle. And we've got a short one, easy to remember. Including this one, it's down 11% year to date. I know you want to know what this is. Don't go away. The exchange was. Be right back. Welcome back to the exchange. Silver down 7% after topping 80 bucks an ounce for the first time ever. Overnight prices are still up about 144% this year. Now it looks like silver is down more than 8%. For more on what's next for the metals trade, let's bring in Jeff Kilberg. You know, is there gold in them? There are hills still. If you haven't already bought it, should you get in?
- [33:44]
F
Well, concession. You know, I'm a golden domer, so I always have an optimistic view on the special and precious metals, but I do see silver as an opportunity here. But let's look at the price action today. It's been sensational. I want to say historic, but this is not 1980. We're not seeing a 50% drop in the precious metal, but we have seen a near 20% move peak to trough Contessa. If you talk about that overnight futures price of 8260 now down at $70. This has been dramatic and the inputs are contessa. Two big inputs in my opinion is obviously tax loss, harvesting and you'll see profit taking. But the one kind of special component that we're not really understanding is the CME group, the futures, they increase the margin necessary to speculate on being long silver. That put a bit of a handcuff and that encouraged folks two days away from New Year's Eve to really book those profits or get out of those positions, which obviously are losses.
- [34:35]
B
But were they silver handcuffs?
- [34:37]
F
They could have been silver handcuffs. But I think what's interesting, I think this is just a reprieve contestant. I see the market moving higher in gold and silver. Specifically in silver. I see $90, $95 as a price target. And why? Well, I think interest rates is all going to kind of dovetail here. So stay with me. But the lower interest rates that I see coming sooner than later in 2026 is going to be another catalyst and anticipating leg higher for silver. So that's where I think this is just a reprieve. I know you see Newmont, I know you see all these different names. SLV is the ETF a lot of folks use to get exposure. So a dramatic pullback. But SLV or silver is still up 170%. That's 100% more than gold.
- [35:18]
C
Wow.
- [35:18]
B
Are you long gold?
- [35:20]
F
We're long gold and silver in our tactical model. So we've been fortunate enough to be long. Both of those we're not going to talk about. But any other losers in the model. But those two specifically have really shined this year, pun intended. But there's no exit yet. We look at relative strength. Specifically in silver, it was up at 85 which is screaming overbought. But here it is today just a couple seconds later at 65. So we're not in overbought territory, despite the fact it feels like it is. Contessa.
- [35:45]
B
Okay, so let's talk about some golden stocks for 2026. You say that you're adding to and this was our mystery chart going into the break, Home Depot. Why?
- [35:55]
F
Well, Home Depot to your point earlier on that tease down 11%. This is an opportunity to buy a quality blue chip tangible name. We actually own it in the Essential40 ETF. But there's a reason why I want to add to this position is because of the lower interest rates. I don't believe Fed Chairman Paulman is going to be able to serve out his full term in the May 2026. A lot of investors are anticipating President Trump to announce his pick in the first or second week of January. I think that will facilitate the 10 year note stubbornly being above 4% to move under 4%. That in itself will be a tailwind for a lot of people who have been waiting to do those do it yourself home projects and Home Depot is going to participate and that will be a tailwind for Home Depot. And lastly look at the inflation specifically in lumber. We've seen it down about 20% just year to date in 2025. I think a lot of these products that were kind of constraining or a headwind for Home Depot and folks to do it themselves at their home projects, that is going to be the catalyst and that's why I want to buy this blue chip tangible.
- [36:51]
B
Name two other stocks that you're adding to Amazon and Berkshire Hathaway.
- [36:55]
F
Amazon. You look at Amazon, it's everything in our world. They continue to incorporate. I think they're talking about getting more and more chips to make that user experience. It's been a laggard year to date. Specifically in the Mag 7. It's been one of the underperforming Mag 7 names. So we own this name. We like adding to this name. And lastly, Berkshire Hathaway, we talk about what could happen, what could be and I think if you speculate Q1 we were really excited and we saw it being one of the best stocks in our sense of 40 ETF. Now it's been a laggard. But what you see the sum of the parts. Remember GE just a couple of years ago, Contessa, when they had all those spin outs that some of the parts one plus one equaled about seven for ge. So we're hoping at Berkshire Hathaway if we do see some divesting, Berkshire Hathaway should participate in a move up higher. And that's why we want to add that position.
- [37:39]
B
That stock up 10% year to date. Jeff, nice to see you. Thank you.
- [37:43]
A
Great.
- [37:44]
F
Good to see you. Contessa. Happy New Year.
- [37:45]
B
Happy New Year. Coming up, pending home sales hit their highest level since February 2023. The National association of Realtors says homebuyer momentum is building. Is this the inflection point for housing? We discuss when the exchange comes right back. Pending home sales hit their highest level in nearly three years last month. Diana Oleg joins me to dig into the data. Hi Diana. Hey, Contessa. Yeah, this was a much better than expected report and the Realtors are saying it's because of lower mortgage rates and more supply on the market. Pending home sales in November rose 3.3% from October and were 2.6% higher than November of last year, according to the Realtors. That was a beat. The street was looking for a 1% gain and that was the strongest read of the year and the highest level in nearly three years. But this count is based on signed contracts. So people out shopping in November when the average rate on the 30 year fixed mortgage really didn't move much at all but was lower than it was over the summer. Rates today are kind of right around where they were at the end of November. So there hasn't been a huge change in rates recently, but they are down significantly from the start of this year when the 30 year fixed was over 7%. As for supply, it is up over 12% from a year ago, but still low. Historically active listings are roughly 6% lower than they were in November 2019. That is pre pandemic. So what does the housing market have to look forward to? Well, 22% of the realtors members said they expect an increase in buyer traffic over the next three months, up from 17% in October, still down from 24% a year ago. And fewer expect to see an increase in seller traffic. And Contessa, we really do need that. Well, it'll be interesting to see how it picks up in this new year. Diana, thank you for that. Coming up, despite wild weather and high rates, some insurers have managed to outperform this year, including Heritage and Lemonade. I mean, look at this. Heritage up 143% this year. We'll get bank of America's 2026 outlook for the industry next. Welcome back to the Exchange. This has been a big year for the big insurers. I mean, you've got Hartford up 26, 27% year to date, Travelers up 21%, AIG up 19% in Chubb up 14%. And that's during a year that saw natural disasters, high rates, sticky inflation. Now a new challenge in the mix for 2026. How do you grapple with the high price of data centers? For more on what to expect in the year ahead, let's bring in Joshua Shanker, insurance analyst at B of A Securities. I mean really what I'm hearing, Josh, is that the insurers see this as a big driver of potential growth because the facilities themselves are massive. And it may take layers of insurers like lots of insurers coming in together to be able to cover them. Or do you think that there's another way around that the prices of that kind of insurance might be so high that you have the likes of Google just deciding to self insure?
- [40:57]
G
I think it's a combination of both. Thanks for having me, Contessa. The truth is that it's a great thing for the industry Complicated risks are what the industry wants and needs in order to justify why it's doing a service in terms of the global economy. And so here's a new complex risk of a lot of insured value coming out. It's a great opportunity for the industry, for the brokers, for the insurers, for everyone in the mix. And they welcome complexity. But you're right, companies like Google, for example, have a tremendous amount of capital and the power to self insure. And if the insurance brokers conclude that the price being offered to insure these data centers is expensive, there's the opportunity of creating structures of self insurance to avoid that risk altogether. It doesn't mean the industry can't benefit because the industry also designs those structures, but it does mean that the underwriters might not be able to wet their beaks on this risk as much as they would like. But overall, a big new, exciting, complicated risk, that's great for the industry. I think it's a positive thing in an industry where pricing generally isn't going the right direction. Perhaps ultimately the, the actual influx of new risk is positive, offsetting that trend.
- [42:10]
B
I want to talk a little bit about now. People don't fall asleep when I say this word, reinsurance. This is insurance for insurers. And because reinsurance rates skyrocketed over the last few years, it's part of the reason, not the whole reason, but part of the factor in why property insurance premiums climbed as well. Guy Carpenter is just out with a note today that says those rates are going to moderate. The January 1st renewal deadline comes up this week and what we're going to see is businesses, insurance businesses, having to pay lower or needing to pay lower rates. There's such an influx of capital, they have done these reinsurers have made great profits. Explain the mechanism for investors about how that works.
- [43:00]
G
Well, the reinsurance is the tip of the spear and so the volatility is extremely high. Long term, that is a huge growth industry. If you believe that climate change is real, and we do. There's been more and more storms to ensure over time. We got to a point in 2024 where the price of property catastrophe, reinsurance in particular reached an all time high and it's going to be down for the second year in a row this year off a very, very high amount. And so the price of reinsurance is still expensive. It's not as expensive as it was one year ago. But the, the fact is that the, if manage correctly the opportunity to make money in reinsurance and also to Give a healthy market where catastrophe can be managed. It's a great business.
- [43:47]
B
Overall the reinsurer return on equity estimated to be 17%. Guy Carpenter says those catastrophe losses $121 billion is anticipated to be the estimate for 2025. When we're moving forward is the is the insure tech the way that insurers are using AI to assess risk to underwrite insurance to process claims Are the savings on technology helping to counterbalance the volatility in climate?
- [44:22]
G
So I think a lot of the opportunity is in the distribution and the packaging and the selling of the insurance at the end. There's a risk at the end of the rainbow, you know and somebody has to take on that risk ultimately. And so yes, AI is going to be a huge benefit into how insurance insurance sold. Whether it's actually a benefit in terms of the pricing, I'm not so sure. Insurance has been dealing with big data for a very, very long time. As I better analyzing big data than than the same actuaries have been regressing and resting data. We think that's marginal overall. But the opportunity to figure out structures that can make the market more efficient, that's definitely part of the situation.
- [45:00]
B
I showed leading into this that there are some real outperformers here. You have lemonade up almost 100% year to date. Heritage Insurance as well, Lincoln Financial, all doing very well. The big insurers, Chubb AIG Travelers have had notably positive returns this year on their shares. You want to talk about Progressive, why car insurance?
- [45:26]
G
Well, ultimately auto insurance is very understandable. Everyone flow is, you know, a huge part of the American lexicon identity. But this is a company that's been better at analyzing risk and better distributing risk than any other. It's basically the best performing financial and the s and P500 over the past decade. It returns an unbelievable amount of capital to shareholders. And it's very rare to go through a year where the company is down. It is down in 2025 now we think a lot of that is related to banks being up, the market being up. And this is the greatest port in a storm. And so when people are bullish on the market, they got to find what they own to sell. When they were scared, they've been selling Progressive. But the opportunity here for Progressive to consolidate the auto insurance market and use its technology to move into adjacencies like homeowners and small commercial. We think the sky's the limit.
- [46:18]
B
What we're seeing is that the property rates in many cases are expected to moderate this year. Although when I say moderate, it's just, just the growth moderating, not that they are actually coming down. It's something that we'll keep an eye on through 2026. Thank you so much for joining us today. Appreciate that.
- [46:34]
G
Thank you.
- [46:34]
B
And just before we go, let's take one more look at the markets here where we've seen a down day with potentially some profit taking here. The Dow industrials off by half a percent. The S&P 500 off by the same. NASDAQ composite off by just slightly more. And Russell 2000 exactly the same. The yield on the 10 year treasury at 4.112%. That's it for us. Thank you for watching the Exchange. Brian Sullivan has Power Lunch up right after this quick break. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. What made you confident that you could do something that hadn't been done before? I have no fear of failure. Trailblazing women, changing the game. One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts.