Closing Bell - Closing Bell Overtime: Looking Past the Turmoil With Former Bridgewater Investment Committee Member Bob Elliott and Former TD Ameritrade CEO Fredric Tomczyk

Episode Date: March 24, 2023

Averages shook off early losses and fears around Deutsche Bank to end the session, and the week, higher. Invesco’s Brian Levitt and Commonwealth’s Brad McMillan break down the market action and give their playbook. Former TD Ameritrade CEO Fredric Tomczyk talks the banking turmoil of the past few weeks. Former Bridgewater Investment Committee member and Unlimited founder Bob Elliott takes a step back to assess the macro picture and how investors should be thinking about the recent market moves. Meanwhile, gold has notched four straight weeks of gains and VanEck Assocaites CEO Jan Van Eck on where the money is flowing in this market. Morgan Brennan discusses the under-the-radar developments in the space sector from the past week. Plus, our Steve Liesman reports on the Treasury Department’s meeting of top financial regulators and the latest bank balance sheet data from the Fed. 

GAINS TO END THE TRADING WEEK AS STOCKS FINISH THIS FRIDAY HIGHER. THAT IS THE SCORE CARD ON WALL STREET, BUT THE ACTION IS JUST GETTING STARTED. WELCOME TO CLOSING BELL OVERTIME. I'M MORGAN BRENNAN WITH JOHN FORT. WE ARE AWAITING BREAKING NEWS THIS HOUR, WITH THE FED EXPECTED TO RELEASE THE LATEST DATA ON ASSETS AND LIABILITIES OF COMMERCIAL BANKS. AND THIS ROUND INCLUDES NUMBERS FROM THE WEEK THAT SBB COLLAPSED. WE'RE ALSO EXPECTING A READOUT FROM TODAY'S FINANCIAL STABILITY OVERSIGHT COUNCIL MEETING. And this round includes numbers from the week that SVB collapsed. We're also expecting a readout from today's Financial Stability Oversight Council meeting. We will discuss it all along with the latest concerns about Deutsche Bank and global financials with former TD Ameritrade CEO Brad Tomczyk.

Let's get straight to the market action as the major averages all lock in gains for the week. Joining us now is Invesco global market strategist Brian Levitt and Commonwealth Financial Network's chief investment officer, Brad McMillan. Good afternoon to you both. Brian, I'll start with you. We not only saw gains on the week for the major averages, but we are now actually higher over the past two weeks since the SVB bank run and failure. Are you surprised by that? Yeah, perhaps a little bit. I mean, the reality is, though, these things tend to end with a policy response. And so the markets had been very focused on the challenges that exist within the financial system and have been somewhat calmed by very quick responses by our policymakers and now starting to look at what an easier policy

environment could look like. Now, of course, we got the Fed rate hike this week, but to many, that's the last one. And, you know, start looking ahead to what an easier policy environment looks like. So I think, you know, for investors, the end of tightening cycles tend to be good environments over the next couple of years. So perhaps a little bit of comfort as we as we assess what policy is going to look like over the next couple of years. So perhaps a little bit of comfort as we as we assess what policy is going to look like over the next months. Yeah. And we certainly saw yields fall again today, Brad. Bond market is certainly pricing in the notion that this is the end of this tightening cycle. How do you see it? I think we've got a recession coming up,

but I think that markets are responding to that. We're seeing interest rates come down. You know, when you look at a couple of things, first of all, we've got all of the backloaded rate hikes that are still showing up in the data. Second of all, we're going to have an immense tightening of financial conditions going forward. You know, the government has done a great job with the term lending facility. And when you look at the numbers, it's being taken up. But that's a bandaid. It doesn't actually solve the problem. So banks are going to have to fix their balance sheets. They're going to be pulling back on loans. They're going to be to businesses, to people. You're going to see less spending. I think across the board, we are going to see a recession sooner and maybe harder than

we thought. Yeah, Brian, I guess it's kind of weird to cheer the Fed hiking less or maybe stop it because we're getting a recession. Right. So you say you favor a high quality fixed income here. Can you get specific on what that means across different categories? Yeah. You know, market sentiment has obviously been somewhat weaker here, which suggests weaker growth ahead. So if you're a very tactical investor, we you know, we say you want to be more defensive here. I mean, in mid-October of last year, we started to pick up signs of a recovery, the market getting enthused about a soft landing. And now the market is is facing this unrest and, you know, concerns about a recession. Now I want to be clear though,

we talk about higher quality, we talk about larger cap being protected if you're more tactical, being defensive if you're more tactical, but look, this is how cycles play out. And this market has priced the recession, I mean it's down 25% peak to drop. Could you retrace some of the gains that we

saw in the beginning of this year? Sure. As you as you move towards a recession. But, you know, investors that are looking over the next couple of years should be looking to a better environment in almost every instance when the Fed stops tightening and when inflation peaks and starts coming down, markets do well over the next couple of years. So this is a moment where we've got challenges. But, you know, intermediate term investors should be looking out ahead of it. But, Brian, tell me more about exactly what kinds of bonds, bond funds, fixed income investors should be locking in here. I mean, look, you should be you should be focusing on higher quality. So when you're in a defensive environment, you're in what the market is looking at as a contraction. You want to be exposed more to government bonds.

They they tend to outperform, as they have been since we've shifted into a more defensive posture. Up next is is high quality corporates. Now, I think spreads will move out some as as the banks tighten lending standards. But you're already getting pretty attractive yields. And then from there, high riskier credit and equities fall further to the bottom to the extent that your inequities, you know, tactically, you want to be in lower volatility names. You want to be higher quality, more defensive, larger cap growth compared to smaller cap value. But again, that's for the tactical investor. And again, over the intermediate term,

the shift in Fed policy will set the stage for the next cycle and a recovery. Yeah, Brad, I'm going to ask you a similar question, because if you believe we're going into recession, then historically speaking, the S&P is overvalued here. So how would you be positioning? Well, when you look at the valuations, it depends on what part of history we're talking about. If we're talking about the past five, 10 years, actually, you know, we're still kind of reasonably valued. It's when we get before the financial crisis that we're overvalued. So the question really is, are we going to see interest rates go back to where they were before the financial crisis? And what we're seeing is exactly the opposite. We're going to see interest rates stay in the same range they've been. So I think there's actually some upside room on the valuation side.

You know, there's some opportunity for growth there. But what's interesting about this one is we're seeing some action in defensive sectors like utilities, which are responding to interest rates, but not so much in real estate because there are some other issues there. But then you're seeing growth. You're seeing communication services. You're seeing tech start to break out a little bit. And that says that investors are still looking for growth, especially in a recessionary environment. And with lower rates ahead, tech all of a sudden makes a lot more sense. So I think to some extent, we're going back to the 2021 playbook, as you said, because there are opportunities for growth and there are also opportunities

on the valuation side, especially for that type of stock. All right. Gentlemen, thanks for joining us today. And of course, we did see utilities, real estate and consumer staples, the best performing sectors in trading today, sort of speaking to that flight to safety, if you will, in the session. All right. Let's turn now to CNBC Senior Markets Commentator Mike Santoli at the New York Stock Exchange. Mike, what are you focusing on? John, sort of slicing and dicing the market to see what's working, what's not. Maybe a little bit surprising.

Take a look at how the S&P 500, if you exclude financials has performed- relative to the overall index you see mostly year to date it was pretty much lockstep and then more recently you got the separation so here's S. and P. X. financials up five point four percent look we're not even.

One quarter of the way through the year that's really not that bad and obviously owes a tremendous amount to the very large mega cap- tech stocks as we've been talking about. You know, Apple and Microsoft together, we were discussing this week, are 13 percent of the S&P. Well, they're 16 percent of the S&P if you exclude financials and real estate. So that's one way the market's trying to insulate itself. Now, if you take a look at the regular S&P 500 versus the

equal weighted version, I pointed to this in a positive way coming off the October low this is a six month chart and you see the real great outperformance of the average stock so to speak relative to the market cap weighted index well you've given that up right so we've sort of rolled over in terms of the average you know rank and file stocks and the S&P 500 market cap weighted is looking better. So that tells you that the market's gotten a little narrower, a little dicier. And the other piece of it is the equal weight is now below that December low. That's not the case for the overall S&P. So, again, it's not that much of a margin of safety suggested by the breath.

However, a lot of the parts of the market outside of tech might be looking a little bit oversold. We'll see if they can respond to that and firm up next week. Yeah, I do think it's interesting, though, that you look at this and then you take out real estate and financials. They've been by far the worst. Well, they've been two of the worst performers. I guess they've been the worst performers month to date, given everything that we're seeing, all the concerns in the banks and the spillover to other parts of the financial sector. And then, of course, real estate and this notion that there is another shoe to drop. Lower rates, though, I would I would expect that would at least help real estate here.

Maybe catch a bit, even if it's not the office rates. Yeah, exactly. There are the makings of that offset from lower yields. I agree with that, Morgan, especially when it comes to just sort of. Triggering a little bit of a comeback in in home building and housing demand so you're right it's not. The I think the home builders don't have a tremendous

representation in the public equity indexes but- real rates and such have a bigger one so that could be the reason. Why lower rates have not really worked in their favor they have a lot of debt to- to refinance and even though we yielded down there up from when they took out the loans but I agree have not really worked in their favor. They have a lot of debt to refinance.

And even though yields are down, they're up from when they took out the loans. But I agree with you. It should be a buffer at some point along the way for many parts of this market. Mike, I'm trying to think ahead. And tomorrow is the last week of the first quarter. It started out strong in January. What do you think the overall story of this quarter is going to be given that strong January start, the craziness that we've seen in the banks and now this quarter point hike with

the Fed saying that the banks looks like are going to do the rest of the work with the effective hike with the slowdown in credit? I think essentially it's going to be reversals is the story of the first quarter. So there was looking like a pretty good theme you had all the cyclical stocks looking good we were pricing in a soft landing in fact. We had an acceleration priced into the market there in terms of the economy and then it completely undid that in the second half now on a net basis if you're an investor. You know you probably positive I think sixty percent of all stocks are up over the last six months- and you have to evaluate whether in fact- you want to stay as balance people have built up a fair amount of

cash. They've thrown money to money market funds. Out which in theory should allow an investor I keep saying this. To allow yourself to shoulder a little more risk on the equity side if in fact that's. In your longer term. Plan so I don't

think we've determined whether in fact we can thread this needle. The Fed can thread the needle with the economy, can escape some kind of more obvious recessionary condition. But so far through the first quarter, I think that the takeaway might be it could have been worse. All right. Mike Santoli, thank you. Now, after the break, former TD Ameritrade CEO Fred Tomczyk on the red flags he says were ignored that led to the current financial instability and why investors should still be cautious. We are back in two. Breaking news on the Treasury's Financial Stability Oversight Council.

Steve Leisman has the details. Steve. Thank you, John. The Financial Stability Oversight Council are just putting out a statement from their meeting this morning. And they said while some institutions have come under stress, the banking industry remains strong and resilient. They discussed ongoing efforts to monitor financial developments. And they heard a presentation from the New York Fed staff on market developments. John, I wonder if in the market,

there was some more hope that there was going to be more positive statement about things to come from the FSOC, but there wasn't. It was a very simple meeting where they, at least what they said is they just simply discussed, heard a presentation from the New York Fed on market developments, and they discussed financial developments and made a statement that the banking system is sound and resilient so um i had read some stuff of people saying there could be something more interesting coming from this meeting today but uh perhaps some clarification by uh the secretary of the treasury of uh what the what the the actual guarantee is for uninsured deposits. But that is not in this statement from this meeting of top financial officials in the states.

John? Yeah, I actually I read some of that, some of that analysis as well. I think it's worth noting, Steve, that when it comes to FSOC, you have all the heads across the major financial agencies and institutions in the U.S. and involves. But really, you're talking about an agency that has very legal, very little legal authority and really serves more as a coordinating forum. So is the takeaway here that it's essentially a vote of confidence that they're moving forward together, they're coordinating, they're having these conversations and they're trying to show that they are active and actively engaged in everything that's going on in the banking sector right now? Yeah, I think that's a nice way to

read it, Morgan, because I think that the urgency of the statement would be commensurate with the urgency of the situation in markets. And things are a little bit, what's the right word, more chill today. Is that a good way to put it? When I looked at my screen of the sectors that were leading the market lower, which has been the case a lot of this week, it was not the banking sector. And the market, as you guys have been talking about, was a little bit higher. It would be like I would look at the screen and this big, you know, when the heat map bubble would pick out, that was the banking sector. That was not the case today, despite waking up in the morning and seeing the headlines out of Deutsche Bank.

It did not. It carried through but didn't follow on is maybe the best way to put it. And we had a little bit of improvement from a still difficult situation. If you look at the market gap with the Fed for the year end, which is one way of measuring the difference between where the Fed thinks it's going and where the market thinks it's going. It's 120 basis points, which is a lot, right? But it was 150 basis points. So things did improve a little bit as we go on. And we'll see how the market and the Fed meet up in terms of the outlook for inflation and how much this banking stress ends up affecting the overall economy. Okay. I like that for a Friday, Steve. F-sock and chill. I have a good one. For more on the banks, let's bring in Fred Tomczyk, former CEO of TD Ameritrade.

Fred, let's get your perspective for the investors at home, really. I mean, after years of really low rates where investors at home have been really just encouraged to buy stocks, we've got to get reintroduced to fixed income, corporate bonds, munis. What should, as we approach the end of the quarter, people be thinking about in their portfolios when it comes to balance in the face of all this volatility? Well, I mean, I think, you know, if you stand back at the market and just look at where we are and all the uncertainties in front of us, we've got the Fed tightening from ultra loose monetary policy for a long period of time, including some experimental quantitative easing

being a bit experimental. We've never I've never seen that in my career. So that's number one. Number two is you're coming out of a period where, you know, they've got that Fed tightening. You've got geopolitical uncertainties with the Russia-Ukraine war. You've got increased tensions with China. And you've got this banking crisis going on, which, you know, and banking does rely on confidence. So you've got all that going on. And on top of that, the Fed's now trying to run two tracks, where it's trying to tighten monetary policy to deal with inflation, but it's also trying to provide liquidity to the banking system.

All that breeds is uncertainty, and I think for investors right now, they should be fairly cautious. So, Fred, give us the classic mistakes, maybe a couple of classic mistakes that investors at home, maybe active traders, would tend to make in an environment like this and how we might guard against those. Well, I mean, it's to me, it's a news driven market because of what's going on today and all this stuff. It's a very news driven market. news to regular markets. So unless you can predict what the news is going to be this afternoon or tomorrow, I think, you know, as a trader, you should make sure you limit your risk. Don't start to take outsized positions. We used to say at Ameritrade, always know your downside and be

willing to make sure you're willing to tolerate that loss. So don't take extreme positions right now. And you can argue that what we've seen play out with the banking sector in recent weeks has really been a crisis of confidence. Right. And that in itself has triggered these bank runs and led to a crisis of liquidity. The next shoe to drop potentially, or I guess the actions are being taken so it doesn't drop, is First Republic Bank. When you see the FSOC meeting, when you see Treasury Secretary Yellen testifying, as she did this week, in front of lawmakers and saying what she's saying about deposits and the commentary from Powell as well on the heels of the FOMC meeting. Does it actually staunch that crisis of confidence, or is there potential for another shoe to drop? Well, you know, banking does rely on confidence, and so I can't stress that enough.

And any time you have a loss of confidence in a bank, it's going to cause potential issues for that bank. So, I mean, I'd like to say where we have been today, at least in the U.S., the two banks that have gone down have had unique situations, so it feels like it's over, but you're never really sure because you don't know the, you used to have a saying, you have your direct or primary exposure, you have your secondary exposure, then you have your tertiary exposure, which is much harder to see. And so those things tend to play out over time. So I don't think we know for sure, but it definitely, to me anyway, the two banks that have gone down in the U.S. seem to be unique situations that, you know, sort of they had weak ALM. Silicon Valley Bank had weak ALM and interest rate risk management and a lot of red flags that they ignored. So hopefully they're isolated. I think they're isolated, but you don't know.

And we won't know for a while. So when you see these times of uncertainty and times of volatility, it always raises the debate about whether to be passively investing or whether to be stock picking right now. Your thoughts? Well, I would be personally, I'd be a little bit more passive and a little bit cautious. But when I talk to friends that are still in the industry, they would say they're retail traders today. When the markets are going down, they tend to have a they move into ETFs like SPY and SPX. And so they diversify a bit. And when the market starts to pick up, they go into single names that they've liked for a long time, like Tesla and Apple. So you see them moving in and out. But from my point of view, this is the time to be relatively cautious and diversified.

Fred Tomczyk, great to have you on a Daylight today. Thank you for your insights. Okay. Glad to be relatively cautious and diversified. Fred Tomsic, great to have you on a Daylight today. Thank you for your insights. Okay, glad to be with you. After the break, is it possible that the uncertainty around the banks could actually be stimulative to the economy? That's a contrarian take, and our next guest is going to lay out the case when Overtime returns. Welcome back to Overtime returns. Welcome back to Overtime. Time for a CNBC News update with Bertha Coombs. Bertha. Hey, John. Here's what's happening at this hour. Speaking to the Canadian Parliament today,

President Biden said our shared prosperity is deeply connected to our shared security. Told the chamber that the U.S. and Canada will stand together against authoritarian regimes, in part by reducing their dependence on other countries like China for critical minerals and semiconductors. The FBI and New York City police are investigating a letter containing white powder and a death threat delivered today to the office of Manhattan District Attorney Alvin Bragg, who is investigating former President Donald Trump's hush money payments to Stormy Daniels. Officials say there were no evacuations or injuries. And one of Trump's lawyers appeared before a federal grand jury today

that is looking into the former president's handling of sensitive government documents. A judge ruled Evan Corcoran cannot claim attorney-client privilege because there is enough evidence that Trump may have committed a crime through his lawyers. And Morgan, I want to say thank you to our retiring producer, Alex Crippen, who really innovated so much of our coverage here over the last 25 years at CNBC. We wish him all the best. We absolutely do. Beautifully said. Bertha Coombs, thank you. Breaking news from the Fed. Steve Leisman has those details. Hi, Steve.

Hey, Morgan. What we have here are a weekly statement from the Federal Reserve, which is a week old, that shows the movement of deposits at small versus large banks and in the whole banking system in the days right before and right after the failure of Silicon Valley Bank and Signature Bank. It showed that the total deposits in U.S. banks were steady at $5.26 trillion. For anybody who's keeping score, folks, I'm using the unadjusted seasonal data because the seasonal data can get weird this time of year in tax season. Deposits at large banks, they rose slightly to $10.3 trillion from $10.19 trillion.

And there was a decline at small banks, $4.96 trillion from $5.07 trillion. These are not huge numbers, Morgan. There's something to watch. We've only got a few days of the crisis or the banking turmoil in there. It could be that there's more money leaving. It could be that this was the worst of it. So I would take it with a grain of salt. We're reporting the data, reporting the numbers, showing that there was a bit of a shift.

What this data is, the large banks, Morgan, are the 25 largest banks. So if money moved from Silicon Valley Bank into one of the other bigger banks, the G-SEP banks, that movement wouldn't show up here. What would show up is moving from the smaller banks, a sample of banks below 25, into the larger banks. And there was some of that. But a little bit of caution needs to be taken because this is a year when people are putting money in the bank, perhaps to pay their taxes, as that comes around pretty soon.

So I'm using the not seasonally adjusted data. Some folks on the wires are using the other data. I've been cautioned against using that. So we're watching this. We're listening for it. St. Louis Fed President Jim Bullard talked about this today. He said there were banks in his district who were concerned about the stickiness of their deposits, but he did not hear about big problems at the banks in his district relative to deposits leaving. So this is an

anecdotal story. It's a data story. It's an evidence story. And we're going to have to watch it and carefully and monitor as it goes along. So, Steve, I want to revisit, make sure I understand the point you just made. You're talking about, when you say the larger banks here, you're talking about the 25 largest banks. Over the past couple of weeks when we've been talking about larger banks, we've been talking about the biggest four banks. So if money is moving out of the 21 into the four, that wouldn't show up here because it's just all sloshing around in

that big pool. You're talking about the little bit that moved out of the smallest banks into the 25. It gratifies me greatly, John, when I explain something about banking and somebody understands it. You got it just right. I never know when we do this kind of stuff if people are going to get it, but you got it just right. This is the way this particular report is separated. It's the top biggest 25 and a sample of like 875 banks below the top 25. Happy to be the guinea pig here. Just running around in this wheel, Steve. You're the best. Well, let's continue this conversation, shall we, with Unlimited Funds CEO Bob Elliott, who previously worked on Bridgewater's investment committee. Bob're here on set with us it's great to have you the last time you were on set was two weeks ago my god what a two weeks we've had it's been a heck of a two weeks hasn't it

i want to get into all of that but first just your reaction to this h8 data this high frequency data which is the closest thing we can get to sort of having a sense of the deposits although not that much since we're talking about the biggest 25 banks. Right, right, right. I mean, I love the fact that we're now rolling up our sleeves on a Friday afternoon getting into some bank data, right? Yeah. So for our macro nerds out there, this is exactly what we live for. You know, you look at this data and what it shows. When I was here two weeks ago, the basic question was, are the Treasury and the Fed going to do enough to stop any deposit runs out of the small banks? And the reality is they took pretty aggressive steps to respond to SVB, to shore up First Republic, at least to hold it up for the time being, and to create programs that provided

liquidity for banks that might be running into trouble. The outcome is what we saw in this data. During the most acute portion of this crisis period, we saw about $100 billion of lost deposits from the smallest banks to the biggest banks. That's not desirable, but that's, you know, a few percent of the total picture of the funding conditions for the small banks. Certainly not a disaster. And then we look at some of those other programs, like the most recent, the combination of the discount window, as well as the most recent Fed program, that's been stable for the week since this data was reported. So it suggests that basically, you know, we had a little bit of a deposit run. It wasn't a good thing, but things are probably normalizing at this point when it comes to the flows of deposit.

So you think the worst is over? We've been having this conversation, potentially. So we've been having this conversation that with everything we've seen over the last couple of weeks, this is going to tighten financial conditions. It's going to make the banks less, or I guess I should say more reticent to lend. And that that in turn is going to tighten the economy and do the Fed's job for it. Do you see it the same way? Well, I think there's real questions about that. I mean, what we already saw through the course of the last year, really, banks had been pulling back their extension of credit. And even before this issue emerged recently,

you had banks actually net zero in terms of their lending, both the small banks and the big banks. And you already saw big banks actually choosing to deleverage or bring down their books ahead of this circumstance. Now, could that get a little worse than zero? Could you start to get a net withdrawal of credit? That's possible, but that's probably not a big part of what's going on. And so then you've got to look at the other elements of what's going on as a consequence of this dynamic. Since I was here two weeks ago, bond yields have fallen considerably, mortgage rates are down, which is stimulative to the housing market, and stocks are up. Very important to recognize, right? Stocks are up since the beginning of this crisis. And so it's possible what we're seeing, actually, is a lot of people pricing in some stimulation, some liquidity coming

in from the Fed, which is supporting asset prices in the bond market. And that may be net stimulative, all things considered. That also sounds like they say there's a hurricane coming, but the sky looks so clear. So I don't know. But I actually want to take a sharp turn and ask you about international equities. In cases like this, when there's volatility or not just that, just these weird financial conditions, so many people say, hey, why take risk when you can get this kind of yield in fixed income? Stay with dividend payers. And historically, that tends to be not exactly the right advice.

Oftentimes, I look back and see there were these moderate risks that were priced very reasonably that people overlooked because they were ignoring extreme risk and looking for too much safety. Are there any moderate risks, reasonable risks, that you see in international equities? Well, I think a lot of when you look at what's going on in the equity market in the last couple of weeks is a real flood to U.S. mega cap stocks, right? And I think part of that is possibly those stocks are being perceived as safe. It's also a function of what we're seeing with big levered

players like hedge funds who had been very short those positions, right, and had basically been forced. They got a short squeeze as a function of this tightening dynamic that was going on and had to delever. And so you've seen that outperformance in the U.S., I think, you know, relative to international stocks. You see the outperformance of tech relative to a lot of other sectors. That's probably not going to be sustainable or durable once that deleveraging slows. And we even saw it at the end of today. You start to see NASDAQ trailing. You start to see the Russell 2K starting to outperform right here into the close.

I think maybe what we're seeing is that that deleveraging that's really helping the tech stocks relative to the rest of the market really stopping. So how do you play the other side of that then? Well, I think the question is basically where are there opportunities? We've had a big dislocation across a lot of these different markets, particularly in the internals of the market. If you believe that the macro economy is by and large in pretty good position and you think that we're not going to see a dynamic where the banking system is going to see a dynamic where uh you know

the the banking system is going to come under significant pressure then a lot of those trades that looked pretty good a few weeks ago if anything are priced even better today than they were before whether it's you know uh being conservatively positioned or in your your non-cyclicals versus your tech stocks because the tech stocks are going to hit with the interest rate impact or um whether you're you're you're looking to international stocks relative to U.S. stocks. All of those things might be good opportunities right now. So just quickly, then the fact that we saw Deutsche Bank, we saw the credit default swaps spike today. There's been a lot of focus on contagion within that market in the banking system as well. How closely are

you watching that? Or is that really just sort of a de-risking within, you know, reassessment of derivative strategies among hedge funds and the like? Well, I think there's a there's a push to try and find the next domino that will fall. And this is very normal when you get these sort of speculative conditions that are going on in this risk. This risk concern, Deutsche Bank is nothing like Credit Suisse. And I think people who are close to these markets know that and understand that. And this is probably setting up opportunities rather than increased risks across those various stocks and bonds. I like to think different. Bob, thank you. Gold turning into its fourth straight week of gains as investors look for safety and Google searches for gold coins are surging. We're going to talk to the CEO of VanEck, which runs the GDX gold miners ETF about the interest he is seeing from investors in the space when we come right back.

Welcome back. Gold prices getting a major boost this month as investors look for safety, notching four straight weeks of gains. VanEck's gold miners ETF jumping as well, trading above its 200-day moving average and up 15% so far in March. Let's bring in Jan VanEck, the CEO of VanEck Associates. The firm has $69 billion in assets under management. Jan, happy Friday. Before I get to gold, I want to ask a broader question. You were already expecting a sideways market for 2023. With all of this bank's uncertainty, do you expect it to be down? And do you still think it's a 40-60 year where investors should be weighted 60 percent toward bonds and fixed income? I think so, John. I think that the narrative is obviously a little bit more complicated than that.

And what I see is in this sort of year where the level of the water in the bathtub is going to be flat, there have been some infusions of liquidity into the market. One was a year end from Asia, China money supply and Japanese bond buying. And that's what led to the January spike in tech stocks and everything. And then I do think that the Fed sort of stimulation here or supportive banks, I should say, will also be a short term putting money into the into the bathtub. But long term, I don't think those are sustainable or long term investable kinds of things. And at the end of the year, the water in the bathtub will be the same. It'll be a sideways year. And I think, yeah, you'll be pretty happy with your your bonds positions.

OK, now gold has had a nice run at these levels. Is it an investment or just a trade that's temporary with maybe some more upside? I think we're at the very beginnings of what could be a several year cycle in gold. And I also put Bitcoin in that category as well. I mean, you have to love finally, as a gold investor, you've been rewarded over the last couple of weeks, right? Weakness in the banking system and gold rally. That's why you own gold. The reason I think it could be a two-year cycle is because I think that Fed is close to the end of their tightening. The market is worried now about the consequences, and it could take a year or more for those consequences to roll through the commercial real estate market, right? The

banking and lending dynamics. Maybe we have a shallow recession. But at some point, the Fed's going to start easing. And that's when gold's really going to party. You know, you have some short term things like gold floating with $2,000 an ounce that got hopes going in the gold community as well. Yeah. And of course, when you see interest rates go lower, when you see the dollar weekend, that's really good for something like gold, too. I thought it was interesting you just mentioned Bitcoin because we have seen this rally in Bitcoin. And I know you have a couple of ETFs that are focused on crypto to a certain degree. So do you see it moving for the same reasons that gold is moving or is there more at play here?

No, I think it's that simple. I think all the speculation is out of both of those markets. There's obviously no leverage in the Bitcoin market with all the regulatory crackdown and all the crises that we've had over the last year or so. So it's up like 70 percent on the year, best performing asset. Again, rewarding the people that own Bitcoin for that thesis of wanting a hedge in their portfolios. So how do you trust it from here? I mean, Bitcoin has been, you know, crypto has been so volatile. It was an inflation hedge and then it was a risk asset. And now it sounds like you're saying it's back to being perhaps digital gold. Why? Well, I call Bitcoin like an eight-year-old child. It's very, very

early in the stages of adoption. There's so many institutional investors haven't really gotten involved. Central banks haven't gotten involved. I think that's all possible over the next several years. So if you look at short-term performance, I mean, Bitcoin was less volatile than the Nasdaq at the end of the year. So if you take any short term time period, who really knows? But the way I put it, this is if you want to have this in your portfolio as a hedge, it's pound the table time, meaning you're not going to get a big flare. The starting gun's not going to go off. But at some point, the Fed will start this easing cycle and you will want this in your portfolio. Short term, you know, there might be pullbacks and it might be a sideways year for this asset as well. But I do think, you know,

when the cycle turns, it could be pretty exciting. All right. Jan Van Eck, thanks for joining us today. Up next, Mike Santoli looks at why corporate America may not be too worried yet about rising borrowing costs and tighter lending terms. Stay with us. Welcome back to Overtime. Mike Santoli is back with a look at how big companies are navigating tighter lending conditions. Hey, Mike. Yeah, John, pretty well is the short answer. I mean, very big public companies in the S&P 500 have not been very effective because they don't rely so much on floating rate bank debt and certainly not smaller banks.

Here from Goldman Sachs is a look at the overall cost of debt at these S&P 500 companies, excluding financials, way back to the mid-70s. So obviously, as bond yields in general have trended lower, so have corporate borrowing costs. It's also enabled these companies to extend the term of their borrowing. So there's really not a lot of maturities in aggregate coming in the next couple of years. They can enjoy these low costs for quite some time to come. It's different from smaller companies. The Russell 2000 is underperformance. A lot of it is about the fact that they don't have quite this luxury. Now, it should perk up, obviously, as they refinance, as companies do have to go back to the bond market mostly. But it's probably not going to pick up that much, certainly not in

historical terms. And actually, the 10-year yield is a little bit lower than it shows here on this chart, given the rally in bonds we've seen right now. Does this mean, as we talk about small and medium business, perhaps being in a tough position for the rest of the year if credit conditions tighten, that meanwhile, with these lower rates, the S&P 500 companies, the biggest, have just gotten that much stronger? On a relative basis, they have, John. I mean, the most extreme example of this is the, you know, the Microsofts and the Alphabets and the Apples that have just tens of billions of cash just sitting there and they don't ever need to access the bond market. They do it only for show and to buy back some stock, have a more efficient

balance sheet. Yeah, smaller companies, you know, the NFIB survey, those are very, very small companies. Those are not Russell 2000 companies. They never feel as if the banks are on their side. There's actually a question about have borrowing conditions become harder or easier. They've literally never said they've gotten easier because they're mom and pops and they always feel like they're hat in hand. So you can imagine now when the banks are even less generous, it could, in fact, hurt certainly much more on that level of business. Yeah. I know Steve Leisman has done a fair amount of reporting on this dynamic as well, as we've seen rates tighten so aggressively over the past year. Mike, the question I have is what would this look like if we were just looking at commercial real estate?

Right. When you have something like what, a third of global debt for the commercial real estate sector is floating and and that's going to be an area and I know we keep talking about it day in day out with everything going on the banks but that this is going to be an area where you could potentially see those problems manifest. It will and the stock markets respond that if you look at how the market right now is valuing something like Borneo I mean I think it implies a kind of you know 8% kind of earnings yield let's call it right I mean basically their rent is equal to 8% of their market cap right now that's really high it shows you that people expect that that's not going to look that well when when rents roll off it's a slow moving issue it's a it's a serious one but it's not one that hits all at once. And the markets tried to price it and figure out what the after effects are going to be. So I don't want to minimize it, but it's the kind of thing where they're going to have to go back to their banks and renegotiate. And the big problem is nobody came back to work in big numbers. So the leases are less valuable.

The rent rolls are lower. Yeah. And of course, to your point, when you take a look at something like this, it speaks to the fact that maybe the aggressive shocks you would have seen in a previous tightening cycle are not going to manifest here because folks had time to lock in on that longer term, lower interest rate debt. All right. Mike Santoli, thank you. Up next, why this has already been an out of this worldthis-world week for the space industry. It's not done yet. Stay with us. Welcome back to Overtime. Let's talk space. While the world's been focused on the Fed and banks and the macro picture,

there's been a flurry of developments in the space base this week. Texas VC Matthew Brown is buying Richard Branson's Virgin Orbit in what's been seen as an 11th hour rescue of the small launch provider. Look at that stock. Keep in mind, penny stock, very, very small. Spiked on that news this week. CNBC disruptor Relativity Space, which is privately held, launched the first ever fully 3D printed rocket this week, though it failed to actually reach orbit.

You had more missions from Rocket Lab and SpaceX this week. And then today, Jeff Bezos' Blue Origin announced plans to return to flight soon after publishing findings on last September's New Shepard failure. And coming up this Sunday, if its own launch with India's space agency goes according to plan, OneWeb will become the first low-Earth orbit broadband provider to complete its satellite constellation. OneWeb will become the first low-Earth orbit broadband provider to complete its satellite constellation. OneWeb CEO Neil Masterson says this launch will enable a startup, which is merging with Udalsat, to roll out full service across the globe before year's end. We distinguish ourselves from Starlink from a competitive standpoint in that we are a B2B business.

We're not a B2B business. We're not a B2C business. So our primary customers are telephone companies, existing satellite providers. In fact, other satellite companies, and I'll come to that in a second, as well as governments. So our approach is to make sure that we integrate our network into others' networks to extend their network and help them serve their customers better. So the idea here as a quote-unquote wholesaler of connectivity, connectivity that because it is from space is actually a cheaper option for regions where there's no fiber, where a government or a company would want an independent backup to the existing infrastructure. Now Masterson is pretty emphatic that OneWeb doesn't compete with SpaceX's Starlink and notes that OneWeb has a $900 million and counting backlog.

You can catch more of my conversation, my exclusive conversation with the CEO of OneWeb on my podcast, Manifest Space, which you can catch anywhere you catch your podcasts. Yes. So on the business end of this, with rates up, cash king again, is space tourism even a thing anymore? Is it all about satellites? Satellites is and has been the moneymaker in terms of the viable business within space. That has long been the case. It continues to be the case. It's part of the reason I think investors are salivating at the notion of a Starlink getting up and running and eventually maybe being spun out as its own entity that investors can trade in publicly, which has been discussed by that company. But space tourism, it's still happening. I mean, really, it's still happening. The line's still just as long to go to space when you could do so many things. It's a

high net worth individual experience. Right. And so when you're talking about, for example, a Virgin Galactic or Blue Origin is not quite as transparent with, you know, what their booking system looks like. But there are there are still a long list of folks that have put money down and expressed interest in doing these suborbital trips. Now, how big that market ultimately long term is going to be remains to be seen. But then you do have missions coming up. You have private, all private missions coming up with SpaceX. And once Boeing starts flying astronauts into orbit, you're going to see those with Boeing as well.

So there is a marketplace and a business case for it. Okay. Very deep pockets you have to have. Yeah, not me. Very deep. All right. Up next, the key earnings and economic data you need to know about before trading kicks off on Monday when we come back. Despite a turbulent week, the S&P 500 and NASDAQ locked in their second straight week of gains.

So what should you be watching for next week? Well, it actually starts tonight. The latest bids for Silicon Valley Bank are due at 8 p.m. to the FDIC. Then over the weekend, China's hosting its development forum in Beijing. The guest list includes Apple's Tim Cook, who arrived today. We're also going to get earnings next week from Micron, Lululemon, and Walgreens, plus Kay Schiller home prices, consumerululemon, and Walgreens, plus Kay Schiller, Home Prices, Consumer Confidence on Tuesday, Real GDP Thursday, and we're going to have Robert Schiller on Monday's show, so you

don't want to miss his thoughts on housing and the broader economy, Morgan. Yeah, I'm excited for that, in part also because he's done so much work on behavioral economics. So when you're talking about things like bankrollings and what we've seen playing out in the markets in the last couple of weeks, it'll be interesting to get his insights on that. It's pretty incredible too, John. We're ending the day higher. We're ending the week higher.

And we're ending the last two weeks higher. And that's when we first started talking about SVB. Yeah, get your portfolio position. Fed Vice Chair for Supervision Michael Barr also speaking on Tuesday. So don't miss that. All right. That's going to do it for us here on Overtime.

Fast Money begins right now.