Closing Bell - Closing Bell Overtime: Robert Shiller On Red Flags in the Real Estate Market; Breaking News on Lyft 3/27/23

Episode Date: March 27, 2023

The Dow and S&P 500 notched their third straight positive session but the Nasdaq fell 0.5%. Crossmark Global’s Bob Doll talks the market action and what moves he is making for his clients right now. Our Deirdre Bosa breaks news on new leadership at Lyft while Wedbush’s Dan Ives joins for instant stock reaction. Mizuho Dan Dolev breaks down the ripples effects from the CFTC lawsuit against Binance for the crypto universe. Stifel’a Mark May talks the impact of SVB failure on tech M&A and IPOs. RingCentral’s CEO discusses the company’s new AI products. Plus, RBC’s Scott Hanold on opportunities in energy, one of the worst-performing sectors YTD. And Jon Fortt eulogizes a tech legend who recently passed: Gordon Moore.  

Well, you got your scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I am John Fort with Morgan Brennan. Coming up on today's show, we're going to talk to famed economist and Yale professor Robert Shiller about the commercial and residential real estate markets ahead of tomorrow's Case Shiller home price data. Plus, we'll ask an analyst about the fallout for crypto-related stocks. Look at that chart today following

news of a regulator complaint against finance. But let's get right to the market action. Crossmark Global Investment CIO Bob Dahl joins us now. Bob, welcome. You, along with some others, are saying trim mega cap tech. But how much? Because a lot of people are effectively invested in mega cap tech through the S&P 500, which is heavily weighted that way right now. And certainly through the triple Q's, does that mean people should trade out of those into something else? Not out for sure, John, if your benchmarks, the S&P 500. I'll give you my portfolios, for example. As you said, 12% for Microsoft, Apple, and Google. I'm not zero. In some accounts, I'm still nine, some seven-ish, just under and less than I was. I started trimming tech a little soon, kind of Friday before last, and started buying stuff that's been hit hard,

banks among them and a few energy stocks. Okay. When you say banks, you say quality banks to add there. How do you define quality in this market? How much of it just has to do with size? A lot of it has to do with size. JP Morgan, Bank America, some say quality, some say not. PNC is super regional. I've been added to. So yeah, I'm not going after things that are in the crosshairs where there's too much uncertainty. I'm trying to buy stuff that I think is quality, going to make it through whatever mess we have. But it's been hit hard as those stocks all have. We did see yields snap back, move higher today.

Bob, I want to get your thoughts on some of the activity we've seen in the bond market. And just as importantly, what your expectations are around the credit market, which is something that Jeff Gundlach spoke about in the last hour on CNBC. Just take a listen to that. When we get back ups in long rates, which I expect should happen, at least moderately in the near term, you should buy long term treasuries, because as we've seen through this period of turmoil, they do act as a ballast against credit markets, which have been wobbling a bit. You see it the same way? I do.

The treasury market is a good place to be if you're nervous and biting your fingernails. And when it hits the fan, that's exactly what tends to do best. Now, we're coming off, if you will, a three and three eighths. I suspect we move up in yield. I think Jeff is saying the same way, move up in yield before we move back down.

But if you're nervous on down ticks, buy some Treasuries. Are you nervous about the possibility of recession? Yes, for sure. I think the banking crisis increases the probability of recession. Whatever you thought before, you've got to add 10, 15 points of percentage to it. So I think that probability has gone up along with it. Slower economic growth in the meantime and probably more pressure on earnings estimates, despite economic reports for the first quarter looking pretty strong.

So, Bob, speaking of banking, regional bank earnings, to my eye, really kind of kick off in the S&P 500 on April 14th, a little more than two weeks from now. I think PNC might report first, and then you got about a dozen the week after that. Are we going to see in those results something that tells us about how much they might be planning to pull back on credit availability or something about the health of those banks that's going to tell us whether they're safe to invest in right now? Yeah, great question. I think the estimates have not changed much, which means analysts are kind of saying, I don't know what to peg the numbers at. Let me wait for the first quarter and the commentary. Then I'll adjust the numbers. Last I looked, financial earnings for the first quarter are projected to be up 6 percent. I don't think they're going to be that good. And you're right.

It'll be what are they doing to their reserves, their credit, and what do the management say about how things are looking? Real estate stocks, REITs under pressure again today. This is being hyper-focused on right now as a potential next shoe to drop where the banks are concerned. Do you go anywhere near it or do you steer clear altogether? Yeah, I think there are too many uncertainties, Morgan, to jump in there. I know the stocks have been hit hard, but I need some more fundamental data points before I'm willing to take the plunge. OK, Bob Dahl, thanks for joining us. All the best.

Major averages finishing the day higher, except the Nasdaq, as we did see those yields move higher as well. CNBC Senior Markets Commentator Mike Santoli joins us now from the New York Stock Exchange. Mike, what are you watching this afternoon? Well, Morgan, looking at how the market splits up between the broad mass of stocks and the sort of heavyweight driven S&P 500. This goes back two years. So this is the equal weighted Russell 1000.

Very, very broad. A little bit of money spread across about 1000 stocks as opposed to the regular old S&P 500. So this is two years. You see, by the way, toward the end of that bull market run into the peak. Huge gains by the S&P 500. The rest of the market not really participating. But we did see some outperformance for a while off of the October low here from the equal weight Russell 1000. But we've lost it. Right. So now you have this big gap, big outperformance gap, S&P 500 driven by the very large stocks in the Nasdaq now looking much better in terms of technical profile. It's a loss of internal

energy is the way I would characterize it. On the other hand, the fact that you've reset most stocks that go all the way back to last fall suggests that the overall market is not ignoring the headwinds that have been created by the potential credit contraction, by the banking issues, and just by the general fact that the Fed has been trying to engineer a slowdown. So you can kind of view that one way or the other. Some parts of the market have indeed taken their medicine right now. Take a look here at another way of viewing this, which is the consumer discretionary area has been a leadership group coming off the October low into the early part of this year. This is the equal weighted version of that compared to Walmart. Now, Walmart's in the consumer staples, but of course, it's the very biggest and most defensive retail stock. And so

you see they mostly move together here in the fourth quarter. Massive outperformance by the average consumer cyclical. Now we have regression and you have them almost coming together again. So again, the market is tacking in a defensive direction without really urgently kind of liquidating all of those bets that were kind of positioned for a somewhat firmer economy. Yeah, battening down the hatches, if you will. I'm particularly keyed in on the second chart, Mike, just because you do have consumer and focus with ShopTalk. In just a few minutes, we're going to get earnings from PVH, the parent company of Tommy Hilfiger and Calvin Klein as well. How important is it to see more

sectors, whether consumer focused or not, more sectors participate in a more meaningful way to the rally we've seen in recent days for us to have momentum going into the second quarter? Yeah, it's fairly crucial. You can have a narrow market for long periods of time. You can have a market that essentially just leans on the most defensive areas for a while. But it tends not to be the kind of move that really propels you with high momentum anywhere significant. So that can be, again, when you're playing defense, it means you're just kind of protecting against downside as opposed to really getting an upside move. So it is pretty important. I still do think there's the potential for rotation back in the other direction. The volatility index is really

low, and that's because the index level volatility hasn't been extreme. And that is because the rotation within the market is kind of keeping things somewhat on stable footing. OK, Mike Santoli, we'll see you more later this hour. Let's turn to crypto. Names like Coinbase and MicroStrategy taking a hit today after the CFTC announced charges against Binance and its founder, Shengpen Xiao, also known as CZ. Joining us now to talk about the fallout is Dan Dolev, senior analyst at Mizuho. Dan, I want to get your thoughts on this, especially given the fact that Coinbase had such a rough day today. Was that stock fall warranted or is it potentially in a position to actually gain some market share if regulators are coming after Binance? No, I actually don't think it fell enough. I have a $30 price target. I actually think it

should go down to $30. I think this is what you're seeing now is the beginning of the crack. This is a real crackdown on crypto. And I would be if I if I if I own any of these crypto names, I would be really, really worried. Last week, SEC, Wells Notice. This week, this comes on Binance. I think every day, every week, something's happening and people are just like they just kind of continue to whistle you know past the graveyard so i think this should continue to continue to go down so dan why why just 30 then i mean if i'm if i'm taking an extreme point of view the dollar and gold are looking pretty darn good now compared to where they have looked over the past couple years what is the business model around crypto beyond just bitcoin if you think bitcoin is great What is the business model around crypto beyond just Bitcoin? If you think

Bitcoin is great, what's the business model that allows a coin base to thrive into the future if people aren't trading multiple altcoins without a whole lot of regulation? There's no business model, right? I think I kind of agree with you. You know, is 30 the bottom? Probably not. I mean, it's probably a good stepping stone if if the if the government cracks down on on all these alt coins and uh staking that's 35 of coinbase's revenue if they crack down on ethereum you're adding another 20 30 then what are they left with bitcoin so i think you know the fact that retail's dead you know all these alt revenue sources like you know usdc is plunging that's you know, all these alt revenue sources like, you know, USDC is plunging.

That's, you know, 80 percent of their interest income is from USDC. That's like the market cap has been plunging in recent days. I think there is no business model. And I think the outlook is pretty dire for, you know, for these exchanges and especially Bitcoin because it's public. So let's dig into that a little bit further then. If you're seeing a broader crypto crackdown by regulators, arguably you're also seeing a bit of a turf war emerge between the CFTC, which today went as far as classifying Bitcoin and Ether as commodities, versus the SEC. And you mentioned that Wells notice on Coinbase. What does further regulation actually look like? How should investors who maybe are a

little more hungry for risk and willing to invest in this sector, even if you are not, how should they be thinking about what that's going to look like, how it's going to materialize? I think it's a great question. So if you go back to Gensler's comments from a few months ago, he actually also said everything outside of or other than bitcoin uh or everything outside of bitcoin is a security bitcoin is a commodity so i think and i've said that many many times before if you really believe in the category and i kind of hate to say that might as well just own bitcoin if you really believe in the category because it's pretty much kind of it's gonna it going to be there to tell the story of this era. Whether or not it should be worth $20,000 or $25,000, I don't know.

But if you have one thing that's going to last from this era, it's probably going to be bitcoin. I'd say more than 95 percent of everything else should go away. So I wouldn't invest in any of the public exchanges, including, of course, not Coinbase. And I wouldn't invest in any coins that are not Bitcoin. Interesting. Dan Dolove, thanks for joining us. My pleasure. All right. After the break, Silicon Valley Bank has a buyer,

but there are still lingering questions about the impact on the tech companies it served. We're going to ask an expert about the fallout for that space next. Welcome back. How will this month's banking turmoil and a possible recession later this year impact smaller tech stocks? Well, I spoke today with A.J. Rohde, senior partner at private equity giant Toma Bravo. He told me he expects that take private deals will accelerate in the second half as investors punish companies that aren't growing profits consistently enough. Yes, we are in a world where public investors and software companies expect long-term EBITDA margins between 30 and 45%, depending on the company. And the public universe right now is negative too, with 6%, 7% interest rates.

You know, and people have been talking about this for a long time, but, you know, people want, you know, and we have too, you know, we have a lot of companies that are very profitable, but they're, you know, cost of debt is expensive. And so, uh, investors want yield. And if they're not going to get yield, they want a lot of growth, but they want safe growth and predictable growth. And not all companies that grow that are public have safe growth or predictable growth, right? They have growth that maybe is, is, is, uh, that maybe is basically based on access to capital, which is less available now. Well, joining us now for more on the market dynamics is Mark May

from Stiefel's Global Technology Group. Mark, do you agree with AJ there? Hey, John. Thanks for having me on. I think there is some truth to that. But surprisingly, John, we haven't seen as much take private activity as we would have expected. A lot of those factors that he pointed out have been around for many months now, and we've just not seen as much activity as we would have expected. I do think that things are setting up for a possible acceleration in the back half of the year. If you think about some of the factors that have driven a little less activity, has been, you know, the companies and their boards haven't really reset their expectations on valuation.

That takes some time. And we've started to see that happen a bit. We've seen some early signs of that. And I think what AJ was saying in part was that in the beginning of the year, when the market went back up and maybe things got a little bit more risk on, that's when the deal stopped. But if we get a recession later this year, those boards are going to have to cry uncle. Yeah, and I agree. I think that there is some truth to that. Now, the reality is that those private equity sponsors like that also like to see profitability themselves or a clear path to. And so some of these companies

have underperformed, as he mentioned. A lot of the same reasons why the public markets don't like them sometimes is the same reason private equity doesn't as well. So those companies also need to get their own house in shape as well. And we're seeing that through the layoff. So that's another reason why activity might start to pick up in the back half. How does SBB impact all of this, given the fact that it was so active in venture capital and in the tech startup landscape? I think it impacts a slightly different segment of the universe than maybe we're talking about with the take privates. A lot of those companies are the small and mid-cap private technology companies, the companies that I and my colleagues kind of bank at Stifel Technology Investment Banking. And for them, it could create also an acceleration activity, but of a different site sort. One is what we call re-equitization of the balance sheet. So if they can no longer access debt capital like they once did, they may have to raise equity. And some of their existing investors, they may not want to reinvest.

So we might see a pickup in equity financing from new investors. And then M&A, we may see a pickup in M&A as well. Have you seen any of that yet since you're sort of on the front lines or have you seen increased business activity in the wake of that bank failing? We have seen an increase in activity, but it hasn't been yet that type of activity. These are companies that are just trying to fortify their lines of credit, making sure that they've got the right treasury partners in place for payroll and things like that. So that's been the last couple of weeks have been more of the focus. But we would expect to see an increase in equity fundraising and M&A activity over the next few months as companies start to realize that they might not be able to access the same type of debt financing on the same terms that they once were able to

access. So, Mark, we got Shop Talk happening now, Industry Conference, and I wonder what happens to e-commerce names and direct-to-consumer names. When I say e-commerce names, I mean some of these platforms that are looking to enable the direct-to-consumer names. If they're already kind of profit-challenged, to put it kindly, and we're headed for this challenge in the back half of the year, if we get hit with a recession, how low are those stocks going to go? So the segment of the market you're talking about, which is more the, I'll call it e-commerce enablement platforms, more the technology side of behind the scenes, that's a really active high growth area where venture and growth equity

remains very bullish, despite kind of the cyclicality that we've been seeing in consumer spending recently. So I'm not as concerned about those companies, even if they're still burning money, being able to access capital, because in general, there's a lot of dry powder in venture and growth equity. And that happens to be a segment where there's quite a bit of interest and quite a bit of growth. I think some of the, you know, direct-to-consumer names that are more, you know, hit-driven or based on a certain product, highly discretionary, you know, those companies really need to focus on, you know, bottom-line profitability. Funding in the near term might be a little bit more difficult. All right. Mark May, great to see you and speak to you. Thanks for joining us.

Thanks, Morgan. Thanks, Joan. Well, PVH earnings are out. Christina Parts Nevelis has those numbers for us. Hi, Christina. Hi. Well, PVH, just so people know, it's a retail brand that owns Tommy Hilfiger. And they had a solid earnings report, EPS of $2.38. The street was expecting $1.67. They also, for Q4, reported $2.4 billion, so slightly higher than what was anticipated. If we're talking about full-year guidance, because we want to know how the American consumer is doing, they're still pretty bullish. They're saying EPS guidance for this current quarter in Q1 is going to be $1.9, so $1.90, slightly higher. Revenue for Q1, pretty much flat. But nonetheless, for the full year, the company anticipates revenue to increase anywhere between 3% and 4% year over year.

Originally, last quarter, they said that they only saw an increase of 3%. One of the key factors I wanted to look at was inventory levels. Last quarter, inventory climbed 32%. Q4, we're seeing it up 34%. So that's not necessarily a good thing. And we did also see, this is the last bit of information, gross margins did fall to 55% or 56%. And that's because of higher costs and sales discounts. So they're trying to get rid of that inventory, but it's still climbed in the quarter. But the stock is jumping on the strong report and the strong outlook, up almost 10 percent. Guys? Yeah, interesting. Morgan, this stock was down

about 20 percent from the beginning of the month and has regained that after hours so far. Of course, we've got to wait to hear once investors digest everything from the call, but, you know, maybe they're not as impacted by the broader macro or maybe they are. We'll have to see. Yeah, the commentary will be key. And it does seem like and I think about Nike last week, too. Investors do seem to be looking through some of these inventory levels, if at least they're moving in the right direction and maybe pricing in the impact to gross margins. But Tommy Hilfiger, Calvin Klein, I mean, these are two brands when it comes to apparel that are having a resurgence as all things 90s related seems to be having a resurgence. So it kind of speaks to the stickiness of certain brands coming out of the pandemic

and the shift we've seen in fashion tastes. But it'll be interesting to your point to see what that means in terms of future pricing. I can relate to that. My oldest son even likes listening to 90s music. It warms my heart. Oh, my God. I know. It's like Nirvana's like classic rock now for this generation.

All right. After the break, we're going to talk about potential red flags facing the commercial and residential real estate markets with economist Robert Schiller as we get set for a big week of housing data. Stay with us. Welcome back to Overtime. Let's get a CNBC News update with Contessa Brewer. Contessa? John, we're getting more information about a school shooting in Tennessee that killed three children, three adults, and the shooter herself. The Nashville chief of police said the shooter was a 28-year-old woman from the Nashville area. Investigators believe she attended Covenant School at one point. That school is a small church-run institution.

Authorities have not yet named the shooter or the victims. Sorry for the music here. Meanwhile, President Biden this afternoon reiterated his call for an assault weapons ban. The shooter in this situation reportedly had two assault weapons and a pistol, two AK-47s. So I call on Congress again to pass my assault weapons ban. It's about time that we began to make some more progress. And another train carrying hazardous materials has derailed this time in North Dakota. That train was operated by Canadian Pacific. Some of the cars did leak liquid asphalt,

but local authorities say there's no threat to public safety. There are also no waterways in this particular area. Morgan, keep a close eye on that one. We certainly will monitor it. Contessa Brewer, thank you. The Fed hiking 25 basis points at its last meeting despite the recent bank failures of SVB and Signature. And as borrowing costs rise, what will the ripple effect be on residential and commercial real estate? Joining us now, Yale professor of economics, Robert Schiller. Professor, we're so happy to have you on the show today. We're going to get a bevy of housing data this week, including Case-Shiller Home Price Index tomorrow. We have this brewing debate about whether we've seen a bottom or even at least a stabilization

in the housing market. How do you see it? Well, it's easy to forecast the short run in the housing market. Not so easy to forecast if you're a long-term buyer. It's not clear. But home prices are very, very high by historical standards. I would extrapolate the downturn somewhat. It's going to continue.

Maybe if you have a chance to delay your purchase, it might be a good time to do it. You might get it a little cheaper after another six months. Hmm. I want to shift gears a little bit because you're one of the founders, you're one of the fathers of behavioral economics. And I want to get your thoughts on the banking turmoil that we've seen over the past several weeks, what it's going to mean to future credit availability, and just the role that behaviors, that attitudes have played in everything we've seen unfold. Yeah. In my book, Narrative Economics, I talk about

narratives regarding financial panics or bank runs. And these were perennial narratives in the 19th century. As the century wore on, they got stronger and stronger. I think a bank run kind of helps. It helps if the narrative is that banks are endangered. And so eventually Congress in 1913 had to put a stop to this. Like, people were so worried about their banks, so they created the Federal Reserve. And but even then, you know, we give the Fed a really tough problem, how to deal with this

fundamentally psychological reaction to a narrative. Robert, I want to go back to housing for a moment. How does this affordability standoff that we see in residential real estate end? I mean, we've got extremely low inventory, high interest rates. Is it going to take higher unemployment to break landlords' ability to increase rents? And from there, the investments don't pencil out anymore and therefore they got to dump them and, you know, inventory rises and prices drop or something else? Yeah. Well, that's the capitalist system with the central bank. I think it works pretty well most of the time. And I wouldn't tinker too much with it.

We have smart people on the Fed, and the Treasury secretary I admire, Janet Yellen, they may have to accept, however, I think this is, as Jerome Powell has put it, they may have to accept something of a recession. But for the housing market, how should the people at home who are maybe thinking about selling a home, kind of a dress thinking about buying a home, how should they expect this to play out? If you have a chance to sell your house now, even if it's for a little less than you wanted? Do you go ahead and do it because higher inventories are inevitably coming? I wouldn't say inevitably. I would say that it's likely to be some more declines. But I hate to, you know, home purchase is such a family decision. I hate to overreact. So we do have a declining market at the moment. But, you know, there are costs to not selling at the right time, the convenient time.

Or you might lose a house that you liked to somebody else. So I don't think it's an easy answer to that question. I do want to get your thoughts on the $8 trillion market known as the mortgage-backed securities market. I mean, this was really, the holdings of MBS was really the beginning of the downfall of SVB a couple of weeks ago, all of those unrealized losses on the balance sheet. You have investors focus on other banks that hold a lot of MBS. And then, of course, we've seen since last year the expectation that as the Fed continues to contract its balance sheet with quantitative tightening, that it's going to start to sell

mortgage-backed securities. Your thoughts on the health of that market and how it intersects with the economy more broadly, as everybody is concerned about a recession. Yeah, well, I am generally positive about financial innovation. And when these mortgage-backed securities came out, when they divided them up into tranches for different risk levels, I thought that that is a good thing. Unfortunately, there's always a risk of a bad outcome when you get used to a new product. And they weren't diligent enough in researching

the likelihood of that. So there is a sort of follow-up to the crowd aspect. You know, it was the same thing when they invented steam engines and railroads. There was a boom in railroad stocks. Now, after the fact, I look back on it and say, well, they were right. Railroads have been very important in our economic history, but not as important as the market thought. They were too inspired and too enthusiastic. Robert Schiller, we appreciate your time and your insights today. Thank you for joining us.

My pleasure, Morgan. We've got some breaking news on Lyft now. Deirdre Bosa joins us on the phone with the details. Hi, Dee. Hey, Morgan and John. So we're hearing that the Lyft co-founders, John Zimmer and Logan Green, will be stepping away from the day-to-day operations, handing over the CEO reins to Mr. Risher, John Risher, David Risher, excuse me, who was an Amazon executive. And really, guys, this marks the end of an era for the ride-sharing company.

Zimmer and Green have led the company since its inception. They went head-to-head with Uber. They IPO'd just a few months ahead of Uber. But in recent years, they've fallen behind in terms of market share, in terms of profitability and growth. And obviously, the share price has never gone back to where it IPO'd in the $70 range. So, again, an end of an era. John Zimmer, who is currently serving as president, and Logan Green, who is serving as CEO, are stepping down and they're handing over the reins to a former Amazon CEO. Bring you more as we find out.

The market likes this news, Deirdre. And Lyft shares are jumping 5% right now as you break down these headlines for us. And I wonder how it speaks to how beleaguered Lyft has been in terms of its underperformance against rival Uber recently. Yeah, exactly. So it has been this really severe underperformance against Uber. They used to trade pretty close in tandem, but Lyft has fallen behind. And there has been sort of a loss of confidence in the leadership there, especially because it felt like they were less equipped coming out of the pandemic. They had less of a grasp on their driver's supply, on demand, how some of those unit economics were playing out. So it's not a surprise that the market likes this. There has long been this thought among investors that something needed to happen. Whereas Lyft's focus and focus on

ride sharing purely, not food delivery as Uber has gone into, that was once seen as a strength, but not anymore because, again, the unit economics have been falling behind Uber's. And that is, of course, that profitability, that adjusted EBITDA metric. Even though Lyft was first to reach that positive adjusted EBITDA metric, it has fallen behind. So it's not surprising the market likes this. Yeah, Dee, this is, David Risher seems to me to be a puzzling choice. He left Amazon more than 20 years ago in 2002 and has since founded a company that helps, you know, get children reading and, you know, co-founded a company getting people to do good out of their donor advised funds, which are, you know, admirable efforts, but don't seem

to have much to do with either transportation or e-commerce retail. And e-commerce has changed a lot. And transportation certainly has changed quite a bit in 20 years. Also, that familiarity with Wall Street, right? I think that Lyft needs someone who is a real communicator and knows how to communicate with the industry, with investors and analysts alike. I agree with you, John. It is a bit of a puzzling choice. We're going to find out more about him and how he is equipped to take on this role. But you can imagine it's a difficult one to take on. This is a company that is thought to have really given the lead to Uber over the last few years and has a lot of work ahead of it. It fell behind during the pandemic, has to get out in front of it.

They have an e-bike business that the company often talks about. But again, when you come to pure ride sharing, it has fallen behind. And we have to learn more about Mr. Risher to find out if he's the right person for the job. But clearly, he is taking on a very big task here. And communication with Wall Street is going to be key. Deirdre Bosa on the news line, bringing us this breaking news on Lyft. Thanks, Dee. We're going to bring in Wedbush Managing Director Dan Ives for some instant reaction. Dan, I want to get your thought on this, especially since typically when founders leave a company or step aside at a company,

the stock tends to fall. The fact that it's rallying here tells you what? I mean, look, this has been another disaster, especially if you look at, you know, the last three to four months. And I think investors

have been more and more frustrated. And this is going to be a positive in terms of at least some action that ultimately can move this forward after what's really been just an absolute nightmare. Dan, what about David Risher? This is not Dara Khosrowshahi by resume, right? I mean, he's not been in the transportation space, certainly hasn't been in the ride-hailing space or the e-commerce space recently. What is it that you want to know that Wall Street needs to know to feel comfortable with this leadership going forward? Yeah, look, I think the choice, you know, some will obviously, you know, scratch their heads.

I think you do need someone from the outside to come in here. You know, if you look at the challenges that Whft has, I think all options are on the table. I mean, they're going to have to look at strategic options as well as different parts of the business. Do they make sense or not? And I think right now, if you look at Uber, they're just gaining share by the day. So time's ticking, which is why they need to do this now. Some are obviously extremely well-respected, but I think fresh eyes is actually what investors want to see. But like I said, I think all options are on the table after what's just been an absolute disaster. So you mentioned Lyft being a disaster. Do you buy the stock now? Is this an opportunity to get in,

play a turnaround? Look, I think this definitely makes a much different investment thesis than it was a half hour ago, because with new leadership, there's a lot of things that could happen here. It's potentially the stress asset in terms of how it trades, strategic options. I think potentially M&A could be on the table. And you have fresh eyes coming in that ultimately are going to have their work cut out for them. But no doubt, I mean, this is a name investors are going to look at, even though Uber is continuing to be the best way to play ride share. This is the medicine they needed, you know, after what's, you know, really just been a dark cloud over the story. Dan, thanks. Dan Ives. I don't know who wants to buy this and take on Uber, right?

Toma Bravo was just talking about the types of companies they expected to be take privates. Lyft does not fit the bill. Well, after the break, our small caps looking cheap. The group getting a Lyft today, but down sharply this month. Mike Santoli is going to break down the charts when overtime returns. Welcome back to overtime. Small caps getting a big boost today, outperforming the major averages. But the group is down sharply this month. Mike Santoli joins us with a closer look at that space and the moves we've been seeing. Hey, Mike.

Yeah, Morgan. And the really wide valuation split. I mean, this is a theme, right? A very kind of uneven market, one where depending on the measure you look at, it's going to tell a different story. So here's the S&P 500 forward price to earnings ratio. It's commonly said, look, it's not cheap. It's actually elevated by historical standards. And that's true. Seventeen and a half barely gets you back to where we were at the peak right before the pandemic. Right. However, equal weighted S&P, that's the orange line. Fourteen times forward earnings lower than you've been most times at the lows in recent years.

And then the S&P small cap 600, not the Russell 2000, but the small cap 600, which are screened for profitability. Twelve and a half times earnings lower. And now we actually got to around 10 back in the October lows. But basically where you were in the 2018 low. So if you say, look, we have a high recession risk, earnings estimates are going to be going down on smaller companies. They're not really equipped for this point in the cycle. I'll say I might agree. And by the way, the market's already figured some of that out, even if it's not all the way priced in. All right. Mike Santoli, thank you. Going with the S&P small All right. Mike Santoli, thank you.

Going with the S&P. Small caps instead of the Russell 2000. Just mixing it up there a little bit. Yeah, indeed. Ring Central, meantime, announcing a big addition to its AI offerings. The company's CEO on how that will help increase competition with its larger rivals. That's coming up. Cloud communication company RingCentral getting a boost today thanks to the launch of its RingSense. The new product uses artificial intelligence to turn conversation data into insights for sales teams. The stock had been a big winner during

the pandemic, but it's fallen sharply from its 2021 highs. Joining us now is RingCentral CEO Vlad Shmunis. Vlad, good to see you. It's been a while. Tell me about RingSense and what this is built on top of. Are you using NVIDIA's tools recently announced to open AI, something else to feed this data in and kind of create a sales and communication specific product? Yes. Well, first, thank you for having me. Great to be back. RingSense is super exciting. It is a revolutionary AI suite. It's a platform that's aimed at making consumer to salesperson, sales team communications a lot easier more productive and smoother so basically it's aimed at making superheroes out out of sales people and sales teams technology-wise we do use proprietary ai technology that is purpose-built for business-to-business communications we believe

it makes it fundamentally more secure and trustworthy than if we were to use a generally available consumer-grade AI platform. You mentioned NVIDIA. Absolutely, we do use parts of that technology, as well as some others, including proprietary built ones. think about RingSense not only as a product that you're using for sales, etc., but something that might be a platform that outside customer service companies might eventually build upon? Are you trying to position it where you might eventually release the APIs and become a platform company? 100%. RingSense is a platform. RingSense for sales is the first product based on that platform. But exactly like you say, there are multiple other applications. You can think customer care. You can think verticalization, verticals like legal, like finance, like healthcare.

Again, it is just a first step in leveraging AI in the voice domain. And not just a platform for RingCentral to build on, then, you're saying, but potentially for others, for third parties to build on and for you to get some revenue off of that? Absolutely, including the fact that even in its first instance, which is RingCentral for sales, we already are publishing open APIs for developers to leverage. All right. Makes sense. Vlad Shmunis, CEO of Ring Central. Thank you. Thank you. Well, energy is the worst performing sector so far this year, not financials. Coming up, we're going to discuss whether energy stocks are starting to look cheap

and another check on Lyft as we have to break, which is popping in overtime on news that its co-founders are stepping back from day-to-day operations, bringing on former Amazon executive David Reicher as CEO starting mid-April. Shares are up 4.5%. Stay with us. Today, we are paying tribute to a tech icon. Before there was ChatGPT or the cloud or an iPhone, the internet or even a PC, in 1965, an engineer named Gordon Moore made an observation, a prediction. Computer chips were doubling their capabilities roughly every year and Moore predicted that would continue far into the future.

That statement, immortalized as Moore's law, was modern technology's Babe Ruth moment, pointing to where every innovation home run for more than half a century would go. Equipped with that insight, Moore and Robert Noyce founded Intel, where Andy Grove quickly joined. Technology cycles have come and gone since then, and the mechanics of Moore's Law have been revised and questioned many times. Intel itself is in a tough moment. But the spirit of Moore's observation, the runaway pace of silicon-based innovation, that's still true as an AI chatbot running on a silicon-based cloud will tell you, if you ask.

On Friday, Gordon Moore died at the age of 94. May he rest in peace. Silicon Valley is Silicon Valley because of the work Moore and his colleagues did. Yeah, in tough times, tough moments for an economy, you know, in the American capitalist system, we got to count on innovators,

and Gordon Moore was certainly one. Well, shifting gears, the Senate Banking Committee is set to hold a hearing on the collapse of silicon valley bank tomorrow and we will get reaction from former fdic chair sheila bear right over here on overtime got a lot of questions with some of that testimony that's been released john yes and questions about the terms under which the the SVB acquisition went through a lot of sweeteners there it took for for that to happen. So what does that mean about what happens for future acquisitions that the government would like for banks to make? Yeah, I think there's going to be a lot of cross currents in terms of the questions they're going to get asked over the

next two days about the idea of bank bailout and what that looks like in this day and age, especially given the fact that you did see First Citizens shares surge on thised today about all of the attempts with this bank that were made apparently to try and have more risk management come into place. Yeah, yeah, for sure. All right. Well, we just got a few trading days left to go in the first quarter and all week we're helping you get set for Q2. Today we're focusing on energy. It's higher today, but it's the worst performer this quarter, down 9%. Should you bet on a comeback? Let's bring in RBC Capital Markets Managing Director Scott Hanold. Scott, it's pretty incredible to see energy stocks performing worse than financials, given how much we've been

talking about the banks. But here we are. Buying opportunity? Yeah, you know, we think so. And look, I think, you know, a lot of this energy tape here has been, you know, much about the macro, but as you said, the banking, you know, sector is really weighed on oil prices. And I think the other thing to consider is that really the E&P companies and energies in general has had a pretty good couple of years. So I do think you saw some, you know, profit taken in the sector. But I would say that where valuations look right now, I mean, it's pretty attractive, assuming, you know, oil can stay pretty firm here. When we talk about oil and gas producers, should these stocks still be moving in tandem

with charts of crude futures or nat gas? Or given the fact that they are free cash flow generators and they're being much more disciplined, many of them with their balance sheets, have we seen a divergence? Yeah, not yet, but that's the hope, right? I mean, the business models are still fairly new. You know, I think the best, which is the largest cap companies, have been in that return mode for about a year or two. I think a lot of the smaller producers are just starting to get into it. So I do think investors need a little bit more of a track record to see some divergence to the commodity. But look, the reality is the commodity is the driver here, right? So there'd be always some semblance of oil prices, you know, dictating the moves in the stock. But over time, we do think that's

going to decouple. So oil prices from here, poised to go lower or higher? You know, we feel pretty good. I mean, we still think China reopening is a real deal. And the other thing is that, you know, we do see increased refining capacity globally, right around 4 million barrels over the next couple of years. So that's going to create inherently stronger demand for crude. And I'll tell you what, these producers aren't growing like they used to I mean flat production is the new growth so you know with that in mind the fundamentals should stay pretty solid okay so name some names for me what do you like what would you buy here yeah look if I'm in the large cap space I like Diamondback energy as well as Marathon oil that's ticker FANG and

ticker MRO I mean those it's all about consistency about operations, high free cash flow yield, and just good execution. You know, if you like some of those, you know, smaller stocks, you know, we like this Matador Resources, as well as Permian Resources, ticker PR. And then for those that are bullish gas, which there are a lot of folks being bullish gas, especially as you look into 2025, we like range resources, which has, in our view, one of the largest and most contiguous core positions in Appalachia. Okay. I have less than a minute here with you. Tell me why you'd be bullish gas right now when we've seen prices in free fall. Yeah, absolutely. I think last year,

gas got a little bit ahead of itself in sympathy with what was happening in Europe. I think this time it's kind of cut in the other way. And look, I mean, fundamentals are comfortable. But, you know, as you look into 2025, you know, LNG export capacity in the U.S. is going to increase. We probably see a little bit of an increase once free pork comes online this year. So we do feel pretty constructive about the commodity. I think it's in pretty good shape. We're just getting into a weak sentiment period during the shoulder season. Okay. Scott Hanold, appreciate your thoughts and your picks.

Some names for our viewers to digest there, John. Yeah. And as we look ahead to the rest of the week, the quarter ends this week. Some interesting things coming up. Vice chair, Fed vice chair, Barr speaking. I think there are going to be lots of questions about supervision and what they might be looking for when it comes to the learnings from SVB. How did that happen? How can supervision be better? How much of this has to do with just bank runs happening so much more quickly, technology enabled, than they used to? It's true. So banks are going to be in focus this week. You got home prices and housing data in focus this week. Consumer. So banks are going to be in focus this week. You got home prices and housing data in focus this week, consumer confidence, which is going to be really key.

And then you've got that preferred measure of inflation, the PCE on Friday, which is going to be interesting how the market responds to that, because obviously we know inflation continues to be too high. But this reading takes us back before everything we saw with the banks. Yeah. I mean, if it's if it's generally in the middle, maybe that makes people feel better. If inflation still running hot, does that cool some of the voices who are saying that the Fed has maybe just one more hike left in them? If that's the case, even with inflation running hot, it's because you think the banks are going to be in such bad shape that maybe they're going to do the rest of the job for them. I'm not sure that's bullish. Yeah, we're going to have to see. In the meantime, you had the Dow and the S&P both finished the day higher. NASDAQ, the underperformer,

down about half a percent. That's going to do it for overtime. Fast money starts now.