Power Lunch - Bank Crisis Concerns 3/15/23

Episode Date: March 15, 2023

U.S. stocks are following European markets lower, as Credit Suisse becomes the latest crisis underway for the banking sector. We’ll track all of the angles of the story for you, including what’s at stake for markets, the economy & your money. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson, and we are watching another major market sell-off today. U.S. stocks following European markets lower as Credit Suisse becomes the latest crisis for the banking sector. Yeah, that stock falling more than 20 percent to a new all-time low, under $2 a share. Its biggest backer, Saudi National Bank, saying they won't or can provide further financial support, leading to a big sell-off in Europe. And that's continuing here in the U.S. Dowdown about 720 points at the lows. We're off those levels now, but still down 1 and a half percent.

The NASDAQ only down two-thirds of 1 percent, but the Russell 2000s, the worst performer with regional banks under pressure. Again, it's selling off by two and a half percent. All right, for more now on the problem, children of the market and the stars in the market. Let's go to Christina, parts in Nevelas. Christina. Well, the good news is we are coming off the lows of the day when the S&P turned negative. That level was 389 or 3, 3,839, but we're still holding on to Monday's lows. But we can't ignore just this sell-off triggered by fears of instability in the global financial system.

And that, like Kelly mentioned, you saw the drop in Credit Suisse's stock. Other big bank names taking a hit, Goldman Sachs, JP Morgan. You can see on your screen down almost 5%, city down even more, over 6% lower. That's driving down interest rate expectations, along with the fact that we got cooler than expected February producer price data. So the two-year right now was 389, 3.89%, the yields on that. And we care about that number because it closely follows the Fed funds rate. and the stronger dollar, the stronger supply right now in oil and demand concerns are actually weighing on the energy sector. It's the worst performing S&P sector right now led by Halliburton

and Marathon Oil, both of those names almost 10% lower. Here at the NASDAQ, though, we have some odd, some, I guess, stranger, I should say, you know, uncommon names moving higher, Sirius XM, and that's on some buy-the-dip mentality after it hit a seven-year low on Monday. Netflix, Zoom, You can see Zoom up about 2% Netflix, over 2 and a half percent higher. And that's just some of the gainers that we're seeing in today's selloff, especially here at the NASDAQ. Christina, thank you very much, Christina Parts in Evelace. A lot of concerns over the state of global banking with Credit Suisse sitting on the brink after losing support from its biggest backer, sending the European financials deep in the red.

And Giuliana Tattlebaum is live in London with more. I wish it were better news to see you with Giuliana. But please, listen, especially we're all trying to figure out since Credit Suisse was such a known, problem for so long, why today did this suddenly become a huge concern? Well, Kelly, good afternoon and thank you for having me. It just goes to show how sensitive market participants are right now to just a little bit of bad news. As you say, Credit Suisse has been a known problem child within the European banking sector for not just months, but for years. Nevertheless, today we saw the stock in Credit Suisse drop 24 percent to the lowest level on record. Credit Suisse dollar-denominated bonds,

also hit record lows this after Saudi National Bank ruled out more investment in the troubled lender. And Credit Suisse management tried to reassure the market today. The CEO this afternoon came out saying we are a strong bank and overshoot all regulatory requirements. Our liquidity base is strong, but investors are yet to be convinced. And as you can see, the European banking sector sold off right alongside Credit Suisse. Obviously not to the extent that Credit Suisse sold off, but we saw some substantial moves lower in several European banking stocks, and several actually hit their trade-down limits, so trading automatically halted earlier in the day.

Beyond the banks, we saw oil and gas sell off very heavily. Basic Resources also suffered some steep losses. On the flip side, the more resilient parts of the market today, those defensive sectors. So healthcare actually managed to end in positive territory. We also saw some resilience in food imbev and telecoms. And in the FX space, on the back of this turmoil, we saw the euro plunge versus the dollar as investors fled for safety and positioned for tomorrow's

European Central Bank meeting. And the interesting thing to note there, the expectation had been firmly for a 50 basis point rate hike. Now investors have been dialing back those expectations and the market pricing suggests a smaller 25 basis point rate hike is actually a most likely. Julianne, just before we let you go, and I talk to people over here about the situation, they all expected to be resolved in some way by, for instance, Swiss authorities, other major banking players who could come in and kind of come to the rescue of Credit Suisse. So it seems to be not so much about this institution itself per se, but about any counterparty risk that, for instance, U.S. companies might have in terms of doing business.

You have to imagine they've all pulled back considerably if they had those exposures, but perhaps we'll find out more. Absolutely. It seems as though those banks around Europe are now looking at their counterparty risk, their exposure to Credit Suisse. And as you said, where do we go from here? There is speculation mounting that we could see the Swiss government get involved, the SNB, because letting Credit Suisse obviously head into trouble from here would be a devastating thing to happen to Switzerland. And given it's a financial center for the world, they're likely to want to avoid that. And then, of course, there is the option that we could see Credit Suisse become a takeover target.

At the moment, UBS, what is often seen as the most likely acquired. for Credit Suisse. The CEO of UBS today actually came out saying our strategy is organic. We are focused on ourselves when they were asked about a potential takeover of the Swiss lender. And yeah, well, that's all right. That's all that tells you. Giuliana, really appreciated. Thank you so much today. All right, as Credit Suisse joins Silicon Valley and signature on the list of troubled banks, the question is whether more will join them, joining us now, to talk about the banking crisis and the ripple effect in the market. Senior Markets commentator Mike Santoli and CNBC.

banking reporter, Hugh Sond, with us in the studio. Hugh, let me begin with you at root, fundamentally. What's the matter with Credit Suisse? Okay. So, Tyler, glad you asked. Yes, it is, me. Investors have woken to the increased risk their billing of the banking system

as a result of moving from the regime where we had zero interest rate policy for about a decade into a more normalized environment. So you have basically the market sniffing out. You've had three banks fail here in the state, the U.S. in the last week. Now you have the market essentially sniffing out. Every bank. Who could be next in the system? So there are some similarities. And if you look at Silicon Valley Bank, we know that on Thursday, 42 billion in deposits fled the bank in a single

day. That's pretty dramatic. Now, we've also learned that with, you know, Credit Suisse, in the fourth quarter alone, they lost 110 billion Swiss francs in their deposits. So 37 percent of their entire deposit base evaporated in the fourth quarter. That was in the fourth quarter. here we are in March, some of those outflows have continued. But this has been a notably slow rolling debacle in the case of Credit Suisse. It's not like SVB where one day everything seemed okay and the next. It didn't. Here we've been watching Credit Suisse deteriorate.

Credit Suisse has been a known problem player. I would say that the Tinder has been laid out. And now with the crash of these three banks in the U.S., certainly the fear, of contagion spread. And it really is the market essentially saying, you know, who's going to be next? And in Europe, they're the weakest of sort of a bad bunch, right? They've had risk management issues over the years. Their revenue is collapsed. Their costs are relatively sticky. So they're in a negative feedback loop at the moment. And, you know, I've talked to sources, and one of the common things they'll say is, you know, when the name of the country is in the name of your bank,

you're probably going to get bailed out at some point. But that has not happened yet. And so there's concern of contagion from a collapse. Even, Mike, as we're showing, for instance, HSBC, which itself just came to the rescue of SVB's UK arm, buying them for one pound. So this is not like you can paint everything with a broad brush here. No, not at all. And honestly, I don't think there's a really satisfying answer to why now,

why today, aside from that trigger being sort of pulled by the comments that, you know, the Saudi Bank would not add more to its holdings. And I think what it tells you is we're in an environment where you just try to pick out the slowest member of the herd because you have a fear that because rates are going up, because you do have lots of flows in motion in terms of deposits leaving, especially low-yielding accounts, you know, you're getting penalized in a sense for the more sophisticated your customer basis and the more concentrated it is, the more vulnerable you are. That was the case with SVB. It's the case with the fears around First Republic to a degree. and it would theoretically be the case in terms of the wealth management clientele of credit tweets, whereas why do we stay when we could just go? That being said, I think we're just trading the shadows here. We're just sort of flinching because maybe there's something there.

There's not a aggregate capital deficiency out there. There's not really some kind of trove of toxic assets we've never before been witnessed to as there was in 07-08-09. What we have right here is government bond prices went down a lot last year. We knew that, right? And that's just sort of sitting on the books out there. So in that sense, maybe there's a slight comfort in the fact that we're not really waiting to unwind something that is a mystery. We're just sort of figuring out whether these folks can stance the deposit outflow.

Hugh, how do you react to that? Yeah. So, you know, one key thing is the news that sparked the sell-off in credits weeks today was Saudi saying, look, no mas. We're in for 10 percent. We can't go any further. That was known. That's a regulatory hurdle that they have. have. They could never have gone past 10%. So, you know, understanding that tells you all that

you need to know about this, which is it's about fear. It's about lack of confidence in the banking system, you know, in that part of the world and concerns that investors have with the risk in the banking system. Yeah, I think that's an interesting way to put it. I mean, we've used the word contagion, a good bit here. It seems like there may not be a so-called a classic credit contagion here, But there is a contagion of suspicion and fear, right? Yeah, and that's based on how flighty are your deposit base. And as Michael just pointed out, I mean, the wealth management deposit base of Cray-Suis, they haven't stuck around.

They've voted with their feet and they've moved. Interesting point that Michael made. Michael, you said, you know, early a moment ago, it's been the more sophisticated customers who have been moving the fastest. Maybe that is always the case, but it's an interesting point. Go ahead. Finish the thought there. And then we've got to run.

As a matter of fact, a lot of the analysts, have said, look, we like the banks that have a very fragmented, overwhelmingly retail deposit base and a lot of these southern regionals and things like that. And it's not, it's really just because the money this doesn't move in mass very efficiently. And there's some stickiness to just having your bank account where you get your payroll, you know, direct deposit. Got it. Mike, Hugh, thanks very much. Appreciate it. Today's sell off putting the Dow about 11% below its recent highs and down more than 4% year to date. It also marks the one-year anniversary. of the Fed's first rate hike this cycle, just the one-year anniversary.

And our next guest says it's still too soon to see the impact across the economy. Piper Sandler, chief strategist, Michael Cantorwitz. He's gotten it right on our air for the past year, telling investors in January to buckle up for a long recession, saying stocks won't bottom until PMIs do. And it could be a long two-year road ahead. Today, he says we have all three ingredients in place for a hard landing. Mike, it's good to see you again. Welcome. You too. Hi, Kelly. Hi, hi, Tyler.

About the only thing I think I can fault you for is being early at this point, because we all thought perhaps by now the labor market and jobless claims would be cracking. What's really interesting is to see the way that we're starting to see credit market sees up even without that happening. So what's your take? Yeah, I mean, we've seen, as you mentioned, we have, you know, we've got a lot of problems that are starting to pop up. We've got knowns and unknowns, and I think there's a lot more. And those three ingredients that you mentioned, I'll reiterate, which is the Fed raising interest rates, commercial banks tightening lending standards and inflation problem. We've had these three issues

for about a year now. It takes time for that to flow all the way through into earnings and the labor market. But obviously, the early signs of that it's having an impact, whether it's through the markets last year and tech stocks getting hit, housing fundamentals and the economy getting hit, and now it's flowing into banks. So it's the rate sensitivity flowing from the earliest parts of the economy and financial markets that are susceptible to it. And the end game is ultimately is the employment backdrop. And that's for us when a recession starts and looking at the forward-looking indicators of employment, that seems to be something that begins in the middle of this year and becomes the dominant risk for equity markets.

Right. And, you know, I'm sure you saw this, but Bank of America, they put out a note last night, Subrida, saying we're now in late cycle in the downturn phase. Torson Sloc and Apollo this morning saying he's gone from thinking we're going to have no landing to thinking we're going to have a hard landing. So the way I see it, a lot of strategists are kind of catching up with your view and with the warnings you've been putting out there for quite some time. Tactically for equity investors, what do they do? I mean, we heard earlier last hour about those who believe a recession's coming and are still positioned for the rebound already, you know,

the asset classes that are in sectors that are usually outperforming coming out of that event. Is that something you think investors can be trying to do right now? Well, you know, it's our job on the sell side, especially in the macro world, to talk about big picture stories that are coming up. And so the irony and is something I often tell clients is, you know, I'm not a big believer that the markets are very forward-looking. And I think that's been on full display over the last 12 months and increasingly, you know, at the last 12 days, if not 12 hours. And so if you're betting on a recession that's going to happen in six months and position for that, you know, six months too early, yeah, you're going to be wrong. And historically, bare markets really start that end up in a recession when unemployment claims start to rise. And, you know, ironically, it's also a bit of a problem today because employment is a bit too strong.

So, you know, I think we're looking at, you know, we have a framework. We've tried to be remarkably consistent with our views despite the market volatility, which, again, is commonplace for bear markets. And the catch-up that is being made now by other analysts, I think, is occurring as we see the lagged effects of this tightening cycle play out. And there's a lot more to come. And so our recommendation to investors at the start of the year, though we have a bearish outlook for year-end when employment breaks, is that you want to remain actually somewhat balanced in really high-quality companies. And because we believe the market's going to be bouncing back and forth between soft-landing hopes and recession fears.

And like you just said, Kelly, in the last six weeks, we've gone from euphoria. The S&P-high beta index was almost at an all-time high to today, you know, in a panic mode. And I think it's going to be bouncing back and forth like this for the next several months until we see unemployment start to more materially. You know, Michael, not too many people who come on our air who do what you do like to toss around the phrases, bare market and recession. They just don't, okay? Yeah.

And you've been real clear about this. But that doesn't mean necessarily that there is a nothing you can do and no place prudently to put your money. And people have to have some place prudently to put their money even during recessions or bare markets. Where are they now in your, where are those prudent places now? What are they? Yeah.

So at the beginning of the year, you know, one of our high conviction views is to own treasuries over stocks. And I think this past week's events is, is the greatest advertisement for the U.S. government for Americans that have been kind of lazy to move their low interest yielding deposits into higher yielding securities, CDs and money markets. So I still think treasuries are more attractive. equities within the broader markets and for investors, our clients that have to be fully invested, again, it's really about looking at company fundamentals and figuring out which names you can

underwrite in a more risky backdrop. So we're looking for companies that are highly profitable, have less cyclicality or sensitive to the economy, that have decent earnings growth, and that are currently outperforming their peers with regards to better earnings revision. So companies like Service Corp, SCI, Lockheed Martin, Tractor Supply, are three names among many names that screen well under those criteria. On the flip side, what do investors want to be avoiding? Well, you know, in January, we saw a huge rally in low-quality stocks that was, you know, coincidentally occurred as the whole no-landing thesis came about. That, I think, is well behind us. And so companies you want to be avoiding are companies with questionable fundamentals,

extreme valuations, extreme leverage, you know, basically red flags. And so some of the names that come up on our screen are NVIDIA, C-ZR Entertainment, and P-N-R. Again, this is a quantitative screen that – and then this is a subset of stocks that screen. We're kind of out of time. But a quick thought on NVIDIA, which so many people do like, because of the tie to artificial intelligence. Got to be quick, Michael.

The valuation, I think, is the biggest problem. And sickly, it's a great secular story. And again, lastly, listen, this is a business cycle story. I was the most bullish strategist in 2021, and we talked about it then when things were good. We just don't have those conditions now. We will again in the future. And hopefully I'm looking forward to that sometimes soon.

Michael, thank you. And again, those long ideas were Service Corp, Lockheed Martin, and Tractor Supply, three companies that seemingly have absolutely nothing in common except the quality that you seek. Michael, thank you again. All right, thank you. Market selling off today, as you probably know, investors looking for safety, money moving into defensive sectors, utilities, the best performing group in the S&P 500, gains of more than 2% in that group. Consumer staples such as Pepsi, Procter & Gamble, also higher.

Not huge gains, but, you know, you take it on a down day. Gold also jumping, getting above 9%. 1900 for the first time in six weeks and check out shares of Valley National Bank. That stock, only down a few pennies in this big sell-off. There you see at Ira Robbins, CEO of Valley. We'll join us after the break. Well, welcome back to power lunch. Stock sliding today as the pressure in the banking sector stretches across the pond. Regional banks in the U.S. have been hit particularly hard in the wake of SVB's collapse with the S&P Regional Bank ETF down nearly 12 percent. So far, this week. Our next guest says there's a lot of uncertainty ahead for the regional names,

but he's confident in a rebound down the line for more. Let's bring in our friend, frequent contributor, Valley Bank CEO Ira Robbins. Mr. Robbins, welcome. Good to see it. Wonderful to you. Thank you for having me. How are you doing? How's a week been? Great. For us here at Valley, you know, it's been an amazing opportunity for us. And we've opened up a lot of accounts. Our teams have been working all week in 24-7 to open up accounts, you know, once the failure of SVB and signature was announced. You know, personally, though, what troubles me a little bit is that Valley's benefit

is coming at the expense of the regional banking industry. You know, Tyler, if you recall back in 2008, 2009, we created this concept of too big to fail. And that's only been proliferated since then. You know, my fear is on the back end of this crisis that we create something called too small to succeed, which would be a travesty for our last. the American economy. Go ahead. I really, can I ask, I actually just saw your bank's name come up on a screen because now we're getting endless screens of who has what level of uninsured deposits and who has what level of

this and what level of that. Your screened very high for growth in commercial real estate loans outstanding. Obviously a big pressure point for investors right now. What can you tell us about the quality of the loans you've extended in commercial real estate? How many of them, for instance, are an office space that might be vacant? And what would you say about those who are concerned about that asset quality for the next couple of years? Yeah, I'd say, look, every organization is different. You know, Valley's been around for 95 years, and we have never had a losing quarter ever in 95 years.

You know, credit quality and the risk management is something we don't take for granted in our organization. When you think about office specifically, you know, we have 260 million office loans in Manhattan. That's it on a balance sheet of $57-58 billion dollars. So we do a pretty good job risk managing our overall portfolio. A lot of the growth that you see is really a function of some of the MNA that we've done over the last few years. People are looking to follow on Kelly's good question there. They're looking at the various banks' loan books. My questions are twofold.

One, are you growing your loan book this year considerably? And what about the credit standards you're applying to applicants or to existing customers? Are you tightening them? It's a great question. And I know many of our peers, you know, I've heard commentary. surrounding tightening credit spreads, or excuse me, widening credit spreads, tightening standards when it comes to debt service coverage ratios

and some of the other metrics that they looked at. Right. We may have a little bit, but reality is for Valley, many of our clients sort of self-select, when's the right time to be in and when's the right time to be out. So origination activity for us has declined this year versus where last year is, but it's largely a function of our clients not feeling comfortable in what they're seeing in the space today and just deciding to keep their cash and hold on the sidelines.

So, Ira, are you making any changes to your business model after the events of the past five days? I think business models in banking are going to change dramatically. That said, as we think about our overall bank, we've always run a very diverse balance sheet. We bank well over hundreds of different businesses. We have never had a concentration in any individual vertical. And I think that's the success that we've had over 95 years,

why we've been so successful. I think many within the banking industry have really operated in that manner. And it's important for us as an industry to make sure that we build that confidence and trust back up. Did you buy long-dated treasuries and mortgage-backed securities over the past couple of years before the rate hikes? I mean, a little bit. I mean, our overall investment portfolio is only 9% of the total assets that we have. So it's very, very small compared to what the other peers are. And we've stressed what the OCI is in the AFS portfolio and the HTM portfolio. And it's minor.

I mean, that's prudent risk management. You know, Kelly, what I see, you know, although it's a little bit different from what it was in 2008, 2009, from a credit perspective, but it's nothing more than a crisis of confidence, a crisis of trust. And trust is a function of character as well as. And in 2009, there was a lack of confidence when it came to credit. And today, there's a lack of competence when it comes to interest rate risk and liquidity risk management. And it's incumbent upon banks to make sure that everyone understands. That's not true for the majority of the industry. Overall, we are wonderful risk managers.

and that's just something that the industry needs to really make sure that we're communicating to all of our clients. Real quickly, Senator Warren is talking about expanding stress test to banks. She might have said 50 billion. I know regulators thinking, okay, maybe at least 100 billion. Remind me again what your size is. But when asked this morning about whether banks could be trusted to do their own stress testing, she sort of laughed and said, I was a professor. I wouldn't trust my students to do their own testing, to administer their own tests.

What's your response to that? Yeah, I think we do a very good job overall. managing the risk within our overall industry. Look, it can always be improved. I think regulation is a good thing within our industry, but we understand the unintended consequences of what regulation is at some point. And it's a great conversation to have,

and I'm looking forward to that conversation. All right, Ira, thank you. And thank you for being available to us as you are so frequently. We appreciate it. Ira Robbins. Thank you. Ahead on the show,

the technical take on the markets. We'll break out the chart. Look at the Dow. We've almost halved our decline today. It's only down 356, and the NASDAQ is only down a third of a percent. right now. Let's see if that's less in the selling pressure in oil, which is down 10% in a week. We cracked below 66 earlier on WTI. We're back after this.

Welcome back to Power Lunch. Bank stocks have been the main character of the market story this week, but our next guest says it's time to move past the financials and go broader. Is that a good or a bad thing? Let's bring in Carter Worth, founder and CEO of Worth charting. I don't even know where to begin, Carter. I mean, where do you want to start energy, the S&P, gold, copper, you name it. Good grief is the expression that comes to mind. I mean, the thing about the bank stocks, and obviously it's important because we're having a bit of a crisis of sorts, and liquidity and leverage and borrowed money and mistaking one side of the ledger with the other is always a problem. But the bank stocks have been chronic underperformers. I mean, if you look at any long-term relative charts, the BKX index itself is basically at its 09 lows.

Or let's consider Valley National. You know, Valley National, what we just heard from, right, is $9.60. It was $9.60.20 years ago. Meaning, you're talking about a stock that adjusted for inflation has lost 70, 80% of its value. Over time, these have not been great investments. The Morgan Stanley, the first one on your screen, you know, that's the same price right now as it was in the year 2000. No. So adjusted for inflation, it's down 45%.

Not great investments. Wow. And Citigroup, obviously 44 means it was 450, you know, from business. back in the pre-split days. So then where do people go? I mean, it's ever thus. So the question, of course, is, is this the kind of environment that attracts capital to the equity market? Because in order for stocks to go up and then a group of stocks, the market go up, you need money coming in. You need more buyers than sellers. This is elemental. And this kind of disruption and dislocation, this is not what makes people want to embrace, to engage, to play the game. It's the

opposite. It makes people want to pull back to take measures, to de-risk. And here we have essentially the market, which is back to unchanged on the year. So it's now unchanged over three months. But it's also over six months. It's unchanged over 12 months. It's unchanged over 24 months. The equity complex, as measured by the Russell 3,000, SB 500, is basically two years plus with no gains. Is it going to really take off from here? Absolutely not. I'm in the camp that it's sideways to down captures 95% of the odds. Right. And that's exactly what you've been worrying about. But what you just pointed out comes as a surprise to me because, golly, it feels worse

than that. Doesn't it? Yeah. Well, at the individual stock level, obviously, there's catastrophes going on. And it's the interplay between, you know, energy at one point is very strong, offsetting losses in big tech. And now, of course, Apple and Microsoft are holding up quite well day-to-day hour-to-hour, relative to the market. So it's ever thus, but the market is essentially unch. And unch is a tough thing to deal with because in many ways, it's even better to have a loser. We know what to do when we're wrong. You get out. Or a winner. Ride it or take some gains when it's just churning and churning, very hard to cope with.

Unch on Power Lunch. Now, let's say I own very quickly. Let's say I own some of these bank stocks. You call them a pair of twos, a pair of deuses. What do I do with them? Fold? Yeah, I mean, obviously, I would go higher up in the quality scale. I mean, this is where certainly leaders will ultimately prevail and some of the big names on the screen now. But J.P. Morgan comes to mind and Morgan Stanley. But what I was hoping to convey is that to think, and who does? I had to look it up.

That Morgan Stanley is unchanged since 2000. That's 22 years, which is to say it's down 45% adjusted for inflation. Those are shocking numbers. You can't even get your mind around. Yeah. And that's one of those pernicious things where you think, like, well, okay, at least I didn't lose money on it. Well, you did. Well, he did.

To put it differently. Carter, thank you very much, Carter Worth. With the stocks way off the lows, as I mentioned, let's get to Contessa Brewer for the CNBC News Update. Contessa. Hey, Kelly, good afternoon to you. Russia's foreign minister says the U.S. is ignoring airspace restrictions near its Black Sea coast that Russia established when it invaded Ukraine.

Washington contends its Air Force Reaper drone was flying through international airspace when Russian fighter jets collided with it. Now, a few minutes ago, defense secretary Austin said he spoke with his Russian counterpart and insisted the U.S. is going to fly wherever international law allows it. In the UK, where the ceremonial delivery of the government's budget to parliament actually merits aerial television coverage, Treasury Chief Jeremy Hunt is predicting the country will not go into a technical recession this year and promising the government will take whatever steps are necessary for economic stability. And in Paris, the garbage is piling up on the city's sidewalks. Trash collectors are in the ninth day of a strike protesting the government's plans to raise the country's retirement age to 64.

In an all-important man-on-the-street interview, one tourist from Spain is quoted as saying, it's disgusting. Bien-insue. Yes. Piler? Maybe we. Thank you. Contessa. ahead on power launch amid this growing stock volatility in both stocks, volatility in both stocks and bonds, where is the best place for you? And as we head to break,

check out some of the names bucking the trend lower today, specifically T-Mobile, buying Ryan Reynolds, Mint Mobile, for $1.3 billion. Speaking of Ryan Reynolds, he will join Jim Kramer tonight at 6 p.m. Eastern on Mad Money. We are back in tune. Welcome back, everyone, to Power Lunch.

Markets bouncing back just a bit at this hour. Reports that Switzerland is now holding some talks on how to stabilize Credit Suisse. Meantime, Rick Centelli, live at the CBO with more on today's tumultuous action. Rick. Yeah, there's a lot of actions. As a matter of fact, a lot of people are calling for cleanup on aisle 12. All I know is that if you consider what's going on with 10-year note yields right now, They're hovering near the lowest wheel close since the last big jobs report on February 3rd.

I find that fascinating. And as you look at 10-year over VIX, over two weeks, you can see how they're inversely correlated, almost precisely. And if you want them to be directly correlated, let's throw that VIX, which, by the way, is on pace for its highest close since CEP, but well under 30. But look at it against Fed Fund Futures. There's a lot of action going on here. Let's talk to our buddy Pat. Pat, here's what I want to know. At the end of the day, we have the ECB tomorrow.

Everybody's talking about rate decisions. Nobody knows the answer there. But you know something about volatility that you want to share. So the biggest things that we're seeing right now is you're pointing out that VIX has been skyrocketing with this move. We're seeing a VIX right around 27 and a half when we first started talking. It's been moving around. It's going up and down a lot right now as the market's going up and down. But the interesting thing that we're seeing is when you start looking at volatility further out in time,

you start looking at a June VIX. The June VIX is two points lower. Right now it's about 25 and a half. Ordinarily, that would be about another point and a half lower, around 24 relative to where the VIX is trained in. So why is it? So what that means is people are worried. People are very worried that this is going to be long, it's going to be drawn out. It's going to be going to be going for a little while longer than what's going on right now. A lot of times when we see these panics, people come for really short-dated options. They want to get cheap protection, some insurance to protect themselves.

Right now we're seeing the spread between the current VIX and the June VIX. wider it gets to the discount, the more long-term this may be. Always good advice, but in the end, we want to know what the ECB is going to do tomorrow. My call, Zero. Kelly, back to you. All right, Rick, we were just talking about the VIX. Thank you. With all the volatility lately, more investors are content to take the safe.

Wait, the T-Bill and Chill. I don't, we cannot say T-Bill and Chill anymore, can we? That cannot be the right approach. Maybe it can be. Let's ask Alex Morris. He's Chief Investment Officer at FM Investments. Alex, first of all, thank you for coming in to join us here. Thanks for happening.

So, yeah, okay, let's rewind three, four weeks. Everyone thought, why worry about the stock market? Take that 5% yield. And we had that six-month, the one year, maybe even the two-year ultimately. Oh, my, how things have changed. I don't know. Now that we've seen the two-year rocketing 40 basis points in one day and then the next and then the next, what is the implication for investors?

I think investors need a safe haven to go to. And we see the skyrocket and price, the drop and yield because they're looking for a safe place to be. And that place is not a bad place to be as the Treasury market. I mean, it's a great advertisement for what the government's been up to for their ability to backstop the economy, broadly speaking, starting with some regional banks. But you're still getting a positive yield. And it's a material number. If we went backwards two years, those numbers were zero. No, but it's also ironic because by people piling into treasury bills, they undermined the banking system.

Let's not forget, everyone who's moving deposits right now. I mean, this is all part of the problem. That's true, but as the yields go down, actually, some of the banks are helped, because now the long-term or mid-term dated liabilities are worth more. So in its own odd way, it's going to sort of balance itself out. But if you did a bad job managing your asset liability base, these moves aren't going to much help, but they help some for folks who are on the margin. There we have a look at two-year notes, 10-year notes and others with nice yields on them.

We look at shorter bills, one year, six-month, three-month T bills. They look okay right now. They're not as high as they were a couple of days ago. But let me spin forward the clock two or three months to the point at which we may be in a debt ceiling crisis. What is my risk there from that if there's a stall or a breakdown? Well, we've been close to that before, and we've always blinked. I think we need to. The government has a long-term requirement to continue to pay its debt,

and a reputational damage would happen if it didn't. So I think we all have to kind of bet that some arrangement is made and made in relatively short order without having to talk about wacky things like a trillion dollar platinum coin or the brinksmanship that we were worried about a few weeks ago. Most people, if they're in anything like a T-bill or everyone's going to Treasury direct and hoping that they're just not going to be in the crosshairs of any potential delay on those payments, make the case for why I should be in some kind of T-bill ETF right now. I mean, unless I have, like, the biggest risk appetite of all time, they must be like a roller coaster lately, right? I mean,

normally an ETF would be a more efficient product, but right now I think, I don't know, maybe I'd just like to sit in that T-bill and not worry about it. Sure. I mean, so there's been some volatility in rates without doubt, but I encourage anyone who wants to look at a T-bill or Treasury Direct to go and try it. It's hard. Or open up your brokerage account and look to buy. The site was down in the middle of all of this. Exactly. It's ultimately, it's hard to buy treasury notes. Folks forget that bonds are still cleared over the counter. They're traded in fractions.

I can't tell you how many people didn't like fractions in school, and no one thinks in 64th anymore. And it's much easier to buy the ETF. And the ETFs we've created stay on the run. So T-Bill. What does that mean? So we stay on the most recent issue from the government, which also is the most liquid.

So if you look this morning around 10 a.m., when we took a look at all of the two years you could buy, so anything that had about a two-year to maturity remaining on it, The on-the-run had a one-tick, two-tick spread, whereas all of the others had five, ten, twenty. So, although you had something that looked like it might mature in two years and you could easily just buy it, when you try to sell it, you were going to find its price was quite different. Interesting. All right, Alex, thank you very much. Thank you.

Appreciate it. We'll have you back. All right. Up next, growing concerns around the stability of the financial system, dampening energy demand. We will dive into that one next. Look at West Texas crude up a little bit from where it was earlier, 6835. nevertheless down more than 4% and below 70. A big drop in oil prices today. Lowest level since 2021 before the Russian invasion of Ukraine, if you can believe it. Pippa Stevens joins us now with more.

Pippa. Yeah, it fell to the lowest since December 2021. But we have seen a big bounce off the worst levels of the day. It was at 65, 65 earlier. So more than $2 above the low that we had earlier today. Of course, this is from the fallout in the banks, as well as global growth concerns. And for WI specifically, it was stuck between that range between 70 and 80. So once it fell below 70, that does fuel technical selling, which then increases volatility.

But we are seeing now a big drop in energy stocks on the heels of oil's decline. It is the worst performing group today. The OIH, the services names like Hallibard and SLB, are among the biggest losers. And that could be because they've actually outperformed the XLE and the XOP over the last six months. So this could be a case of easing up on some of the positions that have been relative. performers. But I did want to point out one chart from Matt Maley over at Miller-Taybock. It shows the relative strength index on the XLE, which is, of course, tracking the energy sector. And it shows that it has dropped below 30 and is now at oversold levels. And you can see in the

past, when it's bumped up against that level, it has then rallied. So could be time to nibble, but with all this volatility in the market, you don't necessarily want to call the bottom. Well, and if we do and it goes up, then it's like there's problems with that too. So kind of trapped here. Pippa thanks. Pippa Stevens. Still to come, our next guest says today's sell-off could be a case of indiscriminate selling. Maybe a good moment to put some capital to work. We'll discuss next. Welcome back, everybody.

Pretty big rebound in stocks today. The Dow was down 725 at the lows. It's currently down more than 300 points. The financial sector, obviously, bearing the brunt of this along with energy, shares of credit Swiss, closing down 20%. Let's bring in Peter Anderson, Chief Investment Officer with Anderson Capital Management, for some gravity and perspective here. and Victoria Green, Chief Investment Officer with G-square private wealth. Wonderful, wonderful to have you both along.

And just share thoughts on this environment. Victoria, I'll actually start with you. You know, we're seeing people in some ways kind of terrified about what's going on with the two-year yield and what that says about what's coming next. What's your take? I think the word is panic, Kelly, because that's really where we've gotten with this market. And I think we hit a little bit of oversold. Like I talked about indiscriminate selling, so you had good companies going down with bad.

And one of the best examples of that was like Charles Schwab. Why was everybody selling Charles Schwab? They have like $100 billion in liquidity like on hand before they even have to sell any of these held the maturity. So anytime you have this panic coming in, people are not thinking rationally. They're thinking emotionally. That's a very dangerous time to be an investor because you aren't seeing rational swings. You're seeing these panic moves up and down. Yeah.

And Peter, you know, there's kind of this urge right now, I think, to say, okay, well, you know, the consumer balance sheet is way different than and, you know, this is not going to rerun exactly like the credit crisis. So therefore, maybe the panic is a buying opportunity or maybe, you know, we know a downturn's coming, but you can start to kind of pick up stocks on the cheap and look past that. What do you think? Well, I think the hardest thing has been this past year for investors to take their time and realize that, you know, when the Fed started raising rates a year ago this month, right? In this day and age of instant gratification and social networking data, et cetera, you know, the Fed still operates in the Stone Age, right? It takes about a year for any of these rate hikes to actually play through

the economy. So that's why we are also anxious looking at every single economic data point that comes out. But in reality, Kelly, I think the SV bank is really the first hard data point that ironically, the rate hikes are working, so to speak, because they have caused such havoc. And I think the Fed, in its wisdom, is realizing that they have to slow down because now we're actually seeing some damage, although they might say, you know, positive impacts from the rate hikes. So you put that all together. I am optimistic. I think the Fed would probably have stopped raising anyway in this very close period. The SV just kind of pushes them over the fence earlier. But I do think tech stocks, for instance, have enjoyed a very strong rebound. I mean, I've had a

very good year so far to date kind of dancing between the raindrops of all this stuff. But I do remain optimistic even in the face of what we are experiencing right now. Peter, is what happened at SVP, you just said it, evidence that the Fed's rate hiking posture is having, is doing what it was intended to do. It would be very easy to argue, however, that the failure at SVB was because the management didn't do what the management should have been doing. And that is diversifying their deposit base and managing their interest rate risk better. And they had a mismatch of assets. And the Fed may have been, you know, lit the candle. But these guys were the ones who let the fire go.

Oh, absolutely, Tyler. I guess it's a complicated situation. It's never one main driver, but I think you hit the nail on the head. You know, the fact that the Fed did push the envelope with rates, rate hikes, I think did cause that to come into the forefront where probably it would not have come to surface had the Fed not be so aggressive. So it's very convoluted in terms of who did what. But I do think that we shouldn't panic about this because as you said, Kelly, it's no. nowhere near what we went through in 2008. And I do see clear sailing ahead. Goldman Schwab, American Express, Victoria, are these for a trade or for the long run? For the long run, American Express is a phenomenal company. And if you look at how they've managed to increase their savings deposits with their CDs and their savings rates, there's a part of the reason people are leaving the bank deposits since the bank's not paying anything for their checking and savings. I think they're very strong companies.

Yes, I know Goldman's going through a little transformation about what they want to do with markets and their retail division there. I do have faith. Goldman will find their ways. They're quality companies. And if you look at their diversified balance sheets, how they're making money, where their revenues come from, I think they're weathered, they're going to weather any challenges to this financial sector much different than, say, just a traditional standalone bank. But they're not just trades for me. They're good, strong companies. I wouldn't buy them if I didn't believe in them. All right. On that note, we'll leave it. It's like a rally and cry. Peter, Victoria Green. Thank you very. You know, we had a real, uh, diverse.

of opinion this this hour. I don't know what that tells us. Yeah, no, we had bear market going to continue and we had more, end on a more hopeful note. And on that, we leave you. Thanks for watching, Powerline.