Power Lunch - Bank Worries, and 3M’s Legal Woes 3/24/23

Episode Date: March 24, 2023

Shares of Germany’s Deutsche Bank are sinking today, as concerns about its health hit the market. But stocks are shaking it off.Is the banking crisis actually contained, or should we still be fearful of contagion concerns? We’ll debate.Plus, shares of 3M just hit a 52-week low, as its earplugs lawsuit continues to drag on. Analysts fear it could cost billions. We’ll explore. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hi, everybody, and welcome to Power Lunch. Alongside Kelly Evans, I'm Tyler Matheson. Coming up on this Friday, thank goodness it's Friday, the latest ripple in the banking crisis, Germany's Deutsche Bank sinking as concerns about its health hitting the market. But stocks are shaking it off, Taylor Swift. Is the banking crisis contained, or should we still be fearful of containing? Plus shares of 3M, 3M, hitting a 52-week load today, the company, the target of a huge lawsuit that's dragged on for years. And unless fear it could cost the company billions, we'll get into that. But first, it's going to check on the markets with stocks lower and in danger of giving up their gains for the week. But these losses aren't as bad as the futures indicated this morning.

Take a look at Deutsche Bank. Here, why don't I just take a look for you? Come on over. Deutsche Bank was down as much as 10% pre-market, and you can look at the credit default swaps to kind of get a feel here for what's going on. Let's start with the equity off the lows, still down about 3.5% today and down 22% in a month. Now let's flip and show you what's going on with the credit default swaps. the cost of insurance against their default. This hit its highest level going back to the European debt crisis.

You can see the year-to-date spike here, especially after the demise of Credit Swiss. These are five years. These go up with about 40 percent today. Here's the long-term trend, though. This is not that unheard of for Deutsche Bank, although we are nearing these levels. As I mentioned, we haven't seen going back all the way to this debt crisis. When companies are repeatedly in the market's crosshairs, it's not a big surprise during periods of weakness and stress to see them pop up once again. Now, that said, the big U.S. banks lower today. The regionals kind of a mixed picture. J.P. Morgan down one and a half percent. B.F.A. is green, though.

Regionals were also keeping an eye on shares of First Republic in particular. Those giving up their earlier gains to turn negative, they're down less than a percent still. But Pac-West, Zions, Comerica, are still in the green tie. And it's not been easy being green if you're a bank lately, but there are three of them. For today, at least, the banking problems are focused on Europe, Deutsche Bank under the microscope, as Kelly just said. Joining us now with the view from Europe is Stephen Morris, banking editor with the Financial Times in London. Stephen, welcome.

Good to have you with us. What's going on with Deutsche Bank and why today? Well, Deutsche Bank is really a casualty of the general fear that we're seeing in markets at the moment, which started obviously by the collapse of Silicon Valley Bank in the U.S. and then spread and provided a backdrop to this extraordinary collapse of Credit Suisse over last weekend, which we chronicled extensively in the Financial Times. traders and investors around the world are looking for the next weak link in banking. And Deutsche has been a perennial underperformer racks by scandal.

Although recently it has been on better form. However, today it's really traded off, as you said before, strongly. Credit default swaps rising. Its share price falling. So I think it's just people probing to see where the next weak link might be. But there's no suggestion that anything's happened in the last 24 hours for Deutsche Bank to be a particular source of weakness or fear of collapse. Europe, do people and do bankers blame the U.S. and U.S. regulators for what they are feeling today in their banks?

I don't think anyone in Europe is actually blaming the U.S. It certainly provided the backdrop for what happened to Credit Suisse, particularly last week. But I think Europe has had its structural and scandal-related problems for a long, long time. There has been a little bit of sniping, to be honest, from Europe and the U.K., the governor of the bank of England said that they warned U.S. regulators about the deposit concentration risk in Silicon Valley Bank before it collapsed and nothing happened. We've also seen a bit of criticism about the U.S. changing its rules to protect depositors over $250,000 in Silicon Valley Bank by arguing it was systemic. So I think there's more disagreement on the regulatory front, but whether Credit Suisse would have survived absent anything in the U.S., I think it's still up

for debate. I think Credit Suisse caused its own demise. And Stephen, where do we go from here? Because it was also obviously the European Central Bank raising rates by half a point. So why aren't they more perturbed about these issues? Well, they're just as worried about inflation as they are about the stability of the banking system and sort of rowing back on any of their direction at the moment would probably have a wider impact on society. The party line from everyone from the Chancellor of Germany to the head of the Bank of England to politicians across the continent is that the banking system is safe. secure, liquid, and well capitalized, and there's no reason to worry. But as you know,

that's what Credit Suisse was saying, and indeed could prove before it collapsed. So it might not necessarily be a cure for market panic. Forgive me for being uneducated on this, but Stephen Banks is your beat, so you know much more than I do about them. Do European countries have sort of the same banking structures that we do in the United States? In other words, there are lots of small and mid-sized regional or local banks, or is it much more concentrated, or is the banking business much more concentrated among two or three large banks in, say, the UK or France or Switzerland or Germany? It's far more concentrated than the U.S.

Remember, each individual market is small. We don't have a pan-European banking market, and the UK is completely separate as well, as indeed is Switzerland. So what you have, especially as a result of the last financial crisis in 2008, is largely, countries dominated by a few very big players. Spain used to have lots of regional banks, but a lot of them failed and were hoovered up by their larger rivals. Similar story in France, Italy, and particularly in the UK.

So it's not the same. The banking market is just not on the same scale as the US. It's still very fragmented, country-based and dominated by a few. larger players in each one of those. That's what I thought, and thank you for explaining that. Stephen, thank you very much for being with us today. We appreciate it. Thank you. It's a pleasure.

You bet. Our next guest also weighing in on the bank crises and the Fed, saying the Fed's gone too far and helped trigger these problems. Let's bring in Ron Ansana. He is CNBC, seniors analyst and commentator and co-CEO of Contrast Capital Partners. Ron, it's good to see you. You also? Obviously, you've been banging this drum for quite some time.

About a year now. But let's talk with some granularity about, to Stephen's point, that he was just making, well, what about inflation? You know, the UK inflation number 10% this week and so forth. So for those who say, well, you know, if they stop hiking here, they're just going to bail out Wall Street and hurt consumers, what's your response? Well, I'm not sure that's the case. I mean, the European inflation situation, particularly the UK, which is 10.4% annualized,

or latest data, is higher than we have here. We've already fallen into the 5, 6% region, down from 9%. Inflation is coming down. We're having goods disinflation. Interesting piece from Peter Orszag and Robin Brooks that was out this week, Peter being a former administration official on the economic side, saying that almost all of this inflation in the U.S. was pandemic and Ukraine related, and that the Fed may well be going too far, which, as you know, is my view.

Well, let's put it this way. Even if some of us think maybe it was the Fed's over-stimulus in Washington, no matter whether it was one or the other, either way it's unwinding now. Absolutely. And as I write today, they're taking the punchbowl away after the party's already over. They're supposed to take it away as the party's getting started, according to William McChesney Martin way back when. And at this juncture, to me, it seems to be overkill. And they're directly responsible for putting very serious pressures on bank balance sheets at a time when they probably don't need to.

So that was what I was going to ask you is what is the damage done by taking the punch bowl, continuing to take the punch bowl away after the party's over? Well, the markets are screaming recession, right? I mean, everywhere you look, that's the word. commodity prices are collapsing, whether it's oil and natural gas, which are at recent lows, whether it's agricultural commodities, interest rates are not screaming inflation. If there was a real market concern about inflation, the tenure would not be where it is today, right? Well, the tenure wouldn't be dropping, and the tenure is dropping for two reasons, it seems to me. Flight to quality. Flight to quality and flight to safety. Number two, the fear that there is

going to be a recession and that eventually the rate cycle is going to flip and go to the way. But that also hurts banks again because as credit is being tightened with these constraints that'll be coming to banks, you have less credit available as we appear to be approaching a recession, although everybody says it's always six months off. It's amazing. I remember sitting on this desk in September, and there weren't a lot of people saying, hey, we're heading to a recession. We're heading to a recession. There are a lot more saying it now. Well, yield curves, it's 130 basis points three-month T-bill over 10-year yields. That's the steepest inversion we've seen since 1980. And it's been persistent since November. And so if you believe that there's a six-month to 15-month lead time, that means May before we even start the process of entering a recession. And the inversion has remained even though the curve has come down.

Yes. Even though the rates have to come down. And that tells you that there's too much pressure. I have to put that little body language in there just to emphasize the point. I'm too old to use body language. But no, look, I think that... I got too much body to use body. I think, you know, this is, we've had this conversation for quite a long time.

we've long maintained that the Fed will go until something breaks, something broke, and the question now is, are they going to break it further? And if they do, it just leads to, and I've been doing this 39 years, you've been doing it about as long, you're not quite that old. But, you know, every time they've broken something, they've been forced to change policy. Yeah, and the market's telling them that already, that they're going to be cutting rates. In some case, depending on how you look at it three, four, five times by the end of the year. Yeah, and this I understand that there are a lot of people, Jason Furman and others,

arguing that the markets have it wrong. Right? And the bond markets were wrong in the past when they underpriced where the Fed was going, and then they brought, ultimately, they realized, no, they're going there, but this time. They may be going there, but they know what the implication is, right? And Paul Samuelson famously said the stock market predicted 11 of the last five recessions. Bond markets usually right. The question, I guess, becomes what do we do now? So if you're an investor and you're saying to yourself, okay, this all sounds doom and gloom,

but Bitcoin's up, big tech's doing great. You know, you sort of say to yourself, has the market already priced this in, especially because we're coming off a bad year because of inflation and all the rest of it? And now that liquidity's back, look at the balance sheet, can I just start chasing these trades again? Well, listen, I don't care what happens in crypto, right? I mean, this is a great excuse for everybody to make the case that we need decentralized finance and that this would have never happened if we just used Bitcoin. I think that's all nonsense. But when you look at big cap tech and the leaders have been Microsoft and Apple, right? Those are the real winners here.

When you look at the six-month T-bilt we've talked about for a while, and by the way, you'd have a huge capital. gain on your one year if you bought it several months ago, those still seem to be relatively safe hideout places for your money. I think 2023 is still going to be a rough year until this stuff clears up. I think maybe the thing to remind people as we start talking about what yields are doing is that you can get, maybe it's still, we should show the six month bill actually because it was 5% a couple weeks ago. I think it's like 460 right now. So what happens when that matures? So all of a sudden, if Tyler and the market and everyone's right and rates are about to come down considerably.

Well, then you go farther out on the risk curve. Exactly. Well, exactly. So that's the question. I think the whole idea of T-Bill and Chill might have worked for literally a couple of weeks, but all of a sudden, when these bills come due in the next couple of months' time, if the whole rate complex is significantly lower, then right? So you buy those at a discounted price, you get all of your principal back at par, and then you go chase risk, right? If we really think the Fed's going to pivot, if the Fed's going to stop and then start cutting rates, as we've said many, many, many, many times, I don't mean to keep using the editorial we, but as has been stated many times in the past, when the Fed changes, you buy stuff. But it's also the case, I think, that historically speaking, we often see bare markets bottom about half to two-thirds of the way through recessions, and you're saying the recession hasn't even started yet. Well, I mean, there's recession in real estate. There's recession in manufacturing.

You know, we got the PMI data today that still shows contraction in manufacturing. So part of the economy is in recession. We know that. You know, not all of it. And look, there's still revenge travel. We still know that's going on. But even airlines are saying later in the year may not be as great as today. So do you think you can own the market here?

I don't know. I mean, I still think, I wouldn't step out too far on the limb until we get some clear. And listen, Jim Bullard comes out this morning and says, we're going anyway. Right. You know, we're going as far as we need to go. And so as long as the Fed keeps saying, they're going to keep going, raising rates, at least in my experience, it's never been a great time to buy equities while the Fed's tightening. Yeah.

Ron and Sana, have a great weekend. Good to see you both. Thank you. Good to be with you. All right. Coming up, as we mentioned, the 10-year yield went to 4% and back so far this year, currently just shy of 3.4. Our next guest says we will see 3.0 sometime in 2023. And Netflix shares are hired today, up 7% this week. Early

reports on the password sharing crackdown in Canada showing positive impact. We'll get a trader's take on that stock soon. Soon, just soon. Welcome back to Power Lunch, everybody. Stock's in recovery mode after seeing declines as shares of Deutsche Bank in your Europe come under pressure and raising fears in the banking sector once again. Our next guest is overweight bonds right now and expects the 10-year yield to get back to 3 percent sometime in 2023. Let's bring in Phil Orlando, chief equity market strategist with Federated Hermes.

Phil, welcome. Good to have you with us. You're the equity market strategist, yet you're concentrating on bonds these days. Why is that? Well, I think it's a more holistic approach here. We like cash, we like bonds, and we are overweight equities, but we're focused on the value portion of the market. Growth has had a great run here during the midterm election rally from mid-October into early February. The S&P was up about 20% during that period.

What we think growth is probably going to pull back here over the course of the next couple of quarters, and we're taking advantage of the opportunity with low price. on value stocks to be overweight value. So it's overweight value equities, overweight treasuries, overweight cash. That's sort of the defensive posture we've got here to try to hunker down and get through this situation until we get some clarity on what's going on in the market and the economy. When you say overweight treasuries and you're forecasting that the 10-year yield may go to 3% by the end of the year, and in light of the fact that overweighting treasuries did no good for Silicon Valley Bank because of the kinds and maturity's durations of the of the

treasuries they had. Where are you on the on the maturity spectrum of the treasuries you are overweighting? So our duration committee is is roughly neutral right now and talking about you know our thoughts that treasuries might get to three percent benchmark tens by the end of the year. Not a terribly heroic call given the fact that we've gone from four 10 to you know 340 here in the last three weeks. So what we're suggesting is that the economy is going to slow. It's going to continue to slow. Treasuries will probably perform well in that environment. Cash right now is a real asset class yielding, you know, four and a half, five percent. And value stocks, low PEs, low betas with dividend yields that are twice the broad market.

I think that those are good places to hunker down and hide out here until we get some clarity. And that said, international is still a place that you'd also be looking, Phil? I mean, usually when we see global downturns, the U.S. holds up relatively better. You always wonder about, you know, people chasing international stocks for kind of the FX trade or something like that. Maybe they're high beta, but could they be heading for some trouble here? So we do like international, Kelly. That international stocks right now are about 40% cheaper than domestic stocks. And the dividend yield on international is about double. the yield on U.S. stocks. China reopening and coming back into the economy is important,

relatively weaker dollar versus euro pound and yen is important. So there are a number of reasons why international looks pretty attractive here as well. When you talk about value stocks in the U.S., what categories are you willing to name some names? Where do you find them? It would be easy, by the way, to say that an awful lot of the regional banks are value stocks right now based on their price. Well, they are, but the fundamentals are clearly in question right now. What we'd like to focus on would be the more stable demand categories, that regardless of whether or not the economy does sort of glide towards a rocky landing or perhaps a recession

over the next year or so, consumers will need to continue to buy health care, energy, consumer staples, utilities. These stocks have been out of favor over the last six months or so based upon that nice rebound rally that we saw in growth stock. So again, if the economy is going to drift lower and we've got a couple of negative GDP prints coming in the third and fourth quarter, the Federal Reserve remains tight. And one of the critical issues here, Tyler, I think, is that we do not believe that what's going on with Credit Suisse and with Silicon Valley Bank are our

symptomatic of systemic problems throughout the banking industry. These are one-offs. These are companies that were poorly managed. They are not suggestive that we're going to see a repeat of the 0709 global financial crisis. All right, Phil Orlando. Thank you very much. Good to be with you, sir. Thanks, Tyler. You bet. Further ahead, 3M breaking its silence over a multi-billion dollar lawsuit. The stock trading near 52 lows. We've got the details when Power Lunch returns. All right, welcome back to Power Launch, everybody. Time for our weekly ETF tracker. This week, we focus on real estate funds, outflows of $253 million over the past week. This, according to our partners at Track Insight, two big factors here. Real estate, always on high alert over interest rates, and also the health of the economy. Recession fears may be adding to jitters here, a commercial real estate, attracting a lot of attention. All the funds, they're down this week, are not all of them, but most of them. Vanguard, Real estate. estate. Schwab's REIT, U.S. REIT fund, down 2 and 3 quarters percent. Real estate select sector fund, down 3.04 percent, and the I shares U.S. real estate fund down about 2 and 2 thirds percent.

So pretty consistent down 3 percent, 2 percent thereabouts. Information, more of it, available on the F.T. Wilshire E.T.F. Hub, Kelly. Tyler, thank you. Let's get to the bond market. Now it's been all the talk. As we're closely watching some key levels, especially on the 10-year, Rick Santelli, what are they? Yes, key levels in the 10-year. If we close above 347, and I'm not sure that's even possible at this point, but that would be a positive. Below the market, right around 323 is very solid support, but do keep in mind, these

prices are moving around like commodity prices, like crazy wheat prices in the heat of the summer. Big ranges, liquidity sometimes an issue. This morning, 9.45 Eastern service sector was better. it reversed rate tighter. Look at two-year. It was over 5% this month. And if you look at tens, they were over 4% this month.

But go back to October, they never traded over their fall highs. HyG, high-yield ETF, not keeping up with the investment grade, LQD, and that differentiation of credit's important. When was the last time you saw people avoiding banks moving into corporate? Hey, let's go see what Dave's up to. Dave, Dave, Dave, Dave, Dave, Dave. Yeah, Rick. All right, Dave, we're on camera here.

It's been a crazy week. What are you seeing? There's panic. There's panic in the air. People want the zero-day options. They want options expiring near-term because they'd ever know going into a weekend, Friday, you don't know what's going to happen. You know, when they say we have everything under control, don't worry, what usually happens?

Exactly, exactly. And it always comes out on a Friday afternoon. They wait until the markets close down, give people time to kind of relax and digest the news. and then all of a sudden then Monday comes around. You know, many are pointing out, and me included, that when you look at the big VIX, it barely touched 30.

It's well below that point. Do you think zero-day options have taken a little of the thunder away from the historic relevance of VIX? Absolutely, because they're always constantly expiring. And so there's that premium where you'd before hold an option for a month or two, well, that option's expiring in a couple days.

Fed Fund futures. They're very good. It's a wonderful contract. But I personally say it's just like a T-E bill market when things get nuts. It's pricing and eases. Your final thought. Do you really think we're going to see the Fed pause, pause, and then start to ease? Absolutely. They kind of have to. They're forced here. If there's a real banking situation, politicians, the media, they'll tell you everything's okay. But if there's a real banking situation, they can't keep raising. It's always interesting

to get your opinions, Dave. Have a great weekend. Tyler, back to you. Oh, all right. Love that, man. Not enough energy there. Not enough energy. Love it. All right, oil falling. today down nearly 1% and back below $70 a barrel. Pippa Stevens has more. Hi, Pip. Hey, well, speaking of energy, natural transition. Yeah, so oil is off the lows of the day, but still under pressure on the renewed banking concerns. We also got fresh commentary from Secretary Jennifer Granholm, who said that it's going to be difficult to refill the SPR, even though oil has gotten down within that $67 to $72 range.

Why would it be difficult? So she gave two reasons. She said the first is that they still have to work through a congressionally mandated sale from years ago that has to take place this year. And then she also said that two of the four SPR sites are undergoing maintenance. And so that's why they can't refill it this year. And that, of course, had been, you know, a big demand boost. Stephen Brennock over at PVM said that it is a major blow to the demand outlook. And that puts even more pressure on China and a rebound in demand there.

Mastifying. I mean, because the administration had said if it got below 70, they'd start buying. So maybe they didn't know about these issues? Well, so they canceled sales looking further out. But the sale this sale this year, that 26 million barrel sale, it was mandated many years ago. And so they can't cancel that. And so they can't be both selling and buying at the same time as what they've said. So, you know, she said it'd be difficult this year.

And so it's targeting further out, which begs the question of, well, that support oil prices into the future. But then what happens today, particularly since we haven't seen that bounce back from China? So that big buyer is sort of the big buyer, i.e., the U.S. is on the sidelines for now, apart from that one that is previously mandated. Exactly. And it was 180 million barrel sale back in the spring of 2020. And so that's equivalent to just under two days of global oil demand. So that is a very significant amount of oil. I'm sorry, the SPR is going to sell that oil, not buy it. Yeah. So the 26 million is there selling. And then the one that Biden had done was also selling. And so then they need to buy back to

replenish because the SPR is now at the lowest level since I think 1980. at this point. So that has to be refilled at some point. PIPAA, thank you. Big deal. A pipa thanks. Let's get to Bertha Coombs now for the CNBC News Update. Hi, Bertha. Hey, how are you, Kelly? Here's what's happening at this hour. Michigan is now the first state in decades to repeal its right to work law in place for more than a decade that weakened unions by allowing represented workers to opt out of paying union dues and fees. After signing the new measure, Democratic Governor Gretchen Whitmer said it will help grow. state's middle class. The House today passed what Republicans are calling a parents' Bill of Rights Act by a vote of 213 to 208 in response to complaints from some conservative

parents who feel they are being shut out of school decisions and worry that their children are being indoctrinated with progressive ideas. This says the parent can now know what's being taught in the school. This is now saying the parents can now look at the reading material. It's now saying the parents can now see what the money is being spent on a school board. And all the rain California has been getting has made life miserable for millions, but it's also allowing Governor Gavin Newsom to end some of the state's water restrictions. But he did not declare an end to the longstanding drought. Think with all of that rain, they have to have made a big dent, right?

Yeah, and the snow melt is going to add to that as spring. Hopefully. Worms up. Bertha, thank you very much. We have a little bit of sad news to share with you today. Our friend and colleague Andy Rothman died last week after a ferocious battle with cancer. Career journalist, Andy most recently worked with us right here on Power Lunch. He also spent several years alongside me, a producing nightly business report and how I made my millions. A sports fanatic, long-suffering jets and Mets fan. A lot of them. Andy covered 10 Super Bowls, three Olympic games for CBS News. He was a March madness. savant. Our thoughts are with Andy's wife, Amanda and the rest of his family. Andy was 62. A great guy. We miss him. Welcome back, everybody. More than 200,000 military service members and veterans are suing 3M claiming combat earplugs the company made from members of the armed forces caused hearing loss. One Wall Street analysts saying the company's liability could be in the billions. For more, here's Simomodi. Hi, Sima. Tyler and Kelly, this is what we're talking about. These are the combat arm

air plugs manufactured by 3M, and we did speak to one of the plaintiffs, Nathan Fry. He's a former infantry officer in the Army. The 35-year-old says 3M's air plugs did not provide proper hearing protection. It's a loud ringing in my ears. I don't look like somebody who probably should have as much hearing loss as I do at my age. 3M is not settling. Its top lawyer telling CNBC that its air plugs do work, despite claims for more than 200,000 plaintiffs that say the air plugs are defective, causing hearing damage.

It was tested by the Air Force and the Army and others, including NIOSH. It should have worked and protected their hearing in environments where it was appropriate to be using this earplug. 3M so far has lost 10 of the 16 cases that have gone to trial with a total of $265 million awarded to 13 plaintiffs so far. J.P. Morgan, Stephen Touss, says illegal liabilities could amount to 10 to 20, billion dollars. 3M tells us any estimate at this point is completely speculative. Meantime, service members are accusing 3M of using the bankruptcy of its subsidiary era technologies to shield itself,

and they've asked a judge to dismiss it. A hearing on this scheduled for April. 3M is hoping new data will help its case. There's records from the Department of Defense that show 90% of 175,000 plaintiffs have no hearing impairment under medically accepted standards. Take a look at the stock. It's at a new 52-week load today. And it's been a key laggard in the industrial sector. Tyler and Kelly. As you said, a 52-week low. So there's a lot that it's a lot to unpack here.

Stay with this, CMO while we turn to our guest, senior research analyst at Mizzoujo, Brett Lindsay. Brett, you cover this closely. And what are your in the market's expectations as to the potential exposures here and how quickly it can get resolved? Yeah, no, good afternoon. Thanks for having me on. So certainly you have to take a holistic view when you're talking about the investment case. as it relates to 3M really two considerations, you know, the operations of the existing business, and then some of these ongoing liabilities, both PFS as well as the combat arms.

You know, obviously it's a fluid situation, and there's a number of different paths that the, you know, the company is moving to try to litigate as well as resolve these going forward. But, you know, right now there's currently more than 230,000 military service members or veterans that are suing 3M as a function of this. Most recently, three on miscontending that the DOD data shows that hundreds of thousands of the lawsuits that were made allegedly, you know, saying these earplugs were defective. Roughly 90% of those plaintiffs have normal hearing. And so this is going to continue to play out. There's going to be a May 1st trial, and they're going to be oral arguments for the appeals of some of these initial bellwether trials. But to your point, there's been 16 trials so far, and 3M is locked about 13 of those.

You know, I think the issue, as it sounds, is that this case is sort of too big to settle because there's over 200,000 plaintiffs. The difference between what they want from 3M and what it says or what it can afford is so great that a settlement sounds like it wasn't on the table. And what investor wants to be exposed now, I guess it sounds like to this, to the judge now moving forward. And we saw what happened with J&J where I think they ruled against. their ability to kind of put these liabilities into a separate company and put that into bankruptcy, so I can understand why investors are unsettled here.

Yeah, no, certainly. It's been an overhang for quite some time, and they're going to work through it. But, yeah, if you have run the numbers, it can, you know, get to some, you know, pretty sporty outcomes in terms of what the liability number could look like. You know, May 1st will be the big trial, but, you know, continue from there. They're also working through a confidential mediation with the other side as well. Brett, what did you make of the letter sent by a large shareholder last month to 3M, CEO, Mike Roman, detailing some concerns they had with not just management, but the trajectory of 3M going forward? Do you think leadership changes or reorganization could be in the cards? Well, I think in terms of the longer-term outlook for 3M, it's really going to be about repositioning to the high-growth markets

and really focusing on where they can differentiate value by utilizing the fundamental strengths of the organization. I would say that's material science and very strong brand positions. And if they're able to prioritize and deploy capital resources to those most attractive opportunities and they're going to maximize value across the portfolio, I think one of the big pushbacks for a number of years, despite free-im investing more on research and development costs than many of their other peers, they just really haven't achieved the same level of commensurate growth as those peers, despite the higher level of investment. So I think the question from here is, can they redefine?

fine and best, you know, extract the value with, you know, very, you know, very much a diversified portfolio. What have the plaintiff's attorney said to the claim or the assertion that you and, I believe, Seema said that some 90% of the people who are claiming hearing loss have totally natural normal hearing? Well, yeah, certainly they're making their own argument and, you know, basically saying that, you know, some of the, you know, some of the levels that were evaluated for what that standard were, were not used in prior cases.

developing their case, I'm certainly not a legal expert. This is probably going to go back and forth for the number of couple of months. You know, I wouldn't expect any type of, you know, new announcement probably, you know, until that May trial and then the second half of this year in 2023. All right, Brett, thank you very much. Brett Lindsay, we thank you, Seema. Good to see you. Thanks.

All righty, coming up. In today's working lunch, we will take a look at one software company aimed at using technology to close the gap. And as we head to break throughout the month of March, we celebrate women's heritage, sharing the stories of women leaders in business and those of our CNBC teammates and contributors. Here's one you know. Morgan Brennan, CNBC closing bell overtime co-host. When I was in my 20s in college studying anthropology, I, on a whim, on an archaeological dig in Kenya, shaved my head. After I did it, I was surprised to find myself mourning the loss of my hair

and what it meant for my identity as a woman. Now, eventually I embraced it. I even had fun with it, but it was this literal lesson in challenging society's assumptions about what my life should look like. That would be my advice to other women and really to everybody. Don't let anyone tell you who or what you should be in this world. Get curious.

Get experimental. Challenge the status quo. Even if you try something and it doesn't work, you will be stronger for it and you never know what opportunities may arise. Welcome back to Power Lunch, everybody. The latest jobs report showed that salaries remain high, but many businesses still have discrepancies in what employees in the same roles are paid. Today, John Ford brings us up close with a CEO whose company uses software to help customers identify and close those gaps. John.

Yeah, Tyler, Maria Colacertio is CEO of Cindio, a platform to help companies analyze whether they're offering employees fair pay and opportunity and minimize legal risk. Colacircio has experience with how workplace hiring habits can limit opportunity for some workers. Even though she was part of the founding team of SmartSheet, now a multi-billion dollar public company, she said she had trouble re-entering the workforce after having kids. But she didn't take no for an answer. That determination was something she learned growing up in a large Italian-American family. I hustle, and I owe that mostly to my older sister. She's 18 months older, and I got to tell you, it was so frustrating to be in her shadow

because she was good at everything. You know, she'd decide to play golf, and she'd go to state and golf. She, you know, was always on varsity in the basketball team, and I was on the freshman team. just dying to catch up with her. And my dad at one point, you know, I asked him to hook up a floodlight over our hoop in the front driveway so that I could practice, you know, well into the night. And she didn't need to practice. She just sort of everything she touched was gold.

In this downturn, Maria's hustling to expand Cindyo's product offerings and show how data can help companies protect the progress they made in their workforces, even as they tightened their belts. That means offering customers insight into the health of their talent pipelines and and their readiness for new compliance rules. A year ago, we were a point solution just focused on pay equity, but we've recently expanded that platform to address opportunity equity. So we have a really great chance to go back to our 260 customers and with a lower acquisition cost expand to get them embracing the full platform.

That said, though, John, for us, we have so much momentum right now with pay transparency legislation. And in particular, the EU directives because we serve global companies. we're seeing a ton of demand on the new side for pay equity, particularly because there is so much compliance regulation and push toward these transparency efforts. I talked to a lot of CEOs have different feelings and approaches to diversity and workforce development. Not all the same, but the best ones seem to have a workforce philosophy they can articulate and data they can present that shows whether they're getting closer to whatever goals they've set. Cindy are trying to arm them with more of that data. This is a hard area because while jobs can be the same, or you can have the same job description.

People are all different. They have different backgrounds. They have different skills. They have different levels of experience. And that's one of the reasons to me why the pay equity question is so difficult to solve. Yes. And in different industries, in different job categories, there are ways of very thinly slicing engineer one,

engineer two, three, four, five, et cetera. But within those categories that companies have set, a question is, do you have equality of pay across the different employee types? And if not, can you justify it? Can you explain it? If you can't, then best fix that before the lawyers come asking. Is there a risk that software or services like hers are themselves getting cut if companies start to tighten the belt here?

There would be that risk. But then on the other side, there are the new compliance rules in the EU, in certain states around pay transparency and then pay equity also where if you cut that it could come back to bite you. So how do companies use the data that they get? What do they do with it then? Well, part of what Maria was talking about in opportunity equity is another area. It's not just about are you paying people the same in the same role. It's are you getting your pipeline is the next layer of management that's ready to take over? Does that look equitable, right? And so companies are using this to kind of, to sift through and not only find potential problems that could land them in legal hot water,

but also look at just are they actually performing up to the goals that they've set, the promises that they've made to their workforces and to their board. And they just pay her a fee for, or their company a fee for that? Yeah, I mean, it's software that they use to keep analyzing that data and that they pay for over time. Am I correct in reading that she herself has seven kids while doing all of this? She does. Wow. You should see the Christmas card.

Oh my gosh. She has a household that is an experiment in equity. John, thank you. John Ford. Up next, growing optimism in the streaming space. Netflix up around 8% this week. We'll trade that name in three-stock lunch. Time now for today's three-stock lunch on the tasting menu today,

a UK regulator dropping a key hurdle to Microsoft's Activision takeover, while Netflix and Match Group are among the biggest gainers on the S&P 500 this week. Here to help us trade all three. McFadden, she's senior analyst at Motley Fool Asset Management. Shelby, welcome back. Let's start why don't we with Microsoft? Sure. You know, Microsoft's a buy for me. And that's because they're a great core, large-cap, well-cap, well-capitalized, financially strong position. Sometimes they offer a little bit of yield if the market has come off a bit or if tech's looking oversold. And with them now sort of prevailing, getting over this hurdle with regards to

Activision, that tells me that management can now go along with their initial plan to continue to expand, reinvest, to generate income, to generate cash flow and appreciation for shareholders. So anytime we see the elimination of that sort of explicit or implicit cost of changing the strategy of hustling to try and find a new way to reinvest and expand in the business, that's going to tick up the outlook. And when you tick up the outlook, we tend to see that little bit of bump in price as well. So for those reasons, Microsoft continues be a buy for me. All right. The behemoth, getting more behemothy. Shelby, what about our next one, which I believe is Netflix? This is the one that's been the big focus on that Canada report and

shares up significantly this week. Netflix is also a buy. So, you know, when we see that sort of third party data coming out, it's definitely positive, feeling encouraging, right? As long as Netflix can continue to, you know, keep their expense run rate at one that is lower than the expansion of revenue, and they're able to continue that cost leverage and scale, then driving subscribers contributes to driving profit, right? You know, the other thing that keeps me positive on Netflix is that they just really excel at what they do. They've got strong brand advantage, sticky pricing power,

and it's a cash generative business. So they are able to finance a lot of their own expansion and growth with their operations, which keeps them from having to raise substantial amounts of capital. And last is just that they're really well positioned to take advantage of what has been a really saturated competitive landscape. As peers and competitors start to sort of offload some of that content and maybe potentially stop running business,

Netflix is in a great position to pick some of that up and to use that continue to drive subscriber growth in the future. So it's a buy for me. It's one of those stocks that feels to me like a got to have. I mean, it's a product you've got to have. and if you're trying to build a core portfolio, there are a few stocks that you would kind of say that ought to be in there somewhere.

And I think Netflix fits that bill, as does Apple and several others. Let's go now to Match Group. Where does this fit in your rubric? Yeah, you know, match is going to be a hold for me. You know, it's great to see some of the data pointing to the fact that there is looking to be a longer runway when it comes to price for them, right?

More wiggle room. But it's still a wait and see. You know, as an investor, I need a little bit more proof that the value proposition is there, that the business model is strong enough to get through a weaker environment for their subscribers. You know, it's really important to differentiate between just the absolute price of the subscription and the value that it offers. So as we go into potentially a slowdown, times when subscription fatigue feels extra heavy on consumers, it's no longer just a question of what's the absolute price. You know, this is a small part of my budget.

It's what utility does this offer, right? So match as a hold because I really need to see how sticky this service is and how much wallet share it can continue to take up as we go into a little bit more of uncertainty. Yeah. Well, I guess its utility could be the ultimate utility, right? I mean, you find love for life. That's pretty good utility, I suppose, for a lot of people. I liked your phrase.

What was it? Subscription, what was that? What was that? Where you said? Subscription fatigue? Yeah. I'm enduring that right now, honestly. I've been trying to cut away, chop through some of the subscriptions,

whether they are service plans or news feeds that I used to subscribe to. I just find I need less. And over time, they add up to more. Shelby, great to see you again. You as well. Thank you. Nice having you with us. All righty.

After the break, a final check on markets. Stocks are near the highs of the day. We'll be right back. Welcome back, everybody. Let's get a check on the markets as we're watching into what, you know, you heard Jillian Ted, no one likes a Friday during a period of banking crisis. Well, maybe this is telling you. Coast is clear.

I don't know. Dow's up 78 points. S&Ps up 12. Nasdax down three. First Republic had been positive throughout much of the session turned negative within the past couple of hours. Check now reveals, geez, look at this, down almost 4%. now all the more impressive that the broad averages are holding up.

One year down 92% on First Republic Bank. We go into this weekend at the very least, with no perceptible cloud hanging there, really. Like last weekend, everybody knew that Credit Suisse was going to be the topic over the weekend, and it surely turned out to be. Anyhow, it's been a very busy week, and we're glad that you were able to join us for at least part of it. Thanks for watching, Power Lunch. Closing bell starts right now.