Power Lunch - Dow bounces 500+ points, but markets remain on track for weekly losses 03/14/25

Episode Date: March 14, 2025

Stocks are rallying, clawing back some of the steep losses from this week, as investors get a reprieve from tariff-related headlines. We’ll tell you all you need to know ahead of the weekend. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch, everybody. Happy Friday alongside Kelly I and Brian Stocks. Yeah, they are rebounding today. But can the bounce back hold? We've also got big moves, potentially with a huge impact on international oil market. It's a story you're really not hearing anywhere else, but you will hear. And the impact of Doge, the federal cuts on D.C. real estate. First, though, let's dig into today's big rebound.

The doubt 500 points. The S&P up nearly 2% after briefly falling into correction territory yesterday. 10% off the recent highs. Today's gains, of course, not enough to salvage the week. The major averages are still down more than 2% for the worst week in roughly two years. The Dow down nearly 3.5%. And check out the numbers over the past six months. All three major averages are essentially flat since mid-September.

That brings us past the election, the inauguration, and everything else that's happened were largely just churning in place here. And, you know, that I think historically, Kelly, is a pretty good point to remember after the week that we have had, the last few weeks that we have had, let's everybody take a breath. We're going to step back and we're going to look at the bigger picture. I know it's scary. But this is not the first time by any means that the markets have seen a swift correction. A correction is when you go more than 10% from your highs. Now, we've done that in less than 20 days. So it has been very quick. But believe it or not, did you know that this has happened six other times since 1950? Of course, each time stocks, rebounded, but did you know, they also rebounded after three months by about 9%.

And in fact, in five out of those six times, the markets were up after just one month. Swift correction, swift rebound. And despite the ongoing tariff worries, one of your next guest says the markets will find their footing before April 2nd when the reciprocal tariffs, which for now, are set to take effect. Joining us now for more. For more, is Tom Lee. He is the head of research and founder of Fund Stratt, also a CNBC contributor. Also joining us, Nancy Tangler, Laffer Tangler Investments, CIO and CEO. Tom, listen, I understand. It's a different White House. Every day we get a market moving headline. A lot of people, I think, honestly, I'm just going to say it, they don't want to be neutral. They don't want to be data

driven. They want to be angry. I get that. But history says that, that markets will recover, right? Yes, they've recovered every time. One thing we have to keep in mind is when markets fall this quickly from a 52-week high. I mean, just remember, less than a month ago we were at all-time highs. That is a market pricing in a crisis. I'd say almost 50% pricing in a recession, and we're assuming there's no Fed put. Now, the Fed isn't a position to cut rates.

That really should mitigate the downside. And I do think two other things that investors have to keep in mind, because many people just want to get out until April 2nd is, number one, I do think there's a very high probability that a tariff solution happens before the next three weeks happens. And it's simple to see because China, Europe, Canada, Mexico, since April 18th, all of those countries have outperformed the U.S. I don't think that markets are that blind to say if Canada, Mexico are about to have a recession, they should outperform the U.S.

And I think the second thing people should keep in mind is that when you have a global crisis brewing, and we highlighted like the 1962 Cuban Missile Crisis, that was a 12-day crisis, but the markets bottomed seven days into the crisis. Five days before that crisis ended, the market was already recovered two-thirds of the losses. And that was only, Nancy, nuclear holocaust. I mean, that literally was, we're going to break the world in half with ICBMs. I mean, that was compared to tariff worries and a slowdown in the economy because we might slap something on European wine or steel seems very small now. That said, again, and I'm not saying the markets

are going to recover next week. I don't know. We're talking about history. And I don't like to bring up politics, Nancy. It always makes you feel like I need a shower. But I will ask you this, How much of this correction that we are seeing do you think 100%, 50%, 0% is political, is manmade, is tariff made? It's funny you ask that, Brian, it's good to see you. If you look at the consumer sentiment numbers today, and I commend everyone to read Kelly's piece that she wrote this morning. But if you look at behind it by political party, what you see is that democratic sentiment has not been this low, especially on expectations, ever. And so if you look sentiment overall by party, Democrats down from 91.4 all the way down to 41.4, while independents and Republicans are down somewhat but have held up.

And then on expectations down from 28.2 to, I'm sorry, down from 93.1 to 28.2. So that's driving some of these sentiment numbers that the market's keying off of. And I would just point out that the bond market is not panicking. And so this notion that we're going to go into recession because the Atlanta Fed, GDP now number was revised down, that was driven by imports. They were up 70 percent in January as purchasing managers trying to get in front of tariffs. So I think just like in 2022, this will all settle in. We are seeing decelerating growth, but that's good for many of the names that have been punished, the reliable earnings growers in technology and consumer discretionary and financials even. So I think we will continue.

This is a correction. We needed one. We get one every 12 months. And so now the question is, have we hit the bottom? Do we have a little more to go? But I don't think we're in a bare market. Nancy, that's exactly what Jay Woods was saying in response to what I already said. Yeah, it's so bad, you're right.

But it's so bad that some of the markets might take it as a sign of capitulation. You know, how much worse can sentiment get from here? And if so, does that kind of, you know, or other technician looking for a rebound, you know, maybe it's for the near term, maybe not, but do you think it's so bad that it can't get worse from here? Almost, Kelly. I mean, if you look at the bull bear ratios, those are near recent lows. And they tend to be good contrary indicators. I would also just say that these, you know, you tied the consumer sentiment back to June of 2022. I mean, that wasn't a horrible time to be buying stocks. That's his point. Exactly. Yeah. In October. So I think there's, this is one of those times

when you are disciplined and you add to the names, high quality, good management teams, and you just keep adding until we get through this. Yeah, you know, Tom, it's weird. I posted something yesterday about losses and whatever on Twitter, kind of a tongue-in-cheek response to a non-business thing I heard on a non-business network about retirees, quote, being wiped out. I thought it was a stupid comment, so I basically said that. It was probably a stupid tweet.

I got beaten like your rented mules, rented mule. Fair enough. The point I was trying to make is that it is a scary time. And when things go down, there are negative repercussions. But at the same time, we have learned that a lot of our friends and family and viewers often will sell at the wrong time and buy it the wrong time. How do we prevent those kinds of mistakes that we end up looking back on and going, why did I do that? Yes. Well, there's maybe two things I want.

the viewers to understand. The first is that this is a waterfall stock market decline. You know, a correction in a month down 10% from a 52-week high. It's unusual. When we look back at waterfall corrections, and it's a piece we did three years ago, the market tends to make a symmetric rebound. That means we could be back at all-time highs in six weeks. So for anyone who thinks that they've lost 10%, and it'll take them forever to make that back, if, they are patient, they might make that back in six weeks. The second thing is something that we call the rule of 10 best days. The 10 best days in any calendar year make up the bulk of gains. In 24, for instance, we were up 24%. Excluding the 10 best days of that year, we were only up four.

So anybody who's trying to go to cash because they're going to wait until April 2nd may miss out on, you know, 15% of the price recovery. And so I think people really need to be patient and just not trade or outtrade themselves. Tom, does it mean that the old stuff is new again? So a couple different questions about this. Number one, do the stocks that let us hire last time lead us higher again or do they need to put in time out because of valuations or other things? Number two, what about the fact that we've kind of been churning around now for six or

some would say nine months in the market with not much to show for it? And number three, what about valuations? You know, again, for those who say, we needed to get down to 20 times for the S&P, that's, that's healthier in the long run. Yes. Well, I think the leadership through January probably is the leadership that takes us from the bottom. So it's probably less mag seven, but it is more the midcaps and the banks and the

industrials and the small caps. To your point about the markets really having gone nowhere for almost a year, I think that's going to have a bullish resolution because we've, markets have gotten so cautious, they've unwound all the inflation progress, all the possibilities of deregulation. And what we've done is priced in the negative consequences of a tariff war or doge. So I think the market is in a position to be really surprised. And that's why I think it's still possible that the markets will be up, you know, 15, 16% for the full year. I don't think people should write off the rest of the year. And then as valuations go, I think as long as the tenure is declining, and that is

the administration's goal, and people believe it's going to sustain at low levels, that's going to reprice equity. So I don't think multiples should be compressing. And you talk about Nancy, the Fed put, this idea that the Fed may sort of have our collective backs. We know the guy in the White House is a real estate developer. He would like money to be free. Maybe he'd like negative interest rates. Who knows, we don't have that. The bond market, to your earlier point, it is not freaked out. And what's really weird is that a lot of companies that are in the direct line of tariffs,

they've moved down a little bit. But the names that have got crushed are names like interactive brokers and whatever that don't have anything to do with tariffs. How do you read it all? Yeah. Well, I think Tom made a really good point, which is the tariffs, they're probably going to hurt foreign markets more than they are the U.S. and yet they are outperforming us. So I think you have to look at this as a bit of a trade. And this is what the algos and the hedge funds do.

They rent space in other areas, so other sectors, other geographies. And there's not a lot of logic in the short term, to your point. So I think, again, you want to be focused as we are on the names that are driving this technological revolution. so the suppliers of software and hardware, and then the old economy companies that are pivoting, tariffs or no tariffs. Because what we heard on earnings calls were that the CEOs are confident they can navigate this as they learn to do, the tariffs, that is, as they learned to do in 2018.

So I think you just want to buy great companies and not try to get too cute about tariffs. I mean, the one unforgivable sin in all of this is the tariff, the 200% tariff on champagne. So I don't, I think that's something we should be talking about. I know, go down to like Thunderbird or Mad Dog 2020. Persecco, God forbid. It's a scary time.

Listen, it's okay today. The market's up. We could laugh about it a little bit. Nancy Tangler, Tom Lee, and Tom, listen, let's all hope for everybody's sake out there that those stats, that that historical lesson that you provided so well is what happens again, because and I'm also, I will say this, I'm going to. Glad that we're not facing nuclear Armageddon. I am too.

That's good. I'll take expensive champagne. Nancy, we'll see you later for three-stock lunch. Appreciate it, both of you. After the break, President Trump getting tough with Iran, we'll tell you exactly what he said and what the implications are next. Oh, welcome back. Let's follow up now on a story that we pretty much exclusively reported on yesterday.

The White House putting more pressure on Russia, Iran, and China over oil sales. As we talked about yesterday, the Treasury Department of the Treasury Department of, letting certain exemptions to blocks on Russian oil sales expire. By allowing the exemptions to expire, it effectively acts as a new sanction on Russian oil sales. This is what Reuters is saying basically right now. Also happening at the same time, Treasury and the State Department hitting the shipping of Iranian oil. It's new sanctions on the so-called shadow fleet of ships that sell oil from Iran. A source telling me last night, and because Iran sells most of its oil, if not all, to China,

this move actually a strike against both Iran and China. It all comes at the same time that President Trump is threatening Iran with the chance of military action if nuclear talks break down. It's all very complicated. Bottom line, it could end up having an impact on the global oil markets, which are down, eight weeks in a row. Let's try to make sense of it all with Daniel Tannenbaum. He is a partner in Oliver Wyman and Halima Croft of RBC Capital Markets and a CBC contributor. Halima, I'm going to start with you. Listen, you and I were going back and forth yesterday.

This is a confusing situation. How do you read it? Oh, and thank you for having me on with the preeminent sanctions expert, Daniel Tenenbaum. But I think this is a very important story that the market is largely ignoring. I think the market believes that President Trump is so committed to getting a deal on Russia, Ukraine, that we should be talking about more Russian molecules coming back onto the market imminently. And they've also, I think, discounted the risk of serious sanctions enforcement when it comes to Iran. Yes, they've talked about bringing back maximum pressure, but people look at Iranian oil exports and say,

oil exports remain robust from Iran. Is this going to be meaningful? But I think you're right to also point out that President Trump's letter that was delivered to the Iranian foreign minister via UAE said, look, you can have a deal or you can have a military strike, take your choice. And the Iranian Supreme Leader was like basically saying, like, no thank you to that letter. Daniel, a very good source to me last night on the phone said that these may, may be increased sanctions on Russia if there is somebody in Treasury or the State Department or the White House that is willing and able to enforce them. And my source, and I think you've said the same thing, were not clear that that person or persons exists.

That's right. And let's remember, we have to give the Trump administration credit for upping the pressure, but that was actually by not doing something, by not extending a waiver that President Biden expended again early January this year. And there's certainly questions around why the administration did this. We haven't actually heard from the administration directly yet on what this means into the broader strategy. It's possible that they forgot about it and that it just expired and now it looks like they're doing something by letting expire. My source last night did not think that was the case, but we don't know. No, but it certainly will make it more complicated for those that continue to buy Russian oil to actually finance those transactions because it closes off the mechanisms

to process any transactions and dollars related to that Russian oil. I mean, I'm just trying to figure, you know what's amazing to me? The oil price is not that high right now. Gasoline prices are not that high right now, and consumer sentiment is horrendous. So all I'm trying to figure out is is all of this going to add up our guests yesterday suggested that the oil price might have more upside to it than people think. And I just wonder how you think this all shakes out. I mean, I would certainly be surprised if part of the calculus of the administration not talking about this was to limit any sort of impact on energy prices. Because certainly talking about withdrawing more barrels that are able to be bought legally on the right side of sanctions, I mean,

this takes the opposite effect and could certainly spook markets. Yeah. It's a very. great point. We know the big energy spike a couple years ago. Halima, same question. What do you think? No, I think absolutely. I think the question's going to be, what is enforcement? Because we have a number of sanctions on Iran that just have not been enforced. And so the question is, does the Trump administration, which has talked about wanting lower oil prices, thrown out the $50 oil price, are they really looking to squeeze Iran and Russia by really enforcing these sanctions? But if they were to enforce them, that would be material, I think, for the market. And I think the other question, Kelly, is, again, the deal or no deal scenario for Iran. Like, what is going to happen in terms of

this nuclear standoff with Iran? Are we going to get a deal? Is Iran going to get a bomb? Or is it going to get bombed? I think those are scenarios we need to start thinking about in the next couple months. You know, and these traders, Daniel, and I know you're not a trader guy, but traders, Big traders in Europe have basically said, we'll buy Russian oil. Russia's figured it out. They bought a bunch of old super tankers. They could get around the insurance sanctions. Yeah, it takes longer.

It might be a little more expensive. But is it fair to say that the sanctions so far have been relatively toothless because Russia's oil sales are 9.9 million barrels a day, and they were 9.9 million barrels a day a couple years ago. I wouldn't say they're toothless. I mean, we've never sanctioned an economy of this scale. They've certainly denned the Russian economy. However, like every other sanctions programs, people find a way to circumvent the sanctions,

which is why that shadow fleet has grown here. I do think what you'll continue to see is hopefully stepped up enforcement. The challenge we're now seeing with the Trump administration is we had a very joined-up UK, EU, and U.S. on the approach to Russian sanctions. And that's really gone out the window since inauguration day. And so that is a bit of a question is how does the EU and UK step up potentially enforcement if the U.S. is taking its foot off the gas? Answer your own question. I've given up. I've given up on Bristol.

It is. Does the damage of potential damage of relationships with Germany and with the UK, with the EU generally, whatever? And Halima, you can jump in too. Does that damage the ability to act adequately enforce? sanctions because we need the whole team, not just left field. So the one thing that the EU has going for it is the overwhelming majority of Russian sovereign assets are immobilized in Europe that they can begin to seize and begin to pay back some of the cost of this war supporting Ukraine without the U.S.'s involvement. So they may not need the U.S. for elements of this.

Halima? Absolutely. And we talk about the return of Russian molecules. People, I think, are getting ahead of themselves. Like, the question is really going to become, does the EU want to take these massive? measures. And does the EU want to roll back, the six package of sanctions? So there's some things the United States can do. But again, Europe has a pretty significant sanctions architecture. And I would lastly say the United States under the Biden administration was focused through price

caps on keeping Russian oil on the market. So I'm not sure it's a failure of the sanctions that we have robust Russian exports. Was it a design of price caps to ensure that we would have these barrels on the market? Halea McRough, Daniel Tannenbaum. Really good insight on an important story. I will call this one WBI wonky, but important, but you made sense and we appreciate it. Thank you. Yeah.

Meantime shutting the door on a shutdown or not. A key vote in the Senate is coming up as a rift emerges among top Democrats. We'll explain and have the details next. Welcome back. A federal government shutdown could still be nine and a half hours away. Critical vote decides that. for the latest on the efforts to keep the government open. Let's go to Emily Wilkins on Capitol Hill.

Emily, a couple of breaking news articles from the political likes in recent hours. Jeffrey stays silent on Schumer's shutdown fold, and they're talking about a stunning demonstration of the breach that has emerged between the two New York Democrats over this looming shutdown. I mean, Kelly, there are absolutely a lot of politics involved in this. And if you look, you know, Senator Chuck Schumer coming out last night, saying he was going to vote with Republicans to go ahead and advance the six-month stopgap. It's caused a lot of heartburn within the Democratic Party, especially

if you consider that all but one House Democrat voted against this measure and against this bill. And the politics here, I mean, they're coming out in exactly who is voting for and against this bill. We don't know all eight Senate Democrats who are expected to join Republicans to vote to advance this in just an hour or so. But we know at least one more of them, Catherine Cortez-Mastow of Nevada, Both she and John Federman have come out and said that they will vote to advance this, notable, because both of those senators represent states that Trump won in 2024. And Kelly, the politics, of course, around all this is very interesting, but I think it is also worth noting exactly what is happening here. Because what this vote is is basically continuing the funding that began during the Biden administration. Republicans, of course, have talked a very big game about cutting government funding and spending.

But at this point, they're just continuing what was there before. I asked Senator Cynthia Lummis of Wyoming a little bit about this. And she said, look, the cuts are going to come. Doge right now, she said it was giving a lot of recommendations to agencies as far as major programs to cut. Listen to what she told me just a little bit ago. That some of the Doge recommended reductions will appear in the, fiscal year 2026 budget. But it takes time to figure out how to absorb them into a new budget and to assure ourselves that the cabinet secretaries who are currently evaluating Doge recommended cuts

have had a chance to put their finger on the scale. This next vote is going to be critical because it does need that Democratic support. But remember, it is not the final vote. All 100 senators are going to have to agree to expedite the process or we could see a very short weekend shutdown. Brian? Yeah, Emily, is it fair to say? Are we out of the woods?

Are we peering into the trees? Like, where do we stand? Because these shutdown fears are also hitting a stock market. Where are we? We might be going into the woods for like half a second, but we're not going to go very deep. weekend shutdowns, they generally don't have a lot of impact. The government's not out and running, not a lot of services are impacted. And of course, all 100 senators, I think, see the writing on the

wall. They see that this is very likely to pass. And we assume that once we clear this major procedural hurdle, we will get an agreement that could allow them to keep the government funded and to make that midnight deadline of tonight. Emily Wilkins in D.C. Emily, thank you. Really appreciate that. Coming up, folks, the real impact of federal cuts on D.C. on commercial real estate and a 2011 federal program of cuts that you may not remember. We're going to talk about it all with Don Peoples coming up. Welcome back to Power Lunch. I'm Leslie Picker with your CNBC News update. The U.S. is proposing a bridge plan to extend the ceasefire in Gaza past the end of Ramadan and Passover.

U.S. officials say the proposal will allow time to negotiate a permanent deal. The U.S. says the bridge plan would include the immediate release of American Israeli hostage, Idan Alexander. Musa Mughal Shandidi Combs pleaded not guilty this afternoon to superseding indictment accusing him of forcing employees to work long hours and using threats to get them to comply with his demands. Combs is in a New York jail right now as he waits for a May 5th trial on federal charges for racketeering, conspiracy, sex trafficking, and prostitution. He has also pleaded not guilty in that case. California's insurance regulator provisionally approved an emergency request today for State Farm to raise premiums by 22% on home insurance for about 1 million customers. State Farm argues the emergency hike is needed to help the company rebuild capital following the Los Angeles wildfires. The insurance giant still needs to make its case at a public hearing.

Kelly, I'll send it back to you. Right, with a lot of homeowners, at least in the wealthy, They're just going to go without and that whole industry being called into question now. Leslie, thanks very much. Leslie Picker. Meantime, Doge is claiming it saved $115 billion so far by cutting government spending. Data is hard to verify. They say a large portion of the cuts come from lease terminations of empty office buildings.

Last week, they also announced an extensive list of federal buildings for sale, including the RFK Department of Justice Building and the headquarters of the FBI. That list has since been taken down, but the message is clear. The administration has its mindset on disposing unused and underused government properties, which my next guest says provides a great buying opportunity for prime real estate, which could be converted into apartments or condos. Joining us now is Don Peebles, chair and CEO of the People's Corporation. Of course, a member of our mock fed panel, too, and that's coming up next week.

Don, welcome. It's good to see you. Good to see you. So you've talked a lot before about how, you know, in D.C. where you spend a lot of time, there's all these vacant office buildings and what to do about it. Do you think they are about to do something about it? Or is return to office going to take care of this, fill those buildings up with workers? I do think there's more to come.

As we've talked about before, that the district market has declined. It's the lowest utilization rates of any major market in the country, has the highest real vacancy rates of any place in the country because the federal government is not utilizing about 80% of its space every day. So now the government is focused on that with this, new administration. And one of the keys here is that it takes a little longer, a lot longer, actually, to sell federally owned buildings. It has to go through a comprehensive process to be declared surplus property and then go through a process and ultimately auctioned off

or an RFP for leases. But what people don't focus on is that every government lease with the federal government is subject to annual appropriations. And so by Congress. So if Congress does not appropriate the money for a particular lease, the federal government can immediately cancel that lease. And the president cannot obligate the government for more than one year at a time, which is why that provision is there. So I expect out of the 44 million square feet that the federal government leases in Washington, D.C., I expect about half of that to get terminated. But do you really think people are going to convert it into condos and so forth? I mean, even with distressed office, real estate in New York and elsewhere, a lot of people say the value just

isn't there. It's really expensive to try to convert. Some of them end up being tear downs. Well, no, look, I agree. Not all buildings are convertible. Look, we have started, we did our first office conversion into hospitality in Washington, D.C., of all places, 30 years ago. And we just finished an office to residential conversion in New York. Not all buildings in the vast majority of most office buildings in D.C. are not suitable for conversions, but many are. And I think those will go first. And those will be the one. ones that will create some economic opportunity. Think for a moment, the D.C. needs another 320,000 housing units in the District of Columbia alone.

You know, Don, Kelly and I, both with the high school and college in Virginia, we got a lot of friends in the D.C. area, and I know this. If you bet against D.C., you've got your, you know what, handed to you. We had Bill Clinton talk about federal cuts. Barack Obama and Joe Biden in 2011 and had a multi-billion-dollar savings plan to cut waste and fraud in the government, not nearly as big as Doge. I get it. This is not the first time either party has tried to cut some of the fat at a D.C. We know that it exists.

Are you, though, of the mind that this will turn out the same, that if you bet against D.C. you're going to lose? Or is this time, this Doge thing? Is this really going to be more serious and bigger? Well, look, one, I'm from Washington, D.C., and I started our company in Washington, Washington, I didn't randomly bring it up. Right. I know.

And look, we've set up an asset management firm, Donahue Douglas, to focus on these office conversions. D.C., before Doge, before Trump came into office, the utilization was the lowest in the country for commercial office space. It makes no sense for the federal government to be paying for office space that 75% of it is not being utilized. So there will be a downsizing of that space, whether or not. Trump administration ever started this. Now they're doing it quicker because that's the one way you get the benefit of savings and our government gets the benefit of savings is to act quickly and not to do this on a slow walking pace. And the quickest way to do it is going to be offices. But D.C. is the nation's capital of the most powerful nation in the world. It's a multifaceted market.

And frankly, the local government has been resting on its laurels, focusing on being the nation's capital and letting the federal government dictate, you know, what the economy is. looks like there, as opposed to diversifying the economy, like, say, Mike Bloomberg did with New York to make New York a tech hub, which is now one of the most dominant tech players in the world. So I think this gives DC a chance to reinvent itself, but reinvent itself, it will need to do because a tsunami is coming. Don, let's pivot, talk about the Fed next week, what they should do with all this. You've been pushing for more rate cuts lately. Maybe that will pan out if the economy weakens. It wasn't just the consumer sentiment reading overall this morning.

look, a lot of people's job prospect the way that they viewed them, that came down quite a lot. If the labor market hangs in there, then I think everything Tom Lee and those who are more bullish right now, I think all of that is true. You know, if it doesn't, it doesn't. And it's a little hard to read which way this cycle is going, especially with all the noise around the government cuts. Yeah, you know, I think in terms of, I think the economy should function for the benefit of our citizen.

And our citizens' most pressing need is housing. If you look at every major market in the country, they're housing. shortages and affordability for housing has declined significantly. And so that's driven heavily by interest rates. And we got to a point of the highest levels of homeownership in our country's history. And we want to get as many Americans as possible to own their own homes. So I think that's one of the functions that the Fed needs to pay more attention to. And it's one of the hidden elements of inflation.

So the cost of owning a home in this country has more than doubled in the last three years. That is a staggering impact. And I think we've got to focus on that because it's housing and satisfying the housing demand that generates, you know, millions of jobs in this country. And until we start, and what we're going to see here is a slowdown of the economy and we're not going to be to turn it around. And so I think they're just, they're reducing rates at the Fed too slowly. Obviously, I think the market says they're going to do it by June. And the consensus is about three, three quarters of a point. I think they got to do better than 75 basis points.

I think the first reduction should be 50 basis points. That should happen next week, but it won't. Don, is there, sorry to interrupt you, my friend. Is there a part of you at all in those quiet moments that you think, are they doing this on purpose to try to drive down borrowing costs? Like, it all seems weird. It seems very weird, and it's almost like they're setting up a recession nearly, and certainly a real estate crisis that smart investors are going to benefit from. I mean, again, we've set up

a new business to focus on converting office buildings into different uses like hospitality and residential. And we've already raised a third of the first fund and we're continuing and we look like we're going to do another one. But I mean, there's going to be tremendous opportunity. Similar to back in the early 90s when Bill Clinton came in and it was during the junk bond crises and the FDIC and savings and loan crises, and there was a massive redistribution of wealth. Don Peebles, fascinating take, as always, we would expect nothing less. Tom, thank you very much. Thank you, Brian. All right, folks, you know, it's been a tough couple of days, tough couple of weeks, but right now,

the Dow is up. The Dow is up 600 points. Treasury yields, bond yields, also rising along with stocks. What's really going on? We'll ask for example. All right, welcome back. Even his stocks have gotten rocked the last few days, something a little weird that's happened. The bond market has really not moved at all. In fact, longer term borrowing costs are pretty much exactly the same as they were to begin the month. Even as stocks have posted a lousy last couple of weeks. So what does this all mean? Let's get out of Chicago. I'll be tonight, hopefully, with Rick Santelli. Rick, it is interesting that so many parts of the bond market, even high yield, junk bonds, they haven't really moved. as stocks have fallen, it's a little weird. Yeah, it is weird. And stocks are the dynamic affecting fixed income. And you know, there's a lot of inflation out there.

So today we have guest inflation. Instead of one guess, I have two guests. Let's get right into it. We have Mike. We have Chum. What do you think about volatility here? Is it giving us any clues, not volatility like choppy, like implied market option volatility?

Well, we had a pretty good, you know, the administration came out really told you what they were going to do. They're trying to take down the economy, take down the market. They weren't going to stand the way. So it's well, you know, documented. And so the volatility just hasn't been there. It's been a slow burn move down. The problem with the slow burn down is if you have a hedge, it's not helping you here. And sometimes that can be the pain trade. And not the big vol explosion that everybody thinks. And for a lot of these hedge funds that are having the multi-streats that are having problems, that's probably the worst-case scenario as well, because as the ball gets compressed, things start moving away from each other. You get dispersion,

and a correlation breakdown. So I think that's a little bit of what's going on. It's actually a pain trade as Volcom's Lord. What do you think? I think the correlation story is a big part of the story. We've seen about a 10% sell-off in the market since mid-February. Now, what we'd seen prior to that, it was just saw a market where, you know, S&P 500 be not moved that much,

but you'd see big moves up in Amazon, big moves down in Tesla. That compressed kind of index volatility. When volatility gets correlated, things start moving fast, and that's sort of what we saw over the last month. Now, today we're rallying. We're seeing volatility come in. We're going into a weekend. Things are quieting down for today.

But I think we've got some catalyst in the future that we've got to look at. You know, just because the big boys are doing something, does that mean they're going to be right? Oh, absolutely not. And actually, what's happening right now is the big boys are having to de-lever. They're being forced into these trades. So this is a de-leverging event. Like Mike said, I'd be a little careful here.

I mean, I think you can get a little rally into the weekend. These are Bona charm flows, and we talk so much about these buyback of deltas as bald a case. we're heading into a big Corley March OPEX. That matters. The skew decays, and that sends deltas back in the market. But those are structural flows. And when those go away, you may not have anything behind it. You know, Mike, your final thought, the last 40 seconds,

if you had to sum up, how's the Fed going to deal with this? You know, I think what next week is looking like we're not moving rates at all. Now, we have about a 30% chance we cut rates of the meeting in early May. But I think more importantly right now, we're not looking at this event-driven, let's look at volatility going into events. We're getting events out of nowhere. We're getting news about tariffs, all this stuff, very unexpected. She kind of can't look at events the same way.

We're having an event almost every day right now, and that's something to think about. Watch out for those tape bombs. Kelly, have a great weekend, and back to you. Gentlemen, thank you all. Really appreciate it. One of the biggest names you know falling 11% this week. It's hard to even guess which one. Feels like all of them.

Is it time to buy the dip? Three-stock lunch tackles that next. Welcome back. It's time for today's three-stock lunch. And we asked our investor to find us some diamonds in the rough amid this week's downturn in the S&P. Plenty of stocks to pick from, but which ones are value and which are value traps. Let's welcome back Nancy Tangler, the CEO and CIO of Laffer Tangler investments. I'm excited for this, Nancy.

We appreciate it. And let's start with Starbucks. One of our favorites, I read every news piece that I can about what Brian is up to over there. Anyway, the stock is still down 8% this week. And you think pick this one up? Yeah, I think you do, Kelly. Thanks for having me. It's a Brian Nichols story.

He has moved very quickly to remove discounts, simplify the menu, add back in the condiment bar. And then they've cut overall corporate overhead. Now, he's saying it's to become more nimble, but it does also save costs. And if you go back and look at what Laxman, one of the slides he showed at the 2023 Investor Day, nine out of the 14 key executives that he listed are either gone or in new roles. So I think you're getting paid to wait. the stock is up 28% since Nickel took over. You're getting paid to wait. You're getting a 9% dividend growth over the last five years. And earnings growth is expected to accelerate. So I think

this is when you can even buy here, and certainly with the recent pullback. And then you plan to hold it for quite some time. All right. So you tuck it away. That brings us to Apple, which was the mystery chart we just teased. Also higher today, but down 11% this week. It was a hold when you were with us last month. Still the case? No, I think you can buy it in here. And there been two great times to buy this stock. The Apple Maps debacle, stocks up 1100% since then, and the earnings warning in the first quarter, or January of 2019, stocks up 550%. So you can, you can step into this name when it gets, when it gets disappointment in when it disappoints the market. And we've got Robbie Walker's pounding his fists on the table saying they're going to

deliver the best AI assistant ever. So we'll see. Yeah. All right. We'll see. What about Adobe? This, I have a feeling we're going like Goldilocks from good to, you know, well, to what here? Yeah. Well, so that's a great question. I'll just say this. I was trained as a value investor. So the temptation is always to buy more when a stock is down as much as this one. But there are what we call value traps. I'm sorry, value traps. We call them criminally cheap stocks at LTI. This company has continued to disappoint. Management's been evasive. They do have an investor day next week, so I wouldn't do anything in front of that. And they do have pricing power. They haven't raised prices for many years. So there are some potential catalysts, but they're just not delivering and they are not charging for AI because they don't

think they are adding enough value yet. You never want to hear CEOs say that. Absolutely. No, you don't. You want them with the pricing power for the latte or whatever. Nandi, Nancy, thanks. Appreciate it. Have a great weekend. Thanks for all your time with us today, Nancy Tangler. And just a reminder, you can recap every three-stock lunch any time you want. Can't sleep, boom.

Just scan that QR code on your screen. Go to CnBC.com and you can find three-stock lunch. We're back with a market recap on a happy Friday. And it is a good Friday. In fact, the NASDAQ Kelly is up 2.34%. I am told that is the second best day so far this year. Still down overall. back to where we were six months ago, but today,

Monday's St. Patrick's Day, you're welcome. Yes, all the kids had to wear green today because they don't have school Monday. I don't know why. By the way, with the positive tone today, the semis have turned positive on the week. So, Enidia is one of the better names

and our semi-analyst said he put that and some of the others, some of the obvious candidates on his list for ones to pick up amid the tech wreck. Yeah, and I love the optimism that Tom Lee and Nancy brought at the top. It's a great discussion. Yeah, so I thought the show is a great discussion,

but we're done. great week and weekend. Thank you. Closing bell starts right now.