Ferro, Lisa Abramowicz, and in reordering. Jonathan your equity market is lower. Kicking off the month with that stock is down. We are plunging 29 . These are the issues, discovery material weakness, writing down the value of companies required and replacing leadership over it and why bc. Lisa the kitchen sink was about loan mark reserves and everyone says this is because they crossed the threshold. This raises questions of if it goes deeper than that which to be is more concerning an speak something about the risks of rates remaining higher for longer. Jonathan all things you dont want to hear from, related to internal review and resulting from ineffective oversight and monitoring activities. Annmarie everyone has come out talking about this was it to this bank and not to other banks in the abc. You have to think jay powell is going to be on the hill talking to senators. He is going to get asked about what is going on under the Banking Industry and if there are larger concerns wider concerns. Jonathan the largest roasted exposure comes from 37 billion in apartment loans. Almost half backed by rent regulated complexes. That is the issue for this name. Lisa there is any issue in new york city about how much people can charge for rent and what that does for certain valuations at a time when apartments are held by that. Right now, the markets dont care. They care white about nycb and nothing else. This is being shrug up to the extent that a year ago people would have said this guy is falling, we better hunker down. You are not seeing that in the same way and that tells you a big message. Jonathan jp morgan closing yesterday at another alltime high. You take the month of february, this has been an issue since february. Regional banks down 3 last month. We have seen bigger moves than that. S p 500 banks of 4 up 4 . Lisa people are not looking for another shoe to fall and this is the question i have. Have we worried ourselves out and now we dont have any worries left so people are throwing in the towel and saying i will go with it . We will have that record high on the nasdaq for the First Time Since 2021, okay. Jonathan i have no doubt you will find something to worry about in the next 60 seconds. Equities on the s p 500 look like this, we are slightly negative, down by 0. 14 . N. Y. C. Be getting hammered 29 . Euros lower. There rose on cpi come upside surprise. 108 1. 08 on eurodollar. Marchex off with stocks at alltime highs march kicks off with stocks at alltime highs. Steven wieting, christopher marinac, and Greg Valliere as trump and biden offer very different perspectives. Steve wieting of citigroup expecting the markets to close the gap saying this the extreme divergence of large cap tech profits from other industries should diminish this year and next. We would not be surprised if max gains in 2024 were cut in half on strong investment spending and greater competition. Steve joins us now. Can we build on what you are expecting . Steven that is still substantial growth. Industries that are literally booming and there is probably a limited number doing that, booms you worry about on the other side, theyre not going from large gains to declines. Theyre going to bit of a slowdown. Magnificent seven, there are four Companies Buying up every microchip they can to offer ai services. An open question as to whether these services are defined demand in the economy from everywhere, not going to be as with each other and theyre going to be able to boom together or will they compete and narrow down profits . We are not willing to give up diversification in portfolios to that on that single trend. A lot of other good things are happening. We are raising our Economic Forecast and seeing industries that have been weak for the last year and a half bottom out and begin a recovery. They want to do as well as mag seven. Jonathan small, midcaps, talk to us about the industries you like. Steve you can get midcap Growth Companies in the u. S. For the same valuation as european shares. The u. S. Midcaps have grown 11 and europe has grown at 2 . We want to swerve towards health care, something that has been out of favor with copd drugs. Stores have had a historic a lot of people thinking we will never do anything in health care but to lose weight which i wish i could. Lisa i was going to say a lot of people are working on that. I am curious about the idea that everyone is shifting to this idea that earnings are better than expected, the economy is better than expected. Fiscal keeps supporting everybody. Why is it cash funds are on for another record year . People of their cash funds and they are palling probably more money into the. Steve the reason we are not more overweight wikis overweight equities is there is great competition from deals. Our bond portfolios are below average duration. We expect to earn that longer than the fed will stay at 4. 5 . This is good competition. We have been bullish for a while. We have seen increasing bullishness. New shorts in the equity markets. Everybody is bearish in the bond market. I think there are some areas that have been so strong that we want to ease back from them. When you have 80 returns on the software, it is time again to start to shift to other areas. There is room for stocks and bonds in portfolios. Lisa this doesnt sound like a market drained of liquidity. It sounds like a market flush with liquidity. White has the fed been ineffective at draining this market of liquidity . Steve do you have to . Must we have a new recession to stop rapid inflation . We have another troubling Inflation Report that is going to come for the month of february. It is another reason for everyone to say maybe we are not on this disinflation trend, maybe we are going to be stuck here. That is possible over the short term. The good news has been we have been able to lineup a lot more in a stable way without a massive surge on employment. If we get too excited, there are going to be problems. Jonathan growth, what do you see . Steve it is weaker pieces of the economy. We had a hidden recession under the surface. If you are looking at germany, japan, china, manufacturing in the u. S. , the reality is it contracted for the year behind us. Trade contracted in percent the year through the Third Quarter last year. These weaker components are moving into a more stable growing place. Probably not anything v shaped, but it is these things in the boom. Jonathan there has been a spread between manufacturing and services for a while. Manufacturing started to come up to services. Does that had you expect that story to complete . Steve it will come with a different labor market outcomes. Automated. The headcount differences are going to be substantial. The Services Industries cannot keep adding jobs per month in those industries. You have seen employment growth from two years ago when services turned back on like a light switch. Hospitality, airlines, travel, all of these things incredibly laborintensive and we had massive job losses to recover. Now we are at the point where it will slow down and it didnt in january. It was 53,000 jobs in january but we saw seasonal distortions. All these things added for directions. It is going to take a while for the market to sort it out. I think we will be worried before we come to grips. Annmarie Mohamed Elerian was talking about what happens in the United States matters in the world. Do you foresee u. S. Growth picking up helping the rest of the world . Steve it is but it is challenging because the amount of time we spent with restrictive Monetary Policy is still going to be longer. We have not changed our midyear estimate. Confidence that we are going to have easing, the communication of easing through markets. The dollar has been stronger. That helps and that hurts. Yields have risen at the long end of the curve. Those are modest challenges while some of the things are helping. Consumer demand has not collapsed and producers have been underwhelming. They have been short in terms of meeting demand. Jonathan it is always good to catch up. Steven wieting there of citigroup. Looking for one more ugly efficient report ugly Inflation Report. Lisa that everyone can look pastbecause it will be ongoing disinflation. It will not be an even ride with a high adoption. This french call center, their shares plunged because clarna said they could respond to their calls with ai and that was wiping out the industry. These are the pockets of distress i find interesting. Jonathan is this on the list of things to worry about, french call centers . Lisa if you think about is, how many businesses will be rendered obsolete that have not been priced yet . Jonathan the bear on wall street is holding up to french call centers. Lisa it is going to be my clarion call. Jonathan your bloomberg brief with dani burger. Dani doj is keeping questioning the timing. Reporters at the bankers meeting in brazil that the price target is not yet in sight. Is comment did appear to pour cold water on the earlier move this month. Economists are still expecting a nearterm hike in march or april. The last time the boj raised rates was 2007. Thomas horton is dipping down with a surprise announcement. It is going to happen at the end of september. He has been the central bank he removed the cap on the frank in 2015 and a doctor the worlds most Interest Rate and dealt with at banking crisis. Dont miss our interview with thomas horton. Meta is winding down its news feature in u. S. And australia. It will draw support from its news tab. Publishers with existing agreements will still be able to post content until their deals expire. Lawmakers have been pushing for meta to compensate publishers for content but the man for the service has declined. Jonathan i cant believe it has been a decade on the job for thomas horton. Amazing how quickly time flies. Lisa i saw that and thought didnt he just get there . Jonathan i want to talk about apple, removed from the conviction list at Goldman Sachs. The stock is down. New York Community bank shares plunging. 500 basis points of rate increase has a stress to be sector. If we look at the loans coming through, we see less loan demand and less that can hurt the environment. Jonathan that conversation is coming up next. Live from new york city this morning, good morning. Jonathan four months of gains on this and be 500. Live from new york city. We are down on the s p. Nycb shares plunging once again. For investors, growth in banks has been tainted with the Silicon Valley bank failure. Talking to investors, doing conferences, their nervous about growth. 500 basis points of rate increase has stressed the sector. If with the get the loans coming through, we see less demand. Jonathan new York Community bank shares plummeting, the company and that sick material weaknesses and that sick material weaknesses in its loan review process. There bank could be swapping ceos and expects to visit a deadline for filing an annual report. Chris marinac saying this, director change are part of the early repairs at n. Y. C. Be. Investors should be pleased. Two directors have resigned, we see this as a healthy change that should build confidence. Chris joins us right now. I assume you believe the stock should be up and not down 30 . Chris that is right or at least creating flat. Book value will only change by three pennies given the fourthquarter changes. Jonathan why are you so confident that are not anymore monsters under the bed at nycb . Chris the companys issues have to do with stress testing. They have to stress test for higher Interest Rates. There is more of that to go but the company has the earnings to work through this. This is not an earnings issue. The credit issue is stress testing and not having done it sooner. The Prior Management Team had to go. We had to have the change in order to have a confidence change. The largest shareholder is taking charge and making swift changes. You have unhappy Board Members that have left and that is fine. This is healthy to get the company where it needs to go. They are now 115 billion. They have to be part of the new world order. The regulatory world is changing but you have to adapt and you cannot sit still. Lisa you say there are a couple of unhappy Board Members. That raised a red flag in my view. The director of the board resigned. In the Resignation Letter he said he did not support another demellos appointment to the board. Why . Chris he did not want to see the ceo change. That is his prerogative. I think you are going to see the Company Move Forward with another director and continue to make changes very quickly. You have one quarterback at the company, you cannot have two. You have to take quarterback number one and run with him and move forward. The story is going to transition to recognizing credit risk and fast tracking a lot of the changes to diversify the portfolio. They have had too many multifamily loans and real estate. There will be more balanced company and they will make more money with will create book value and get the stock price moving again. That is a shortterm reaction that will change. Lisa the majority of people waking up in markets dont care about new York Community bank or that company but they care if this is a harbinger of more weakness to come, if this means yields remaining hard for longer or creating cracks on the Balance Sheets of banks that have been punished but cant climb out of it. How would you argue that this truly is idiosyncratic and not a regulatory capital issue . Chris every bank has credit risk and if you look at the filings we saw this week and last week we are seeing increases in the criticized assets. Really criticize. Back to the stress test issue, banks recognizing the risk. What investors dont see is that leverage is 60 today instead of 95 in 2008. You are not going to lose money at new York Community like you would have because leverage was higher. You will have some losses, some need to build reserves. They have done a big piece of that. The whole industry is going to continue to march forward and be more profitable than folks understand. Most banks are asset sensitive which means higher asset rates for longer benefits most margin. Most companies see an increase to earnings if Interest Rates are high. In a lot of respects, the fed cutting rates too quickly is not a great thing for the industry. It is a perception issue. Lisa i wonder when this thesis comes true. We are looking at an inverted yield curve which makes it challenging. We are also seeing real concerns about loans not getting liquidated because it isnt a market for them. When does the page change despite profitability right now . Chris i think the banks are in better shape than people realize. There is enormous liquidity whether it is private credit. It is better than perceived. The challenge banks have on selling loans or liquidating assets is they dont want to take big haircuts. They would like to take time. Sometimes they can do that, other times they have to take action. In nycbs case, you will see them take action quickly. The 10k will be resolved within 14 days. A lot of that are changes that have to happen. We have seen other banks of internal controls and Large Companies like jp morgan and wells fargo. They have made their changes and move forward. Annmarie the underlying issue is Interest Rates. Nycb, pour stress testing and higher Interest Rates, who else is having poor stress testing . Should we expect this to happen every few months . Chris nycb is unique in terms of having crossed over 100 billion with an fdic transaction , not prepared to do stress testing this year. That is idiosyncratic. The rest of the industry is all over this. The issue Silicon Valley bank issue was about security is underwater and deposits out of whack because they had large picture capital deposits. Those deposits are gone. The industry is in much better position from any uninsured deposit standpoint. Nycb has excellent deposit flows the past month. Deposits have been stable, the company is going to make money this quarter. It is unfortunately have to make these Board Changes now. It is going to be for the long run much better to do this housecleaning today. Jonathan outside of nycb, isnt the market coming your way . Jp morgan closing at an alltime high. Monthly gains on the s p 500 last month. The regional banks, lower through february but nothing drastic a given the single lamp. Is the market coming our way . Chris i think so and he will see the tangible keeps growing for companies. We will probably see markets go up again on higher rates at the end of march but we can handle that. Most banks are managing expenses well and at the end of the day, the net chargeoff companies are reporting our modest. We are worried about stress testing but ignore the fact that chargeoffs remain low. Jonathan nothing to see here. Ultimately making the point here that we should not be down 30 if this is truly that kitchen sink moment. Lisa the second one. They had this before, it was a kitchen sink moment before. When you kitchen sink something, there is not anything left to kitchen sink again. There is nervousness about what we dont know in banks, the risks we havent fully priced. That is evident in one name. Jonathan i dont want to sink volume three anytime soon. President biden and donald trump offering different visions on the southern border. We will be catching up with chris valliere. That conversation just around the corner. Equity futures on the s p 500 down. 1 . This is our future, ma. Godaddy airo. Creates a logo, website, even social posts. In minutes how . A. I. impressed ay i like it who wants to come see the future . get your Business Online in minutes with godaddy airo when i was your age, we never had anything like this. Get your Business Online in minutes wh