Transcripts For CNBC Power Lunch 20240713 : vimarsana.com

Scrambles to absorb the rate shock. Opec has failed, failed to reach a deal to cut production all of this as the coronavirus spreads globally we are now more than 100,000 confirmed cases worldwide with more than 200 cases right here, kelly, in the u. S. Thank you we have all angles of todays sell off covered bob pisani is watching squatock. Rick santelli is in chicago where yields continue to plunge. Steve liesman is monitoring the fed and economy and diana oleic is telling us what it means for the economy and eamon javers at the white house looking at possible government response, but lets begin with bob just barely negative for the week i know that sounds startling barely negative for the week overall. Important thing here the bottom was 2954 and we are below that bottom right now for the s p 500. Take a look at some of the laggards now microsoft down very weak today jpmorgan, the worst performer, down 7 overall. Nike also weak dow inc also down. Home depot is down for the day, but up for the week. Thats been one of o the better performers all throughout the week energy stocks, new low you heard from brian, no deal with opec and russia big drop in oil. Exxon mobil, 7. 3 dividend yield. All the major Oil Companies, new lows these are rather startling numbers. Banks new ulloases lows. Low yields weve got loan growth possibly being slower higher loan defaults potentially down the road. All these new 52week lows finally, cyprus semiand and lot the other semiconductors micron, logic, nvidia, all down. Looking for om bottom here, but still very, very tentative back to you. Thank you very much the ten hf year yield falling low r and lower and lower, briefly below. 7 early this morning. I cant even read that. 7 Rick Santelli tracks the action at the cme hi, rick hi, tyler lets start at the two year part of the curve even at 51 if they close here, that would be the lowest yield close in basically five years and there was a point where theyre at 51, they were at 38, they would have taken it back to october of 14. 24 hour of tens. 66 was the low and when it was there, it was down just shy of 50 basis points on the week. As it sits now, were down 16. Hovering at 75 lets look at the one week chart. Still down 39 even though its not 49 and finally, tens minus boons. This is really crazy ive always wondered how theyre going to rekcalibrate whats going on with the two different policies and negative yields were getting closer and closer. 146 is the difference between the tens and europe in the u. S thats the flattest in four years and remember, whats good for house iing refinancing is nt good if youre looking for rates to firm up the convexity hedge. When they lose a mortgage, their portfolio gets less sensitive to adjust that. They buy ten years then they have to buy a trillion ten years institutions as people refi finally one week of the dollar ind index, it is down 2 on the week yep convexity grab term i learned this morning, President Trump signing a spendinging bill and now the white house is hinting on an economic stimulus bill eamon . Yeah, kelly, a big change this morning from the white house earlier in the week, officials had been telling me they were not pursuing policy options to absorb some of the Economic Impact of this coronavirus hit. They did not think earlier in the week it would be that significant. Now today, that tone is changing we have larry kudlow out on cnbc earlier this morning talking about a variety of policy options. He says he wants the response from the federal government to be tashlgted here and narrow in scope, but it is clear that they are considering a number of policy options here at the white house. An official tells me the president has not yet been believed on all the options, so no decisions have been made, none the less, larry kudlow talking through the think iing about how theyre approaching that lets think about individuals who might lose paychecks because they have to stay home if they get the virus. Small businesses that might get hurt by this perhaps we would look at some sectors. I know you all talk about airlines so one Senior Administration official telling me today that the president here does not want to be caught flat footed he doesnt want to go too small and in terms of what options theyre look iing at, this official says theyre looking at september 11th response as a model for how to approach this based on how this impact rolls through the different sectors of the economy. Thank you meanwhile this mornings jobs report shows the impact of coronavirus hasnt yet hit the u. S. Economy but it is coming as fears of recession loom over wall street. Steve liesman has the latest yeah, kelly, Federal Reserve fi officials here in new york by the way, listening a lot to what im sure eamon is reporting about what the fiscal side might do theyve been emphasizing the Public Health response, the most important cure for the virus jim bullard expects a powerful one from businesses, families and schools and he thinks the market may be underestimates that response. Markets seem to be pricing in the very worst outcome here and not quite sure thats warranteded. Given the kind of response im describing now Charlie Evans also emphasized that Public Health response, but if you listen to the end of what he says, hes saying iing the fed stands ready and watching perhaps to do more. But at the moment, you know, were face iing a new risk Public Health safety is a paramount and getting on top of the spread of covid19 has to be moamong the highest priority of things takinging place today, but the fed is paying attention and responding as appropriate. The market sure thinks the fed is paying attention. Take a look at these probableties a 10 chance for a cut at the march meeting then 90 for a 50 basis point cut. So thats where the market is priced while the fed perhaps wants the fiscal side to step up, they know the market is still looking at them for additional rate cuts and steve, even as youre talking, we have more from the boston fed president we were talking to dave last hour, the feds going to have to start buying bonds in the near future if we almost go to zero, then you have 25 basis points left if you need to do anything else, youre going to have to buy bonds. Hes saying the fed should consider widening the type of assets they can buy. Japan was like 30 of unoclo just feels like were going down that path. Well of course the fed has certain legal limitations on what it can buy, but there are certain things it can do with additional what would you say kind of provisions many the Federal Reserve act. But i think the fed is not there yet, kelly i think they want to take this step by step it gave 50 this week feels like last week and it has additional rate cuts to go before it gets to zero now you have larry kudlow talking about additional responses from the fiscal side totally agree on timing you know it might no not be this week, next week, but it seems to be more in the near future also, kelly, its important to think about whats the most effective . Rate cuts have limitations in helping out people who cant get to work and i think hopefully the fiscal side is aware of that i know the fed is. Thank you very much the dow and s p 500 now down nearly 14 from record highs made just less than a month ago as investors try to ingest daily 1,000 point moves. How much more pain may be ahead . Michelle and michael are with us neither of you expect a recession in the United States both expect potentially whats calleded a v shaped recovery in other words, a sharp bounce off the bottom when ever that bottom may be. Why do you feel this way were looking back at the data and previous viruses like sars, swine, bird flu, r and you have a move down in regards to the market then you get a move high er a year later. The s p in all those cases were up anywhere between 10 to 30 . So were just looking at the pass as a guide and of course history doesnt repeat, but it rimes. In those cases, did the market fall off as significantly as it has this time though i dont think so. Now keep in mind, were coming off an extremely strong market in 2019. Valuations were getting a little stretched, so probably the market was a little due for a correction and one would argue last week, yes, i think coronavirus was on our minds, but also the surprise of Bernie Sanders probably a part of that sell off so i think its just multifaceted so michael, you say in all likelihood, no reeducation, but you must give it some probability of possibility how much well i think the key data to watch are going to be the housing data and the point of data. Typical recessions happen after a lot of tightening in the system inflation spikes corporates hit consumers. We dont have that today so for me, if we continue to see employment remain healthy. Todays jobs report is good, its going to likely get hit in the near term from the virus, but if housing and employment stay healthy the odds of a sharp rebound are extremely high lets talk about the feds next move. A full point cut would be what were basically discounting. Thats what steve told us. At the next meeting another half point. Is that going to help . Unfortunately, i dont think its going to help in a big way for the economy. Because we dont have a financial banking problem. Liquidity a lack f o money problem no. And ultimately, when markets are going down for specific reason, this case, the virus, history shows whatever that specific reason thats taking down the market, there needs to be a solution around that for the market to begin to rebound we saw that in 09 in oil prices, bringing down the market in 2016. European banks in 2012 so when theres some view these issues have been resolved, thats when the market can start the look past that and cutting rates isnt going to do that i think its going to be about fiscal stimulus. If you see a break in consumer confidence, the governments going to have to step in, offer Small Business loans, maybe tax cuts relief. Let me ask you something that may be out of your zone, but im going to ask you any way would this be a wonderful time for the u. S. Government to float a 100 year bond or a 50 year bond with Interest Rates where they are why the hell not zpl i have no idea i am not an expert but with rates being so low, it wouldnt be a bad idea. Completely on the surface a. I have a low rate on my mortgage and im looking to refinance. It just makes perfect sense. Even the 50 year, they cant really get the interest from the participating banks because they say how u would we hedge against something. Just sell it to households bypass wall street all together. You brought up an interesting point on credit. What do you see in the last few day, credit has caught up and gone beyond what equities are pricing in weve seen them move up to about 270 in the last week and in market corrections, you typically see a tight correlation between Investment Grade credit spreads and pe of the market and as of the last three day, Investment Grade credit spreads are more consistent with a pe of about 15 so if equity markets catch up to Investment Grade, thats about a 10 draw down. That is concerning we have to leave it there michael, michelle, thank you very much. Coming up, we are continuing to watch the dramatic decloin of the ten year yield, briefly dipping below 7. 7 this morpg. Up next, a closer look at the impact of falling yields on housing and the banks then we will get the pulse of the consumer from landrieus ceo what is he seeing at his restaurants and casinos around the world . And were all over these moves in the stock market as well. As you see, the dow is off more than 600 at fidelity, online u. S. Stocks and etfs are commissionfree. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk the yield down to 0. 75 right now. Mortgage rates are fall iing to near record lows as well diana oleic looking at the impact thats having on housing and the mortgage market. Yeah, unlike earlier this week, the Home Builders arent holding up in todays sell off all off as much as 3 even though the average rate fell to a record low of 3. 29 according to freddie macs weekly averaged yesterday. Rates are up a tick today as lenders try to deal with this volume and volatility costs them money. Nearly 13 million can reduce their rates by 75 basis points and save big thats a record refinanceable refinan refinancing. The average borrower can save about 277 a month on a 30 year fixed if all those borrows did that, that would be a collective 3. 5 billion a month in payments quite an economic stimulus now if rates fell just four basis points more from there, another 1. 7 million borrowers would fall into that pool of savings. While home openers are conservative, they have a record amount of tapable equities 6. 2 are trillion worth collectivity so we could start to see a lot more cash out refis. Thats what weve been talking about this week. Thanks those lower rates might be good for home buyers, but not for banks. The banks making new loans making less money on them and the big banks are all sinking again. Financials are the second worst performing sector. Mike mayo of Wells Fargo Securities warning that earnings could take a hit of 25 to 30 and yes, he is here with us on et whats your worst Case Scenario look like . Sfwl worst case is the reduction to Bank Earnings by 30 . Because of . And over the last couple of week, weve reduced our earningings by almost 20 . And the biggest reason is because of the ten year treasury yield. The flatter yield curve. Lower Interest Rates, what we talk about net interest margins in bankling. What do you have it doing we have it somewhat around here so this is the worst case and we have another 50 basis points of Federal Reserve cuts banks make money on the difference between theyre b borrowing and lending. For banks, this is an earnings recession. Not a Balance Sheet recession. And that is a critical difference from the financial crisis a decade ago. Thats what i want to probe more with ou because back in 2008, 09, banks were at the center of the problem. Here, banks are Collateral Damage to a problem not of their own making and i would say when you say Collateral Damage, the Banking Industry has the strongest ambulance sheet in a generation and think about this the bangs have added 1 trillion of o additional cap one trillion with a t 2 trillion of additional cash. Of deposits. You have a Federal Reserve stress test every year every year, the Federal Reserve, the overseer of the Banking Industry, they assume armageddon will happen. Then it was an exten shl crisis many did or got swallowed up this is not that absolutely not. If you want to look to the 6 trillion Investment Grade bond market, the fixed income market saying about Balance Sheets . Theyre fine remember during the financial crisis, we had Early Warning indicators, youre not seeing that here. You have u more capital, more liquidity, the stress test, a bond market saying fine. You have u the strongest Balance Sheets in a generation so you have this earnings decline its painful in the shortterm but longterm, banks are are more resilient are banks buyable and if so, which ones ilt depentds who you are. I know you have a lot of new viewers watching during this period so at first, it needs to match your objectives. If youre asking whats going to happen in the next day or month, i have no idea if youre looking out over the next year or two, or three year, id love to come back on your show and say what an amazing buying opportunity you think you will be doing that we might have you back i think we would, but you think youd say that in three years . Absolutely. Three years seems almost High Conviction call. If you buy one of the largest banks. Goliath is winning you have citigroup, bank of america, jpmorgan, three large banks. This is what they live for to demonstrate the strength, the ability to gain market share the ability the to provide support to the economy this is what the Bank Industry prepared for for a decade. Now it might be the real scenario, but theyre prepared for it is there a different threat though not the one we saw in 07, 08 we were talking about how the fed might need to expand its purchases of bonds and stocks and other tools. I guess Balance Sheet expansion can be good, but if were talking about zero and negative rate, Jeff Gundlach said its destroyed the japanese Banking System how do you factor that in . I think ive been on your show earlier last decade talkin about japan light and you can pull that up online. To some degree, the banks have been through quantitative ease lg and all that and a big difference is the ability of banks to control costs so half the costs are employee costs and so people on wall street will be making a lot less money. People in the high income jobs are making a lot less money and also technology is allowing banks to be a lot more efficient. Thats a huge change versus the japanese Banking System and i think the policy response in the u. S. Tends to be a lot more dynamic and then what took place in japan so well take that back off the shelf and bay ty the wa, the bank dividef yields are supr safe the Federal Reserve assumed armageddon would happen before they allowed banks to pay off their dividend if you look at yields versus the ten year, these are nice bond proxies, so this super Oil Companies<\/a>, new lows these are rather startling numbers. Banks new ulloases lows. Low yields weve got loan growth possibly being slower higher loan defaults potentially down the road. All these new 52week lows finally, cyprus semiand and lot the other semiconductors micron, logic, nvidia, all down. Looking for om bottom here, but still very, very tentative back to you. Thank you very much the ten hf year yield falling low r and lower and lower, briefly below. 7 early this morning. I cant even read that. 7 Rick Santelli<\/a> tracks the action at the cme hi, rick hi, tyler lets start at the two year part of the curve even at 51 if they close here, that would be the lowest yield close in basically five years and there was a point where theyre at 51, they were at 38, they would have taken it back to october of 14. 24 hour of tens. 66 was the low and when it was there, it was down just shy of 50 basis points on the week. As it sits now, were down 16. Hovering at 75 lets look at the one week chart. Still down 39 even though its not 49 and finally, tens minus boons. This is really crazy ive always wondered how theyre going to rekcalibrate whats going on with the two different policies and negative yields were getting closer and closer. 146 is the difference between the tens and europe in the u. S thats the flattest in four years and remember, whats good for house iing refinancing is nt good if youre looking for rates to firm up the convexity hedge. When they lose a mortgage, their portfolio gets less sensitive to adjust that. They buy ten years then they have to buy a trillion ten years institutions as people refi finally one week of the dollar ind index, it is down 2 on the week yep convexity grab term i learned this morning, President Trump<\/a> signing a spendinging bill and now the white house is hinting on an economic stimulus bill eamon . Yeah, kelly, a big change this morning from the white house earlier in the week, officials had been telling me they were not pursuing policy options to absorb some of the Economic Impact<\/a> of this coronavirus hit. They did not think earlier in the week it would be that significant. Now today, that tone is changing we have larry kudlow out on cnbc earlier this morning talking about a variety of policy options. He says he wants the response from the federal government to be tashlgted here and narrow in scope, but it is clear that they are considering a number of policy options here at the white house. An official tells me the president has not yet been believed on all the options, so no decisions have been made, none the less, larry kudlow talking through the think iing about how theyre approaching that lets think about individuals who might lose paychecks because they have to stay home if they get the virus. Small businesses that might get hurt by this perhaps we would look at some sectors. I know you all talk about airlines so one Senior Administration<\/a> official telling me today that the president here does not want to be caught flat footed he doesnt want to go too small and in terms of what options theyre look iing at, this official says theyre looking at september 11th response as a model for how to approach this based on how this impact rolls through the different sectors of the economy. Thank you meanwhile this mornings jobs report shows the impact of coronavirus hasnt yet hit the u. S. Economy but it is coming as fears of recession loom over wall street. Steve liesman has the latest yeah, kelly, Federal Reserve<\/a> fi officials here in new york by the way, listening a lot to what im sure eamon is reporting about what the fiscal side might do theyve been emphasizing the Public Health<\/a> response, the most important cure for the virus jim bullard expects a powerful one from businesses, families and schools and he thinks the market may be underestimates that response. Markets seem to be pricing in the very worst outcome here and not quite sure thats warranteded. Given the kind of response im describing now Charlie Evans<\/a> also emphasized that Public Health<\/a> response, but if you listen to the end of what he says, hes saying iing the fed stands ready and watching perhaps to do more. But at the moment, you know, were face iing a new risk Public Health<\/a> safety is a paramount and getting on top of the spread of covid19 has to be moamong the highest priority of things takinging place today, but the fed is paying attention and responding as appropriate. The market sure thinks the fed is paying attention. Take a look at these probableties a 10 chance for a cut at the march meeting then 90 for a 50 basis point cut. So thats where the market is priced while the fed perhaps wants the fiscal side to step up, they know the market is still looking at them for additional rate cuts and steve, even as youre talking, we have more from the boston fed president we were talking to dave last hour, the feds going to have to start buying bonds in the near future if we almost go to zero, then you have 25 basis points left if you need to do anything else, youre going to have to buy bonds. Hes saying the fed should consider widening the type of assets they can buy. Japan was like 30 of unoclo just feels like were going down that path. Well of course the fed has certain legal limitations on what it can buy, but there are certain things it can do with additional what would you say kind of provisions many the Federal Reserve<\/a> act. But i think the fed is not there yet, kelly i think they want to take this step by step it gave 50 this week feels like last week and it has additional rate cuts to go before it gets to zero now you have larry kudlow talking about additional responses from the fiscal side totally agree on timing you know it might no not be this week, next week, but it seems to be more in the near future also, kelly, its important to think about whats the most effective . Rate cuts have limitations in helping out people who cant get to work and i think hopefully the fiscal side is aware of that i know the fed is. Thank you very much the dow and s p 500 now down nearly 14 from record highs made just less than a month ago as investors try to ingest daily 1,000 point moves. How much more pain may be ahead . Michelle and michael are with us neither of you expect a recession in the United States<\/a> both expect potentially whats calleded a v shaped recovery in other words, a sharp bounce off the bottom when ever that bottom may be. Why do you feel this way were looking back at the data and previous viruses like sars, swine, bird flu, r and you have a move down in regards to the market then you get a move high er a year later. The s p in all those cases were up anywhere between 10 to 30 . So were just looking at the pass as a guide and of course history doesnt repeat, but it rimes. In those cases, did the market fall off as significantly as it has this time though i dont think so. Now keep in mind, were coming off an extremely strong market in 2019. Valuations were getting a little stretched, so probably the market was a little due for a correction and one would argue last week, yes, i think coronavirus was on our minds, but also the surprise of Bernie Sanders<\/a> probably a part of that sell off so i think its just multifaceted so michael, you say in all likelihood, no reeducation, but you must give it some probability of possibility how much well i think the key data to watch are going to be the housing data and the point of data. Typical recessions happen after a lot of tightening in the system inflation spikes corporates hit consumers. We dont have that today so for me, if we continue to see employment remain healthy. Todays jobs report is good, its going to likely get hit in the near term from the virus, but if housing and employment stay healthy the odds of a sharp rebound are extremely high lets talk about the feds next move. A full point cut would be what were basically discounting. Thats what steve told us. At the next meeting another half point. Is that going to help . Unfortunately, i dont think its going to help in a big way for the economy. Because we dont have a financial banking problem. Liquidity a lack f o money problem no. And ultimately, when markets are going down for specific reason, this case, the virus, history shows whatever that specific reason thats taking down the market, there needs to be a solution around that for the market to begin to rebound we saw that in 09 in oil prices, bringing down the market in 2016. European banks in 2012 so when theres some view these issues have been resolved, thats when the market can start the look past that and cutting rates isnt going to do that i think its going to be about fiscal stimulus. If you see a break in consumer confidence, the governments going to have to step in, offer Small Business<\/a> loans, maybe tax cuts relief. Let me ask you something that may be out of your zone, but im going to ask you any way would this be a wonderful time for the u. S. Government to float a 100 year bond or a 50 year bond with Interest Rates<\/a> where they are why the hell not zpl i have no idea i am not an expert but with rates being so low, it wouldnt be a bad idea. Completely on the surface a. I have a low rate on my mortgage and im looking to refinance. It just makes perfect sense. Even the 50 year, they cant really get the interest from the participating banks because they say how u would we hedge against something. Just sell it to households bypass wall street all together. You brought up an interesting point on credit. What do you see in the last few day, credit has caught up and gone beyond what equities are pricing in weve seen them move up to about 270 in the last week and in market corrections, you typically see a tight correlation between Investment Grade<\/a> credit spreads and pe of the market and as of the last three day, Investment Grade<\/a> credit spreads are more consistent with a pe of about 15 so if equity markets catch up to Investment Grade<\/a>, thats about a 10 draw down. That is concerning we have to leave it there michael, michelle, thank you very much. Coming up, we are continuing to watch the dramatic decloin of the ten year yield, briefly dipping below 7. 7 this morpg. Up next, a closer look at the impact of falling yields on housing and the banks then we will get the pulse of the consumer from landrieus ceo what is he seeing at his restaurants and casinos around the world . And were all over these moves in the stock market as well. As you see, the dow is off more than 600 at fidelity, online u. S. Stocks and etfs are commissionfree. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk the yield down to 0. 75 right now. Mortgage rates are fall iing to near record lows as well diana oleic looking at the impact thats having on housing and the mortgage market. Yeah, unlike earlier this week, the Home Builders<\/a> arent holding up in todays sell off all off as much as 3 even though the average rate fell to a record low of 3. 29 according to freddie macs weekly averaged yesterday. Rates are up a tick today as lenders try to deal with this volume and volatility costs them money. Nearly 13 million can reduce their rates by 75 basis points and save big thats a record refinanceable refinan refinancing. The average borrower can save about 277 a month on a 30 year fixed if all those borrows did that, that would be a collective 3. 5 billion a month in payments quite an economic stimulus now if rates fell just four basis points more from there, another 1. 7 million borrowers would fall into that pool of savings. While home openers are conservative, they have a record amount of tapable equities 6. 2 are trillion worth collectivity so we could start to see a lot more cash out refis. Thats what weve been talking about this week. Thanks those lower rates might be good for home buyers, but not for banks. The banks making new loans making less money on them and the big banks are all sinking again. Financials are the second worst performing sector. Mike mayo of Wells Fargo Securities<\/a> warning that earnings could take a hit of 25 to 30 and yes, he is here with us on et whats your worst Case Scenario<\/a> look like . Sfwl worst case is the reduction to Bank Earnings<\/a> by 30 . Because of . And over the last couple of week, weve reduced our earningings by almost 20 . And the biggest reason is because of the ten year treasury yield. The flatter yield curve. Lower Interest Rates<\/a>, what we talk about net interest margins in bankling. What do you have it doing we have it somewhat around here so this is the worst case and we have another 50 basis points of Federal Reserve<\/a> cuts banks make money on the difference between theyre b borrowing and lending. For banks, this is an earnings recession. Not a Balance Sheet<\/a> recession. And that is a critical difference from the financial crisis a decade ago. Thats what i want to probe more with ou because back in 2008, 09, banks were at the center of the problem. Here, banks are Collateral Damage<\/a> to a problem not of their own making and i would say when you say Collateral Damage<\/a>, the Banking Industry<\/a> has the strongest ambulance sheet in a generation and think about this the bangs have added 1 trillion of o additional cap one trillion with a t 2 trillion of additional cash. Of deposits. You have a Federal Reserve<\/a> stress test every year every year, the Federal Reserve<\/a>, the overseer of the Banking Industry<\/a>, they assume armageddon will happen. Then it was an exten shl crisis many did or got swallowed up this is not that absolutely not. If you want to look to the 6 trillion Investment Grade<\/a> bond market, the fixed income market saying about Balance Sheet<\/a>s . Theyre fine remember during the financial crisis, we had Early Warning<\/a> indicators, youre not seeing that here. You have u more capital, more liquidity, the stress test, a bond market saying fine. You have u the strongest Balance Sheet<\/a>s in a generation so you have this earnings decline its painful in the shortterm but longterm, banks are are more resilient are banks buyable and if so, which ones ilt depentds who you are. I know you have a lot of new viewers watching during this period so at first, it needs to match your objectives. If youre asking whats going to happen in the next day or month, i have no idea if youre looking out over the next year or two, or three year, id love to come back on your show and say what an amazing buying opportunity you think you will be doing that we might have you back i think we would, but you think youd say that in three years . Absolutely. Three years seems almost High Conviction<\/a> call. If you buy one of the largest banks. Goliath is winning you have citigroup, bank of america, jpmorgan, three large banks. This is what they live for to demonstrate the strength, the ability to gain market share the ability the to provide support to the economy this is what the Bank Industry<\/a> prepared for for a decade. Now it might be the real scenario, but theyre prepared for it is there a different threat though not the one we saw in 07, 08 we were talking about how the fed might need to expand its purchases of bonds and stocks and other tools. I guess Balance Sheet<\/a> expansion can be good, but if were talking about zero and negative rate, Jeff Gundlach<\/a> said its destroyed the japanese Banking System<\/a> how do you factor that in . I think ive been on your show earlier last decade talkin about japan light and you can pull that up online. To some degree, the banks have been through quantitative ease lg and all that and a big difference is the ability of banks to control costs so half the costs are employee costs and so people on wall street will be making a lot less money. People in the high income jobs are making a lot less money and also technology is allowing banks to be a lot more efficient. Thats a huge change versus the japanese Banking System<\/a> and i think the policy response in the u. S. Tends to be a lot more dynamic and then what took place in japan so well take that back off the shelf and bay ty the wa, the bank dividef yields are supr safe the Federal Reserve<\/a> assumed armageddon would happen before they allowed banks to pay off their dividend if you look at yields versus the ten year, these are nice bond proxies, so this super High Conviction<\/a> that banks can weather a body blow can weather a storm, we dont know how severe, but it probably wont be as severe as the armageddon scenario implied by the fed every year over the last several years. Good to see you mike mayo of wells fargo now to rahel its time for trade iing natn gold surging 7 . Stocks sink and investors pile into the long time safekeeping but does it have more room to run . Craig johnson and Danielle Shay<\/a> joining me now for more. Danielle, would you be a buyer of gold here so normally i wouldnt buy something thats ran so far, however with the downturn to get even worse, we have a variety of fakctors. The emergency rate cuts. The flight to safety in bonds then we have no buyers coming in the s p anywhere so yes, i think gold still has more room to run and i am a buyer so craig, lets bring you into the conversation. What are you seeing in the charts well, the gold continues to shine at this point in time and yes, it is a defensive play and the question everybodys trying to figure out is it moving up wabecause of the coronavirus, as were seeing the equities sell off or is it fear due to whats happening with ten year bond yields i think the its a combination of the above when e look at the chart to me, your next comes in around 1785 then its going to be 1885 so i think theres more room for gold to work and yeah, i would be a buyer of it in maul positions. And more specifically, do you like gold mining stocks or prefer something more direct buy in gold. I prefer the direct buy on go gold i love the gld etf i think the its a great way to add to a longterm portfolio i also enjoy buying calls on gld as well as just selling putt credit spreads i think those are all great plays. Unlike gdx which would fall in a dunn turn, gld would likely continue higher. Thank you for joining me and for more trading nation, head to our website or follow us u on twitter. Thank you very much still ahead, the Coronavirus Impact<\/a>ing business around the globe. Well talk to tilman fertitta. Thats next on power lunch. We see homes staying cooler without the planet getting warmer. At emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. announcer treating others like wed like to be treated. Has always been our guiding principle. Heres your b cnbc news update President Trump<\/a> touring hard hit nashville, tennessee, and surrounding areas slammed by tornados this week 24 people were killed and there are still many more missing. The president earlier signing a disaster declaration which will free up federal money for the Recovery Efforts<\/a> the House Committee<\/a> ves gaiting boeing 737 max planes saying quote a lack of transparency and other issues led to fatal crashes last year the committees preliminary report blasts boeing for technical design failures and says the faa failed in its duty to find those safety problems. The Islamic State<\/a> group has claimed responsibility for r a deadly attack in kabul this morning. Afghan Officials Say<\/a> the death toll has risen to 32 after a gunman opened fire and the vatican has confirmed its first case of coronavirus. Some facilities in the vatican have been closed for cloning the pope is rofr iecovering froa cold the vatican says he is sufing from no other illnesses. Back to you. Lets take a look at the markets. The dow dropping about 600 points as you see there. About 582 at this moment thats b about two and a quarter percent just slightly higher for the week the s p 500 down 3 on the day north ameriasdaq s p in the red all the major indexes down about 14 from record highs. That puts them scarily into whats called correction territory and thats happening as Interest Rates<\/a> continue to reek havoc on the market the ten year yield sinking to historic lows. Still at levels we have not seen. 739 . Oil is also sinking dramatically for the day and wildfire close up, its down u 10 to 41 barrel. This after opec was unable to reach a deal Brian Sullivan<\/a> is here with more and weve been looking for any sign they might be able to scrap something together im talking to people, theyre not getting together its 8 00 p. M. In vienna so they have time. The saudis are leaving tomorrow so any hope of a deal has flown the coupe i think and thats what were seeing. Theyre talking about potentially Video Conferencing<\/a> if they have to finish just remember this, the current deal to cut 2. Off the quota expires at the end of march. If its all countries for themselves as the u. S. Has been doing, like we talked about in the last hour on the exchange, oil could be in the high 20s or low 30s in a week. What happened to the presumptive deal or was there never one . There was a deal and what happened according to everybody that im talking to who was in some of the meetings was the russians were ticked off that opec announced a proposal for a deal without their blessing. Right. Like your son comes home and says im spending the night at bob bys i was going to say yes, but thats how its gone this is according to the Iranian Oil Minister<\/a> the worst meeting hes ever been to and hes the longest serving oil minister of all. 30 plus years, so hes seen it where does that leave the Oil Producers<\/a> now if were talking about heading into the high 30s, maybe lower. How much risk . Baker hughes count came out at one and showed another four theyre not cutting back they will. Capital spending will go down. I think youll see, not me talking, people ive talked to, dividend cuts happen across the board and these oil stocks are going down and that could take a big toll on houston, which i think were going to get into now. Stick around as your next guest as a unique insight into the consumer both here and around the world the chairman and ceo of landrys his company owns 600 restaurant, five casinos he says starting this week, his revenue dropped sharply, roughly 10 a day because of the coronavirus and he doesnt have much of his ability for how long this slide will last and hod how bad it will get. Welcome. Good to have you with us hey, guys tell us about what youre seeing and segmented if you wouldnt mind is the pain mostly in urban areas. Suburban, high b end, mid or lower end . Where . Where its really happening right now is that youre having conferences canceled everywhere. And in your big urban just say steak house, youre feeling it in your tourist areas, youre feeling it where youre not feeling it is in your suburban restaurants your dell friscos in new york by you guys. By your martins in new york by you guys then in the suburb, youre okay. Then the regional casinos are okay because youre staying local but then you get into vegas and vegas is really starting to slip now so what are doing mitigate the damage from this fall off in business are you having to restrict hours . Cut back on hours . Tell people not to come in and how does that ripple through the system then people who really feel it because they may be making really a kind of a subsistence wage what happens and its a shame, but its the only way to combat it is that youve got to protect your labor if youre a restaurant that was doing 20,000 a day and now youre doing 20,000 a day, the way to stay profitable because remember, when i say im off a million a day in revenue, thats on a base of 12 million a day in sales in restaurant sales. Okay but remember, that last million in sales is your most profitable its just like any business. Where your heavy profit is so if you dont cut expenses and what can you cut not going to cut the quality of the product. Now so you can only cut labor. Youve got to watch labor. Whats going to happen is the old supply and demand like youre starting to sea seafood, beef drop. Start seeing produce drop because theyre not selling as much well everybodys got to get rid of their product so if you manage your business really, really well and you can stay in that eight to 12 off in revenue, youre going to do okay but you dont want to go 20 off. When you get to 20 off in a same store sale no matter what business youre in, thats when you start getting into trouble theres a book i read calleded shut up and listen and theres a chapter called know your numbers you just gave us the numbers youre the consumer king what was it, tyler help me out here with the malt 12 million what is it day in revenue. Down about 8 to 8. 5 seems to be about the average number it moves around when i look at the stock charts of many of the big restaurant companies, theyre down 30 and 40 month so even the mashlgt is getting it wrong or the market is suggesting thats where things are going to go so what are you seeing the market looks into the future and thats the crystal ball and the market does panic with all the quick selling and we move in herds as we know. But remember were just getting the coronavirus tests out there now. Were going to find a lot more people have this than we think e. But what Everybody Needs<\/a> to remember is this is not going to kill you unless youre most likely already a sickly person and you just got to take care of yourself theres no reason to panic even when they announce that another 100,000 people have it people are going to get this the people are at home with it and you just dont take and you dont go to work and give it to other people dont go to a ball game and give it to other people everybody just needs to take care of themselves and we all need to have good habits right now. But more people, were going to find out every day have this, but weve got to go on about our lives. Youre not going to die from this you can take your rarest diseases that yu get in america and not as many people are going to die from this coronavirus as die from these. Let me get back to your Business Operations<\/a> here as i understand it, you have some restaurants and Different Things<\/a> in china. Can you talk to us about what that business is like, give us any sense of how much china might be back online or not here one word. Bad. Its so funny. Im going to tell you u something funny and its not funny, but we were finally able to reopen a martins in beijing the other day and this is never happeneded in all my 30, 40 years with as many restaurants but we opened a restaurant and sales for the day were zero. Okay so everything is Getting Better<\/a> and i think its a good lesson for us to learn because we hear from ore people in china that things are Getting Better<\/a> but people are still not moving out freely like they did before. But its good for us to see though that if its better in china were going to hit a peek then it will get better. We talk and spend time together in houston about the Oil Price Impact<\/a> i understand houston is a mass massive city its well diversified. Youve got a consumer er econo. However, oil prices have gone up and down wildly. Were now starting to enter this period where price rs remain in depressed for a long time. Nobody expects prices to move higher over the next couple of years, so we get this extended sort of slow slide in the price of oil what do you think will happen to houston, this is the Fastest Growing<\/a> large metro area in the United States<\/a> and a massive economic driver for your state and for the country . Well, when we manage to adjust to 50 oil and you and i think a show on this a couple of years ago an weve adjusted. Adjusting to 35 oil or 30 oil is pretty improbable because you, you really, you really cant do anything to cut expenses and cant find any more technology to drill any cheaper and basically people arent drilling much any way, but the biggest problem is Oil Companies<\/a> have lots of debt. Theres so many small drillers and suppliers. Its going to be interesting for houston. At some point if oil sticks around 30, 35, you are going to see problem. But weve got a great economy. We saw the jobs report everything changed monday morning. Thats when everybody started canceling conferences and huge conventions. Everybodys canceling everything right now. So Everybody Needs<\/a> to remember its going to get worse. But then it will get better. Lets talk about something that hasnt been canceled and that is nba games. I wonder what youre seeing atting rockets games or around the league what is adam silver saying about whether individual teams should play in front of empty arenas or whether the league will do that league wide. Bring us up to date there. The only no show was us last night against the clippers and rockets that was played in houston but our fans were all there and like i said, a lower no show rate than usual. Which i like to see because then were not panicking and a we shouldnt. I dont think you should play games in front of no audience. I would hope we would suspend for a week or two. But you dont want to play games with no fans thats never going to work like i said, everybody just needs to be a little better. Were doing a few Different Things<\/a> that weve never done before of course in our kai issy knows and rest raubt raunts and hotels, but Everybody Needs<\/a> to wash their hands and stay away from people that are sick and if youre sick, you shouldnt go to work but yall have been hearing this from everybody for weeks now so i dont need to repeat it. Quickly i was going to say i think we cant overstate the reason i got involved in oil and gas, that city and state was so important to growing the entire economy at the depth of the great recession. We have remember a lot of people dont care what happens to oil and gas or maybe they dont care about texas in general, but your state has been the economi growth driver in the country, so if we see texas slow down, its very possible and Steve Liesman<\/a> will confirm this, that the National Data<\/a> will start to come down as well this can bring down all the data if people stop spending money, thats what causes everything to go away. Because remember, were always overbuilding always overbuilding and always a lot of supply. As soon as theres no demand for any product, thats when we get into trouble thats what im paying attention to because we can take a robust economy that we have and lets all be smart and lets really work hard on not panicking and let a coronavirus run our country into a recession yeah. Look, it is not the flu though the its worse frankly so we understand why people are scared there are deaths and it comes during flu season. Its hard. Its a lot for the Hospital System<\/a> to handle i understand why people are concerned. I understand why people are concerned. Im doing things to be safer, but at the same time, im still living my life im going to basketball game im going out to dinner. Im not doing, the rodeo is really having, which is 100 thourk people a day here in houston. Its not suffering any attendance issues now. Two eegs concerts in town this week and were sold out and im glad to see that people are are taking precautions and not panicking. Great to see you. Like you, i dont think ive ever washed my hands so much in a week as i have this week thank you very much. Good to see you as always. Thanks, guys. Good to talk to you. Houston rockets owner and owner of so much more. Coming up, the cruise lines may be the hard hit stocks in the sell off royal caribbean, carnival, norwegian losing roughly half their value this year. Now should there be a full stop of cruising on all cruises to stop the spread of coronavirus well speak with a former Homeland Security<\/a> official after that right after this quick break on power lunch. At fidelity, online u. S. Stocks and etfs are commissionfree. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk while our competition continues to talk. Robinwithout the commission fees. So, you can start investing today wherever you are even hanging with your dog. So, what are you waiting for . Download now and get your first stock on us. Robinhood. Welcome back ten year yield is just above. 7 right now and the stocks the markets are headed back towards their lows of the session. The dows down about 800 points now. Thats a 3 drop brings us 25,300 today and in fact the dow is the outperform former nasdaqs case almost 4 and weve put crude on your screen its a little hard to disentangle cause and effect but the 10 plunge in crude today isnt helping. You can see it not move ng the after hours session after opec failed to reach an agreement with russia about the one million plus Barrels Per Day<\/a> cut that had been previously expected now Vice President<\/a> pence is expected to meet with cruise line executives in florida tomorrow as the Trump Administration<\/a>fla, as the Trump Administration<\/a> is reportedly considering ways to discourage travelers on cruises as a number of ships have been turned around and question and answer tee are tee, a Global Security<\/a> and Risk Management<\/a> advisory firm, was former chief of staff for Homeland Security<\/a> under Michael Chertoff<\/a> is it prudent . Its on a riskbased approach if youre looking to take a cruise to italy or the southern part of china, thats probably not a good idea right now. The cruise industry would be well served to look at what the airlines are doing, which is basically take that riskbased approach, any ports of concern in affected areas, those are the lines that should be stopped the other cruise lines destinations they should be screening passengers obviously before they get on a the lo of the cruise lines are trying to do that both with regular temperature checks as well as questionnaires. It may make sense to do it now, but its a bit after the fact, and if we do it for cruises, why arent we doing more at ampts . When i was at dhs, we looked at different technologies, and cbp, who handles the International Flights<\/a> into u. S. Soil, they are in fact doing that any person coming in now from ports of concern or other destinations are being screened for temperature. If theyre exhibiting any kinds of stems theyre put into a secondary screening process. Dhs has the authority to quarantine at the border so i think the administration is doing the right thing hoff the highrisk destinations screened so then what happens to the traveler who comes back from, say, london. Are they asked if theyre feeling okay running a fever . Did you go to these regions in northern italy or others where there have been outbreaks . Thats right, tyler in addition to that, at some ports weve been implementing infrared technology that allows you to see if somebody is exhibiting a temperature even if they dont admit to that one of the challenges that cbp and dhs faces is this particular virus doesnt necessarily exhibit symptoms for 14 days so thats why the questionnaire you mentioned is so important. Its also important why people need to answer honestly when they come in do you think its time to quarantine the cruise ships . I think the intent was good quarantining that ship when you had somebody infected. The mistake the japanese made, unfortunately, a study in sweden show you probably would only have 70 infected instead of 700 if they allowed people to isolate those who were already and do what we did with the people from china even asymptomatic, put them in quarantine for 14 days, which is the time frame in which the disease manifests itself, then you can determine who is safe to leave, and who is not . Ironically whats happening right now in San Francisco<\/a> in that port, holds those people in that ship, in many respect, the ship is like a petrie dish, youre all crammed in, and the staff are trained to quarantine somebody in small numbers, not as much as large numbers, getting this was offshore into a proper facility is the better way to go. Chad, thank you, sir. Thank you. Lows on worries of what the Coronavirus Impact<\/a> will be on the economy. Is the bond market signaling the fallout could be worse than we ink . An even Slower Economy<\/a> than we expect well discuss that when power lunch returns through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Glee welcome back. The mark selloff continues as bond yields have been plunging were close to the record lows were at 0. 72. Joining us is r. J. Gallo its great to have you here. R. J. , i hear people recommending munis when yields are already at a 40year low. Look, state and local governments are munis safe right here right now the ratio, they have all surged higher its the same as wider spread in investmentgrate corporate bonds. The plummeting treasury yields are reflecting rising risk of a recession. To your question about munis, in a relative sense, theyve been from spending most of the prior 12 months sort of rich, they actually look cheap right now. Only ref tiff to treasuries the question, though, is we know they have huge obligations it means they have to spend more money servicing that id love the tripleexempt status that i can get. Im not sure i can trust my local authorities. If turned concerned about municipal credit quality, and if we do in fact end up in a recession, those concerns will become morered the muni mark is overwhelmingly high quality the fact that the discount rate is plumb elling, yes, that is a challenge. Pensions get paid off over 10 to 30 years you have the vast majority of american states in better state than they were five or ten years ago. In a relative sense. Munis probably still offer safety we have about 30 seconds. Are there slivers that would be riskier than others . For example, airport authorities . Well, right now in the market you are seeing the reaction to the evidence plummeting in demant airportrelated are in fact underperforming. I think its safe to say that they are forecasting higher risk of reseg i dont know if its a fait accompli i think its prudent to remain in fixed income given the volatility in stocks. R. J. , thank you so much thanks, everybody for watching power lunch. Hang in there closing bell, the last hour of the week, right now. Well can um to closing bell. Objection densal down 15 . The worst performing sector this week, oil is down a massive 10 just today we are at session lows, down 3. 7 on the now nen tiff for the week as a whole","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia902902.us.archive.org\/0\/items\/CNBC_20200306_190000_Power_Lunch\/CNBC_20200306_190000_Power_Lunch.thumbs\/CNBC_20200306_190000_Power_Lunch_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240716T12:35:10+00:00"}