Expectations, both stocks falling. We mentioned somebody was listening in on the Conference Call and it caused that trader to hit the sell button we wont tell you which trader it was just yet. Tim, it wasnt you what did you make of the Conference Call . I think you have a case here where clearly the numbers on the headline looked fantastic. But what was really causing that, that was about provisions, that was about credit quality. Which, its strange because we were complaining that we were fearful that the banks had bigger credit issues that were being possibly seen on the headline and therefore they were putting aside the major reserves what jp morgan look, that beat was a combination of some very strong Investment Banking and fic business but alsos the provisions that came down. Thats something we should everyall be encouraged about with banks bus i think there is more where that came from. But there was some sense this was the only reason. Net margins fell 14 basis points i think banks are going to ten to experience pressure when you look at that, glass empty going forward. It was definitely the Conference Call. Citi down 4 jp morgan down 1. 5 or so. What struck me about the Conference Call is that analyst after analyst were trying to get citi to pinpoint the approximate cost of fixing the regulatory issues after question after question after question nobody got an answer and that seemed to be the problem. No. You know that was the problem, clearly. Somebody i think one of the analysts i am paraphrasing. Forgive me they said in terms of regulatory issues whats the difference between you are you this years wells fargo, which is somewhat damning in terms of just the question. To your point, nobody seem to have an answer i think thats problematic in this environment we can talk about tangible book value and what i think about jp morgan im sure karen has some opinions there. I think karen made the point yesterday, the runup in some of these banks, understanding it wasnt all that significant but you had a number of these banks run up specifically jp morgan from i think 92 to 102 maybe this was the reason sort of buy the rumor sell the news in terms of the selling off today. Karen is back we were having technical issues. You are the trader who sold on the back of the Conference Call. What alarmed you. Jp morgan had good provisions, capital markets, and the spread but it didnt inspire me trying the orchard park through the regulatory issues y they hadnt made progress on it since they knew about it for a while, how much it was going to cost, how long it would take to fix. Given those extra expenses how were they going the get a higher r. O. E. What parts of their business were they going to be excited about . They really didnt have good answers to any of these questions. So i just think, a dollar book value at jp morgan is worth a lot more than a dollar of book value at citi. It trades that way it should trade that way it was inunfiring. Funny thing from the fall, mike mayo, an outspoken analyst was begging the ceo to step aside now and get jane fraser get to work. Really, they were not confidence inspiring and the stock deserved to be down. Profitable lags its pierce. R. O. E. Lags its pierce spending 1 billion to work through the regulatory issue but it doesnt have a handle, at least its not sharing its estimate how much it will cost in the future or how long. If you are a lover of bank if you appreciate the bank trade and want to be in a bank, is this the bank to be in at this point . No. I think you have to either be in Goldman Sachs or you go into investment managing and you going into a black rock. If you look at black rock price action today it was the only one that was green so i think the retail audience or the investing audience is probably leaning towards a black rock having said that, melissa, if you look at the tenyear yield then you everylay the xlf and all the financials they trade in lock step with yields. We had a hint of money coming out of growth going into value for the last two weeks now you are starting to see that sort of unwind the last two days because you had apple and amazon and technology suck up all the air in the room. But i think that financials truly need that value trade. They truly need rates to increase and that was starting to move the needle for them on a yield basis. These guys are covering it on a micro basis. Im covering it on a macro this for me is value they are at the epicenter the value trade. But you do need the tenyear yield to start rise forth the banks to work again. Would in the would you rather that you floated to me it is Goldman Sachs and black rock. I dont recall saying the words would you rather i dont remember that happening whatsoever but if you want to you never do. You go ahead and do that, do what you like. Karen, i want to go back to you. What makes you hold on to half of that position still i guess i mean, it trades with like you are in the dog house valuation. That is somewhat compelling. I want the see what jane fraser can do but, you know, i have sort of a trading position and a Holding Position so the trading position, i sold. It almost wouldnt have mattered what price the stock traded at because i just found that call so uninspiring but, as a value girl, you know, im always interested in something thats really cheap. It is cheap. It deserves to be cheap. But i do think there is sort of a path higher. But it definitely warrants a smaller position, for sure, which it is now . Guy, if not citi, then what bank i think citi is interesting i understand what karen is saying 100 . We mentioned for a while that citi, in terms of price to tangible book is trading at lfls we last saw probably in the financial crisis today they reported tangible book karen knows better than i but 62 give or take you are talking about a stock right now thats trading 62 of tangible book. I think 70 i didnt hear what you said but in comparison, jp morgans tangible book went from i think 63 to 77 for reasons that karen also can explain but thats the math. So you are talking about jp morgan thats now trading 1. 3 times tangible book. It deserves that valuation by the way, it probably deserves more of that valuation i can make an argument just based on that math it should be a 125 stock but i think citi is in the dog house n the penalty box for good reason but that valuation specifically to me, even with all the head winds, with all the thing we are going to hear about it remains somewhat compelling to me in citi tim, you are in citi, correct . This didnt prompt you to reevaluate your position whatsoever chateau bow wow i didnt hear it the same way karen heard it today i respect karens call citibank, which has underperformed jp morgan so relative to another Money Center Bank best of agreed by 20 since that june 5th high, by 20 . And i think the issues for citi bank really are get on with the restructuring. The reference to whatever went on in todays call but importantly, the fact this has proven to be a company that isnt controlling expenses like they used to that was disappointing today, too. The best thing citi had going for it were reserves that were loiter than expected i didnt hear anything new, there was nothing in those numbers that havent already been i think punished in the stock. I was surprised the see the massive underperformance today each on a day when the headlines were good and they disappointed. Not making a move today. Closing eerks trade and eaton vance, the difference between the Business Model and that one being rewarded in the Analyst Community and the market is the recurring wretch stream and the predictability and the lower risk and lower val tilt in that easterning stream of morgan stanley. I think you are going to be surprised and i think thats a stock you can own into earnings into lets bring in girard did you find the citi call as alarming as karen did . I will put this question to you which was posted on the call is citi this years wells fargo . I would say, no, it is not this years wells fargo by any stretch of the imagination the problems that citi has of course are internal controls and procedure problems wellss problems were problems with their consumer customers, where those customers were hurt and damaged. So id kuwait it more to the you might really the jp morgan london whale problem of seven or eight years ago. Thats i think a more similar comparison but it was disappointing they certainly were asked consistencally throughout the call about the expense number for working through these problems they dont have their arms around it just yet as part of the cease and desist order they have about 120 years where they have to put the plan in place they will have an estimate i think by then which means we will probably get a Fourth Quarter number it is going to take time it is going to be challenging on the cost side because revenues are under pressure as traders have been talking about, the Interest Rate environment put pressure on the debt interest margin for everyone which is going to affect wretches in 2021. Seasons you are making a comparison to the london wail episode, when that happened did you as an analyst get a sense of how much that episode would cost jp morgan and what time frame . I am trying to understand if there is an appropriate valuation discount embedded in citi group shares right now given we dont know the extent of the expense and we dont know the time frame in which this issue will be resolved. No. Thats a few question, in lista. I would say that i think the stock overreacted to the problems when this first kaem out a couple of week ago the stock traded down two days in a row. Obviously it underperformed again today. Dont get me wrong the problems are serious but they are fixable and the big difference is that, again, this is not something where customers were damaged or hurt and in the jp morgan case, the losses were bigger just because there were trading losses. But it was a control and procedure issue there as well. And it was fixed rather quickly because it was more trading than it is with this issue when they have to, again, control the back office it will take time. The cease and desist orders are very powerful. And we will get a number we have got to remember, too, that the company does have a lot of moment up in investment. Abouting, jp morgan put up good numbers today and like the guy said we are probably going to see good numbers from energian stanley and goalman this week, too. Karen you have a question. Let me ask you something about the pressure on the net interest margin. A lot of that was due to an influx of dps. Do you think they are going to be better able, citi or jp morgan to convert some of those deposits into anything higher yielding than the shortest end of the curve karen you put your thumb on it it issan an unbelievable problem to have. I cant believe i am saying this, but there is too many deposits the inflow into the Banking System because of what the Federal Reserve has been doing has been extra other the Balance Sheet at the fed is now close to 7 trillion it was close to 4 trillion before the pandemic that money has to flow somewhere. It is flowing into the Banking System unfortunately, the banks do not have the loan demands to support that kind of deposit growth and it has to go into shortterm assets meaning sitting on the fence Balance Sheet and it is costing them money, believe it or not and hurting the net interest margin. We need to see the deposits outflow or put them to work. But the banks are a little reluctant to do that because they dont want to go out on the yield curve and take that Interest Rate risk so the pressure on the margin is not going to be alleviated i dont think any time soon. Girard thank you for joining us great to hear from you girard cassidy of rbc. We havent talk about what the banks said on the Earnings Call to the economy. Usually jamie dimon is a Good Progress knost kator on that tim what was your takeaway well, he certainly made a very clear plea for more support for the economy in terms of fiscal stimulus jamie dimon i think has always had a very kind of rational and sober look at the economy and the world. And i think that that sent part of a message people know that banks ultimately are the ultimate barometer trade for the economy. We talked on this show all the time, at least over the last two or three months, maybe six months, where the disconnect between the Banking Sector and the rest of the market either said there was something wrong in the assessment of the economy or frankly how healthy main street was and banks should be trading better maybe on some level odays temperature test by jimmy diamond and to the extent either implicitly by citi bank was not all that bullish on the economy. Banks have played that story for the last six months . All right. We want to take a check on shares of bed, bath, and beyond. They are spiking in afterhours session. Eric chemi has the details. The shares up 6 in the last few minutes after the close. Putting out an 8k saying it with off noncore assets raising a quarter of a billion dollars that would include the Christmas Tree shops division. Also Linen Holdings to an institutional buyer and a districts center in florence, new jersey three noncore assets that bet bath and beyond is selling an 8k just put out thats why the stock is up 6 . We already know that bet, bath, and beyond has been on a campaign to reduce its footprint by closing stars karen, what are your thoughts on this one it is very leifered anything they can do to take down the leif vaj good they have been doing a great job and as you said, closing the store base is going to ends up being good for them. There is a real big Short Interest here. It is pricing in a good recovery, which they deserve, they deserve that credit because they are doing a good job. But i am not in it. Coming up, apple feeling the need for speed we are going to take you through the event today where the company unveiled its firstever 5g iphones we will break down how our trarders are trading this news. First a developing story in the biotech world as a second tech company pauses it is virus trials the latest when fast money returns. You can go your own way go your own way your wireless. Your rules. Only Xfinity Mobile lets you choose shared data, unlimited or a mix of each. And switch anytime so you only pay for the data you need. Switch and save up to 400 a year on your wireless bill. With the carrier rated 1 in customer satisfaction. Call, click, or visit your local xfinity store today. Welcome back to fast money. We are following a developing story in the biotech world as el el becomes the second major drug company to pause it is coronavirus trial within just the past 24 hours. Lets get to megger theel with the details. Meg . Melissa, well, lilly of course is koefling antibody drugs to treat covid19. We learned of that temporary pause on enrollment in one of its antibody trials from a doctor who tweeted about it today essentially saying it had been paused due to potential safety concerns in the trial we dont have much more information. Heres what we do know this is an nihsponsored study testing the antibody drug on top of standardized care for hospitalized cases, which is remdesivir little lee telling us there was a pause of enrollment in terms of safety for participants in the trial. We do know their other antibody trials are continuing. Only pausing this one trial. You also mentioned Johnson Johnson. Last night they announced a pause in their covid19 vaccine trials due to an unexplained illness. It is under review from a data safety monitoring board. At this point we dont know even if this participant received a vaccine or a placebo we did talk with the ceo this morning about how it might affect timelines heres what he told us. Even with the pause, we are still planning for success we are looking at First Quarter of next year as the time line that we have put out there we are continuing to invest as if success will occur. So we are continuing to expand our manufacturing footprint to ensure that in the event we do receive approval that we are ready to go and manufacture and distribute vaccines to as many people as might need them. Now, melissa, of course these headlines sound very scary but what experts are telling us is this is actual three system working as it should be. These are very large trials, and they are under a ton of scrutiny we usually just dont hear about these kinds of things. What it shows is that these independent data monitoring boards are watching the trials closely, pausing them if something looks off, investigating. And if they look okay, allowing them to start again. At this point, we just dont know what the events were. Meg, just to be clear, this trial specifically was the antibody drug in concert with remdesivir; is that correct . The antibody drug alone, last week was it, that el eli lilly filed an eua for that . Yes, eli lilly and regeneron filed for emergency use authorization for their antibody drugs. The data that eli lilly has is for a different setting, for patients who are not in the hospital they were not receiving the antibody on top of remdesivir. We dont know if that led to these issues but that is a difference in the two settings. And we dont know if the person who got sick was on the placebo on received the treatment; is that correct thats correct. We content know that information in eli lilly trial or in Johnson Johnsons trial at this point. Where do we go here i am glad you asked that question and glad meg gave you that answer. Clinical trials are going on all the time and they are stopped for whatever reason and we never hear about it because for obvious reasons maybe we are not all that interested in it. This is hyper focused. I can understand but with that said, lilly traded awful since the beginning of july look at it quickly, on october 27th they record the 148 level, in february, the stock made a high at 148. Then fell off the cliff and traded at 122. Past resistance becomes support. A company 18. 5 times lastiers earnings and you probably have 11 eps growth i think you buy eli lilly. Regeneron