Well of course, were still waiting for more details out of d. C. , when we may see a vote steve weiss, i turn to you first. So we had this historic rally. Were trying to build on it today. Do we have something to work with here . I think we do so theres been a change in my thought process. I was actually very encouraged by the orderly selloff and not of huge magnitude on monday, not at least compared to what weve seen and mentioned that the buying last week, previously added some core positions yesterday, it went a little further than i would like to see, than any rational person would like to see, but i did add a little bit in the morning, supersized some positions. But heres how im looking at it i think weve now defined the bottom of the market sure, it could go a couple of percent lower, yes but its not going to go 20 lower, its not going to go 10 lower, nor are we going to go up in a Straight Line so the most important thing i believe about investing is being able to quantify your risk, your downside and coming out of this, were going to have no Interest Rates at all, zero rates, maybe even negative rates, as the market is trying to push us into so what i see is an unbelievable m a period thats going to follow this decline, as Companies Buy other companies. We shrunk the number of available equities over 15 years by 50 theyll continue to shrink, so there will be a scarcity factor. Compound that with what joe and i have been talking about, which is a major rebalance at the end of this month. Jpmorgan estimated 850 million, give or take thats going to come to the market, 850 billion, rather thats going to come to the market thats going to be huge. So now if you can just pick the companies that will stay in business and be able to thrive in a postvirus economy, i think youll do well now, look, its probably going to get worse from an optics standpoint, particularly as you see the new york numbers and what happens in the hospital, anecdotally, talking to some er doctors, doctors that are working the er now, which are a lot of them. Theyre already pushing to be out of ventilators and out of beds in the icu. We dont even need anecdotal evidence Governor Cuomo has just been addressing that. I appreciate that, steve kari, i talked to a wellknown Hedge Fund Manager yesterday who told me, he thought the bottom was in you have Jeffrey Gundlach talking about, you could go to 2,700. I dont know the time frame, but hes talking about in this current snapback do you think weve put in a bottom or at least that were close well, scott, i wrote a piece for the cnbc website this weekend, and i addressed that issue. I said that i felt felt that 30 to 40 down from the peak, the 3386 s p peak from february 19th, that would be roughly where i expected the market to go if you looked at what the market could earn, what the S P Companies could earn in 2021 so it was 14. 5 times earnings. Thats what i thought made sense. And im going to stick with that it doesnt mean that we cant drop 5 or 10 based on news about how the use has gone past china in the number of active cases, which has happened. Or if we have other, all sorts of health care risks that become apparent, but the economy is probably going to recover in 2021 and if you look at history, and ive put together a chart. I hope we have it, which a table of the time period since 1960 when the market dropped, more than 27 and 6 months, and 12 months later. In all cases, the market was higher by at least 11 percent, from that trough and thats what is likely to happen here, because we will resume production, and were going to get a 2 trillion plus bailout, buyout, loanout, however you want to call it. So that seems to be what the market is telling us today notwithstanding some shocks. Well, joe, its sort of the point that bullard was making on the st. Louis fed president earlier, when he talked about a big snackback coming, saying that q4 of 2020 and q1 of 2021, in his words, could be boom quarters its still hard to declare that were all clear, though, isnt it oh, absolutely, scott by no means can you declare that we are all clear i think a lot of the commentary coming into today, and im trying to keep things very simplistic when im looking at the markets, because theres so much needed that still has to unfold but i think it was a sentiment that you wanted to come in and sell the rally that we had yesterday and the higher open. Usually, the hardest trade to make is the right trade and i think staying long off of yesterdays rally is a very difficult thing to do. We tried to go down to 2,400 and test that level earlier in the day. That seemed to have held support and now we are pushing back to the high there are other conditions within the market that lend i. T. To suggest that the Jeffrey Gundlach theory might be right i keep looking at the credit markets, looking at investment grade. Youre seeing spread are narrowing. Investment grade for technology, for Consumer Discretionary, and for the senior level of financials so thats a good indicator, but i caution everyone just keep it simple right now. Very slow steps in whats going to be a process. Weiss made good points, too, that the numbers and the words i use are, theyre going to be hard to bear you listen to Governor Cuomo and its just shocking in many ways, stunning and its saturday about where this appears to be going in new york city and all of that is going to be filtering through the investment world, as all of you are thinking about the market and the questions weve been asking about where this is really going in the nearterm for certain jim lebenthal, how do you see things youve gotten some commentary here ive mentioned some of the notes that are out there bernanke was on cnbc this morning, talking about the possibility for a shortterm downturn, that matches kind of what bullard was talking about it feels like the tone has improved, somewhat so, let me focus on the good news and let me be an optimist i have one sort of down piece of news, but the good piece of news is this. Its important fiscal and monetary stimulus came in for this crisis far faster than anything aive ever seen before. Bear stearns went under in march and tapp. A. R. P. Didnt come unt october. The speed that stimulus has come is unprecedented theres no question thats going to help. Thats good news and the bad news its not that bad, but this feels to me much more like a bear market rally. I dont think we need to set new lows, but i think its unreasonable to think that we go straight muup from here i think you retest the lows because data will be coming out that we dont know right now we dont know the length of time this economy will be in quarantine we dont know the depth of the decline in earnings per share. Im thinking about yesterday, scott and you had Companies Like intel and General Motors removing guidance. That makes sense theyre not issuing new guidance because they simply dont know thats the sort of uncertainty that the market hates. And while it may be enjoying this rally, as i am. Im enjoying it tremendously, but i do think that you might get another 5 to 7 from here. And thats probably the top of a bear market rally. You test the lows, but the good news and ive been saying this all along, end of the year, i think were meeaningfully higher from here baused on how fast and how big the stimulus is meghan shue, how do you see things today as we look at it, were remaining conservative in our portfolios were underweight two equities but the perspective and the advice were giving clients really depend on whether you are a fully invested, hopefully in a diversified portfolio or whether you have some cash on the sidelines. If youre fully invested, one of the best things you can be doing right now is to rebalance your portfolio. Thats a bit of a secret weapon during these volatile periods. And if you rebalance when the market is down, you end up with more money than if you had bought and held through the weakness and the recovery. And for those clients who have cash on the sidelines, were advising them to get some of that to work, maybe on a slightly more compressed time frame. Were already down about 30 , which is the average for a recession. But this is very unprecedented we dont know, you know, weve never had an kmip stop so abruptly and the biggest thing that is going to drive the market whether this is a sustained rally is time. If we do get the economy back up and running on a time frame that the president was suggesting over the last couple of days, then this could be sustained yeah, that doesnt seem that doesnt seem realistic, though right . I mean, large pockets of the economy are not opening on easter i dont care what anybody says its not going to happen that way. So theres some Downside Risk to that, and that is why were remaining conservative, because we think its probably more likely that that time frame has to be extended a little bit. Kari, in all of this conversation, its not like youre doing nothing you are buying some stocks and we have heard from folks over the last few days who, in fact, are doing the same why dont you tell us what youre at least looking at, what youve added, what youre thinking about you still may well, you have to look at how your portfolio can be upgraded if possible, you have names that might not be able to sustain a long downturn where they cant sell their products and they dont have enough cash on hand so for example, we bought microsoft. And microsoft is what i would now call an essentially company, as you, scott, may be an essential employee at cnbc, they need outlook Everyone Needs to be able to use what microsoft offers. And i think with 130 billion with cash on hand, its the kind of name which we didnt own before, we own many tech names we dont own more than 35 stocks but this is one we didnt own. We had an opportunity to buy it for less and thats one we bought we have also added to names like visa, to zoets, a Veterinary Products company we have added some to blackstone, because it got totally destroyed to salesforce. Com and to paypal and we also sold a few names, because we thought we could, as i said, upgrade the portfolio. They were good companies, but might have trouble in a market that isnt going to have tolerance for companies with little cash and very little cash flow to sustain themselves so, were not buying lots of names or lots of new positions, just microsoft but we are adding where we thought it makes some sense. Yeah, joe, you know, take us to the whiteboard again. You have clearly written a bunch of stuff up there for a reason, presumably, the kind of things that youre looking at, whether theyre stocks or otherwise. Well, im trying to keep it simple and i think you have to really not address so much that the market is going to be up 20 in six months or we can take out new lows just simplistically, on the top of the board, im looking at the credit markets im seeing the tightening of spread and improvement and i think whats also very important there is measuring fiveday momentum relative to the s p. The s p is down 3. 25 over the last five days but you have Consumer Discretionary names like mcdonalds up 9 , home depot is up 6 . Nike up 4. Starbucks up 10. Chipotle you can extrapolate some degree of confidence that at least youre seeing a little bit of stabilization within the market. And i think thats whats important. You first want to see stabilization. Think about the range that we have today today is one of the tightest ranges that weve experienced probably in the last ten trading days thats a positive condition. So to your point before, theres more work to be done ive got the positives and negatives listed on this crisis of preservation. We still need an italy peak, we need an explanation on the d. C. Fiscal gridlock. And we certainly need a resolution as it relates to oil. Theres still more work to be done, but trooiying to keep it y simplistic weiss, i dont know if this is considered a risk by you or not, the more you go up into the vote whereby w vote, wherever that is, do you risk more of a sell on the news event once the package actually passes you possibly could, but ive got a little different view on this to me the action yesterday was, i would say, three quarters based upon trumps statements that he wants to reopen the economy by easter, which i dont think happens, and one quarter on the stimulus. The stimulus still wont drive dema demand, but if it does sell off look, its still a phenomenal trading market. And a lot of what i did. I bought a lot more visa on monday, i sold the overage, over and above my core position, sold it early today the news comes out, ad revenues are down. No kidding weve been saying it for a couple of weeks. Twitter said it on monday. With the stock being down today, i went out and added significantly to a large core position so you have opportunities. I initiated positions in the home builders. Those stocks have been destroyed. You mean to tell me with zero rates that those arent going to go back on their trajectory. I bought hxb, lennar, pulte, so theres lots to do, but the market is starting to discriminate take adobe, why i couldnt understand why the stock moved as much as it did. It didnt participate yesterday, its not participating today so the days of the zooms, theyre too far overbought i also went back into xbo logistics. I bought it last time around, sold it foolishly at 65. If the market trades back down 10 , these stocks may go down 10 , but in a year, they will double so theres definite risk. The market is certainly not going down were at the highs of the days across the board the nasdaq was negative 15 minutes ago and now its not only positive, but adding to its gains. Can we show the wall and show everybody where we actually stand right now. The dow is good for 742. Thats now 3. 5 . The s p is knocking on 2,500 again. And there is the nasdaq, which is at 7468, its 51 points so thinks are moving rather quickly. Nasdaq was negative, now its positive a lot of these tech stocks that were hammered have pretty good bids over the last few days. A lot of notes of picks from firms like William Blair looking at nasdaq stocks, facebook and alphabet and netflix and roku. These are the kind of places yo have to look i think we have to be careful. It doesnt mean it cant go back down 10 and that we should not just wholeheartedly decide, this is the rally weve been waiting for. Were going straight up from here buying when we see the prices are right and adding to positions and upgrading a portfolio is perfect but lets not forget what jim cramer has said. And i believe it to be true, that we havent seen the worst in many cases of this whole pandemic and there are going to be scares and over the weekend, if people decide, oh, my god, we have now surpassed china, number one country in the world, head for the hills, we could have a lot of selling on monday i dont want to get overly zealous or overly optimistic but when we hit prices that are undeniably oversold of very highquality companies, i think theres justifications in making those purchases. Got you scott, can i make a quick point . Dont we expect that the market is going to at a certain price its going to price in the worst outcome. And i think the market at some point is going to digest negative news and continue to move higher and i think for the listeners, you have to be very cautious of that and i think today is representation of that expectation was, this market was going to reverse today its not and theres been a ton of negative news today outside of the possible fiscal stimulus deal hey, scott, its jimmy. Do you mind if i give you a quick one on something go ahead. Look, ground zero of this bear market has been the speculation in airlines, cruise lines, and casinos and you have to know this, all right . They bottomed a week ago they bottomed last wednesday so theyre five days into this rally. And you can take a look at any chart you want, american airlines, Carnival Cruise lines, mgm. They all bottomed five days ago. Some of them are up 100 in that time frame im just preaching caution im not preaching fear, okay because i think at the end of the year, youll be higher but youve got to think, those people like ricky sandler, who was buying a week ago in those names, up 100 in some cases, theyve got to be thinking, maybe this is a time to take some money off so i just want to preach to our viewers, lets be cautious in those names for this bear market are the most speculative, and have gone bananas in the last week i got you words of wisdom, but not lost. We got it. Thank you, jimmy, for that lets bring in our next guest, as monday may have been the low in this bear market. Ed jar dhani joins us now. So why do you think the bottom is in . A lot of our institutional accounts have been doing this for quite some time and have been through a lot of ups and downs in this market and the seasonal folks wanted to sell their bonds. And the market had turned extremely liquid for the past couple of weeks until recently i think what we saw was an etf meltdown, where a lot of individual investors just wanted to get out there was this mad dash for cash so the market turned totally illiquid, couldnt get out of the bonds if you wanted to in order to buy stocks. What changed, and i didnt hear too many discussions of the fed here this has really been all about the fed. The fed came in on march 15st, it was a sunday, and gave us 700 billion in purchases and didnt establish any schedule. So they could have done it anytime. They gave us qe4 through 50 your point is well taken it is open ended and that is the underlying and i dont know if you want to use the word backstop, because thats whats change in the markets until monday the markets became suddenly very liquid in the bond market so youre seeing a lot of people saying, if thel give them my bo because theyre extremely cheap compared to what they were only a few weeks ago. Thats really whats been driving this market, the fed marty many years ago said dont fight the fed. And many of us thought on march 15st, when we came back on monday, that the market was saying, the fed is out of ammo, they have no bazookas left then they came back and said, we have plenty of bazookas and if you thought we were out of ammo, watch us buy everything except highyield bonds kari, what do you think about that ed is not the only one saying that, by the way and once you feel somewhat confident that youre able to see a light at the end of this tunnel, does it really come down to that . The fed fired a hundred bazookas we have a multitrilliondollar rescue package thats going to pass on the hill its just a matter of what hour or what day, but you have to believe that thats going to happen and then were going to get back to thinking like maybe the bullards suggest, that youre going to get these big snapbacks, even though there are views on the other side. Everything that ed said is correct. And this program of 2 billion sorry, 2 trillion its hard to say trillion so frequently these days. Adding trillions in the fed, unlimited money, yes, of course, its incredibly positive the liquidity issue was part of the biggest problem over the last two weeks there was not a market for anything if we were trying to do any buying or selling, we found it was virtually possible for hours at times so i think it is critical that we have orderly markets, that there is available liquidity, and that there is relief that investors are saying, wow, the government is going to do something and help people out. Remember, 50 of americans work for businesses or enterprises that are 50 people or less so it is extremely important that we have something in place that helps those businesses. It is not the same as putting three yeah ceos of mammoth coms in a room with Timothy Geithner and john paulison and say, lets make a deal. This is much more complicated. So we expect complication, but at least there is hope and some relief on the part of investors that well be able to get through this or at least theres some type of effort on a solution and thats what people are looking at after the hysteria of the last two weeks and therefore ed, its a good point that kari makes and i dont want it to be lost on anybody, regardless of what number they come up with and end up passing on the hill, there are people today around this country who are not working and who are worried about feeding their families next week, if not this week, and who are worried about having a job to go back to, that regardless of what the fed does, they may not have a job to go back to if they work in the Restaurant Industry so i get your point that the fed has come out with the cavalry and hired other cavalries to come along with them but those problems are not going to go away overnight for what is the backbone of this country being Small Business so its hard to declare kind of things are all clear to use that as the backdrop. Thats not the expression i youd here thats fair, i did. Thats fair. Look, this is the great virus crisis and its three crises in one a Health Crisis, an economic crisis, and a financial crisis what the fed did is really try to address the financial crisis. And it was awful and it could have you know, they all interact. If the Financial System melts down, the economy melts down even more. So the fed did everything they could possibly do. And its working but the root of all of this, its a Health Crisis it is kind of world war iii against the virus. And to the extent that were treating it that way, during wars, you spend a lot of money you dont worry too much about deficits and debt. And during world war ii, when we did that, the fed agreed with the treasury that he would basically keep Interest Rates extremely low. And thats exactly whats happening now. Scott, weve got helicopter money, is really what it amounts to the fed has, before the Congress Passes the stimulus said, whatever you put together, be assured that we will provide the financing to keep Interest Rates down and to bring liquidity back into the market place. And youre absolutely right. The suffering in this country is horrible i mean, the uncertainty, the stress is horrible i dont know that well be able to stay at home for months its going to have to be weeks and well probably find that well be able to slowly go back to normal in many parts of the country. New york may take longer, because apparently thats where the epicenter is right now lets point out the market for everybody again. The dow is up nearly 850 points. Weve picked up steam a bit in the last 26 minutes and maybe even more recently than that there it is, 21555, lets call the dow there, 850 thats a gain now of better than 4 s p is capturing 2,500, a little over that level. 7,500 is now where the nasdaq is back to that thats a gain of 1 and the russell is having a strong day in its own right joe, i guess i go back to you on this notion of the fed and what the fed has done and its helicopter money this is even bigger. Its like c130 transport money thats been dropped and its going to be here and be somewhat of a backstop. And once youre able tolook out, youll hear people say, its the fed the feds the backstop dont fight the fed, like ed has said and you go back to the playbook of 09 the fed has arrived and its going to be there no matter what, its going to buy everything if it has to. And thats going to provide some sort of stimulus for stocks, or not. Do you agree with that or not . I think when we look back two or three years from now and markets are higher, were going to applaud and credit the Federal Reserve for what they did in march of 2020 what theyve actually done this month has put liquidity in the places that the Market Structure needed it most so i would liken it to the pluming in a house that was all clogged up and the Federal Reserve, whether its the derivatives market, the futures market, or the credit market, by the nature of what they are doing, theyve restored liquidity against that Market Structure. When you restore liquidity to Market Structure, you give confidence to investors that they can utilize the capital markets. I think thats the single most important thing. And listen, i apologize if that thinking is shortterm in nature but thats where the siren, where the fire alarm was going off last week. The markets needed that liquidity. The Federal Reserve absolutely addressed that scott, can i just interject for a second here . If i said no, would you stop . Not in the least. I didnt think so, go ahead the way i look at it, what the fed did is they really helped out the credit markets, they were not completely dysfunctional, but a little bit. But in terms of what theyve done for equities, clearly and directly, theyve done a lot directly, whats really driven equities is not so much the fed. Today, its whats being looked at Going Forward, which are zero Interest Rates now, being kaufrl on that, that didnt help negative rates didnt help europe they didnt lift europe at all and they had negative rates for a long time. So you have to have some caution here, also im bullish because im looking past the next three months, and i assume this goes for three months but im not all in yet i think the market always gives you another opportunity. And when you have days like today, you confuse it with some cessation of the issues happening with the coronavirus and thats just not factual. So dont put it all in but at the same time, i dont want to have to worry about picking the bottom, which is impossible to do so ive got more than enough exposure right now, where im participating to a large extent, and thats how you have to play it, i think. And trade it, too. Hold on, jim. Ill get to you in just a second did you mention earlier, steve, and forgive me if i might have missed it in all the cross fire that im paying attention to and thinking about, did you say that you sold target and peloton and regeneron . No, and i didnt sell them today. I sold those actually friday through monday i think target i might have sold before just because, you know, the costs are going up, but the low margin and target said this, but lowmargin products that are selling. Its not the highermargin products and i went to a home depot actually last week before i dont even know if they shut down or not, they only low 50 people in the store at a time, including employees, and theres a line spaced six feet apart to get in so im not so crazy about the retailers right now. Ive got a lot of amazon ive added to amazon through this process thats where i prefer to play it, because when you see you know, with facebook, also, sure ad revenues are down, but usage is up so much. When it comes time to sell ads again, theyre going to point to this increased eyeball, increased usage. Same thing with amazon, theyll sell more. Youre talking about substantiative changes in their Business Models that will endure past this. Target, im not so sure about that yeah. Jim, go ahead. Ill make fwoitwo points i want to come back to the fed a lot of time viewers saz, what does that mean, dont fight the fed . One area where you can see how bad things got and how good the fed did a job was the muni market aaa munis last week were six times on an aftertax basis what the treasury market is thats incredible, thats ridiculous and usually you see crossover buyers, taxable investor say, why dont i pick up munis when the tenyear treasury is 0. 8 . The reason they didnt come in is because they didnt have the liquidity. Think about who those buyers are. Its hedge funds its banks, banks with their Balance Sheets that are trying to raise capital to meet credit line withdrawals, now theyve got the fed giving them liquidity and say, yeah, okay, lets go buy moveinys. By the way, today, the aaa municipal scale is going down in yield, up in price by 50 basis points thats incredible. That is a direct reflection of the fed. And im an Equity Investor so we havent talked about boeing yet look, its not all on the fed. Its on the government, too. And whether President Trump or congress, both sides have come in and said, this company is simply too important to let it fail give it a little bit of a pat on the back the bill has to be approved, but at least both the executive and the legislative branch of the government are recognizing what needs to be done to save the economy. Boeing is a canary in the coal mine for the economy ed, ill give you the last word i appreciate your patience in bearing with us today. Look, as we all know, were going to have some terrible, terrible economic numbers, unemployment numbers right up ahead for march, april, and may. But then i do think, im not a virologist, so i cant predict exactly how this virus plays out, but i am staying at home with my family, a lot of us are doing that and the reality is, a couple of days into this, were all starting to get cabin fever. And i think once we perceive that its safe to go out again, i think youre just going to see a tremendous amount of spending in the economy by the way, i also think theres going to be major supply chain shifts back to the United States i think companies are starting to think about it as a result of trumps trade wars but now as a result of this virus, i think this the focus is going to be on stable, predictable, safe, close to home supply chains as opposed to the most efficient ones, which all seem to have run through china i think we all have to consider, and i know jim and david this morning were having this conversation, that the world may not go back to what it was like previrus i think youre right. But you just said theres going to be this tremendous amount of spending no, no okay, what i i did say that i thought supply chains would change. That part of the world will change pretty dramatically i think that, youre right, it could wind up being just a few quarters where we just had this extraordinary relief and pod impact on the economy, but beyond that, we still have lots of other issues, like demographic issues that have suggested were going to have slower spending on a trend basis. But all in all, i think we all just want this thing to be behind us so we can get on with our lives and it may not be the way weve been conducting them up to now, but life will go on and the economy will recover and the stock market will move higher well make that the last word for this segment ed, thank you for joining us be well. Take care of yourself. Well talk to you again soon well take a quick break, come back and talk about the hunt for yield in this market battered dividend stocks you may want to start thinking about well debate that straight ahead. 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In its wait, what can you tell us scott, there was a copy of the legislative text that was circulated among lawmakers before a call with the treasury secretary this morning, which i was able to obtain and ive been combing through it for the last couple of hours and in it, there are some notable restrictions on what companies who received these government loans can do with their cash flow. Notably, there are restrictions on both buybacks and dividends for a company that takes out a government loan, they cannot buy back their stock for 12 months after the loan is repaid and while that loan is outstanding, the company cannot issue a dividend on common stock. There are also, scott, some restrictions on compensation for Companies Whose executive officers at these companies, who take this government aid its fairly complicated legal language i want to make sure that we understand the specifics of that exactly. But for those wondering whether there will be restrictions on bonuses or exec comp, it does look like thats in there, as well very interesting. Kayla, thank you so much i want to get right to our gang and kick this around come back on if you have anything else. Certainly happy to have you. Thats Kayla Tausche in d. C. With the latest. Okay, steve weiss, so, you take a government loan for one year, no buyback, no dividend, your thoughts because buybacks and dividends, for many stocks, have been a certain stimulant over the last, i dont know, ten years, minimum. Yeah, thats absolutely right. And at record levels i want somewhat fell off in 19, but, look, if thats the price of staying solvent and being in business, its really not a choice to make clearly, it will minor some of the investors that can buy, particularly institutional funds. But, you know, i think its a small price to pay and absolutely legitimate, to tell the companies, this is how you have to spend your money, until you pay us back. So im all in favor of that. So, joe, i dont know that anybody, frankly, on this program over the last many years has talked about buy backs and kept track of them as closely as you have so if the landscape is changing, how does your perspective on which stocks you may want to own . Well, it lends evidence to what i suggested yesterday, where youre going to see a significant divide in performance in the s p and youre going to have an echelon of stock that are able to allocate capital to their shareholders, and then youre going to have others that can t cannot and i certainly dont want to invest behind those companies that are unable to do so im just sitting here thinking, i know many people have talked about it, what is Warren Buffett thinking in all of this . So Warren Buffett, a huge fan of buying back stock. Airlines, unable to buy back stock after this thats something thats going to be very interesting to see how that plays out but i think the divide is going to be incredibly important looking forward. Who can allocate capital to shareholders and who cannot . And thats going to direct your Investment Decisions youve got to think even bigger. Its like airlines, its other areas of hospitality, big hotel stocks well, what i mentioned airlines, its what we know that Warren Buffett is significantly invested in. For sure. Your point is well taken im just saying, its even a bigger issue than that meghan shue, your reaction to what kayla reported . I think that the buyback news is important and this is something something that we were expecting buybacks to be reduced this year and lower than historic than they storkly have been anyway because you tend to see a little bit more caution around that ahead of an election year. So this is definitely going to push that. Any boost from buybacks. And it could spill from those companies that are getting aid to those companies that arent getting aid, because the taint and the negative tone that there is to buybacks today so from our perspective, for the broader equity market, this is definitely a headwind. And i think you need to be looking for companies that are going to be generating their own growth organically, not necessarily from dividends or buybacks Going Forward what i suggested, kari, for arguments sake, ill just throw the other side out there, that these companies that are taking government aid are doing it not out of any fault of their own. This was a disaster. It wasnt a financial crisis brought on by the careslessness of executives. I know people are screaming, well, they should have saved for a rainy day. I get it i totally get it im just throwing out the idea of, this was a major disaster. This is disaster relief. Should any company be punished i think there are two pieces to that question first, of course, its a disaster its a health care pandemic. Its out of their control, definitely so, the simple answer is, they couldnt control it and if theres no one in a hotel or in a plane, its not their fault. However, i would like to push back a minute. If you take, as an example, marriott they bought starwood and paid a very, very high price. There was a bidding war, they bought it, took on a huge amount of debt. Thats a choice. If they cant make payments on their debt or are squeezed because of it, thats selfinflicted so in some cases, theres a company thats just operating and bam theyre hit with a shutdown because of the coronavirus. But if there are cases where they took certain actions at very high prices that added a lot of leverage, because they assumed that it was just blue skies ahead i think theres a price to be paid these airlines, over the last decade, theyve spent as much money buying back their stock, nearly, as theyre asking for in a rescue its like 45 to 46 billion, when youre in need of what is now 50 billion. Your point is well taken, but again, i is buying back stock considered being careless with the Free Cash Flow of your company . I dont know i dont think it is theres a fine line sometimes it is ibm it was but the bank stocks, post 2008, and the ones that took like aig and took aid from the government did quite well without being able to return capital to shareholders i dont think thats going to keep people away from them what will keep people away is the stocks doubling before the recovery, before people are back on the planes. These are exceptionally capitalintensive businesses, so theyre going to need that capital to come in how about if i tell you that not buying back shares is bullish. Lets do a thought experiment here i take it for granted that share buybacks will be ver boaten, at least for companies that take aid. If these companies are generating a lot of Free Cash Flow, one is pay the dividend, but the other is pay down debt and the average debt to equity ratio will go down that means that credit spreads will go down because there will be less corporate paper out there are for fixed income managers to buy. So lower Interest Rates on koem Corporate Bonds and higher dividends. I submit to you that thats still bullish in the long run for stocks so ultimately what this comes down to is Free Cash Flow generation jo i dont care how it gets distributed to the stakeholders in the company, as long as Free Cash Flow is being generated upon and improved upon, thats good for the stock market. And and ceos make less money. I want to call folks attention once again to the market we continue to add to these gains and you have the dows at 21777. Now its better than 5 . S p 500, 2528, thats 81 points. Thats 3. 25 and theres the nasdaq again it was fairly negative when we came on the air, its up 121 points as well today go ahead, steve. Youll also have having studied quite a bit in corporate governance, youll have ceo comps come down, because they wont be able to move the stock price up with buybacks in order to hit its certain triggers on their compensation packages. And thats pretty important. And its also one of the and this isnt going to be broadbased. Were talking right now for the companies that take money. A lot of companies are going to take money. Were not talking about four companies. Absolutely true but youre also going to see major m a. I dont know if the bill says anything about not being able to buy other companies. And what buffet says is, sure, he likes buybacks, but he also says, if i cant find anything to buy outside of berkshire, ill buy my stock back so not that thats his number one plan whos that, meghan . This is meghan . I think youre making a really good point. As we look through were always trying to look through to the other side of this when we come out of this, whether its after one quarter or two quarters, it will probably be a relatively short time frame, what does that other side of the market look like on the recovery . Typically, you would look at valuetype of stocks to do very well in that environment but the point youre making about dividends is important, because a lot of those value names typically rely on a high dividend to attract or a dividend yield to attract investors. We look recovery, when it eventually comes, is going to be led by growth oriented names. Youre able to get those Technology Type of stocks on this longterm trajectory, generating their own growth and not relying on buybacks and dividends. Typically in a recovery you expect value stocks to bounce back aggressively, we think it might be a diversified buyback and growth will do as well as value on the other end. Can i make a point . Carrie, yes you can. What megan said is true the market rose on the back of technology stocks. They had the biggest gains going up into the peak coming down, theyve performed better than most of the market its not exactly. Right they performed better because i think theres been anticipation that organic growth and the technology or digital Platform Companies have to be the ones going to lead again. They out performed and i expect that will continue the companies that got a premium, a big premium, because theyve been buying back so much stock will not be able to do that. The opportunity is going to be in the credit markets, unquestionably think about Financial Institutions youre not going to buy the equity youre going to buy the debt american express, wells fargo, aig, theres opportunity on the debt side. The world of post 2020 when theres some resolution, theres going to be an environment where if you have a cash rich Balance Sheet to megans point, if youre able to exhibit growth, a premium will be paid for your equity price growth is going to be so incredibly challenged looking forward. If you think about how challenged growth was in the last five to seven years, now compound that with the circumstances and economic freeze growth is going to be so challenging. Its going to create a wide divide in the s p between the haves and have nots. Lets get to some viewer questions. Its been a while since we did ill throw out a couple questions to the group lets take a question from barry in chicago can you talk about 401 k s some of us only have access to the market through our 401 k . When should we get back in if our timeline is five or ten years . Jim, thats a good question for you. Yeah. Well, as im hearing you ask that question, im thinking one of the beautiful things about 401 k is usually one month you get something taken out of your paycheck to put in thats exactly the way to do it. You have decades usually i dont know how old the questioner is. Most people have decades before theyll use this in this bear market, bear markets generally take a couple years to recover keep buying every month. With your 401 k youre thinking 20 years out and youre in fat city right now youre like warren buffet his words an oversexed man in a harem. Jim. Its his words not mine. I dont know if he said that publicly. He did. Well go back and check i want to go to carrie i think we had a big drop in all the Service Providers because whether its hospitals or insurers, nobody wants to touch them a number of Drug Companies are working on products or types of vaccines you can buy the larger Drug Companies, merk, pfizer, lily because theres a future for them even if right now theyre challenged. Steve weiss, lets talk about rates. Is stored capital the easy answer or are there other options . There is a place for a number in the portfolio i like agree because they have the Blue Chip Client base just signing up walmart i dont see the risk that you have in store. They transitioned the company completely from the old circuit citys and radio shacks to lowes and walgreens. Theyre on a strict rent basis i added to agree again i also added to crown castle its been a long time since this stock sold with an over 4 yield. With my 5g this fits perfectly in it. This is going to be a huge stock. There was no reason for it to decline with rates where they are. Expect to see it pick up again. Joe, to you john in california bought a small amount of exxon at 81. 57 he said would it make sense to match the quantity to lower my average cost no, not in the energy market. I would not do that. As i said, the opportunities with going to be on the credit side im not adding to energy at all. If oil is telling you anything, its that that is going to be the contagion spot Going Forward. That cant be solved by the del se ferarerve or administration. Well take a quick break and be back straight ahead vo quickbooks salutes the grit and determination of those who work for themselves. Theyre the backbone of our economy. And in these challenging times, theyre adapting to support their communities. So be sure to support them in return. Intuit quickbooks. Every time it takes care of something for us, we celebrate. How often does that. Got it. Servicenow the smarter way to workflow. Were back one more reminder about our special event at 7 00 eastern. Its a special town hall, pandemic and the path forward. Ill speak with gary cohen, mark cuban, nasdaqs president and ceo, john rodgers of aerial investments and Scott Gottlieb please submit your questions and use cnbcpathforward final thoughts im looking to actually trim a little bit as we get to the close, but still be way more invested than i was a week ago. Were not going to have time for everybody. Guys, thanks so much dallas higher by 9. 23. Kelly evans picks up breaking News Coverage right now. We do, scott. Welcome, everybody im kelly evans. Stocks are taking off midday with optimism jumping as the senate strikes a deal. Many details still arent known and it hasnt been approved out of the house promising news out of new york in its coronavirus the dow briefly up almost 1,000 points s p up less than
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