Transcripts For CNBC Squawk On The Street 20240713

Cramer, david faber coming to you live from separate locations this morning its risk off following those onemonth highs from yesterday empire and retail sales for march were abysmal the worst on record. Below Expectations Oil below 20 earnings from citi, goldman, bank of america showed the major banks are, as expected, bracing for a wave of defaults some more than others when you look at the percentage of the total loan book at jpm and city. Jpm is the one that people decided wasnt that great. When i look at it, i think it had to do with tone. Jpmorgan, the crucial lines were something that were uttered by jamie, which were, look, may is not realistic. It will be june, july. The problem with basing everything on that is that you dont realize these banks are much more much better prepared than we thought you have a citi thats down from its tangible book value, its actual youll have multiples that are incredibly low because people feel the dividends are in question yet you have a tremendous amount of capital with these banks. I dont want to go against a market that decided the banks are no good. I will say that judging by what you have seen during this last 30 days, these numbers are better than expected im not saying buy them. Im saying they are what they are. Theyre all going down i thought they were in each case better than what the stocks are indicatin indicating sorry im here we saw the reserve builds yesterday from jpm, of course, and from wells fargo seeing the same today. The question that went on, as we watched those stocks turn around, the bank stocks, the overall market up 3 , was how much more. This morning citi also adds to reserves theyre at 20. 8 billion. 2. 91 of overall assets. Goldman sachs has 930 million in reserves 3 3. 2 billion reserve position. The Investment Bank had the second best quarter ever in terms of revenues. Wasnt that weird yeah. 2. 2. 18 billion in the investme bank and bank of america has 3. 6 billion to its reserves. In consumer, of that 3. 6, 2. 3 was for consumer that was interesting the granularity is encouraging. Brian moynihan at bank of america does remarkable work if you look at the state of washington, things have leveled out there. They went down, then theyre okay the whole volume of everything, if you want to look at it, for bank of america is not terrible. Bank of america makes a case for state by state bank of america makes a case that we should open places im looking at these things through the eyes of what the governors are saying and what the president is saying. I was heartened by the state that did it right, though it was in conflict with the federal government at times, makes me feel Like Washington should be opened if you have more numbers that indicate things went down and then are back up, not all the way back to where they were and it turns out february was incredibly strong, then you can open things. Isnt that the debate with these banks . Its not what the dividends are or what the what the bad loan qualifications are, but what do they look like in terms of giving you a signal that we can reopen the economy im saying theyre not that bad. Maybe you can make a case it shouldnt be so binary some parts of the economy should be reopened and maybe reopened next month jim, we used to look at loan book and slice it a bunch of different ways, exposure to energy and housing will we start slicing loan books via exposure to states that have reopened exposure to washington i think thats going to be how well look at it for the overall economy and the stock market i didnt like wells fargos oil and gas. I think theyre the theyre the riskiest i didnt like the wells fargo call at all. Other than growing numbers about deposits, i got no assurity from wells. Bank of america made me feel like the country is in a slowdown, its a rerecession its nota depression jpmorgan, they were the most touchy feely i wait to hear what wilf said. To me, jpmorgan was like, i dont know its all right i like bank of america i know it doesnt matter i really like city, and that Means Nothing at all city is so far below tangible book value it cannot be explained other than the fact that were going to be in depression i dont think were going to depression once again, i can see people saying, my god, kram ser cramero bullish. No, i see the stocks when you look at the make up of the quarters you have a reason to not want to jump off a cliff. I dont want to hang myself. Im not hanging myself after listening to the banks there you go maybe wilf will hang himself hes over there. I love seeing another person its an incredible thing hes distant from me hes probably on the 20yard line, im in the end zone but to see a person is hopeful it makes me feel like something could be the way it used to be wilf, you look great what else is new wilf is like two people, too. Hes so tall hes got that going for him. Plus hes on the phone. Hes making calls. Hes doing things no mask hes like the president , last time ill compare them i would not view you as being bullish now either i listen carefully to what you say. Thats not what my takeaway has been some people say cramer is in asuit. What does that mean . Im in an insane asylum . Im jimmy chill. He used to live next door to me. I did go to gumby in 1999, i think hes referring to my halloween costume. It was nice to see eddie murphy rephrase that feels like a lifetime ago. You talk about reopening the state of washington, home to microsoft, the stock which is up 10 this year. So many other companies that are in hightech conceivably providing software to small and mediumsized businesses, you can open up the state of washington, but it doesnt mean the companies that are based there are necessarily going to be doing particularly well as they watch so many of their customers struggle to pay bills. Right if i were the state of washington, i could say you could have contractors do a lot of work. They wear n95s you could open up the doctors, the dentists they know how to wear masks. You can make the case that people can gather in some way that does not make you feel like people will get sick the state of washington is ahead of everybody else. Micha micha michael corbat, they had asia. There are some green chutes. People will hate me because washington is considered democrat, they will think im antitrump theres good news, bad news. Citi reminds me of cal fed in the 80s when the tangible book value is twice what the stock was. The tangible book value was scrubbed by the government citi was owned by the government for a while. I dont want to jump off a bridge, but i dont want to have a party. All right those are two extreme outcomes right youre somewhere in the middle well talk a lot more about the banks today. Well talk about these retail sales numbers, which are breath taking we have to get to the airlines and this 25 billion aid packag thats been agreed to in principle with treasury. Well talk to doug parker later this hour. Lets get to phil lebeau good morning. Well talk about the aid package and why Airline Stocks are indicating theyll open higher i have to show you the new numbers from the tsa we track this every day. They tell you heres how many people were screened in terms of passengers and crew members at all the airports in the u. S. They hit a new alltime low yesterday. 87,000 thats how many people were screened at all of the airports in the United States you have to wonder if it goes much lower than that 87,000 thats how much it was yesterday. I know you see 90,000 there. That was a couple days ago look at how the stocks are indicating they should be trading higher at the open in part because they have some certainty at least over the next couple of months when it comes to meeting their financial obligations, now that they have reached an agreement with the Treasury Department on these payroll grants we wont go down the road of all ten of these and how much they are getting from the Treasury Department well talk about the big three first off united it has not allowanced the final total, it is expected to be around 4. 4. 9 billion that it will receive both in terms of a cash grant as well as a loan 30 of it will be made up in terms of a low interest loan to treasury delta, 5 5. 8 billion american excuse me, delta was 5. 8, america at 5. 4 billion. When you look at the big three, theyre getting close to what they were expecting to get, maybe a smidge less because this is essentially oversubscribed. All the airlines came to treasury and said we want a piece of the 25 billion. Dont forget, well be talking with doug parker, chairman and ceo of American Airlines you do not want to miss this exclusive interview coming up today on squawk alley at 11 00 a. M. Really what you want to focus on with doug parker is not only the nearterm and making sure they have the liquidity in place and the fact theyre going to borrow more he already said that but the question is where is the bottom when do they start to see some bookings whether its in june, july do they have any indication when they expect that to happen right now, guys, theres very little in the Airline Industry at least domestically in terms of when things start to improve, at least a lettittle bit. Phil, to clarify for viewers, the no layoff agreement takes us through the end of september is that correct . And the other thing is summer fares, which got ridiculously low, 90 round trip new york to orlando, i see some evidence that those fares are coming up for the coming months. It doesnt matter how low you go on these fares. Were in an environment now where people either cant travel because theyre not allowed to by their company or they dont want to travel they decided, you know, in this environment i dont want to be out. Why should i go to a particular destination if the restaurants are closed, if im not able to go out to the theaters sh s or theme parks. At some point it becomes ridiculous in terms of how low you go with the fares. All the airlines have said we believe theres a base thats where they are. They will probably come up from there. We wont see them skyrocket. Phil, if you told me that something was different about the plane, im ready to travel maybe ultraviolet light. Maybe they pull out seats. My wrife and i want to take a trip well go to a place that we know is secluded that is a retreat. We have to go through milan airport. We dont like that can the planes be reconfigured so we dont just say, you know what, youre going right to the hospital when we land . Theoretically, could they pull out some seats . Yes. Will they do that . No heres what the airlines will do theyll do similar to what delta decided to do. Delta is not putting anybody in the middle seats delta is boarding people in groups of five at a time theyre trying to make it clear to people, social distancing is what youre going to have to practice when you are flying i expect all 9 airlithe airline move in that direction some people in the industry have discussed do we offer folks a mask when they get to the gate they can say, i may not always wear a mask, but im deciding im going to wear a mask here or when they come into the airport, before they go through the tsa checkpoint those are all possibilities. Its all about making people feel more comfortable and ensuring their safety. By the way, all the airlines, theyre wiping down these planes theyre disinfecting these planes if theyre not doing it on a nightly basis in terms of going through and disinfecting, theyre close. They realize the importance of convincing the flying public that theyve got to feel safe. The question im getting this morning in conversation, and you raised it already, and will with mr. Parker, come september or october, when this money conceivably starts to run out, are they going to need more . Giving those stunning numbers youre sharing with us, even the idea of it coming back slowly over time, its easy to imagine theyll come back for more money. Yes, in a word, yes they will have to come back for more money its all about how quickly travel comes back. At this rate theyll have to come back and ask for more money. We also could see payroll reductions in the fall if things dont improve. Phil, well see you later this morning with doug parker. We have retail sales, empire and now Industrial Production. Lets get to Rick Santelli yes Industrial Production for the month of march, we will capture some of the effects of the coronavirus on the economy what ihave not captured yet is whats coming with the numbers which are a bit slow let me go to the charts. Well get to the numbers if you look at a twoday of twoyear, i picked two days because its important to see how much the markets have moved with context how the short end is compressed. Basically in a macro way we move from 25 basis points down to 20 basis points as you move down the curve to tens, what youll see is kind of 77, 66 much bigger move the long end is where the action has been if you look at 30year, even more dramatic in terms of how rates have melted down and finally here we go on the data down 5. 4, down 5. 4 on Industrial Production and, of course, you know the last time we would comp this number january 1946 january of 1946. When it was down a little over 5. 5. Utilization rates plummeted to 72. 7 and of course we still have more data to come with business inventories. Dollar index is my last chart i want to go to. If you look at a twoday of the dollar index, wow, its up about a penny. The dollar index rising here is just a barometer that the temperature of trying to procure dollars through this added volatility weve seen the last 24 hours will be difficult Great Stories on how emerging markets are trying to deal with it all in all, rates down, dollar up does give us more heated temperature for the Global Economy today. Carl, david, jim, back to the three of you all right well see you later on we want to get to meg tirrell this morning on a couple of stories. One is this report that remdesivir trial has been suspended in china but the big news this morning is about this new serology test out of abbott. Yeah, carl. Abbott is announcing it will start shipping this Antibody Test tomorrow in the United States this is a test to determine whether people have already had the infection. And it can test for those antibodies specifically testing for one antibody called ipg. They are looking to immediately ship 1 million tests in the u. S. And 4 million for april. Theyre hoping to ramp up to 20 million tests in the u. S. In june this is the third testing platform that abbott launched for covid19 it also has the rapid point of care test that can be done in 5 to 13 minutes. Of course, youre hearing about all of the testing, being able to offer this different type of test may help a lot to learn about the infection and hopefully whether we have the antibodies though the science still has not fully answered that question i think the thing that haunts us no meg okay the thing im trying to figure out, david and carl, if you had it, does it matter maybe you can get it again one thing thats novel this thing has been ahead of us the whole way. Its been one step ahead of the pos posse. Were the posse. Now we get the notion of whether you had it maybe it doesnt matter maybe you can get it again we thought mortality would be low. Mortality in new york is over 6 thats unheard of. We thought this thing, you could detect it when you fist got it we only discovered now that maybe we have tests that can detect it. We also discovered its not well distributed because its done by the states, the states are relying on the system of testing and no one is ready for the testing. I guess what im saying, every time we think they have this thing and ill include Johnson Johnson and talk about that on the mad dash, every time we think we have covid19 it outsmarts us we have to start thinking as if its a fluid enemy that is just beating us and beating us. Hence why you have dr. Fauci fauci knows this thing is triumphant so far. The president thinks hes triumphant over it we have to imagine it as a as an amorphus enemy not to mention the false negatives that you lumped in there as well. Which is carey you hear ant totally somebody tested negative numerous times only to wind up very sick very quickly and having it on the fifth time they were tested they found out that they had it that said, there is hope certainly for these antivirals they are moving along. Some of them rather quickly. Some are for people in the hospital to be infused i have been talking to people that we brought on who are working on an oral antiviral that conceivably and it moving quickly by the way through trials in the uk conservably could be something that treats people at home the moment they think they have symptoms thats the abbott home test that could be a bridge to the vaccine. Thats the equivalent to the athome pregnancy test that weve been waiting for no, this would be to treat the virus. But you need to know you have it so were talking you know, hopefully by the fall. If thats the case, then you can justify this move. If its not the case and everythingkeeps beating us, th move will be backwards, all over stone age. No trex . No. No . Think of the dinosaurs as a failure, but they lived for hundreds of millions of years. Theyre plastic, you can give them to your kids. Theyll be around forever. Do you think there will be a plastic figurine of faber 200 years from now destroyed from covid dont let it get you stay home. Well take on a im here. Im here apparently im not going anywhere youre home. Your home is now the studio. Jim, stay there. Carl, stay there well be back with more. Were looking for a down open when the markets open in nine minutes after a strong rally yesterday. Resqwkn e re after this isnt just a department. Its a voice on the other end of the phone. A note to say youre on our mind. A willingness to come to you. The world and how we interact with each other is changing. But that will never change who we are at lexus. Now, more than ever, you and your needs come first. Find out what Service Options are available in your area at lexus. Com people first futures are weak as Bank Earnings roll in for a second day and our first big Economic Data points forthe month of april roll in as well. Industrial production, retail sales, empire, all weak. Well get the opening bell in six minutes. Poppy come quick something big. Has arrived. [ screaming ] tiny diamond is my name my whole bodys made of glitter and ill throw it in your face shbecause Xfinity Mobilehen ygives you more flexible data. You can choose to share data between lines, mix with unlimited, or switch it up at any time. All on the most reliable wireless network. Which means you can save money without compromising on coverage. Get more flexible data, the most reliable network, and more savings. Plus, get 200 off when you buy an eligible phone. Thats simple, easy, awesome. Go to xfinitymobile. Com today. Welcome back to squawk on the street. Well try for a little normalcy here, jim, pretending that were back in the old days its a hump day, wednesday you and i would always like to remark on that for the mad dash, youre doing tesla. A name we used to talk about endlessly. David, its time. Goldman sachs, david which happened to report today Goldman Sachs says buy tesla why . Its an Industry Leader in evs its poised for longterm growth david, they love the Balance Sheet. Its got 6 billion in cash they have the edge, the model 3. Its shipping in volume. Theres, i guess, 15 unemployment people want to snap these things up it has a battery efficiency. All in all, i think when when youre having about to go into a depression, when you have dramatic unemployment, what do you do you buy the stock of tesla doesnt that say it all . It does say it all. This is a blue chip apparently with a 1 130 billion market value up 70 this year on that note this does seem to be i dont want to call it the nifty fifty, there are a group of stocks in ascendance. I was going to do that we were trying to make an acronym, it turned out to be a 50letter acronym. It was a whole scrabble board. Netflix, david the race is to figure out how many new netflix customers they have is it 200,000 . 500,000 . Tiger king. When the president was asked about tiger king that was one of the best shows. Didnt you think yes yes. Was that better than last night with benioff and bloomin brand and jean george . Which show did you like best . I think tiger king shows you that netflix would blow away the quarter. I believe that could be the case i have not viewed it myself. We are getting deeper into the catalog. The question for all of these services, jim, they wont have a lot of they wont have a lot of content come the fall winter given the lack of production going on now that includes peacock, which is having its soft launch today, main launch taking place later this summer. Not associated with the olympics as had originally been planned we need fresh content but youre thinking so far into the future come on, this is now stuck at home what are you going to do . Complain youre stuck at home youre going to watch reruns pivotal goes to 490 on netflix a new street high. You were soliciting acronyms on twitter. I liked m. A. N. C. A. V. E. Microsoft, amazon, netflix, comcast, amazon, verizon and Electronic Arts. I like that that is good. We talked about amazon yesterday. Jeff bezos is worth 1 135 billion. And eric schmit formerly of google talked about the degree to which we should be grateful for these services and the way they came along. The benefit of these corporations, which we love, in terms of the ability to communication, the ability to deal with health, the ability to get information is profound. I hope people will remember that we wouldnt be here today, for example. Thats right. So lets be a little bit grateful that these Companies Got the capital, did the investment, built the tools that were using now. Fair . Its good and bad if you run a Small Business like a lot of people do, amazon is not your friend. Every single one of these banks has a page which talks about the companies that basically compete with amazon. I dont think anyone would agree with eric schmidt about that i do think that tech apple and alphabet when they came up with their contact tracing, which was dismissed instantly was a brilliant plan so make it so if you knew whether or not you got it from someone. I will put tech in b plus, unless you want to do benioff, bringing ppe from china. I dont think tech has distinguished itself i think tech has ascended itself i think when this period is over, amazon, walmart, theyre going to be kings. Everybody else will be out of business you can use those parking lots to get tested by abbott. When it comes to blah, blah, sorry sorry, guys i was going to say, david, we have a piece up on jcpenney, they are looking into bankruptcy protection they already closed 850 stores yeah. Thats thats suboptimal. Theyre in a lot of malls. Simon properties, which downgraded yesterday and the stock was up 3 yesterday was a weird day. A lot of negative news and stocks went up a lot of people left confused. The futures were playing the role it is not like people sit there and say, you know what i want to buy the futures, take out simon prop tirertyproperties it doesnt work like that. Everything moves up. Like today, everything is moving down were stuck in a binary world where the market is not that efficient. Its trying to be. Jamie dimon said were not going to open up in three weeks. We have a market thats binary now. I dont think the situation is as binary as the market is making it. He said severe recession and a number of other things the banks are taking it hard today. Im looking at the sampling. Didnt you think he was a downer he was a downer. Yeah. He was a dimon downer a little bit. Perhaps being realistic in a way that maybe the Broader Market is unwilling to accept or just simply thinks the fed will always be there in some fashion to support every asset class when it comes to retail, jcpenney, its not exactly a stranger to financial distress or the idea that it was going to meet that kind of distress if you believed in the call, you buy ulta ulta is down big ultas competed against sephora. The thing that worked the best in jcpenney is sephora when you buy makeup, that presumes youre going somewhere. Maybe youre doing selfies i think ulta is the winner if youre looking for someone to play off of what was the inevitable closing of jcpenney 100,000 people used to work there. Remember that day you reported on the bonds, it was like one of the worst deals ever, you said thats just a dangerous piece of paper. You actually made a judgment and i think that paper is worth what a lot less. Hugely dilutive equity offering. This is a long time ago on jcp, which has been suffering since bill ackman. Is bill sad is he still sad . I dont know. He didnt get the check he wont get the donald trump signed check no. He wont go to Dollar General. He wont be doing that thats true Dollar General has wipes. On the subject of amazon and facebook and google, guys, we did talk about amazon, of course, because of the strength certainly of its overall business aws is seen as more of a jewel as ever before but the advertising part of the business which has been growing dramatically and is an important profitable part of the business given the margins there and more so with google and more so with facebook, i do wonder given the reliance on small and mediumsized businesses in terms of advertising what the hit will be for those companies in that area good point. I know facebook is saying things have not been strong if things get better, then facebook might be the one to buy. If youre pessimist, facebook is the one to sell. There was a fellow this morning on squawk who said well have a v. The Third Quarter will show growth the stock you buy is facebook. Im not as bullish as that i find it hard to believe theres going to be a v. I think some Companies Like United Health are saying things that make me feel better i also feel like when jamie dimon speaks a lot of people listen hes as powerful a voice as anyone in politics that was the one that sent chills through my spine. Hes a regular hes a straight shooter it would have been advantageous for him to say things will get better he didnt do it. That cast appall, and that is what follows today the Conference Call was bed. Youre right by unh for sure, beat by 9 cents. They keep their fullyear guide. Oil is the other downer in the wake of that opec plus deal. A teenager once again. Now the iea is saying that storage, weve been talking so much about at what point storage could reach capacity theyre talking in the coming weeks. Isnt it funny exxon did that big deal you say why do they do a big bond deal if oil is going to rebound . They knew. The companies to watch are these Pipeline Companies just dreamers. You take energy transfer, a gigantic one it yields 20 . Is that sustainable . No i do not think it is how about Kinder Morgan sorry. Thats how itwas pronounced in washington yesterday can it work . I dont know these pipelines are owned by used to be rich people i say used to be when they bought them they were rich this is the group that crushed rich people. I think distribution will go down dramatically. Its something to watch. People started talking about wealth effect. These stocks are owned by the wealthy. Theyve been a disaster. Guys, on the subject of oil and gas, a name we followed closely is occidental. They are paying that dividend in stock to berkshire it looks like berkshire has already registered it for sale no. 17. 3 million shares, relates to the resale by the selling stockholders, affiliates of berkshire up to 17. 3 million shares of occidental they paid them in shares, they registered them and are selling them wow no bottom fish there no flounder . Guess not mackerel . No. Okay. Flying fish . Occidental is awful. I couldnt believe it bounced. Exxon not so great only chevron its chevron, diamondback, eog, parsley which is on today on mad money and pioneer. Those are the only ones i trust here everyone else is in a scrum. I mentioned the ones who have good Balance Sheets and growth all the rest are just be my guest. Including schlumberger, which i used to love cant like that group. Remember esg yeah. These guys were failing that kept me out of them esg. What does that come up to . Even more uninvestable. This is the most uninvestable group ive come across they found too much oil. Theres no place to put the oil. Apache was the worst performer in the First Quarter it bounced big its time to sell apache i think its time to sell occi its time to sell any oil and gas pipeline they are all dangerous these things do trade together on etfs. Sell, sell, sell sorry. Sorry. Sorry. Despite the yield on some of those names, jim, speaking of yield, once again we have a very large name in this case its procter. Upping the dividend again by 6 . Moving the earnings up to friday, which is earlier than expected that comes on the heels of the other move by j j yesterday with a similar percentage increase i would buy procter here. J and j w j j was a remarkable thing before they announced the earnings, they announced the dividend one thing thats happening this earnings period, can you raise your dividend . Buy. Will your dividend be cut . Sell i listened to the wells fargo call wilf and i wilfred frost, he and i had difference i felt the dividendthat shchari c scharf gave me very little confidence about the dividend, gave my confidence about little. Procter announced a dividend early. What does that say they get the zeitgeist of the moment if you can pay a dividend and increase it, thats a stock to own. If you have to cut the dividend, no thank you there it is. Thats theearnings season in a nutshell yeah. Yeah jim, speaking of wilf, lets get across the room. I know hes been listening to some of these calls. What have you got . Also just mention on the dividend before i get to the script, bank of americas chairman and Ceo Brian Moynihan saying even if in terms of the payout ratio its going from 25 to 30 up to 40 , they discussed it with the board, they have three, four times cover for the dividend and i thought that the cfo of wells also clearly confirmed commitment to the dividend on closing bell yesterday as well lets get to the key factor that weve been comparing against all of the banks of where they stand relative to each other in terms of provisions for bad loans. Here we have their quarterly provisions in dollar terms also perhaps more importantly to compare them how they stand in terms of their total reserves relative to their total loans. Citi the biggest increase this quarter, and the biggest level their call starts soon some key factors out of other calls this is for q1 as at the end of the quarter, could rise from here. Ill come back to that point at the end. It would be worse if not for the government stimulus measures the standout areas of concern so far have been within the Consumer Credit cards, within commercial, its been real estate, retail, and energy Goldman Sachs by the way, on this measure would be about 2 2. 5 theyre not a major lender yet were talking about hundreds of millions of writedowns for them. If youre hoping for Goldman Sachs overall earnings to benefit from low lending and high exposure to trading, it didnt really play out the bottom line there being even with a Good Business mix, caution dominates volatility during this quarter. I spoke to the cfo, one standout comment he said, q1 was about techal katechnicals, environments he said were past that because of those stimulus measures q2 is about focusing on the fundamentals it will lead to layoffs and credit losses, but Company Specifics will come through in a way they didnt in q1. On that note f we lo, if we loo big banks yeartodate, you are seeing differentiation Investment Banks performing better than the lenders. Within the lenders theres performance difference based on whether you think theyre safer or not ill come back to what i heard on the call, the cfo of bank of america said in terms of your question about what its likely to be the reserve build in the future, if we thought we were going to have to add more reserves in the fut xhure we wod have put it into this quarter. Thats a different theme compared to jpmorgan and wells fargo yesterday. The line in the Goldman Sachs release, significant net losses across Debt Securities and Equity Investments reflected significant market net losses for investments in public equities, and significant gains in private equities. Is private equity in trouble thats a big question Goldman Sachs, youre referring to their formerly business schooled investing and lending which they spread out across different business lines, and some writedowns there. Is private equity in trouble clearly you dont have to market if youre a private equity company. Its not like they have to take their losses in the way the banks are taking their losses this quarter clearly private equity values will fall in the same way that public equity is, just not a daytoday business. I think that, jim this is not answering your question really, but it raises a significant point about these writedowns were seeing from the banks. Theyre huge numbers and painting the forecast that the banks think significant numbers of companies and individuals may go bankrupt in the months ahead. That said, they are not cash charges. They are writedowns that they book for this earnings and if in six months or 12 months the economy is looking better again, they unwind it and book a big profit in a later quarter. Thats an important balance to factor in. At the moment, were seeing a massive earnings writedown for the banks. Are we yet seeing a big asset Balance Sheet writedown . We dont know the answer to that question yet the share price, jim, continues to suggest the latter. If we look at the yeartodate performances for the big banks, a happenedfndful of them are approaching yeartodate declines approaching 50 that suggests a dire, longterm outlook, not just a bad Quarterly Earnings performance wow jim, i mean, that comment by moynihan, if we thought we had do it, we would have done it this quarter is interesting. People were looking at city and jpm at 2. 9 of their loan book, 2. 3 and say they might be closer to the end of this process, that would be net bullish relative to peers. Is that view misguided no. Boy, these stocks are so hated i felt that were further along. But they are all swamped by the ppp, and those Small Business loans could be a problem i think when i look at what the loan book is, i thought bank of america had a good loan book i didnt think it was that bad people think were going into recession. It doesnt matter what they say. If they go into recession, people dont want to own these stocks when they have to talk about the dividend, people presume maybe the dividend is in trouble i dont want to make light of the situation. The bank stocks are trading on what the bankers are saying is irrelevant and were back in a 2007 situation i dont thinkwe are, but that not what the markets judgment is you know, jim, to your question on private equity, it is an interesting time for private equity overall clearly they are focused on their portfolios of existing businesses they have been notably left out of many of the aid programs available thus far at least in terms of the c. A. R. E. S. Act, in terms of the feds main Street Lending facility and so the question will be do they reek qquity tiz their businesses with dry powder or how do they go about dealing with weakness that theyre seeing in businesses in the portfolios that they have. It does bear watching. Overall private equity and private companies. We dont talk about it often yesterday we were spending time talking about wework and what would appear to be a pretty bleak future for that company. Airbnb is another one worth mentioning it wasnt that long ago, it was a 40 billion value or so, expected to come public the end of this year yep now, jim, they just borrowed another 1 billion but you can imagine those values are nowhere near what they once were because people are not traveling, and they dont particularly want to stay in an airbnb right now if they dont know that who was there before them. No. Look this is a clorox wipe situation, its a boat situation. I listened to Carnival Cruise yesterday, i was like are you kidding me i doubt the cdc will let you go. They have people stranded all over the place the travel and leisure situation is just very, very grim. On the private equity, its interesting. Just three months ago, if you talked to younger people, they didnt want to go into Investment Banking they didnt want to go to facebook or google they wanted to go into private equity these are often the equivalent of the shoe shine boys buying Stocks Private equity is what im worried about, theyre incredibly levered all over the oil market. Yeah, jim were hovering just above session lows early in the session. Oil is back above 20 lets get to bob pisani this morning. Hey, bob good morning. Happy wednesday. We are in the same problem areas we have been in the past couple of months. Energy is the weak point again banks. Russell 2000, small caps, industrials. Consumer staples doing generally better along with health care. We have seen this this movie many times look at the weak sectors the markets are telling you what the problems are its emerging today. Energy is 40 , 50 off the highs. Banks, 40 the russell. This is the same thing i put up. Industrials, up. Industrial Consumer Staples are outperforming down 7 . And health care down 7 . The market is telling you what it doesnt like. Where are we right now in the downturn february 20th and march 23rd, i call that the panic phase. We were down 34 we turned around the next day, march 24th, now 27 off the lows and now, the frustration phase where the markets are going to be choppy . Look at today. Look at the news you heard wolf talking about the bank loan losses high reserves out there. You heard the march retail sales. The worst on record down 8. 7 . 18year lows on oil. Does this sound like great news in the next month . Theres a reason the markets are down today bear in mind this is the frustration phase. The guys were talking about dividends. Johnson johnson surprising everyone with a raise and proshlt a Procter Gamble those are anomalies. Weve seen darden, ford, nordstrom, delta, boeing, the list is going to get longer. There are a lot of lists being circulated on wall street about Companies Whose cash flow has dropped and prices have dropped dramatically and dividends are sky high you should see the lists kohls, for example, nearly a 15 dividend yield schlumberger 13 halliburton is right up there as well ethan allen. Many of the retailers are up there. Hotel Companies Like host hotels up airlines are smaller but still elevated youll notice something about this it tends to fall into a particular group its not across the board. So its retailers, energy, hotels and airlines. Guys, theyre talking about roughly a 10 decline in dividends right now for the year, but again, concentrated in particular sectors david, back to you all right bob, thank you bob pisani as we look at an s p that is as bob said, hovering near the lows of the session 2776. Below 2800 again a lot more squawk on the right coming right back. People know aflac. Aflac . But not what they do. So were answering their questions. Aflac is auto insurance, right . No. Uh uh. Is it Homeowners Insurance . No. Uhuhuhuh is it duck insurance . Nope. Ahhh do they pay me money directly when i get sick or injured . Yeah. Aflac you got it. You know aflac boom get help with Expenses Health insurance doesnt cover. Get to know us at. Aflac dot com. Those onemonth highs getting wound back as breadth is negative march Industrial Production worst since 1946 march retail sales are the worst on record year on year a lot more squawk on the street continues in a moment. Life isnt a straight line. And sometimes, you can find yourself heading in a new direction. But when youre with fidelity, a partner who makes sure every step is clear, theres nothing to stop you from moving forward. Confident financial plans, calming financial plans, complete financial plans. Theyre all possible with a cfp® professional. Find yours at letsmakeaplan. Org. Theyre all possible with a cfp® professional. When yowhat do you see . 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Liberty. All right. Lets get to jim and stop trading. Sometimes you get down. Its difficult to fathom where we are with this disease my hope is j j producing up to 900 million Coronavirus Vaccine doses if trials go well we need to challenge what is ahead of everybody thats the one to watch, and if we get anything that tells us that this thing is ahead of schedule, then people are going to want to own stock so i dont want to be cheer leader no pom poms. Its a difficult time. But j j is the hope right here its up to alex in some ways yeah. You had him on last night. I ask you to reflect on that and talk about tonight glax sew, a French Company and british company. They tend not to be together, but they are everybody wants a vaccine. Without a vaccine, all the things we talk about, social distancing, which is now physical distance. We want masks and testing. But i think what we really want is a vaccine if you can get a vaccine which many people think is impossible for three to five years, life might return to the way that it was. Matt gallagher is the biggest realist when it comes to where things are going car jn c carvana is on fire need to see vaccine. A lot of things are in the balance. It can be beleaguering to watch the bank stocks go down. But i cant cheer lead it at all. Jim three to five years, jim, for a vaccine . The bears are saying three to five years and a lot of the bears have a lot of street credit a lot of people think this can come back in various forms and its crafty. I hate to demonize it, make it too human, but it is confidenty i crafty illness well see you tonight good wednesday morning, everybody. Im Carl Quintanilla with sara eisen and david faber. Were getting business inventories. Well get to Rick Santelli for that it is february numbers. Its on the older side, but nonetheless, we need to keep track. Inventories down four tenths of one percent. Thats the weakest drop on a month over month basis from august of 09. National association of Home Builders housing index well aim for cherry blossoms. We have snow here in chicago ill take this, rick. Definitely Builder Sentiment in the Single Family Housing Market is down 42 points in april to 30 on the National Association of Home Builders wells fargo index anything above 50 is positive. Not only was this the first negative read since june of 2 4 2014, it was also the largest withinmovant drop in the history of the survey which dates back to 1985 the expectation was for a drop to 55. The survey was conducted from april 1st to 13th. Its the most current read we have on the builders to date of the indexs three components, current Sales Conditions dropped 43 points. Sales expectations in the next six months fell to 36 and buyer traffic decreased 43 points to 13 Home Building was strengthened and new home sales in march hit thehighest level in 13 years construction was deemed an essential business by the federal government during the coronavirus pandemic although, certain states new york, new jersey, pennsylvania, washington, michigan and vermont have shut down most operations sentiment fell across all regions but most sharply in the northeast and the midwest. Back to you guys thank you very much. Lets get back to the Broader Markets here dow session low. Down about 600 points. Joining us on the phone line this morning is lori cavasina and dan suzuki thank you for joining us good morning. Good morning. Lori, we knew this period would come we knew that once we got into april wed start seeing economic metrics that more fully reflected what happened in the latter half of march how surprised do you expect equities to be in the coming weeks when we get more of these . Well, its interesting. The chatter with people i was talking to yesterday internally and clients, no one really understood why the market had been rallying so much, and thats really been the conversation over the past week is kind of what were the buyers looking at so i think whoever it was that was actually doing this buying over the last week or so, they are surprised by this data frankly, i think a lot of investors have been expecting us to retest the lows i think its a mixed bag in terms of who is surprised and who isnt. So are you looking for a retest of the lows or how much do you think this 50 retracement needs to be unwound given some of the data rolling in the way i put it is i am keeping an open mind about whether or not we saw the bottom on march 23rd, but im not convinced. And one of the reasons why i havent quite been convinced is i dont think we ever got clear capitulation my favorite stat you look at retail investors, bears up to about 52 financial crisis they regularly hit 60 and got up to 70 . I think that will go down in history as something more akin to the financial crisis as opposed to just sort of a growth scare which is where the 50 psps measures top out at. Dan, we saw a school of macro desks who expected us to go back and retest some of the lows, but they were taken aback by the speed and you could see creativity of the fed. To a lesser extent, congress how much of that lessens the case for a complete retest i think that all the stimulus helps and theyre doing the right things but i think the bottom line here is as lori mentioned, you havent seen the things in place that would imply market bottom here and i think theres some confusion going on in what you should focus on. I think that when you look for a bottom, you just look for some signs the economy is Getting Better or it starts getting less bad. Were so far away from that with profits and all the indicators crashing to the downside we need to see signs even in the high frequently indicators that those things are inflecting the other way. Were far from that right now. And this idea were getting this buying opportunity of a decade or of a lifetime, it seems farfetched when the market, its hard to argue the market is the problem going into this the market was assigning the highest multiple in two decades on peak earnings late in the Business Cycle informal when you combine that and say whats the potential downside you have to take the multiple level down to a normal level, lets say 15 times and the implied earnings anybody who followed Cyclical Companies knows you dont want to value on peak earnings. Take the earnings numbers down and combine it, it implies theres still a lot more Downside Potential in the market you talked about stimulus. Right . But stimulus talks about is it an attempt to get the economy back to normal both the economy looked normal six months from now . Six months from now, eight months from now . My guess looking at where china is that were going to be 85 of capacity by then. If you tell me if you told people forget the net quarter or next six months, that six months from now regardless of what happens now how bad the data is the economy is going to be running at a sustainably 15 lower run rate, thats basically a recession in itself. Theres going to be second and Third Order Effects that are going to be accelerating the new daily case feed and infection rate is slowing. Just listening to both you and dan, lori, i think theres obviously consensus that theres a lot more bad news coming whether its on the virus or economy or earnings or the market so youve got this consensus trade saying were going to retest the lows. Its no wonder weve seen a 25 rally. Thats the pain trade. Isnt it yeah. And look, i think dan brought up an interesting point on valuation. Our guess for 2020 earnings is 125. Our guess for next year is 153 when we look at the numbers we think you could have made the argument if you were in the right neighborhood a few weeks ago, they dont look cheap anymore. On 2020 number, its a 20 times multiple i think it made sense the rally we have. I think you got good news on the virus. We saw some plateauing the stimulus helps and matters but did we have sort of that valuation sign of relief and has it played out . I think thats probably what were dealing with now were confronted with as dan mentioned the second and third derivative impacts the skeletons starting to come out of the closet. I think its concerning yesterday and today were not seeing the banks trade up. Were really seeing that investors have managed to be surprised to the downside somehow. And that may be a combination of whats gone on in the quarter. That may be a combination of outlooks thats telling me that weve sort of exhausted that valuation opportunity the market thought it had for a little while. Its a really good point about the banks, dan, and just in terms of the data, weve gotten so many bad numbers just this morning diana reported the housing number which was really worse than expected. Pretty shocking. Industrial production, retail sales. Numbers that we couldnt have even imagined weve been seeing and they look a lot worse than they did during the great recession. The Market Reaction has been pretty interesting if you look at all those shocking jobless claims numbers over the last few weeks showing 17 million americans filing for Unemployment Benefits. Most of those were up days in the markets. How do you make sense of the disconnect there yeah. I think right now theres given that were in unchartered waters, i think the market is left concerned with the magnitude of the downdraft and more concerned about the duration of how long this lasts. I think thats where the bigger debate is. You can almost see any number is reported and youre not going to see the market react much from here because basically the consensus is the economy is going to be operating as close to zero as it can be until we can start to get the economy getting back to normal so its less about the magnitude and more about the duration. And thats why i think theres some theres risk because i think right now the only data the market is looking at and focussed on is high frequently data which you can throw out the window and more importantly, the extra rates and the fatality rates and things like that. I think the issue with concentrating simply on the covid related is that as i mentioned before, those are actually going to start to peak out and slow but those second and third order derivatives are accelerating as that happens, on some level, the catalyst for the recession doesnt matter because you start to see the second and Third Order Effects with lingering effects and multiple effects on each other talking about cap excuts, layoffs, business closures and defaults those are long tails on them as they start to quick in and accelerate, it almost doesnt matter people talk about animal spirits when the economy is booming but those animal spirits work in the opposite direction as you enter recession. And thats the concern i think its going to last longer and then youre going to be able to see those data points less crazy levels than you see today, but youll get some real idea of the other side of this yeah. And if i could just thats a good point, dan. As youre talking go ahead, lori sorry i wanted to jump in on the duration point i think dan makes a good point there. When we surveyed investors a couple weeks ago we found they felt we were going to get back to normal in terms of life and Business Activity the second or Third Quarter of this year two data points this morning that made me wonder if that assumption is being tested and disappointed one mayor blauz owe apparently said on another network we might get back to normal in september. That was i think a little out of sync with Investor Expectations to me. And i believe one of the companies that reported this morning said something about the possibility of a recession lasting to 2021. I dont think thats investors radar. We need to watch that discussion closely. Thats where were starting to get incremental bad news we werent hearing about a couple weeks ago. Yeah. As youre saying this, lori and dan, the Goldman Sachs cfo saying while we feel comfortable maintaining our dividend, we are reexamining Forward Spending plans dan, to your point about the second order effects one last thing, lori, and i dont mean to place more value on it than it deserves but why did the vix get below the 50day faster than it took during the financial crisis and is it really suggesting a spike, a reemergence of the volatility later in the summer . I think everything is just moving so much faster than what weve seen in past crises. Part of thats just the influence of the system traders, the funds on the street. This is just unfolding so much more quickly i think were seeing it to the downside and the up side but i would absolutely not rule out further volatility spikes into the summer months i think one thing it seems like every time we figure out what the market is focussed on today, it turns out that the narrative changes a little bit i thought jim was making good points earlier about the vaccine. Now that weve gotten plateauing in the viruses, youll start to see the vaccine, the treatment discussion thats going to become more in focus, and theres a lot of uncertainty i think that could contribute to more volatility. Lori, dan, very good discussion thank you for that see you soon sara big hour still ahead for you. World Bank President david mallpass joins us in about a half hour, and later the managing director of imf ngo anywhere. Were back in just two minutes welcome back we want to explore now the topic of aid to Small Businesses around the country given the various programs available to them and the question as to whether the funds are actually getting to those in need and for that we bring in davided toson, an investor and adviser to over 30 Small Businesses across the u. S you commented last week on the programs that were available to Companies Like the ones you advise you gave the program so far a c minus or maybe a d plus one week ago. Have your grades improved since then no. In fact, it might not even pass the class. Washington d. C. Is debating whose signature gets to be at the bottom of the check. Time is running out. This week Small Businesses reported 28 hkt of them, 28 of them said they will not make it to the end of the month. Meanwhile we have a massive disconnect between whats happening in washington d. C. And whats being said in washington d. C. And whats happening on main street in Middle America. Ill give you an example with the ppp. They said 75 of that money had to be used for payroll if theyd only ask Small Business, they would have found out that 50 of Small Business expense is for payroll the rest goes to other uses. So why are they being asked to take on this debt burden when they cant use it for the things that keep them open . 30 of Small Businesses have said theyre not going to apply to the ppp why . Because of the red tape. They dont trust the government and the program doesnt line up with their expenses. Look, apple might be sitting on 200 billion of cash but thats not how it works in Middle America most Small Businesses have two wee wee weeks supply of cash. They cant issue stock we have big business advising the u. S. Government an how to handle Small Business. Its not working yeah. Well, you i know youre aware of about 31 companies that have applied. How many have gotten the funds they need that youre aware of great question. One. And i cantell you this all of them applied on day one on the friday it was available, one has their cash and thats why whats the problem . The sba is reporting how many loans have been approved but they are not reporting interestingly, how Many Companies have cash. And thats the reason why. They dont have the cash you know, professor, im also aware of something perhaps unexpected theres been an increase in Unemployment Benefits. You need a certain amount of Staff Members to be able to actually apply for some of these loans or grants. And im aware of some businesses that have lost employees who would rather take the higher unemployment benefit even though it may not last that long because it represents more than they were making at the companies and then the companies are not eligible is that something youre hearing . Oh, exactly and thats the perverse thing thats happening again, its why no one in washington d. C. Or in manhattan bo bothered to asked whats happening in Middle America. If you make around 50,000 a year or less youre better off taking Unemployment Benefits thats insane. Now you have employees making this difficult choice. Would i rather be laid off do i want to quit . Companies are facing the situation they say i have a ppp loan which doesnt really work for me maybe im better off laying off my employees they want to be laid off to see what happens and then what happens at the end of the eight weeks . Whats going to happen at the end of the eight weeks is theres a cliff. And no one has thought about that cliff while washington d. C. Is arguing about who is responsible, whether its the governors or imf or the World Health Organization, no one has told Small Business what happens at the end of the eight weeks standing, david, this is the banks fault or the policy makers in washingtons fault when it comes to fast tracking those loans into the hands of Small Business owners . Ive heard of bankers in america working tirelessly to make the loans theyre working on the weekends and doing everything they can. The problem is the banks remember what happened in 2008 when they made guaranteed loans and in the Obama Administration they came back in the justice department, started going through with a fine tooth comb looking to see what loans are not eligible for guarantee the banks are faced with a situation where they want to help their customers and want to help kmeamerica and get us backn their feet, but they cant risk the fact that the risky loans may not be guaranteed so theyre taking their time. Well, what about the feds role here . And, you know, again, the main Street Lending program, the 600 billion theyre going to potentially ensure credit flows to businesses. Has that gotten started yet in any real way well, the fed has done a good job of making sure theres liquidity in the system, but the fed shot all their bullets over the last three or four years keeping Interest Rates down to basically near zero. The fact that when we really had a crisis, all the fed could do is drop the rates basically from 3 to 1 that didnt make any difference. In 2008 the fed could make a massive cut in Interest Rates. That made a difference theyre shooting blanks now. They can create liquidity but nothing with Interest Rates now. Your thoughts are based on everything youre saying a lot of the money is not going to get where its needed and the companies will continue to face dire consequences as a result . No. Its not going to get there on time thats the issue i mean, when you said as i said earlier, 28 of companies saying theyre not going to make it to the end of the month 64 of businesses think if they cant reopen and get business to normal within three months theyre out of business. The problem is that we dont have the time to go through all these processes about making sure the guarantees will happen. Whose signature is at the bottom of the page. We have to get the money to the businesses right away or were going to wipe out a generation of Small Businesses. Professor, appreciate you joining us again thank you. Sticking with the banks. Well get to the etf spotlight will fred frost has some of the highlights from the bank Conference Calls lets kick off with the estimates for potential bad loans. Its been the key focus for the quarter. There they are for you in dollar terms and percentages of total loans outstanding. Yesterday despite getting the impressively scary numbers, jpmorgan and wells fargo were up before their analyst goals theres the intrachart you can see it sold off significantly during the course of yesterday when the analyst started. That happened because we heard from the cfo of j. Pmorgan that the build for the relative to what we booked in q1 here is the cfo of bank of america being a bit more optimistic on his call today in terms of your question about hey, whats the likely reserve bill in the future if we thought we were going to have to add more reserve build in the future, we would have put it into this quarter now, when we get to the end of the second quarter, we may have a different view of the future and so we may release reserves, or we may increase reserves. The quality of our loan book wont change that much that doesnt change that much in a quarter. Weve been focussed on prime and super prime customers. The impacts to us of all the inputs is going to be different. And you know, i guess thats i guess thats what all the information i would want to give you about, like, one input or another. That hasnt helped the share price today. Bank of america the worst performer of the banks have reported today currently down 6. 6 . Goldman sachs a relative outperformer day one. 7. 7 broad index down significantly 4. 5 for the week as a whole were looking at down 10 now for the banking index. Yeah. I think thats sort of where some of the bullish arguments on the overall market start to fall apart. Weve seen this tremendous bounce and people are looking toward the opening day for the economy and the flattening of the curve on the virus and the fed swooping in with trillions and trillions and yet, the banks are still pretty deep in this bear market. What does that tell us about whether we can actually recover here absolutely. I think if and when we reopen the economy, perhaps a month or two later than the market is expecting it will be piecemeal at best, and thats why theyre having to increase provisions for potential bad loans. They think some people wont meet the gains a few of the banks approaching the 50 decline. It paints a picture of what investors feel is the outlook for the banks. Thank you American Airlines ceo doug hr er joining us in just unde anour. Stay with us were back in just a moment. Its only human to find inspiration in nature. And also find answers. Our search to transform. Farm waste into renewable natural gas led chevron to partner with california bioenergy. Working to provide an alternative source of power. For a cleaner way forward. Lets get an update on covid19 confirmed cases of coronavirus around the world have gone above 2 million. This is even as the growth rate of new cases has slowed. About 30 of all reported cases are here in the u. S. The coronavirus test that uses saliva is being rolled out as a testing site in new jersey making it the first in the country. The most current tests require a swab of the patients throat or nose the test was developed at rutgers university. 27 Major League Baseball teams agreed to participate in a study of coronavirus Antibody Testing. Its designed to measure whether Team Employees have been exposed to the virus rather than if they currently have it. The tsa says a new record low of travelers yesterday and down 96. 2 travelers from the same day last year a kentucky family is breathing a sigh of relief after their 101yearold virginia harris survived coronavirus. She says it was just not her time carl, back to you. All right. Thank you very much. Session lows are pretty close. S p down about 80 handles and the tenyear at a low. David malpass is moments away dont go gir derek, seems like your team is operating just fine remotely. Yeah, everything is running smoothly with the now platform. bling see, incident resolved. How did you. Gotta enjoy the small wins. You keep being you, derek. Keep being you. Shbecause Xfinity Mobilehen ygives you more flexible data. You can choose to share data between lines, mix with unlimited, or switch it up at any time. All on the most reliable wireless network. Which means you can save money without compromising on coverage. Get more flexible data, the most reliable network, and more savings. Plus, get 200 off when you buy an eligible phone. Thats simple, easy, awesome. Go to xfinitymobile. Com today. Lets get to the founder of joshua, good to see you. Thanks for having me. Curious to know what you make of what the market has done over the past few weeks was this about removing some solvency scenarios off the table, and now were back to this grind of really trying to figure out duration of this economic cessation you know, look, i think thats correct the fed has inserted liquidity into the market. Theyre trying to prop up businesses that need help. Theyre trying to bail out companies that need some help. Get people back to work, and i think thats very important. And i think, look, you know, the shape of the recovery is a question mark here and a lot of your guests talk about the shape and the letter were all trying to figure that out. Whats your best guess at this point and how much of the obvious play books whether or not youre bearish on things that require human to human contact, how much of those are played out what kind of opportunity is left there . Well, look, i think its definitely upward sloping. I think the question is how long it takes for people to get back to work and what that looks like you talked about human to Human Element in certain sectors theres different letters for certain sectors. I think when you think about theme parks, sporting events, things like that, retail where you have to have face to face contact, i think theyll probably take longer to recover, but theres going to be bifurcation in the market. You need to pick your spots as an investor. And some of the spots you looked at include charter and northr northrup you want to talk about your thinking on those two names . Sure. I talk about charter in the book thats an investment ive been involved in for a little over eight years when the new ceo got there. And i think what weve realized through this crisis is that the residential broad band network is very important. And were all running on our residential broad band networkings right now. Its become a critical infrastructur infrastructure charter is growing broad band subscribers. When you think about the way we act and spend our time, a lot of it is online for work or entertainment. They have a long runway ahead. I think overall the market in general is id say bearish on cable because theyre confused about whats happening with the video subscriber landscape while a company like charter may be losing video subscribers and last year they lost about 400,000, they gained 1. 3 broadband subscribers. Like charter a lot here. You have to focus on Balance Sheet, and despite the fact that charter has 4. 3 times leverage, they have access to capital. They just did a deal yesterday raising about 3. 3 thats amazing in this market. And i think if you look at their cash flow generation, theyll do about 20 billion or more Free Cash Flow in the next three years and they only have 10 billion of debt during the next three years. Look for them all that one reason why the stock is performing relatively well flat for the year. Before the crisis, we spent a lot of time talking when it came to charter and others who provide Cable Services the threat from 5g eventually being able to actually provide a Broadband Service wirelessly into the home. Thats still out there, even if it had been delayed in some ways as a result of what were dealing with right now right so spent a lot of time on 5g were hearing about this five years ago. I think the issue is what do the standards look like . You talked about the delay as well it really is overbuilding the existing cable structure and requires engineers and people on the ground to build that infrastructure and i think overbuilding never really is a good Value Proposition for verizon or at t. You certainly saw it with google fiber in kansas where years ago and google who has unlimited liquidity and they could hire the best people, they couldnt replicate what cable was doing lets say 5g internet existed today. One, how does it work . It can be cumbersome ive seen a lot of videos and how its tested and how it works. Then it has to be a good Value Proposition for the customer it has to come at a cheaper price and be a better product. So i think 5g, the way its going to really work is its going to be great for autonomous driving. Its going to be great for smart cities but in the nearterm, i dont see it as a replacement for the traditional cable business josh, one of your tips and strategies in your investing like prose points out a lot of the turns were generated coming out of the financial crisis by buying out of favor businesses w wondering how far youre willing to take that strategy right now. Arnold donald joined us yesterday and said 2021 books were looking strong. Is that the kind of out of favor business investors should be looking at for me, i would look at a company like anaptive. They have an amazing ceo tied to autonomous driving tied to active safety. A lot of features in the automobile where active is aligned many years ago were like to haves and now theyre must haves. I think a company like a carnival which im not involved with right now, think about the human factor are people going to be willing to go on cruises and what does it look like. Did i lose you . I think i lost sound joshua, thank you i think i lost sound. A thousand or of the little book of investing. Appreciate it very much. I want to get to news involving the jedi contract that was awarded by the department of defense to microsoft but is disputed by amazon thats going on . Well, thats right. The pentagons Inspector General has released the review of that contract which you said is being disputed by amazon it found that awarding the contract to a Single Company was consistent with applicable law and acquisition standards. In addition, the ig found that awarding it to Just One Company could have resulted in more favorable standards for the dod including a better price even though we know the price tag buzz 10 billion on the political influence question, the pentagons ig found that dod personnel were not pressured in the decisionmaking process. However, the ig said it was not able to conduct a thorough and full review of political interveerns because several key dod witnesses were not allowed to speak to the ig, prevented from speaking to the ig by the administration so from the evidence it was able to review, no pressure however, a full investigation was not able to be conducted now, it is unclear what this means for amazon were still reaching out to the company to see if they intend to continue with their protest of the awarding of this contract. Amazon had also said there were several metrics by which the contract was awarded which it did not agree with well continue digging through the report to see exactly what else is in it and bring you updates we hear from the company. All right thank you. World Bank President David Malpass on the other side of this break stay with us issues facing our world, what do you see . We see a billion more people breathing free. We see access to fresh food being the global norm, not the exception. We see homes staying cooler, without the planet getting warmer. At emerson, when issues become inspiration, focusing core strengths to create a better world isnt just a result, its a responsibility. Emerson. Consider it solved. A big show continues this morning. Well talk with the world Bank President in a little bit along with the imf managing correct georgieva as headlines are flying from the imf regarding Debt Forgiveness around the world. The twoyear yldie at a fresh threeyear low back in a moment shouldnt you pay less when you use less data . Now you can. Because Xfinity Mobile gives you more flexible data. You can choose to share data between lines, mix with unlimited, or switch it up at any time. All on the most reliable wireless network. Which means you can save money without compromising on coverage. Get more flexible data, the most reliable network, and more savings. Plus, get 200 off when you buy an eligible phone. Thats simple, easy, awesome. Go to xfinitymobile. Com today. With us on the World Bank Groups response to the covid19 pandemic, president of the world bank, president malpass, g goodo see you. Usually wed be sitting in the middle of the imf where bankers get together to hash out the worlds problems where is the coordination right now . Is it happening . Hello good morning and yeah, that would be fun to do it that way, but this is working fine the coordination is happening in video conferences. So we just had one this morning with the g20 group. And then yesterday there was one of the g7 finance ministers. I think its very good coordination, though, its more by video i mean, i guess im thinking to President Trump yesterday announcing hes suspending funding for the World Health Organization for what he says is severely mismanaging the crisis, starting from covid19 in china. And just separate countries going their own ways in terms of fiscal stimulus and support. Monetary sim yu monetary stimulus and support. It feels different than other periods in history when weather the world got together, especially in dealing with a health crisis. Do you wish wed seen more of that there is a lot of coordination the world bank now by the end of april well have 100 programs in 100 countries with Health Emergency programs where there can be bulk purchasing and financing by other operations. Theres good coordination on that we do a Needs Assessment that involves many parts of the international community, and with regard to your point about what individual countries are doing, i think thats to be supported. Meaning, the u. S. Is doing things that it wants to do in the u. S. That are effective and in europe that theyre trying to find effective measures. So my sense is theres good coordination we saw that today in the g20 communique where the 20 largest economies in the world called for debt moratorium for Bilateral Official debt, and thats 165 billion of debt that well have through the end of the year before any payments are due on it. So thats very good coordination, and it included china. So i want to add that in you know, its really a global effort to help the poorest countries. As you are trying to help the developing world in the poorest countries, are you relying on the chinese data on the pandemic do you trust that information . You know what ive tried to focus on the problems that i can deal with and so those are getting a lot of programs that have broad menu of actual equipment, personal Protection Equipment that can be used in hospitals by nurses, by the Front Line Health Care providers. So thats been our big focus, and then what were going to be doing, the world bankwill be doing 160 billion of financing over the next 15 months for the economic rebuilding that needs to be done of course, more money is needed for developing countries the other Multilateral Development banks are putting in what looks like 80 billion. Well have a total of 240 billion from those institutions and the imf is also doing several initiatives that will be very helpful so i think were the world effort is focussed on trying to get to a very broad response to covid how is the developing world doing with this pandemic and are you worried at all about a surge in places with crowded cities and difficult access to clean Drinking Water and crowded slums and Health Care Systems that are not up to the task . Give us a sense of what youre seeing and what you expect there. Im glad you focussed on that this is a huge problem that the world recession will be deep and that especially impacts poorer countries and many of the cities in poor countries are overcrowded, dont have good transit facilities, and that itself is bad with covid. So were trying to work on that, but it becomes a country by country support effort i was just looking this morning at nigeria efforts and the efforts that well be taking in nigeria. Many of the very pope lus countries need extra support right now and they also need programs and im glad you said, clean water, access to electricity, sanitation, these are all critical problems that i think some progress can be made on, but the big worry is that were moving backward right now because of the global recession. How long at the bank do you guys see this recession lasting . We know its going to be deep and severe, but i think the question is how long it takes to get out of it . Some part of that depends on the developed world. You know, the u. S. Is the the worlds biggest economy and can be critical in the Global Growth outlook. Europe itself is important japan and china, of course, are important in this mix. And so, the thing that would help the developing world the most is strong growth in the developed world. That means the working capital for Small Businesses im worried that as the Central Banks have a mismatch of their maturity, it doesnt provide the working capital at the short end for growth by Small Businesses, which is one of the critical job engines. Were trying to do that in the developing world through the ifc. Thats part of the world banks, the International Finance corporation is providing directly working capital lines of credit to keep Small Businesses open so they can be ready for a recovery as you know, so many of those developing nations, especially in asia, depend on a strong china. Has china contained the virus . I dont know about the virus. I know theyve i cant comment on that. But one thing i do take note of thats going on in the world, is in many previous crises, the currencies have moved a lot, have been one of the weak points, but in this particular crisis, the major currencies have been steadier than in the past and i think thats a very good sign. One of the things i worked on when i was in the u. S. Administration was the stability the importance of the stability of currencies and thats been in the communiques of the g20 and the imf communiques. And so far thats been a source of some small part of stability in this crisis and i welcome that i wonder if your views have changed at all since going from the administration to the world bank, which is so much more globally focussed. Theres this realization now that were so department on the Global Supply chain and on china for critical things like pharmaceuticals, medical equipment and supply, and whether that should be changed whats your view on that, and has it evolved these are very important questions of how extended do you want your supply chains to be, and how interrelated to countries around the world what systems do you want to have be vital from your security standpoint, from your supply line standpoint. And so i think the world needs to think about whats the most effective system to be efficient from an economic standpoint, and also to be balanced from a security standpoint. So at the world bank, one of the things that we that i stress is the importance of trade facilitation and the ability of supply chains to adjust to the changing circumstances that means countries have to allow a dynamic process for their supply chains, because sometimes, you know, special interest try to stop that kind of change. And so, we have to let markets actually function, even during the crisis now, and be ready for the rebound phase on the next side should the u. S. Relax some of the tariffs in place against china and other countries in the middle of this global recession . I dont know about that but im i i favor markets that function and are open and that invite new suppliers when those can be brought in and i think there is value clearly in having suppliers close to home. But i think theres also very great value in having china having had growth over the last 20 years or so, really starting in 1978. Its been one of the gainers in the world, in terms of alleviating poverty, and that also is welcome. And i noted earlier, chinas participating in this debt moratorium on debt service, and theyre one of the biggest creditors in the world now and so, its very welcome for the world to see china participating in that. David malpass, thank you for joining us thank you we appreciate the update on the efforts from the world bank. Nice to be on thanks all right. Meantime, sarah, the sell off remains in place here, dow down about 600. When we come back well talk to American Airlines doug parker print this historic agreement inciple with the treasury for aid in the Airline Industry. Back in a moment sometimes the challenges of todays world make it tough to take care of yourself, thats why you can rely on natures bounty. To give you the support you need. To stay motivated keep active and sleep well. Add a little more health to your day. With natures bounty. Stocks moving lower today with as you can see every sector in negative territory outperforming the market slightly is the Communications Services sector, some of the leaders are gaming stocks, activation blizzard. We see Electronic Arts outperforming, hovering between positive and negative territory up about half a percent. A move in netflix today, trading at highs amid a flurry of positive commentary. Giving the stock a new street high price target 490. Netflix was already on a tear, up 15 this week you can see its up almost 4 now. Carl, back to you. Thank you very much morning, welcome to squawk alley. As we watch the sell off take off some of the one month highs we got yesterday data rolling in showing a fuller impact of the covid19 crisis during the month of march. Retail sales, Industrial Production and banks not helping. Were going to start with fill lebo and the ceo of American Airlines, doug parker. Good morning. Good morning. Lets bring in doug from the headquarters of American Airlines in fort worth, texas. You reached an agreement in principle with the Treasury Department on the payroll grants for 5. 8 billion how much will this tide you over to make sure that the payroll can be met, so to speak . Its great news for america, our customers and team, and the industry the last time i talked to you we were in the middle of negotiating this, and we went through some tough times in getting through it, but were just elated to have that behind us its incredibly important given where demand for air travel is right now and were extr