Transcripts For CNBC Power Lunch 20240713

Will be back he ignited a bit of a controversy and a heck of a lot of curiosity yesterday on this show when he said he is not using the 5 million he will ultimately get, he expects, from the government, to pay workers he will be back here to explain why hes doing that and why and how that is helping him, kelly, keep his business afloat yeah, looking forward to that, tyler, thanks. And were about to get a closer look at the economy. The Federal Reserve releasing its beige book report just this minute Steve Liesman digging through it for us bob pisani and Rick Santelli are standing by for instant action before we dig into that, lets dig into this selloff what are you seeing . Were down, kelly were well off of the lows and you can think andrew cuomo, once again, market mover we rose about 20 points off the lows as cuomo was talking about hospitalizations down, intubations down but if you look at the sectors that are down, these are the sectors that are down on general worries about the economy and things are not going to get better soon. Energy, banks, the russell 2,000 are getting clobbered. This is what always happens when you get coronavirus worries that are out there. Stayathome stuff is doing well new highs. Weve got netflix, new highs amazon at a new high walmarts at a new high, and even eli lilly at a new high where are we right now im describing the three stages weve been going through first is the panic stage thaended on march 23rd we were down 21 but today, we got the reality phase coming in. Just look at what weve got here weve got bank loan losses with very high reserve. Were hearing from the banks march retail sales are the worst on record. Oil prices are at 18year lows the builder conference is the worst on record. Can you get much worse news than this and i think the market has just got to digest the fact it will be a rough few months. Back to you. Robert, thank you very much lets go out to chick and check in with Rick Santelli. Yields collapsing today on all kinds of Economic Data the yields, rick, had been stable, at least on the tenyear for much of the past few days, but not so today yeah, no, its been unbelievable as a matter of fact, i guess what sticks in my mind is Industrial Production had the biggest monthly drop since january of 1946. That pretty much says it all beigebook, steve will get to but their big headline, you know, sharp contraction. We kind of knew that not a reaction now but Huge Movement all day. Look at a who have year note yield and realize we havent seen these yields, should they close under 19 1 2, which we were briefly, since september of 2011 call it 81 1 2 years this chart goes back to the Eisenhower Administration on tenyear notes with hovering around 64 basis points ten basis points above the alltime foreverlow yield close. And that isnt a good thing as these rates come down. Finally, lets look at the dollar index breaking news, i think exactly this is a different kind of breaking news, rick. Were just going to interrupt you to get the beige book headlines. And steve, everybody knows, we dont get the embargo anymore. Were all doing this on thefly what can you tell us i can tell you that its a different kind of beige book, kelly. Activity contracted sharply and abruptly, the beige book says, about Economic Activity in the United States. This is the collection of economic anecdotes from around the 12 districts i want says the hardesthit industries were leisure, hospitality and retail most districts reported declines in manufacturing there was strong production, however, of food and medical products those were hampered, though, however, there were delays across manufacturing, because of virus prevention measures and supply chain disruptions the energy sector, obviously, suffered from high production and low demand and obviously, decreased output. Loan demand, something the fed follows very carefully, was high throughout the country, as businesses sought to borrow money to stay afloat and stay alive. Employment declined throughout all districts. And one more headline i want to give you is the idea that employment is expected to, the nearterm outlook for more job cuts in coming months. So this is a beige book, kelly, that for month after month after month told us that Economic Activity was modest to moderate throughout the country very little variation throughout the past 13, 14, 15 months actually, even longer than that. And then it turned sharply last month when it started to include the effects of the coronavirus and now its fully taken over the picture of the economy right now, as we know it yeah, well said, steve. Lets bring in Rick Santelli, rick, to resume what you were saying, but maybe first to react to what weve just heard from the beige book yeah, there is virtually no reaction in the fixed income space, because the reaction has been all day as tyler referred to, tenyear note yields here at 64 basis points havent moved a lot since those headlines. But thats down 11 basis points on the day if you look at a 30year bond, its down 13 basis points on the day. The yield curve has moved nine basis points, because twoyear notes really arent moving, so its flattened theyre only down two basis points and let me get back to the dollar the dollar index has over a 1 range in the last 24 hours and the hyg gap lower, thats not a good thing credit markets were doing pretty good on the spread, especially high yield and Investment Grade. And the hyg now, kelly, is giving up some of those gains that its had that really started on march 23rd with the fed announcement of the program for Investment Grade and of course, then it really escalated the junk and hyg etfs when the fed said, lets include some junk etfs in there. But the beige book summarized what investors have intrinsically been feeling, the last 24 hours, especially. Rick all right, rick, thank you very much. And lets get some more reaction to that beige book and what it means for the markets Going Forward. Gabriella santos is Global Market strategist with jpmorgan Asset Management mike ryan is americas ceo with Global Wealth management welcome to both of you gabriella, let me start with you, your reaction to the beige book which really turned a bright red crimson color so i think the beige book is confirming what investors have known for the past few weeks, which is that the economy is really sharply contracting here, in the month of march. And in the month of april, as well and today we also got the first hard data confirmation of that, with retail sales and with Industrial Production. So i think its pretty clear at this point that weve begun a pretty deep recession here in the u. S. And around the world. I think the action for this week is a little bit away from the shortterm Economic Data and a little bit more into, number one, how is this impacting the micro, how is it impacting companies and what are they doing to position themselves and number two, where do we go from here . And thats really the most important question right now its that next phase of reopening. And we hope that theres more of a realization that this is going to be a slow process, a gradual process, one that has fits and starts and thats really dominated still by the Health Care Issue and i think thats what youre seeing the markets today, is youre seeing the realization that were not quite past the storm. Its not smooth sailing from here quite yet it really is, gabriellela, as you say, where do we go from here and mike, how quickly do we get there . So what, mike, is the cautious, prudent thing to do with my money right now . Where should i if i have incremental money left, where should i be overweight where should i be underweight . So, first of all, let me go back to something that gabriele said i think the beige book report gives us kind of this grim confirmation of what we already knew in terms of this, this is going to be a pretty steep economic deceleration. Theres a couple of things we will look through the beige book to get a best sense of first of all, in terms of labor market conditions, what do companies see Going Forward. Those who havent already laid off workers, what are they plans . And what will this do for investment spending. While the beige book gives us confirmation of what we see, we have to look through that in terms of what do we see happening next and going back to gabriellas point, when do we see this economic Recovery Process begin to take hold obviously, there are a lot of prep conditions that have to be met there first. First of all, we see the containment of the Public Health threat thats the most immediate issue. And then secondly, we need to see that the initiatives that are put in place by both fed as well as the federal government from both monetary and fiscal policy channels are going to help us work through that transition period and allow the economy to restart once we work through that so going back to where were recommending, right now, were looking in three places. One, where we think theres some opportunities that have been where weve seen some dislocations in companies where we still think the longterm fundamentals in tact we call these our discriminating buyers list. Secondly, sellers or Asset Classes that reflect an overly pessimistic scenario one example there is what we see right now in high yield. And lastly, where we see some longterm trends that are still in tact, for example, in areas like health care, secondly, in Digital Transformation but also in this last thing that we talked about in terms of the move towards deglobalization all right lets move back to Steve Liesman, whos had some time now to pour over some of the pages of the beige book. Are you finding any nuggets in there, steve you know, just an answer to the labor question that was just asked, the beige book suggests that more layoffs are to come, and well get that jobless claims number tomorrow, where another 4 million americans are expected to have applied for Unemployment Insurance i was going to say that raphael boss bosto bo bosstich that solvency problems become issues that will be with us for a longer period of time, than just liquidity problems, which the Federal Reserve and back up. I was also going to point out, when ric was on, thats whats happened to the 210 spread is its taken a turn to being flatter or narrower than it had been in the past if youll remember, tyler, the bond market was well ahead of the stock market in seeing problems out there and now with the kind of closing of the spread here, im wondering if once again, the bond market is seeing trouble that goes on further than the stock market might be seeing and its been an interesting process to watch the outlook embedded in prices now, the fed is so heavily in the market here that maybe one should be careful taking any signals at all, but i will tell you that that spread has begun to narrow again, suggesting that theres maybe more concern about the outlook in the future embedded in the bond Market Pricing right now. I guess, gabrielle, i would ask you to react to that as steve pointed out, the bond market last summer fall was flashing some signals of concern. But it wasnt flashing signals of concern about a Global Economic shutdown and a Global Pandemic it was looking at other things now you can make the case that the bond market is expressing its concerns about the Global Economy in reaction to whats happened with the pandemic thats right, tyler i think just looking at the yields we have on treasuries, we thought we had low yields last year, right, when they were a little bit below 2 . Well, turns out you can go significantly lower than that, when we do have a shock hit the economy, when we do have a lot of risk aversion one interesting point that steve was making, i think, is really important, around fixed income and credit, specifically so this idea that this shock is not just a month or two, its really going to be a difficult 2 2020, and the idea that the fed and congress can help with liquidity but not solvency is really important so for us what that means the credit that we hold or the companies that we own in the equity market needs to be ones that were Comfortable Holding for the next year and beyond ones that have solid Balance Sheet and can survive this moment and for us in credit, that means a preference still for quality so Investment Grade over high yield at the moment. All right, folks. Weve got to leave it there. Gabriella santos and Steve Liesman, as always, great to see you. Kelly . Coming up, were all over this big selloff on wall street after a slew of negative Economic Data this morning, showing the real impact of coronavirus, of course, just reiterated by the beige book, as well take a look at energy, by far and away the biggest loser today, down another nearly 6 as crude broke below 20 a barrel before rebounding. Financials also lagging after the big banks report weak earnings and a mixed bag for the airlines after reaching a deal for billions of dollars from the government will it be enough to keep the biggest players in business. We got a special report. Much more power lunch right after this there are times when our need to connect really matters. To keep customers and employees in the know. To keep business moving. Comcast business is prepared for times like these. Powered by the nations largest gigspeed network. To help give you the speed, reliability, and security you need. Tools to manage your business from any device, anywhere. And a team of experts here for you 24 7. Weve always believed in the power of working together. Thats why, when every connection counts. You can count on us. Welcome back, everyone, to power lunch. Retail sales suffering a record decline in march it plunged they plunged about 8. 7 , as the coronavirus continues to hobble the economy and hit the consumer hard. Retail stocks continue to take a beating. The xrt, thats the etf that tracks the group, is down another 5 today lets check in with Courtney Reagan now for more. Hi, courtney reporter hi, there, tyler. The consumer was really the strongest part of the economy before the coronavirus hits, but once it hit, the consumer went down, so did the retail industry, and it may be what holds us back from a full recovery remember, 70 of Gross Domestic Product comes from Consumer Spending thats 3. 9 trillion. And the National Retail federation estimates that 1. 3 trillion in sales will be lost over just three months during this pandemic. Surveys show a lot of consumer reluctance to spend beyond essentials right now, and when stores reopen, will consumers feel comfortable or will they continue the social distancing measures look, retail is the largest private sector employer in the country. 32 million americans are directly employed by retailers 52 million, when you add in those ancillary connected workers. Thats one in four americans weve got hundreds of thousands of retail workers that are furloughed right now, thousands more that are taking reduced salaries those corporate workers. Best buy just today sort of announcing additional measures in that regard and right now, the National Retail federation is estimating that 6. 1 million retail jobs will be lost entirely. This is more than a furlough, in the first three months of this crisis, more than 12 million over the course of a year. We know that retailers have borrowed billions of dollars in revolving lines of credit. Theyre suspending dividends and buybacks, theyre doing what they can but they still have expenses that they have to fund, even if those stores are closed. And then weve got names that were already on the brink of trouble anyway im talking about bankruptcy, the bword maybe names like jcpenney, Neiman Marcus among others this could be what finally pushes them over the edge. And theres a big ripple effect, especially if youve got a lot of names that go under at the same time. Think about the retail rents, all of that real estate, the vendors that are owed money. This could be a big problem for a very important industry. Back over to you guys. Courtney, thank you, Courtney Reagan for more on the challenging times for the retail industry, lets bring in steve sedov, the former chairman and ceo of saks. Steve, you just heard courtney lay it out there, theres a lot of concerns swirling about whether these retailers are going to emerge from coronavirus. I think that courtney described the situation extremely well youve got a very difficult time for retailers. Theyre just going through the first phase of this, which is survival what do they need to do in terms of managing liquidity . They furloughed people, theyve cut orders, theyre not paying rent and theyre saying and theyre looking for loans. And theyre trying to survive. Now weve got to go to the question of, how are they going to open . Because these are high fixed cost businesses that just cant operate without revenue. Now, recognize its not all of retailers. Youve got the walmarts and targets that are doing extremely well right its the apparel retailers that are down 50 in the month of march, and that was only for half of the month. So weve got a very difficult economy for a number of the retailers. And whats really going on is the ones that were strong going in are continuing to be strong the trends that were strong are continuing and the ones that are weak, some of the ones that courtney mentioned, may or may not survive through this so lets talk about jcpenney and whether you think filing for bankruptcy protection is an attractive option for them well, it may or may not be. Theyve got to negotiatewith their lenders. Their equity value is only about 70 million. Theyve got debt coming due. Theyve got a lot of inventory thats in the system, and the real question is, whats the longerterm Growth Strategy for that brand or other brands that are on the edge . If they have a game plan that says, we can close half of our store base or some number, that is far better by getting out of the leases than bankruptcy may make a better option right now, nobody is putting anyone in bankruptcy, because stores arent open and you couldnt even liquidate the inventory if you wanted to liquidate it so for some companies, bankruptcy may be a reality. Others, not. Its going to be the highly Leveraged Companies that are most at risk and jcpenney is one. Youve lost 90 of the value already, roughly in the last year and a half. So bankruptcy certainly, restructuring is an alternative for of some form of the debt or their leases is something jcpenneys has to look at, but so do many other retailers. Theyre just not alone in this boat steve, tyler here what happens to the inventory that these retailers already have its a massive issue. I lived through the recession, the 08 09 period, and that was when volume was down 25 , and there was enormous amount of discounting. Now youre talking about volumes down 75 or some number like that so youre going to have billions of dollars of inventory in the system, theres going to be product for the outlets, for the offprice players, but theres so much product, there are going to be new formats. Guild and players like that came out of the last recession. I think youll creatively say new ways of trying to clear products but this is by the way, the amount of product in inventory that you have sitting there is limiting the amount of cash available to buy new product so the product is going to be clogging the system for some period of time, and its a major problem, because youve got price credibility issues in terms of how much full price will you be selling coming out of it . The real issue to me is what is consumer demand going to be, as we go forward . Right now, were trying to figure out, how do you open a store . What are the Safety Measures what are the testing that has to go on so the consumer will feel comfortable . The reality is, we dont know what their Shopping Behavior is going to be coming out of it and i personally think its going to be a lot slower than some people think. In that case, steve, what does it mean for society if we just dont have the level of stores, at all, in 6 or 12 months that we thought we were going to have. We know store closures are picking up already, but this is a very different phenomenon. Its going to have huge ripple effects, i would imagine, on the labor market, on the shopping malls, on towns and budgets. Well, clearly, youre going to see a lot more store closures we have three times the Square Footage as the number of stores in europe. Youll accelerate the trend of the poorermalls, the c and d malls closing. Youll see a closing of a lot of stores but youre also going to see some other things going on some of the Early Stage Companies arent going to be able to survive this, because they dont have the financing capabilities and its not just getting a bridge loan, its really able to get the consumer demand coming back i think you have another problem, and courtney referred to it, a lot of these retailers are going to use that line from the last recession, which is, dont let a good recession go to waste. And theyre going to fundamentally restructure and have a lot less people coming back on stream, so the Unemployment Rate getting back to the kinds of level that were that we were at prethis isnt going to happen that quickly so that weve got to factor in a much slower demand structurein the fourth in the third and Fourth Quarter yeah, no, its going to be a challenge. And its just incredible to see that jcpenney equity at 26 centsper share steve, thanks, appreciate it steve sadoff kelly, still ahead on this edition of power lunch, crude dipping below 20 a barrel earlier today as the coronavirus drives demand way down and inventories go way up. We are all over that move, as the oil market gets set to close for the day. Plus, airbnb was supposed to be an ipo darling well, now the rental company has taken on billions in debt just to stay afloat amid the virus fallout. We will bring you those tas,deil after this short break have you heard . Whats up . For the First Time Ever you can watch the brand new Trolls World Tour movie. Wait for it. At home. What, what, what . Oh what a troll. The World Premiere is now in your home. Welcome back to power lunch. Lets get to eric chemi for the latest on the coronavirus at this hour. Eric kelly, good afternoon new jersey is reporting a nearly 40 drop in daily new cases, only 2,625 since yesterday, but there are 351 new deaths, taking the states toll above 3,100 hes urging residents to remain vigilant dont take your foot off the gas, folks stay on this i know youre itching to get out and back to normal so am i. Who could blame you . We cant we just cant yet. I promise you, the second we think we can, we will let you know that. You have my word honda is furloughing most salaried workers in the United States for two weeks it began shutting its north american operations on march 23rd, and since u. S. And canada facilities will stay closed through may 1st. Volkswagen will resume some production in germany next monday, and in the United States on april 27th. Plants in spain, portugal, and russia will also restart on the 27th vw says plants in other countries will ramp up production in may. As always, for more coronavirus coverage, head to cnbc. Com tyler, back to you all right, eric, thank you very much. U. S. Airlines, including american, southwest, delta, among others have reached apparently a preliminary agreement with the Treasury Department for payroll assistance phil lebeau spoke with doug parker, the ceo of american about this and he has the details now. Hi, phil hi, tyler clearly a muchneeded lifeline, not only for american, but all the airlines as they want to keep their payrolls locked in at least through september 30th heres what american will be receiving through the payroll grant. Now, we call ate payroll grant actually, 70 of sit a grant of the 5. 8 billion americans getting, 4. 1 will be getting a grant they dont need to repay the remaining 1. 7 billion will be a lowinterest loan all of this comes as were seeing recordlow numbers in terms of people who were screened by the tsa at airports around the country yesterday, dropping down to 87,000. So it looks like it cant go any lower. And doug parker is not going to call the bottom here, but he did give us some sense that there are some signs to be cautiously optimistic about when it comes to future bookings just in the last week, we started to see bookings outside of 90 days, starting to tick up a little bit again, those can be changed in the future, that doesnt seem to be the case. That seems to be a little bit of an indication that maybe our country is starting to get moving again we have our sales team that tells me were being asked to work on conventions in the Fourth Quarter so a little bit of cautious optimism certainly, nobody in the Airline Industry is ready to say that theyre out of the woods yet the Airline Stocks are mixed and remember, tyler, this is 25 billion from the Grant Program the other 25 billion in the federal aid package for airlines comes in the form of loans american will be applying for a loan from the treasury and other airlines, as well. Look for that over the next couple of days i was going over some notes there, phil, and forgive me if you said it and i didnt hear it is part of this program, does part of this program involve warrants or the ability of the u. S. Government to buy shares in these airlines it does involve warrants. All of the companies that are getting a payroll grant essentially 3 of the value of the grant, its basically 10 of the loan component, comes out to about 3 will come in the form will be warrants the value equal in warrants that the Treasury Department will receive. Unclear yet when the Treasury Department plans to cash those warrants in. So, that is one form of how the federal government is going to be getting compensated, as part of setting this program up phil, thanks very much. Phil lebeau reporting from chicago. Still ahead, alan rosen, the ceo of juniors cheesecake joined us on power lunch yesterday to explain how he was using his ppe moneys and hes now facing some blowback for it. But he, like so many other businesses, is not only trying to navigate the current environment, but also how to survive past that june 30 or eightweek deadline for dispersing the moneys he received well talk to him again along with a Small Business expert and get further clarity. And remember, you can always watch or listen to us live on the cnbc app well be right back. Our special breaking News Coverage returns after this. Welcome back coming off the lows of the session right now. The dow is still down about 1. 5 , the, b russell 2000 falli worse, its down about 3. 4 , and oil, really brutal lately. Today, falling below 20 a barrel, before trying to recover somewhat just closed up, lets go to eric chemi at the commodity desk with more eric wti closing below 20 a barrel after briefly rising more than 1 earlier today. Brent under pressure, down more than 6 today. An hour ago, the Texas Railroad Commission Chair told cnbc that the commission agrees, quote, it has to do something as many Texas Producers face serious challenges during this crisis. A Production Cut in texas would be the first in nearly 50 years. Meanwhile, the eia today projecting a 29 million barrel production in april oil demand that would put it at levels not seen in 25 years the eai also warning there is no amount of output cut big enough to fully offset the nearterm decline demands. Eric, for one, i know i havent put gas in my tank for about three weeks. Eric chemi, thanks very much Small Business loans from the government starting to hit Bank Accounts this week, mercifully, and juniors cheesecake is one of those receiving 1 million so far out of the 5 plus million that its owner has applied for but eric rosen said hes not passing on that money to its 650 employees just yet were not even paying them right now. We cant if we were to pay them now and didnt get the green light to open until the end of june, the money would be wasted until after we used up that money. Restaurants dont typically have a ton of working capital sitting around theyre monthtomonth businesses, so this capital will carry us through our grand reopening, for lack of a better term so rosens comments sparked such curiosity and even controversy among our viewers, like you, that we decided to have him back today, to explain why he thinks his approach to handling the cash is not merely permissible under the law, but is the responsible thing to do for his business and his workers. Hell join us in a minute. But first, lets go to kate rogers for more details on how the sba and the treasury think this program is intended to function kate reporter hi, tyler well, for many Small Business owners out there, there are a lot of questions remaining on the ppe front, like when they should start using their cash once they receive it, if they do want this loan to be forgiven. Now, remember, these are loans of up to 10 million, based on 2. 5 times average monthly payroll. They have 1 Interest Rates and max terms of two years they are meant to be used on payroll, mortgage, interest, utilities, and rent, even while the business is closed, in order to be forgiven the funds must be used over an eightweek period that begins at the time of dispersement treasury advises that 75 of the forgiven amounts should be used for payroll. Now, a Senior Administration official tells us, the covered eightweek period does begin at the time of loan disbursement. Rehiring must happen within that period in order to have the loan forgiven the purpose of the funds is to make payroll and benefits even if employees are not able to work the whole idea here really is to keep people off of unemployment during this time, but many Small Business owners do have questions that remain about what happens after that eightweek period if stayathome orders, for example, remain in effect, what winds up happening to their business one thing is for sure, the money is going quickly as of this afternoon, more than 1. 3 million loans have been assigned for a total of 296 billion. The program, as well all know, is funded for about 350 billion. Lawmakers and advocacy groups have been warning that the funding could run out as soon as this week. A source familiar with the program did confirm with me that funding could run out by end of day today, based on current lending projections. Back over to you thats fascinating, the money is going fast. Theres such demand for it so one question i have, indicate, is just how rigorously will the sba, treasury, irs, anybody be tracking the disbursements of these misunderstand amoneys and how the money is being put to use so that is a great question per guidance, it is actually on the bank to determine if the loan was appropriately used and how much should be forgiven. You submit, you know, things like payroll and other items, that the money was used for. The bank would have 60 days to determine whether or not it should be forgiven and at what level it should wind up being forgiven but the banks are also lacking guidance, for example, the consumer bankers association, just yesterday, asked both treasury and sba for more guidance on forgiveness provisions here, because they have questions, too. I think thats going to be the next wave of questions that were going to need to get answers. But, you know, i think the owner of juniors does have a great question here and a big problem, what happens if stayathome orders are in place. What happens when the business opens back up and you potentially run out of money its a real conundrum for Small Business owners. Or doesnt open back up, which is certainly one of alan rosens concerns kate, thanks very much and i want to welcome back juniors cheesecake ceo, alan rosen, who was with us yesterday. And i want to have him explain a little bit more, what hes doing with his ppp money and also with us, Small Business and Entrepreneurship Council ceo Karen Carrigan, welcome to both of you alan, im going to start with you. Alan, its clear that this money was intended, both to do two things either to keep people on payroll or to bring them back afterwards you also heard kate say there that one of the intended uses of this money was to keep workers from having to file and go on unemployment but that is exactly what, by furloughing your workers, you they are doing they are going on unemployment so by conserving the cash now and saving it, thus, for the moment when you bring them back, do you feel that youre really in line with the spirit of this program and if so, why well, im going to tell you why. So first of all, i want to clear something up from yesterday, because i think you, tyler, no offense, and some of your viewers, misunderstood so we are clearly going to use these funds as it is intended for payroll, for utilities, and for rent we also are clearly that we have eight weeks to use it from the time we get funded the problem is, as you just recognized in your Previous Report recognized, we have a stayathome order issue here in new york, we have restaurants in manhattan and its unsafe for people to go to work right now our intentions are to employ 650 people for the balance of their lives. Not for eight weeks and then put them back on unemployment. But to as our company has existed for 70 years, we now have to make a decision, do we pay people to stay home for eight weeks and then potentially never get open again, which is counter to what this Small Business administration wants. They want Small Businesses like mine and millions of others. And by the way, there was a lot of positive reach out yesterday. People said, now people are starting to understand the dilemma we have as Small Businesses when do we reopen, how do we use the funds. And if we dont use it within the dlins, guidelines, it becoma loan and thats a risk that we all take but i also believe that as this virus lessens and becomes on the time frame, some of these timetables may have to get pushed back a bit. So youre quite correct i was lets say, a little bit confused by how you were using the moneys, because as i understand it, and i think a lot of people understood it, the idea is that this money was intended to keep people on payroll or to bring them back imminently, immediately, so that they didnt have to go on unemployment, and were tided over to the point at which the business would reopen. So let me let me come back to come back to something in effect, is your is your move here the idea that workers can go on unemployment now, or if the business doesnt reopen, they are going to be back on unemployment later right listen so you can take your pick as to when. Listen, we have employed people gainfully for 70 years, okay offering medical benefits, et cetera, et cetera. If we take this money and dont treat it like the Precious Capital that it is, and we waste it over eight weeks, because thats the only part that has deductibility, and then we have to unemploy people in eight weeks, because our businesses are operating or not even operating yet, depending on how this virus plays out, then weve done a disservice to everyone. The people who lent us the money, to our employees. And listen, more so than anything, tiyler, i think you ge this from talking to me over the last 24 hours. My employees and their wellbeing is paramount and on top of my mind thats part of the reason i totally i totally believe that i totally believe that and i just think its its a question of when youre going to deploy the capital, which seems like if you do it within the eightweek window, then the deployment of that capital, if it goes to the stipulated expenses, is then forgiven if you dont deploy it, lets say you bring workers back in a trickle and some of those workers dont come back during the eightweek period, you still will have the loan, it will convert to a loan at a very favorable Interest Rate of 1 and you can use that as part to defray some of the payroll expense. Am i understanding you are 100 correct. It will convert to a twoyear note that will have to be paid back but keep in mind, thats a lot of money to have to pay back on a business that we dont even know, clearly, how its going to be performing over the next two years. You know, if dining out goes to seating every third table and people wearing gloves and masks, i dont know everyone in new yorks tolerance for that just yet. And it remains to be seen. So as the steward of our business and our employees, you know, im looking to take care of them. Ive got to make sure that we have the most, you know, success possible not for eight weeks, but for another 70 years and i take that job very seriously. And as i said a moment ago, i totally appreciate your sincerity in saying that you dont last for 70 years if you dont take good care of your employees. I want to come back to how quickly you might bring those employees back on in a trickle or a torrent and well get to that in a moment first, let me bring in Karen Carrigan of the Entrepreneurship Council to get her reaction to not just what alan is doing and his tactical approach here of how hes using the ppp money, but what youre hearing from other business owners. Do you have any problem with what alan is doing no, no, i dont in fact, businesses of all sizes and kinds across industries, you know, from two employees to ten to a hundred are grappling with these same issues. You know, when the legislation was drafted and when it passed, the economic conditions, the impact, cascading effect of the coronavirus has really been very severe, obviously, for the economy, and first of all, businesses so, you know, what they want and what were arguing, as a Small Business group, is that there does need to be more flexibility, but in the rules. And like alan said, this is not a grant, this is a loan. And in order for those in order for those moneys to be forgiven, it does have to be used precisely the way the law and the rules are written in terms of payroll expenses during that eightweek window so it just doesnt make sense if theres no demand. I mean, if youre going to disrupt employees lives who have maybe already been laid off two or four or eight weeks ago, do not have that certainty you know, coming back to the business and then having to lay them off again and i do so karen, are you hearing go ahead finish im sorry. I beg your pardon. In terms of, this is the best news for the taxpayer, because that eightweek window started for him and if youre you know, if youre going to bring people back just for it to be forgiven, as opposed to, if its not used for those purposes, you do have to pay that money back okay. Im going to switch back to alan and you heard what karen just said she said she has no problem with your approach here but let me come at you and i dont mean to say, come at you thats okay, im used to it thats all right you know, were going to have some good cheesecake after this. Youre not kidding. But can you understand why some people who were in contact with us overnight, and i think probably with you, would feel that youre sort of double dipping. In other words, your company and your workers are benefiting from, on the front end here right now, federal and state unemployment benefits, which by the way, you as a taxpayer and an employer are paying into, so lets just stipulate that. And as an employer and then you would benefit at the other end then you would benefit at the other end from the ppp loans. Can you see why people would think, thats kind of a double dip . Yeah, but theres a misconception out there. So if i and ill say it again. If we and i think karen alluded to it. If we take people off unemployment today, and use up all of that grant money, and in eight weeks, were not operating efficiently because of this virus and no fault of our own. Listen, we dont want to be in this spot. Nobody does. My employees want to be at work today. Waiters dont want to be working in empty restaurants, okay, tyler . Its just not the way we operate. If were operating at a third capacity, weve used up the money, we then have to put people on unemployment, we have we havent only singularly dipped, weve in and out put them back on unemployment and we got a free loan i think im actually taking the honorable approach and saying ill use the money either before the eight weeks or after, depending on how business allows and if its after, and i have to pay back the loan, i pay back the loan i think this is the honorable way to handle it weve had a fascinating conversation here this afternoon and yesterday and offline over the past couple of days. Let me just turn very days final question if i might. If you get some sort of green light from the state, from the governor, or the mayor to reopen your locations, how quickly do you think you will be bringing workers on and what kind of trickle or flurry or flood i think its going if you anticipate doing that i think the business is going to dictate how many people we need based on how comfortable people are in dining out again. As i sit here today, it looks like a skrcary environment for people in general. The next 12 months unless theres a vaccine, will be horrifying for Small Businesses in this country. The sba loans were intended to save those businesses and thats the way we are trying to use it. I agree its going to be payroll. Sorry. Right so my final question is, the money that youve already received, the oneplus million, and you have other loans pending totaling something above five, that money that you have received, you have put into a segregated account that youre not touching am i right on that correct i recommended this to everyone trying to get a Small Business loan set up a separate Checking Account so when the bank has to come see how you use the funds in two years you can show them you used it for payroll and the associated taxes, you used it for utilities, which is allowed, and you used it for rent you show them those three items and the use of the proceeds and the timing of it, and its eer in a grant or its a loan. Simple as that as i said, the only other wild card is how this changes over the next several weeks and months alan, thank you for your involvement these past couple of days, and good luck to you and your workers karen kerrigan, thank you as well kelly . All right moving on to airbnb, the company has raised 2 billion in debt in just a week as the coronavirus pandemic continues to ravage its business the former unicorn was on track to go public this year its a different story deirdra bosa has the details quite the turnaround, raising a billion dollars, and each of those fundraisers, 2 billion in the last week alone the portion of last weeks raise slashed the companys value a wigs by nearly half. The most recent Debt Offering carries a steep Interest Rate of about 9 it tells us the company, once the most anticipated ipo of this year, has seen its business just pummeled by the Global Pandemic and now turning to pad its Balance Sheet to get ready for what is likely to be more pain to come. Other companies are affected by the outbreak and raising debt at similarly steep terms. A few of them, theres nordstrom and wynn earlier this month, slack on the other hand at the other end of that spectrum its Debt Offering, while this isnt apples to apples, carried a coupon of half a percent you can see the different positions companies are in in the current situation. Airbnb is right in the middle of the Global Travel industry that is getting absolutely killed also interesting is who is buying into airbnb at this moment amid so much certainty. Theyre some of the biggest institutional, private equity and hedge funds. Fidelity, t. Rowe price, sixth street partners, they put money in the deal prior, and apollo and Oak Tree Capital theyre essentially betting that air bshbnb will get through thin could emerge Even Stronger deirdre, thanks deirdra bosa with the latest for us tyler . All right shares of tesla up 34 over the past month wow. Climbing again today after its factories were shut down because of the coronavirus Goldman Sachs saying the stock is a buy well talk agent whether theres even more room to run. Thats next. Issues facing our world, what do you see . We see breakthrough medicines getting to patients in record time. We see harnessing natural gas unleashing the promise of clean energy. We see engineers simulating the future to improve today. 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. This virus is testing all of us. And its testing the people on the front lines of this fight most of all. So abbott is getting new tests into their hands, delivering the critical results they need. And until this fight is over, we. Will. Never. Quit. Because they never quit. Welcome back stocks are selling off on the back of bleak corporate Economic Data today illustrating the extent of the coronavirus damage and that it might be worse than investors expected dow moderating losses, down about 363 points right now we were down more than 700 at the lows the nasdaq only down 0. 8 and coming off its best winning streak since december. Tech stocks have held steady in the face of this volatility. Steven grassi is here. Would you be betting on the nasdaq these large Cap Tech Companies have run this market in the last couple of years. Those are the ones that if you have to look at this, what are investors going to put the most confidence in and validity in Going Forward . Which of the Companies Going forward are as close to a guarantee to last when we get out of this coronavirus environment is the large cap the ek that people are putting that credibility in do you buy there will be a lot of divergence . Right now its the nasdaq outperforming but ultimately, will all of the indices rise and fall together . Yeah. You know, its funny, if you asked me that a week ago i would have said yes. When you start to look at the Energy Complex and the smallcap complex, theyve sort of uncorrelated themselves literally in a matter of days to hours. So if you look at your screens, yesterday you had oil fall and you saw the market rise. Today everything falls together. So i think ultimately, if theres a blanket, if were going to survive or fail, yes, well do that all as one but if youre going to start to see this unversely or uncorrelated market, i think theres room for there to be winners and losers but if you look at what the feds doing, the governments doing, kelly, theyre not allowing anyone to fail. So back in the financial crisis, it was too big to fail ive said it before, it looks like no one will fail this time around there are going to be companies dragged over the finish line so i think we will survive all together if that makes sense in a word, sort of as an aside, what do you make of the tesla rebound lately so tesla has defied all laws of probability everyone knew about its short interests and people were voting against it the shanghai plant opening was the first surge higher in tesla. The shorts and have been run over so many times, but when you look at the stock chart now its defying the laws of probability yet again. So if i had to tell you in a word, i would say sell it at these levels you have the 735 level, which were right around, but remember where they raised money. That raise of money was 767. So if you think about where resistance is going to be on the charts, its between now and then so the risk reward definitely stacked in the bears hands right now as far as tesla goes all right steve, thanks. Good to check in with you again. Steve grasso tyler . You know, kelly, there arent many stocks that are up 75 year to date like tesla, i would have to say maybe zoom. Maybe zoom p. Well see you back here tomorrow in the kitchen, kelly, all right . Great stuff appreciate it. 2 00. Our breaking News Coverage continues now with the last hour of the trading day it begins with bell be with th right now. Thank you, tyler and kelly. Im sara eisen with wilford frost. Markets sinking today but major averages are staging a lateday comeback lets look at whats driving the action at this hour. Shocking new data painting a dire picture of Economic Activity in this country, retail sales, Manufacturing Activity both plummeting. Corporate earnings also weighing on ventilator sentiment today with banks saying they are bracing for large losses ahead another ugly day for the Energy Market brent crude partly sunny nling wti trading below 20 a barrel the dow is down 700