Transcripts For CNBC Closing Bell 20240713

Tepper and Stanley Druckenmiller both say stocks are overvalued u. S. china tensions flaring again as the fbi warns that chinese hackers are targeting covid19 research firms. We have a big lineup of guests today to help break down this selloff including bill mill miller, david harrah, david ruinstein and Liz Ann Saunders from Charles Schwab. Down 550 points, down 620 moments ago. Weve got full Team Coverage of todays market downturn. Scott wapner, mike santoli, and Steve Liesman with us. That bearish call from apple when asked about Hedge Fund Manager Stanley Druckenmillers assessment that the risk reward in the market is, quote, maybe as bad as ive seen it in my career, heres what he said. Its definitely as of yesterday, now the market is down from yesterday, i would say that, you know, 99 was more overvalued than 2000 but, yeah, i would say its one of the most overvalued markets, maybe second most overvalued i seechb the market is pretty full but theres a lot of liquidity there. Its too hard to say the market cant go up or Something Like that, but its not a very good risk reward market lets bring in scott wapner on the news line who did that interview earlier and mike santoli as well. Scott, thanks for joining us one of the most overvalued markets ive ever seen, he said. The tone of the interview not desperate, not like the bill akman interview of march no, wilf, nor is David Teppers positioning really reflective of, you know, perhaps a dire scenario for the stock market hes taken his Long Exposure down to 10 to 15 he told me, but hes not short and even though he said that the markets pretty full, he made it clear he doesnt hate the market for the reasons he suggested there at the end of that clip. You do have all of this liquidity. You do have the fed and congress engaged in ways that theyve never been before. And theres no thought that its going to end anytime soon. So as long as thats the backdrop its kind of hard to get overly negative. Its also worth noting, guys, that he was last on with me on march 23rd that was the day of the bottom he told me then that it could be a bottom, that he was nibbling that and you should buy a little if youre a longterm investor so its a good time to catch up where his psyche is today. Though hes cautious, hes not short. Thats worth noting. Scott, you know, youve talked to a number of these bigname Hedge Fund Managers lately the president tweeted this morning i think in response to some of our discussion around Stanley Druckenmiller saying the risk reward is the worst hes seen it, and, you know, a lot of them right now are making bearish calls. Weve heard it from jeffrey on your show, seen it in a paul singer letter. The question is to the president s point, how are they actually positioned . Are there positions such that it goes along with some of their scarier rhetoric about some of the risks that lie ahead and, you know, how do you take that as someone whos interviewing them about how serious some our audience and the Retail Investors should be taking these calls i think teppers positioning is 100 reflect tich of his viv. Hes cautious and taken his Long Exposure to stocks down to reflect that, but hes not coming on today and saying that hes cautious and that the markets overvalued and going out there today and loading up the truck. At least i have no reason to believe that he is its reflective of his point of view its hard to make a case other than what Stan Druckenmiller has made that, yeah, the risk reward isnt great right now. Whos going to argue the other side of that now, it doesnt necessarily mean that the market is doomed or that its going to go down because both mr. Druckenmiller and david tepper are well understanding of the power of liquidity. You know, look, they can come on and talk about their views all they want. Everyone is sort of talking their book when they come on and talk about where they see things going or the stocks they like. Teppers positioning to me seems fully reflective of his point of view that he, pressed openly and honestly on our network today. Mike santoli, perhaps to take playing devils advocate the other side to mr. Tepper, i mean, in the short term, how much is the s p equal weight and maybe not the s p 500 off its recent highs and more attractive than when were at those highs and longer term, a relative argument comes in and equities can be argued to be the only alternative relative to bonds . Sure. I mean, i think the russell 1000 at todays lows is down about 8 from a couple weeks ago. So clearly, there has been a little bit of backsliding, a little bit of wear and tear on this tape. To me, a lot of these investors who made a lot of money, i think its understandable that they wouldnt necessarily see a tactical edge at this point after a 35 rally that after all is led in this last phase by the most obvious consensus winner stocks there are so its hard to have value there unless you feel like being brave and going into the banks and the transports and other stuff that has bombed out for understandable reasons i think to some degree, it speaks to what the overall psychology is of this market, which is its very difficult to find some traction on a fundamental case in the intermediate term given the wide range of outcomes. But its not necessarily something that to me means that theyve got this thing figured out and therefore theres no upside even after this little pullback by the way, just to scotts point about how, you know, david tepper seemed to be relatively measured along this, before that quote that we played, he said yesterday before this little decline he thought it was the kind of market where you had 5 potential upside and 15 downside well, now youre 5 down from a 5 15 split so it seems almost even plus 10 or minus, it doesnt seem since 1999 or 2000 where the nasdaq went down 75 to the low and the s p went down by half. Sure. Because you have the fed involved this time around in ways that you obviously didnt back then. Look, if you would have bought the market or nibbled or bought a little as tepper told you to do or said he was doing or advised on march 23rd, listen, the markets up 30 since then how can you blame anybody for taking a somewhat cautious view after the kind of parabolic move weve had off the bottom to getting to the point today, sara, where he said its pretty full hard to argue with that. No, absolutely. I just think its sometimes hard to follow all the calls when some of these there are such big names and theyve made so much money, billions of dollars, on the markets its almost hard sometimes to follow the timing of everything. Just because the headlines are sometimes speaking louder than nuances that youre describing that santoli is describing about what theyre actually doing. I cant tell you how many people come up to me or call me and say, look, if i listen to everyone on your network, i would have missed a 30 move off the march lows because everyone has been so bearish, which is not exactly the story, scott, i guess is the point yeah. Look, no one ever suggested you were going to listen to everybody that comes on our network and does everything that they say some of these guys will be the first ones to tell you that they missed it or they got it wrong or theyre not always right. And thats why i think i mean, look, i like interviewing tepper on our air because i think hes a straight shooter. I think hes completely honest he speaks in a way thats more easily understood than some others perhaps in his position do i dont see how you could be any more open and honest than he was today and if someone wants to take that advice and either buy or sell stocks at the end of the day, thats on that particular individual well said scott wapner, thanks for joining us thanks, sara. Lets turn now to the credit market more and more Companies Looking to raise capital through debt. Mike, youve been taking a closer look at how this money is being used and look at that list of how many wellknown and some of them highly rated and some of them not so much companies are taking advantage. This market is happy to buy new debt from companies at the right price, at what the market deems the right price. Whats interesting is if you look at this chart of corporate resolving credit lines that have been drawn down, a big story several weeks ago, a lot of companies had backup credit lines, theyve drawn them down up to about 21 . Thats Merrill Lynchs estimate as of the end of the first quarter. 21 of the lines have been utilized down from about 30 in the peak of the Global Financial crisis and up a lot from a few months ago a tremendous percentage of a lot of the corporate issuance thats happening right now is merely going to pay down those bank lines to essentially say let me have the market refinance that emergency back stop line thats good. That creates a cushion tremendous amount of equity offerings happening this week and last week as well, so the Capital Markets are providing new cash to companies. Its generating a little bit of a cushion for them, but its not necessarily to the most productive longterm investment use. Right . Its just sort of to tide them over till these times pass and cover fixed expenses or take out other debt the credit market is wide open but not necessarily funding great period of new growth or even stock buybacks that the point. Mike, to your point, Capital Markets, particularly on the debt side but also the equity side, is a big reason why the likes of Goldman Sachs and Morgan Stanley are significantly outperforming the likes of wells fargo in terms of share price year to date right. A decent little upset to their otherwise falling earnings turning to the fed and fresh commentary from chair jay powell this morning which set the tone for the session today. Steve liesman joins us with the big highlights steve . Yeah. You know, its interesting to hear your conversation about tepper earlier theres not a whole lot of room between fed chair jay powell and the Hedge Fund Investor david teper or about the market going up or down its about pricing in risk jay powell said the outlook is highly uncertain and there are significant Downside Risks in fact, he said over time his concern is that a liquidity problem becomes an insolvency problem. The Coronavirus Crisis raises longer term concerns as well the record shows that deeper and longer recessions can leave behind lasting damage to the productive capacity of the economy. Avoidable household and business insolvencies can weigh on growth for years to come. Now, on negative rates he said its not something were looking at a lot of people took a lot of meaning from his addin for now. I dont take a lot of meaning from that. He says unemployment will decline sharply but remain high as the year goes by. We just in the last half hour talked to clevelands fed president and she chimed in about negative rates as well across all committee members. Its not something we think of as being a tool that we would use. You know, the fed never says never, right circumstances could be different. But its not a part of the active discussion. So its not part of the active discussion, guys, although thats apparently not true on our network addin markets as well where people are actively discussing it steve, we were talking about how active debt Capital Markets are and that means the Biggest Companies have been able to issue debt and improve their Balance Sheets when does the feds main Street Lending Program Actually start and what kind of confidence, what kind of tone did we get from the fed chair today that thats really going to address that middle part of the market thats neither captured by bond issuance or by the ppp yeah. I dont actually know how little it is, wilf. I dont have enough information to tell you that i suspect its a fairly large chunk, that midsize market that has no access to Capital Markets. He said in a few weeks and it could exclude those. Im coming to the conclusion that the fed has found a very powerful and dangerous new tool in this Corporate Bond program and it makes me think that by lowering Interest Rates and doing regular treasury market and sqe it may have been barking up the wrong tree or not all of the right trees. If you look at the powerful response of bond markets to this fed bond program, which has created lending in the economy just by the fed announcing a program, i think the fed may be on to something here in a program that may stick around as part of its tool kit for a while. And you may see more of this because its creating real money in the economy steve, thank you very much for that weve got 45 minutes left of the session. Were still trading markedly low. Energy, financials, industrials at the bottom of the pile today. After the break, legendary Value Investor bill miller will join us with his thoughts on todays hs llh and whyebuison airlines thats right 43 minutes left of trading another day of weakness across stocks were at session lows with the dow just about there, down more than 600 points, 605, a loss of more than 2. 5 s p is down 2. 3 every sector is lower. The hardest hit is energy. Financials, though, down more than 3 . Industrials are down more than 3 as well Consumer Staples holding up the best, though still lower by more than 1 . Lets check in on some of the individual Market Movers now shares of ww popping as jeffreys initiates the company at buy the firm says the covid19 Health Crisis unlocked a new durable trend with wellness being prioritized at home. Weight watchers. I guess for some people. Occidental petroleum falling after reuters reporting the company is offering employees voluntary buyouts in the next two weeks. Occidental citing the pandemic and the steep drop in oil prices stock down more than 8 . All four major indices falling off today, down more than 2. 3 on the s p after cautious commentary from jay powell and david tepper have hurt market sentiment. Joining us now, bill miller, chairman and cia of Miller Value Partners thanks for joining us. Thanks for inviting me on lets kick off with the Broader Markets. We were just discussing in the last segment that the comment from david tepper that stocks are pretty overvalued overall in his view, comparable to pre the dotcom bubble bursting where do you stand on that view of overall market valuations right now . I agree with david that 1999 was a much more overvalued market than this we have a bifurcated market where internet and workfromhome names have had a great year and the average stock hasnt so i think if you look at the overall market as a market, were trading right now around 17 times the consensus on bottomup earnings estimates for 2021, which is about the average for the last five years. So those estimates may be too high or may be too low, but i think that gives you a sense of what analysts at least are thinking and if thats the overall market number, i would call it it might be a little extended given the fact we have a chasm of bad news to go over here, but i dont find it as dramatically overvalued as david or stanley do. A few weeks ago, bill, you made some headlines, maybe a month ago now, saying this is one of the best buying opportunities of my lifetime and we have seen stocks stage a remarkable recovery over the last month i mean, april was one of the best months in years has that topped out . Do you think that was it no, i dont think it was it i made those comments on cnbc on march 18th and i think the market bottomed on march 23rd and weve had a big rally. 30 plus in about four weeks is, you know worked off a fair amount of that dramatic undervaluation but i do think if youre look at couple of years, there are still values to be had in the overall market you know, weve kind of bumped our heads at the 2900 level at the s p and in a bit of correction now i wouldnt be at all surprised to see that continue technicians tell us that measures down to maybe 2,600 or so that seems about right if that happens then whats going to be the case, like what you see today, a lot of smallercap names and the financials and all will go down more than the overall market and the internet names and the workfromhome names will probably do better but, you know, i think that, you know, people are surprised, it seems to me, you read all this about how theyre astonished that the market is doing so well when the Economic News is so bad. And i mean its remarkable to hear people say that because the market predicts the market the economy does not predict the market all Economic News that we get every day represents and measures the past and the market is looking forward so unless somebody has Privileged Access to the faw chur, saying that the market is wrong, you know, is a fairly bold statement bill, one of the sectors that has not rebounded that 30 plus since march is the airlines. Do you think its do you still own some airlines . We do weve owned airlines far long time we own delta and united and have since literally midsingle digits so, you know, we had i think 6 on united, was 95 most of the last couple years. Theyve been clobbered now for obvious reasons, and, you know, Warren Buffett got a lot of attention when he sold all his Airline Stocks weve decided right now these prices, as you say, theyre bouncing along the lows, like American Made a 52week low today. I think right now Everybody Knows these things have taken on a debt, nobodys flying, theyre losing 50 million a day, and theres a consensus view that people arent going to come back and fly for a long while that view might be right, but our view is theres a fair amount of option value in the big airlines right now because they have enough liquidity to get through the end of this year, in fact, probably somewhere into the mid20, 21 and maybe a full year from now so a lot can happen between now and then if youre making a bet on the airlines right now, youre making an implicit bet against the vaccine or against a sensible Covid Treatment so, you know, people flying the airlines now because theyre not afraid of getting smallpox or polio, you know, or diphtheria because, you know, we have treatments for that. And right now theyre terrified of the virus but if theres a vaccine, and theres a huge amount of upside on the airlines thats not reflected in that. Were not prepared, though, and im not saying we arrive at these things down to zero Risk Management positions in place there and were looking at the fundamentals right now we think the risk reward skews favorably relative to consensus. But even if you are betting on a vaccine, bill, i mean, the most optimistic cases are 18 months i think is where dr. Sfoudr. Dr. Fousm is telling us, at least a year, and that would be at record speed. The question is can the airlines, you know, survive with these kind of fundamentals until that point, especially when the c. A. R. E. S. Act funding runs out in september and just adding to that with boeings ceo, he relies on these airlines as customers say this week he wouldnt be surprised if one of them cant make it. Oh, i wouldnt be surprised at that either again, you know, the boeing ceo doesnt have Privileged Access into the future. Hes looking at the current future and extrapolating it out. I would just correct your locution slightly. Were not betting on a vaccine were not willing to bet against a vaccine. If the early trials on a vaccine andthere are a bunc of vaccine trials going on around the world if those show a lot of promise, it may be the case that it takes a year or 18 months to get them fully approved, but if those show a lot of promise and the market believes that they are going to get approved and are going to be effective, these stocks are move way, way in advance of the approval of a vaccine. I want to emphasize, were not betting on a vaccine we think the negative news is fully priced in now and we have enough liquidity to get us through at least the end of this year bill, another sector that is down sharply, about 45 year to date as we stand, is the banks, not so much because they didnt bounce from the march lows but theyve fallen aggressively again during the month of may. As a Value Investor, are you buying the banks yes we own the banks we havent bought any recently because were full on banks. Airlines were probably about, you know, 5 of the portfolio, 95 is in other things so we have a heavier weighting in financials than we do in the airlines the big banks,jpmorgan, and oth financials, brighthouse financial, which actually reported a gap earnings that were almost double its current market cap, which is why you dont want to pay a lot of attention to gap earnings. I think the banks right now are very well capitalized. A lot of excess capital in normal times theyre under very little risk chairman powell said he didnt see any reason to stop the banks from paying dividends, stop buybacks theyre very, very cheap relative to the overall market based on history, and if the economy begins to come back as it will at some point, were kind of thinking, you know, small growth in q3 and a faster growth in q4 if that leads to a steepening of the yield curve, people will tell a different story on the banks and theyll play catchup. Does it surprise you, bill, we heard from Warren Buffett, who famously owns so much of airlines and banks, and that he had a bearish view on the economy, hed sold all of his airlines but seemingly at that point two weeks ago, hadnt sold any of the banks does that add up to you . Yes, because the outlook for the airlines is much, much more difficult than the outlook for the banks. There are no banks that have the possibility of the big ones, certainly have the possibility of going bankrupt in the next year or so. There are many scenarios under which that could happen with the airlines the banks are doing fundamentally much better than the Overall Airlines that bifurcation isnt surprising again, morgans owned banks the entire time hes been involved in markets even when hes running the partnership and, you know,airlines hes hated debt for a large portion of his career it came in a few years ago and he was probably saying he was right during that point in time after all. Bill, i want to ask about one of your biggest winners and your biggest holdings, which is amazon, which has proven itself a juggernaut throughout this crisis obviously, its had a tremendous rise already but after the last quarter there are some questions about, hmm, the growth rate of aws, the Cloud Business potentially slowing, the sacrifice of profits to sort of grow and meet demand and rising costs. Where are you on just how much more upside there is for amazon . I think even with amazon at the current price, there is exceptional potential in amazon because theyre so powerful across so many dimensions. And when, you know, jeff bezos talked about spending 4 billion of operating profit based on the pandemic, i think people havent quite figured out what that means. I think what hes doing there is he is going to try and effectively sort of immunize his supply chain and his Employee Base so, you know, they of got all kinds of people working, scientists on this kind of stuff, so i think what hell do is have a massive testing program, theyll basically be as insulated from future pandemics as any company could be. And most companies couldnt spend, you know, basically almost all their operating profits in a quarter on something thats fairly chancy like this. Aws is number one in cloud yes, microsoft is growing faster, but thats just a question of scale and companies and more suppliers the advertising business is tremendous, but its going to be hit as advertising is going to be down. But overall, we expect that amazon in the marketplace right now will probably we think revenues can grow between 20 and 25 a year each year for the next three years, so that would double the size of amazon at current valuations, which are not terribly demanding, certainly based on history just look at market multiples on enterprise to ebitda, two years, amazon is at a market multiple and a whole lot better than a market stock hmm and finally, just, bill, looking at multiples in general, is it hard to be a Value Investor right now where theres not a lot of Forward Guidance . I mean, most companies are pulling it its hard to have a forward view and therefore is it harder to find what companies should be valued at in this environment . How are you looking at that . And which names stand out . No, i dont think its any harder than it was in 2018 or 2009 or 1982 or 1987 after the crash or even maybe in the three down years in the early 2000s. When the economy is doing poorly and theres a lot of uncertainty, people focused on the short term and trying to predict whats going to happen then are having a much more difficult time were trying to look at a normalized view of the economy the economy has grown roughly in the last ten years 1. 5 to 2 , so way below the longtime norms but we dont think thats an unusual number for the beginning of 2021 or to grow for the next three to five years. We Value Companies on the present value of future cash flows so reported earnings dont make a lot of dont play the big role in what were doing one of the reasons people missed amazon for the first 15 of its 20 years, they were constantly looking at reported numbers under gap, and as i said before, theres a ren thason theyre ca generally accepted accounting principles and not divinely inspired accounting principles thats one of the differences. Were trying to focus on where value is created, and thats by generating cash and allocating that effectively one final question if i may its hard to argue against the truck churl reaso structural reasons for amazon, but you mentioned advertising revenue might be under pressure. Googed and facebook in the past, they like other big cap tech outperformed recently. Do you get concerned theres a bit of a disconnect there, they perform well but advertising revenue might be under pressure . No, because basically the things that drive future advertising revenue like, for example, with facebook engagement are way up. So just as, you know, amazon, workathome companies have done very well, you know, what were seeing there is that the underlying metrics for longterm growth of their ad business is terrific its just that the consumer and other companies are cutting spending to basically insert cash that spending will come back and those companies will be in a stronger position than they have been in, in our opinion. Bill miller, great to speak to you thanks for joining us. Thank you guys. Breaking news in the food delivery space dom chu. This could have wide ranging fekts for restaurateurs and Small Businesses across america. The new York City City Council has just approved moments ago a cap on the number and amount of fees that thirdparty Delivery Services can charge restaurant owns for taking their orders and fulfilling them for delivery those will now be capped at 20 total. That includes a Delivery Charge as well as any kind of a commission for taking the order itself thats a big deal. It could be precedent setting if it goes to other jurisdictions the other set of headlines comes via dow jones, which says the uber ceo and the grub hub ceo are negotiating directly, according to sources familiar, about a possible merger agreement. Uber and grubhub are eyeing synergies of more than 300 million from combining possibly according to sources and those sources are saying that uber is discussing the possibility of paying 1. 9 of its own shares for every share of grub hub, so, sara, wilf, some interesting headlines with regard to food delivery back to you. A lot of leaky sources in this story as grub hub shares are down 4. 25 dom, thank you the fbi sending out a warning today about chinese hackers targeting coronavirusrelated research eamon javers has the details on this story eamon . Yes, sara, thats right its called a Public Service announcement this time in the midst of a Global Pandemic warning, says the fbi, and the department of homeland security, that the chinese are trying to hack into American Pharmaceutical Companies and universities to get access to virus and Vaccine Research data. Heres the warning for American Companies from the fbi theyre saying that youve got to assume that press attention will lead to increased interest and cyber activity by the chinese. They want those firms and universities to patch all their systems for critical vulnerabilities, to scan web applications for unauthorized access, and to improve their credential requirements. They want to use multifactor authentication for all of this research data. And then they say they want these companies and universities to identify and suspend access of users who exhibit unusual activity so theyre saying that you should, if you were involved in this coronavirus research, you should assume that the chinese now are trying to get access to that data and you should take steps. They also say they want anybody who sees suspicious activity to call the fbi do you see this, eamon, as sort of a broader picture of the u. S. china tensions flaring right now . U. S. More confrontational against china on covid19 . Yeah. Theres movement we know with gop senators, not to mention the threats that President Trump has maderecently on trade. Absolutely. Its partisan trends that have been going on for a while. I talked to a National Security official today who told me he wants the world generally to take a harder line against china. So this is implicit in this entire approach. And you do see the president taking the much harder line against the chinese right now. Its also part of a trend that weve seen of chinese hacking into American Companies, which has been happening for a while, and particularly their interest in Biomedical Research information. Thats also been happening for a while. Now those two trends are sort of colliding and were seeing this very intense warning here from the fbi amid real heightened geopolitical tensions between these two countries. Eamon, thanks very much for that still ahead on the closing bell, well take the pulse of private equity when we speak with David Rubenstein. And as we head to break, heres a check of bonds yields low across the board today, down 0. 65 on the tenyear yes. The first word to any adventure. But when allergies and congestion strike, take allegrad. A nondrowsy antihistamine plus a powerful decongestant. So you can always say yes to putting your true colors on display. Say yes to allegrad. Welcome back joining us by phone, david herro from Harris Associates and Portfolio Manager of the oak Mark International fund. Thanks for phoning in. Good to have you again why europe they have been underperforming the u. S. Why do you think that changes . Thats one of the reasons even going into this crisis, they were trading at significant discounts to the u. S they should trade at some because u. S. Companies tend to be a bit more profitable, but theres a pretty wide discount of conventional valuation measures and then post this, and were going through this market selloff and this little crisis, we do see that the european stocks have underperformed by at least 10 if you look at the euro stock 50, down almost 30 , the s p 500 is down about 17 . So that valuation gap even has grown larger and so i do believe theres good value especially as were starting to see European Countries which got hit first and earlier in many cases than the u. S. Are starting to open up kids are going back to school. Factories and restaurants are reopening, et cetera when you look at valuations, where we are in the crisis, i think europe is better poised from a starting point from where we sit today to achieve very, very strong numbers over the medium and long term i guess, david, valuations, though, themselves are pretty hard to put your finger on at the moment given the uncertainty over the e part of the multiple what gives you confidence that that underperformance, cha which has persisted for quite a long time, you could make that valuation gap argument any part of the last decade, what gives you the confidence now is the time it turns around no, youre right. That gap has persisted and there will be a gap. But i think its just gotten so large today and in many instances these companies arent so dissimilar. I mean, you have large global businesses like an allianz insurance, which of course owns pimco, like a Credit Suisse. These are all old businesses but based in europe. They have great exposure, just as much as the u. S. Does, to some some of these Companies Might have greater u. S. Revenues if you take a ukbased company that owns sun belt, it has 80 of its revenues from the u. S. And, you know, this is just it trades at a discount to where it really should because part of the reason is people are scared of europe between brexit and the sovereign debt crisis five or six years ago and the greek crisis this has scared people away despite the fact that earnings have been okay they havent been booming but theyve been okay. So if prices have dropped and earnings have been okay, that means that valuation gap is opened far more than it should be versus noneuropean shares. Youre even betting on european banks, which has been among the hardest hit, even before this all started, to wilfreds point, the idea of negative Interest Rates, even in this country where all the central bankers are falling over themselves to say were not having negative Interest Rates, the banks are sinking. Why are the european banks a good bet yeah, this is really the opportunity because people believed that the negative and low rates in europe would have destroyed the ability of these businesses to earn and despite, despite the fact that we have seen for over a half decade, the better part of a decade, low and negative rates, these financials have been able tocompound book valu per share growth and Earnings Growth you ask yourself how and why yes, Interest Income has been strained, but theyve been able to make up the cost efficiencies and nonInterest Income, fee income, selling investment services, et cetera, et cetera, so despite the fact theyve been able to maintain or grow earnings, youve seen last year was an okay year for european financials, but this year has been terrible im seeing blue chips like bnp paribas down, Credit Suisse down 40 . These are businesses that have been able to protect and in some cases like Credit Suisse in particular grow their earning streams despite the low rates. As a result were trending 30 or 40 of book value, which is substantially below previous lows in 2007, 2008, 2009, when they had a lot less capital. Theyre safer, diversified their earnings streams and their valuation multiples are as low as theyve ever been this is why we believe theres such an opportunity here david herro, thanks for joining us this is the last commercial we take before we head into the close, which is just 16 minutes away down 2. 5 on the dow every Financial Plan needs a cfp® professional 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. 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. Truly transformative sleep. So, no more tossing and turning. Because only tempurpedic adapts and responds to your body. So you get deep, uninterrupted sleep. During the tempurpedic summer of sleep, all tempurpedic mattresses are on sale you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. Make ice. Making ice. But youre not mad because you have e trade which isnt complicated. Their tools make trading quicker and simpler so you can take on the markets with confidence. Dont get mad get e trade and start Trading Commission free today. 13 minutes left in the trading day. We are now in the closing bell market zone. Mike santoli here as always to break down the crucial moments of the trading day today weve also got josh brown back at the party as well. Josh, welcome. The Broader Market, stocks sharply lower after comments from Federal Reserve chief powell saying the path forward is, quote, highly uncertain, the dow on track to post a threeday losing streak and close at its lowest level since april 21st. Were having our worst week for stocks since march 20th, which was when stocks kind of bottomed recently and then started to take off josh brown, what do you attribute the selling to in the last few sessions, including today . Yeah, so i think the selling is easier to attribute than the buying was a lot of these are stocks that didnt get close to the highs so theyre rolling over from a lower high, which the technicians would tell you is just confirming a downtrend we knew was already in place. So ge is now trading at a level you havent been able to buy it at since 1987. Feel free. Be my guest. The Airlines Look like death on toast. American airlines, new low today. And the banks, even the best bank in the country, jpmorgan, which i own, is 40 off its highs. So the stocks that you would think should be down are down. Anything travel related, anything events related, and really i dont see the reason why we would expect anything different. This is the quarter were in right now thats going to be the nadir of earnings and things should start getting a little less bad from there, but were still looking at fullyear earnings for the s p 500, negative 20 , if were lucky, hopefully a big rebound in 2021 as the comps get easier. But when are we going to get back to those 2019 levels . That could take years. A lot will be dependent on science, a lot will be dependent on politics, and when various states get back to business and when people feel better, theng things that are just theres no precedent you cant predict them in the absence of those certainties were left with all of the uncertainties and it makes total sense to me that we would be mired in a trading range somewhere around where we are mike, to the point of the trading range, what are the key levels you keep an eye on in the s p 500 that would make you think weve broken out of this recent shortterm range to the downside to the downside, i mean, i think youre look at in the low 2,700s was the low from one of the last 5 pullbacks we had the difference between whats going on right now and the continued weakness in those hardhit areas that josh was just mentioning is were having a shakeout in the big nasdaq stocks and a shakeout after a very good run, an extremely good run on a relative basis. I would say 2,720 in the s p a lot of people are looking at you have to get below 2,600 to get rid of more than half of this whole rebound rally thats when you start to say is it really rolling over for good. I think on the way to that, if we were to continue to decline, people are going to be very scared, theyll assume it will be a retest and it may or may not be i think the burden of proof is on those people who think we shoot right back to the lows i think sideways with 2,900, 3,000 as an upside, 2,700 and below to the downside makes a lot of sense given the range of potential outcomes were grappling with josh brown, you know, part of the narrative today is the cautious commentary from some bigname investors Stanley Druckenmiller, Economic Club of new york, david tepper on Halftime Report with scott, all sort of coming out, theyre talking about their positions, talking about the fact that the risk reward doesnt look all that great its things that youve been talking about. Do you think that has an impact . It might have a psychological impact at the margin, but i think this is probably the most important response i can give you to that question, and i want everyone to pay very close attention to me. Stan druckenmiller and david tepper are two of the alltime greatest traders who ever lived. Like literally in the pantheon, if not top five, 100 top ten. Even they couldnt repeat the performance that got them there. And theyre both retired, by the way. So i dont think that individual investors or the vast majority of professional investors who are watching us right now should be reacting at all to what they have to say. First of all, they would be the first to tell you a lot of what they do is gut instinct. Teper is not systemic. Druken hiller is sorosesque they take risk off thats not repeatable. Theyre not going to tell you when they change their mind. This is the key, sara. The biggest trade in druckenmillers career was pulling two 180s in the space of four days, being out of the nasdaq during the biggest tech boom ever, then being all in and then two days later not only being out but being short. Hes not going to call you so on january 17th, if you were watching squawk box that morning, kernan got an email from both of them. They were bullish as all get out. They loved being in stocks, intermediate term bullish, shortterm bullish they couldnt see what was coming no one else could either they changed their minds do not change your Asset Allocation based on druck because he aint going to call you when you have a different opinion a few days later its a snapshot, a moment in time when commenting thats right. But josh brown wont quite call you but hes regularly a guest every week on the closing bell. Were going to know every fwis a twist and turn seven minutes left of the show ill tweet it if you dont have me on the coronavirus has disproportionately impacted lowerincome people. Powell said 40 of those in households making less than 40,000 per year have lost a job in march according to fed data as more americans turn to costcutting measures, Retail Stocks will likely feel the heat d. A. Davidson says t. J. Maxx, burlington and ross storesare best positioned to weather Economic Conditions due to consumer trade down potential. Mike santoli, is all of that priced into those stocks already . I dont know if its fully priced in. I do know thats the playbook. This is pretty much a cyclical routine we go through and play the trade down in Dollar Stores and those retailers you mentioned that are off price big question, really, related to tjx and, you know, burlington is are you going to get back to a world where you want to go in and Treasure Hunt and wait in a twisting line at t. J. Maxx and buy stuff off the shelf near the checkout those are the questions, not so much the character of the consumer going into this i think its logical i just dont know if theres much of an edge at this point to know exactly what the nature of this consumer comeback, if we get one, is going to look like the question is can they reopen tjx does well or did well during the last recession yeah. The question is they dont have an Online Presence so they just need can you reopen, but much more than other retailers, they rely on people kind of being there. They talk about a Treasure Hunt, about the serendipity. Thats a difference r different experience than Curbside Pickup at target. Right you can socially distance i think at t. J. Maxx you just have to dig deep. Lets hit the cruise lines cruise stocks under a will the of pressure today. Seema mody has the details on another brutal day for this group. Seema . It certainly is, sara cruise stocks at session lows as Credit Rating agency moodys downgraded Royal Caribbean as the cruise line has gone to the debt market today pledging 28 ships as collateral in its over 3 billion bond offering a source familiar says that deal will be priced at around 12 , so in a similar range as carnival and norwegians recent debt offerings but still a steep price to pay now, with todays losses, norwegian cruise line, the worst performing stock on the s p 500 this year, down 82 . Its expected to report a firstquarter loss tomorrow morning. The key focus will be on longterm bookings and how its planning to incorporate social distancing and protective gear on board sara, you may be able to social distance at t. J. Maxx, but can you do the same on a cruise line thats the big question. Seema, thank you for that those stocks suffering significantly. Airline stocks also falling to multiyear lows today, the thing that Value Investor bill miller had to say about airlines earlier on the show. Our view is that theres a fair amount of option value in the big airlines right now because they have enough liquidity to get through the end of this year, in fact, probably into somewhere into the mid2021 and maybe even a full year from now. And so a lot can happen between now and then and if youre making a bet on the airlines right now, youre making an implicit bet against the vaccine or against a sensible Covid Treatment phil lebeau joins us now with more on Airline Stocks phil, a rare bull there on the Airline Stocks coming in a week as sara mentioned earlier even the boeing boss is bearish well, yes and a lot of people are bearish on the Airline Stocks, which is reflected in the stock action we saw today. Start off with American Airlines it has hit a multiyear low, its lowest ever since it went public back in 2013 seema mentioned norwegian being the worst performing s p 500 stock. Heres the second worst. United airlines. Second worst s p 500 stock year to date, down more than 77 . And then theres delta, which is widely believed to have one of the best Balance Sheets in the industry its now trading at 2013 levels. Thee three things are driving the stocks lower right now you have lackluster q3 demand. Nobodys quite sure how many people will be flying in the third quarter. Most do not expect a full recovery until 2023 or 2024 and that means you have to punch liquidity. Bill miller is saying he believes they have enough liquidity in the near term and thats true. Theyre not going to fall apart tomorrow but when does the recovery come and how much liquidity do they have to get there . All right, phil lebeau. Thank you very much. Big questions still. Mike, you have more on the market internals two more minutes of trading. What do you see . Yeah. As you would expect, plenty of weakness if you look at the volume split it was 92 to the downside earlier in the new york stock exchange, maybe a littleless than that right now. Weve had a little bit of a lateday comeback off the lows in the s p 500 also a similar story where the average stock underperforming the market cap weighted s p 500, the eqal, basically all bigcap stongs equal weighted and that is obviously underperforming the s p even though its all down today. That equalweighted index down about 8 off its recent high then the vix popped again today, not near panic levels but definitely rebuilding a little bit of premium it doesnt take much were in a 5 shakeout from the highs but it doesnt take much to get people nervous that theres plenty more on the downside whether there is or not. One minute left of the session as mike said, off the lows the low of the dow was close to 700 points about 25 minutes apg. Were down less than 5 pushgs poi 500 points all sectors remain in the red on the s p 500. The best performer, Consumer Staples, is the only sector down less than 1 energy and financials follow banks suffering significantly again, down sharply, kbwbanks index down 4. 5 , down 11. 7 just this week. Wells fargo down significantly, 6 or so, down as much as 9 earlier in the session, down close to 60 year to date. We are seeing yields slip lower as well today, the tenyear down at 0. 64 Oil Prices Moving lower. At the bell, we have the s p 500 down 1. 7 , dow down just more than 2 , or 491 points, and the nasdaq down 1. 5 off the session lows but still an ugly day. Welcome back if you are just joining us, im sara eisen with wilfred frost and mike santoli look how we finished up the day on wall street the dow fell 516 points. We were down more than 600 at the lows got a little pop there toward the close, but pretty much as you can see we were lower all day. As far as the s p 500, we are looking decline. Every sector is lower. Energy the hardest hit, but financials with another tough day, down 3 industrials down 2. 5 . Materials. These are the cyclical groups tied to the economy, down 2 utilities and staples fared the best the bond proxy, the defensive sector the nasdaq, tech stocks were dragged into todays selloff despite the fact they started the day higher as you can see, nasdaq was positive this morning, closed the day down 1. 5 . Fared better than the rest the russell 2000 index of small caps clobbered today those smaller stocks have been hit in this downdraft weve seen in the last few days, down 3. 3 . Were now looking at the worst week for stocks going into thursday since march 20th. Of course that was the big rebound we saw over the past month or so. Investors are now awaiting earnings from cisco. Well bring you those results as soon as they are released. Good read there on i. T. Spending overall. Plus we will ask Carlyle Group cofounder David Rubenstein about how private equity firms are raising money and where theyre putting it to work amid the Coronavirus Crisis and these market swings. Josh brown still here. Sylvia deblanti joins the conversation mike, where the selling was today and what thate tetells yo about the recent rally and whether its topped ow it tells you the nasdaq probably got a little extended we did see some shakeouts in some of the big nasdaq names aside from amazon, and really, that was enough to expose a lot of the underlying weakness in some of the other parts of the market that has been there for quite some time. 2,820 on the s p 500, a familiar level to me, the low in august of last year where we had that recession scare. We continue to fight out this range, 2,800, 2,900. Its the fourth 5 pullback from a high in the s p 500 since the march low. So at this point, thats all it is, even though it seems to be a lot worse because a lot of the leading stocks gave way. I wanted to ask you about the banks we touched on before the close, another terrible session for the banks. I wonder if you think they should be taking any strength at all from the fact that jay powell today and later in an interview with Steve Liesman, loretta meser seemed to rule out negative Interest Rates. Is the yield curve the banks have to work with pretty much at the worst its going to get for them, even if there are some other factors that clearly are significant hurdles for the sector to get over yeah. Thats a really great question, wi wilf weve heard policymakers rule things out before and then the situation changes and they have to reconsider them i dont think in 2018 or 2019 Jerome Powell was considering going back to zero trait but the world changes. Its nice to hear them say negative Interest Rates are not being discussed. They shouldnt be. Theyre terrible theyre a tax on banks and have done nothing to stimulate the economies where they exist zero im glad theyre not talking about it but never say never we saw crude oil trade at a negative number. We shouldnt say Interest Rates cant do that. Maybe that is whats ailing the banks. I also think there are new banks that trade in other sectors like technology, but like paypal is a Payments Company its a 165 billion market cap cisco is an 80 billion market cap. Paypal excuse me, citi group. Paypal is twice the size of citi group. Do most people know that are they aware of that whos going to get the next 50 million new customers, paypal or citi there is this surreptitious turnover beneath the surface thats playing out in the stock market but maybe not in the imaginations of most people where Technology Companies are becoming the banks of the 21st century. And where do you think the money comes from to make paypal a 165 billion market cap some is coming from the market caps of traditional lenders and Payment Processing companies thats like a secular trend thats been going on for 20 years and i think where we are with rates probably can exacerbates the price action and makes it look even worse well, weve got to talk about some big investor calls happening today, all weighing in on the market. Appaloosa management Founder David tepper calling in to cnbc earlier, was cautious about the market heres what he said. I would say that, you know, 99 was more overvalued, 99, 2000, but, yeah, i would say its one of the most overvalued markets, maybe the second most ive seen at that day. Last hour we talked to bill miller he agreed with that take listen disagreed. I think if you look at the overall market as a market, were trading around 17 times the consensus on bottomup earnings estimates for 2021, which is about the average for the last five years. So those estimates may be too high or may be too low, bub i think that gives you a sense of what analysts at least are thinking and thats the overall market number, i would call it it might be a little extended given the fact weve got a chasm of bad news to go over here, but i dont find it as dramatically overvalued as david or stanley do. Josh brown, you set it up really well in talking about the risks of following big names into the trade, the fact we dont get all the information. Our pal ron insana wrote in and characterized it well too. He said that risk reward being the worst in his career, which is what Stanley Druckenmiller said, is not a trade tepper is more nuanced about the whole thing. Warren buffett says he sees no bargains its all very different than bill akman a while ago who came on and scared everyone and really set up a trade according to ron insana. To your point,er you have to take all of these with a grain of salt. What would you add look, look, i think its good color to have. Like if youre going to try to take an amalgamation of opinions from smart investors and use that to color the way you might feel about the market, i think thats perfectly reasonable. Why wouldnt you want to hear what some of the smartest investors have to say . But acting on that is different. The analogy i use when my clients call up and say, did you hear what soandso said about gold did you hear what jeff said about the next depression . And bill gross is talking about a debt super nova . Very simply put, if your teenage son or daughter needs to take a road test, are they going to watch Dale Earnhardt clips on youtube . So we have to just contextualize the fact these are very bright people but what theyre saying is not really applicable to most people that are just trying to invest and save for retirement i think the bigger thing to consider here is that of course this isnt as overvalued as 1999 you dont have to go by someones opinion. Just look at the data. On a weightedaverage basis, the triple qqqs are trading at 26 times last years earnings 26 times in 1999, they were 95 times earnings, okay the s p was at 45 times earnings empirically we know that thats not as overvalued. Its like, lets just take a deep breath, lets look at the data, lets focus on Risk Management within our own accounts and, yes, some of these wild predictions may come true, some of the worst ones might come true, but they dont usually come true. Sylvia, where do you stand on the overall market levels and that balance between the outperforming tech names and the underperforming value cyclical stocks like banks and airlines yeah. Its important to sorry, sylvia sorry i think josh brought up some great points you have to look at this at a moment in time, and this market is a little bit different now than it was before, so even, you know, different from 2008, for example. The fed is coming in with a bazooka of a floor to prop up the market were talking about a perceived 8 trillion Balance Sheet coming our way, and i think that does add some assistastability for t market the market doesnt necessarily match the economy and the potential of a longterm recession, but there are bright spots and technology is one of them the workfromhome theme has been a massive tailwind for Technology Companies and Semiconductor Stocks weve seen the continued growth in names like apple and names like microsoft, although they pulled back a little bit today, increase, you know, cisco earnings coming up here, everyone is using webx, using increased reliance on data centers and security i really think that the Technology Names are some of the bright spots that will continue to benefit, not to mention the continued growth of semiconductors for the data, the chips, the memory, and the 5g we need to sustain this going forward. Weve got the first Earnings Report out back to the Broader Markets in a moment josh lipton has ciscos numbers. So, wilf, cisco q3 earnings per share 79 cents the street was at 69 cents revenue comes in 11. 98 billion, the street was 11. 7 billion nongap Gross Margins clocking in at 66. 6 for the quarter infrastructure platforms down 15 , referring to the companys core Network Offerings applications down 5 that would include webx, its Video Conferencing service which goes head to head with Companies Like zoom. Looking ahead, q4, they say expect eps between 72 and 74 cents. They see revenue declining between 8. 5 and 11. 5 the street thought it would be down 12 this Conference Call kicks off at 4 30 eastern and well be on it back to you. Josh, thanks so much for that one. Mike santoli, cisco holding up in what kind of way relative to some of the other big tech outperformers . Its more on a defensive side of things. So its not as much the secular grower independent of gdp. Cisco is kind of a gdp, world gdp plus or minustype topline grower but very strong Balance Sheet, much more defensible business, 3. 5 dividend yield that is sustainable. I think those are the reasons you would own a cisco and not necessarily place it in the same basket with kind of the gogo tech of the internet thats been running the nasdaq right now thats why i think a little more weakness in cisco, recently off its highs because it is a little more dependent on the rest of the world and corporate spending ramping up a bit robin, the ceo and chairman in the release talks about how theyve benefited. The pandemic has driven organizations to digitize their operations, support remote workforces at a faster speed and greater scale than ever before and they highlight some of those numbers in this release. Josh, is this a workfromhome type of stock . And in general, are you still pursuing that as an investment theme . Yeah. And they havent shaken up those stocks yet, notably. Theyre still hanging pretty high im in zoom and have been for a long time and im in slack cisco is not going to get the benefit of the growth in webx because its not a big enough part of its business to offset the much, much, much Slower Growth that mike santoli was just talking about mikes dead on this is a proxy for Global Growth plus or minus so if youre a shareholder in cisco, common stock, what you want them to do is reaffirm that three and change percent dividend each year, maybe nudge it a little bit higher in good times and certainly never low it, and then buy back 10 or so of the float if politically feasible and not screw up on execution. One of the slight negatives you might want to keep an eye out and maybe theyll address it on the Conference Call, we dont want to see a lot of vendor financing here if youre making the numbers by loaning your customers the money, thats not hot for 2020 there was talk of that the other day. Well see if thats what they emphasize or deemphasize. If thats going to be the way they make their fullyear numbers, you may see negative notes on the street. Sylvia, where do you stand within the tech space . What are your top picks . In the tech space, weve actually seen a lot of flow into a whole bunch of rets. Its the top names that let the market up. The apples, the microsofts of the world and, you know, not even tech but sort of relevant to tech is, you know, amazon into the Consumer Discretionary index. Its one of the top performers there. So those three stocks have really been leading the markets for, you know, since the march low, and i think will continue to i also just like the general theme of semiconductors, again, with the overall 5g need for speed, working from home i dont think that this is going to be a temporary thing coronavirus or not i think a lot of Large Organizations will look to improve flexibility and the need for, again, speed and data centers, you know, webx, Video Conferencing, all sorts of capabilities that allow their work flows to collaborate and work efficiently together. Thats really in the technology and in the Semiconductor Space and theme. Year to date, look, theyre still performing minus today where we got a small pullback, in the free beta etf products you got doubledigit returns. They do continue to hold up well sylvia and josh, thanks for joining us great to see you as always tonight dont miss jim cramers interview with ciscos ceo, 6 00 p. M. Mad money. Thanks to josh and sylvia. Up next, the equity playbook well ask david berunstein about whether hes putting money to work in this volatile market this is decision tech. Find a stock based on your interests or whats trending. Get realtime insights in your customized view of the market. Its smarter Trading Technology for smarter trading decisions. Fidelity. Ever somethings gone mogotten into the office. M, i hear you. Feels like theres no barriers between departments now. Servicenow. The smarter way to workflow. Major equity averages sharply lower into the close, dow down more than 2 . With us now for an exclusive interview, David Rubenstein, cofounder of the Carlyle Group. Nice to have you again, david. Thanks for joining us. My pleasure to be here. Thank you for having me. So theres a growing chorus of bigname investors coming out saying stocks are looking overvalued weve started to see a stumble in recent days how would you assess the risk right now around stocks given the enormous uncertainties that lie ahead for the economy and for the pandemic in the private equity world we focus less on the value of stocks day to day than we do on longerterm type of occurrences. So we are not as subject to the daytoday vagaries of the market we do own publicly traded stocks once we take them public but generally, i would say the markets are going to vacillate for quite some time. Look what happened today the Federal Reserve chairman made a speech, a very good speech, but the market went down in response to that. I think youre going to see that for a long time and i just think its going to take a while before people are comfortable that the bottom has been hit to that point, david, your coceos would have to withdraw outlook going forward. How long do you think the private Equity Industry or carlyle more specifically will be in a position where youre only earning that 2 Management Fee and youre not realizing the 20 performance fee . Is it next year youre back to being in profit in that sense or five years away . No. Nobody can say for certain i dont think its fiveyears away remember in the last Great Recession we had about ten years ago, private equity performed extremely well and outperformed Public Market averages consistently and i suspect that will happen again. Today what private equity people are doing is making certain their employees are healthy, the x companies they own have employees that are healthy, taking care of the healthy employees, number one. Two, making certain that the values of the companies are preserved and when necessary enhanced by additional equity, of buying debt back or things like that or putting in additional debt. Three, looking for new opportunities that might arise because prices are low theres a variety of things were doing. Private equity is in pretty good shape relatively speaking, but were not magicians. We have to deal with the economy that we live with, but generally i think were in pretty good shape relative to Everything Else about those opportunities, david, and that dry powder that you have i mean, are you seeing a lot of them out there right now and if so, where well, as a general rule of thumb, people that are sellers tend to think that their prices are shouldnt go down as much as buyers think they should go down when youre ready to buy something in this environment, youll probably have to wait a while because sellers havent yet adjusted to the likely decline of the value of what they own so we have a fair amount of dry powder as do the other large private equity firms we see a lot of opportunities. But we dont think that if you dont move in a week or two or three or a month that youre going to miss the best opportunities. Some of the best opportunities that occurred in the last recession occurred, you know, three, four, five, six months into the recession when people made investments so we are not basically upset that were not putting out a lot of matchup rig of money right now because we have a fair amount of Due Diligence to do, were waiting for the right opportunities to come along given that dry powder as you mentioned, david, do you think its fair that private equityowned companies should not have access to government bailouts, Government Support programs the most important thing is employees, that they have jobs and they can feed their families and theyre healthy. So whether you are employed by a private equity firm or a Public Company or a family should not be that relevant but i recognize the political situation on capitol hill and elsewhere. But i think congress should worry about employees and making certain that theyre okay and not whether the private equity firms own them or not, but in the end, thats a difficult argument to make in this environment. Im more worried about the employees and the employees of Smaller Companies than i am about whether private equity benefits when you think about, david, some of the opportunities, and you mentioned the timing is key, and you dont have to necessarily pounce, how are you thinking about shortterm versus longterm changes as a result of this pandemic in all sorts of industries, you know, from travel to technology i mean, where do you think the best opportunities are given, you know, things are going to change as a result of all this well, templeton famously said the biggest mistake in words at this time is different, but he was wrong in this case this is not just a recession its a gigantic health care problem. I think peoples lives will be changed in the way they deal with their lives in the future will be changed just in the way of people who lived through the Great Depression changed their lives. My parents lived through the Great Depression they were scarred by it. People are going to be scarred by this and therefore i dont think theyll travel quite as much as they did for a while, wont go to hotels for a while, wont go to as many big sporting events for a while but it will change eventually. It may take a year or two for people to come back to these habits particularly if we get a vaccine. If a vaccine comes forward, then i think all bets are off and i think people go back to their conduct. And based on the conversations ive had with people at nih and over places, i do think there will be a vaccine in the not a too distant future it takes a lot to test them and you have to produce them, but i dont think with all the people working on it, i think we will get a vaccine hopefully before a second wave of this comes along. There was a stake in American Business travel and pulled out saying it was an adverse event are you concerned theres an reputational damage to carlyle that you stepped away from a deal youd signed on the dotted line for i cant comment on that as all the lawyers and everybody else have told me, and im a lawyer, so i know thats good advice i can say this, that in certain situations like this, you know, firms that have been around for a long time that have a very good reputation will find their reputation will stay intact. Weve been in business for over 30 years we have a very good global reputation people know were people of integrity. I dont think our reputation will be harmed by one deal or another deal or things like that other than that, i cant comment on that specific situation david, i mean, im not a lawyer you are a lawyer so im up against a goliath. The material adverse event clause thats always in every deal Companies Like yours do, is that not really designed for a companyspecific thing that emerges in your target company that youre acquiring, not a broad global macro event that applies to absolutely everyone what if you were about to buy zoom, for example, or one of the stocks thats massively benefited from this pandemic would they be able to say to you, in fact, we deserve double the price . Were walking away at this price . I dont think they would, would they first, im not a goliath in the legal world. If i was, id be practicing law. I wasnt that good a lawyer. But i would say that it depends on what the specific language says in many of these kind of contracts. And material adverse clause provisions vary. Some of them have had pandemic things, some have not related to them, it depends on what the language says. I dont really have i cant comment on that specific situation, but i think these clauses are well designed generally and people who execute these contracts generally are familiar with the provisions i just cant comment onwhat is in a specific provision in a particular deal, though. We know uber is trying to buy grub hub do you see this as a unique example because of what were dealing with in terms of m a activity, or do you see deal making picking up here as a result of the pain and businesses that are shrinking and suffering in many ways the bigger ones of being able to be resilient and do these kind of deals . I do think youll see strategics doing a fair bit of buying, which the uber deal is a strategic acquisition, and i do think some companies that are hardpressed for business now or cash may want to do deals. And we see plenty of these opportunities as well. The timing of these things, though, will vary. I think youll see a fair amount of activity as you did in the last in the Great Recession we had about ten years ago, a lot of acquisitions occurred then too i think youll see a fair bit of it now i think the m a lawyers and the m a bankers are pretty busy these days David Rubenstein, good to check in with you. I think you made the right choice, david, pursuing private equity not law i dont know. You made a pretty good choice. Youre doing pretty well thank you for having me. I appreciate the opportunity to talk about the private equity world, which i think is in reasonably good shape. Thank you very much, david. My pleasure still ahead, we will ask Charles Schwab chief investment strategist Liz Ann Sonders whether shes finding deals. You can watch or listen to us live or on the go on the cnbc app. Across america, Business Owners are figuring things out. Finding new ways to serve customers. Connect employees. And work with partners. Comcast business is right there with you. With a network that helps give you speed, reliability and security. And enough bandwidth to handle all your connected devices. Voice Solutions Like remote Call Forwarding and readable voicemail. And safe, convenient installation. When every connection counts, you can count on us. Get the connectivity your business needs. Call today. Comcast business. Welcome back mike is taking a look at Berkshire Hathaways stock mike yeah. Well, Berkshire Hathaways stock looks pretty rough right now if you take a look at a oneyear chart. Its trading as it is the biggest component of the s p financials, trading along with financials, obviously big insurance component, insurance under pressure as well as manufacturing and transports so the question now is, does that make it cheap take a look at berkshire compared to apple. Apple of course the largest single Public Company holding that berkshire has right now, worth about 78 billion. Apple has not helped, not provided support in the last leg for berkshire. As a result, berkshires apple holdings alone are equivalent to about 19 of berkshires market cap right now. So thats a tremendous implicit bet just on that then the publicly traded stocks that berkshire owns alone are now more than 45 of berkshires market value, leaving not so much for the other operating businesses then on an absolute valuation basis, this is a 20year chart of berkshires pricetobook value, down to 1. 1 times just about on trailing book value obviously, there are Downside Risks to the book, but unless youre talking about the Global Financial crisis bottom when it traded just under one times book, you dont tend to be able to get berkshire that much cheaper. Either you have to make the conclusion that somethings fundamentally changed here, theres not value there, or berkshire looks like a decent risk reward setting here those positions in banks, you know, jpmorgan, wells fargo, bank of america, u. S. Bank corps as well as some of the credit card Companies Like amex point out some legitimacy. I asked that with bill miller because clearly hes bearish on the economy but didnt suggest at least in the q a that hed sold out of the banks or was planning to. Remains to be seen whether that will happen in the future. Clearly, he sold out of the airlines a lot in those big banks which have been performing terribly. You do have to keep in mind how low hes in those banks in terms of price, though hes owned so many for so long, its not Like Airlines where he went against a fundamental principle of his, bought the airlines not too far before they peaked and then had to essentially say i was wrong, im just going on Something Else its a different equation for financial stocks all right, mike thank you. Weve got some breaking news in the energy market. Dom chu with the details yes, maam, sara, we have some stuff from the u. S. Energy department this is according to reuters the u. S. Department of energy saying that it will buy up to 1 Million Barrels of Sweet Crude Oil for the Strategic Petroleum reserve from small to mediumsized domestic u. S. Producers. Also going on to say per the report that the oil purchase for the spr, the Strategic Petroleum reserve, will serve as a test for conditions of physical crude Oil Available to the reserve and wilf and sara, as we saw the negative prices last time around for wti futures, many parts of the physical oil market are still at very depressed levels so it could be a situation where the u. S. Is trying to figure out the logistics of getting that very cheap crude oil for the spr. Back to you. Dom, thanks so much for that. Still to come, much more on the selloff well ask Liz Ann Sonders whether she agrees with david tepper and Stanley Druckenmiller and that the market is overvalued tonight 7 00 p. M. , ulta beautys ceo on the companys response to the outbreak and the reopening of some stores and mine street in crisis has some businesses in downtown thomasville, georgia, fighting to survive would you volueer ntto be infected with the virus in meet one woman who is thats at 7 00 p. M mhm, yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. And wells fargo employees are assisting millions of customers never before across america through fee waivers and payment deferrals, helping people stay in their homes through mortgage Payment Relief efforts and donating 175 Million Dollars to help hundreds of local organizations provide food and other critical needs. When you need us, wells fargo is here to help. And right now, is a time for action. So, for a second time were giving members a credit on their auto insurance. Because its the right thing to do. Were also giving Payment Relief options to eligible members so they can take care of things like groceries before they worry about their insurance or credit card bills. Right now is the time to take care of what matters most. Like weve done together, so many times before. Discover all the ways were helping members at usaa. Com coronavirus welcome back investors suggested Jerome Powells summary on the economy, david tepper calling the market one of the most overvalued hes seen joining us now, Liz Ann Sonders from Charles Schwab. Good afternoon thanks for joining us. Thank you we didnt hear much from powell that should make us optimistic on the economic outlook. Also kind of didnt suggest on the monetary side hes going do do much more and suggesting it should come from the fiscal side should that be a worry to Equity Investors . Im not sure so much sure how much more the fed can do they have a lot of tools that were already in their toolbox, they got boo their toolbox, that can help on the liquidity side what powell said that was important today and echoed yesterday by what Stan Druckenmiller said in the economic call with new york and i was on that call which is making the contrast between liquidity and solvency and the fed has a lot of tools, will continue to have tools to make sure theres liquidity in the system, make sure the plumbing of the Financial System is working but ultimately theres not much they can do about corporate solvency i think thats still the issue in front of us and probably the most important when you think of the second order economic impacts. So i was glad to see him emphasize that today so what are your expectations, liz ann, on that front as far as Congress Stepping in with another stimulus or Relief Program package to try to stem the tide there . So, it probably is necessary. We know the policy brought forth, the 3 trillion one, which in its current form isnt likely to pass, but there is every expectation that something more will be needed because, you know, frankly, even using the term stimulus was a stretch, at least in the early stages of this, and i was somewhat pleased to see that the c. A. R. E. S. Act was termed a relief act, because it really is more about triage and rescue than actually attempting to stimulate Economic Activity i think thats down the road so, yeah, i would expect more on the fiscal side, just something not as exactly as the package looks in its current form. As im sure youre aware, weve been talking about the bearish calls from david tepper and Stan Druckenmiller today you have, i know, a smart money versus dumb money is the nickname label for it indicator. Where do we stand on that indicator at the moment . So, some of the recent activity on the behavioral side of sentiment had really started to pick up, not quite to the frothy levels that we saw back in late january into the middle part of february but there was some, for lack of a better word, sort of form of activity seen in the behavior of many individual investors, speculative activity in the Options Market too. That was a cause for concern i already mentioned druckenmillers comments on liquidity versus solvency, which are important, but also valuation. It is sort of a moving target right now. The e is in freefall but theres a yawning gap between bottomup estimates, which analysts are flying blind with no guidance, but the consensus for 2020 is 127 of s p earnings but you have worstcase scenarios out there like goldmans, which is down at 70 so even at 127, if thats accurate, which it probably isnt, its been coming down about a dollar a day, youre talking about 22 times earnings. If the more dire scenario unfolds and its 70, using goldmans worstcase scenario estimate, youre talking about 40 times earnings. So theres just this impossibility of doing valuation analysis, but if you trust anything resemiblg the consensus, they dont look good. But looking into 2021, im a big believer in trending growth rates, but heres where level matters. The we do get 25 in 2021, up from what . Its a tough thing and valuation is a Terrible Market timing tool in any environment. Its as much a sentiment indicator as it is some fundamental indicator. Those are important too. I would say that in any environment. Liz ann sonders, thanks for your take. Thanks for phoning in. My pleasure thank you. Still ahead, shares of mccormick have been outperforming the Broader Market during the coronavirus pandemic and have held up well even today. Well talk to the ceo about the surge in sales amid increasing demand for cooking at home vo since our beginning, our business has been people. And their financial wellbeing. Its evident in good times, with decisions focused on the longterm. And crucial when circumstances become difficult. That continued emphasis on people our advisors, associates, clients and communities gives us purpose, strength and a way forward. Today. And always. Our Retirement Plan with voya gives us confidence. We can spend a bit now, knowing were prepared for the future. Surprise we renovated the guest room, so you can live with us. Im good at my condo. Well planned, well invested, well protected. Voya. Be confident to and through retirement. 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. Time for a coronavirus update with melissa lee. Governor andrew cuomo says antibody tests show Health Care Workers in new york city have a lower rate of covid19 exposure than the general population. He believes face coverings send a message to others. When someone wears a mask, it says to other people, i respect you, i respect your family, i respect the work of our frontline heroes its a sign of respect and all new yorkers, i believe, should do it nbc news contributor dr. Joseph fehr seen in a file video has been hospitalized with coronavirus. In a tweet, the prominent disease expert says he used max protections but still managed to contract the virus he is urging all americans to continue social distancing although he is improving he says he is not out of the woods yet as all, for more coronavirus coverage, head over to cnbc. Com. Sara melissa, thank you. Up next, shares of mccormick making a steady climb higher since the coronavirus pandemic lows that companys ceo joins us next with how theyre holding up in the face of heightened demand. Or whats trending. Get realtime insights in your customized view of the market. Its smarter Trading Technology for smarter trading decisions. Fidelity. Big food brands seeing an increase in demand as more consumers cook from home amid the coronavirus outbreak one company benefitting from the trend is mccormick and company, the flavor and spice maker, outperforming the Broader Market in the last two months, up nearly 25 and outperforming once again today joining us on the cnbc news line, lawrence kurzius, chairman, president , and Cottage Grove crowe of mccormick lawrence, good to have you here. Tell us where youre seeing the most demand, spices or condiments like franks red hot, and how thats changed over the course of the last few months with these stayathome orders thanks, sara. Id like to begin first by sending sympathy to everyone thats been impacted by covid19 and thank the essential workers including those of us at mccormick for keeping us healthy, safe, and supplied with sts essentials like food just about anything that relates to food at home is up really strongly right now, sara, as people are trying to shelter in place, schools are closed, workplaces are closed, restaurants are closed, anything related to dining at home, cooking at home is really strong right now. The flipside of that, of course, is anything related to restaurant consumption is way, way down lawrence, some of your peers when theyve come on have referred to pantry loading or something along those lines. Have the severe buying of things for cooking at home continued right up until present day or was it an initial burst of items that perhaps you dont need to be regularly buying . Right wilfred, ive got two perspectives on that first of all, for mccormick, were really not a stockup kind of company its not like toilet paper where people are going to run out and load up. What were seeing is real consumption by people really cooking at home and theyre using our product to prepare all those food that they might have stocked up on. Our Research Shows that a typical really only 75 of households have a week or two of food on hand, so this idea of people really being stocked up i think is more perception than reality. As we look to our experience around the world, if we look ahead to china, which is maybe two or three months ahead of us in terms of coming through it, were still seeing doubledigit yearonyear increases, strong drimg increases for retail Food Products for china consumers so this new pattern of behavior of cooking at home is likely to be with us for quite some time i was wondering how youre sort of positioning for the future and how youre planning to hold on to customers that may be coming to you that werent there before and whether youre having to adjust any of the manufacturing and focus on where the products are manufacturing in terms of holding on to the consumer, a lot of people are really learning how to cook right now. You know, some of our most successful items right now are really familiar family favorites, especially, you know, with kids at home, like mccormick taco mix is up triple digits so thats a real simple thing to make baking is up really strong and on our digital and social media property, searches for howto and recipe tips are all up triple digits and no question is too simple. You know, weve gotten questions like what is a teaspoon . You know that people are learning how to cook for the first time like anything, practice makes perfect. I think people are going to have some good experiences with it and its a peat eaattern of behr that will keep up. The latest Consumer Price index report, food at home inflation rose 3 from march to april, biggest sequential increase since the Carter Administration is that something that youre passing on to the consumer and you see as a continuing trend here, people having to pay higher prices at the Grocery Store . Yeah. I think a lot of that might be driven by things other than prepared food. Certainly in our case, we havent done anything with pricing. You know, quite the opposite weve incured a lot of extra costs as weve really costs as weve skcrambled to kep the supply intact and thats a cost that we absorbed for ourselves and that might be reflected in the mix of products many times and economically hard times consumers will trade down to less expensive products and right now theyre buying whatever is available. Can you get old bay hot sauce right now or is that still unavailable . I think old bay hot sauce is a pretty tough ask right now, but i think youll find that theres plenty of franks out there, and i will say that franks goes great whether you got your food at home or whether youve had it as takeout franks doesnt care where you cooked it, but what i would encourage you to do is put a lot of cooking at home and then put franks on the products. Our franks is up still in double digits and knocking on the door of triple interestingly, frenchs mustard is also one of those brands that we bought at the same time as franks and its demand is extraordinary because of this meal occasion people call lunch that people have to make at home and make sandwiches. Lawrence kurzius, thank you for joining us. Thank you for having me. Up next, excuse me up next, trading the turbulence it was a wild day on wall street with the dow closing down more than00 5 points and what you need to be watching ahead of tomorrows session well be right back. Ement. Constructing funds that dont simply follow an index. But explore new terrain. Helping you fill portfolio gaps. Connect to client goals. And strengthen confidence in you. Flexshares. Powered by over a century of investment expertise. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. So were working 24 7 toected maintain a reliable network, to meet your growing internet needs. Were helping customers who are experiencing Financial Difficulties stay connected. Were increasing internet speeds for low income families in our internet essentials program. And delivering selfinstall kits to your door. Nos comprometemos a mantenerte conectado. Were committed to keeping you connected. For more information on how you can stay connected, visit xfinity. Com prepare. Up next, new updates from washington on a coordinated effort to develop a covid19 vaccine. Well be right back. Because its the right thing to do. Were also giving Payment Relief options to eligible members so they can take care of things like groceries before they worry about their insurance or credit card bills. Right now is the time to take care of what matters most. Like weve done together, so many times before. Discover all the ways were helping members at usaa. Com coronavirus thats why working together ist more important than ever. S at t is committed to keeping you connected. So you can keep your patients cared for. Your customers served. Your students inspired. And your employees closer than ever. Our network is resilient. Our people are strong. Our job is to keep your business connected. Its what weve always done. Its what well always do. Weve got some breaking news on vaccines. Kayla tausche with the details from washington. Kayla . Sara, the top two leadershi spots called warped speed, it has chosen the former head of glaxosmithklines Vaccine Commission as the chief adviser for that initiative and the chief operating officer job will be filled by gustav perna who has been overseeing the armys Global Supply chain. Operation warp speed has gone from 80 to 1,000 and the number of vaccines they are testing dr. Anthony fauci says he wants to be something at finish line by january. Lets hope . Kayla, were also getting headlines here from the president weighing in on the negative Interest Rate debate that has dominated cnbc today. What did he say . Well, hes currently meeting in the cabinet room with state delegations from colorado and north dakota making some comments about fed chair jay w powell, his performance as fed chair has improved and President Trump thinks that the u. S. Should have negative Interest Rates. President trump also says that he thinks the schools should reopen so certainly making some headlines there. Well see if the state leadership from colorado and north dakota agree on that front. Sara thanks very much for that casino stocks meantime underperforming the Broader Market, meanwhile, clark county nevada, for the second straight day and Contessa Brewer has that for us hi, contessa. Hi there, wilfred, clark county, the home of las vegas on sunday saw a dozen new cases of coronavirus and then the next two days they saw those cases surge into the triple digits governor steve sisilack just allowed the restaurants to reopen on saturday the Southern Nevada district is not blaming the reopening and it points to massive increases in testing and thats the primary goal of the states casinos and the Coronavirus Task force which has ramped up the ability to test wynn resorts has even contracted to have its own onsite Testing Centers so that every employee who comes back to work has the ability to get tested. Wilf sara contessa, thanks so much for that, and guys time for final thoughts and bad day for the markets off the lows and ill just mention the banks again the kbw banks understand theyre 44 year to date and its particularly this month, mike in may theyve pulled back aggressively at 15. 6 lower in the month of may so far. Yeah. These general wear and tear Consumer Credit concerns, i think is one of the big reasons and plus just everything that looks like value is getting sold in favor of something that looks like growth and both are exacerbating longstanding trends. I think the notable shift here in shortterm sentiment is something worth watching and well see and the bulls have lost a bit of momentum this week especially with the closes that weve seen recently and well see if jobless claims tomorrow reconfirms the trend that naib maybe the narrative is changing around reopening that will be more cautious and prolonged pain. We are out of time for mark, sara and i melissa lee has you covered next. Fast money starts now im melissa lee. Guy adami, tim seymour, dan nathan and technology permitting, Karen Finerman will join us shortly. Coming up, the danger zone the chart masters with us and he brought five charts that point to more trouble ahead and shares of cisco surging after reporting results. The companys call i