Transcripts For CNBC Squawk On The Street 20240712

Something positive, right, with that rising case count hitting new records, it seems virtually every day, and deaths also starting to move up in knows hardhit states as well with hospitalizations thats certainly been a focus for Market Participants as you guys well know Scott Gottlieb who we follow closely tweeting about the remdesivir news, very encouraged but needs to be confirmed in a prospective trial, appears to be a receipt peck testify analysis of the face three data suggesting a survival benefit in severe Covid Patients. We have made the point many times it is only good news on remdesivir, but lets remember its an infused therapy in the hospital typically for people who are severely ill what we are hoping for and waiting for are significant antivirals that will have an affect on the virus far earlier in its course so that people will feel much more comfortable in resuming behavior because if they were to get it and these were to be available they could immediately take an oral antiviral, for example, or something very early in course that would kill the virus. We are not there yet were watching vaccines closely, but we are back, mike, i guess, on covid watch overall given, unfortunately, this distressingly high number we seem to be getting every day of new cases, even if it is younger cohort, this he still do get sick for sure. David, obviously on watch, i do think it probably contributes to this sense of unease in terms of where the bond market trades right now. Ten year treasury yield down back below. 6 , also just the have haves and have nots situation in the markets where anything thats tightly levered to that aggressive reopening type action has suffered in the last lets say five weeks or Something Like that. You had peak optimism about the reopening on june 8th when the s p made its high but also when the reopening trades made their high since then its been about as we keep repeating this migration, this crowding, this hiding in mega cap Growth Stocks you know, thats probably going to get stretched too far, youve had amazon at more than 200 billion in market value this month and this month is only six trading days old at some point it gets a little bit unstable having all that all that flow and all that weight at the top of the market and Everything Else kind of suffering including, you know, banks and small caps, but for now its the markets way of keeping itself supported in this high liquidity environment, carl. We will talk more about amazon as citi goes to 3550. We will tell you why in a little bit. David, were beginning to see some big mac row desks play a couple of cards on this covid front. Goldman yesterday saying we dont expect broad lockdowns again, maybe some people think thats a nobrainer given what the likes of what mnuchin have told us on our air, but they think that states will be more nimble, close down bars, kentucky masks go mandatory tonight at 5 00 and jpmorgan as well, kolanovic saying we retain a risk on portfolio, we do not think the uptick in cases although its a set back is going to be market negative in the long term. Yeah, its interesting, isnt it, carl, and i know you follow that stuff closely, i see some of your tweets during the course of the day, particularly with that jpmorgan credit card data that seems to have been so indicative of some of the trends weve seen in terms of spending in restaurants and bars and the case counts following but i do wonder, carl, im curious, if we get were 63,000, if we continue to move up and hospitalizations continue to move up and hospitals in some of these states really do become overwhelmed and we get reports of that in certain areas but not statewide, does that change the approach of that State Government because there are Health Experts who say if we could get to 80,000, 90,000, 100,000 new cases a day is that going to change the way it is viewed again . As unlikely as it would seem given the sentiments from both state and the federal government that we ever would lockdown again, it would seem to at least lock down several behaviors for people if we continue to get this rise in case count. No doubt about that goldman had some numbers out yesterday of Covid Patients the percentage of Hospital Capacity in arizona its a quarter of the Hospital Capacity is covid now, 16 in texas, 15 in florida mike, abc news got an internal fema memo yesterday in which they found that up to 58 florida hospitals have no icu beds so, davids point is exactly spot on. Its an echo of what we went through in new york city and were praying that it doesnt turn out to be an exact repeat. Right exactly. And i think the puzzle as the markets try to assimilate all that is how much are we already seeing the change in Consumer Behavior or business behavior in the Realtime Data that everybody is tracking already and how much of it is just, hey, were hoping that some threshold level is not reached where you need more forcible shutdowns so thats the uneasiness thats underlying exactly how this market has been trying to navigate this period its interesting because in a sense everyone is getting a pass on the summer months in terms of delivering realtime earnings or anything like that, but you have to have the feeling that things are have a path to improvement or were getting past a certain peak. I know, carl, you keep an eye on tom lees stuff and hes pointing out houston peaked a couple weeks ago. Yeah. You can massage the data in certain ways that make you think that we can predict though these curves are going to look. Yeah, as tom says this morning, thats going to be one of the Big Questions of the weekend is whether or not deaths can maintain that fat margin away from caseload speaking of earnings, david, buckle up for next week, i guess, because the banks are on their way. Luckily we will have jim back to talk about it, but a couple of interesting calls on wells today. Ever core adds it to the tactical outperform list, baird goes to outperform as there is this notion at least when it comes to wells if they rip the bandaid off, so to speak, i think it was ever core said, maybe that does tactically outperform but next week is going to be wild. It is and the banks i mean, mike mentioned of course what were seeing in terms of yields right now thats not a great formula for success for the banks. We have talked about some of the banks benefitting from the incredible amount of activity we have seen in debt and Equity Capital markets. Theres no doubt you are going to see numbers there that are extraordinarily strong merger and acquisition activity as people well know has not been that has been muted. To the overall Interest Rate picture and their ability to maintain or have a Net Interest Margin that is significant, that is going to be under measure that is why were seeing some names and you mentioned wells fargo, we watched the weakness in that stock, we watched a refound for some time but it is below a 100 billion market value. No shortage of challenges for charlie scharff, they did answer the dividend question, so we will have to wait and see what more we get from them in terms of earnings and outlook. Its really remarkable that its happening to wells which now trades at a discounted book value that looks very much like citi whereas wells used to always have this huge premium to book value the group as a whole, the s p bank sector is at, you know, Something Like 75 of book value in aggregate its basically as cheap if you believe, you know, the stated book values as it was in 2011 when we had the sovereign debt scare, when yields collapsed and, by the way, everyone thought yields would never go up again for the foreseeable. The Valuation Case is just pretty much all you have right now because everybody is so absorbed all the headwinds and, yes, Capital Markets business looks great, can we extrapolate that forever, maybe not. Yeah, they took on a lot of fees from ppp loans but thats a oneoff, too its an interesting trade. At some point the group gets stretched too far below what the rest of the market is trading like and we will see if earnings are some kind of a catalyst for that change. Credit losses obviously what they say about them in the next couple of weeks and projecting ahead probably is going to be the big factor that we cant quite model in just yet. Yeah, i mean, thats credit losses is key, as you say, mike. I wonder are the banks reflecting perhaps a less sanguine view in terms of the course of the virus and the economy than perhaps the Broader Market is because we know the 600 supplement runs out at the end of july, our credit card balances are going to start to look perhaps worse, commercial real estate loans, loans to the oil and gas industry, i mean, you can go down a list that can get fairly scary when it comes to reserve at least, reserves at least, pretty quickly. Doesnt mean the banks are in anywhere near the precarious position they were more than a decade ago theres nothing like that. But when you increase reserves, you obviously deeply deplete profits. Thats what i keep saying the fact that the banks are better capitalized and they have that cushion thats been mandated, one of the reasons you care about that is because when things get bad you burn up that cushion because thats what its there for. That isnt necessarily, you know, positive for shareholder returns in banks while thats going on so that is why its the big swing factor david, in terms of head count, i mean, its been a remarkable week for layoff news out of levis, harley, walgreens, we will find out what happens at united, but there has been chatter about moves that wells may make, bloomberg yesterday saying it could be in the thousands and they make the point that layoffs are one thing that banks have resisted pretty well in this whole mess and i wonder if that dynamic changes i do, too carl, i do, too. I think weve mentioned and ive certainly heard the conversation around a number of furloughs becoming permanent layoffs, but also corporations using this unfortunately as an opportunity to what they would say is get more efficient when they look at what theyve been able to do in a remote environment, with ep they look at what theyve been able to do with only team a back in the office while team b and c are somewhere else, ive certainly heard people wonder, well, maybe there is an opportunity here for us to cut. So you could wonder how much that is going to occur and whether it will occur in light of whats going on right now given that this is being viewed in part as i wont call it a throw away year but one that is not necessarily being focused on in terms of the earnings power of these companies, it gives them that ability to do it i think its a very important issue we have to watch not just for the banks but overall. Mike, we talk about operating efficiency, whether its salaries and benefits or Corporate Travel weve been talking all week about for the past couple of months about the move to digital, the way we are working at this very moment. You have to imagine whats happening right now in Corporate Travel departments is their expenses on moving people around the country basically goes to zero obviously it creates a perfect real world experiment to test whether there is full value being realized from all the travel you know, one way to interpret how the market has held up relatively well versus the economy, the sort of main street economy, is, you know, market kind of sniffs out and this happened in 2009, too, that this whole event has swung the pendulum back in favor of corporate books from labor so its kind of a capital over labor story, you know, whether thats to be celebrated or not, it seems like if you were worried about wage pressures coming into this year it being a crimp onprofit margins thats one thing you are not worried about right now. Guys, it is a summer friday but we have some wood to chop this morning, a new street high on netflix at goldman, a street high on amazon at citi, street high of nvidia at rosen blatt. Disney big opening tomorrow and will tesla join the s p 500 . We will talk about that when we come back. Its a thirteenhour flight, thats not a weekend trip. Fifteen minutes until we board. Oh yeah, we gotta take off. You downloaded the Td Ameritrade mobile app so you can quickly check the markets . Yeah, actually im taking one last look at my dashboard before we board. Excellent. And you have thinkorswim mobile so i can finish analyzing the risk on this position. You two are all set. Have a great flight. Thanks. Well see ya. Ah, theyre getting so smart. Choose the app that fits your investing style. In a highlyconnected lexus vehicle at the golden opportunity sales event. Lease the 2020 es 350 for 359 a month for 36 months. Experience amazing at your lexus dealer. Iredefined the wordng thschool this year. Experience amazing its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Names in retail that could potentially file for bankruptcy. So far half of them have courtney is here to talk about who might be in the next wave. Hi there, carl. Youre right, there were eight of those retailers in about mid march that i pointed to on that bankruptcy watch list. Half of them they have already made it there, going to chapter 11, along with several others that werent necessarily on the list because they were smaller but still wellknown names we think this could just be the beginning. About 11 major retailers or brands have filed for bankruptcy since the pandemic shut down much of the country and they join five names that did so earlier in the year, including 200yearold Brooks Brothers niemann marcus, jcpenney, j. Crew, gnc and others as well all of these players were weakened and worrisome to many before covid19 to be fair but it was the subsequent store closures that accelerated a lot of that pain that was already being felt ascena retail, the parent of ann taylor, lot of, justice, lane bryant and others has nearly 3,000 stores and is reportedly preparing a filing that will include a large store closure proposal its debt is considered distressed and the interim chair said they are each waiting all options available to protect the business and stakeholders. Taylor brands thats the parent of mens warehouse, joseph a. Bank and others, it warned in an sec filing, quote, if the effects of the covid19 pandemic are protected and we are unable to increase liquidity we may be forced to scale back or terminate operations and or seek protection and you applicable bankruptcy laws. Those are some of the names, but s p global does 18 other names or its distressed list, moodys has 20 and both of those lists include names like rite aid, party city, j. Jill and petco. We should note that jcpenney submitted a reorganization plan this week officially to split the company into two parts, arite owned by its lend err an an operating company that will be leaner than the store base now. The court has a deadline of tuesday to decide if that plan is approved or if assets need to be sold out and liquidation becomes part of the consideration. Next one will be a big one for that 118yearold retailer carl. Courtney, thank you for that. Its a stuff story courtney reagan. David, it does bring to find what we were talk being before the break which is this city of citi of Amazon Amazon of u. S. Retail sales made up 4 last year and they see it going to nearly 7 by 2022. We see that reflected every day when the pvhs and kohls are down and amazon is up. Yeah, no doubt and we see it reflected in a 1. 58 trillion market value with the stock up 72 . By the way, no he is are enormous numbers when you are talking 4 to 7 but even 7 is still at a level there amazon can claim, come on, monopoly or anything like that, forget about it it is interesting to note, carl and mike, of course, when you see that list of retailers that have gone bankrupt, how for so many years we were viewed as a strong investment for private equity which loaded many of these companies up with the debt that they are now of course dealing with, but there was a time when retail was seen as fairly predictable in terms of its cash flows and many of these Companies May have had underlying real estate, the private equity thought they could repurpose in a profitable fashion and or monetize in some way. That story of course has changed dramatically over the last few years. This is simply accelerated friends that were already in place and those trends of course to your point, carl, include the incredible rise of amazon and so many others who are dealing well, now almost solely digitally with their consuming audience yeah, i mean, i was going to say this bull call on amazon talking about 50 of ecommerce at some point thats perhaps going to build the case for, you know, outsized market power. Just in terms of the analytical dynamics going on here the consensus price target coming into today for amazon was 2830 the stock is at 3192 in the premarket. If you are an analyst and every single analyst except maybe one has a buy on it you find a rationale to raise your price torgt or say sell the stocks and who has the guts to say sell the stock. Thats whats going to happen probably across the board. Right and bear in mind citi was at 2700 so its a pretty large leap take another break here as we get ready for the final opening bell of the week squawk on the street is back in a mut ine. This selenite grey is so pretty isnt it . Wow. Jim could you pop the hood for us . There she is. Turbocharged, right . Yes it is. Jim, could you uh kick the tires . Oh yes. Can you change the color inside the car . Oh sure. How about blue . Thats more cyan but. Jump in the back seat, jim. Act like my kids. How much longer . Exactly how they sound. Its got massaging seats too, right . Oh yeahhhhh. Oh yeahhhhh. Visit the mercedesbenz summer event or shop online at participating dealers. Get 0 apr financing up to 36 months on select new and certified preowned models. Now is the time to support the places you love. Spend 10 dollars or more at a participating Small Business and get 5 dollars back, up to 10 times with american express. Enroll now at shopsmall. Com. A little push and pull on this final trading day of the week asia was lower but europe is green. Concerns about covid and record death cases but reassuring news out of gilead. Scena. Announcer the opening pell is brought to you by nuveen. A leader in income, alternatives and responsible investing. And its time Corporate America paid their fair share of taxes. We thought in our administration we should lower the tax in the high 30s to 28 , lower it to 21. Im going to raise it back up to 28, provide hundreds of billions to dollars to invest in the growth of this country and the days of amazon paying nothing in federal income tax will be over. Thats former Vice President biden with his first Major Economic address this pennsylvania yesterday, david. Talking about racing Corporate Tax back to 28, tailoring his own buy america message an basically mocking the number of times that the president has tweeted about the dow and the nasdaq well, we know this is a president who is very much focused on the markets as a barometer of success weve seen that firsthand, even at times when we mention something here and we see a tweet that pertains to the same subject matter the effectiveness of the 2017 tax cuts is certainly something weve discussed and will continue to. I dont know how much of a part of the campaign it will actually become given Everything Else thats going on right now, whether corporations really did spend a lot of money, hire a lot more people than otherwise would have been the case, invest more or whether a lot of it went to corporate buy backs, that will continue to be a question. But what is interesting, guys, is this idea that you didnt need to come down to 21, you could have gotten something done perhaps at a higher number, save some money meanwhile we are spending trillions right now to keep the economy afloat, not to mention the feds Balance Sheet, although now down to 7 trillion one wonders whether that will also be a part of the conversation in terms of revenues and deficits. It typically falls by the wayside. Yeah, its interesting because it really is not a tremendous revenue raiser certainly in the grand scheme of things, its an element of a populist message and these gestures that say capital has made too much for too long reg testify to workers, lets even that out, wealth disparities and Everything Else that seem ingrained in the tax code, but it is true we are not talking about paying for things with these tax increases, its just kind of, you know, knitting around the edges of the budget so it is its interesting probably also why the market seems to find nothing to outright panic about just yet because its so unclear what might happen down the road or if, in fact, new Spending Priorities become more important than exactly how weve raised revenue for various constituencies out there. Yeah. Carl, you know, in my world the biden the prospect of a biden presidency and potentially as well a turn in the senate figures most prominently as you might assume into the prospect for merger and acquisition activity and whether that would be severely dampened if in fact you had all three parts of government in democratic control. We will have to wait and see of course whether any of that happens, but thats come up a lot recently in conversations at least ive been having with the lawyers and bankers and executives who at least think about doing deals, whether or not you would its already too late at this point, but whether you will see a Significant Impact or downturn in some way in activity because there will simply be a lot more scrutiny of consolidation given what many say are the negative aspects that it brings, including workers for workers. I dont know about you guys, but im seeing more and more reports not about the impact of the outcome of the election, but the impact of the lack of a clear outcome of the election, what happens to markets if its contested, if its close, if the results are late and thats something that is going to have to be factored in as we get, i guess, on election day essentially because there is no way to know what thats going to look at. A look at the open, dow up 24 points, s p up 2 we mentioned some of the new street highs, mike, we mentioned amazon and now heath terry at goldman sakes netflix to 670 as the streaming wars are going to heat up. Its essentially a way to say stay in, the story remains unchanged, going to get results from them, you know, within a couple of weeks and, you know, its virtually assured that probably the sub numbers look pretty good and its always remained a question of exactly what return the company is getting on its own spend and what it really expects on the originals and production side, too. You are running out of stuff on the shelf. A lot of that stuff is interesting but its so ingrained as part of this stay at home trade which is now at a probably record premium against the reopening sectors right now in the market that its hard to see what changes it. Right now theres so many reasons to just not fight this move i think and the only question becomes across the market is how much are you paying for the perceived certainty of these Business Models in this environment and its a tough question to answer. Youre only mike, youve been skeptical for a long time i just wanted to follow up, mike, is you have resisted hard the idea that the Balance Sheet at the fed is a machlger dynamic in stock price action Balance Sheets shrunk for four weeks in a row if we continue to chop or grind lower will that convince you that it is related at least on the margin what i resist is the idea that there is some realtime dollar for dollar impact of incremental moves in the fed Balance Sheet and the s p 500 market cap in the general sense that the fed is very accommodative and will remain so and is perhaps suppressing bond yields by buying a lot of bonds out there, of course thats part of the backdrop that its helping but why is the Balance Sheet principally going down in the past few weeks swap lines with central banks, they are maturing and not getting renewed. Tell me how that was driving the market here. Thats not about like, oh, theyre deciding to stop buying bonds. Thats why i feel like its a little bit of a cargo cult thing, hey, look, we found this relationship, it must mean everything and i dont think it means everything necessarily also i have never had a good answer as to why the fed throwing money at everything wouldnt just across the board have the junkyest most leveraged, most distressed assets going up along with the best Quality Companies in the world. Right now its the best Quality Companies in the World Driving this market. There is dissidents in that message, i think. Yeah, to that point amazon is up again as weve discussed in part as well the positive resource that carl mentioned earlier. Netflix also up. Mike, you mentioned valuation, im looking at netflix now, it only trades at 50 times his estimate for 2021. Is that a reasonable multiple for the growth rate there . I mean, its interesting because now you can talk about pes, you can talk about its not the problem with netflix, unlike some of the other big tech names is its not as much of a kind of automatic Free Cash Flow story because they have had trouble staying above the positive line in terms of Free Cash Flow, but i think in this context you understand why people are paying 50 times next by the way, look at some of these names like zoom and like shopify that have enormous market values, you know, 50, 75 billion dollar market values when theres not really as much of a proven record of delivering any kind of earnings so, you know, it seems like this is the market were in for better or worse, david. Carl, im not quite sure what the multiple is on tesla these days, but im going to guess its pretty high, although the stock is not up today for the first time i have seen it in a while. Yeah. Well, im sure mike has more stats on tesla than i do, but up 500 in a year and today its reuters that argues im not sure what theyre looking at exactly, mike, but they say it appears to be on the verge of joining the s p 500 which would obviously as they add unleash a torrent of new demand for the shares that have already had a lot. I dont think there is a particular catalyst except that tesla will report earnings obviously this quarter and s p does want to see, i guess, maybe four consecutive quarters of positive net income or Something Like whatever the kind of standards are either formal or informal that the S P Committee is going to look at, it may qualify. Its also very conspicuous to have a quarter trillion Dollar Company outside the index, in fact, you know, between tesla, shopify, spotify and zoom video thats half a tllds sitting outside the s p 500 at the moment so thats becoming a little bit of a glaring disconnect and its not a critical point in terms of if you own the index youre not getting representation, but theres going to be an effort perhaps to find excuses to get tesla in there its a very, very big company to go in for the first time you have to go back to those periods when you had a lot of like Goldman Sachs coming public along with a lot of Mutual Insurance companies, we had this massive amount of market value they had to find a way to get into the s p yeah, i dont think beyond the profitability streak theres anything much to talk you know, thats driving the talk right now but it makes sense that its likely a when not if for tesla. Carl, disney david, just one on auto makers, ford which was mentioned earlier this morning according to the u. S. Ambassador to mexico may have to shut some u. S. Car plants if they cant get enough of these engines out of mexico ford is now back below the 50day, david, for the First Time Since may 15th. So we will watch some of the oems setting aside all stories of just competition, now its once again about supply and in this case crossborder supply with mexico yeah, supply chains are a key thing that have to continue to be watched closely of course, when it comes to ford i always point out the only one of the auto makers that did not file for bankruptcy and onetenth less than onetenth the size market cap wise of tesla at this point. Guys, we were talk being netflix, always tends to bring me to disney as well i watch the competing market cap comparisons between the two, netflix a bit larger than disney, but we will be focused on disney in part because the parks are going to open at least to some level of capacity, the parks in florida are going to open that will be a key moment for the company, its moving ahead despite that rising case count or the significant numbers that were seeing in florida at this point. The stock itself down about 19 . Perhaps not nearly as bad given all the different areas where disney has been vulnerable and continues to be somewhat vulnerable to you will at things that have happened as a result of the pandemic. Not just of course people not going out, perhaps not being willing to go to a theme park, but each production of movies, lack of sports for espn, things that weve mentioned many times. I think theyre probably fairly happy with the performance of the stock. I know nobody is happy when its down, but given all those things coming at them, mike, one could say its weathered it fairly well at this point as you have said many times its an iconic name that certainly may get some multiple points simply for that. Without a doubt the stock traded well below here when you didnt have all these issues in the past few years didnt get down under 100 when people were kind of concerned about various things i mean, espn, the strategy with the strategy with streaming and all the rest of it direct to consumer. It didnt need all these things to get under 100 at some point. You have to believe, yeah, this is pretty much a pretty decent value to settle out at right now. Yeah. I think its reuters out this morning with a piece on disney calling it the ultimate hold because of the long term opportunities are so great even though the park shutdown is such a tough headwind for the company. With err looking at a bit of a mixed picture, dow is up 4, lets get to bob pisani. Hello, carl happy friday, everybody. A modest reversal of the trend this week but not a lot of conviction behind that i think the main trends are still intact lets take a look today, though, banks have been awful performers as we go into earnings season next week, for the last two weeks, modest upside today, Consumer Staples better, health care flattish but the glil yad news is good news overall for the trends here. Tech modestly lagging and china which has been on a tear all week down today. We will get to that in just a minute here. The trend this week is very clear, we keep emphasizing tech wins no matter what, reopening good news, reopening bad news, tech generally does well semi conductors, the nasdaq 100, microsoft, this is just for the week and s p growth overall which is largely into of Course Technology as far as the laggards here. Weve talked about the cyclicals not getting any traction at all even on up days, energy, banks, industrials, russell 2000, theres s p values grope up 2. 5 , value down 2 , a typical trend thats been going on for many years. In terms of what moves the market i added a sixth bucket yesterday but the news weve been getting, the reopening has been rocky, its a w not a v the stimulus its there but there may be some less on the way depending on how the Congress Congressional negotiations about treatments are advancing thats been a definite positive throughout this mess trade war with china still another child card out there and the election, thats another one that i added as a wild car of course, valuation if the reopening does poorly, many stocks are overvalued. So there is a lot of things that are on either side positive negative here and you can see the market hesitating. As for china this week, weve been talking about the wild moves in chinese stocks. Up 10 on the week look how contradictory these messages are on monday the chinese securities journal which is state owned called for a healthy bull market go out and buy, folks. Yesterday the China Economic times, which is a state owned vehicle said it was a crazy bull market going on and people should be careful. I dont know what this is clearly mixed messages here and i think they have to get a little clearer idea about what they want the markets to do if they want the markets to do anything at all, but obviously theyre being very involved. The mchi the broadest chinese, this is up 10 in a week they can jawbone the market. Official government organs jawbone the market otherwise nobody would care following what they say you see whats going on here and the i wish auto us there finally how about a slower return for wall street we have been talking a while, for a while, about the fact that wall street trading desks have been very successful operating at home. The big concern was the wifis. The wifis have generally been operating well today btig run by steve starker and scott kovalec announced they were not going back through 2020 not labor day, through 2020. 100 work until they get more clarity on the indoor environment. As to what happens postvirus, postvaccine, at least half of their staff is expected to combine remote and in office work on a permanent basis. So this is the first firm ive seen thats announced theyre not coming back in 2020. David, i speak a lot with the desk, the trading desk, the buy side desk and sell side trading desks. Generally ive heard things are going very well and there is not a lot of pressure on people to go back at all certainly through labor day, im not sure about past that im wondering you talk a lot with the m a desk and the deal making desks is there any pressure youre hearing from people to go back sooner rather than later not really, bob, its a great question, im glad you brought it up. I mean, Goldman Sachs asks their partners to come back in some phases but i think theyve only got 20 in the Actual Office Investment Bankers do most of their work on the phone or on airplanes. Many are happy and telling me they are more efficient sitting at home doing zoom meetings to the extent thats being a more acceptable way to do things because they are not traveling as much. Being in the office for many bankers is not really that much of a necessariitynecessity, at t right now. When i hear what btig is planning and i hear anecdotally other firms as well i continue to wonder about your major metropolitan areas, particularly of course new york city and the Financial Services and so many others what thats going to look like when you simply do not have the same amount of workers even when things are over and done with as soon as possible we hope, coming back to work bob, theres just going to be fewer people working in Office Buildings it would seem like yeah, and the fear was that the wifis were going to be the weak link and back in march people were terrified that they were going to be overburdened, they were going to break down, the messaging traffic would break down and to a large extent that hasnt happened theres been wonderful Technological Developments about compressing the message traffic thats been enabling wall street to essentially function very well and even us we were given these remarkable devices we are using them now, david, which are glorified ipads with fancy lenses on them and theyve been working very efficiently and by and large the Broadcasting Networks including us have done very well with that if theres any good side to this mess, this disaster, its that the technology has definitely been pushed and found to be functioning for the most part fairly well. Guys, back to you. Emphasis on for the most part, bob. Thanks. Yeah. Bob pisani. Were watching yields this morning. Coming off that record low for the five year. Lets get to Rick Santelli you know, carl, as i look at yields right now it just quite impressive from a historic view. Were under 14 basis points in a two year if we closed here it would be a new all time record low for twos a little under 17, it would be a new record for threes. Five years are hovering at 27. 5 basis points tied for the all time low closing yield sevens did make a new low closing all time yield yesterday and if they were to close here at 45 and change they would make another one. So you could clearly see that all investors appetites are pointing towards whether its high quality sovereigns, Investment Grade corporates, anything that they can get some type of return on and consider safe from a principal standpoint look at 24 hour chart of tens and realize that the ppi data was more deflationary than anything else. Maybe when the demand side comes back that picture can change dramatically with he saw yields pop up a little bit on the long end, it was about the gilead drug story than anything else, it wasnt the ppi data if you open the chart up to early march we are down as low today as 56 basis points intraday right before the data came out and the all time low closing yield was 54 but we have firmed up, were basically knocking we just traded 60 basis points which has some psychological cliche associated with it, at least these days in investors eyes. The big news of late of course has been how chinas equity markets are as bob pointed out they broke an eightday streak today, they were up 10 for the week remember if you go back to 2007 the shanghai composite was over 6,000. Lets show a 20 year chart of the shanghai composite and the Dow Jones Industrial average you can see that, yes, were down from, what, 29. 5 on the dow to 24. 6 and change or so, yes, were down a bit but we are not half of what we were so be very careful on what we see with regard to the current opposite stance of some stock markets as certain economies maybe get ahead of covid, ahead of us or some of the various parts of the economy open up more aggressively than others, but in the grand seem of things u. S. Investors and u. S. Equities still reign supreme. Carl, back to you. That is a great chart, rick thank you. Well see you in a bit Rick Santelli. Financials and energy showing a little bit of life here at the open, we mentioned wells fargo half an hour ago and it is, in fact, helping to lead the sector up almost 4 . We are back in a moment. Come on in, were open. All we do is hand you the bag. Simple. Done. We adapt and we change. You know, you just figure it out. Weve just been finding a way to keep on pushing. The debate about reopening schools this fall is the debate about reopening schools is challenging notions about college bonds. Scott has that story this morning. We talk a lot about student debt the colleges are big borrowers some 280 billion in debt outstanding. Most of it high quality, rated aa or better and much of it tax free take a look at what happened to the normally boring yield chart this spring as the pandemic took hold and rating agencies and investors took a look at the pressures colleges are facing. You think longer term, demand is going to remain strong for Higher Education it brings intrinsic personal and society benefit. Were looking at a period of turbulence over the next year and possibly two years these are the universities that have issued the most debt the university of california system, the State University of New York University of texas system, nyu and the california State University system. Fitzgerald thinks big brand name schools should be okay its the smaller ones that are starting to see the outlooks lowered. The Trump Administrations latest crackdown on International Students threatening to deport students at schools not offering in Person Instruction is a challenge. At some schools those students are as much of 15 of revenue or more the university of Southern California saying it will let International Students add an in person course free of charge to their schedule this fall if it helps if their visas others are suing including harvard, mit, and the california State University system joining a suit by the states attorney general. That system is the largest by tuition in the country yeah i saw a statement from the u. S. Chamber of commerce. Critical of the move out of i. C. E. Its a big story good to see you. Were going to continue that conversation in the next hour with the founder and executive chair of abc mouse squawk on the street is back in a moment. Experience the adventure of a bigger world in a highly capable lexus suv. At the golden opportunity sales event. Get zero percent financing on all 2020 lexus models. Experience amazing at your lexus dealer. On alsave without evenls. Leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. Coming up this afternoon on closing bell, an exclusive with Arnold Donald as they resume some sailings beginning in august at carnival a lot to talk with him about including the Balance Sheet and more thats this afternoon on closing bell. Squawk on the street is back in a moment. From the hospital shifting to remote patient care in just 48 hours. To the university moving hundreds of apps quickly to the cloud. Or the City Government Going Digital to keep Critical Services running. You are creating the future on the fly. And we are helping you do it. Vmware. Realize whats possible. Tiktok in the news again today. A lead gamer and Youtuber Tyler ninja deleting the chinamade app over privacy concerns. He tweets hopefully a less intrusive company can recreate the concept legally. Such funny and amazing content on the app from influencers. My kids are starting to show me copies of tiktok i wonder what you made of companies trying to distance itself from the chinese infrastructure i think its interesting and actually important this is not an insignificant media company. I think a number of companies that buy media on tiktok are trying to figure out how it impacts their media spend should the u. S. Government as pompeo alluded to, the idea of cheelosg it up. Yesterday there was an outage. It worried users it already had been the plug was pulled. Well watch how this is how they deal with this att tiktok. Its a Chinese Company but theyre trying to move the weight of their operations to the u. S. If they can or to another major city in the world outside of china its not unimportant and its potentially important for the likes of snap as well, carl, which potentially could be a platform that former tiktok users if theyre shut out go to. The president talking about biden on his way to florida. We look forward to it Tropical Storm cay is probably going to be hitting a place called new jersey, a good place, pretty soon. So we are on the watch were fully prepared fema is ready in case its bad it shouldnt be too bad, but you never know at this moment it looks like its going to be hitting new jersey fairly soon and were fully prepared and other than that, ill see you in miami. Okay thank you. Say it . He plagiarized from me, but he can never pull it off he likes plagiarizing. Its a plan that is very radical left, but he says the right things because hes copying what ive done. But the difference is he cant do it. And he knows hes not doing that he cant be the same because hes raising taxes way too much. Hes raising everybodys taxes hes also putting tremendous amounts of regulations back on and those two things are two primary reasons that i created the greatest economy weve ever had. And now were creating it again. Okay thats the president on his way to florida commenting on the former Vice President s speech in pennsylvania yesterday about the economy. David, we basically have some pingpong action going now its going to take us into this final stretch of the election where one responds to what the other just said. Yeah. At a different time, carl, i think we perhaps would have been focussed more on the coming election but were now getting to mid july its coming up there is finally starting to be some proposals from the biden camp in terms of economics well see the response as you said well be more focussed on it as the summer comes along and the conventions, i guess the Democratic Convention is going to be virtual. Unclear exactly what the republicans are doing at this point given jacksonville was their current venue. Things arent going well there when it comes to the virus no. And the times with some interesting reporting on the funding of the convention itself in jacksonville. Well look at that a lot depends on the Public Health picture good morning happy friday welcome to squawk on the street. Im Carl Quintanilla with kayla toshi, and faber is here for the next hour as well. Look at the markets. Jeffrey solman joins us to take stock of where we are. Its great to see you. Happy friday to you as well. Its good to be here, carl. Nice to hear your voice. Where do you think we are we got so many i guess binary issues facing us people wonder if were at an Inflection Point on health were keeping close attention to what stimulus can come later in the month. Directionally, tonally, whats your thought yeah. I mean, i think this is virus versus fed i do the fed has done a great job at creating liquidity and fiscal stimulus with the fed. Virus versus policy broadly. But were watching closely to see what impact the virus has on the economy. And i would say im not particularly surprised by whats happening. We know reopening would cause an increase in infection rates. I think were better prepared to handle the infections across the country, though theres going to be stress points and hot spots these are things we expected to happen this idea of a w in terms of ups and downs, thats probably what our expected case was going back a few months thats what were seeing play out. My advice is you have to own the things you really like a lot where you have a high degree of conviction theyre going to be around a long time. And not pay too much attention to the daily swings. When we get into next week and Bank Earnings are the story, we keep hearing its a hall pass quarter, a writeoff quarter. How much deserves to be looked through when we start getting the prints you know, i think people will take a look at onetime write downs. If banks get the opportunity to take onetime hits and write them off, they will because they want to reestablish the strength of their book value numbers. Once banks, mostly large banks here, not relevant to banks like ours, but for large banks when they write down assets, if their book value is resilient, people take comfort in that and then people take that onetime write down and look at the cover operating and make determinations as to how they are positioned to withstand any further write downs or just how their core operating businesses are doing. Jeff, volatility is the new normal even before the pandemic based on what the administrations policy has been, but based on what we heard from the former Vice President yesterday and the Trump Administration today, it seems the political reality is that populism and nationalism is here to stay for the next four years regardless of who is in office and were expecting forthcoming executive orders from the white house. On shoring supply chains as the Vice President proposed and were expecting a tariff announcement from the u. S. Trade representative today how focussed should investors be on that even as were watching the virus and hospitalization numbers go up . I think investors should be focussed on it when you look at the polling numbers, theres an expectation we could end up with three parts of the senate and house in democratic hands you have to factor that in i think people panic too much about that theres Significant Growth under democratic regime. Under the Obama Administration we saw economic rallies. There is a bipartisanship than i think people would like than the political realities or the politic political pundits would like you to believe im not concerned about who ends up occupying the white house there will be some differences, but by and large, the American Economic engine operates pretty well under both parties. And so people will adjust to the things that i think are important to the Democratic Party if that turns out to be the case those are things like increased focus on sustainability and clean energy those will be things like social reform and things like that. And by and large, i think were headed there anyway over the long hall, and so people need to be adaptable in their outlook to build their Business Models to be resilient to handle those kinds of things. Jeff, its david. Lets talk about the Capital Markets for a moment theyve been extraordinarily strong whether its Companies Issuing debt or equity or even ipos, something callen likes as well theres been a speculative nature to things as ell. Give me your take. Is this something you would have suspected . Is it surprising and is it sustainable . I think first, any time you have a scare like the one we had in march, i mean, broadly in the markets, Companies Take a look at this and say wow, we got bailed out by the fed a little bit. Theres a lot of liquidity in the markets today, and now with lower rates people are looking for better rates of return so you have to pick this time to refinance yourself if youre not refinancing yourself now, when would you for companies and industries that are more challenged, its a matter of life and death for companies who have resilient Business Models, its an opportunity torefinance or finance yourself to do strategic things so everybody is having conversations about financing. That includes ipos and debt financing. Theres increased activity in the stock market its evolving as an alternative to the ipo and those kinds of things what ive said to clients is financing a strategic discussion now. Its in every boardroom that i know we talk to. The Board Members are asking management how are you financed to either withstand some of the challenges or take advantage of some of the dislocations that are happening in various industries so yeah, its been a great time, and id say for the foreseeable future, the next few quarters, i dont see that changing. Jeffrey, how about standards for financing . We had reporting yesterday that wells is telling clients you got to have a Million Dollars in balances for some select refinances are people getting more selective . Well, i dont focus as much on the consumer market, but certainly i think we put protections in place under dodd frank to i would say make sure that Consumer Lending doesnt get out of hand in the Mortgage Market thats one of the enduring effects of the Global Financial crisis from a decade ocean im less concerned about housing prices and overleverage in the Mortgage Market. The real question is whether equity prices are priced appropriately. I will say this. Certainly with the fed doing what it did, it gave opportunities for a lot of companies to push off nearterm financing cliffs and thats pretty helpful, i think in a lot of ways. Businesses that are industrial structurally impaired or not adaptable enough to handle things as it relates to the crisis are challenged in the Retail Market where Brooks Brothers and Companies Like that all right we lost jeffrey. Our thanks to him. Got some good candor and clarity on the markets which are confounding to a lot of people at the moment. Kayla . Carl, despite record new cases in florida, disney world will reopen tomorrow in orlando. A former employee joins us on the challenges tyhell face up next stay with us music anncr give customers access to precisely what they want, when they need it the most. With adyen, the payments platform that delivers convenience for all. Adyen. Business. Not boundaries. Time for our etf spotlight looking at the spdretf ticker. Banks are set off to kick off another earnings season next week were set for the worst quarter for the sector since the great financial crisis is another rough quarter ahead well ta aut ilkbot in a few moments. Stay with us its time Corporate America paid their fair share of taxes we thought in our administration we should lower the tax in the high 30s to 28 . Im going to rise it back up to 28 provide hundreds of billions of dollars to invest in the growth of this country. And the days of amazon paying nothing in federal income tax will be over thats former Vice President biden speaking to pennsylvania yesterday, extending on what hes already said and that is he wants to bring Corporate Tax rates back to 28 interesting debate on the street Goldman Sachs, for example, argues that will be a risk to eps in the coming year, but others like jpmorgan say it might not be market negative and thats been something thats been on his platform for some time. He wants to raise the Corporate Tax rate, undo some of the parts of the tax cut in jobs act the president passed to, for instance, raise estate taxes as well and raise taxes on individuals over 400,000. Thats how he says he is going to fund his pro worker platform which looks a lot like what the president ran on in 2016 hes banking on a hawkish nationalistic platform helping him win in key areas like western pennsylvania where he was making the speech yesterday. Hes not shying away from the fact that it has similarities to the president s own campaign, but hes saying what the president did didnt work. That contracts for Foreign Companies went up. And there needs to be more money plowed into the contracting system for american companies. For its part the white house is working on its own set of policy proposals and is trying to figure out how much it needs to provide in incentives to get big tech companies, some of the fig Pharma Companies to move their supply chains to the United States so far the math has not worked theyre trying to figure out how to get it there. Yeah, and the current pandemic, of course, also another reason perhaps some of the companies will rethink that. Thank you for the insight given how closely you cover all that happy to have you this morning lets get back to Corporate News involving disney the companys disney world is set to reopen tomorrow despite the rise in covid cases in the state of florida our next guest is a former design manager at disneyland paris. He works at a firm that specializes in theme park production bill coan, do you believe disney world should open tomorrow and can they do it safely . The answer to both is yes, they need to open and should open and im confident theyll do it as safely as you can see anything in your day today life. Disney has a strong approach, and people walking into the park will feel confident its a safe place to be. Why do you say they have to do it . Theres a lot of factors. They have a lot of business and Guest Experiences wrapped around the theme parks, and then the broader platform of disney with all its other ventures, entertainment ventures, movie making, cruiseships and such at some point they need to move forward to opening these things and particularly with the resort, they have to take advantage as best they can of the Summer Season and focus on moving forward into the fall and into the thanksgiving and christmas season, and theyre going to need to have some practical operating experience and capacity Management Experience before they can really get into the fall timing is going to be important, and i think thats why they are moving forward i would say cautiously yeah. Based on what you can see and i know youre not in the park, what do you think the Guest Experience is going to be like will it be similar to the one you spent yours focussed on creating . I think it will be a little bit different. This has impacted the theme parks and locationbased entertainment in a lot of ways so the guests will perceive differences. Thats intentional the operators want them to feel comfortable so theyll be overt and covert the operators will distance people, reduce capacity and lines will not be as they have been in the past the bad news is there will be some attractions that wont be open or the experience will be slightly different live shows, walk around characters will be different so to the real disney fans, theyll notice the difference. To the average guest coming in, i think theyll still experience a Great Entertainment experience bill, considering that in a previous life you were an urban planner for a lot of parks, a lot of families have cancelled their trips to disney world and are trying ore schedule them if youre a family going on a visit to one of these facilities, what do you know about where should a family avoid . Where do you think its impossible to fully sanitize yeah. I dont know theres much of that the guys in the big Entertainment Companies are addressing everything down to the restroom experience. They have to assume that people coming to the park in their every day life now are impacted by social distancing and face masks and hand cleansing and all that stuff theres nothing theyre going to go into a theme park and experience that is that much different than what theyre doing day today. The guests are used to this to a certain extent im not sure i would do anything except maybe a little more avoiding the crowds, the large groups of people and i think disney will manage that quite well. If i was walking in with my family, im not sure i would be constantly hunting safe places to go. I would hope to enjoy the experience closer to normal. Thats good to hear im wondering if there are any potential longterm benefits to the company by some of the changes in behavior . Do you think more families will buy things like fast passes to cut the line spending money at the park in places they otherwise wouldnt of course folks like disney, any of the big Entertainment Companies are in business. Theyre looking for Revenue Opportunities, and there always will be Revenue Opportunities in safety and security, because people might be a little more money for certain features and experiences that allow them to be a little bit separated, and i think like merchandise, there will be face masks with mickey mouse on them. I think at the end of the day, the Technology Advancements that covid is pushing could have come along anyway. Certainly disney is in front of a lot of this. This moves it forward quicker. I think it will be the second and third tier groups that adopted the technologies quicker as well. Disney will always be out there kind of as a leader in this, but this will start becoming ubiquitous in almost any attraction you visit bill, im wondering there must be somewhere in the disney play book, a line that determines when they have to reverse. If they have to reverse. Im wondering what you think that calculus looks like is it about consumers deciding the experience isnt the same . Is it just a case spike . Is it employees revolting or some fix of all those things well, the reverse would be pretty aggressive. I think theres probably going to be some course changes. And theyll sense that nobody will sense it quicker than the guys running the parks. But i doubt seriously that there will ever be a complete reversal its too complicated to take the resorts back into an open situation, because getting these things up and running and started and operating is a very complicated process. And it would take some major event to turn them around. Im more inclined to think theyll make course corrections. It sounds like you think shanghai was the case study and with that in the books, it sounds like youre calling a reclosure impossible not impossible. Its not impossible. Smart people would never say that i dont think any of the Major Companies would say that i think theyve staged the openings, the Lessons Learned in shanghai and hong kong and tokyo as they come online are going to be really valuable to the overall platform, and they i assure you theres some smart and creative guys at disney in Strategic Planning or operations that are kind of writing their chapter in the book disney started 65 years ago theyre learning as they go, and like i said, im confident there will be adjustments. I would be surprised if they turn around and go the other way. Finally, bill, i know your company has come up with this contactless temperature check. Is it being used in the park are there i would assume this is the kind of thing thats going to be standard issue in a lot of Office Buildings eventually i think part of the reason we decided to jump in like so many other groups will be to take advantage of the potential opportunity is that were lifelong theme park designers and developers so we see the first of the low hanging fruit is to find technology we can get into attractions quickly. And thats some of the technology were working with now. Im not sure we would do it specifically and only for themed attractions. Wed like to think this technology will have applications to shopping malls, theaters, hotels and such. And Office Buildings you make a great point we right now run technology as people come in and out of our building its seamless. We think theres application that may launch from theme parks that will be applied in a lot of different business platforms yeah. Well watch closely. Bill, thanks for the update. Appreciate your time good to speak with you guys. Have a good one. Meantime, obviously markets in a tight range on this friday. Lets get to sue with a news update good morning. Heres whats happening at this hour the Los Angeles Teachers Union is expected to call for school cam can puss to remain closed and Remote Learning to continue when the fall semester begins. The Los Angeles Times says Union Leaders concluded its not safe for students to return to classrooms given the Current Conditions there in nevada the counties that include las vegas and reno are reclosing bars to slow new outbreaks of coronavirus the governor says he ordered the closures to ensure hospitals did not become overwhelmed with patients for more on that story and closures, go to cnbc. Com and in india a suspected gangster linked to dozens of crimes including the killing of eight Police Officers has been fatally shot the man was being driven by officers when the vehicle crashed. Officials say he stole a policemans pistol and tried to escape before being killed you are up to date ill see you in an hour. Squawk on the street returns after a quick break. Aflac. These are all the cab rides to my physical therapy. And aflac paid me directly to help. Aflac. What he said. And this unexpected bill is from. The twothousanddollar specialist. Thanks. Aflac. When youre sick or injured, aflac is there. We can help with Expenses Health insurance doesnt cover. Get to know us at aflac. Com now you can trade stocks and etfs for any amount you choose instead of buying by the share. All with no commissions. Stocks by the slice from fidelity. Get your slice today. Welcome back Jpmorgan Citi group and wells fargo kicking off a big week for earnings tuesday to discuss this lets bring in tom for a preview of what to expect hes the ceo of kbw. Its good to see you this has been widely telegraphed to be the worst quarter since the financial crisis with that as the opener, tell us what youre expecting well, ill tell you first, remember, we are using a new Accounting Practice for this recession thats never been done before banks are required to provide for all the credit losses through the cycle. Youre pulling forward estimated future losses and thats why it makes it a little bit more spectacular in the comment you made that its going to be the worst quarter. Because it will be the worst quarter because earnings will be low, but it wont be the worst quarter because of credit losses in the were expecting loan losses to be benign. Thats going to be one of the Big Questions of the quarter which is what are management saying about whats going to happen to credit later in the year when a lot of the government stimulus programs run off . So what were really focussed on for this quarter is whats happening with credit . Were expecting very big provisions, probably larger than they were in the First Quarter then were expecting provisions in the second half of the year to decline were expecting head winds on revenue because Interest Rates are down were expecting margins and Net Interest Income to be down there are going to be some banks that do better than others the banks that start reporting on tuesday in particular, jpmorgan and citi with Excellent Securities operations. Those who have Investment Banking along the lines of sales and trading, Capital Raising are going to do well and those with mortgage businesses are going to do better. To that end, theres 190 billion of new stock issued recently a lot of regional banks will see benefit on fees from the paycheck protection program. How bright do you think some of the bright spots will be and do you think it will be enough for investors to hang their hat on heres the story. The size of the provisions are going to be really big theyre going to see big provisions and its probably going to make folks and investors nervous. Like i said, thats because of the accounting thats involved we believe that once we get past this moment, if things we only have two banks of our 24 banks in the index that we think are going to lose money this year we think the Second Quarter will be the toughest quarter. Well get better as the rest of the year plays out we think 70 of the banks will earn their dividends this quarter. So bank stocks coming into this were trading around 160 at tangible book. Today you can find plenty of regional banks trading at 90 of tangible book. The question is how much of the challenging head winds you mentioned are already in the stocks we think these stocks are really pricing in a lot of uncertainty. We need to get through the Second Quarter and into the second half, i think, for investors to see i think better performance. Tom, i wonder if you think if the provisions are that big, can it be accompanied by some reassurance they wont be as big in the subsequent quarter . That is really important. Jpmorgan traditionally kicks everything off id say i think jamies Conference Calls are one of the most widely listened to in the market and also, too, this is new weve never had this accounting. Weve never had government stimulus like this, and thankfully global pandemics dont happen often we never shut down the economy purposefully and restarted it. Hearing the color from jamie and other managements is important what i hear from ceos is that they do see green chutes and cash in their clients accounts. And so it makes them feel better, but no one will feel really good until you see it play out and the other thing, carl, is i think one of the big stories in the last couple weeks is the banks did pass the stress test i think really well. The fed at the last minute did another dose of conservativism so the Balance Sheets are strong this is an earnings issue for the vast majority of the banks and we want to listen to what the tone is for management in the quarter. Tom, im listening to you i get it all you know, in terms of the Balance Sheets and in terms of where things stand i wonder whats going to change the sentiment on the stocks themselves the biggest four banks are down between 30 and 50 in case of wells fargo. What changes that . Thats the majority of conversation we have in our Research Department and on our trading desks. Most of our target prices are 30 higher than current stocks so a couple things in my experience its hard to have stocks rally when there still is perceived bad or challenging news thats coming out theres no way you can say the Second Quarter is going to be a good quarter, because the provisions are very big and returns are going to be very low. I think you actually have to see it play out, and if you were to say tom, whats the beacon to look for were modelling 2022 and weve since done a sensitivity ive heard your comments about the biden tax plan we factored it all in. If you look at these stocks and if our models are anywhere near being right for 2022, we get through the trough of performance which i think is going to happen in the next six months you can make a lot of money in these stocks but the uncertainty is high. And i think thats whats fearful to investors and the last piece is growth is just crushing value. And that trade is happening hard in the market. And banks are smack in the middle of that i think thats also driving the momentum its so poor right but when it comes to the back to the Balance Sheets, we can go through the quarter. I talked about it earlier. M a is slow, but debt and Equity Capital markets are excellent. Back to the Balance Sheet. What would it like for you to revisit your somewhat optimistic views in terms of the banks ability to withstand this economic downturn . We need to see i think the mile markers are we need to see what happens when the deferrals stop and when clients of banks are expected to start making payments again, i think if that kicks in, that is a key catalyst for the group. And right now theres just a little bit too much uncertainty. Even though there are expectations that what weve been seeing so far is more of the deferrals are voluntarily paying even before the deferral period is over we need to get through that moment and i think thats when you start to see things happen because remember, too, before covid banks were returning 100 of their earnings return in dividends or share repurchase. Share repurchase has been shut down dividends are more in question because of the fed policy. If we get through the credit, then i think youll see those things come back, and i think thats when the stocks probably start to work. Well, tom, thats because the Federal Reserve has asked banks to be as conservative as humanly possible because they dont know how this Public Health crisis will turn out. Yes, its not a banking crisis right now and banks will be the first to say theyre the life guards this time around, not the victims. Theyre helping to underwrite some of the aid programs but whats the likelihood you think this could become a banking crisis if the deferrals cause people to not be able to pay their bills for a considerable amount of time weve done the math and the analysis remember, dodd frank required the regulators to do a stress test every year. And theyre supposed to predict every year that something really bad like the Global Financial crisis happens again, and they test the banks the banks have been continually passing the stress tests and then in the last stress test, the fed introduced a new covid more stressful test and when you test those loss rates, unless we go to something thats enormously historic, beyond the Global Financial crisis, the banks Balance Sheets should be able to withstand that that also assumes that the government, if thats happening, doesnt step up with more stimulus which i personally think would be unlikely. So thats so thats why my firm has been saying all the damage that was done from the Global Financial crisis provided for a more sound Banking System which means that what were talking about right now is more of an earnings crisis than a Balance Sheet crisis thats how we got there. Tom, finally, on one of the stimulus programs, id love for you to give us a window into the main Street Lending facility the fed said borrowers hadnt been asking about it how much do you think the industry could benefit from the liquidity and how do you think the Program Needs tochange to get people interested . I really have not been hearing from banks that theres a problem with liquidity or capacity to make loans i think its i think, actually, the fact that the main Street Program with Government Intervention isnt robust and roaring is a good sign that means the standard lending facilities are working banks are flush with cash right now. Theyve got lots of liquidity. So i take it as a good sign that we havent had to lean on that Government Program to make things work. I think there have been the triple p program, for example, there still is capacity in that. I think its a really good sign. So i think its good that we havent had to lean on that to be able to get loans i think theyre coming through the more traditional channels. The banks are open for business. Theyre willing to make good loans and we know theyre talking to their clients and as we heard from the treasury secretary yesterday, there will be more money coming into the system at the end of the month, even if its more targeted than the last time around well see what next weeks earnings bring tom, we appreciate you setting us up for it have a great day. Do not miss an exclusive with the carnival ceo, Arnold Donald on closing bell. Ccl has come way off the early lows currently up 6 leading to help the s p. Back in a minute a major rotation in the market that should accelerate as the pandemic worsens in certain parts tofhe nation. More squawk on the street coming up. Stock slices. For as little as 5, now anyone can own companies in the s p 500, even if their shares cost more. At 5 a slice, you could own Ten Companies for 50 instead of paying thousands. All Commission Free online. Schwab stock slices an easy way to start investing or to give the gift of stock ownership. Schwab. Own your tomorrow. In a highly capable lexus suv at the golden opportunity sales event. Lease the 2020 nx 300 for 339 a month for 36 months. Experience amazing at your lexus dealer. In the area of covid consumers are buying beef directly off the cow our jane wells is inside a butcher shop in california good morning, jane hey, carl warning, if youre a vegetarian or dont want to know where your meat comes from, turn away whether its concerns ant covid impacting packing plants, increasingly americans are buying meat directly from ranchers and having it processed by private butchers cutting out the middleman, so to speak the covid thing has really set off a panic. Reporter now ken short runs a private butcher business he used to go to ranches now he has a shop set up this meat is not for resale. The animals are brought in for the owners, whether its the rancher or customer who has bought the animal. He says business has doubled thanks to americans who are really trying to buy meat directly this way for the first time people are calling me from all over the southland i mean, its not just local here i have people coming in here from 120, 130 miles away this is a london broil. Reporter now, among the customers buying meet this way is james brown this is his ranch direct beef he bought due to supply and safety concerns well just be buying from this local producer from here on out. I have no intention going back to the Grocery Store reporter now, meat bought this way can be more expensive though not necessarily and since its private, theres no need for a usda meat inspector. Kent short says nobody here as gotten covid. Back to you. Jane, thank you jane wells youre welcome. In her gown and her mask, and her cap, and Everything Else yeah looking good as always. All right. Lets take a quick break the debate over reopening schools this fall front and center for many parents. Abc mouses founder and chairman is going to ins tt jo uonha subject next its pretty inspiring the way families redefined the word school this year. Its why, at xfinity, were committed to helping kids keep learning through the summer. And help College Students studying at home stay connected through our university program. Were providing affordable Internet Access to low income families through our internet essentials program. And this summer, xfinity is creating a Virtual Summer camp for kids at home all on xfinity x1. Were committed to helping all families stay connected. Learn more at xfinity. Com education. Watching some data out of florida this morning well turn our attention to nevada rolling back some of its reopening plans with the governor announcing bars will close in several counties across the state effective tonight. Contessa brewer has that hi, carl. The infection rate has climbed so alarmingly that starting today the bars will close in the states big e counties clarke county, where las vegas is and reno with the new restrictions slot machines in the bars also will have to be shut down. Bars in restaurants will close though alcohol can be served at the tables, but restaurants can go longer seat parties larger than six people. Bars and casinos are closed. And those casinos can still serve alcohol. The whole point here is really to keep people from congregating in close quarters with their masks off which, of course, they have to do to drink. The point of the masks, the governor says, hes permitting gyms and pools to stay open, but he has strict warning reminders that masks have to be worn unless as he said, youre in the pool or walking to and from the pool i mean, that pool culture is so important in las vegas in the summertime the resorts are already limited to 50 capacity at these pools you got to wonder what vegas is without a bar scene. Analysts are watching to see whether it discourages the crucial drivein traffic, especially from california the companies with the most nevada exposure here, mgm and caesars, red rock resorts, and eldorado which is clo eldorado how is the ramp up in caesars announced yesterday its reopening balis, thats the sixth property for them to reopen in las vegas. Contessa, quick, among those who watch the sector, what kind of grade are they giving themselves on the initial reopening so far i mean, i think they have been very surprised and pleasantly surprised by the pent up demand, but the issue is if you have 1. 3 million americans filing for unemployment, if you have a shortage of discretionary cash, if you have concerns by going into some of the places you could contract coronavirus infections, whats that going to do to your demand . Are you going to see demand ramp off . Theyve been good. The business is better than expected will it stay that way . Thats the key a fascinating look as we see another day where the cruiselines are leading the market well talk more about that later on this afternoon. Contessa brewer watching nevada. As we go to break, look at shares of roku having quite a week if is the largest weekly gain since mid april it will take you back auttobo a nine month high. Back in a minute helpful tips. 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And stop this political nonsense it is only political nonsense, it is politics they dont want to help them because they think it will help them on november 3rd i think it will hurt them. Open your schools. That was President Trump yesterday saying schools must reopen in the fall now a tweet saying now that we have witnessed it on a largescale basis and firsthand Virtual Learning has been proved to be terrible to discuss this, lets bring in the executive director the Parent Company to abc mouse. A lot of companies that the parents are familiar with. Good to see you this morning pleasure to be here with you. I would like you to First Respond to the president and his claim that Virtual Learning has been terrible. What have you seen in the last several months about the impact of Virtual Learning on children and what we may see this fall. I think the fact that there are Digital Learning solutions have been extremely helpful to families and teachers. Across the country, around the world, our learning solutions. We announced a program in early march, our school continue ne y continuity initiative. We provided free codes to other kids access all of our content and we had, you know, ten million hours of usage over that three month period of time and the learning outcomes and the feedback were tremendous there are solutions that can work it is really important that they are designed specifically for that purpose and that is what we have been doing for over a decade as well as you mentioned, doug, Many School Districts are trying to Leverage Private Sector Technology to try to supplement or supplant what theyre doing in the classroom how much of those partnerships are dependent on federal funding. What would happen to some of those School Districts if it went away. That is a big issue and you know we are in the business of helping educate children everywhere. Over a decade ago we started Building Digital solutions that could reach kids anywhere they are. In school or at home and we have hundreds of thousands of teachers that use our digital curriculum base platforms in the classrooms and they have millions and millions of families that use our products for supplemental learning that teachers embrace and recommend. I know there are so many families who are trying to make this decision, which is, in essence sending their kids to school what do you know about the increase in screen time, the lack of socialization, i imagine youre well versed in a lot of the research is there a downside to doing that i think that the screen time issue is what is the quality of the content that is being engaged with our content is highly interactive which is a lot different than passive videos and other things that dont engage the child and help create Decision Making and thought provokes curriculum based content. So that is a very strong focus for us we we have been working on it for a decade we have a learning system that we patented that will be rolling out towards the end of this year and into the future that has shown unprecedented results in assessing and placing each child where they should be at each subject. Because kids are all over the boards as far as where they are. I mean per the nations report card two thirds of our kids pr entering fourth grade were below the reading level. Now we have this pandemic and were being looked to by millions and mlillions of families to help with quality learning solutions to positively impact their kids learning trajectory doug, we all have kids and decisions to make this fall, but the president has praised telemedicine what is it about education do you think that makes the president think it is simply not going to work. Im not certain you have to look at the research we have done our own research and independent studies with World Class Research organizations and it all has to do with the quality of design, the learning activities, sequencing the assessment and data collection, to ensure they are studying precisely what they need to be studying and not something that is above or below their level. So we need to keep the child moving at their own pace if you have perhaps like that you cant go wrong but theyre few and far between and were just extremely pleased with the relates that wesults e getting and were proud of that. And i think that you just have to look at the research. Doug, we have a few seconds left im curious if you have or did have young children, what decision would you make inperson or fully virtual i think there are many aspects of inperson that are essential for young kids whether or not the guidelines are going to protect those kids are not is for the experts to decide i did have five kids of my own, theyre grown now, i have four grand kids all using our producting and doing extremely well we wish them and you the best all of the kids across america thank you for carl and david for having me this week. Kayla, always so great to have you thank you for that have a good weekend, guys. Happy friday, welcom