The bondholders and stockholders were wiped out in yesterdays season sale to jpmorgan. The market is essentially reevaluating the Downside Risk in the event another Regional Bank sees the same fate. There was a highlight of the big Bank Balance Sheet to acquire the failed bank out of receivership due to cost concerns in a world of consolidation, though, this calls in regionals ability to compete the timing is kind of unfortunate, too, coming off the heels of better than expected q1 earnings last week but right ahead of tomorrows fed meeting and amid the debt ceiling debacle. In a goldman note to clients, the firm notes the selloff was driven largely by hedge funds, specifically short pressure. The firm notes the lack of relief rally yesterday when jpmorgan First Republic news was announced sent a bearish signal to the market, guys. You mentioned one thing, and that is the level of uninsured deposits that some of these Regional Banks have. Why is that such a sore point . Are investors worried that that money is not sticky money and might flee to money market funds or other higher yielding alternatives uninsured deposits, exactly right, tyler, are seen as riskier forms of deposits, because people look at whats going on they feel the jitters. They start to have the concern that, you know, there could be some sort of failure here. Uninsured deposits would be the ones most vulnerable. So those are the ones that tend to be more to leave the bank first. So could bankers, Regional Bankers, ameliorate that problem by paying more on deposits in other words, if i make more money on my deposit at your bank, i will be less inclined to flee to another kind of product. So thats one response. But i think it depends on the risk calculation that each individual depositor is alookin at because they may pay more, but if the bank fails, the amount is worthless because you have the risk of losing all your capitol if capital is uninsured at your bank thats why the fdc is looking at potential reforms, to make people feel like their money is safe in these institutions and theyre not going to pull them out. The risk of pulling out these uninsured deposits is that it affects the asset side of the balance sheet. There is a mismatch thats created, and thats the concern the market hasghtiness of the uninsured deposits. Fascinating answer. Leslie, thank you very much. Appreciate it. Beyond those growing concerns about the Regional Banks, fears are rising over tech and a. I two Companies Reporting an impact already, chegg saying it is hurting growth. Ibm may use it to replace workers. We have more in the tech check. Deirdre . Tchegg is the First Company t blame chat gpt and a. I. For slower user growth, and it is probably not the last. Were seeing the flip side of the a. I. Boom. Microsoft, nvidia, meta, they have billions of dollars to pour into the platform shift and so much to gain for the littler guys, itll be more complicated chegg ceo says he will fight chat gpt with chat gpt to ultimately make a better product. You hear similar arguments, especially in cybersecurity. A. I. Will both be a threat and an opportunity but very quickly, as it turns out, investors are having to figure out if it is a net positive or negative for Companies Like chegg and Industries Like edtech, which Business Models will be eviscerated. Where does the value flow . Were only at the beginning of this dual lingo, theyre looking at how the Business Model could be affected ibm kquantifying the impact on jobs, saying 30 of jobs could, quote, be easily replaced by a. I. In five years that, again, is just the tip of the iceberg. Goldman sachs estimates that 25 of all employment could be automated by a. I that is a quarter of all jobs in america and europe i havent even mentioned, guys, the Writers Strike and a. I. Concerns there, or a. I. , aka, fake selena gomez at the met gala last night. This is all happening very, very quickly. As we were warned but maybe even quicker than many expected. Yeah. Dierdre, stay right there as we talk more about the longterm implications of a. I. For business, but also for society with us now is cnbcs steve ko kovac. This is a broad question, and i think the answer is it is different depending on what the corporation does and is. How will a. I. Affect the corporate landscape broadly, and which industries will it hit the most, the hardest or the best . Yeah, thats a really tough question because it is specific, tyler, to the Different Industries lets talk about whats going what were seeing in education, for example. I want to see the grades of these kids for choosing chat gpt over cheggs products we know are right. We already know these things can get wrong. As we see Industries Like hollywood get affected, as we see Industries Like ibm and, you know, hr work get affected, how good is chat gpt in these Large Language Models at replacing im less confident in that based on what ive seen and how good they are at giving appropriate answers. Look, theres a reason why, to dierdres point, big tech is investing more in this than ever there is a reason why microsoft hasnt put these products into education yet. Just a couple months ago, they announced a bunch of cool a. I. Tools for office apps, but theyre not selling that to education yet because they dont know if it is going to be helpful for students or if it can be a cheating tool or what they need to get those answers right, tyler. Im going to give you an anecdotal evidence i was at a table that included my son about a month ago two other students, one at a university i will not name, the other a classmate of my sons in high school. I asked them, have you ever used chat gpt for anything . They kind of sheepishly all at once looked down at their asparagus and looked away. I said, so what . Yeah, weve used it. The College Student was the most forthcoming. He said, yeah, i used it to write an essay for me, and i got a 98 on it. Wow. Wow. This is there you go. Maybe it is good enough. Youre in trouble i am out of here, man im getting out of the top tick. Chiney, let me turn to you with that bit of evidence in mind i suppose the overriding question is, on balance, is a. I. Going to be good for society or bad for society . And why . Thats a really great question and one with a lot of stakes i will say, at this point in time, if we can steer it correctly, putting in the right guardrails and stafety mez smass in place, we could have an optimistic future with this tech not technology however, theres a lot of decisions that need to be made ahead of that to reach that overall scenario what is guaranteed over the next decade is a lot of change. A lot of disruption. We need to be in an environment where we can absorb that and harden our institutions for that, which involves a lot more foresight. We have mentioned here education being a little bit disrupted Large Language Models like chat gpt and these systems, Research Papers have existed on these systems for years. So we do have time to prepare. We just need to lean on a lot more into the future we need a lot more cohesion between public and private sectors, so were not always caught off guard, kind of scrambling to adapt to these technologies why do you say that the pluses will outweigh the minuses, fquickly . If we look at the historical trend of technology overall, its led to more jobs. Its created new industries. Weve largely been better off as technology has advanced. So if we look at that as our data points, Artificial Intelligence is going to be far more powerful, some say, than electricity or the wheel. Dierdre, she says look to the past and take heart for the future i could never answer that question i mean, that is the conversation here in the bay area among everyone right now, is it going to be a net positive or a net negative if anyone thinks they can answer it, i just they cant theres no way for us to know right now. People are in technology and say, yes, itll be used to figure it out. The c hegg ceo says hes going t use it to make a better product, but we dont know. Talk about the ramifications the next decade, theyre happening right now. Theyre happening in the stock market with ibm, chegg, Many Companies to follow. This is being negotiated, and there is no way to know. Im using the stuff every day, and a lot of the answers from chat gpt and bart, they sound right, like maybe your sons friend who you threw under the bus, tyler, the essay that doesnt stand up to scrutiny i dont know you have to be really careful. I think thats the attack alphabet is taking. On the ibm front, they expect to pause hiring for roles as 7,800 jobs could be replaced by a. I. In the coming years this is probably, you know, the first very tangible example of a. I. Coming to the white collar workplace. Are you surprised at how quickly this has happened, and do you think that this offthehand, sort of offthecuff comment, he will walk back from it, or will more companies quickly follow suit he hasnt walked it back yet. In fact, his predecessor talked about this all the time. Look, i think hes just saying the quiet part out loud. The ceo of ibm, he says that these kind of jobs, theyre basically very easily copied over to an a. I. Chatbot, for example. Think of customer service. Thats just a lowhanging fruit kind of job that can be replaced by these this is something people want. As we talk about efficiency all this year, especially in tech companies, what is more efficient, i guess, thats getting rid of a human or not hiring a human and having software do it instead that sounds awful and scary, of course, because thats jobs a human is not getting, but for the company at large, maybe, you know, it is a good thing it protects margins and makes the entire organization run more efficiently. I really think everyone is thinking like mr. Christian is thinking, theyre just not saying it yet because, look, were talking about it now right final question. Shanead, what is the one area of a. I. , or is there a particular piece or part of a. I. That frightens you more than any other . I get all the hard ones today. I think the uncertainty, we obviously cant plan for a breakthrough, in how capable and advanced these systems get i think is a bit challenging but, to be completely honest, im less worried about a. I. And more worried about our social, political and social environment to absorb the changes from Artificial Intelligence. I think what our foundation is is a little cracked, and thats what alarms me a little bit more. I think i agree with you. I think i agree with you strongly i think thats what worries me about this, is the potential for misuse its always the unintended consequences that get ya, right . I think we can agree on that thank you very much. Shanead, steve, dierdre, appreciate it. Still to come, a huge day for the markets today and tomorrow the fed is set to make what could be the most important Interest Rate decision yet why investors are still dealing with the after effects of the bank crisis. Theyre desperate for any sign of a pause or pivot. How will powell and Company Respond . Plus, we will speak to pfizer Ceo Albert Bourla the company beating estimates. The catalyst, revenue from its covid19 vaccine and antiviral. The outlook is strong despite worry from analysts. Fulltimely, well speak to Ashton Kutcher, the Hollywood Star and investor. Hell weigh in on a. I. And streaming, awe as s llthe hollywood Writers Strike power lunch will be right back double check that. Eh, pretty good whistles yeek. Not cryin, are ya . Lets tighten that. fabric ripping ooh. Wait, wh wh what was that . Huh . What, that . No, dont worry about that. Here we go. Asking the right question can greatly impact your future. Are, are you qualified to do this . What . Especially when it comes to your finances. Yeehaw do you have a question . Are you a certified financial planner™ . Yes. Im a cfp® professional. Cfp® professionals are committed to acting in your best interest. Thats why its gotta be a cfp®. Find your cfp® professional at letsmakeaplan. Org. Welcome back to power lunch. Stocks heading lower today. The Regional Bank fears have been lingering around. Lets get to chicago to see how the stories are playing with bonds. Rick santelli live with the traders. Rick yes, its the onetwo punch the first punch, job openings and labor turnover, jolts dropping under 9. 5 million the second part of the punch, Regional Banks under pressure again, whether it is pak west a and option traded. Consider intradays of huge drops. Interest rates skyrocketing. You see the kbw index there. The lowest level since october 20 lets talk to a trader what a day, do you have a minute of course when we look at 50,000 puts today on pacwest, what did it do to volatility . How does that figure into the onetwo punch of the fed tomorrow and Regional Bank nervousness . Gives short pause for a little bit, but were going here into the fed meeting as if the ball is sticking out there this is well stelegraphed. Hedge Fund Positioning is short now across the board id say it had a blip effect. Jamie dimon was saying, we can take a breath now. He is one of the best bankers in the world. Is he a little early is he incorrect . Is there too much in front of the fed meeting . The reality is, its a selffulfilling prophecy if theres a run, it can keep on going. Banks at the end of the day have a tail on them particularly the Regional Banks have 70 of exposure in commercial real estate, as that starts to decay. Its a function of time. It can get ugly, right at the end of the day, the fed is going to keep stepping in, b backstopping these things, well have a rally. Between you and me, dont listen out there, people, you think the fed is really going to do anything after tomorrows quarter point, seriously i think theyre going to keep it stickier than people think. Stickier, i agree they could leave it up once again, i used a thermometer. Or the thermostat. Just because youre at 60 degrees and put the setting at 85, you have to go 51, 52, through all of it. So leave it up there and let it do its work, higher rates. I a iagree. They have to wait and look theyre not bringing it down. I agree with you on that. Theyre not bringing it down lets leave it with this the slow, unexpected issues in effect of fastmoving rate hike cycle, got to watch out for the moguls, right . Absolutely. Takes a little longer. Thanks. Take care. Tyler, kelly, back to you. Thank you very much, rick for more on what to expect from the fed tomorrow, lets bring in brian smegly from Guggenheim Investments he is a new face for cnbc, joining us from the loud and crowded conference in beverly hills. Great to see you, brian. If i tell you i think theyre going to break things if they hike rates tomorrow, do you disagree thanks, kelly great to be with you i disagree that tomorrows decision is going to make or break the economy. Our sense is that the economy is already headed for a recession in the second half of this year, and that reflects the cumulative Monetary Policy tightening that has already occurred over the course of the last year. I think from here, whats important is the feds efforts to convince the broader public that it is committed to fighting inflation and doing what it takes to finish the job. Brian, by the end of the year, will the fed be loosening money or sort of paused . Yeah, tyler, i think if we look at the two major tools the fed is using on Interest Rates, theyre likely to hold rates steady in the second half of the year potentially start easing in the First Quarter of 2024. Thats only if the Unemployment Rate rises on the order of a percentage point the way the fed is projecting as of the march Economic Projections thats an ugly scenario for the economy and investors in our view in terms of the balance sheet, the fed is wlikely to keep shrinking the securities, quantitative tightening, and we think itll continue at least into the first part of 2024. Brian, curious as someone who worked at the new york fed, kind of the markets, you know, leadership position, well say, within the fed, what do you think they think when they look at the board today and see the Regional Bank etf down 7. 5 . Are they calling the fdic . I dont know just take me inside this Decision Making process 24 hours before their next rate hike decision. Yeah, without a doubt theyre watching closely the price action across markets, particularly the stress in Regional Bank shares i think what that demonstrates to me, the signal, is that this policy of significantly inverted yield curve will continue to put funding strain on banks. Quantitative tightening will draw deposits out of the system. Thatll increase funding costs for banks in general, but particularly for the smaller and midsized banks. Also, were going to be facing additional regulatory pressure and supervisory scrutiny the fed is going to take that on board and consider the implications for the availability of credit and the cost of credit to the real economy. We heard chair powell talk about that at his press conference in midmarch, where he said that a tightening of bank credit conditions, which has been under way for more than a year, but will likely continue in the wake of these bank failures, that could very well take the place of alternatively rate hik