down side. but about 16% on the upside. a defensive way to be invested >> jason, quick. >> mcdonald's. same store sales were up 12.6% >> phil? >> amd, it's at a seven-month high >> thank you that does it for us. "the exchange" is now. >> thank you very much, scott. hi, everybody. welcome to "the exchange." i'm kelly evans. we have yet another day of banking concerns dragging down the market credit suisse appears to be the latest on the bring, as its biggest backer, the saudi national bank, will not provide any more capital investors here are mainly hoping u.s. financials aren't exposed to my risks there. the do you was lower by 2% today. watch this level

i believe 38, 39 was about the level we started the year. so the nasdaq similarly down about 1.4% today european markets just closed half an hour ago with major losses here is gentlermany down more tn 3% pressure across the board for credit suisse. worst week since june of 2020. and the european central bank is due out with its latest rate decision in the morning. are they going to hike by half a point? here you can see the pressure across the european banks. here in the u.s., banks are back in the red, with the bank etf down another 4%. first republic back to the 30s huntington bank, you can see the declines there it's not just banks. we should highlight this point right now. this is not just the banks energy and commodities are

really getting hit hard today, as well. we just cracked below $66. you tend to see sharp moves like this once we blow out of trading positions. nobody was expecting such a precipitous decline in oil prices here. so that's blowing up some positioning. copper, down almost 4% today on the verge of going negative for the year gold, up 1.5%, as investors seek the safe haven trades. obviously, bond yields are lower again today as well. but the drop in the ten-year and two-year are also striking down about a point, more even since last wednesday last wednesday is when we cracked above 5% on this yield let's kick it off with rick santelli rick >> yes, you borrowed my first chart. one week and two-year yields

just think, one week ago today it closed at 5.07% to think it closed at 4.43% last year and we're at 3.84 that puts it in perspective. that was two-year note yields. let's look at two-year futures, and on top of that, let's put another price contract, fed fund futures. on this chart, i would like the viewers to understand that it is important to try to decipher the magic of fed fund futures, but it's basically just another short-term debt instrument look at the way it looks on that chart. now, let's switchgears let's keep fed fund futures as a price and overlay that with one-month t-bills, down about the same amount in yield and you can see how they're ly .

tomorrow, it will be one interesting morning. i know you will be discussing that, kelly. i don't think they are going to raise rates at all, in my opinion. but we will have to wait and see, but there's some very telling markets. so the two-year in europe versus the ten-year, it closed at the least inverted of the year now, if you go back just a couple of trading sessions, it was at the most inverted since the early '90s to me, that may be better off listening to the markets tomorrow kelly, back to you >> rick, thank you very much joining me now onset to make sense of this market action, i'm pleased to have such a big group. andy, nancy, peter, welcome to

all of you and our own steve liesman is here, as well. steve, if i may, let's kick it off with you and bring us up to speed on what the market is now pricing in for the fed, which decision is due out a week from today. >> yeah. i think i'm overusing the word "dramatic," but i think it fits here a dramatic change in the outlook for the fed after a dramatic move earlier this week the march fomc rate hike probabilities, we're probably at 59% of no change, 41% for a 25 basis point hike it had been reverse. take a look at the outlook for the peak rate. a week ago wednesday, we were 100 basis points off of that here is the broader fed outlook. they're still toying with this idea that there is something of

a hike coming. but then look at the cuts that are baked in for the rest of the year, all the way down quite a bit, into the 3s there one last chart i believe we have, which is the ecb rate hike probabilities picking up on what rick was saying. 85% now for a 25 basis point hike, and 15% for a 50 it had been virtually 100% for 50 before we had issues in the european banking system. >> peter, what is the significance -- this was a no known. svb had to pause their financials and wait on approval from regulators. the issues go back years why the reaction in markets today? >> credit suisse has been a slow moving car crash the last couple of years and it's strange that what triggered it was not news or an announcement from credit suisse, who is just the saudis saying

okay, we're done at 10%, we're not going to increase that but in the context of the fragility of all these financial institutions triggered that. but at the end of the day, the swiss is probably going to back credit suisse, and i think that we have to separate the viability of these banks, european and the u.s., versus -- which i don't think is in question, and i don't think the pause here is a need to worry. but what is the profit outlook going to be? what kind of equity raises are these banks going to have to do to save their banks and what kind of duration risks will be fully exposed? >> there is no way you can think the economy is going to grow today as much as you thought it would a week ago this is starting to feel like a faster slow motion credit

crunch >> totally what we know is that bank lending standards have tightened, and we also know that small businesses are pressed and so the question is going to become what happens? i run a small business, what happens? so i think long-term, this gets us where we need to go it has an impact on inflation that will be disinflationary ultimately in the meantime, it's going to be very important to know what you own, to know the management teams. what happened at silicon valley bank was a rookie error, a basic banking 101 match your assets and liabilities. they didn't, and they are, in a sense, getting a do-over for their depositors, which is good news for the depositors, and that will help keep payrolls going in silicon valley. but we thought we would see a recession this year. i think now we know we're going to see a recession the question is, what is the fed going to do about it

>> it was a week or two we were talking about how those rate hikes hadn't fully been felt by the economy yet, and they were growing and now we're seeing evidence of that should the fed cut with inflation at 6%? it's not like you see them taking off because we are pricing in a pause we're not pricing in a pause and saying we're going to take a break at 3% next year. >> yeah. the last time i checked -- >> here it is. >> they're not going to go from raising to immediaty cutting from a risk management standpoint, they should do nothing next week. i know symbolically, they may think hey, we've been talking so tough on inflation, we have to throw one more out there but from a risk management stand point, they should stop. shifting to the decline in interest rates, that's a tougher poll for them because of the rate of inflation. yes, we'll still continue to

moderate, but this is different this time in the sense of the fed's ability to address an economic and a credit or a banking challenge, with just -- let's just cut back to zero and start doing qe again those tools have been taken away from them. >> i think what's happening today is the market is responding to the fed's job. there's a potential banking crisis brewing that could do the fed's job for it and that gives the fed cover to pause and start to -- >> it's odd, because they're doing the job for the fed, yet the fed almost doesn't want to acknowledge it people are talking about the precedent in england where if there is a blowout, the pension system is going to blow up does that seem like a reasonable template for what the fed should be doing now >> central banks have covered

the hikes until something broke. something broke in the u.s. last week with a bank failure that gives the fed a lot less cover to continue to hike. but something more important is happening, which is the economic outlook has materially changed the fed used to try to get interest rates to get inflation back under control now the banking sector is likely to do that banks are important to extending credit to small and mid-sized businesses now what banks are likely to do, given the warning shot is pull back on their lemnding to the small and mid-sized businesses >> something like, you know, 70%, 80% of all the job openings are new businesses what do people do -- nancy, stocks, bonds, gold, what is the move now

>> we were already positioning our clients for a recession, so we moved them into short ladders last summer, and we did that at the expense of convertible securities with a little more volatility in the equity strategies, we added risk because what we know is coming out the other side of this, that includes technology and consumer discretionary, those are areas you want to be invested in we were in this morning buying some of the energy -- the upstream names, which it's hedged with oil and copper, and we added to platinum and lithium, i think >> so these are creating long-term buying opportunities >> yeah, the volatility is the trend of the long-term investor. if your horizon is more than three weeks, this gives us an opportunity to pick off names. we were adding, as you know, to technology in the fourth quarter. the nasdaq is still up 8% year-to-date so we're pretty happy with that trade. we added the high quality names,

and that's a way we continue to plot along >> that raises a question for many people, which is if we're going into recession, and this will continue to be or have another leg down in the bear market, when should people expect stocks to bottom? >> well, the problem that stocks have is they're still expensive. if you look at the price-to-sales ratio, we're not that far from where we were in 2000 even price-to-earnings, we're still elevated and i think earnings will start -- they have already started to fall and will continue to fall there's no valuation cushion to them so if you buy stocks today, you've got to extend out that time horizon i think also what i'm watching is what the dollar is going to do now feds rizing interest rates faster than everybody else, driving the rally last year. out side of today's bounce, i think the dollar will start having issues and maybe the gold

rally -- >> good for u.s. stocks. >> i remain bearish on gold, but it will be international stocks that do better on the weakening dollar >> a lot of traders have been putting on the gold copper trade, which they're riding one way with copper, another way with gold. i remember we were talking earlier, maybe in a year, about the attractiveness of european stocks you say not so fast, because the dollar could weaken and support them >> i like the asian markets much more that's where a lot of the economic growth is going to take place. the china reopening is going to be very big for that region of the world. even europe will benefit from that while the u.s. is going to be not as affected positively by that and has its own challenges. >> andy, what about you? >> i think a bear market plays out in three ways. one, valuation comes down.

we're somewhere around the second act today and i think where markets attempt to turn around is between the second and third acts we're watching a crisis unfold fundamental also bottom i think later this year, and that could be an opportunity for investors to load up what i think investors ought to do is look to position portfolios a little more conservatively >> i'm sure they're kicking themselves now technology and the nasdaq are the ones holding up right now relatively speaking. >> that is one area to consider at least getting to benchmark, because that's something investors underweighted. the other area is consumer staples, which had a good year last year. they did a good year passing high costs to higher prices. so just because the economy pulls back, they're not likely to have to put their prices so much >> finally, before we go, energy is falling apart here. >> i agree that the direction of the movement of oil prices today ought to be lower.

i feel like that is a very large move in a structurally undersupplied market >> so everyone makes that case though, who would have thought we would start talking about china's reopening. prices are down 20%. >> and we're long, so it's not a good day for us. i do think over the next couple of years, the demand for oil will exceed supply and china, in 2023, is going to exceed its precovid level of oil consumption, that is going to create some level of support >> consumer discretionary, we got the retail sales report this morning. is there a sense that the financial markets are seizing up, but the consumer broadly is okay did the consumer start to seize up in a slower, more under the radar kind of way. >> a lot of those numbers got revised, so i think it matters again which industry you're participating in but the consumer, you know, i know they keep being buried prematurely. they're still pretty healthy

you look at balance sheets or income statements or asset values, they are still where they were prepandemic. people are working now that inflation is coming down and the rescission to last might numb pti numbers is critical real wages will begin to go up instead of contracting, and i think that will be at the margin, at least decent for retailers. >> it's a major difference than 2006 when people were way overleveraged. you have to wonder what kind of cushion that does provide this time around. stocks, by the way >> so we've been adding to target and i know that feels a little counterintuitive, but we owned it and have added to it. we also added to some of the discretionary/staple names like mcdonald's, but we've been taking the money out of staples, because the valuations are a little overweighted. so chip potle is one of the nams

each with the pullback on tesla, we are happy where we acquired it and will add to it. >> the dow only down 550 at this point, so things are turning around thank you for coming in today. we were just talking about housing an the consumer. mortgage rates are on the move let's get to diana with the latest numbers >> this should come as no surprise the arm rate on the 30-year fixed fell 20 basis points this morning to 6.55%, the lowest rate since february. and you can see somewhat a roller coaster the last week has been with the rate jumping over 7% last wednesday, according to mortgage news daily. a lot of folks have been asking what this banking stress means to mortgage lending and to the banks. there is currently nothing wrong

with the credit quality of outstanding mortgages. it is excellent today due to tighter underwriting and the fact that record low rates had everyone refinancing into 30-year fixed rate loans but the one area this could impact is credit availability for future loans not necessarily the conforming fannie and freddie loans or fha, but jumbo loans. and a bigger impact is going to be for home builders and their ability to get construction loans. we'll talk about that in the next half hour >> for now, diana, thank you larry fink warning of a slow-rolling crisis in the wake of silicon valley's bank collapse in a letter to chief executives, he wrote -- >> my next guest disagrees when it comes to svb's failure. he says it was largely

self-inflicted for more, let's welcome in jesse rosenthal and mike santoli joins us, as well. jesse, i'll start with you you were sort of early and/or accurate to point out problems with svb so why don't you think this is a broader indictment of the regional banks here? >> i think it's important to kind of segregate between a liquidity crunch crisis, which is what is gripping the fears in the market right now and what happened with svb. so big picture of the solvency problem with svb lie in accounting with the securities they were holding. they were holding a bunch of underwater but very importantly zero risk assets the u.s. government treasuries wiped out the entire book equity of the bank. they are, quite literally, the only bank in the u.s. that was in that position >> so what are we to make then of this number, $630 billion,

jesse, would be the hole if we had the entire banking system marking similarly to market? >> first of all, that does not drive-in solvency. the banking system has so much more capital than it had 10, 15 years ago, that they can absorb that unlike silicon valley bank. so the system would still have excess equity capital. and this is where the liquidity comes in if they don't have to sell it, they can just hold on, and this is the liquidity component again, we know exactly what these assets are worth and we know exactly -- you will get 100 cements at par if you pate for repayment. this is also where the fed's facility on sunday night cannot be understated, because they now give the ability to take these underwater securities, go to the fed, and get 100 cents on the dollar, without ever having to sell them.

>> and yet, mike, we still see the banks trading under a significant amount of pressure why do you think that is >> yeah, i would grant that svb is extreme to the point of being an outlier but it still reflects the potential pressures on other banks. what drives behavior changes, it's kind of a second look at our exposures, where we have duration, what the losses are. the whole what if scenario and the pulling of deposits from smaller banks that need them more than the bigger banks in a macro sense, to me what matters more and why i don't think we're talking about some kind of uncontrolled chain reaction in terms of deposit flight from the system that will weaken it. i think you have had a little bit of wiggle room created here, but i don't know what it means for the credit impulse in the economy or what it means for the

smaller banks. that to me is coloring the view of economic growth, even if you can set aside svb as a particular case in terms of the stress >> the other thing, jesse, if you took a snapshot of the banks prior to the svb issue, i can understand your point that they wouldn't have to make these four sales. but now in an era of deposit flight, do we know the extent to which deposits have changed hands and then forced institutions to have to react, just like they did in svb's case >> yeah, we don't, and that is the tricky component here and why the fed moved so quickly over the weekend bank liquidity crisis, you do not want to fool around with because the situation can change quickly. silicon valley bank is a perfect example here the reality is the way banks work, and i urge everyone to rewatch 80 years ago "it's a

wonderful life," almost no bank can withstand that type of bank run. more broadly speaking, there's still a lot of cash, a lot of already marked securities to be able to absorb it, and i agree with the prior point, that i think it's much, much more likely that we are seeing deposit migration up the scale in banks rather than aer liquidity price in the system. >> do you think that is a waste of time exercise >> i don't think it's a waste of time exercise, but one of our thesis here is that the more and more we can prove out silicon valley as an extreme outlier, and it is in virtually every case, the more we should get comfortable with how the rest of the banks are sitting. silicon valley bank, like i said, was a series of missteps starting with an egregious asset

liability mismanagement and duration mismatch that does not exist that other banks, and that largely comes down to the deposits, which is high liquorlated. that's just not the case with the rest of the system >> let me end with reading the charts now that these declines are in the books, now that the s&p is positive on the year, where does that leave us? >> well, first of all, i view the last ten months as being this really wide, messy trading range. at the lower end, you have been pricing in obviously much higher odds of recession. that's back where we are, more or less. i don't think we have a valuation problem, we have a where are earnings going to go problem? so right now, it's much more the bond work and volatility that's causing everybody to question whatever thesis they had we went from fire to ice in terms of what we are afraid of

so fast without stopping in the middle for a warm bath that's what i think the market is spooked by. we're holding the lower end of even monday's lows so far, so we'll see. >> thank you both. great to have you today. mike santoli and jesse rosenthal. still ahead, the selloff in european markets is expected to have some sizable spillover effects on u.s. companies doing business there we'll look at the multinationals that are most at risk. and take a look at the sectors today as we head to break. energy is actually the worst group, down almost 6%. financials aren't even doing worse than the material stocks, hexch e wn%. "t ehange" is back after this network, associated british ports can now precisely orchestrate nearly 600,000 vehicles passing through their uk port every year. don't just connect your business. (dock worker) right on time. (vo) make it even smarter. we call this enterprise intelligence.

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powering possibilities™. welcome back, everybody. energy the worst sector as oil broke below $66 a barrel let's get to pippa stevens on a check. what is the buzz about this? >> falling to the lowest level since december of 2021, wetting crushed here with spill over from the turnover in banks there is also the stronger dollar, a well supplied market for at least the first half of the year trading activity also playing a part pointing to delta hedging, increasing today's volatility. institutions are selling crude futures in order to avoid downside risk. energy is by far the worst performing s&p sector. halli

halliburton, the biggest loser players like marathon oil and others also taking a hit >> look at halliburton down almost 10% thank you, pippa let's get to tyler mathisen now. >> thank you very much good afternoon, everyone a chinese billionaire is scheduled to appear before a judge in new york city accused of orchestrating a billion dollar fraud the government says he was arrested this morning. he and another defendant, who remains at large, are charged with raising money from his online followers by promising big returns. instead, according to the indictment unsealed today, he lined his pockets with the money he stole, buying a mansion, yacht, and two $36,000 mattresses he's a business associate of steve bannon, who is a top adviser to former president trump. the state of texas is taking control of houston's public school district, which serves nearly 200,000 students, citing

allegations of misconduct by school trustees and low test scores democrats say it's simply a political power grab and near the top of a 56-story building in dubai, the pilot of a small plane pulled off a spectacular stunt, landing on a hel ipad with only 68 feet of runway. the polish air racing champion has been preparing for today since 2021, making 650 test landings on short runways around the world. kelly, back to you >> still gives me the jitters. tyler, thanks. coming up, shares of credit suisse hitting a record low, falling to $2 a share. down 21% its inability to raise capital renews fears in the banking crisis should u.s. investors arfe the turmoil? one strategist says no and will tell us why, next.

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situation there, and how much it worsens or not in the outlook for the u.s. economy and banks >> well, certainly, despite the selloff today, it's important to

note that the europe financials index, measuring europe's bank, is down just 1% year to date euro zone commercial banks have been able to increase their lending rates more than deposit rates thanks to cheap funding. as a result, literally european banks have never been more profitable and never been better capitalized. i think in terms of a global financial crisis deepening the current earnings and economic downturn is valid. we'll need to watch things like oil prices and cds but the biggest concern still for me is inflation and central bank rate hikes. i think we'll get more of that from the european central bank tomorrow i think the market may pivot back to that >> so not to go too far, you know, into this, but i'm curious because you mentioned it would we have been better off if

our structure had something like the targeted long-term financing organization, are they getting the last laugh here because of the way this was set up? >> i think so. a lot of times we look at europe and say they're doing too much, there's too much bailouts for the banking system but in situations like this, it does pay off >> and look at the bailout now you say wow, the european central bank just keeps come up with these schemes look what we just did. we have to figure out what we're going to do scheme wise now. >> exactly i don't think the fed has a plan in place or the treasury to deal with this. now we're faced with this difficult question of, do we look towards financial stability concerns and not hike rates or get back to addressing true financial stability? the ecb has the ability to

provide a back drpop to the banking system >> david, what are your thoughts, what are your investments you are making the last five days >> the best thing investors can do is not get caught up in the day-to-day volatility. we think this crisis is ultimately going to pass, and we do think it will be a good year for stocks once gewe get through this so we think the fed, the fdic and treasury steps up and really puts a lot of things in place to have this settle down, it's not going to settle down today or this week, but it will settle down this month. if that's the case, we think it will be a better environment for the overall market on a 12-month basis. we do think the fed can slow down and in fact, stop raising rates at this point. at a minimum, they will pause. because we think inflation has

been coming down this is going to be deflation n and by the time the financial markets settle down, inflation will continue to trend lower >> what do you own right now that you think sets you up for the year you foresee with everything going on we were just talking about? >> we have a diversified portfolio. we do like financials and we have a lot of financials our outlook on financials is positive however, it has more risk than we thought and it is going to take a little longer an the upside is more limited. beyond the financials, we do like technology and industrials. we do like some health care. so utilities, which have been doing poorly this year, we think in an interest rate environment, there should be a nice rebound

there's lots of places to make money out there. focus on the highest credit quality. we don't think you want to chase yields with lower quality financials, because we think you're going to make money without significant risk >> jeff, do you want to just comment there? i feel like there is this view right now that which had a scary couple of days but got through it, and now we can go back to business as usual. what if we don't, jeff >> i think this is a wake yaup call for your portfolio. if you have been taking on too much risk, it's not too late to shift to a quality focus i point out that in every -- in nine of the last ten months, the stock market has moved up or down by five percentage points i think you want to focus on quality stocks we have designed quality characteristics a few ways, but one way is low price-to-crash flow companies with more immediate

crash flows than those in the distant future those outperformed last year even outperforming in recent days, as well. just use that free low price-to-cash screen to sort through stocks i think -- >> david, would you agree with that >> we are talking about buying quality tech, selling at reasonable valuations. also, like an apd, you know, quality company. union pacific has gotten beaten up that's what we focus on. we agree, we would not be more specu speculative >> gentlemen, thank you. speaking of trying to stay bullish here, the fallout from europe could have big implications for u.s. companies. it's not just the european and

u.s. banks we're watching. let's get a look at the companies most exposed over there. >> concern around europe's growth story came to light mcdonald's added it is being judicious in pricing items. holdings among the highs exposure in the s&p 500, that's bookings holdings with 55% of sales there. and more americans are traveling overseas for the industrials, research says europe's been this slow growth, high cost region, with some secular growth areas like renew aables and farm equipment

john deere recently sharing while dpgrain prices have come f peak levels, that's not stopping these stocks from moving lower today. >> honeywell down almost 4%. coming up, we'll go back to tech investors hope for a fed pause a key supplier just warning about dend we'll get the fallout, next.

welcome back dow is down 560 points, the nasdaq is the best performer today, down less than a percent. how big a red flag is this for consumer tech and maybe apple? steveco vak is here to discuss was this a surprise? >> not really. apple had similar warnings we just got from foxconn. most of those iphone pros that didn't make it out in time for

christmas were supposed to be made there, so they're saying similar to what tim cook said on the earnings call, which is it's going to improve quarter over quarter because we got that facility back up to production we have heard this before from other companies. i'll point to microsoft as the best example windows revenue fell 39% in that same quarter pc demand is falling smartphone demand is falling even apple is not immune >> would you say the other tech companies are hit harder in terms of layoffs is that the companies expanded more and are down sizing more or is apple seeing perhaps a higher -- just put it in context. >> apple's not down sizing, that's for sure. in fact, they put out in one of the disclosures that they're going to increase their spending on suppliers

that's foxconn and many others it could be some improvement in the back half of the year for other products they're not necessarily down sizing in fact, for the full year, analysts are expecting very modest revenue growth that apple can hopefully beat at least. >> i don't want to keep using the expression shoe to drop, but is there an expectation that they were able to meet the higher demand during the pandemic without having to overexpand or was it just all happening on more of the foxconn piece of it? >> it's more of the foxconn piece. that is one of my questions to tim cook, are you guys back up to capacity? he said we're back up to capacity to what we need maybe it's not 100% capacity at iphone city, but we are able to meet the demand we have right now, which is technically going to be lower. >> steve, thank you very much. still ahead, the vanguard

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reits getting hit in today's selloff. small declines but one area where banks have been already pulling back on commercial bank activity will the concerns cause loans to dry up even further. diana olick is here with the story. diana? >> reporter: the short answer is yes, and liquidity isn't the only impact. i spoke with willy walker of walker a.m. dunlop who are the largest lender in the nation and he said every regional and local bake across the country are assessing their loan assets and lights and as a result they will be more discerning about extending credit to commercial real estate which will suck liquidity out of the system. in addition, commercial developers who largely use regional banks and depend on those relationships are in a conundrum. >> one of the things that many of our clients have been struggling with, diana, over the last week is i work with pack west and work with first republic my relationship is with them i'm wondering whether i ought to

move my deposits away from them, and if they move them, they lose the relationship the other thing is those deposits are tied to new loans or existing loans. >> reporter: and this is not just for commercial developers, but home builders as well and the builder sentiment report out this morning, nahb's chief economist said a follow-on effect of the pressure on regional banks as well as continued fed tightening will be further constraints for acquisition, development and construction loans for builders, and, of course, when loan conditions are tight, builders don't build houses and home prices, where do they go, kell >> right, exactly. before we let you go, i've been cure grouse there's any knock-on with what's happening from the regional banks are the problems hitting home builders at all? >> reporter: there's great concern. stuart miller, linear beat in their earnings report and he came on with analysts and said he's very concerned knowing how important regional banks are to the house sector

he says the landscape will shift, and we won't be able to see around the corn, and he said our focus will take into account the unexpected, staying close to the market on a community basis, keeping production moving, but he said that will impact both prices and margins. >> diana olick with commercial real estate drying up are we about to have a credit crunch. what role could others play in that market as well? ron, it's good to have you here and you're also a customer of signature bank you were or still are? >> what are you hearing? do you have access to your fund. >> we start hearing rumors that we might be acting fast and we must pull most of our capital out of there the banker on the signature on the phone say we know as much as you do, and our response is you better be safe than sorry.

we move it to other banks that we have a better relationship with we had access to all the capital lines >> with signature. >> with signature. they are back in business. obviously, we're taking a more cautious approach. we're hoping they will truly be back in business on the longer horizon and be happy to stay a long-term client of the bank because there's great people there. right now you've got to be careful. >> you're in the middle of so many different hurricanes that i don't even know where to start let me throw it back to you actually so you've been in the middle of the banking problems signature your firm focus is on commercial and residential real estate, both of which remain under pressure what keeps you up at night, or do you see this as some kind of opportunistic environment to be in >> i see it as a golden age for private lenders like ours. we provide first mortgage loans, predominantly on residential, commercial properties, mostly in new york so a lot of multi-family, a lot of condo buildings, and, you know, we look at it case by case and deal by deal and right now i have to say the new york residential

market looks pretty resilient. >> oh, it's -- everyone is depending on it. you have rents at all-time highs basically, even with the biggest number of apartments coming online and it sounds like decades. does that worry you at all >> we actually see the supply level that everybody spoke about pre-covid. that's evaporated. right now there's a shortage of supply no one has really built a new product in the city in the last three years. everything you're seeing coming online right now is projects that started pr pandemic so we're providing the capital for people to get to the finish sfwlin would you be involved in any office conversions people talk about it like that's the answer, and it's also very difficult to do and will probably take some time. >> it's complicated. it's more complicated than people think to convert an office building to resi. we've looked at a few of them. we haven't trans acted on them yet. it has to be at a certain basis to make sense and the layout really needs to work, but that's going to be definitely a trend we know of 6 million square feet of office building right now in manhattan that's going to get converted. >> wow. >> it will take them probably

three years to get to the finish line so the supply shortage will not get fixed immediately by those projects. >> do you feel good about the return on investment you'll have for the next couple of years getting to this point, everything sounds great from here on out, things look really dicy in terms of the economy and in terms of where rents might go if we do have a recession and all of that. how do you, you know, confidently invest here? >> so you have to underwrite the responsibility of covering the loan and to cover the rate increases. you have to underwrite the property itself and the liquidity of that specific asset, so when you look at new york residential, it's much more liquid than real estate properties in other parts of the country. listen, right now banks are pulling back in a major way. we are stepping into loans and types of sponsors that typically would get a loan from a large commercial bank. >> it's a huge opportunity for you, but, i mean, are there enough of you to make up for that loss of funding from the banks?

>> no, there's not there's a lot of debt funds. a lot of debt funds have been able to raise capital, but in order for the market to be robust you need the commercial banks back in the game it's going to be a very interesting year i think that right now we're seeing spreads increase meaning we're getting more returns on our loans, and we actually reduced our loan-to-values meaning if a year ago we landed 65% loan-to-value, this year it's more like 55%, and if last year it was more second-tier developers and this career it's top-tier sponsors and assets so higher quality, more return, but big irsystemic risk. >> to be worried about, absolutely people are wondering how are you keeping things going right now you're a prime example of that ron, thanks so much for coming in appreciate it. that does it for us today, everybody. coming up today on "power lunch," we'll cover the coverage of today's selloff and talk to valley national ceo ira.

dow is down 500. i'll speak with tyler on the other side of this break

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good afternoon, everybody. welcome to "power lunch. alongside kelly evans, i'm tyler mathisen, and we are watching another major market selloff today. u.s. stocks following european markets lower as credit suisse becomes the latest crisis for the banking sector. >> that stock falling more than 20% to a new all-time low, under $2 a share its biggest backer saudi national bank says they won't or can't provide further financial support leading to a big financial selloff in europe, and that's continuing here in the u.s. dow down about 720 points at the lows we're off those levels now but still down 1.5%. the nasdaq down two-thirds of 1% but the russel 2000 is the worst performer with regional banks under pressure again it's selling off by 2.5% >> for more now on the problem children market and the stars in the mark, let's go t