that's 362, and the two-year has moved up rather sharply, now back almost to 4.25% oil has been able to stay above -- no, now it's down below $80 again. even with recent cuts. here we are. humpday. it's over. make sure you join us tomorrow "squawk on the street" is next ♪ good wednesday morning, welcome to "squawk on the street," i'm carl quintanilla with jim cramer and david faber at post nine of the new york stock exchange premarket stumbling a bit as earnings not being greeted well at companies like jpmorgan, synchrony, asml. inflation running hot in europe. road map is going to begin with netflix posting those mixed results, saying its broader password sharing crackdown is on

track. morgan stanley is out with its quarterly results. they did surpass what most analysts had been expecting but the stock is down. fox news agrees to pay more than $787 million to dominion. that is settling a defamation lawsuit that was brought by the voting systems company we're going to begin with netflix this morning mixed financial results, sub ads also coming in below estimates co-ceo ted sarandos was on the call last night talking about the company's quarter. >> on revenue and profit, we're growing, not as fast as we believe we can, not as fast as we want to, but we are growing, and we are profitable, and we have a clear path to reaccelerate growth in revenue and profit, and we're executing on it. you'll see a broader rollout of paid sharing in q2, and we're going to continue to grow that ad business. we're also aiming to continue to grow free cash flow. as we said, we're going to generate about 3 bi$3.5 billion free cash and on increased margins. >> we had the 10% drop before

the recovery last night. i think it was the jpm desk that said, take a chill pill. >> i liked that. i like the quarter, i'll tell you why. the progression of the accelerating revenue growth. this whole story that maybe they're not rolling out password changes fast enough. i mean, they're being very -- i think they're being very prudent. was it like the old days when the quarter was about, did you watch this movie and how great was -- no, it wasn't like that it was very nuts and bolts, but maybe that's what you need at this point, the senior growth company, where they talked about how good games are going, and they're going great in india they're talking about how a movie slate can be good. they're saying, listen, we're going to do many movies, and they do very well. david, there is nothing wrong with talking about how you're now investment grade there's nothing wrong with talking about how this does not make the magic go on if they're talking about how they're doing quite well >> no, but this is no longer your daddy's growth company, so

to speak this is now a generator of free cash flow, and that's where people are going to -- or i think many investors will be focused, and on that front, by the way, they came in above where many of the analysts who follow the company had anticipated. they are decreasing ever so slightly their content spend, so they're staying around $17 billion. >> slightly, but in a way that's going to fall to the bottom line very quickly, even with a little bit of revenue. >> right so, then it comes a question of, all right, what are you willing to pay as a multiple of free cash flow? >> right, and i think that -- i was going to come with a complete wacky analysis. everybody's so gloomy, and i don't like that. what these guys need more than anything else in the world is a good theme park. >> good theme park >> they have all these characters >> you're going to sell a company on building a new theme park if it's the last thing you do >> he's got some land in new mexico i don't know if you heard. >> the fact is, netflix could

right now announce a theme park and raise prices for the theme park they have all these great characters no one's thinking about it as a great characters company >> "stranger things" land, yeah. >> joint venture with the company we work for, it would all be added in a licensed business, i will broker the deal, and i will take absolutely nothing because i work for the company. >> back to reality now >> m&m >> they'll generate $7.8 billion of cash flow through -- out to 2025 my question, what is the appropriate multiple to pay? >> do you want to do it on earnings on earnings, it's too high >> okay. and free cash flow or the free cash flow yield is okay in your opinion right now? >> i thought so. >> and what about -- you know, we still don't know yet fully the ad-supported tier exactly, how many people are taking it. >> but didn't you think they were encouraging in their comments, netflix?

>> i think people would like more information if it was possible to give them. >> i don't think they're hiding anything i think they're trying to be very consistent. you had jessica asking the questions. in a positive way. but the -- let's say the trajectory of the questions were, okay, listen, the balance sheet's much better. how are the rollout of the series that will be the good. how are the movies doing how are the games doing? password back again, sounds very good come back with inclusion second half will be better than first. >> right >> which is a lot better than i can say about many of the companies that i deal with second half's better than first. you know anybody who's got a crystal ball besides netflix at this point about second being better than first? >> no, i think it's very difficult in this environment to have a real idea of what the second half is going to look like >> prosecution rests >> i didn't realize i was on the stand. >> well, you didn't realize that you settled with me for $798 million before we even started. >> isn't it true, david -- >> that's nothing.

i'll write that check any day. as for the "love is blind", the flix flub from the weekend, they did say the tech is there to do live >> yes, and that was a very important thing because we talked about chris rock, and i think chris rock live, these are events that you would pay a separate price for, they're that good i'll give you my shorthand analysis i would pay more for netflix, i would pay more for amazon prime, i would pay more for costco. i don't know if i would pay more for a cable bundle i think the consumer all over is trying to figure out what they'd pay more for and what's the bargain. i came away thinking, netflix is a bargain. isn't it the moment that we're waiting, we're all looking to say, i'm still wanting to pay for that >> yeah, i think a lot of consumers are trying to figure that out i think a lot of them are overburdened by streaming services at this point that said, one good show you want to watch will keep you paying the price

>> and how about 35 new shows that you want to watch and 15 movies and 5 live -- that's why i come back and i say, wow >> but it is funny how we are recreating the cable bundle with all these ad-supported entertainment networks that basically you're paying a subscription for i mean, at some point, somebody's going to bundle them all together again and we're going to be back where we started. >> there were seven channels that i wanted for summit, new jersey, that i get, of which there's no programming >> i hear you. >> and i even sponsored a high school program to get some programming, so when i went from 37 to 48, there was something there. and it was mostly about summit lacrosse >> do you keep track of where you have cable and where you don't in your 15 different homes? >> yeah. i've got comcast >> is your cable bill -- does it come in a book form every month? >> i have a cfo of cable bills, and i pay her about a hundred dollars a month to keep my bill at under $1,500. >> you can do a lot of different

things there could be an entire -- you could have traders doing very -- >> maybe you have paramount and in the country >> let's cut paramount next week and back at netflix that week at that house >> i have rabbit ears in new mexico that's a killer. >> rabbit ears are making a comeback >> they're so great. >> they work >> i have no cable bill. i get to watch 3, 6, and 10, which is in philadelphia >> you know what that costs? >> we got to move on for no reason whatsoever. >> it's free >> what's free >> the air digital antenna. remember when tv used to be -- >> chatgpt on bing says air is not going to be free google says air is going to be free for a while >> let's get to morgan stanley under some pressure as we said despite beating on earnings. ib and fic, a little bit better than expected, but as mike mayo pointed out, total capital markets is close to the worst of the peer group >> all right, well, was it perfect? no they did have organic growth of

10%. not many people have that. they had $110 billion in net new money, which i think is the real story that no one's thinking about today. did they have a higher provision? absolutely but they have $143 billion loan book, and given the rate move, you have to expect a higher provision. it sells at 13 times earnings, and so therefore, people say, you know what? if it's not any better than goldman, why should we give it that high multiple you have a 3.5% yield. they bought back stock but bought it back too high. i give you a radical analysis that the stock is back to where it was a week ago, so there you go >> that's radical. >> it's radically normal and rational versus the notion that morgan stanley has finally blown it james corbyn did fine. what do you want the stock will be at $88 next week, and we'll forget about it. >> mayo says the capital markets revenue was down, second worst

behind goldman-sachs >> that's great. there are no capital markets >> that's true in fact, on that note, gorman himself saying, you know, it's -- right now, underwriting and m&a remain very subdued. as i've said previously, these are revenues delayed, not dead, and he did say, we're already seeing a growing m&a pipeline and some spring-like signs of new issuance emerging. >> that's a good time to sell it, then we should sell it. >> he's saying back half >> when goldman was down 13 yesterday, i said, what a great time to sell it on the cusp of when m&a is about to come back the stock was immediately up 7 from there am i a seer? no everybody wants to make it so this is a dramatic moment for this group, and it's not it's not they did fine. some of them had net inflows silicon valley bank changed where people put money, and morgan stanley got influenced. >> well, the real story is western alliance today where deposits stabilized quite well in the month of march. up 18% premarket

>> i know. literally five weeks ago, we thought western alliance was a group of countries that we put together against the eastern bloc, and suddenly, western alliance became the most important bank in the world, was going to collapse, and next thing i know, it's time to buy western alliance, which some people thought was a cable company. >> they may have there was one called western something or other >> i want to go back to, we did have this incredible scare it's not done because first republic is still out there, but schwab marked, to me, the stake put in the ground, which just said, things are back to normal. >> first republic and all its interest-only loans for mansions in the hamptons. >> no, because they also loan for mansions in mendocino. >> napa. >> someone told me in a very high level, and i'm not going to kid you, but it was a major high-level official, that, this is about the vineyards >> it's true they had a lot of vineyard clients. >> just in terms of the 340

million americans, that is not a favored special pleading group >> not necessarily >> we must save the vintners >> it is important in my view. >> i have five acres of wine >> i'm sure you do do you know where they are >> i don't know, but i'm going to get a check from somebody do i know where they are yes, it's in my top hectare. >> fgorman said we're not in a banking crisis in his view he said, "i consider the current issues as not remotely comparable to 2008." >> meantime, says fed's probably not done we could see one or go more hikes. >> two is bad. >> he says, no rate cuts this year probably cuts in '24 >> the ten-year is still rolling. did you listen to bostic yesterday? >> i did >> what is it like when somebody really rational comes on and talks rationally >> i enjoyed listening to bostic, and i often do >> he's not try to throw a bomb or a mester bomb

i don't care what happens, we're taking it to ten that's an extrapolation a of what she said. she didn't say that. >> gorman and dimon are in a similar place, though, still get to the high 5, 6%-type interest rates, which gorman on the call again, just a few moment ago, says is not shocking "again, many people are calling for a modest recession it might be, you know, i don't know, obviously my gut is whether it's a modest recession or not, we dodge that bullet, sort of doesn't matter that much what really would matter is if inflation is not tamed it has to go much higher than people are expecting it to go to get a deeper recession." >> he thought that unemployment would go to 4% and inflation rates would go to 4% -- inflation would peak at 4% that didn't happen >> right >> he was too bullish. and his crime of being too bullish is a crime that i think's a misdemeanor. >> some would say maybe you're being a little too bullish >> mine is not -- you don't even get -- mine's, like, smoking pot

in central park. >> it's legal now. >> it's terrific >> they praise you >> the clouds -- >> two guys hit me to sell pot i was going to a restaurant last night for my wedding anniversary. two guys were in a bidding war one guy was willing to sell it to me for x. i didn't know i was in an open air pot market because i was at 53rd and madison >> how was it? >> i passed on it and went for the champagne. >> he went for the booze >> should have gone for the pot, it was a lot cheaper >> lot of people go for the cannabis >> netflix, fine morgan stanley, fine western alliance, unbelievable, but western alliance always triumphs in the end. >> i got an upgrade too over at wedbush today, goes to outperform >> there we go still to come, fox and dominion reaching that $787 million settlement, avoiding a trial we'll discuss that next as we get to the futures here.

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introducing the next generation 10g network. only from xfinity. the future starts now. fox and dominion voting systems reaching that $787.5 $787.5 million settlement tuesday, narrowly heading off a trial shortly after the jury was sworn in dominion's ceo telling reporters, "fox has admitted to telling lies about dominion that

caused enormous damage to my company, our employees and the customers that ewwe serve." he added, "lies have consequences." it's three times the largest media libel case in history, and smartmatic and other suits may be in the future >> look, i mean, i think a lot of people just felt the size of it just meant that they were obviously guilty now, i heard, you know, david, that you get these all over the place. i've heard theses as crazy as now they can say to trump, we paid the money, we did our best, let's move on. you know that we're your ally. >> okay. >> don't leave me hanging. >> i don't know what to say to that >> have you heard that >> no, i haven't heard much of anything listen, when people talk to me about fox, this was not insignificant, given the amount of money at stake here, although they do have a fairly significant cash position. but when you talk about fox, it's still more about, i mean,

they try to put it together with news corp., and they decided not to this is more about the future of the company. obviously, it's a sports and news company, and what that's going to look like fox news is the center of the company, without a doubt it is, by far, the cash flow engine of this company but this does not seem to have, in any way, hurt them. >> exactly >> in terms of their communication with their audience and the way they make their money. >> right or with their guests or with their talent >> yeah. >> do you think the talent was -- i think that rupert murdoch was protected above all. he didn't have to get on the stand. >> didn't have to get on the stand. would have been interesting to see him get on the stand and any number of other notables, but didn't happen. there he is, 92-year-old rupert murdoch. >> didn't have to get on the stand. >> nope. >> the institution was protected. >> at a significant cost, but

again, you can see there's fox shares they really just -- >> it was preserved. >> this has been an issue, but it hasn't been the thing that has moved the stock, frankly, one way or the other >> people come to us, i mean, my view of murdoch, whatever, people say, i guess it's really damaged by it. the answer is, no. do i want but i don't like the segment the segment's tough to own anyway >> it's a tough segment to own, yes. >> i mean, look, we just talked -- >> although, again, they distinguish -- >> $110 billion and we're slamming them. >> they distinguish themselves as being different, obviously. nobody did a better deal, in many ways, than mr. murdoch, in selling much of the company to disney at a very high price and then selling sky to our parent company. >> you just said a very high price. you know that the disney people might dispute that >> i've gone back and forth with bob iger about it. they have their opinion. others have theirs by the way, they paid a high price for pixar. they'd do it again a hundred times over

paying a high price doesn't mean it was a bad deal. >> but i think you do have -- where the layoffs are going to be concentrated or where i was suggesting the layoffs would be concentrated contentious figure >> now we're talking about disney, yeah >> recognized that he felt that marvell paid too much, but they also thought the entertainment division had gotten patent happy. >> disney is moving forward with executing on the cuts that had already been reported on >> iger can make the cuts. he can be the bad guy. have the bad cop and then the good cop comes in with a clean slate. >> if they stick to the two years, yeah. they should already be identifying the next ceo of that company fairly soon. >> i like that >> we're going to get to more on disney and these reports that thousands of job cuts could be coming in as soon as the next week also, the reedy creek board meets today in florida we'll get cramer's "mad dash," countdown to the opening bell withut fures a little bit weak here don't go anywhere. ♪

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welcome back time for a "mad dash," and then we'll get to an opening bell a few minutes from now let's talk a little abbott >> there have been a lot of quarters that have been in dispute so far since earnings season began other than jpmorgan, no real clear winner, so to speak. abbott's a clear winner. this makes sense to me, why? because medical device sales increased 12%. people were not looking for that they're looking for 8.5% established pharmaceuticals up 11.1%. diagnostics, equal to the street nutrition, actually better david, they've got some franchises that are doing amazing, a diabetes franchise that's very strong they're telling a very good story. they are now past covid, which had really kind of, let's say, muddled the figures.

clear beat, well done, robert ford really establishing himself now after amazing tenure from miles white. you buy abbott labs at this point. >> you like it here. anything else or this is purely an abbott story? >> great question. i think what it is, they have the scale. they have a thing called libre, which is a way to be able to measure glucose, and it's a really fabulous, inexpensive device that could be a $10 billion franchise without a problem, and the street has not been recognizing it. the street's been talking about covid testing. you have to go past covid. by the way, the presentation was extraordinarily clean and good and made you feel very confident that down 10%, you want to buy this one >> all right that's one of the names we'll keep an eye on when we get an opening bell about four and a half minutes from now. stayitus wh

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the opening bell is brought to you by nuveen, a leader in income, alternatives, and responsible investing. it's likely we'll see at least one more and possibly two more rate increases. that gets you to sort of high 5,

6%-type interest rates, which is not shocking, and if we get through that, again, many people are calling for a modest recession. it might be, you know, i don't know, obviously, but my gut is whether it's a modest recession or we dodge that bullet sort of doesn't matter that much what really would matter is if inflation's not tamed, it has to go much higher than people are expecting, and you go into a much deeper recession. that's certainly not a likely outcome at this point. >> james gorman of morgan stanley on the call talking about the trajectory from here of the rate hikes. i guess no surprise, two years, almost back to 4.3%. >> yeah. look, everybody's pretty convinced there's going to be -- it's just a question of whether it's going to be one or two. i do point out that the bank of america people question why there need to be any, given the fact that there might have been some weakness in april i'm not hearing anybody saying that so far, april's strong. i just feel like a lot of people are saying, let's see what the big -- say like the big

consulting companies are saying. let's see what the big tech companies are saying in terms of layoffs. i don't hear -- david, maybe you can contradict me. i don't hear a lot of tech companies doing a lot of hiring. >> no. i'm not going to contradict you on that. >> let's get the opening bell. at the cnbc realtime exchange, at the big board, it is advisor shares, celebrating its etf. at the nasdaq, it's aetneat the change, a nutrient-rich snack and beverage company speaking of sort of macro conditions, these reports of disney next week, vox saying meta has a new round, open door cutting another 22 after cutting 18% last fall. >> let's take the first two. i think there's a lot of kind of saying, listen, these were the ones that they announced, but now we're giving you the granularity of where they are. disney, the very expensive entertainment business meta, initially first, i would say, the most expensive people

technologists, administrative. i want to go back on amazon. i think that amazon is waiting to try to figure out how to lay off next, but it will be the expensive people, not the warehouse people i keep -- a lot of the tech companies i deal with are saying, look, we overhired, but we're not going to just lay off people we're going to find out who's expensive -- i'm going to use a term that is not popular, but who's deadwood who's deadwood who doesn't produce revenue? we're going to get rid of those. >> yeah. >> and get rid of is the -- wow, see, disney -- >> don't get -- >> i'm sorry >> don't get off on that stick to what you're talking about. >> we flashed disney >> it's an interesting point you're making. we flashed disney, because they're following through on the layoffs we already knew about. we don't want to do the news twice. on this larger issue of layoffs, you also got to overlay the fact that a lot of people in tech in particular are still working

from home. >> it's a really good point. >> that adds a layer of complexity to it and/or at least makes it easier in some ways you can say, come back to the office or you lose your job. >> i'm trying to figure out which are reductions in force, which means it's nothing to do with your work, versus which are decisions made about your performance. i feel like the next round at meta is performance-related. the first one is for risk. >> and can they judge that performance accurately >> i think they judge it by whether, did you come back are you making it so that we can -- whether we can -- >> he made it clear in that memo that he wants people back. >> right well, i mean, we're no longer -- carl, one of the things that's happened, maybe people don't realize it around the country, but i can get you 5,000 engineers today if you want. they're everywhere and 5,000 graduates from the great schools. they're everywhere because there's not a lot of hiring going on, because people

are believing maybe we overstaffed. so, you now can pick and choose, which means that zuckerberg can say, i'm going to let go of this guy who's making $2 million, and i'm going to get a guy who's making $200,000. you can exchange like that if you want to, and you can also put them in different divisions. they need more people in reels, and they need more people in instagram, and they have overhired for the metaverse. they're making an adjustment they're not a steel mill where they're getting out of cold and going into hot >> the whole framework right now is that earnings are coming in better than feared, and they think that's going to be especially true in advertising that's why they went to $270, meta, yesterday. >> i think their advertising business is going to be terrific, because instagram is giving you this amazing return people i know in businesses are saying, you know what? there's been a nice pickup in instagram. we're getting much more targeted it's better than the clutter, and it's a preferable place. i see a lot of reels advertising. i mean, reels was kind of like

bing for a while there >> yeah, it was. gets more respect now. but i mean, this thing has come so far from the bottom it's up almost 80% >> maybe it shouldn't have been where it was when it was down at the bottom, it was like zuckerberg was working on, you know, goggles. that's over. >> yeah. they're going to change the name back to facebook >> i said that that was -- >> oh, you did that? >> i was facetious you bought into it >> maybe they make it a.i. co. he's talking about a.i. more than he ever talked about the metaverse. >> i've not mentioned nvidia yet. >> you haven't, which does still have a larger market cap than meta i would point out. >> because you need nvidia in order to have a.i. >> yes, you do >> now, there's a lot of dispute about the cost -- how much it costs to buy an h 100, which, by the way, you need when i try to pin people down. >> explain -- just stop for a second tell people what an h-100.

>> it's a souped up card, a souped-up semiconductor. you need boat loads in order to be able to get it, so if you want -- if musk wants to challenge, let's say, microsoft. now, microsoft yesterday said, we're going to develop our own chip you can say anything you want. the fact is that it's -- you can't get h-100s you have to make special deals, and don't pay $42,000 on ebay for an h-100, which people are doing right now. >> right that said, listen, i mean, microsoft -- tesla does develop its own chips, apple does develop its own chips, by the way, we know who makes those apple chips and those tesla chips to some extent it's tsmc. >> and then asml reported last night that maybe they're worried about demand, and asml is tsmc >> we're going to talk more about this because it figures prominently in geopolitical concerns too we need to fully understand the importance that taiwan semi has. by the way, in the news again because of that arizona plant

where they may be spending as much as $40 billion, with some disagreements or perhaps trying to navigate the chips act so they will get all the subsidies they're looking for, for that arizona plant, given how much more expensive it is to build a fab here in this country than in taiwan is going to be interesting. not to mention, they're not going to make the highest-end chips in arizona >> secretary of commerce raimondo disagreed with that i point-blank said to her last week, are they going to make the two large form factor and not the small? she said, no, that's not the case >> they're going to make the high -- >> which is different, because what you're always worried about is that we're making so-called dumb chips that go into this and not the smart chips that go into artificial intelligence. she says that's not true i push back and said, look, it costs a fortune. everyone knows the reason we went to taiwan taiwan raised a generation of engineers, and we raised a generation of people who write

copy and do what? i don't know >> "the journal" piece today looks at pushing back against some of these conditions for the subsidies. they don't want to share their profit, if they exceed expectations >> again, raimondo would say that's not true. what you got to do is put money toward things americans need like child care. she was saying, why is -- why does the right say that child care's -- we can't provide child care is that something -- we should cut that out in order to demonstrate that we're tough >> the response would be, what do you want? you want to reshore production, or do you want to improve corporate employee benefits? >> raimondo is the only one that has republicans on speed dial. >> that's true i do hear positive things from the business community and people who are not necessarily left-leaning, at least about raimondo frustration on other fronts, but they do point to her positively.

>> it's very controversial >> that said, to this appointment, we'll watch the construction of this thing in arizona. it's not unimportant the information sharing as well with the u.s. government i mean, tsmc has the plans that nvidia has they make the chips for them that's pretty secretive stuff. you want to make sure nobody else sees that >> i just want to know, as much as i respect and love nvidia, if you're the chinese agent who's -- let's say mao says -- i'm sorry, president xi says that you have to go get h-100s do you not set up a dummy company in south korea called "i love america corp."? chinese companies have those funny names. >> they try to get around these things the russians are trying to get around it too right now, and succeeding to some extent in terms of getting ahold of chips for their weapons. >> yeah. do you remember the pickling in oil and rubber they did in the 1950s? >> i don't remember that, no, jim. >> go read some novels

gambler holds up great novels >> you mentioned musk a moment ago. more news about tesla today, cutting prices for a sixth time. guggenheim today reiterates a sell some discussion about why they're not presenting in shanghai and then this jonas note last night out of morgan stanley looking at a new ev from byd that costs 11 grand and says, no wonder tesla is cutting prices >> that byd, i was discussing the other day what's existential or not is existential for google the fact that bing is back existential for -- >> bing is not back. bing never was now it is. >> existential for cars is that you charge as much as a big-screen tv. >> byd is, i think, overtaking tesla's market share in china. now, that said, the market -- ev market in china is expanding enormously, so it doesn't mean that tesla won't continue to have growing sales there >> right >> but the concern is that its share will continue to be

compressed >> well, what do you do if you're ford? i guess you could say, listen, we're making trucks. so far -- i saw some analysts saying the tesla truck is on track. i don't know anyone -- i don't even think musk thinks it's on track. i think he's decided it's just not really the area that they're going to excel in. whereas ford f-150 -- >> they could choose a new model to be out there for something. >> the ford f-150 is loved the lightning is loved >> musk has been on this media offensive talking to the bbc and tucker carlson and an industry conference in a q&a with the chairman of global advertising and partnerships for our parent, nbc universal, in this case about social media and how that ties in with a.i take a listen. >> today, with advanced a.i., the -- they can pass every kind of test for a human. so, you can actually create, on one computer, 100,000 accounts

so, then, that all sound human and pass every human test. so, how do you know which one's real so, effectively, by charging a small amount of money and requiring a credit card and a phone number, we increase the cost of a fake account by literally a thousand, if not 10,000 and so -- and my prediction is that any social media company that does not require a small amount of money and does not do verification will cease to be relevant >> that's twitter blue, i guess, jim. >> look, i subscribed immediately. i think that in musk we trust on how to figure this stuff out right now, we know twitter is a vast wasteland/cesspool, but it's less of a cesspool since -- i think there's going to be some accountability eventually, i think that blue is going to be able to give you some say >> right right now, twitter not making money yet. his larger point is, again, about the power of a.i. and the

fact that you could have these a.i. tools that create hundreds of thousands of accounts immediately unless you're able to verify in a more significant way that requires them to actually give you something, as in, your credit card money or money. >> but the new twitter immediately alerts you to whether there's people who are lying about you. they alert you immediately unfortunately, i have had to turn the alert system off because i have been alerted four times during this show that people are lying fortunately, at least i get a heads-up, and i think he's going to end up making -- right now, twitter is not really a great place to do anything other than find things out that you wouldn't know otherwise. but otherwise, i certainly wouldn't want to advertise against it, not when instagram is the friendly, happy place >> jim, i want to get you on some airlines today. ual with that net loss, they do see a profit in q2 international growing twice domestic kirby said there was a sharp

dropoff in bookings after sivb >> yeah. i found that -- i wonder if it doesn't come right back. i just find that -- the stock, of course. people are taking cues from the st stock, but united airlines, i think, is in great shape when you get into full flight with american airlines, it looks like they're making more >> i would hope they're making money. they're charging enough, and every seat is taken. >> is that your personal view? >> and then -- i don't know. sit on the ground a long time a lot of times have you been delayed lately any bad delays >> i don't want to jinx myself >> not too bad, right? >> i have a lot of traveling coming up. >> they should be making money that's all i can say >> i liked his comments, but i think we've gotten -- this is what i have been trying to push back on, and i'll do it again tonight on "mad money. we're now in a moment where we're saying, you know what? last saturday was good, but it turned out that monday was bad we can't do that it hurts people at home.

we've got to get out of this idea that the second week of march was good but the fourth week was bad, because we have to take a long-term view. long-term view is that people are still traveling. we'll hear that from american express soon and bookings, bkng, has been a remarkable stock people are traveling is the "business traveller" back that's harder to find. i think most people feel the business traveler is coming back, but the first call of a business is on zoom, and i think we're confused because zoom doesn't go up. there's so many companies that do that. it's a dime a dozen. they push you to teams -- i got a new microsoft pc, and it opens up the teams >> well, there's the added complication that if you are traveling to, say, a city like new york, why would you come on sunday night when no one's in the office on monday so you get some trun kcated visits >> first meeting is, like, well, i don't know, see you at the office >> business travel, again, the question as to whether it will ever come back to 2019 levels, it's hard to imagine >> here's the stat that i

thought was interesting from the brookfield default in washington >> yeah. >> 50% of those office buildings, unoccupied, because people are at home that's the work from home city washington how is that? >> because the government -- what do you mean when gensler's not in front of the fireplace, i will tell you what the occupancy looks like. >> you're telling me that the government people don't work as hard as private? >> i'm just saying when gensler is not in the -- >> leading the witness sustained. >> we will know. that's it. that's your tell >> i just think it's -- it is interesting that we have to start thinking that the occupancy rate in san francisco is higher than the occupancy rate in washington >> yeah, but it's not high it's still 55 -- i mean, in new york, it's a little higher, but it's still not across the board. >> you go to atlanta, it's 109%. >> that's not true >> i'm saying that some adve cities -- >> some cities are better than others >> some cities, the commercial

real estate defaults are almost nil. >> it's not about defaults it's about occupancy >> let's be non -- let's be straight new york is getting better week by week in terms of occupancy. >> yeah. okay >> washington isn't. san francisco isn't. >> that's because the federal government is not mandating people coming back to the office you know how many people they employ in washington, d.c. >> the lobbyists too >> i'm just saying, if you want -- one of the reasons why commercial real estate is not collapsing like we thought is that it's more regional than we thought. a lot of areas, people are coming back to work. >> regional, and it takes a long time to work its way through the system >> that was musk's point on fox. he did talk about what he called a dire situation in cre. you want to take a listen? >> we really haven't seen the commercial real estate issue drop that's more like an anvil, not a shoe so, the stuff we've seen thus far actually hasn't even -- it's

only slightly real estate portfolio degradation. but that will become a very serious thing later this year. in my view if banks end up having loan license in both their commercial and -- they're definitely going to have loan losses in their commercial portfolio but also in their mortgage portfolio, this is a dire situation. there is a solution to mitigate the magnitude of the damage here, which is for the fed to lower the rate >> he's not my go-to on this sorry. he's just not my go-to he's my go-to on a.i. and evs and so many -- on space. not on commercial real estate. >> do you like jamie dimon on it brian moynihan >> that's more my go-to. >> i represented their views >> and/or many of the people that we have had on. scott remembchler, willie walker

>> i just think that jamie dimon talks about you need the class of building. that's eye of the beholder everybody says class a te density. where you have a lot of density class a, you're not having a problem. >> you heard moynihan yesterday talking about their portfolio at bank of america. >> what'd you think? >> i thought it was realistic. again, office space -- office buildings, it's an $80 billion this year. it's a big number over the next five years in terms of refinances that need to take place. there will be more equity. you're going to have a harder time converting some of these office to residential, given the floor plates, but i don't think it's risen to that level yet of the kind of concern that you heard that musk has. by the way, the guys on the banks, though, no real signs of life goldman is down again after yesterday, not much. bank of america is down over 2%, jim. >> that seems extreme. >> following yesterday's quarter. and there you see it morgan stanley is down about

1.5% >> look, push back on musk let's just look at these empirically. you want to look at boston properties, bxp, which had a very good talk last month. they have a lot of class a in san francisco and new york and they're saying things are not bad. sl green says they can make some sales and not have a problem, and granado says business is okay if you have good retail in it let them be the tell barley sternlicht would tell you things are quite bad, and that's why he's got a great cash position, but i think you have publicly traded equities that are better way to view things than the banks themselves. bxp is the one i'm watching. >> bunch of dow names are down we were even lower, if it weren't for travelers with a nice beat. got an 8% div hike added to the buyback. take a look at bonds we mentioned the beige book coming up at 2:00 and then

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jim, what's on mad tonight >> pro liogis, a warehouse community. is ecommerce slowing according to them no watch tonight. a lot of people are worried about ecommerce, i'm not i'm worried about too many employees at amazon. they've actually heard that. that i said that. >> amazon has? >> yes and mentioned it to others and wish that i would go away. they're such good guys they are actually great guys. >> luckily you're going nowhere. see you at 6:00 on mad money

when we come back, a check on the regionals, ceo of citizens financial with us. average deposits did stabilize in march we're back in a couple

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good wednesday morning and welcome to another hour of "squawk on the street," i'm sara eisen here with carl quintanilla and david faber. live for you at post nine of the new york stock exchange. stocks under pressure down half a percent on the s&p, dow down 120 points what's weighing down most on the market communication services, energy and information technology nasdaq is pulling back about .7%, we've gone negative for the week on the s&p just barely. 30 minutes into the trading session. the movers we're watching, tesla under pressure after yet another round of price cuts here in the u.s. this is the sixth time this year coming ahead of earning results

this afternoon netflix is still in the red. that's taking down communication services earnings beating expectations, revenue falling short despite better than expected subscriber growth down almost 4% we're going to talk about that, down as much as 12% after hours yesterday. and morgan stanley lagging this morning despite results that beat on the top and bottom lines. you've been digging into the morgan stanley results david what did we learn? >> not a great quarter but not a bad quarter. you can see the market reacting the way it is. capital markets in if particular was kind of a weak spot, at least according to some of the analysts we mentioned yesterday. mike mayo said earlier, better than expected but versus peers morgan stanley capital markets down 15% year over year. yesterday if you recall, goldman sachs was down 17% year over

year after a strong 22 for that quarter which also did not do well in fact, according to wells fargo's mike mayo, goldman and then morgan stanley were the worst when it comes to lagging peers. in areas of course we think of them as the leaders. but beyond that we got comments from gorman in terms of the macro economy what he's seeing for interest rates and the like. and, of course, what higher interest rates on deposits have meant for the current environment. take a listen. we've had a, you know, pretty significant shock to the system in the last few months but thankfully the financial world got through, it could have turned sideways. and you know, higher rates came at a time of increased uncertainty. it's rational people would take advantage of high rates. but they're not going to stay in cash at 4% forever, that's not

going to happen. >> at some point it's his belief you do sort of look towards higher potential returns when things are a bit calmer or there's more visibility. >> what stood out to me in this report was the crown jewel, wealth management saw 110-ish billion in assets for inflows. so they have to be happy with that it's not a net interest income bank as others are like a citizens, like we're going to talk to later today i'm looking forward to pnc in the 11:00. but the macro economic rates that's changing by the day it's worth mentioning what happened in the uk overnight with inflation up 10.1%. does that mean it's harder for us to fight inflation and we have high numbers even though the market has been betting on disinflation the odds for the may hike go up now at almost 100%

now a 25% chance in june >> yeah. uk 10-1 we were looking for 9-8, core at 6-2. overall core inflation continues to firm up, b of a was looking to take a bass and now back to 25 they argue we're importing disinflation from china but you can argue more inflation from europe. >> it's interesting that the market -- the stock market has held up so well, relatively well in the face of rising odds of higher interest rates. the market hated that last year but it's almost a choice between recession and higher rates and for now the market appears david to like the higher rate stories because it means we're not seeing recession we heard that from bullock and ballard yesterday. so far not getting a ton in the form of earnings suggesting recession. >> and the bond market has been playing along lately, too. 210. >> moving higher yields.

dollar seems to have found a near term bottom and is moving a little bit higher. and then the banking stress, you know what, it's been quiet, relatively calm, getting through the bank earnings. seeing deposits have stabilized for the most part. there's earning pressure and seeing stocks down 15 to 20% year-to-date but the stress level has been brought down the question is, david, if we continue to see the fed hiking are there other problems >> right and that continues to be part of the commentary of some of the ceos of the banks, including gorman who like jamie dimon to a certain extent expects we'll get to as high as 6% for a terminal rate, which he said is not shocking but if we get through that people are calling for a modest recession he says it might be. might be. >> he's comfortable with it. >> yes. >> the question is does he break anything at 6:00%.

we've seen what happens, things break. another earnings mover today, netflix the stock down a little bit. i say a little bit guys because it was down, what, 12% after hours yesterday. came all the way back to the flat line. the guidance was a little bit weaker, carl even though subscriber growth was okay and the analysts are focussing this morning on how it's going when it comes to the password crackdown delayed not seeing the results of that for another quarter or so. and also on the ad tier. >> street is satisfied with it after that obviously almost classic response to earnings something like 28 times in the past 15 years or so dropped more than 8% on earnings. b of a goes to 410 on the notion this is generative to revenue w with, and they were defense on

the tech part after the love is blind issue, but they're looking at things being there if they move into live programming or gaming >> the top line growth grows over time, domestically and canada as well not talking about a market growing at all at this point net subscriber editions down over the last 12 months that's on a rolling basis outside of the u.s. and canada, there is still growth. and there's free cash flow we talked so often about that $17 billion number in content spend. that's where they're sticking. a little bit above 17 billion which is less than many analysts had anticipated. and, therefore, will also mean that more money may flow to the bottom line. >> they raised the guidance on free cash flow, right? 3.5 from 3 billion. >> that's correct. >> so do you value it like a more traditional low growth profitable company >> i think you have to

it's still high cash flow given the market value, you heard multiplied by 3.5 billion you get to a high free cash flow multiple that is expected, free cash flow, to go up on an earnings basis. still expensive. but the revenue growth this company had is not one what it was. >> there's also the argument last night they might be more immune to a writer strike if, in fact, there is one we talked to ben silverman yesterday in the 11:00 about what that would mean for the composition of overall content leaning more on news and sports and reality unscripted especially even content that's written out but not shot would probably not be shot because the other acting unions in solidarity with the writers. >> they mentioned this on the call, they don't want to see a writers' strike but feel good about where they are with the content and what they have under their belt you mentioned revenue and subscriber growth. the way they paint it in the

shareholder's letter it's a great chart which shows that less than 5% of tv screen time in new markets like mexico, poland and brazil, is spent watching tv. which is a huge opportunity for them less than 10% in the uk and the u.s., in terms of streaming of netflix. and these markets are still dominated by linear tv so they see a huge growth runway for streaming adoption and netflix adoption. >> as reed has said years ago, our biggest competition is time. >> sleep. >> in terms of time spent and sleep. before we get to united we want to review those numbers as well the broader market, we have the s&p down a little over a third of a percent but this morning i noted a number of conversations people talking about the debt ceiling for the first time in a while. in part because tax receipts have come in lower than expected you both had kevin mccarthy on a

couple days ago. give me your take here in terms of whether or not this is going to become a particularly important component of our daily discussion soon. >> my take after speaking with house speaker kevin mccarthy is it's a total disaster. because he wants to use this opportunity to negotiate some sort of spending cut deal. president biden said he's not negotiating over the debt ceiling, there's a budget process for that and therefore where do we go from here because it seems like a fundamen fundamental difference not to mention a lot of the house members are against raising the debt ceiling even though mccarthy wanteds to negotiate, it's not clear he has the support of his party, he said he has the support of america, i'm not sure how much of america would like to see snap food stamps cut and other cuts they're proposing so they're completely at odds. and as far as the market is

concerned we're not seeing it necessarily yet in the stock market but short term treasuries, cds, cost for ensuring against default and there's movement there -- >> when are we going to know the x date it does depend on tax receipts we have reports coming in lighter than anticipated >> they originally said june some on wall street thought september but goldman sachs yesterday said early june because they're looking weak either way it comes down to the wire if not after the wire what does a technical default look like? >> pimco has been stubborn linda cantrell saying the political incentives to take it to the breach are not there. a majority of americans support a clean debt ceiling increase which was not the case a decade ago. they're not concerned. >> i think someone should tell the republican party that. and they should get it done and

try to negotiate later they can talk about all sorts of places to cut spending and covid savings and defense and wherever they want to do it but the debt ceiling playing with the full faith and credit of america the market would not like that, neither would business. >> as david said it is a volatile morning for united after the loss phil lebeau talked to scott kirby later today. the stock close to a one month high hey, phil. >> the reason the shares are moving higher is the outlook q1 was a loss but smaller than expected it's the q2 guidance as well as the outlook going for the full year that's moving the shares higher q2 expecting to learn between $3.50 and $4 a share strong spring bookings no slow down in demand there and the full year eps guides that has not changed, still 10 to $12, even though the street is expecting $8.62 for the few year they're more optimistic than

analysts here's scott kirby talking about demand and the state of the economy as he sees it. >> if i look at the macro economy, at a bigger picture it feels strong to us. the last week seeing records on bookings the macro economy feels good but the story about silicone valley bank i think indicates what others said, the economy is fragile, it wouldn't take much to push it over. >> if last summer was the year of domestic travel exploding this is the summer of international travel exploding united is trying to meet the increased demand by dramatically increasing the capacity up 17% compared to last year. you see shares again up more than 2.5% today. the rest of the airline stocks we heard strong outlook from delta last week. we'll get more of the airlines this week, alaska next week and then america and southwest bottom line is this, all the executives i talked with are not

seeing a dropoff in demand as we head into the summer there was concern in march we might see that, but they are not seeing that right now. >> phil, thanks for that interesting comments out of kirby about the dropoff in bookings after silicone valley tesla just a few hours away and more discussion about the additional price cuts. >> the sixth time we've seen tr price cuts it seems every time we see it the conversation turns to what's the impact on margins. we know they have better gross margins than anybody else among the auto makers and they are going to take advantage of that. as a result the focus when they report after the bell, auto gross margins, 20.5% is the consensus. anything above that supports the stock below it we see further pressure it's the pricing pressure impact particularly in china, we'll talk about that in a bit that's different than what we're

seeing in the united states as well as europe global production also gets some attention. their global delivery estimate is for 1.8 million vehicles this year though people said if demand is slowing down are they going to be able to hit 1.8 million i don't think they'll change their guidance today i don't expect that to happen but shares of tesla are under pressure in part because we're seeing a sixth price cut. i know we focus on the price cuts here in the u.s. primarily because it gets so much attention here but what's happening in china is significant. the chinese ev market has become incredibly competitive not just with lower price offerings but a slew of auto makers and as a result china is going to get questions in the conference call tonight for elon musk, especially on the pricing front. >> that was my question. do you expect they'll entertain those questions in a significant way and give us a sense to what they're seeing on the market there, which obviously is

expanding but their share seems to be getting compressed >> right their share is getting compressed because there's so many more offerings from automakers particularly lower on the price scale. look at gm, for years it has had success with a low-priced ev in that market. you wouldn't compare that to a tesla over there, a completely different type of vehicle but now byd is coming out with a lower priced model do i think elon musk will talk about china tonight, maybe but he tends to not get in the particulars when he's asked the questions. i think other executives may address this in terms of what they're seeing over there. >> phil lebeau, thank you. as we head to break, a road map for the rest of the hour home prices seeing the biggest drop in more than a decade the ceo of maimitation homes. and a bull bearish on

netflix. the guidance was a bit disappointing. is the banking crisis over we'll talk to one person about citizen financials and what he's seeing when we return. don't go away. (man) for our not-so-small business too. (vo) get internet that keeps your business ready for anything. from verizon.

this new data from red fin showing home prices are falling 3% in march, the biggest drop in ten years. weekly mortgage apps sliding 10% as home buyers remain sensitive

to rising interest rates, 30 year fixed back to 6.4 several housing stocks near 52 week highs more on the health of housing as we get into the spring season. joining us this morning dallas tanner great to have you. your own shares are back to the highs of the year pretty much. there is a budding discussion about maybe a rolling recession in real estate moving into commercial but out of single family is that how it feels >> you know, it's interesting. single families held up really well and all things being equal. feels like we've had rolling bits of bad news starting in tech and working to commercial real estate. at the end of the day if you look at the average household and consumer still strong. i think more importantly you mentioned the mortgage application data what's interesting you still have 83% of mortgages in the u.s. sub 5%. and 63% of mortgages are sub 4%. so i believe that price stability in current mortgages across the country is actually

helping housing prices and created a favorable environment for builders >> isn't it also some velvet handcuffs for those who benefit from low mortgage rates and suppressing their willingness to list which puts the onus on the builders >> you're spot on. the locke t that decision for that they want to do to your point on the builders, if the 30 year fix rate is in the low 6s and the conversations we're having, they're able to buy down the mortgage rates to high 4s, low 5s. that's a compelling argument for somebody that wants to own a home it's creating less transaction no doubt about it. if you look at the data out there on new listings on a year over year basis, much less coming into the spring and summer selling season, which you

sort of understand but it doesn't help create more volume. certainly a challenge market from a supply perspective. >> dallas, specific to your company, a number of analysts at least weighing in with questions about california in particular somewhat important market. regulation there in terms of rents. what we may see there. seattle also increased scrutiny over rent growth is that a concern for you? would you swap out exposure in california for another region if you could? >> we love california. it's one of the greatest economies in the world, quite frankly. there's no doubt that housing policy is becoming something that is more at the forefront in terms of both, you know, questions around affordability but really the pressures here, the villain in all this is supply in california, much like some other states in the country is supply constraint. and it's not just the california issue. new supply happens at the local parts of real estate markets

we can create federal policy a bunch of focus on things to make things better but we need the local levels to approve more housing, getting more housing supply in the local marketplace. that creates pressures as local municipalities get smarter around how to work with developers and builders you see supply command there's other markets that do it well so that is going to be a challenge for those parts of the country where regulation and permitting is a hard thing to come by in today's world. >> something else people are dealing with is higher rates i assume your cap rates are high, but are they high enough to justify going into the market and buying assets? >> we have cost to capital being a public business and we use low leverage in our profile. what you are not seeing to the

earlier point in the conversation is a delapat designation from housing prices. so expect the assets would get better for investors or capital wanting to come in but home prices are holding up to your point so there's a spread in the marketplace however i think we could see opportunities across multifamily and single family as larger operators or professional managers come up against recap scenarios or times they need to refinance things we're hyper focused on building new product. we want to try to bring a bunch of new product into the market over time with our partners around the country because the demand is begging for it they want new products new homes. >> where do they want that we saw the interesting migration pattern happen during covid. towards some of the big cities

or places like florida is that continuing or reversing? >> no, you're right. we saw some of that urban flight so to speak during the covid period but we opened a community outside of marietta, that community has been terrific. we have ones we're trying to build in california. we have new communities in arizona and other parts of the country. what you see from the customer, they want the single family lifestyle but down payment light. i think one of the big misunderstandings on the current customer today renting, there's 45 million households across the u.s. renting today is a lot of our customer base wants choice they want flexibility. they want to be down payment light but they want access to those new schools and those great kind of transportation so finding that balance is a really good value proposition for an american family.

>> rebirth of the suburbs. something to watch in the coming years, dallas. appreciate it. thank you. good to see you guys, thanks. fresh comments from gary gensler on crypto but what he didn't say is making headlines more on that after the break stay with us dow is down about 125. back when i had a working circulatory system, you had to give your right arm to find great talent. but with upwork, there's highly skilled talent from all over the globe. right at your fingertips. ♪ this is how we work now ♪

turning to crypto this morning s.e.c. chair gensler defending his agency's crackdown on crypto. he yesterday he said he never saw an industry so uncompliant with laws. but financial services chair mchenry questioned whether he viewed ethereum as a commodity >> do you think it serves the

market for an object to be viewed as a commodity and then a security i think no should be a simple answer for you here. that uncertainty is bad, is it not? >> and i think that congress has said that there's one agency, the securities and exchange comm commission -- >> and you won't answer my question and you're the head of the agency give me a break. >> i'm answering it in the generic because you would not want me to speak of any one set of facts and circumstances. >> but you've already spoken have you said anything about bitcoin? >> my predecessor in the agency has done that. >> but you're not willing to do the same about either. >> to catch more, head to cnbc.com/cryptoworld dow down 106 "squawk on the street" returns after this

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welcome back to "squawk on the street" i'm frank holland. your cnbc news update. 29 people are dead in beijing after a fire broke out in a hospital on tuesday. the blaze forced dozens of people to evacuate the private hospital and prompted some of those trapped to escape from windows. the cause of the fire is still under investigation. secretary of defense, lloyd austin is in sweden today to meet with his counterpart. austin will travel to germany where he and general mark milly hosts a meeting of ukraine group ats at ramstein air base and fox news reached a settlement with dominion voting systems. fox faces another suit on the same issue by smartmatic that's the latest.

sarah, back to you. >> thank you just about an hour into trading. stocks under pressure. we have seen some improvements some of the sectors going green in the last few moments or so, talking real estate. utilities and health care. a defensive led rally. what are you watching, bob >> health care, consumer staples, utilities banks are doing a little bit better a lot of the concerns about bank earnings have passed us at this point. so that's the group that's moving earnings today yes, netflix weighing a little bit, morgan stanley weighing a little bit by and large the beats have been noticeable baker hughes, abbott labs, united airlines, u.s. bancorp, and morgan stanley weighing a little bit on the markets right now. here's the score card we have about 10% of the s&p reporting,

53 companies, 83% beating, that's above average, beating by 6%, that's above average that's why the s&p is on an uptrend since the middle of march, up 7, 8% on the s&p people don't want to believe it because think don't want to believe in the soft landing hypothesis but you see up about 7% this is a complaint on wall street, they don't like the volumes, volatility. only 10 billion shares a day tra trading, this is equities, so the volumes are lighter and traders don't like that because they make money on the volatility and volume. but it's understandable considering the banking crisis had everyone's time. the vix at 17, that's an unusual number that's where it was at the market top in january of 2022. so here's the story on vix

declining vix like you're seeing there is associated with higher equities but a bottom in the vi vix, a trough is associated with the market top that's the way to understand the vix. it only tracks 30 days out it's not a recession indicator just 30 days look at the vix futures. look pfarther out, 22 back in july on the vix futures that ain't 16 or 17 there are concerns about a recession reflected in the vix futures over all so the problem is the people in the market do not want to believe the way the market is positioned it's positioned for a soft landing and they don't want only to it so there's a fight in the community about where we're going and we should be trading at these kinds of levels right now. >> bob, thank you. let's get back to shares in netflix. they're down about 3.5% after the company reported after the bell kind of mixed results here to help break down the

quarter, michael nathanson he did increase the price target to 350 and we have john, with a buy rating michael, let me start with you usually i love to talk industry with you, we'll get to that. but talk stock price how do you go about valuing netflix? is it a free cash flow story is that what you're radioing at in terms of trying to determine the trajectory of the stock price or is it still something else >> no, thanks for being here that's it. all these years we talked about netflix. always been a ten year story out. now we see cash flow earnings close to cash flow. it's easier to val wait. we look at free cash flow year, earning per year relative to other stocks and they're all valued using those metrics so i look at it, as it's much easier now because we have good data points to compare

that's what changed for me and how we value it. >> to that point they're talking they raised their free cash flow guidance, cut their content spend or at least it's not going up by much what does it look like going out? and why is it only i guess a market perform >> here's why. because we look at the cash flow and earnings a couple years out. call it $20 per share earnings story in 2025. dave, i look at the other options, the s&p where it trades, a premium to the market we get to 350. it's not complicated anymore it's not "hocus pocus. it's earnings per share. the debate is what's the right multiple the bears, bulls, and neutrals like me are in the same place, what multiple you want to put on it you look at the earnings and compare it to other options. that's how it gets to the market two years out. debate whether or not that's

right. >> john you're a little more excited about the netflix story, right? it's hard to know if it's a saturated market or not. they put out a chart that shows only 9% of the total screen time is on netflix, in the u.s. part of it is in poll land, is that the thesis, more room to run? >> i think so. they've been talking about engagement, that's a huge focus area for them. talked about it last night to your point, room to go there and they have initiatives that i think can drive numbers. numbers above where we are, and one of them is paid sharing which is a big topic of discussion going into the quarter and then also kind of last night and they said, hey, we're going to roll out more broadly in 2q, that was a one quarter slippage so rolling it

out to the u.s. in larger markets in q2 i thought they were constructive on the markets they rolled out in the first quarter, canada being one of them, they said, hey it's a good proxy for the u.s. and since they rolled out canada, the canada revenue and member growth is above kind of u.s., which is now going to be rolled out in 2q i want to talk about the work we published two weeks ago from our td cowen survey saying 21% of borrowers in the u.s. would become new members 16% of borrowers would have the existing pay under pay what does that work out to 30 million borrow es, households, if 21% become new members that's 6% new members, which is above what we have. so the next couple quarters are going to be interesting to see how paid sharing helps drive revenue reacceleration and potentially could drive numbers high other the street.

so is that where you di diverge? are you willing to put a higher multiple on it than michael as a result the revenue number is going to be higher and therefore the bottom line as well? >> partially, david. the thing that we would argue is, say, just hold the earnings multiple as we get through the year people are going to look at 24 earnings and that's at 29, 30 times, that's 440 for us that's where we are, and that's the difference and also, as michael is pointing out, there are 3% free cash flow yields this year 5% next year we went to 4.5 billion in free cash flow. we were at 4 billion going into it obviously as you mentioned to start they went to 3.5 billion guide from 3 billion we think it'll be better than that and we think street numbers could come up as we get through the year. >> with those key things michael, let me end with you

more broadly is there a takeaway here from netflix's quarter for disney or paramount or warner brothers, or our parent company broadcast anything more broadly speaking that we heard that changes the way you view those companies or streaming efforts? >> i think we're at the place where everyone wants to slow down content spending. the mission is drive profits but looking at the growth in the past quarter for netflix, not a lot of sub growth in the u.s i worry that it is -- as everyone slows down content spending the industry, even though it's early, will see a flattening of subscriber growth this year that's going to cause real concern about this sustainability of streaming models so netflix is the canary in the coal mine, it's slowing top line growth they have to move to other ways to monetize i'm concerned about the industry and i think we'll see slowing growth for everyone this year.

>> conversation to be continued. guys, good points from you both, appreciate your time thank you. >> thank you >> thanks. still ahead, citizens financial missing earnings estimates in a quarter that also saw deposits fall. ts'll break down those resul in a moment. don't go away we're back in three.

citizens financial shares are lower this morning after missing earnings estimates as the company sets aside 168 million in rainy day funds chairman and ceo bruce joins us now in a first on cnbc interview. welcome. >> it's great to be here thanks for having me >> we have a lot to talk about right now. clearly the market is focused on the results of banks like yours. first on deposits, what's going

on there deposit flows and cost of deposits >> yeah, so clearly there's competition for bank deposits from money market funds so as the fed moved aggressively to raise rates i think depositors have taken the opportunity to search around for higher yield so we have some deposits leaving the banking system and once the bank failures occurred in early march that really woke the market up further. so i think there was a bunch of velocity of tos and fros i think we opened a record number of accounts for incoming and saw some of our bigger depositors move some of their money to dive dive diversify. so we caught as much inbound as outbound in march and deposits are stable but bottom line you have to pay more for deposits and that's going to have an impact on the net income margin.

>> more on that if you could, we're trying to figure out what the guidance on margins look like how much more do you expect them to eat into the net interest income >> yeah, so, you know, we took our guide down a bit and i think on the call we said we ran a 330 net interest margin in the first quarter which was stable with the fourth quarter and then by the end of the year we could be somewhere in a 310 to 320 zone. which is still a pretty good level of net interest margin and will still generate healthy returns for the year in the mid teens in terms of of a return on equity it's just a recognition that you won't make as much spread because you pay more on de deposits. >> what's happening on the loan side, bruce? loan demand, growth, what does that look like right now >> i think we and other banks are being more careful in terms of making new loan commitments so if the economy is slowing and may hit a shallow recession, you

want to be disciplined in terms of extending new credit. so i think you'll also see the guides for more robust loan growth as we came into the year tail off a little bit. line utilization is down a little bit i think as companies are reassessing how much offense they want to play in the course of the year. so nothing all that dramatic but at the margin i think you'll see a little less lending from the banks. >> what does that transplait into for economic growth you and i have been talking for several quarters, bruce, and you've been relatively optimistic and positive on the u.s. consumer and economy but now you're seeing and doing tightening lending standards and these pressures, what does it do for your outlook >> i'm still relatively optimistic the consumer is still in great shape, a tight labor narcotic, a

chance for people to be employed and we have higher savings coming from the pandemic most companies are doing well, watching commercial real estate a little bit but it's hard to see how we go into a more significant recession. part of this lies with the fed so the fed is significant recession. part of this lies with the fed, so the fed is continuing to raise rates and there's the market thinks that they'll go one more hike for 25 basis points in may or june. and then pause but, they have to factor in, if banks are not lending as much, that's contractionary. that may be the equivalent of one or two more hikes. so i think if the fed kind of moderates from here, i think the economy can absorb that. and i think we'll move through the year with, at worse, maybe, a shawl recession. >> bruce, you mentioned commercial real estate i'm curious as to how concerned you are about that particular asset class. i know you increased your

provision for credit losses, just by a reserve build of 35 million. what are you focused on as this year and next year moves along in that particular area? >> sure, so, you know, commercial real estate is -- comprised of a number of subsectors and the one that the market is very focused on and banks are focused on is their office exposure so if you look at multi-family, if you look at warehouse distribution, retail, the other sectors are generally fine but because of the slow return to office trends, there's pressure, more pressure on commercial real estate office. and so, you know, the kind of actual characteristics of your portfolio matter so how much is central business district versus suburban, how much is type "a" versus type "b" and "c"? who are the borrowers that you lend to that are quality so, i think, you know, most

banks will see criticized assets go up. they'll have a lot of loans to work out but i think that the loss content generally is manageable, put away significant reserves. we have almost a 7% reserve against our general office real estate exposure, which hopefully will be sufficient >> bruce, it was widely reported that you were one of the interested parties in buying the sale of the svb. and i'm just wondering if you can tell us anything about that process. how far along you were what the interactions were like with the government and the fdic, and whether you see other opportunities? >> well, we typically wouldn't comment on a specific situations, but, you know, i think the svb was one that you had to look at very carefully, given that it failed but there were parts inside of svb, like their asset and wealth management operation, which had

particular appeal. at a certain point in time, the fdic was considering bids for pieces of svb. they ended up going with a one-bank solution with first citizens, not to be confused with citizens. but in any case, that was administratively easier for them to just deal with one party. the good news from our standpoint is that we have a very strong capital liquidity and funding position so, you know, we can be opportunistic here and if there are -- hopefully there's not, but if there are other situations where banks come on the market through potentially an fdic process, i think the regulators appreciate that we run the bank well and in a safe and sound fashion we have the capital and the management expertise to go out and play so, we'll just stay opportunistic and see how things play out i would just make one plug for, we did finish the conversion of investors bank, as part of the

new york metro play with hsbc and investors. we did that conversion during the quarter in february. and that went flawlessly so we feel really good about the opportunities ahead of us in the new york metro region. and hopefully you're seeing some of our signage around new york and new jersey these days. >> we'll look for it bruce, thank you it's good color on that whole process. thanks for joining us today. >> my pleasure >> prius and the stock has really come back it's down about three quarters of 1%. quack on the street has more on the regionals and super regionals next hour. we have an exclusive with pnc ceo on the sectors' recent volatility and how his bank managed to grow deposits in the quarter. he joins us right here at the new york stock exchange in just a few minutes. stay with us hey professor, subscriptions are down but that's only yan estim think the t is overreacting? how'd you know that? the company profile tool, in thinkorswim®. yes, i love you!!

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welcome back just enough time to check morgan stanley shares noted they are now in the green, this is after beginning the morning down as much as 3%, after earnings were not particularly well met by investors, but that does seem to be changing a bit. we'll have a lot more on morgan stanley when "squawk on the street" continues right after this

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good wednesday morning welcome to another hour of "squawk on the street. i'm carl quintanilla with sara eisen here on the floor of the new york stock exchange. bill nygren, why he is trimming netflix and using the cash to buy some banks >> speaking of banks, an exclusive interview with the ceo