good tuesday morning i'm sara eisen live at the milken conference in beverly hills. carl quintanilla is at the new york stock exchange. another huge hour ahead. the ceos of levi's and kroger on the state of the consumer. first republic's lead banker on the deal before the deal and bridgewater's co-cio with us this morning >> sara, as you know, stocks lower across the board nasdaq, s&p off by a percent

regional banks are the story investors hoping first republic is the last domino to fall but severe pressure on pacwest, western alliance, both down 20%, and taking others with it, kbw regional bank down 40% we were talking with mike santoli the last hour about the surprise hike out of australia where we thought there would be an extended pause. you couple that with eurozone cpi, there is inflationary worry, and in others, deflationary worries >> so, the question is, what does fed chair powell do and what does he signal? there's plenty of evidence in the banking system and these ripple effects and concerns there's reason to be cautious, right? everyone's expecting a credit squeeze from the banks pulling back on lending. it's not clear the contagion is over every day we see sharp drops in other regional banks on the other hand, to your point, inflation is sticky and they don't want to be the ones

that let inflation get too high and not do enough about it so, i think that risk for the market, carl, is clearly they don't signal they're pausing as the market is expecting. here at milken i've been talking to a lot of big investors, nobody i've spoken to expects the federal reserve to be cutting interest rates this year as the bond market is priced for. they constantly i hear, inflation is set to remain higher for longer. i had a panel about it yesterday. rb schwartz, the ceo of carlisle was on it. he said that, a number of big asset managers on there. this disconnect between what the market is pricing and what the fed might do is front and center and feeds into what is happening with regional banks and the risk still out there. >> in the words of one of the officials in australia, they are, quote, dead serious about making sure inflation gets reined in. anecdotally this morning, "wall street journal" with a piece about ford cutting prices on some evs for the second time

this year. and i was interested in your discussion with marriott about whether or not even pricing in services and travel might soften in the back half >> right he basically said that they won't be going up as much, but it didn't sound like given the demand trends they're seeing, prices are going to come down any time soon for normal levels. services and certainly hospitality and hotels are a certain area of the economy booming right now. it's not necessarily reflective of what's happening with the rest of the economy. they're seeing strong demand and no sign it's slowing down in all the categories international business and leisure driving the bus here the big question is, what is the fed going to do? they expect tightening to take hold following the recent bank failures we've seen and the credit squeeze 96% of respondents in the fed survey expect lending standards

to tighten over the next 12 months our next guest argues saying central banks need to remain restrictive for the next 12 months so we can bring the u.s., uk economies back to ee q equilibrium. joining us, karen tambor, nice to see you in person >> great to be here in person. >> especially since getting the new job at bridgewater regional banks, pacwest, western alliance, are having sharp cuts again. we thought the first republic deal would be an end to the panic. is that not true >> i think when you have tightening as rapid as we're seeing, the tightening we're coming out of is the fastest in decades, you'll get reverberations from that it's like the market thought there would be no consequences to tightening more than we have in decades the most natural consequence to get is a credit tightening

you don't know which banks will tighten to what degree and nobody knew which banks had which exposures, but the fact a credit tightening needed to take hold, you're trying to bring things back into equilibrium, and what we're seeing ahead of us is months where that's going to reverberate and slow the economy. >> how has it influenced your view of recession this year? >> it hasn't much because i was expecting that that tightening would flow through i didn't know where, how, at what pace. my view is the economy needs to slow i don't know if the tightening the fed has done is enough to slow the economy sufficiently to really bring inflation back down to what its target is. i really see one of two paths. either that tightening keeps reverberating through and does slow the economy, there's a real probability of that, and we go into a much deeper recession than currently priced in markets are expecting barely a blip, mediocre growth, and in that case the fed can ease into those circumstances, yet it

still has to be cautious in doing so, or the economy doesn't slow that much, more like what it's priced in the markets, and then inflation is a lot stickier than we'd like and the fed will have to tighten more to actually engineer a slowdown. >> either scenario does not sound great for risk assets. >> that's right. i think it's oneof the most dangerous times for risk assets that we've seen in decades not great for bonds either you're in a situation where either the fed will need to tighten more to slow the economy or inflation will get more entrenched one of the amazing things about bond arkets, expectations for the long term is the fed always gets what it wants don't worry, inflation is going back to normal if that starts getting questioned, if more say, wait a minute, maybe inflation won't go back to normal you'll need structurally higher interest rates. >> quickly, i am curious, some who are more constructive on asset prices would argue the

tightening was already in place, even prior to silicon valley bank and this was just an acceleration of that and if you look at models that look at credit contraction, most are saying maybe 50 basis points out of gdp on the full year. is that polyanna >> i think that's totally right. this was in place well before silicon valley bank failed this was in place, we didn't know how it would play out but we knew that credit contraction was going to make its way through, the tightening was going to make its way through. we don't know exactly how much it will slow the economy when you listen to the estimates, if that's all the credit contraction does, that means the fed will have to do another round of tightening to get the economy to slow efficiently to deal with the inflation problem. when you look at where inflation is, and inflation will fall, but if it goes from 5% to 3% and you still have very low unemployment rate, at what point will the fed

ever tighten to control inflation if not when the economy is pretty good, when the unemployment rate is still low >> how do you position, karen? you at bridgewater had a pretty good last year, right? >> we did. >> you were long commodities, short equities. >> and short bonds at a time when inflation expectations started picking up. >> what do you do now? >> it's a tough time for investors. you have to look for uncorrelated things outside of 60/40 holding stocks and bonds you can go to other geographies, places like japan where the inflation is a lot less entrenched than in other places and they're pretty excited to see 2% inflation that's a great thing places like china and other things you can do is look at other sources. for example, looking at the euro relative to the dollar the euro is as cheap as it's been in a long period of time. this is a great time for uncorrelated sources of alpha. that core exposure most investors have in stocks and bonds is less attractive than it

has been in some time. >> you like the euro, even though europe is also going to have to do more tightening to fight inflation with a weaker growth rate? >> i do. at this point europe really did go through a structural competitiveness shock last year with everything that happened with energy prices but that has gotten priced in and europe has gotten structurally cheap. on the flip side of that, while the dollar has been very strong and a lot of money has gone in, so those are the sorts of rubber bands that get stretched and can really reverse. >> you also mentioned china that's been interesting. i don't hear that much bullishness on china, even though they're reopening investors increasingly see it as risky given the geopolitical tensions between the u.s. and china, which are only getting worse. >> i think that's right. i think that as an investor, you have to think of china in two different ways you have to think about the economics and basically say, if i'm building a portfolio, this is probably the best source of diversification that exists in the world. it's just a very different system, operating on its own drum beat, own monetary fiscal

policy so you can get diversification and valuations are more attractive in a lot of places like the u.s. have you to also think about geopolitical risks that as an investor you're subject to regulation you don't know how that will play out and that has to be part of the calculus in the risk/return. >> what would make you think, okay, there's a great opportunity to buy here? you do sound pretty negative. >> on u.s. stocks you just have to have valuations come down to price in a more significant slowdown in the economy. and that will happen and it will be a great buying opportunity. >> how deep a recession are you guys looking at? >> look, it's really an either/or. either you'll get a recession that's at least a normal recession, not a covid-like recession but a normal recession such that inflation starts to come down or you won't get a recession and stocks will be hit by all the easing priced in.

the thing investors don't really realize, you're not at this point in the cycle and have this much easing already effective. so the fed is priced to go from 5% to 3% in a short period of time, that means as soon as we hit summer, every day the fed doesn't ease it's a tightening because it's a tightening relative to what's priced. every day the fed will be forced to be tighter relative to the markets and that will end up hitting stocks one of those two things has to come out of the prices. >> it sounds like you don't buy the tightening narrative for the year >> the tightening -- >> the cutting narrative. >> the fed could do it but it risks long-term reputation on inflation or a major slowdown, in which case tightening would be in order. >> thank you for the time this morning. appreciate it. co-cio of bridgewater and a good taste of what they are talking about when it comes to the fed and economy. ceo of levi gives us his take on the consumer and first

republic banker who advised on the deal before the fdic deal with jpmorgan. are all the trouble it is behind us or is the action in the banking stock suggesting otherwise? me see bk ahetrt"acin mont ♪♪ choosing miracle-ear was a great decision. like when i decided to host family movie nights. miracle-ear made it easy. i just booked an appointment and a certified hearing care professional evaluated my hearing loss and helped me find the right device calibrated to my unique hearing needs. now i enjoy every moment. the quiet ones and the loud ones.

make a sound decision. call 1-800 miracle now, and book your free hearing evaluation. and this is ready to go online. make a sound decision. call 1-800 miracle now, any questions? -yeah, i got one. how about the best network imaginable? let's invent that. that's what we do here. quick survey. who wants the internet to work, pretty much everywhere. and it needs to smooth, like super, super, super, super smooth. hey, should you be drinking that? -it's decaf. because we're busy women. we don't have time for lag or buffering.

who doesn't want internet that helps a.i. do your homework even faster. come again. -sorry, what was that? introducing the next generation 10g network only from xfinity. the future starts now. broad market weakness today but check energy as well feeling pressure bp getting dropped chevron, exxon, halliburton are in the red as well the vanek oil services is on

pace for the worst day since march. wti falling on weak economic data out of china and ahead of the fed decision tomorrow. that is also now trading at its lowest level since march almost back to 72, sara. >> yeah, the job openings was interesting coming in a bit lighter than expected. let's get a check on the state of consumer demand with levi strauss, company delivering a beat across the board in the first quarter but shares did plunge 16% on the day of earnings last month after outlining a cautious macro outlook and margin pressure triggered by higher levels of promotion. joining me in a first on cnbc interview, levi ceo chip bergh the only man wearing jeans. >> it's in my contract. >> you have to change business casual what happened out there? investors were disappointed with the outlook you gave and the impact of the macro outlook. >> we said coming into the year that this was going to be a challenging year, navigating the

macro environment with inflation being very, very high and the fear of recession still being out there. there's no question that, especially here in the u.s., we're seeing the bifurcation of the consumer the lower end consumer is definitely stressed right now. we have two value brands that compete mostly in the mass channel. those brands were down double digit this past quarter. but we're in control of the levi's brand where we're in control of the business, the levi's brand is really, really strong. levi's was up 9% in currency last quarter our direct-to-consumer, our own retail stores, our e-commerce business grew 16% this - >> wholesale is under pressure. >> u.s. wholesale. >> department stores >> there were three issues that really triggered the reaction on wall street. one was u.s. wholesale being really, really soft. not just us, it's endemic to the

macro system right now number two was our gross margins being under pressure because of high levels of inventory, which was the third issue, and a very promotional environment. we made some conscious choices to begin clearing some of the inventory. our inventories finished the quarter up 33% versus a very depressed a year ago but we knew that this year was going to be very, very challenging. a tale of two halves is the way we're talking about it >> the first half rough -- >> being very, very soft because we're up against a huge base period a year ago when the business was strong, growing double digits. the second half we're up against a weak base period and we're expecting a much stronger second half. >> i'm curious about that second half outlook, though, because while comps are better, forecasts for the economy are getting worse. >> right that is the big reason we maintain guidance despite beating consensus.

we maintain guidance really as a matter of prudence and just out of some concern about the macro environment and being able to navigate it. >> it really is confusing when it comes to the consumer, chip, because the most valuable company in europe when bed bath & beyond files for bankruptcy. i know there are management issues to discuss there but such a big gap. where are you on the luxury spectrum >> it's also all over the world. the sweet spot for the levi's is that 50,000, $150,000 consumer, that consumer is still buying. our direct-to-consumer business was up, as i said, 16% internationally the consumer seems to be much stronger and our business internationally was up double digits it really seems to be centered in the u.s., centered on that low to moderate consumer that is

really feeling the stress of inflation and the fear of recession. >> i would think your consumer goes across many incomes. >> yeah. i like to say this is one of the most democratic brands in the world. >> i want to ask you about ai, the online education company chegg is plummeting. one of the reasons is the ceo was saying chatgpt is actually been a threat and hurting the business for online education with students signing up there and looking for answers and homework help on ai. i know you've been experimenting with ai supermodels, which is a whole other thing to talk about. but how much are you trying to incorporate it into the business at this point? >> well, we've really been investing in ai and data science for the last several years we've had 170 years of data in this company we've been trying to leverage data science and ai to advance

our business on -- and most of the use cases have been around pricing and promotion optimization and things like that we are now experimenting with generative ai, with models driven by data science, but there's no question that it's starting to have a positive impact on our business so, we are continuing to invest in it. we're actually training our own employees. we've trained over 100 employees in data science. we've kind of run a data science boot camp. >> to do what? to understand trends >> to pricing, promotion, assortment planning, supply planning, demand planning. the use cases are very, very robust for really taking all of the data that we generate and using it as an aid to decision making >> and the supermodel, should the real supermodels be concerned about their jobs >> no. we are still using models.

you know, think about when you buy online, one of the biggest issues we have and all apparel companies have is people re returning outfits because they don't fit right. when we sell online, we have one model -- >> and they're never your size >> never your size what generative ai can do is show you that product in your size so, you have a better idea of how that product will fit you because it can generate a model in any size, basically. >> interesting chip, thank you very much for taking the time out today during a busy milken schedule that is chip bergh out of levi carl, i would say cautious on the consumer >> makes sense given some of the data coming in, especially today, sara. meantime, regionals continue to tank this morning how the fed is thinking about that ahead of tomorrow's rate

decision, is coming up next. we'll get goldman's take on the bainseofwh wconkg llf ene me back all) a mountain? a tree weathering a storm? (thunder) lions? nope. (lion rumbles) we do it with our people.

dow down 560 here, close to session lows regionals became the story of the morning very quickly getting hammered, pacwest, western alliance falling farther than most as this persistent banking crisis begins to infringe on the fed ahead of tomorrow's decision. steve liesman joins us, along with leslie picker with color from a goldman sachs call with how the market is changing views on whether or how regionals should exist. >> yeah. after yesterday's news, it really is a new world order for regional banks that's really what this well-timed goldman call was all about. with regional bank analyst ryan

nash, he talked about how today's selloff relates to concerns that there was no systematic risk exception designation that covered uninsured deposits that needed to be enacted during this deal and that basically the regulators were willing to let the bank fail and then fall into the hands of the big banks, ie, jpmorgan in this situation, which really is a negative for the regional bank model as you look kind of to the future toward additional consolidation here additionally, we talked about this a bit yesterday, just this idea that the haircuts involved here, about 87%, investors are extrapolating that to other regional portfolios as well. so when you put all of this together, it's this idea that this is an industry that will need to consolidate over time and that it's jpmorgan and its large universal banking peering that have the winning business model in this current environment whereas regional banks have a large disadvantage.

>> steve, i wonder if there's a way to push back on that tomorrow and if this gets folded into some of the presser commentary. >> i don't think so. carl, if i could apologize to mark, i heard very much from some people i've been talking to what leslie is analyzing or right there, which is, you know, this deal for first republic spooked a lot of people when it came to what is the value of these regional banks it's like, you know, the stock is worth nothing and the assets are free that's essentially what this deal looks like to a lot of people so, what is the outlook for these regional banks meanwhile, the fed is hiking rates. there's a question as to whether or not they are correctly incorporating the financial stability outfall from these kind of rate hike moves. they're going to go up a quarter, which may or may not help them on the inflation front, but it creates greater instability on the banking

sector if you look at what is expected in our fed survey, 100% think the fed is going to hike rates but 59% think the fed should not do that because of concerns with the banking system they're looking for tighter credit, looking for less gdp there's a sense here that maybe the fed is not really listening or paying attention to what's happening in markets here. >> yeah. you wonder what a day like today will do especially if it gets uglier leslie, my question to you is on the discrepancy here first republic bank and svb, what i keep hearing is they were idiosyncratic. they had their own issues. their business models, the management of interest rate risk, and importantly the deposit outlows we saw at first republic that's what really sort of recharged this crisis after first republic reported earnings didn't necessarily see that, even in some of the weaker links like pacwest were on western alliance, which saw good news on

deposits i think we should underscore they're different situations, even if the market is on the contagion theme. >> we hear two schools of thought here just yesterday jamie dimon said this phase of the crisis is over i don't know what the second phase looks like or if it's happening this quickly, but the market would indicate there's still significant concern out there. to your point, sara, these regionals just reported earnings last week. and, by far, the deposit outflows were much better than people had feared. that had created some stability in the stock so, given the events of yesterday, it's this idea that the m&a environment for regionals makes them a very complicated bet right now. in talking to investors, i've been on the phone with a few of them just this morning, they basically say, you know, the risk/reward here is still very dicey. and this is the type of investment that can turn on a dime without necessarily a key news trigger, which we saw this

morning has really been the case it's just the psychology, the concern, and that can ripple through very quickly. >> sara, i think there's an issue of how do you make that case we had eric rosengran on this morning and he could not make the case that the business model of the regional banks is a stable one that you can figure out. why are those uninsured depositors going to stay there what are they getting from that banking relationship in terms of interest and in terms of security there it's also worthwhile putting out -- our data team looked at the shortage out there zion's bank corp, comerica, western alliance, they're high on the short maybe what we're seeing is the volatility you would see if the shorts took an active interest in some of these companies. >> we'll be talking, i'm sure, not just today and tomorrow, but in the days to come, as leslie and i talked about a moment ago,

whether or not there needs to be some heightened insurance coverage for at least business accounts steve, leisle, thank you very much coming up, the head of goldman's tech fund gives us his outlook for ai, the digital ad space and the area of the sector he thinks will continue to see misses from this quarter. watch uber shares jumping after this nearly 30% surge in revenue good guidance on ebitda for june stocks up 42% this year. me a million different ways i should be trading. look! what's up my trade dogs? you should be listening to me. you want to be rich like me? you want to trust me on this one. [inaudible] wow! yeah! it's time to take control of your investing education. cut through the noise with best-in-class education resources that match your preferred style of learning. learn your way. not theirs. td ameritrade. where smart investors get smarter℠. (cecily) you're looking pleased with yourself. (seth) not to brag, learn your way. not theirs. td ameritrade.

but i just switched to verizon. (cecily) so you got an awesome network... (seth) and when i switched, i got to choose the phone i wanted. for free. not bragging. (cecily) you're bragging. (neighbor) oh, he's bragging. (seth) who, me? never. oh, excuse me. hello, your royal highness, sir... (cecily) okay, that's a brag. (seth) hey, mom. i gotta call you back. (vo) switch and choose the phone you want, like the incredible iphone 14, on us. (cecily) on the network worth bragging about. verizon - psst! susan! with paycom, employees do their own payroll. - what's paycom? a magic payroll genie? - it's a payroll app. - payroll is way too complicated for the average person. - paycom guides them through it. missing or duplicate punches, pending expenses, unapproved pto, on and on. - why would employees wanna do all that? - this could be a stretch, but i think it's 'cause they wanna get paid correctly. i like getting paid correctly.

dow down 610 this morning. you have apple reporting earnings thursday after the bell beats on the top and bottom lines last week from microsoft, alphabet, meta, amazon and this environment that's never been this bullish on ai, which is an area our next guest is excited about but not on the names you might expect joining us at post 9 today, brook dane from goldman sachs. at knee-jerk is nvidia. >> ai, there aren't a ton of market vehicles that you can point to and say, that's the pinpoint thing the market has gravitated across a couple of big winners. we think first as we move through the year, there will be a lot more companies you you'll see have ai power their business and create higher growth and higher margins secondly there's one name in more of the picks and shovel

side the market is missing and missing as a leverage to ai. the company is marvell their core business is doing connectivity in data centers and one of the key bottlenecks besides using gpus is this connectivity we think as the big platforms continue to spend on ai, they'll continue to invest behind marvell's business solutions what is more exciting is the asix side. they're going to move to a world where they're balancing both gpus and asix. we think they're positioned well for that. >> cloud growth on the wall as well what is the thinking -- i know you're watching data dog and snowflake in the wake of what we heard about aws. >> yeah. so, you know, as -- the big trend of the past year in terms of the cloud has been optimization, optimization, optimization how can people basically run their cloud infrastructure more

efficiently? that's pressured all the vendors in this space. we're particularly interested in the consumption based models like snowflake, like data dog that will probably be the first to see any stabilization in that trend and any reacceleration data dog reports this week there's some reasons why the quarter may be uneven. every sell side firm has previewed why the guidance for the next quarter may be challenging. if you look into the back half of this year, it is compelling they should see reacceleration, should continue to perform great on the margin side and will benefit from the resupgs of what we're seeing on the cloud side. >> banks are a huge story today. we know financials are the largest buyers of tech and software does this make you worry about i.t. spending at large >> yeah. you don't get to be an old software analyst by not being worried about every quarter and understanding there's variability in the numbers there are some challenges in this particular quarter. the fact the banking crisis

started to unfold in the last days of the quarter probably will impact results out there. we'll see management teams that execute really well and see other teams that fumble. so, we're being very careful and selective in that. one of the reasons we've taken profits in names that have come up a whole lot is because we feel the variability around this quarter is higher. we wanted to have dry powder to add back to names where we have long-term conviction in them and think they'll continue to be growers with great margin expansion and all the usual things we look for as a team we want to be cognizant of the fact there's probably more volatility and we want to be in a position to take advantage of that. >> on digital ads, are you thinking about advertising as a function of economic slowing or not? >> yeah. there's no question that the digital ad space is impacted by gdp growth and the macro stuff we saw that last year as people began to get fearful of the economy, that was one of the things they pulled back on what we're seeing today, we think those businesses are stabilized we think as you look into easing

comps in the back half, coupled with some of what the big companies have done in short-term video to counteract the growth of some of the newer products out there, as well as the margin structures of these businesses that are going to shine through, we think there's real opportunity a name i'll call out is google we have a high degree of confidence in the underlying fundamentals the stock is cheap on free cash flow. >> one name that straddles advertising and the ai side. we're busy today, but thanks for coming in. >> thanks for having me. >> sara? >> carl, private sector faces a potential credit crunch with regional banks falling hard this morning again after jpmorgan acquired first republic's assets over the weekend the kre look regional banking etf is down more than 7% names like pacwest, western alliance getting crushed, down double digits. joining me with his outlook is lazard financial adviser peter

orszag is the perfect guest to talk to because you advised on the first republic deal, that didn't happen, before the government stepped in. you have been in the government during too big to fail and, of course, at the omb and worked with treasury. so, what do you think is happening today? >> i think the problem right now is we have deutsche bank like attacks on a bunch of regional banks. so, you short the stock, try to create a bunch of noise, and the key thing, the reason deutsche bank survived is the deposit base stayed in place and the key question here is, will those deposits stay in place at the regional banks? so, there are lots of things that can be done from avoiding, you know, closing the barn door at the wrong moment with regard to what the regulators do to providing more assurance on uninsured deposits because that's what would help keep the deposit base solid >> so, a lot of people are

looking at, as leslie reported, the deal we got from the fdic and jpmorgan didn't see a systematic risk exemption and did see, you know, shareholders get hit hard on the back of this deal. do you see -- do you draw conclusions about that deal as it relates to the future of regional banks in this country >> well, i think any bank failure has the risk of rattling confidence and when the underlying business model questions about, you know, what is the future of regional and community banks, intersect with concerns about interest rate marks, the deposit base, and now increasing questions about the credit quality, especially in commercial real estate so, if we had -- there's academic research suggesting if we had a 10% default rate on commercial real estate loans, you're talking about something like another 500 banks that would face significant pressure. >> so, i know you can't talk

about your work with first republic, advising them before the fdic stepped in, but what about the deal with jpmorgan, what did you think of how that panned out >> you know, without going into too many details, i think relative to what a lot of people expected the cost to the fdic was probably smaller than what it could have been, in part, because jpmorgan gave up its $5 billion deposit, and in part because jpmorgan made the $10.6 billion payment to the fdic. but again, looking forward, i think the big question is, you know, we've got a lot of other regional and community banks out there, and what is the macro economic consequences, the credit crunch implications of what is happening? frankly, what should the fed do in response? >> and the answer, you think, is they should have paused how many meetings ago >> too many. but that's all water under the bridge the question becomes, what do they do now? and, again, we saw job openings

come down significantly. they're down by more than 1.5 million. i believe the fed has time to pause. let's see how this regional and community bank credit crunch plays out. inflation expectations remain very well anchored doesn't mean they are necessarily done but they have time to pause and see what happens. >> you know what powell says, we can't wait for that to happen. inflation rates are coming down but not fast enough and there are pockets where it remains pretty sticky. >> i think the key to that is the inflation expectations part and the fear that, somehow, if you just wait a month or two too long, inflation expectations make you fall off the cliff. that's not the way they work they gradually become unhinged they don't happen overnight. you would see that happening in real-time. it's not if it did start to happen, then the case for tightening would be ak seccentud

what we were talking about the severe pressure regional and community banks are under in the wake of these bank failures, i think it is folly for the fed to keep their eye on price stability and -- >> it wasn't supposed to get worse. jamie dimon sounded optimistic that this acute phase is over. we heard that on this program. you think the problem is they haven't addressed the issue of uninsured deposits >> it's a combination with of uninsured deposits there are interest rate marks on a lot of bank balance sheets and credit quality concerns are starting to creep into the discussion again, especially in commercial real estate. >> what do you think happens here >> well, there's what i hope happens and we'll have to see what actually does happen. >> beyond the fed taking a pause, what do you think >> i think there's a lot public -- the policymakers can do to take the edge off of this

problem. so, i mentioned, for example, avoiding closing the barn door at the wrong moment with regard to the regulators. there's a whole lot of other things that policymakers could do and, by the way, the other thing they could do is avoid making the situation much, much worse with the upcoming debt limit - >> yes, i knew i wanted to talk about that treasury secretary yellen saying early june i think that was a surprise to a lot of market participants who were hoping july. >> it wasn't just the treasury department the congressional budget office yesterday came out and also said early june those weaker than expected tax receipts have two problems one is they may be signaling, possibly, we'll have to see, a bit of weakness in the economy more importantly, yes, they accelerate the date. a month to deal with this problem is not a lot of time. >> june 1st. you know the intrakacys of the process and what she can do.

there's stuff to do always, isn't there? >> there's always stuff to do. >> sell assets, delay payments. >> but the point is, it's coming really soon. whether it's june 1st, june 5th, june 7th that doesn't matter. the point is it's not august or september. >> there's word that president biden is willing to at least start talking with the republicans. does that make you more or less opti optimistic >> more optimistic because obviously we need a deal here. one thing i noticed, by the way, with regard to the house republican package that was passed is not only the terms that the white house objects to, and we can get into those details, but also that bill would only extend the debt limit by one year. we do not want to deal with this again in the spring of 2024. that would be really problematic. we should have done it during the lame duck. one of the biggest mistakes we can make here is only to extend it for a year because we do not want to be dealing with this again in an election year. >> is it at a point it's

influencing the advice you're giving your clients around - >> i would say it's starting to seep into discussions. i think that will become accentuated over the next couple of weeks as we get into mid-may, this is really going to be the thing you can't avoid talking about. >> you don't expect a default, do you >> i hope we don't have a default. i don't know what to expect at this point because the system is much more polarized than it's been in the past the other point to note, which i think is relevant here, is the treasury market is also much less liquid than it was in years past if you look at bid/ask spreads, they're wider, et cetera it's dangerous both because the system is more polarized and because the treasury market is less liquid than it has been historically, which means if there are tremors, they can have pronounced impact. >> you see this as an economic problem at this point? >> i would say these two things we're talking about, other than that, the economy looks okay

the consumer is holding up, corporate balance sheets are in decent shape, et cetera. but you have these two big problems one is a potential credit crunch coming from regional and community banks interacting with commercial real estate and the second is the debt limit. >> and it sounds like you're expecting weakness in the jobs market that's what's held everything together, tight job market and low unemployment. >> i don't know that you need an increase in the unemployment rate but as job openings decline, wage pressure should come down a bit, and that would be one of many that reinforces my point about the fed having an opportunity to kind of feel things out and see how it goes before continuing down their path. >> well, you called for this before we'll see if they listen to you this time. peter orszag, thank you. what a perfect guest to have on a day like today. >> very good stuff when we come back, why the threat of chatgpt is tanking shares of chegg today. we'll explain that on the other

side of the break. berkshires this weekend, live on cnbc and cnbc.com on saturday, may 6th. buffett and munger will take the stage. becky quick will be live in omaha beginning at 10:00 a.m. eastern time. finally a bounce off the ssn ws w is down 515.

and this is ready to go online. any questions? -yeah, i got one. how about the best network imaginable? let's invent that. that's what we do here. quick survey. who wants the internet to work, pretty much everywhere. and it needs to smooth, like

super, super, super, super smooth. hey, should you be drinking that? -it's decaf. because we're busy women. we don't have time for lag or buffering. who doesn't want internet that helps a.i. do your homework even faster. come again. -sorry, what was that? introducing the next generation 10g network only from xfinity. the future starts now. shares of chegg getting hammered after disclosing that chatgpt is having a significant

impact on new consumer growth. deirdre bosa is watching that story on "tech check." dee? we have spent time on the big ai announcements for big tech like microsoft, alphabet, nvidia and meta. now we are starting to see the flip side as well, the down side stock impact chegg is the first public company to blame ai and chatgpt for a major guide down and slower new user growth investors were properly spooked as you can see it is down nearly 50% today. its value now at a little over a billion dollars. a few years ago during peak pandemic this was a $14 billion company. the ceo says he will fight generative ai with generative ai you need to use chegg to learn it look at duolingo there is a skepticism on the street that ai will be a net negative for ed tech at the moment they eviscerate entire business

models, continue to try to quantify the threat or the opportunity to eliminate jobs. that is already happening at ibm, the company pausing back off hiring and says 30% of jobs could, quote, easily be replaced by ai in five years. goldman sachs expects to be most impacted there's office and admin support, engineering it sees as easily automated that is less impacted. in-person jobs like cleaning and maintenance and construction 25% of employment could be automated by ai, a quarter of all jobs, guys as morgan stanley said this morning on a separate note, it is all happening so fast i couldn't agree more. >> i was telling someone this morning, dee, i expected to hear about these concrete examples in the back half of the year, certainly not this week. even the writers' strike is a real point of discussion in trying to get a deal with

studios. >> copyrighting is another industry pointed to as being affected by ai i use it almost every single day now. i guess that is the argument that chegg is making and other companies in the months, weeks, days ahead is that it needs a human touch as well because it's not always right i did a search on chatgpt and bart chatgpt had something that looked correct but was not the formula is working with a human touch, this automated, generative ai. it's going to be a tough task for companies to figure out as chegg is finding out in real time >> and that's not considering the negative side of cyber attacks and scams and national security thanks so much the chegg ceo dan rosensweig will join "overtime" tonight the hollywood writers strike two writers who willei ion

atn mont wghn good night! hey corporate types. would you stop calling each other rock stars? you're a rock star. you are a rock star. rock stars. please! do you know what it takes to be a rock star? i've trashed hotel rooms in 43 countries. i was on the road since i was 16. i've done my share of bad things. also your share of bad things. we know that using workday for finance and hr makes you great at your job. but that don't make you a rock star. ted! ted! ted! oh ted in finance. you're a rock star! hey liz in hr? can you do this? unless you work with an actual rock star. you are a rock star! thank you! who's the new guy? hi, i'm ozwald. hello ozwald. give it up for pam. pam, you are a rock- [silence]

i wasn't going to say it. ♪♪

all the buzz today on the writers' strike in hollywood as late night and other television production shuts down with thousands of wga members joining the picket line. a couple days ago we spoke with the writers and co-creators of the hbo series "white house plumbers" which premiered last night, by the way, on the challenges today show writers are facing >> the industry has changed seismically but we're getting paid the way we used to get paid in 1975. and so they have to figure out a new mode of compensation >> i just remain very hopeful that cooler heads prevail because i think everyone on both sides wants a resolution that respects the writers, that keeps everyone working we're all keeping all of our fingers crossed that very smart people in these rooms figure things out >> sara, it wasn't long ago that revenue sharing from the streaming model was considered the new innovation the unions needed to hammer out with the

studios. now with ai that looks pretty pedestrian given some of the potential changes you could use ai with to either write or rewrite scripted copy. >> until today everything was all cheerful and happy around ai and the potential it could have on business and boosting stock valuations, not so much with chegg, as we just heard from deirdre, and concerns now about jobs as well i would say it was a big topic the potential of the technology, the danger of the technology, what ultimately it would do to the labor force. that question with ibm in focus today as well, carl, adding to what i would say is kind of a gloomy mood where you talk to some of the biggest and best investors in the world and ceos of companies like kkr, private equity, hedge funds here, and there's a con seven tus that we're going into a rocky period whether it's the stickier inflation, whether it's the uncertainty over what the fed

will do and whether it's the fact that stocks have remained remarkably resilient and are not pricing in some of these big risks according to investors i would note today it's not just the move in regional banks a move higher in gold and a move higher in the vix, the volatility index, which has been complacent something to watch as fears creep in on a day like today it does reflect some of the conversations i've been having here >> vix back to 19. a one-week high. 8 to 1 down volume you do have all s&p sectors in the red. kre, as we mentioned earlier, down 7%. ten-year, sara, down to 3.43 take you back to probably april 28th and oil as well five-week lowery after bp's quarter is sort of implying some sort of downward shift in global activity >> weaker economic data, right weaker economic data by treasury what a setup for fed chair jay

powell tomorrow. all the expectation he'll hike interest rates a lot of uncertainty, carl, over what he'll signal, twl it's going to be a pause, let's see what's happening with the economy, the lending crunch, or we have to keep going because inflation is strong. i'm not sure there's any consensus on what happens. >> that's what we thought we were going to get in australia and then the surprise hike good stuff from milken let's get to the judge and "the half." carl, thank you very much. welcome to "the halftime report." i'm scott wapner front and center this hour what else, this ugly sell-off today just as the fed begins its pivotal meeting on interest rates. our investment committee debating the road ahead for your money. joining me right here at post 9, stephanie link, joe terranova, jim lebenthal, brian belski as well there's the ugliness the dow down by more than 500. the s&p 500 is down more than