good tuesday morning i'm sara eisen with carl quintanilla live on the floor of the new york stock exchange. setting at again da. the street is betting rate cuts are in the cards for the fed, but one money manager says not so fast. bruce richards of marathon asset management says why one more hike may be ahead. what can 2012 tell us about what's in the banking system alan schwartz, former bair sterns see with us. the co-ceos of on running

join us on the back of stellar results, a 90% rally in the stock this year. how do they keep that momentum going? markets have a lot with macro, retail earnings the range is tight, s&p down 14, and dow down 200. >> you could argue the market is holding up well in the face of continued nervousness around the debt ceiling we have the 3:00 p.m. meeting and secretary yellen warns time is running out when it comes to these talks. not seeing much action in terms of nervousness in the stock market, the vix, the options market for volatility. you do see it in the bond market, certainly in that one-month treasury bill. between that and what i would call some bullish data retail sales comes in growth, 0.4% less than expected but still really some underlying momentum, especially in categories like restaurants and bars, which are the services

category industrial production comes in a little bit better. there's nothing that would suggest that our economy is slowing in any serious way. >> even the negative prints we've gotten, like jobless claims last week, kind of got discounted because of some metrics in massachusetts that made the numbers seem less valid. >> we'll see if that continues on thursday. that will be an important release. meantime, topping the tape for us, bear sentiment versus low volatility bank of america's most recent fund management survey showing global growth expectations hit their lowest point this year expectations are now that gdp will contract over the next nine months following this morning's retail sales report, economics out with a new note saying they now see storm clouds for the consumer. despite the bearish outlook, allocation to stocks creeping higher and the s&p 500 hasn't seen a weekly change of more or less than 1% we were talking about this narrow range over the past six weeks. that's the longest stretch since

2019 let's bring in cnbc senior markets commentator mike santoli. maybe it is all that negative sentiment, which is keeping markets higher. >> exactly it's the mix of caution and confusion that has the market at this sort of standstill. as we keep pointing out, it's not as if all stocks are doing nothing. it's that you have this real push/pull within the indexes so people are registering their concerns about a slowdown in growth if you look at the financials. if you look at the consumer cyclicals. but, you know, the somewhat safer stuff that has worked as defense continues to hold up i also think we've gone on long enough i mean, the peak in the number of respondents to that survey saying they expect a recession in the next year, it was november of last year. we still have time for that to be correct obviously, six months. but the point is we've been living with this anticipation of aggressive fed tightening. they want to slow the economy. we're coming off the pandemic. so, in other words, it's been so well telegraphed to everybody. we've been steeped in it

meanwhile, the trailing one-year return, total return for the s&p 500 as of today is 5%. up 5%. we actually just emerged from 12 straight months when the trailing one-year decline was -- return was negative. you've got this interesting situation here where time has done some of the work to moderate expectations. >> meantime, the data out of china, not great they missed on all kinds of metrics. on monday it was jpmorgan saying take your gains in europe. i wonder if you think we might start looking better relatively to some ex-japan. >> yeah, sort of less negative i think that's also coloring, by the way, this survey results it's a global fund manager survey i think growth outside the u.s. was a consensus, you know, upbeat call coming into the year but, you know, the stock market in europe has still outperformed the s&p 500 so far this year japan kind of breaking out you have all of these one-off effects in different parts of the world which is maybe a

buffer by the way, in answer to the criticism that it's just five nasdaq stocks working because the rest of the world wouldn't be doing okay in terms of their equity indexes if it was just, you know, the kinds of companies that u.s. has a monday op reply -- monopoly on. >> and europe is doing well with the luxury. >> and they don't have regional banks either, so that's not a drag. >> two big variables outside of investors' control are playing out in the market and on capitol hill today the debt ceiling and bank weakness the president meeting with speaker mccarthy to continue those negotiations against this quickly approaching x date and presidents of silicon valley and signature bank appearing before senate banking to discuss their collapses. joining us alan schwartz, guggenheim, former bair stern ceo. it's grat to have you. >> thanks for having me. >> regarding the debt ceiling, there's so much discussion around the timing of a default,

but you point out that a downgrade may be even easier to get in the short term. >> i think that's right. i mean, we have to worry about a default primarily because if it -- that secretary yellen is saying we have until june 1st, if you look through what kind of processes are required to actually have this resolved by june 1st, there's a lot that has to happen. you know, though can really think they're going to get something done and procedurally given time gaps of how long it takes to agree on something and then write it up and and then have three days on the floor, we don't have much time we better get this done real quick if june 1st is really the date, number one number two, the second thing you mentioned is in 2011 everybody knows s&p decided to downgrade u.s. treasuries based on the uncertainty that was being created in the process but that was only one out of the

three rating agencies. officially with two out of the three still rating at aaa, usa treasuries are still a aaa security as it relates to all sorts of requirements and trades are margin calls and all these kind of things and what collateral you can use if the uncertain leading up to this date and the political dynamics stay as they are, if somebody like fistch and/or moody's decided that's uncertainty is causing the problem that s&p said and a second agency downgrades us, we are now officially not a aaa security we don't really know what kind of ripple effects that could have through the financial markets. >> even though we're wringing our hands over everything you said, the market continues to hunt for constructive elements can i get you to talk about whether or not ipos can actually get a window here this summer?

>> well, what we've seen, really, ann walsh, my partner, and the cio at guggenheim investments, she mentioned we seem to be in a kind of a rolling recession as we go through this, where we had a boom in goods and then supply chain interruptions and collapse in goods and inventory problems. meantime, services that were shut down are now booming, as you just mentioned so, there's a lot going on of sort of evolving ripple effects of not just one kind of economy moving in one direction. basically, the same thing's been true about the markets i think you just talked about the markets have been relatively narrowly constrained for quite some time. within that, though, you've had periods where, you know, the high growth stocks got hit hard while cyclicals came back. cyclicals come down while growth is coming back in the meantime, defensives stay so, there's a lot of swings in

this market. so, i do think there are parts in the market with companies that are doing well and are stable that there's a decent chance if other macro things don't just really get in the way that the market would be open for some ipos and, you know, we're working on some of that. >> well, one of those macro things, alan, that could get in the way is the bank crisis with a lower case c, i guess we're calling it. >> right. >> our viewers know you led bear stearns in 2008, helped with the sale to jpmorgan i wonder what kind of flashbacks, if any, you are having given the multiple bank failures, one ended up in the hands of jpmorgan. i know this is very different, but are there similarities that investors should be aware of >> it's very, very different, but there's also always similarities point number one, what's very, very different is the last cycle was driven by credit there's no question that too

many bad credit instruments or low quality credit instruments, especially in housing were issued when that came through, then you had to deal with bad credit. this starting point of this cycle has been all about duration it's not about credit at all the problems in silicon valley, first republic were about borrowing short, lending long. something you never thought people would do but it was in high quality the fdic did an excellent job of jumping on that and essentially putting an end to, i think, the run on the banks, if you will, because i think they've had things that calmed down. it is true that those three banks, one other, that were really outliers in the amount of duration risk they had i think the second part of this, though, that we haven't yet seen, and again it's similar to the last wave where at first it seemed like it was just a little bit of a problem with certain parts of the market like repo

and then you found out it had more impact throughout what we don't know is while we've seen that a number of lenders like these banks took a lot of duration risks, but we think that's contained on the other side of the question, how many borrowers took on too much duration risk we know we saw a lot of floating bank rate debt in the high-yield market and the buyout market, but we don't yet know. everybody is worried and should be about commercial mortgages. but other types of companies that, you know, it was just too easy to finance yourself with short rate debt. now as the cost of debt goes up, it may cause a credit problem for them not being able to refinance the assets that they own. so, we haven't seen yet how that will potentially flow through. so, you really have to pay attention to second order effects as we saw in the last cycle.

>> so, in your view, should the fed be pausing here in order to not make those factors worse >> yes, i am in the camp on that i saw austan goolsbee from chicago mention that and a few others i think the fed is, you know, it's been a very confusing time because of some of these rolling variables. but if you look at what monetary policy, they've been hoping to get rates high enough to cause a tightening in financial conditions and lending conditions to bring down inflation. they hadn't been seeing it yet, so they kept raising the rate. what we're seeing is now that the effects of that has caused what is obviously a tightening in lending standards in the banking community for sure so as we see the tightening, the fed should be data-dependent and see if that tightening of financial conditions actually leads to some of the things that we're looking to get through higher interest rates. and if that happens and it

starts to bring down inflation, which it could, then i think just pausing, not saying they're done, just pausing and being data dependent is the thing to do. >> we'll see some year-on-year numbers on cpi next month might get pretty interesting if you look at where we were a year ago alan, great discussion great to see you again thank you for the time appreciate it very much. >> very nice to see you. thank you. have a good day. >> thanks, alan. still to come, on running, the shoe brand backed by roger federer has exploded in popularity and so has the stock. the co-ceos join us next following new results this morning. of course, don't miss elon musk on cnbc tonight, 6:00 p.m. eastern time with our own david faber in the wake of their annual shareholder meeting happening later today. we'll talk some twitter, spacex, n'go me.acro, ai and a lotor dot away.

we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go. i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch.

they're giving back 7% despite the swiss schumaker raising guidance for the year ahead on sales. another sign of consumer resilience with sales from the company's dtc, direct-to-consumer business, up nearly 65% from last year. joining us first on cnbc, the on co-ceos, it's good to see both of you good morning so, mark - >> thanks for having us. >> not a lot of other retailers

reporting 78% sales growth what are you seeing from the consumer right now >> we're very, very happy for q1 rurts. we just launched a new cloud surfer, which was the big launch ever very difficult on the opticals so on the preorders in the accounts for q3, q4, so it was really positive news across the board. >> martin, who are you taking share from >> i think the consumer who wants to have a product that's rooted in innovation performance that has a strong dna and lifts one culture, this is what we do. those are people that actively run in the product every day, more are using the products in an everyday environment. but it's all about movement. this is what we are for. we want to inspire the human

spirit for movement. >> nike has dominated in the running category lately. i have to think this is making a dent does the competitive environment impact you right now or are you continuing to see signs of very strong demand? >> we're trying to bring amazing superior product to the market, so we just had the boston marathon and some of the best tennis players, the world number one. we won a couple of very important track and field races. we very much feel we're proving our product is very, very strong, also very, very sustainable. this resonates with the consumers. this allows us to grow on such a strong rate across the board that's what we're focusing on. >> we're seeing especially strong growth in the wholesale business in north america. it's interesting because that's not a point of strength for a lot of the other brands out there. what is -- what do you think is driving that what are you seeing from the orders also from the promotional side of things right now?

>> we see our retail partners also see a very strong demand for the on brand so, at foot locker, run specialty accounts we see the general environment being discounted but being focused on premium and business where we continue to drive we selectively expend our presence in wholesale, so we just opened up 50 more dick stores we really want to meet the customer where the customer is shopping and talking to the right consumer, and this is what we do on a global scale. >> marc, i'm curious where your head is on inventory management. we've seen some high-profile examples where companies obviously were saddled with too much, but others who stepped on the gas and ended up selling quite a bit and it led to

volume how are you planning for the rest of the year >> for us what's very, very important is we can capture the demand out there with new product. we have inventory growth but it's fresh product and that product will allow us to also capitalize on potentially even higher sales than what we currently guided so, this is what we're looking at and we have to be clear that part of why the inventory is a bit higher is the factories have caught up very, very quickly and transit times on the trade lanes, the ships, have come down this is basically what you're seeing reflected in the inventory. it will allow us to capture on demand and fresh products. >> obviously, very high growth rates, but we still should put in perspective, small relative to some of the bigger competitors in terms of revenues 420 million in swiss francs.

>> we have built a global brand. we are growing across the globe. at the same time, we are still at the very beginning in some weak markets like china, but also in latin america, in the middle east, where we are at the very beginning of the many european markets and then we have started really in running we have moved over into outdoor. now we started tennis. we keep on adding more customer groups that we want to talk to and, again, for the past years we have seen a lot of strong growth every quarter and this is what we are focusing on. we also want to grow and have proven this again in the first quarter in a profitable way. also very strong cross-profit margin as well as high ebitda margin. >> how do you make sure it's not just a fad we have seen with some of these other brands i'm looking at the stock of all

bird since it went public. it used to be a much more popular shoe how do you keep the brand momentum and brand heat going without fizzling out >> from the beginning we've been very focused on bringing product innovation to the market we very much believe if we're able to continue to innovate on the product, to make the product even more sustainable, to make runners faster, have them go longer, to enable tennis players to win grand slams this will translate. we're basically doing this innovation together with very, very accessible design that's what we've been doing for the last 13 years. this is what we continue to do and this will ensure that it's not a fad but a long-term growth story. >> appreciate the time today thank you both. >> thank you for having us. >> co-ceos of on holding, which is has been an amazing stock story lately. coming up, a generational

opportunity in fixed income. marathon assets management bruce richards will join us with his outlook for the credit market. we're watching shares of etsy the stock among the worst performers in the s&p as morgan stanley cuts price target to $74, with 20% downside from here concerned about etsy's ability to continue to grow growth sales and expand margins. overall market is down dow is down 212 points p weasel 'll be right back. towns, and on main streets across the us, you'll find pnc bank. helping businesses both large and small, communities and the people who live and work there grow and thrive. we're proud to call these places home too. they're where we put down roots, and where together, we work to help move everyone's financial goals forward. pnc bank.

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this capital one move is interesting. it gets a boost after regulatory filings showed berkshire took a new position in the name last quarter. meantime, they exit bny mellon, they add apple, american express. we thought buffett was souring on banks not this one. >> that was an interesting call.

meantime, european markets set to close in a few minutes. keep an eye on u.s. debt ceiling negotiations, for one. that's happening this afternoon, a big meeting at 3:00. big mover in europe was vodafone announcing it will cut 10% of its workforce. the story abroad this morning is china. disappointing data out of the world's second largest economy industrial production in particular weak. retail sales fell short of expectations the youth unemployment rate skyrocketing to a record high, over 20% market is taking that sort of in stride as we have continued evidence that the china boom story is not exactly playing out as much as we thought. copper prices are sort of the north star here and they're lower on this data. >> not a lot of desks have retrenched on their annual growth targets for china earlier in the year morgan stanley went to 6 or 7 i think they're still hoping this pans out in the back half

of the year. >> one thing going for china, it has room to stimulate because it doesn't have an inflation problem like the u.s. and europe do it can go with easier policy to try to prop up growth. and when i read some of these notes on china, the research notes, the biggest risk, they're not so much worried about the economy, they're worried about china arming russia and that what would that do to the market an interesting geopolitical dynamics. let's get a news update with the dow down 200 and contessa brewer. >> hi. the new mexico gunman who killed three people and injured six others yesterday shot randomly at cars and a house, according to police. they say the shooter fired at least three weapons, including an ar-style rifle. he was confronted and killed on scene. authorities have not yet released the identities of the gunman nor the victims. two of florida's top republican legislatures are endorsing ron desantis' possible

bid for president. former president donald trump received support from florida congressional republicans in april. and a german court sentenced five men to prison for the theft of more than $100 million of jewelry from green vault museum in dresden in 2019 those thieves stole 21 pieces of jewelry containing more than 4300 diamonds. the men received sentences for as much as six years and three months it was really a dramatic heist, you might remember caught the attention of all of germany, but most of the jewelry, sara, carl, has made it back to the museum >> wow con contessa, thanks. meantime, the hollywood writers strike could throw a wrench in netflix's ad plans that's coming up. plus an ai update from washington as chatgpt creator sam altman testifies before congress

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(funky electronic music) (narrator) invest in. believe in. move in. grow in. build in. thrive in. all in north carolina. ranked america's top state for business. take a look at amgen and horizon therapeutics the ftc blocking amgen's acquisition. this is the latest deal to come under scrutiny from the biden administration this one was a big surprise, as david mentioned earlier, because they weren't seen to compete, these two companies, on any of the drugs. we'll wait to see what the government's argument is

it's having an impact. horizon down 15% some other biotechs are down. let's go post to post with bob pisani a couple hours into trading. >> home depot misses on revenue and guides a little lower. this general theme they want to put out that the consumer is a little weaker, particularly on the big ticket items, this is largely priced into the market this is not new news that the consumer's a little weaker here. you can see it in the trading action here's home depot. 7 million shares, that's pretty heavy volume it normally trades 4, but it's earnings day so not surprising home depot is only down 1% on a bad guide for the year, because it's already been down 10% for the year this has been pretty well telegraphed what's going on. you can see it in other home improvement companies or affiliated with home improvement. whirlpool down 3%. whirlpool has had a problem all year they had a disappointing earnings report about three

weeks ago. they're near a new low for the year, near a 52-week low this is very well known, the problems for the consumer. look at the flooring companies, mohawk, the big traditional flooring company they had earnings three weeks ago. they were a little better than expected, but this has been trending down for several weeks now. this is right near a new low for the year, 52-week low. $94. it's down 8%, 9% on the year remember, the s&p is up about 8% then the much smaller flooring company. remember the only lumber liquidators, now called ll this stock's down 5% it had earnings reports last week it's been losing money for a couple of years, but it's down today. this stock has been almost straight down for the last year and a half so, the point here is we know that people pull forward the home improvement projects during the pandemic, home depot said this on the conference call. that's having an effect. in addition to that, some inflation sticker shock is weighing on those higher priced

items for those consumers. guys, back to you. >> talk in a bit, bob pisani. for "from the desk of" we turn to the writers strik and how it's hitting netflix jpmorgan says how it could be due to the strike and the longer netflix waits the more it could add revenue. average ad revenue has been slowing since last year. we have an interesting take. >> saying effectively paid sharing, making people pay for sharing their passwords is a price hike he's saying, we're going to make you pay more if you want lots of people to be using your subscription he's saying that netflix might be reluctant to charge people more at a time when they're telling the writers that they don't want to be paying them more netflix has been at the center of so many of the frustration at the writers guild and the idea they want to be compensated more and differently for their success in the streaming platforms.

>> everyone says, look, and usually if a labor negotiation, there's a history you've shared, you've been through these rounds together but these new streamers are relatively new to that kind of party. >> i think that's why netflix is drawing the brunt of the frustration from the writers guild. what they are doing here is on television, you got paid more if your content was played over and over and over. the more people watched, the more you get paid. they want the compensation to work the same way on the streamer it has not been that way at netflix. n netflix, you get paid flat fees and that's the way streaming worked for the rest of the giants and not only are we seeing it impact paid price hikes, netflix was supposed to do a big in-person presentation now they're streaming their presentation because they didn't want picketers out in front, which would not be a good look when you're trying to get advertisers on board this would be the first year netflix did a big up front. >> i've seen a lot of frustration from the actors and writers around the lack of

transparency in netflix now. used to be their secret sauce, but now they're getting called out for not sharing metrics because it makes it impossible to determine these issues. >> writers say we want to get paid if our shows are more successful, then netflix has to disclose which movies are watched more and less. it's interesting for netflix, to be at the center of this. >> finally, last week netflix did say they were trimming some content spending, right? is that because paid is taking longer to roll out >> it's paid and also advertising. we're seeing everyone try to trim their content costs here. it's all about this new focus on profitability rather than growth at all costs so, i think these things are all coming into play part is also the timing of when you're producing these big shows. it takes a while for the revenue to flow in because you have a big show like "emily in paris" which is being delayed, the new season or "stranger things,"

those seasons are being delayed because of the writers' strike. >> but not "bridgerton." we're waiting for release date. >> they're just in post production and that's safe. >> good. although i like "emily in paris," too. bruce richards was one of the few winners from the collapse of credit suisse. now he's calling for a, quote, generational opportunity in fixed income and another fed rate hike. he'll join us next. later tonight, elon musk joins us here on cnbc following the tesla annual shareholder meeting. our david faber in austin, texas, f tt. quk t seet" is back in a moment.

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i'm okay. welcome back when it comes to finding value right now, our next guest says we are seeing generational returns on the fixed income and credit markets, causing this an amazing time to be a lender with an eye on opportunities in commercial real estate joining us at post 9 is marathon asset management bruce richards. always a pleasure. >> good to see you. >> you came in and said we had manic monday yesterday didn't feel like manic monday. >> it wasn't only mother's day, it was time for companies to get together and we saw seven bankruptcies in corporate america on monday, which is the greatest number of bankruptcies we've seen on a monday in a dozen years. so, the credit crunch has arrived. you start with envision, a $10 billion company, where the quite equity sponsor put $3.5 billion

equity into it, which is now toast. creditors -- senior creditors will come out okay owning a company, but a lot of bankruptcies that have happened. when we look forward, i've been projecting when default rates were less than 1%, that we would have cumulative default rate of 10% and i'm now revising it higher to 12%. credit crunch arrived, and i'm calling it today that it's officially here based on this manic monday. >> based on the fact we've seen the turmoil in regional banks? >> well, regional banks are adding - >> on top of the fed tightening. >> starts with the fed 500-basis point tightening and the cost of funding being inverted so anyone that borrowed floating rates, which is a lot of corporate borrowers which the rate was zero, loaded up on debt, too much debt and a lot of restructuring will come as a result the back end of this also is a great time to be a lender. but the credit crunch is here. you look at the banks and the

banks themselves, i'm not talking about the big four or maybe the strongest of the super regionals, but i'm talking about the cohort, the kbw whose debt trades below 80. that's really the tell what's the equity, what's deposits, but don't foreget to watch the credit when credit trades at 60 cents on $1 or lower means banks are having trouble getting credit. >> who's opportunity is that >> that's an opportunity, i think, for the lending community to step in - >> direct lending, shadow lending. >> exactly because the banks are not going to be able to be in position of the lend think about commercial real estate, for instance there's $1 trillion of commercial real estate debt coming due in the next two years. banks are 50% of that lending market the private credit lending market is only $100 billion of real estate debt it's a big gap between where banks can lend and where the

private debt community has enough debt to lend. and what the capital that's needed by the real estate operators. so, this is all coming to roost as debt maturities come up and as delinquencies start to rise and we're starting to see that. >> i'm going to guess the loan officers' survey does not fully reflect what's happening, last week or the week before, and the fed allows them to declare victory for now? >> well, i think the fed has raised rates ten straight times since march 17th of last year. i'm on the fence here, but i think they're probably done. are they going to move come june 15th and 16th? probably no, unless on june 3rd you get a big cpi print. if you do, then they go right back at the next one but right now, based upon what we're hearing from the fed governors, i think -- and based

upon the credit tightness we're now seeing, i think it's not only prudent to pause, but probably what they're going to do >> it's interesting that you're so worried about the credit crunch i think a lot of people are worried about it, but not seeing a ton of evidence that it's having a major economic impact at this time. >> i think all the markets and the headlines are really focused on the s&p being up and the big tech stocks doing well, but underneath the surface is what the issue is underneath the surface you have apple today valued at $2.7 trillion do you know it's the first time in history the whole russell 2000 now is that same number, $2.7 trillion. the russell 2000 is unchanged on the year number one, what is below the market in terms of the credit crunch that's starting to happen now, the recession we're moving towards in the future is very, very different from how the top

eight stocks are performing. so, with the retail sales being strong and consumer being strong, and, you know, some of the leading companies also doing well, everyone thinks it's hunky-dory meanwhile, there's a lot of noise between the surface so we're really concerned with that. >> if thesecompanies have a shorter runway than they thought, what happens to labor does the job market really crack here >> i don't think the job market cracks, but it's going to be one of those recessions where the job market will weaken going forward into next year, yes. but it's going to be one of those recessions where nominal gdp is growing at 2%, inflation is running at 4% so, real gdp, negative 2%. maybe growth slows to 1% nominally, which i think is in the cards, by the time this is over for a quarter, that means negative 3% gdp print because of 4% inflation rate. so, nominally it's going to feel

okay, and it's going to feel okay in the jobs market to a degree but we're going to have a recession. that's our base case i think the train's already left the station for that and it's inevitable it happens i'm calling for q1 of next year when that recession starts. >> i guess my follow-up is how you're positioning you said you're already doing a ton of lending to fill in the gaps but you always like to buy things that everybody else hates. so, are there opportunities, for instance, in the regional bank debt >> so, we bought some of the regional banks on the dips, but you have to -- >> the stocks or the bonds >> the stocks and the bonds. but you have to be very, very careful, i think, with the regional banks because i think it gets cheaper as the year goes on so, have we seen a low kbw no, we haven't are we going to see the low some time in the fourth quarter i believe we will. that also might be the case of reits. if you're a contrarian buyer, wait for it, it will come, but there will be a lot of pain

between now and then. >> what happens between now and then to trigger that more fallout on the economy? >> fallout on the economy but talking about the loan losses in the banks that's not really happening yet. you've seen deposit outflow to a tune of $1 trillion, but you haven't seen the insolvency that comes as a result of losses in the bank balance sheet number one, number two as it relates to reits, we're talking about the reits, you see commercial real estate devaluation because the simple truth is when you were in covid and rates were zero, everything was in the moon, 17 million treasuries were trading negative, remember that, carl? >> oh, yeah. >> yeah. during that period of time, real estate got bid to the moon, as did some growth technology stocks and now all that air is leaving the bubble, and real estate's devalued by about 25% across the board since the peak in 2020-2022. there's too much debt. remember, commercial real estate is a highly levered asset class.

a lot of leverage on those properties. >> really quick, isn't the scary part that the cycle, the back end of the cycle will be different because there won't be a return to office >> no, there's going to be a return to office. >> you think so? >> just like the aircraft, you know, tsa numbers swung from 2.5 million positive to a measly 250,000. it took them forever to get back to a million and now we're at the highs. people will come back to office. no one can see it. it's two years out is san francisco a real problem, that's a generational problem? absolutely in their office market 40% vacancies. but the measure other office problems will come back if it's a class a. so, what are we buying one thing that's really intriguing that's out of favor right now, but you have to really have a keen eye to this, and we have every deal reversed engineered, every loan in securitization is pivot bonds,

bonds above the fulcrum. bonds that won't take the losses, some are getting crushed where selective buyers in the snbs market. >> i was thinking sexier than bonds. what's the credit market going to look like as we get closer to the x date on bond think away fk at the treasury market, treasury bills. >> the only place of any panic >> let's talk about that, june 1 like janet yellen is saying? no, probably closer to june 15th because she has a little wiggle room june 15th is corporate quarterly tax day. it will probably take closer to july 1, july 4, but it will be an issue because the house is divided and this is a very big sticking point that doesn't get resolved easily and will take us much closer to the x date which means you're going to have some short-term treasuries come due in late june that will be under a lot of pressure, may trade up

to 6% yield as ten-year notes rally. >> and then you buy? >> then you buy anything cheap, they will not default on their debt the scare will be over because at the end of the day they will resolve. >> thank you, bruce. we got a lot done there. bruce richards, marathon sam altman testifying on the hill is more regulation coming for ai companies? 'ldiusafr is ♪ (upbeat music) ♪ ( ♪♪ ) constant contact's advanced automation lets you send the right message at the right time, every time. ( ♪♪ ) constant contact. helping the small stand tall. (cecily) you're looking pleased with yourself. (seth) well, not to brag, constant contact. but i just switched my whole family to verizon.

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open ai ceo sam altman calling for ai regulation in his testimony before the senate today. deirdre bosa is monitoring that. hi, dee. carl, throughout the hearing so far generative ai has been compared to the first cell phone, the creation of the internet, the industrial revolution, the printing press and the atomic bond. that gives you the idea of the stakes the tone itself is vastly different around social media and big tech which have been far more combative this feels more collaborative. lawmakers and sam altman seem to be on the same page. regulation and guardrails are needed altman says the safe development will require a combination of companies doing the right thing. that's is regulation by the government and public education. he made a comparison to photo shop saying when it came on the scene people were fooled, but over time they figured out what was fake and what was real he says that generative ai will

be like that but on steroids there's also been a lot of discussion on ai's impact on jobs senator blumenthal called the elimination of jobs by ai his biggest nightmare. altman is more optimistic, says there will be far greater jobs chatgpt is good at doing tasks not jobs, guys >> is there anything, deirdre, any contours of what legislation would look like that are coming out of this from either side >> great question. not really this is the challenge. the ramifications can be very, very serious they have to know where the guardrails need to be and platforms need to be clear in what is being run by this generative ai or chatgpt and what isn't it's hard to see the actual legislation. it is a difference from what we've seen the last ten years

which has been reactive and this is at the early middle stages. really general, what is generative ai, how could that affect jobs? how is it in relation to other platforms we've seen they talk and talk about this, we rarely see action but they're early so perhaps this time will be different >> makes social media content simple by comparison, right? >> the early point, that's a good one they weren't this early on the social media thing deirdre, thank you deirdre bosa wall street is buzzing about return to work to the office with black rock updating its policy that story after the break

the first time you connected your godaddy website and your store was also the first time you realized... well, we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com people are going to come back to office no one can see it. it's two years out >> people are going to come back to office? that was marathon's bruce richards with us just a moment ago. on his commercial real estate bets black rock making some news today hoping on the office bandwagon in a new memo the firm says it will now require everyone to be back in the

office at least four days a week with flexibility to work from home one day almost a year to the day of instituting a three day in-office policy i have a feeling we're going to see more of this the labor market isn't so tight, and people are required to come back more. >> yes we'll see what happens let's get to wapner and "the half." carl, thank you very much. welcome to "the halftime report." i'm scott wapner front and center this hour big money's big ai bets and what it says about the stocks that can still work in this market even after some nice early year gains. we'll discuss and debate that with the investment committee. joining me right here from post 9 josh brown, stephanie link and jim lebenthal. let's check the markets. largely in the red today home depot is weighing on the dow. the s&p down about ten points. it is the nasdaq that is outperforming once again with technology, and that's really, josh, where i want to