mike mayo is going to join us shortly from wells fargo.is the worst case. the core issue is a lack of funding diversification. most of their deposits are from vc which has is -- its issues. that is mike mayo of wells fargo. tom: running us right now is mr. mayo, senior equity analyst at wells fargo. i have eight ways to go here. i want to simply say, is this morning the opportunity for the major banks to get competitive ground? do the major banks benefit by all of this turmoil, because financial america will find comfort with big banks? mike: the unintended consequences of everything that has taken place since the global financial crisis is it has increased the moats around the largest banks. the regulation, the reduction of mergers, the too big to fail. all of that simply has reinforced the resiliency of the largest banks. resiliency of the balance sheets, credit risk much less, and the resiliency of the business models, the scalability you have gotten from technology. also, the resiliency of the funding. even though deposits are declinin

and the main question is, i really thought the interview with mike mayo was very interesting. is he ready to sound the all clear alarm so we can come out of our cellars that the storms have passed when it comes to the banking crisis i don't know that that's true. it certainly feels that way today relative to yesterday. there's been some talk, there may be a few other banks out there, but maybe the system did work, scott. maybe indeed the amount of capital at the big banks was enough to buttress them from this storm that came through, and with the addition of the extra fed program, but maybe there's more shoes to drop we just don't know it's interesting to hear mike make that call this early. >> yeah, i mean, he's still here, so let's ask him is it too early to make that kind of a statement? >> i said and i say that it's most likely all over doesn't mean there's some smaller banks. when i look at the largest banks, the solvency and liquidity issues are off the table. once you go past the top 20, there might be some things they shouldn't be systemic sort of issues. it's not the

kbe, 7% but, mike mayo is sitting here too so glad you're here on a day like this. thank you for making the trek over here. what should we pay closest attention to >> well, look, tail risk happens and remain elevated and there's a warning today with the incident at silicon valley that the biggest risks are outside of the largest banks. the largest banks have been regulated and regulated and over and over again we have an annual fed stress test that i estimate is the equivalent of the last three recessions combined. so the key word here for the largest banks is resiliency, resiliency of the balance sheet, resiliency of the business model and resiliency of funding even if that resiliency isn't quite as strong as i thought with interest rates at 3% interest rates at 5%, you know, the title of our note today, bank stocks have gotten powell'd the fed going up so much warning number one is beware of financial firms outside of the largest banks and warning number two, this economy is a little bit like a souffle you get your ingredients, you cook it and then you put it into

mike mayo will j lily! welcome to our third bark-ery.y sale. it's a cost to the fund. what's that joe? >> $20 billion. >> if chris earlier in the show was right -- maybe they didn't take the mortgages, some of the loans it troubles me that the fed and fdic can't resolve these things before the bank fails. dodd-frank made them incapable of going in earlier to resolve the banks, only after they fail. i'm surprised it took two weeks to sell what everybody thought was a good bank that just had a duration mismatch. it makes me a little more nervous this morning. maybe mike mayo coming up will make me feel more confident. >> it's not always a zero sum game, rick, but first citizen shares are up 40% today. i put in the fdic for a symbol, it doesn't come up. would it be down? >> i think that it probably would be but i also think that there's a whole movement going on here that people are starting to get used to the aromas of how some of these issues are going to continue to play out. so i don't think that the rally that you're discussing today i

that's mike mayo >> he's liked this for a long time i like it, too if you think capital markets and wealthement are bottoming or troughing, i think we are capital levels are great they just spent $10 billion on technology that should help them be more efficiency going forward. >> schwab, the target remains 100. that's 30% what do we think >> we own schwab it has a lot of organic growth they've gained market share. they've made smart moves and higher interest rates helped them we like that call. >> up next, mike santoli and his "midday word." missions... but it also means cutting costs. because now clean energy is more affordable energy. we've been investing in american infrastructure for thirty years... lowering electricity costs today, and protecting from volatile energy prices tomorrow. so walk with us— and let's make cutting energy costs real. ♪ old school wisdom, with a passion for what's possible. that's what you get from the morgan stanley client experience. you get listening more than talking, and a personalized plan built on insights and innovative technology. you get grit, vision,

. >> how big are these -- your colleague mike mayo wrote banks are getting powelled, in other words,mega losses was silicone valley bank the worst or the tip of the iceberg. >> that's indecorative of the pressure a lot of these banks are feeling after chairman powell spoke over the last few days and the expectation for the short end staying higher for longer, i think really triggered the move that we saw at silicon valley where they realized the losses on a portion of their securities and then announced a subsequent equity raise from that there are liquidity concerns on the parts of investors as deposits continue to see higher costs and deposit outflows is putting pressure on the banks to make sure they have enough liquidity on the asset side to fund that or to reinvest at higher rates so it's a little bit of a spiral right now. >> this might be a dumb question, but why did they buy so mortgages and bonds last year >> in 2021, they were seeing a lot of inflows from their clients. their depaositors are the beneficiaries of massive amounts of investment on the parts of investment capit

here is what the domino effect of problems outside the banking industry on the banks themselves as mike mayoank am list at wells fargo securities friday before regulators announced svb's closure. still the heart of the economy. if there is issues then banks are going to feel it. what do you make of all of this today and what it means for the average person sitting at home? >> well, there were red flags already coming into the year. last year i think banks lost that depositors took out like 240 billion. it was the most money since the 1948, something like that. that was a serious yellow or red flag. true, people are trying to find other things money in cds, treasury bills. why leave it in a savings account. banks very slow to spend any sort of higher rates to depositors. there are several narratives here. this bank had -- they had a big up versement portfolio. this is a rock and rolling bank. they hit the scene. they wanted to be, you know, big and they were big. they were very aggressive with their investment portfolio versus their loans. lost 2 # billion on bonds. when word got out that the

mike mayo on jpmorgan upgrades it to overweight goliath is winning this episode doesn't sort of tell you where the money -- some of the more worrisome so to speak money has flowed over the last handful of days, then nothing will he upgrades it give me your thought before we bring in brad. >> the simplest outcome is usually the correct one. think about this logically for one second what offers relief to all of the banks that are holding treasuries on their balance sheets in terms of assets? what offers relief is what's happened in the last three days. where treasury yields move lower. is the federal reserve going to obstruct the process of on one hand on a sunday evening announce that they're going to provide the necessary relief to the tension and stress that the banks are feeling, and then on the other hand, at a federal reserve meeting come out in a press conference and talk about the need to continue lighting extreme measures to combat inflation? there's no logic behind that the simple explanation the federal reserve is going to continue to allow the relief be offered in the form

mike mayo, banking analyst atqq wells fargo, coming out andó[■ naming both of these signature top picksns axd profit and l the meme stocks start going again? >> here's what i would say. these days, i don't k#v how many meme stocks, true meme stocks there still are.xd we knew what they were. i looked atu■ bed, bath & beyon that's a penny stock now. not sure it is a fair comparison. amc is the most, i guess, significant comparable meme stock. >> right. where are they now? i think we should do a segment on that. where are they now? where are they now? >> '1+y you tell me, i'll make it happen, joe. i'll do that. thanks. >>> coming up, full coverage ahead of today's fed decision. formeró[■ kansas city fed presit thomas hone ig will tell us why he thinks the fedw3 needs to ke hiking rates. former goldman sachs ceo lloyd blankfein gives usok his take o blankfein gives usok his take o thgs andin 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 hote

yesterday mike mayo said the fed liquidity, sort of resolving th weakest players, we'll get new regulars probably no capital raises immediately, and they think the bank discount will come off of it crossing the tape, we were looking for 63, and it's 62, one-year inflation expectations low nest almost two years. >> that's a good sign at least for fed. we know they were watching expectations and the pushback, if they raise rates again, if they do keep speaking hawkishly, is going to be -- are they watching inflation expectations they said this was more important to them by a lot of metrics including in the market, 10-year break even, all of that. inflation expectations are coming down. and that should be good news for the fed and should give them some time if they want to pause and see how the hikes are getting through to the economy, then they can do that. we're showing -- we've got this great priced in already. what happens if it doesn't happen >> there's that, but i think the upside case would be if they do move swiftly to start cutting it avoids the worse of an economic downturn >> yea

thinking it might be up today, with mike mayo reiterating why he likes it, why it's the low-cost consumercky with the largest banks. it's down 1.2% the financials have had a little bit of a struggle here it's no longer really much of a rate story it is really about kind of have you seen the best for credit low unemployment is great but can only go one direction. >> capital markets are horrible, too. >> terrible. good bond issuance and everything else. >> everything else when you talk to the likes of some who -- again, anybody in this, as i try to, it's just dead and continues to be dead. it's not an unimportant contributor for the earnings for some of these big banks. >> for sure. meantime we're watching the jobs number, of course, on friday linkedin with interesting statistics about the hiring rate they argue it's down 6.5 month-on-month it's the biggest one-month decline since 2020 hiring they argue is now down 31% from april of '22 when the declines began and down about 28% year on year obviously we're leaning heavily on some of this high frequency how many millions of u.s. workers mig

now, even wells fargo analyst mike mayo upgraded shares of jpmorgan this week, saying that the, quote can watch some of those pre-market action moves to the upside and speaking of analysts, we'll end with a check on roku shares. higher by roughly2.5% right now, just around 30 to 35,000 shares of volume the streaming device maker is getting upgraded to peer perform, that's a more neutral rating from a prior underperform over at wolf research, saying amongst other things that a lot of the headwinds that led to the prior downgrade like advertising weakness, higher expenses, maybe in the rearview mirror, and that active account growth remains resilient. roku, by the way, is also one of those companies, becky, that disclosed that it had a sizable portion of its cash held at silicon valley banks roku shares getting a little bit of a bid right now i'll send things back over to you. >> dom, thank you. the collapse of silicon valley bank prompting a volatile trading start to the week. the two-year note saw its -- i should say, the yield on the two-year note saw its biggest decline in more than