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Middle East Escalation, Micron's Big Beat, and the Private Credit Exodus 3/19/26
00:43:47
Oil prices spike after Iran strikes key energy infrastructure in Qatar, but is the end of the war on the horizon? Micron shares slide despite blowout earnings, but BofA is still bullish. Plus, why private equity's pain could be commercial real estate's gain.
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- [00:00]
Schwab Announcer
Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy. Gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more@schwab.com trading men are struggling with
- [00:29]
Dr. Guy Winch
their mental health at some of the highest rates we've ever seen, but most aren't getting the support they need. And that needs to change. I'm Dr. Guy Winch, your host for season three of the Visibility Gap, presented by Cigna Healthcare. This season we're focusing on men's mental health, bringing together real stories and expert insight to explore the pressures men face every day and why opening up can feel so difficult. Join us for the new season wherever you stream your podcasts.
- [01:02]
Kelly Evans
Thank you very much for that, Scott and as the Dow hits its lowest level of the year, welcome to the Exchange. I'm Kelly Evans. And that index is down almost 400 points this hour as stocks are broadly under pressure. The NASDAQ the worst performer, the S and P erasing nearly all of its gains over the past six months now at 65 80. Many say it's below the 200 day moving average that it closed below yesterday. A lot of these are key trading signs of a loss of momentum. And it comes, of course, as oil prices are rising once again amid new attacks on key Mideast energy infrastructure. That has the price of Brent almost near the highs from a few weeks back, 119 and change. It's at 109 now. So we're off those session highs. European natural gas, same kind of story, was up 20% earlier on. It's settling down somewhat. And the U.S. oil benchmark, for what it's worth, WTI crude in more of a holding pattern, albeit a high one at $98 or so. We're also watching shares of Micron. Those are selling off, although well off their session lows today on that blockbuster quarter. Blockbuster. Very eerily reminiscent of what happened with NVID circa two years ago. We'll talk about what they said and what the trade today tells us about the memory market and the AI trade. But first, let's begin in Washington where President Trump just spoke in the Oval Office. Eamon Javors has the very latest for us.
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Eamon Javers
Eamon hey there, Kelly. President Trump, as you say, is meeting with Japanese Prime Minister Sanae Takeichi at the White House today. She told reporters in the Oval Office this morning that the global economy is about to experience a huge hit because of the Iran war. She also said she came to the meeting with specific proposals to calm global energy markets. In the portion of the meeting that we saw on camera, President Trump acknowledged that the Israeli attacks on the Iranian gas fields came without US Awareness. And he said he's unhappy about that, signaling a divergence of strategies between the US And Israeli militaries that have been carrying out the campaign.
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Kelly Evans
I told him don't do that and he won't do that. We didn't discuss, you know, we do,
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Eamon Javers
we're independent, we get along great, it's coordinated.
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Kelly Evans
But on occasion he'll do something and if I don't like it, and so we're not doing that anymore.
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Eamon Javers
So the president there saying that he communicated his displeasure to Benjamin Netanyahu of Israel. And although Reuters is reporting today that the United States is considering deploying thousands of American troops to reinforce operations in the Middle East, President Trump said in this meeting here that he's not sending troops, quote, anywhere. Now, the meeting with the Japanese delegate is expected to go long today. The White House has scrapped the luncheon component of this visit so they can extend these closed door working sessions and we'll see what kind of readout we can get when the prime minister leaves.
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Kelly Evans
That's interesting. All right, Eamon, for now, thanks. Appreciate it. Eamonn Javers, let's get some reaction and analysis now from our next guests who both say the next few weeks will be critical but for different reasons with the Iran war. One says we can't leave before the job is done, but the other says the longer we stay, the bigger the impact on international energy markets. Let's bring in Fred Kemp, the CEO of the Atlanta Council Council and a CNBC contributor, along with Amrita Sen, who's Energy Aspects founder and director of Market Intelligence. Fred, welcome to you. I find it, you know, a warning sign that the kinds of options that would have been considered ludicrous and off the table a few weeks ago are now being actively discussed, namely things like troops along the Iranian coast.
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Fred Kemp
So, so both things are true that you just said, Kelly, which is the, that you can't cut and run. You have to finish this mission or you're going to head up in the worst of all worlds. And the, the stronger it goes on, the more energy prices are going to go up. There are really two wars going on. One is Israel and the United States on the Iranian regime. And the other is the Iranian regime's war on the global economy. What's changed is because of all of these attacks on Iran's Gulf neighbors, the Gulf neighbors agreed with the President, United States, that one can't cut and run, one can't, one can't reward Iran for being the destabilizing factor. It's again become at a time when it's at the weakest point it's been in last 40 years in terms of its military capabilities, its proxies, its nuclear capability. So I think you're going to see a real tension here between the, the growing rise in oil prices, uncertainties after the strikes of the last 24 hours on the natural gas fields, and the conviction on part of not just the United States, but the Gulf that one can't let Iran get away with this.
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Kelly Evans
But Freddie, what does it tell you that instead of us getting, I mean, the President's post last night was extremely sharply worded whether or not he had a heads up about these strikes. There's a fury he's talking about here, huge, incredible warnings for Iran about us wiping out, you know, their energy production and so forth. That's not the kind of thing that tells you that he's looking for an off ramp here, is it?
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Fred Kemp
I don't think he's looking for an off ramp. I think, I think as long as the Straits of Hormuzza are blocked and they're not really closed, they're just blocked. You know, no shipper feels particularly safe going through, whether or not you have insurance. But as long as it's blocked, I don't think Donald Trump is going to stop his attacks on Iran. It's a, it's a really high stakes game of chicken. And the feeling is the, the more targets that the US can hit, the closer we come to a point where one can open, at least to a certain extent, the Straits of Hormuz and where Iran is going to have to back down. But what you're seeing is something one didn't want to happen, which is Iran ratcheting up. And that's what you're talking about, Kelly, is whether or not the President knew about the Israeli attack on the gas field, which was then followed by the Iranian attack on, on the Qatari part of the gas field. That's certainly where things, where things have ratcheted up to right now. So the question is, how does one actually reverse that?
- [06:59]
Kelly Evans
Amrita, do you want to jump in here and talk about what further impact we could See, especially if it's true on these reports that the main natural gas production of Kuwait could be, or, I'm sorry, of Qatar could now be, you know, 20% of it could be offline for a period of two to three years. Is that right?
- [07:16]
Amrita Sen
So we don't think the timeline is necessarily accurate. And look, this is all new information. We've got satellite data that shows definitely kind of some damage on one train. The other one right now is inconclusive because of cloud cover. But fair to say, two trains have been damaged. Yesterday we had also seen an attack on the gas to liquids plan which would have also reduced LNG production. Clearly there's damage that's going to take a while, could be months, even over a year to fix this. That will only be a certain once we know the extent of the damage, whether it's three to five years. I think that's too soon to say. Having said that, I think it's probably fair that, you know, the market's been expecting an oversupplied gas market. And if that's the case, why pay up for, you know, equipment at a time when prices were going to be lower? Right. So the repair works could be slow as a result of that. But taking us step back, no doubt about the fact that what started with just shipping some infrastructure or like tanks has now become an outright attack on energy infrastructure across the board. And oil prices, if you ask me, are still way too low to reflect the true extent of what is going on and how much production we are shutting.
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Kelly Evans
Why do you think that? It's interesting to hear you say that because it's not. You know, I remember you being much more measured and cautious about oil prices. I just want our audience, they know, but like, you're not the first person to jump on here and say oil price prices are going to shoot higher. So when I hear you say that there may be too low, I mean, I'm struck by that. And what is your feel for what a more appropriate level would be? Because the Wall Street Journal asked a bunch of economists and they said if oil goes to 135 and stays there for a few months. Yeah. Then you're probably talking about recession.
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Amrita Sen
So look, it gets complicated with regards to financial markets, right? Like it's a price discovery problem. What I will say is look at the price of Dubai, right? We're talking about West Texas Intermediate wti, which is for the US But Dubai is your benchmark Asia that has been trading above $150 for the last few sessions. Today is about I think 165. That is reflecting what is really going on in the market in the US the reason prices for WTI haven't caught up is the market is just fearing some, some form of a US intervention export bans which we don't think are likely for crude at all. But you know, that's why there's a fear and that's why people are not kind of pushing prices higher for that. And that's why the disconnect between US prices and benchmark prices in Asia is about $60 right now. But where we the impact as a product prices, diesel jet gasoline is starting to go up on our numbers. You get to about 185 and you stay there for product prices, not crude end product prices and for a few months and then yes, you are going to be in demand destruction or recessionary territory.
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Kelly Evans
All right, Fred, hearing all of that, what would you tell us about kind of not. We're not at the weekend yet. Although are cooler heads going to prevail here? Is this going to come to some bigger fever pitch? First? First?
- [10:07]
Fred Kemp
Well, I think you have to watch the Iran side of this. I don't think the President is going to back off at this moment. There are two to three weeks, although there are people in his administration that think that perhaps one needs to because of domestic political issues. But I don't think he's going to. So you've got two to three weeks. We hear from senior military officials two to three weeks worth of targets yet to hit in Iran. If the straits remain essentially closed for five or six weeks, you could see Brent going up to $150. That really does get into global recession territory if it hangs on for that period of time. And so it really is a question of can they hit enough over time in Iran that the Iranian calculus ends. Let's not forget there are three key officials that were killed this week by Israeli attacks in, in Iran. So the pressure continues on Iran. And my bet would be over time that, that this will end. That will go through a more difficult time. Prices will go up some, but in the end Iran is so weak that something will give at one point or another. You won't end the war, but you'll get the war to a situation where the disruption is such that it's manageable and you can start running the world economy again. But we certainly didn't go into this thinking we to be in threat of global recession. And I think we really have to look at that and see that as a real possibility.
- [11:33]
Kelly Evans
All right, quickly, Amrita, before we go, it's my understanding that even though we focus on wti, it's West Texas, it's the US Benchmark, but it is the case that Brent, which has been much higher, we are showing that spread there. If Brent's around 120, a little bit off that now, that does influence our gasoline prices.
- [11:51]
Amrita Sen
Absolutely. 70% of a product price in the US particularly on the course is basically linked to Brent prices. It's a global market. And that's I was just in D.C. just got back to New York today and I've been saying this to everybody I've been meeting there, that it is not about the US Crude price. It is about the Brent price that impacts products. Right now we have over 10 million barrels per day of production upstream shut in over 4 and a half to 5 million barrels per day of refinery runs, which is what products are. By the end of this month, we will have created 100 million barrels of product losses just across gasoline, diesel and jet. So imagine if that keeps going on, that number just kind of becomes cumulatively larger. That's the biggest shock. It's the products market rather than the crude market.
- [12:34]
Kelly Evans
All right, thank you both, really appreciate it. I'm ready to send joining us there along with the Atlantic Council's Fred Kemp. Now those oil prices and the possibility of a longer conflict are putting pressure on the market again. The S and P is back to its lowest level since November. So that's wiping out nearly six months of gains. But our next guest says look, these tensions are nothing new. These pullbacks are still likely an entry point for longtime buyers. Joining me now is Nancy Tangler, the CEO and CIO at LafferTangler Investments. Nancy, welcome. I was struck by, you know, we wake up this morning and gold selling off and silver selling off and some would have expected those to be more flight to safety. But the commentary I've read is that people are basically piling out of everything else to pile into the energy space for the very reasons maybe that you just heard Amrita laying out. What would you say to investors who are looking at the flip side of this, which is we want to herd into energy and energy related names, maybe get out of some of those other areas of the market right now.
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Nancy Tangler
Well, Kelly, thanks for having me. I think one of the things a long term student of the market knows is that there is, there is a momentum trade that chases what has just worked. And I'm not saying you shouldn't be in energy. We're overweight energy, we have been there for a long time. It's hurt us, it's helped us. But we're more inclined in this environment to take some gains because I think what we know from previous oil shocks is that this will get right sized. I mean, it was just 20, 22 when we were above $120 a barrel. Yep. We saw, you know, it hit the market and it added to inflationary pressures. But the fact is that in a slowing growth environment, the last place you want to be is in cyclical stocks. The right place to be is in the steady growers. And so that's what we've been adding to over recent weeks.
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Kelly Evans
Another example is, you know, the Citrine piece since that was published in the software space that, you know, that again, I give them credit as a piece of writing. Wonderful. Is it investment advice? Well, you know, sign of a top. Maybe the software names are up 11% since then. Do you have a comment on that?
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Nancy Tangler
I mean, I think again what they the market was discounting was that the, you know, that software was being eaten by AI. And in fact, what we've since learned and what many of us knew was that there will be winners and those companies will become stronger. And so if you look at a Microsoft, which we've been adding to in recent months, that's a company that will be able to pivot, increase margins, embed AI in every aspect of their business. And there are, and there are a dozen others, there are also going to be losers. And those are names like Adobe that we exited a while ago, not because we're super smart, but we just didn't see a CEO that was pivoting to the new technology. So eventually they'll probably get it right too. But in the meantime, these present, I don't want to say once in a generation, but certainly once in a few year buying opportunities just like Deep Sea did. And I was on the air with you at that time, on that day and we were buying then too. And it's, it's paid off handsomely.
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Kelly Evans
Right. I mean, look at, you know, we're going to talk more about this in the next block. But the reaction to Micron is that understandable profit taking. I just want our audience to know as well, one of your biggest holdings across your different strategies is lam Research. If I look across, you know, you've got some defense, you've got Wal Mart and Tesla still, but you've got lam Broadcom, Nvidia, Google. I mean, they're sort of the way it sounds like that you're Playing the AI trade.
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Nancy Tangler
Yeah, well, different strategies. So the growth strategies own the high growth octane names. But in our value strategy, which is also our ETF, TGLR, we bought Google about 18 months ago when it was a member of the Russell 2000 value and was left for dead. So sometimes the market's right about those things.
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Kelly Evans
Things.
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Nancy Tangler
But oftentimes in this, in this new world of algorithms, reading the hedge fund, reading the headlines, hedge funds jumping in, what you see are these distortions that could present opportunities for long term investors. So that's where we're focused. We own, you know, we own a number of consumer discretionary names like TJ Maxx and Ulta as well. But amongst our top holdings. You're absolutely right, it is. We are overweight technology in that portion of our portfolios.
- [16:38]
Becky Quick
Yeah.
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Kelly Evans
So let me then, you know, if Gemini's right that you're a check success player, always looking 10 moves ahead. Nancy, please enlighten us. Maybe again, just going back to so big picture for this year. We come in, everyone's overweight, everyone's got high price targets, everyone's going international. Now we're calling all of that into question. Now we have an energy issue that's affecting consumer demand. We are talking about recession. The US now looks like the best place to be relative to some of these other markets. So what's the next 10 moves look like?
- [17:08]
Nancy Tangler
Like, yeah, well, we never left the U.S. i felt like Europe was a trade. It hurt somewhat in the short term, but I think long term this is the best house on the block. And so what you want to be thinking about, and let's also remember that these stagflationary comments, this is not the 70s. I was not investing money then, but I was alive living through it. You know, the average home was spending more than 5% of their income on energy costs. In December it was 1.8%. Energy was half again as much of a percentage of GDP as it is now.
- [17:42]
Becky Quick
So I think what we have to
- [17:43]
Nancy Tangler
do is step back and say high end consumer discretionary is probably going to be okay because the top 20% or 70% of spending, which is not to say I'm not empathetic to the lower 80% because I think energy costs will have to come down. But I think this administration is aware of that. I think the CEOs are aware of that. And if you look at productivity, which is something we've hung our hat on, there's no better place to measure it than in oil production where we're using fewer rigs to produce more oil and that should be able to continue. So I'm pretty optimistic that we will get hurt less by high energy prices and rest of world will get hurt more and that will give us a chance to return to fundamentals as investors.
- [18:26]
Kelly Evans
And then the last thing I want to emphasize in your holdings here is you do have a number of defense names like L3 Raytheon or RTX I guess we're calling it now. You have some exposure on again to the kind of the energy pipeline, GEV and Quanta, you know, one of your larger holdings that we don't talk as much about. So those are I guess the other larger narratives where you're placing your bets.
- [18:48]
Nancy Tangler
Yeah, I guess I really didn't answer your question, Kelly. Those are places where we've been adding and Raytheon and L3Harris were names that we added two years ago and that's how this works. You know, we added to them somewhat but we've been actually trimming RTX in recent months and we will likely be trimming lhx. That is how you make money in the markets. You buy from greedy sell from panic sellers and you sell to greedy buyers. And so that's what we're doing. We're trimming back the winners and we're adding to the names that have been clobbered that we think have potential. We launched a thematic portfolio in at the end of September. That is also where we're making our bets. Space, robotics, nuclear and quantum computing. That's going to change the way we live in the next 10 to 15 years.
- [19:33]
Kelly Evans
All right. And by the way, Q4 earnings are pretty good. I was reading Yardeni this morning. What was the growth, 13% or something? Thing? Yeah, 11 quarters in a row.
- [19:41]
Nancy Tangler
Good.
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Kelly Evans
Crazy.
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Nancy Tangler
The triple plays, Kelly. The ones that were beat, beaten, raised, they got clobbered as well. So that's the opportunity, that's the dislocation in the market. It's not just earnings because they're backwards looking, but it's also guidance.
- [19:55]
Kelly Evans
All right, Nancy, appreciate it. Thanks so much. Thanks, Nancy. Tangler with Laffer Tangler. Coming up, micron paring its 9% drop after that massive earnings beat where revenue nearly tripled as demand for memory soars. Our next guest now sees the stock climbing to 500 but says so suppliers could now end up being the biggest winners. He'll join us next to make his case. Plus, JP Morgan still sees no rate cuts this year, even as Fed Chair Powell admitted it's too soon to know the precise economic fallout from the Iran war? What impact will Warsh have on the committee's thinking if he's confirmed by the June meeting and now people are saying
- [20:29]
Vivek Arya
maybe he won't be.
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Kelly Evans
We'll debate with a 10 year back at 428 and we're watching shares of Ecolab. The Wall Street Journal reporting they're near a deal to acquire the data center cooling company cool IT systems from KKR. The four and a half billion dollar deal and ecolabs trading down about 3% on that. We're back with a whole lot more after this.
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Schwab Announcer
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- [20:54]
Kelly Evans
Oh joy. Another day, another buzz delayed. Look on the bright side, you can finally catch up on podcasts.
- [21:01]
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- [21:02]
Kelly Evans
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- [21:24]
Schwab Announcer
Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24. 7 professional answers and live help and access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more@schwab.com trading men are struggling with
- [21:53]
Dr. Guy Winch
their mental health at some of the highest rates we've ever seen. But most aren't getting the support they need. And that needs to change. I'm Dr. Guy Winch, your host for season three of the Visibility Gap presented by Cigna Healthcare. This season we're focusing on men's mental health, bringing together real stories and expert insight to explore the pressures men face every day and why opening up can feel so difficult. Join us for the new season wherever you stream your podcasts.
- [22:24]
Kelly Evans
Welcome back. As we mentioned, shares of Micron are selling off about 4% today despite blowout earnings last night. And it really doesn't get a whole lot better than this for Micron. Revenue tripled. Nearly tripled, I should say. EPS beat by 31%, guidance was 37% above consensus and their $34 billion revenue guidance for next quarter now exceeds its full year revenue for every year in its history through 2024. Here's what the CEO said about the chip maker's role in the build out this morning on Squawk on the Street.
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Vivek Arya
If you look at S&P 500 tech companies, Micron is among the top 10. Micron is the invisible layer powering AI today and that's reflecting in our strong performance and strong outlook as well.
- [23:12]
Kelly Evans
Our next guest just raised his price target on the stock by 100 to $500 and reiterates his buy rating thing. Vivek Arya, Senior semi Analyst at bank of America. Vivek, so glad you could join us. Not to move past this, but you know people always want the next hot thing and you know what? What they just did isn't good enough. You're talking about the supply chain for Micron maybe being one of the next places to look. So I'd love to hear more about that.
- [23:35]
Vivek Arya
Thank you Kelly. So you know, first things first. Memory is critical to AI, right? There is no AI without a place to store all the data, the model, the weight. So if you believe in AI, you have got to believe in memory. I think what we are really debating in memory is when does incremental supply come on board to compress the margins that are well above prior peaks? I mean Micron reported a quarter with 75% gross margins and guided to a quarter with 81% gross margins, which is higher than Nvidia's gross margins. And the reason is phenomenal demand and literally no supply supply. So where I think today the debate is not about demand per se, it is about when that incremental supply comes on board. And our view is that it will probably take a year plus for that supply to come on board. And then the other point that you mentioned about suppliers, I think the reason they are perhaps more durable places to look for a multi year investment horizon is because how do you create that incremental supply? You create that by adding clean rooms and then by putting a lot more tools in them. So names such as Applied Materials, Lam Research I think are very well positioned for what is beyond when this supply starts to appear in memory and starts to inevitably compress the pricing environment.
- [24:46]
Kelly Evans
It's funny you say that because Nancy Tangler was just on in her one of her top holdings across all of her funds is Lam Research. So say that again what you just said. In order to support the memory build out, you need more rooms that you're filling with more tools.
- [24:58]
Vivek Arya
Absolutely. Today the reason memory Pricing is so high is because there is not enough clean room capacity available. So whatever limited capacity that we have have is being directed away from PCs and phones towards AI and it is driving a very strong pricing environment a year from now as that clean room capacity starts becoming available. And even a Micron has invested in new fab capacity in the us. In Taiwan, you know, we have the Korean memory makers who are investing in new capacity but it is going to take another year. But as that clean room capacity comes online, you're going to have to fill it with tools. So semiconductor company, equipment companies like a Lamb, Research, Applied, kla, they benefit from additional clean room capacity coming on in memory. And also by the way, a lot of the reshoring trends, right? More Taiwan semi fabs, you know, the possibility intel gets into the foundry market. So they benefit from multiple levers beyond just this one year memory cycle.
- [25:56]
Kelly Evans
So what I'm watching, I'm sure you and everyone are and I think it was that Micron announcement this week or last week that they were going to add capacity in Taiwan. We were watching for the market to sell off and it didn't. Those stocks rallied that day. The moment, and it's funny, it's almost like it's less about what the companies say in earnings, maybe probably more about the first time one of these memory companies says we're doubling capacity in XYZ Place and the stock sells off 12%. I mean that might be the moment. Is that the way to think about it?
- [26:26]
Vivek Arya
Yeah, absolutely. And you know, one thing I know it's always risky to say it's different this time, but what is perhaps different this time is is that for the same amount of capacity that you need for AI versus non AI, you need three to four times the number of wafers, right? In past cycles, what used to happen is demand went up, supply went up commensurately or even more and pricing came collapsing down. This time as demand is going up, you need to have three times the amount of supply, right? To counter that. That is what makes the supply demand equation favorable for memory makers for at least another year or so. That is the reason why we felt that that the more prudent thing would be to continue to stick with this for the next year. But inevitably in another year or so, you're right, people will anticipate new supply coming on board and that is sure to compress margins and pricing. And that's the time when I think the semicap equipment trade becomes even more durable for the next few.
- [27:21]
Kelly Evans
Looking for the exact data Point. But I think it was SK this week who said they think there's going to be a wafer shortage till 2030, which maybe gets at what you're talking about. The flip side of that and you know, no one wants to hear it doesn't matter right now. But if you need three times as much wafers going into it, when the cycle turns, does that mean you kind of have that leverage working against you in the other direction?
- [27:41]
Vivek Arya
100% right now? What perhaps saves them for some period of time is that today markets such as PCs, such, such as smartphones are being starved of memory capacity. You know, soon it's very possible even the automotive sector might be starved out of memory capacity. So it's possible that as that initial memory capacity comes online, it just goes to backfill demand that is being lost on the PC and the phone side. So we still think that, you know, there is time for that supply demand to become unfavorable. And then the other thing to keep in mind is the complexity cycle is not stopping. You know, I gave you the three to one trade ratio, three times the number of wafers in Nvidia's next generation Vera Rubin products product. That trade ratio goes to four times, it's possible. And then the future product, that trade ratio might even go to five times or more. So it's not a static cycle. Right. And that's why I think these memory companies are feeling very good that this can be an extended cycle for them.
- [28:37]
Kelly Evans
Yeah, it's, it's stunning. It's really stunning. To look at more revenue in a quarter than the company's ever done in a year is pretty crazy. Vivek, thanks so much. Appreciate it today. Thank you, Vivek. Aria with bank of America. Coming up, is private equities paying commercial real estate's gain? New data shows a staggering amount of fundraising by those kind of commercial real estate funds. We'll talk through the details next.
- [29:03]
Schwab Announcer
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
- [29:32]
Eamon Javers
Before we had ATT business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn an influencer even live streamed the whole thing. Not good for business. Now with AT&T business Wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [29:56]
Kelly Evans
AT&T business Wireless Connecting changes everything
- [30:03]
Vivek Arya
At
- [30:03]
Diana Olek
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- [30:34]
Kelly Evans
Private equity firms are under some pressure amid concerns over private credit and just the general performance of the asset class. But could their pain be commercial real estate's gains? Diana Olek has more in this week's Property Play. I hadn't thought about this one, Diana. Welcome.
- [30:50]
Diana Olek
Thanks. Yeah, Kelly, it's hard to believe it's only been four years since investors fled commercial real estate funds due to fast rising interest rates. And now some are piling back in as they rotate out of that once hot private credit play. Investments in non traded REITs plunged from $33 billion in 2022 to just 5.7 billion last year year, but they are seeing big gains in just the last few months. These REITs raised $593 million from investors in January. That's up from 467 million in December and 416 million in November. All of that according to Stenger Investment Banking Now. Additional data from COSTAR shows investments in non traded REITs have seen gains over the third and fourth quarters of last year. Blackstone's B REIT reportedly had its best inflows since 2022 in the first quarter quarter, the fund raising roughly $1 billion more in capital than it paid out in redemptions. When asked recently on CNBC's Squawk on the street if it could be from private credit, Blackstone's Jonathan Gray did not dismiss the idea. I also spoke with JLL CEO Christian Ulbricht, who said he was already talking with his colleagues about just this. Now for a lot more on this story. It's all in the Property Play newsletter. Go to it now. It's free cnbc.com property play.
- [32:08]
Kelly Evans
Thank you very much. It's funny. It's not funny watching ping pong from one industry under pressure to the next. And maybe they'll be back to commercial real estate soon. But anyway, for now, thanks. Appreciate it. Diana Olek to Dom Chu now for the CNBC news update. Hi, Dom.
- [32:20]
Dom Chu
All right, Good afternoon, Kelly Ferrari says it will temporarily suspend deliveries in the Middle east as the war in Iran continues. The luxury Italian carmaker said it is monitoring developments and the potential implications to its business. Iran attacked more energy infrastructure sites on Thursday after Israel targeted a major Iranian gas future field on Wednesday. Metal Platforms announced today that it is beginning to rely more on advanced AI systems to handle content enforcement and moderation related tasks on its platforms. The company said AI will be used to do things like catch scams and remove illegal media. Meta said the process could take a few years, but noted they will not completely rely on AI for monitoring content. And Netflix is planning a Cage Demon Hunters world tour, according to a source familiar with the talks. The streamer is looking to capitalize on the animated film's success by staging a live show with original songs from the film. Netflix's most popular movie took home two Oscars on Sunday. Bloomberg was first to report on the talks. Kelly, I know that my daughter has been seen humming golden around the House. I'm sure she'll want tickets to that show if it does become a reality.
- [33:31]
Kelly Evans
Don, thank you very much, much, Tom Chill. Coming up, the great rate cut debate. JP Morgan still sees zero cuts this year. There was, that was a call a while ago. They're betting February's weak jobs report was a one off. Will the effects of the Iran war force the Fed to adjust? We'll check in with Mike Faroli about that next. With the yield curve at 42 basis points, the lowest it's been in 11 months. We're back in a moment. The Fed is still projecting one rate cut this year despite despite stubborn inflation and the recent surge in oil prices. Though Chair Powell notes there was a meaningful amount of movement toward fewer rate cuts by people when talking about their projections. My next guest has said since January there will be no more rate cuts this year and says yesterday's commentary only reinforces that. Let's welcome back Mike Feroli, the chief US Economist at JP Morgan. Mike, it's good to see you. Yeah, I mean, at this point the market is quickly coming around to where you guys are. So, so it's just a little weird to see the pipeline inflationary pressures. I mean, PPI yesterday was horrendous. The PC core in January was 3.1. So I just curious for your take on that.
- [34:39]
Mike Feroli
Well, look, I mean our, our position all along has been that Growth books okay. And inflation is high. I mean as you mentioned, we're a full percentage point above where the Fed wants inflation to be. And in addition, we've also been thinking that the neutral interest rate is probably higher than the Fed thinks it is and they're moving in that direction as we saw yesterday. Meaning that policy maybe isn't as restrictive as we thought. Now obviously the conflict in the Middle east adds a whole new wrinkle to that. But I think certainly the conditions that prevailed before the war or whatever we're going to call it, you know, motivated a policy rate that's unchanged.
- [35:19]
Kelly Evans
One more before I get into a juicy issue regarding the chairman, but the question would be, so could this be kind of a, is it should we view this as maybe a doubly good outcome or doubly bad? The doubly good outcome is inflation's not going to be that bad. Growth is going to be okay. The labor market and you know, six months from now we'll look back and everything's fine. The doubly bad one is we do have a lot of sticky inflation. Consumers are going to be really frustrated, gas prices are going to be a hit and growth is more stagflationary. Which of the two camps are you in?
- [35:51]
Mike Feroli
Look, I mean we have an inflation problem, but it's not that intractable. And I do think that Chair Powell, you know, is mostly right when he says a good portion of the inflation that we're seeing or have been seeing is due tariff pass through which should fade over time. That's, you know, that being said, I think the Fed probably has to adopt a pretty cautionary stance here given that as had been remarked several times yesterday, we've been running above target for five years and so that really risky anchoring inflation expectations. But overall I think the picture, you know, even if requires means less rate cuts, I think it's still a pretty favorable picture when we look at how resilient growth has been an inflation story that, you know, probably should get better over time.
- [36:33]
Kelly Evans
Why do you think the labor market weakness is passing? You know, this is one area where even those who don't think it's like a downturn would just say immigration so low, you know, what's going on there.
- [36:42]
Mike Feroli
If you're referring to the February jobs report, I think you have to average that with the January jobs report. And when you do that, you're looking at average job growth that's going to be, you know, probably something that's the new normal which is 0 to 25,000 per month now, around any month, they're going to have a lot of volatility. So we're going to probably see going forward a lot more negative payroll numbers. Back in the day that was quite notable. But I think going forward we should probably, probably expect to see one of those every couple of months.
- [37:13]
Kelly Evans
So let me turn to this, this kind of new it's not a conspiracy there. I guess it's a real theory around, around the Fed chair. You might have seen this from the Washington Post last night. They said Fed staff in recent weeks have come to believe that the White House might attempt basically to declare sitting Fed Governor Stephen Myron as acting chief come mid May. And they Jarrett Seberg at TD Cowan act we believe Trump always preferred Myron who wants to more aggressively cut rates. And this would explain why the president hasn't more or the White House hasn't been working harder to confirm Warsh. And I bring this up because if it went in this direction, I wonder if the market would start to react differently and say, well, yeah, maybe we should put a couple of cuts back on the table.
- [37:55]
Mike Feroli
Yeah. So my understanding of the law is that the president can't do that, make him either chair of the board without the Senate or chair of the committee without, without the consent of the members of the fomc. So I suspect that's why Powell was pretty and Powell is a trained lawyer. I'm not he was pretty confident yesterday when he said that if a new chair isn't confirmed, he'll, he'll stay on board and continue to act as chair pro tem.
- [38:20]
Kelly Evans
It says the president believes he has the power on May 15 to elevate Fed Governor Steve Meyer in his acting chair rather than have Powell continue that role. But you're right, it might work out that Powell is a lawyer here and would know exactly how to deal with this. But this could this be an area where the action comes and then as we've seen with other actions by the administration, they wait for the legal challenge and in the meantime he's de facto in charge.
- [38:40]
Mike Feroli
Well, I mean they took action against Governor Lisa Cook and she's still voting on the committee. So I suspect Powell, you know, I think he's pretty secure in his job certainly through, you know, through June and potentially if he chooses to chooses so through 2028.
- [39:00]
Kelly Evans
Imagine that. Mike, thanks very much. Appreciate it today.
- [39:04]
Mike Feroli
Good to see you.
- [39:04]
Kelly Evans
Mike Froli, JP Morgan still in the zero cuts camp. Coming up, a very personal story squawk box is Becky Quick joins me here on set to Spotlight families dealing with rare diseases, including her own. And the scientists, advocates and innovators who are fighting to change their futures. The exchange back with more after this. Tonight, a deeply personal story from one of our own. In a special one hour documentary, Squawk Box's Becky Quick opens up about her daughter's rare disease and connects with others determined to rewrite the rules of medicine. Here's a sneak peek.
- [39:49]
Becky Quick
I've got a pretty thick skin, but the idea of putting my daughter out there was not a thrilling one. I'm Becky Quick. I'm a morning anchor at cnbc, Squawk Box. And I am the mom of Kaylee Quayle. She has a rare genetic disease.
- [40:07]
Kelly Evans
Happy birthday. It was the first birthday party.
- [40:11]
Vivek Arya
There was something so wrong with it.
- [40:14]
Mike Feroli
She couldn't blow out the candle.
- [40:15]
Becky Quick
You start rolling it back and it's like if she can just walk, if she can just talk, uh oh, she can just find a friend.
- [40:32]
Dom Chu
We have this platform, we have the money.
- [40:36]
Mike Feroli
Like, we gotta, we gotta go $10 million.
- [40:40]
Dom Chu
I remember Jen hugging and said, we're
- [40:42]
Kelly Evans
gonna find a cure for Lucas. It's all a miracle. Susanna has a mutation that kills the nerves in her whole body. The referral pattern is contributing to a delayed diagnosis.
- [40:56]
Becky Quick
What did you think when they brought up the idea of gene therapy?
- [40:59]
Kelly Evans
I had this feeling that there was something to it. Even though it seemed so far fetched. Did you hold your head up?
- [41:04]
Eamon Javers
Today we finally pushed, pushed very hard
- [41:07]
Mike Feroli
to get genetic testing on Andrew.
- [41:10]
Kelly Evans
I'm so fortunate that I was able to hold him in my arms when he passed away. Thank you.
- [41:16]
Becky Quick
What does it cost to save someone $1.2 million. I hope I can get the cost
- [41:22]
Kelly Evans
down to somewhere around $700,000.
- [41:24]
Mike Feroli
Life Terry chose to proceed.
- [41:26]
Dr. Guy Winch
And that's a scary decision for any family to make in any clinical trial.
- [41:29]
Becky Quick
The science, the technology is exploding.
- [41:31]
Kelly Evans
We're in the golden age of medicine. We're not on the cusp anymore.
- [41:34]
Becky Quick
And the biggest challenge is Becky, our man made. We're all kind of desperate. What can we possibly do to help our kids and help other people?
- [41:43]
Kelly Evans
I still deep down believe that Kaylee
- [41:46]
Mike Feroli
was put on this planet for a reason.
- [41:48]
Becky Quick
I do think Kaylee would want to help her friends and people she hasn't met yet because she is a good, sweet girl.
- [42:01]
Kelly Evans
This makes the no crying thing pretty hard, Becky. So in doing. And you talk about how like it's a tough decision to kind of. But then look at all those other stories and all these people, are these people now coming out of the World. We've had this big event and there's so much to learn. Everything that you just described there, everyone is dealing with something so different and so expensive and so overwhelming.
- [42:21]
Becky Quick
Yeah, I think John Crowley probably said it best when he said this is really the golden age. There have been developments for decades that people have been working on, and the science and the technology have finally gotten to the point where we understand so much more. Part of that is sequencing the genome. Right. And understanding what the root causes of some of these things are, instead of just seeing the surface level issues that are there, understanding that there's something in the DNA that can be fixed potentially. The idea of gene therapy is huge. And you saw baby KJ and his family, the Muldoons, who are talking about a successful gene therapy that just took place at chop. The first child to undergo something like this. There are things called ASO therapies that are working to try and either up regulate or down regulate proteins to maybe again get at some of these root causes instead of just looking at the surface level issues on these things. And that's what's so exciting. And part of the reason that we're doing cures is there's so much that's happening right now, but all of these fantastic things that science can do at this point. It takes a long time to get from the lab into the patients. And that's where you see these parent advocacy groups, because the parents are the ones who are advocating the most to try and make changes happen, to try and get the FDA to pay attention to what's happening, to try and get investors to say, hey, there is something that can really be done here. And guess what the beauty of CNBC is. You can show that this is investable. There are ways to actually make money while you're doing good with some of these things.
- [43:45]
Kelly Evans
Has the needle even since when you first found out about her diagnosis?
- [43:50]
Becky Quick
Definitely it was six and a half years ago when Kaylee was diagnosed. At that point, there were 700 people who had been. Or almost a thousand people, I take it back, who had been identified with syngap. Right now it's 1700 people. So part of it is finding more and more of these. And you realize that first of all, the diseases, there are more people, even though they're rare, there are more people who have them than we realized. It's expensive to get some of this testing done, done. It's hard to make sure doctors aware of some of these things. And then, yes, once you have larger patient populations, once you can identify these things you can try and get at the root cause and do get into drug development, get into therapies on some of these issues.
- [44:24]
Kelly Evans
And do these become, you know, publicly traded? I mean, does it rise to that level? And we keep hearing about, you know, because it's still a targeted issue. You know, 1700 people is still, you know, a small number.
- [44:34]
Becky Quick
So you saw Stan Crook. He was the gentleman who I asked, how much does a couple cost to save a life? He said $1.2 million. He's hoping to get it down to 700,000. He runs nlorem. It's a not for profit organization. But before that he was running Ionis Pharmaceuticals, which is a major publicly traded company. So he was doing ASO therapies there. Had some parents come to him for very micro rare diseases where there's five people, maybe 15 people who have a disease like that. He couldn't do it at Ionis and realized what, wait a second, I can just make this myself, which is why he started the nonprofit. But a lot of times what you'll see with rare disease is if you can solve the rare disease, maybe you can get to larger issues. It's happening with cancer on some of these things there are kind of like Alzheimer's diseases that start very young in children. And they're thinking if they can target it there, maybe they can get at a root cause to help Alzheimer's patients overall. So there are larger markets. The other thing is if you can resolve, resolve one issue, one rare, rare disease that seems to stand alone, but if you find a way that's a platform, then you get several of them, you have a much larger audience.
- [45:40]
Kelly Evans
All the more reason for people to be aware of these connect and be talking to one another. Thank you for opening up about all this, Becky. Thanks. CNBC Cures Defying Rare Disease premieres tonight right here at CNBC at 7pm Eastern. Definitely don't miss it. And there's much more on the exchange when we come right back. Open Air wraps up up its pilot project of running ads at the end of the month. Julia Boorstin has more on the ad industry's reaction so far. Julia?
- [46:05]
Julia Boorstin
Well, Kelly, some ad industry insiders tell us they are frustrated with the slow pace of the rollout of OpenAI's ads. According to Sensor Tower estimates, ChatGPT ads have rolled out to about 5% of daily mobile app users, up from just 1% at the start of the month. But sources tell us OpenAI required an unusually high financial commitment for for a test as much as $250,000 per brand and is deploying those investments so slowly they're unlikely to spend all of it OpenAI telling CNBC that the slow rollout of the ads program is intentional and they're, quote, encouraged by early signals from users and participating brands. Now a range of industry insiders tell us that the caution is a good sign of OpenAI building a sustainable ad business. The frustration stems from eagerness to see how the ads are working, working to be able to plan AI spending for the year, and one of OpenAI's partners on the test Dentsu telling us, quote, we're eager to partner with OpenAI to further test, learn and evolve the offering. When user intent is precise, brands with focused offerings and tailored messaging are best positioned to deliver relevance and value in the moment. Now the opportunity here remains massive Truist projects OpenAI will grow its AI ad business from less than $1 billion this year year to over $5 billion in 2028. But OpenAI slow rollout may advantage Google, which will sell an estimated $252 billion in search ads this year. Google has not yet rolled out ads in Gemini, but it does sell ads for searches that do include an AI overview.
- [47:37]
Kelly Evans
Just use Gemini to avoid it for now. Julia thanks. Power Lunch is up next.
- [47:43]
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