In short
Meta’s stock selloff after New Mexico and Los Angeles penalties over child safety; implications for Section 230 immunity and future big-tech litigation. The show also covers rising rate-hike odds amid inflation/energy pressures, plus other market movers (Waymo robo-taxis, Brown-Forman deal talk, airline TSA shutdown impacts, private credit risks, and final trades).
Guests (backgrounds)
- Glenn Cohen, Harvard Law School professor specializing in law/policy; discusses Section 230 and tort litigation precedent.
- Terry Monis, ICG Advisors co-CIO; former credit-cycle practitioner focused on private credit underwriting and fund liquidity risks.
Key claims
- Meta’s “tobacco moment” analogy: potential platform redesign and AI/product changes, not just warnings.
- Section 230 immunity line between product design (e.g., infinite scroll) and content is central; Meta likely appeals, possibly to Supreme Court.
- More litigation likely beyond Meta/YouTube (Snap/TikTok previously named; settled after adverse Section 230 ruling).
- Private credit may avoid “blowups” but faces “great disappointment” from redemption-driven liquidity and overpromised returns.
Notable examples
- Meta down ~8% day; nearly $300M in penalties; ~$150B market-cap wiped in days; “collars” used to reduce exposure.
- Waymo hits 500,000 paid rides/week; Uber down similarly.
- Brown-Forman up ~10% on reports Pernod Ricard considering a bid.
- Airlines pressured by jet fuel doubling YTD and TSA staffing absences/quit rates during DHS shutdown.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOMeta's Stock Decline Analysis
1:44 to 4:13
Discussion on the significant decline in Meta's stock and its implications.
“falling nearly 8 % today, its worst day since October.”
Responses to Meta's Challenges
4:13 to 6:40
Panelists share strategies and viewpoints on Meta's market situation and future.
“There are investor concerns for a host of reasons.”
Legal Implications and Future Outlook
6:40 to 10:18
Discussion with Professor Cohen on the legal challenges facing Meta and potential outcomes.
“Think about how many users are across these platforms and what percent of people were smokers, you know?”
Investor Sentiment and Market Reactions
10:18 to 14:06
Exploring how the recent events affect investor sentiment towards Meta.
“It's been a bad week for Meta for sure and for YouTube to a lesser extent.”
Public Health Perspective on Social Media
14:06 to 14:40
Explore the framing of social media as a public health issue and the slow governmental response.
“When it comes to governmental action, though, I would not hold my breath.”
Investor Sentiments on Social Media
14:40 to 15:43
Understand the emotional and personal challenges investors face with social media stocks.
“Professor Glenn Cohen of Harvard Law School.”
Impact of Social Media on Youth
15:43 to 16:54
Discuss the implications of social media usage on young people and parental concerns.
“But if you think about parent like the cutoff at 13, I don't know if you're a parent.”
Market Trends in Memory Stocks
16:54 to 19:35
Analyze the performance and market sentiment surrounding memory stocks like Micron and Sandisk.
“Meanwhile, shares of Micron down another 7 % today.”
Geopolitical Impacts on Oil Prices
19:35 to 23:05
Examine President Trump's social media announcement and its implications for oil prices and negotiations.
“saying he is pausing attacks on Iranian energy plants for 10 days.”
The Fed's Rate Hike Chances
25:05 to 28:00
Delve into how rising inflation forecasts are influencing Federal Reserve decisions.
“Yeah, but to me, I don't know that it really means much.”
Show all 19 chapters
Rate Hike Scenarios and Market Dynamics
28:00 to 30:28
Discussion about potential scenarios affecting rate hikes and market positioning.
“And their dependence on where they get it from, of course, is conflicted.”
Analyzing Bank Stocks and Interest Rates
30:29 to 31:36
Exploration of the impact of interest rates on bank stocks and market movements.
“We hit 4 percent, actually, in the two-year yield.”
Airline Stocks and DHS Shutdown Impact
33:44 to 37:56
Discussion on the effects of the DHS shutdown on airline stocks and travel sentiment.
“The Nasdaq leading the losses down nearly 2.4%.”
Concerns in Private Credit Markets
37:57 to 41:48
Insight into the risks and dynamics in private credit markets and investor behavior.
“and I wonder how much of this is going to end up being denied because you can't change.”
Bank Exposure to Private Credit
41:49 to 42:00
Exploration of banks' exposure to private credit and its implications.
“And it's going to be the great disappointment, unfortunately, for a lot of these retail investors.”
Bank Exposure and Risk Management
42:00 to 43:58
Discussion on banks' exposure to non-depository financial institutions and the impact of risk in the current economic climate.
“You know, our banks have a lot of exposure, nearly, what,$2 trillion or something like that.”
Waymo's Major Milestone and Market Impact
44:14 to 45:49
Analysis of Waymo achieving 500,000 paid rides per week and its implications for competitors like Uber.
“Waymo crossing a major milestone, hitting 500 ,000 paid rides per week.”
Final Trades Discussion
45:49 to 46:35
The hosts share their final trades and investment strategies based on the evening's discussions.
“It was a nice, tight little group tonight.”
Final Trades Discussion
46:42 to 47:08
The hosts share their final trades and investment strategies based on the evening's discussions.
“You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion.”
Transcript
Automatic transcript. May contain errors.0:00At Edward Jones, we believe rich is more than caring about the latest and greatest. It's also taking care of what gives your life meaning. That's why your dedicated financial advisor meets you where you are, with personalized financial strategies that help protect what matters, so you can preserve your progress while creating a path forward. The key to being rich is knowing what counts. Let's find your rich together. Edward Jones, member SIPC.
0:30Melissa Lee:Are you as confident as you should be when it comes to growing your business? Is your strategy ready to execute today? If cash flows aren't where they need to be, growth could be at risk, especially in the eyes of your investors, board members, and the business press. But when your business is operating in top shape, you've earned the right to grow. EY Parthenon can help you reimagine your business and execute a game plan for long-term growth. EY Parthenon. Solutions that work in practice. not just on paper.
1:28maker Brown Foreman gets his buzz back. And the RoboTaxi rivalry heats up the numbers out of Waymo that may be pressuring shares of Uber today. I'm Melissa Lee coming to you live from the studio of the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, and Dan Nathan. We start off with that massive drop in shares of Meta, the social media stock, falling nearly 8 % today, its worst day since October. It is now down 15.5 % in March, making it the worst performing MAG7 stock this month. The most recent weakness coming as juries in New Mexico and Los Angeles handed down penalties totaling nearly$300 million, ruling Meta failed to adequately protect children using its platforms.
2:08It's a relative drop in the bucket for a company that brought in more than$200 billion in revenue last year, but the news has wiped out nearly$150 billion from Meta's market cap in the last three days. On top of that, Meta also cut several hundred jobs this week across its reality labs, Facebook and other divisions. So what is next for the stock? Karen, I go to you first. Meta is a large position for you. It is. It's no longer the largest, a combination of reducing some exposure here today. You know, I didn't like this back to back news. The first one sort of thought was like this one. I think it's going to be pervasive.
2:46I don't know how it ends up. So there's the big uncertainty of ultimately where does this end up? We don't know. And then I know we'll have a guest on later talking about 230 and protection there and how could that survive or not. That's really important. But also, this used to be a different model company. We talk about this all the time, how asset light it was. And that is no longer the case. Hopefully, with the massive spend, we'll end up being a decent return. But maybe it won't. And so, you know, Google is also affected by the same thing. But YouTube, as a proportion of Google's revenue, is significantly, very significantly smaller.
3:28And so I don't weigh that nearly as heavily. But so I try to think about, all right, if I owned none, would I own some? Yes, I would here, but I would not own as much as I had going into today. Presumably it's because the valuation has gone to a point where it is attractive. where the risk reward is interesting, but I wouldn't own as much as I had going into today. So I had to, and I did that through collars. But so this was not great. And I don't think it's going to clear up for a while. Just going back to Google for one second, do you remember how long all of the litigation and the remedies hung over Google's head and they ended up with that very good outcome?
4:06That could happen here, but I don't know. I think it was just prudent to be smaller. Yeah. I mean, there were issues with the story going into the verdicts already. Right. There are investor concerns for a host of reasons. Decline started well before this week, Tim. Well, and so the question is, is there any reason to go buy it? Not necessarily. Is this met as tobacco moment? Yeah. Who knows? But I do think that's the issue. The issue is no it's not going to get away from you on the upside, even when you look at the trailing 12 months. And this thing is now around, I don't know, 17 times, Karen, something.
4:4318. Yeah. Below market for sure. Valuation. And yes, I think long term, you know, without being a legal prognosticator that this is probably going to prove to be a pretty interesting moment. But I don't know when when that turns. And I think we get back to also just the performance of the broader mega cap tech companies today. It wasn't just Google. There was a lot of weakness. Obviously, we're going to talk about a mark that had a lot of weakness. But I think you can find flaws in the story in a number of these names. But most importantly, it's just these are no longer cash machines.
5:18Melissa Lee:Yeah, I think going forward, it's not about that business that you just mentioned, that$200 billion in revenue. We know where that comes from. I think you have to think of this company relative to the other hyperscalers right now. And so you think about Llama, and that's their meta-AI model. It is a consumer. It's not like you can compare this to Claude and what's going on there. It is open source, right? But here's a company that's spending hundreds of billions of dollars, and they don't have a cloud business. They don't have Azure. They don't have AWS, you know, and they don't have GCP. And so when you think about this valuation, I think it's kind of discounting some of that.
5:53Melissa Lee:Because, you know, over the last five years in, you know, Metaverse, Reality Labs, these have been misfires. This has been poor execution. But here's the good news for them. I mean, there's going to be a lot of development on top of this open source model. if they could get it right. And then the other thing is they have two platforms that have over 3 billion monthly active users. 3.6. What's that? 3.6. Yep. Amen. I mean, like, you know, and then they have one with like two. Instagram has like 2 billion. So, you know, they're ultimately just going to get it right because of that user base, right?
6:23Are you bullish?
6:24Melissa Lee:No. I mean, like, listen, I'll be really clear. I'm not happy about anybody who lost money if you're a viewer of this. It makes me happy that there are repercussions for having this sort of behavior across a platform, knowing that they, you know, Tim used the term tobacco moment. I mean, you could make the argument. This is so much bigger. Think about how many users are across these platforms and what percent of people were smokers, you know? I mean, like, if you really think about it. So this is going to be a vice stock, in my opinion, you know? And I think Karen's point about YouTube, it's really not a social platform, you know, for all intents and purposes.
6:56Melissa Lee:I mean, it is an advertising platform. But, you know, I mean, I just think that meta couldn't go low enough for me right here. And hopefully you're all collared up. I mean, I think tobacco moment, it's hard to make the direct comparison, obviously. I mean, their harms are being caused for. Well, it's litigation overhang. It's litigation overhang, right? But for this particular story, for the meta story, we're talking about not slapping a warning label on the side of packages. I mean, we're talking about a potential redesign as one of the remedies, a redesign of the platform. The repercussions not just of Section 230, but of how they design and sell their AI products.
7:32I mean, there are all sorts of other things that are embedded in sort of this question of whether or not they have to do something to address this in their business model. Is it going to work? How long? Right. What happens in the interim? I don't know. I don't have to answer all those questions. And one other thing that's not delightful, but it's not a huge problem, but I don't love it. This used to be a cash rich balance sheet and it is no longer. I mean, it's fine. Totally fine. But so this evolution lately is it's it's it's somewhat troubling. However, it is an extraordinary business. I do think they have the resources to work hard at it to fix whatever it is.
8:09They've done that every time, whether it was remember with the crisis over mobile, they're not getting it. They're not they're not going to get it. They got it. Clearly, they got it. So I don't think you could just say, all right, met is toast. But I had a leg. So also, you know, when you look, at the blame in terms of the damages. It was 70-30, so it makes meta look like 70 percent the bad guy or, you know, more than two times as bad as Google. You know, the percent of their audience that's in this age group that at least has been focused in on is the analyst community has done a great job on this and seems to know that it's somewhere in the mid single digits.
8:46Therefore, it's again, you can put it in perspective and that ultimately there probably have been some plans to redesign, redeploy. I mean, and then you get back to the other thing is where else are you going to go if you're an advertiser? Seriously. I mean, I don't I mean, and I know, you know, around the elections and in Trump 1.0 and there was a lot of stuff that seemed as if advertisers were going to go in the other direction. They never did. They never have. I'm not saying they never will, but I don't know what else they're going to do here.
9:16Melissa Lee:Yeah. If you were playing would you rather? I mean, and you think about Google, right? Well, we're not, but I guess you are. I mean, she's saying if one, we're doing that. I mean, Google is such a slam dunk relative, on my opinion. Like, we just talked about how many platforms they have with multi-billion. I mean, Google has that. Gemini is embedded in all those products. And it's also, you know, again, has that cloud. And when you think about the model, which really caught up, there has not been a single good thing that I've heard about Llama and some of these other. I mean, and again, you could say, well, that's what's going on with Google maybe two years ago with Gemini.
9:48Melissa Lee:But I just think if you're thinking about these different platforms, if you're thinking about the integration of the models and how they're going to monetize them, you know, for all intents and purposes, Meta.ai could cannibalize to some degree some of that Facebook ad spend. So that was the big knock on Google for a couple of years. And no one really made that argument for Meta, but it'll be interesting to see how that plays out. All right. For more on these verdicts and the precedent they could set for big tech going forward, let's bring in Harvard Law School Professor Glenn Cohen. Professor Cohen, great to have you with us.
10:15Thanks for being with us. Thank you for having me. How do you think about this in terms of precedent setting? It's been a bad week for Meta for sure and for YouTube to a lesser extent. On the one hand, we have this very large verdict in New Mexico and there's more to come in that case regarding public nuisance. And then we have this one result in the Los Angeles case, but that's one of several thousand pieces of litigation that are being consolidated in a bellwether. A bellwether is supposed to give you a signal. It's not a great signal for Meta. So you think there's more litigation to come? I mean, it's interesting because, you know, the stock reaction to the news for the two verdicts was pretty swift when it comes to Meta in particular.
10:56But the Wall Street community seems to want to defend Meta still and look through these cases and say these are small amounts, that there won't be further cases pursued because the payouts were so low that not many other plaintiff's attorneys will want to join the effort. The payout is not worth it. How do you see it? I think the$6 million payout split between the two companies is significant enough to have people bring litigation. It's also going to increase the number demanded on settlement. Now, in Meta's defense, one argument they made that was rejected by the court, and the reason it got to trial, was they said they were immunized by Section 230.
11:33And there is this question about where the line between the design of the product, like something like infinite scroll on the one hand, and content is. And that line is one that's going to matter a lot for immunity to lawsuits. And I expect them to appeal that and maybe even go all the way to the Supreme Court. So they may lose a bunch of these cases and ultimately get a ruling that Section 230 immunizes it and does the damage. So, Glenn, Tim, first of all, thanks for joining us. It's a fascinating topic that you can opine on. Maybe who else is vulnerable here, especially, again, hiding behind Section 230 immunity?
12:08because this is something that probably a handful of companies that are north of a trillion dollars in market cap could probably have some exposure to. Do you think this spreads beyond these two? Yeah, well, I mean, Snap and TikTok were originally named in the Los Angeles case. They settled out. Snap, I think, because the liability for them, they're a small enough company that it's a significant number. TikTok, a little bit more complicated to understand exactly what they're thinking. But once they got a bad ruling on Section 230 from the judge, they decided to settle. I think those two companies, though, are going to be susceptible to a lot of litigation going forward, and certainly Meta and YouTube as well.
12:47Professor, if they were to hire you, Meta were to hire you, and you were to agree to take the job, and they were to say, help us get in front of this entire situation, how would you advise them to do that? So I think they have two routes. One, they want to win in the courts on the Section 230 arguments, and they're going to make those arguments on appeal. They're also going to push back on causation, about questions about whether this caused it on the one hand. But in terms of their public facing and in terms of the business story they want to tell, I think they want to tell a story about what they've been doing to make this safer for these populations and to talk about changes to features that they're making and why they take this seriously, because they don't want to look like public enemy number one when it comes to social media addiction.
13:26Do you think this will change the way society views big tech? And I ask that question not because it's an interesting philosophical one, because it is. I mean, we are a business news channel. So I want to sort of understand whether or not you think there will be more willingness, increased willingness for companies to go ahead with this and also to press the representatives in Washington to do something about it so there could be other guardrails being put in later on by the legislative route as opposed to just through the courts. So two answers. One is just to say in the public consciousness, I think you brought this up earlier today in your broadcast, the fact that we're putting them alongside tobacco as a product is not a place they want to be.
14:05And this idea of a public health problem with like opioids, gambling, tobacco, and now social media is a very different framing from the one we've had before in the public consciousness. When it comes to governmental action, though, I would not hold my breath. I think Congress has been very slow to act in this space. I think it's complicated to actually rewrite the law in a way that will satisfy their constituents. And I think there's now an argument that if tort law is recompensing and giving punitive damages, why does Congress need to stop in? So I think some will be dissuaded from acting and rather have it play out in the courts.
14:36Glenn, great to speak with you. Thanks for your analysis. We do appreciate it. My pleasure. Professor Glenn Cohen of Harvard Law School. So as an investor, how do you think about our conversation?
14:47Melissa Lee:Well, it's hard. You know, I have this blind spot, and it's going to shock you guys. I sometimes can't divorce some personal feelings from investing. No, really? But this is one that I've just really disliked for a very long time. And, you know, I'm off every single one of their products. I will never be on another one of their products. I think the damage that they have done to our youth, you know, I have kids. They're in college. And I look at this behavior, and I just can't believe it. I just think about, like, how much time they spend just doom scrolling, doom scrolling, doom scrolling. And it really is.
15:17Melissa Lee:I mean, it's one of the worst things. And I'll just tell you personally, because I know you all care. I mean, I am off every single social platform, and it's one of the best things that I've done in my life over the last few years. And I think that there is going to be some sort of movement. I believe this. I'm going to start it right here. No, I'm just kidding. I'm not kidding. I mean, like, I think it's going to be like, you know, when you think about young kids, I think the parents are going to think a lot, lot more careful about this than they were, let's say, 15 years ago. Well, that's why, I mean, the idea that it affects a small percentage of its users, that's fine by the numbers.
15:50But if you think about parent like the cutoff at 13, I don't know if you're a parent. I don't know if you say, OK, you're 13 now, so go ahead. You know, you think about it in an entirely different way, perhaps. You know, again, parent of two kids. And it's probably until they leave the house going off to college that they have that freedom to not have me care about what they're doing on the Internet. And I think as we're talking about, it means that they're going to have to change the products. And that's going to be part of what Professor Glenn said is getting out in front of it and trying to change the narrative a little bit.
16:21What does that do to the advertising business? That's really what it comes down to. And I think they will find a way to have this be, you know, less offsides. And social media has been a question and frankly, really going all the way back to things that they have. They have been in the eye of the storm so many times for things like this. And yet the company got to be the third largest company in the world until, I mean, the chart looks awful. I don't think you have to buy it here. Meanwhile, shares of Micron down another 7 % today. It's six straight day of losses. The semi-stock has now dropped 23 % since reporting better than expected earnings last Wednesday.
17:03Other memory names down in Sympathy. Sandisk losing 11%, though it is still up more than 150 % this year. There's this notion, you know, Alphabet releasing TurboQuant, the compression algorithm that's going to reduce the amount of memory. that is needed to power LLMs. That's an interesting one, but the counterpoint to that is, okay, fine, now you can do so much more with that extra memory you're not using to power that LLM. I just feel like the run-up was so enormous, and once the sort of sentiment changed a little bit, we saw it with Micron's earnings, really good, didn't matter, that the underlying story is still there, But now all of a sudden people are afraid of, okay, boom and bust, which they weren't.
17:48And maybe that's just because, you know, the VIX is higher. The world seems a little more, you know, treacherous for investors. I don't know that what happened today. I don't know that that really changes anything. Sentiment changed.
17:59Melissa Lee:Yeah. And the one thing is, like, people, like, were wrong on NVIDIA for a very long time, myself, because we were fairly certain that competition was going to come, right? Whether it was Custom Silicon, a whole host of other things. And, you know, a lot of their customers were looking for second sources, right? And then you think about TPUs from Google. This is why the stock NVIDIA has gone sideways for six or seven months. I mean, like, that is it. You know, I mean, like, and now we see it from everywhere and the stocks aren't acting well. You know, like, like Broadcom was supposed to be a big competitor.
18:29Melissa Lee:Right. And so, like, at the end of the day, I think that to your point about Micron, it ran up 30 percent in the print. Now it's down 20 some percent or whatever. There's just very few ways at this moment to express this sort of trade. And I think they're going to have to be another sort of technological breakthrough that causes another leg higher for all of these names. So I wouldn't be surprised if Micron is down 40 percent or something like that. Sandisk at some point will probably be down 50 percent from those recent highs. These things really need to get shaken out. And the sentiment has to get much poorer because we know this.
19:00Melissa Lee:The technology is great. I mean, you know, the worst version of this technology was the one you just used. OK, it's only getting better. But there's going to be commoditization of the models and then, I think, a hardware that goes into it. I just want to quickly point out that the semis, which include memory, and this was my most important trade of all time yesterday because we're never no hyperbole on the show. Maybe is actually the underperformance today in the last few days, significant underperformance, and maybe is breaking that uptrend of relative outperformance. This is something to watch.
19:30It was down 4.5 % on semis. All right. Meantime, President Trump posting on social media just within the last hour saying he is pausing attacks on Iranian energy plants for 10 days. Eamon Javers has got the details on this. Eamon.
19:43Melissa Lee:Yeah, Melissa, we saw the president extend that deadline on Monday by five days. Today, one day ahead of the deadline, he's extending it again by 10 days. And I want you to take a look at the phrasing here at the top of the president's social media post. Here's what he said. He said, as per Iranian government request, Please let this statement serve to represent that I am pausing the period of energy plant destruction by 10 days to Monday, April 6th at 8 p.m. Talks are ongoing, and despite erroneous statements to the contrary by the fake news media and others, they are going very well. To me, Melissa, that as per Iranian government request phraseology at the top is a little bit telling.
20:22Melissa Lee:that indicates that the Iranian team made a request of the president to make this public via social media, and he did so. That indicates some level of negotiation taking place behind closed doors. And we saw Steve Witkoff at the cabinet meeting earlier today confirm that they are having meetings back and forth between the United States and Iran through Pakistani intermediaries. And we also saw the president confirm this morning that, in fact, the gift that he had talked about earlier this week that mystified a lot of us. He said the Iranians gave a gift to the United States, but he wouldn't say what it was.
21:01Melissa Lee:That gift was eight ships full of oil, which the Iranians allowed, he said, to transit the Strait of Hormuz as a gesture to prove that the Iranian team that the president was talking to did, in fact, have command and control authority over the strait itself. So that interaction earlier in the week seems to have really gotten the president's attention. He seems to have really been sort of into that idea that they were able to do that secretly. And then he wanted to tell the world about it today. Clearly now extending this deadline also indicates that, you know, there is something happening behind the scenes here.
21:35Melissa Lee:You know what that exactly is. How will that resolve itself? Does it mean that U.S. troops will not be used on the ground? All of that we just don't know the answer to. But it does indicate something moving below the surface here, Melissa. Just to put this together with what Secretary Bessam said earlier today about the traffic through the strait increasing. Is that gift a one time gift or is it eight tankers a day? I mean, do we have any idea of of I mean, if it's just eight, 100 ships go through on a daily basis. Yeah. I mean, it's not anywhere near. We know it was a two time gift. Right. I mean, the president said there was one convoy of eight ships that was allowed through and then another one of two ships making a total of 10.
Read the full transcript
22:19Melissa Lee:But to your point, that's not material to the global oil crisis that we're facing as a planet. It is material to the negotiations in the sense that it does two things. One is it convinces the White House that the people they're talking to in Iran actually do have control of the strait and can authorize things to go through or not go through. That tells you you're talking to the right people. And the second thing is that it indicates that the fact that those negotiations are going on may be an optimistic fact. And if you're somebody who is looking for a resolution of this, the fact that they're talking is now evident.
22:52Yeah, definitely. Eamon, thank you. Eamon Javers from the White House. We did see a reaction immediately in the price of oil, but then it bounced back. And then for spies and queues, we saw that go up a little bit. Eamon is always doing a great job and has to do a job of almost nuanced phraseology. as per request could be all kinds of things. And it sounds as if almost, hey, we need your help. We're ready to, as per request, I'm not sure how we're defining it. Coming up, rate hike chances on the rise. How rising inflation forecasts are changing the odds for the Fed's next move. What it means for Jerome Powell as his tenure, the chairman draws to a close.
23:32Plus, a whiskey blend, a potential high spirits deal, sending shares of Brown Foreman jumping, who's looking to take a shot. The impact on the V &O sector. Do not go anywhere fast when he's back in two.
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25:34Yeah, but to me, I don't know that it really means much. The Fed fund futures is just like any other contract. We see what happens with oil, with stocks, with foreign exchange. They go crazy. A headline comes out, they reverse. If this conflict ends in a timely fashion, many things are in reverse. To point to a tightening in October is anything other than a potential tightening. I just think we're way over our skis. As a matter of fact, if we look at all the data prior to the 28th conflict of February, think about it this way. CPI was cool. PCE was warm. GDP price indices were very warm. And PPI was hot.
26:15And all that is prior to the conflict. Now, let's look at the 210 spread, which closes at the flattest it's been in eight months. Right in the middle is where the conflict started. But it started flattening long before that. And that was an early warning sign. That flattening is pulling out, easing. And the reason I just described, we already had inflation. The problem now is that we are making inflation a bigger story based on what's going on with crude oil, Brent, and energy and natural gas. But many of those markets probably aren't going to last long enough, maybe I'm optimistic, to really have the inflation settle into the economy.
26:56Christine Lagarde is one of the few central bankers that continues to point out it needs to be higher for longer to metastasize within the economy before central banks should deal with it on a tightening basis. Otherwise, it's not going to be very fruitful to tighten at this point in time. Ultimately, a tightening may be needed even if the conflict didn't begin. And let's consider this. Our interest rates are roughly the highest since the summer on a closing basis. So the two-year today, probably around a seven-month high yield closed. The 10-year around eight-month. But look at the Europeans.
27:35Boone's closed at a 15-year high. Gilt's closed at an 18-year high. And I think that's very telling. And that bundles it all up. It's really all about energy and the staying power of these prices. And no matter how long and short they stay higher, the Europeans, the Asians are going to have a much harder time because they haven't procured enough of their own supply of energy. And their dependence on where they get it from, of course, is conflicted. First, thanks for being on, Rick. Two scenarios, and I want to get your take. Let's say Janine Pera were to withdraw her case against Powell till his votes washes in in May.
28:17or she doesn't, and this drags on, and worse cannot be confirmed. Do you think these two scenarios change the likelihood of a rate hike? I don't believe they do, and I also don't believe that much of the questionable activity on voting and getting confirmation or worse, I don't really think it's going to be a problem, and I think the politics that underpin it will dissipate before we really need to do something. But no, no matter how it turns out, I don't think it really changes the dynamics. I have confidence in the Federal Reserve, the governors, all the members that they can see through some of that to do the job that the economy and the data point to.
29:01Rick, Tim, you've got your ear and you've got relationships with all the big bond traders in Chicago. What we are hearing about is that the options markets are showing that a lot of these guys are taking out protection, especially so far. so secured overnight funding rate, things to get maybe a little bit more on sides. Is positioning way off sides here? Do you think that could have something to do with an even more violent move or could lead to a more violent move to come? Well, I think a lot of the violent move is because they were positioned on the wrong side. Just consider on Friday, the 27th of February, the day before the conflict, we had the low yield closes for many of the fixed income markets for this cycle.
29:40You know, we are under 4 % for a 10. So all of this was very interesting. So we had offsides activity. If anything, I think some of the activity you're pointing to down the road will actually dissipate some of the volatility. I think in many cases, the worst is behind us. And in terms of a 10-year, I think we're getting close to a top of the range. If we get any type of yield close in 10s, about 4.5%, I think that the amount of moves will start to get a little bit more aggravated and the market will be a little thinner. But I do think that the way it leaped off those low yields from the 27 took a lot of the sting at that point that we don't need to experience now moving forward.
30:26All right. Rick, great to see you. Thank you. Thank you. Rick Santelli in Chicago for us. What do you make of the rate moves? We hit 4 percent, actually, in the two-year yield.
30:36Melissa Lee:Yeah, and I think Rick's point about the 2-10 spread is interesting, right? So we're nearly flat or we're down a bit, right? And if you just overlay the BKX or the XLF to the 2-10 spread, you're going to get the 15 % move lower in bank stocks. And we know why, right? So the net interest margin when you have a flat spread is tough for the banks. And so, you know, to me, I just think the move in the banks, a lot of people are scratching their heads. If there was anything fundamental, we're all excited about all this capital market activity. All this capital market. Why are you smiling at me? I'm not giving you any look.
31:04Tim's smiling at me.
31:05Melissa Lee:You're smiling at me. Karen, they're looking at me. I mean, okay, just joking. You know, I just think it's really interesting because a lot of people were scratching their heads and saying, why are we having this bank move? Is it related to what's going on in private credit, that sort of thing? But it really has to do just overlay the 210 spread and BKX. I just want to simply say that I think where we are right now in terms of this rapid change in perception of the Fed is unprecedented. I've not seen it in a long time. So we went from easing to now hiking. And that some people think there could be an emergency hike.
31:34In a matter of weeks. That, to me, is extraordinary. And, again, one of those, oh, I've not seen this before. There's a lot more Fast Money to come. Here's what's coming up next. Spirits lifted. Shares of whiskey maker Brown Foreman surging today. The French liquor company sipping on a potential bid. And whether it can get the booze stocks buzzing again. Plus, all the tarmac trouble for airlines as the DHS shutdown continues. the impact on security lines, and the much broader economy. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.
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33:29I'm talking championship-level fast and easy delivery. So level up your grill game and your outdoor chill game and head to Wayfair.com now to get your outdoor space ready for the season. Welcome back to Fast Money. Stocks falling hard into the close. The Dow down 470 points. The S &P shutting 1.7%. The Nasdaq leading the losses down nearly 2.4%. WTI crude climbing yet again, settling above$94 a barrel. And saying in the energy space, Occidental climbing more than 4 % today after reports the company's CEO is preparing to retire after about 10 years at the helm. Shares of Oxy up nearly 57 % so far this year.
34:08Celsius shares under pressure down 13 % this week. Costco introducing its own line of energy drinks under its Kirkland Signature brand at a major discount. A 24-pack of 12-ounce cans costing customers less than half the cost of Celsius drinks. Shares of Jack Daniels owner Brown Forman up nearly 10 percent after Bloomberg reported that French spirits company Pernod Ricard is considering a bid for the company. The stock's seen its best day in over a year. Pernod Ricard owns labels like Absolute Vodka, Malibu Rum, and Jameson Irish Whiskey. and shares of Unity software jumping after hours. The company pre-announcing results reporting Q1 revenue and adjusted EBITDA above prior guidance.
34:48It is the UN guys' junk. Thank God.
34:50Melissa Lee:I mean, thank you for saying that. It's really important. I knew you were going to say that. He needed a little bounce in the junk. In the junk. Oh, boy. Health in the junk. Oh, boy. Yeah. Brown Foreman. Yeah, Brown Foreman needed a bounce. And part of the story that is why this deal could happen is that the Brown family controls almost 68 percent of the voting stock. So this is the kind of a thing that they can do what they want. And ultimately, this is a time when Pernod has to be looking at one of the most iconic and largest and highest quality spirits companies in the world. I mean, this was a$70 stock not that long ago.
35:27This has been extraordinary. It's not a small deal, though. It wouldn't be a small deal for them, but it could happen. I guess a whiskey merger, right? Coming up, the latest headwinds for airline stocks as the DHS shutdown rolls on. The impact on the names and all other industries that could take a hit, too. The details when Fast Money returns.
35:51Welcome back to Fast Money. Airline stocks continuing their descent. And major carriers ending today in the red as the DHS shutdown continues. Most seeing double-digit losses since the start of the month. CNBC's Phil Lebeau has more. Phil. And Melissa, most of those losses are likely because we've seen jet fuel prices just shoot up. They've practically doubled since the beginning of the year. Yet it doesn't help that every single day we hear about the lack of TSA staffing. And that continues to weigh on just the overall question of whether or not people are willing to fly right now. At some point, you say, is it worth it?
36:25Atlantic, Houston, New Orleans, both of those Houstons, one is Houston Hobby, one is Houston International. More than 30 percent of the TSA officers have been reporting as absent, according to the TSA. In terms of call outs yesterday, it was 11.14 percent of all the TSA officers in this country. that essentially comes out to a little over 3 ,100 officers. By the way, almost 500 TSA officers have now quit. You might say to yourself, well, how many is that relative to the overall number, which is close to 40 ,000 or something like that? Yes, it's a small one, but you can't blame some of these people.
37:02They've gone almost a month. Frankly, I have gone a month without being paid. The travel chaos is weighing on the airline stocks, but really it's more about jet fuel. That's really what's hurting the airline stocks more than anything else. There is some good news in the fact that the airlines are reporting stable demand so far, though I have to tell you, Melissa, as you take a look at the airline stocks over the last month, I am increasingly hearing anecdotal stories from friends who are traveling saying, I've got a trip coming up in the next two weeks. Should I rethink about even going through the hassle?
37:36Look, that's strictly anecdotal. That doesn't mean that it's going to happen widespread. We'll hear from the airlines, by the way, in a couple of weeks when they report their Q1 results. Obviously, jet fuel is the big story, but this is certainly not helping. Yeah, especially around spring break season. Phil, thank you. Yeah. Phil LeBeau. So, Karen, you always think about things in terms of a purchase delayed or denied, and I wonder how much of this is going to end up being denied because you can't change. I mean, if you're traveling for Easter or for whatever holidays come Passover and you don't go, You're not going the following week.
38:11Right. You just don't go. Maybe, though, I'm not quite sure for the business traveler that they may end up being delayed, not denied. But some portion has to be destroyed. Right. Because it's not going to be delayed. What I think is unfortunate as someone that likes to invest in airlines but does consider them trading stocks. But I've wanted to believe Delta is a long term investment. I still do. But if you look at Delta, they were just getting back to above pre-COVID EPS. Now, somewhere north, seven bucks a share just when their business was starting to normalize. I will say they've never been run better.
38:45And if you're thinking about what are those long term trades I want to have when this all wears off, I think highest quality airlines of Delta is what you do. Coming up, the credit concerns are still coming. While our next guest says there's more pain in store and where it could be setting up opportunity in the space. Fast Money is back in two.
39:09Welcome back to Fast Money. Private credit lenders suffering steep losses this quarter as investors grow jittery over a potential rise in defaults and tighter liquidity. Our next guest flagged risks in the system well before firms like Blue Owl and Apollo started to cap withdrawals from their funds. It says there are more problems lurking. ICG Advisors co-chief investment officer Terry Monis joins us now. Terry, great to have you with us. Thanks for having me. Appreciate it. You know, I feel like everybody's trying to look for the blow up, how it's going to express itself in terms of being the next great financial crisis.
39:38But you're saying it's really the great disappointment that is the worry. That's right. We should just take a step back a second and say, like, what's going on right now is totally predictable for anyone who is paying attention to the markets and was a practitioner. It's a credit cycle that's just beginning now. And if you've been through credit cycles before, you understand that asset liability mismatches arise and they reveal themselves when capital starts to flow the other way, when capital starts to leave a space. This time, you know, excesses build up in different parts of the credit market during different cycles.
40:07Sometimes it's corporate credit. Sometimes it's the bond market. Sometimes it's MBS. Sometimes it's asset-backer, CLOs. This time it was in private credit. It was very obvious to us because we just followed the money. We saw where there was tons of capital flowing in. We saw where there was excess being built up and risk being built up. But, you know, the thing is retail money came in last, and retail money came in through vehicles that are open-ended in structure. They have an inherent asset liability mismatch. Look, the mismatch is not that great, right? They only allow for limited redemptions, and they tend to be not levered that highly.
40:36The problem is there could be a death spiral for these funds. Once an investor sees other investors redeeming, there's a little bit of like a prisoner's dilemma, right? So if I see that you're redeeming, I say to myself, wait, I can't not redeem because I'm going to be left holding the bag. Because the investment manager needs to sell assets, build liquidity, and they're usually selling their best assets first. So if I don't redeem, I'm going to be left holding the worst assets. So I have to redeem. And that's a bad situation for everyone. Now, these vehicles can reduce the amount of redemptions that they provide investors, and they have been, which is good.
41:08So they're not going to blow up. There might be a few blow-offs because there are some people who did some pretty terrible underwriting. But there's a lot of good underwriters there. There's a lot of good credit managers. So we don't think there's going to be huge blow-offs. But we think that once investors, you know, ask for their money back, managers have to start defending liquidity. They raise cash. They have to, you know, stop investing into a great market. And that's really bad because you're missing out on the best opportunities. So your returns are not going to be as high as they would be otherwise.
41:33And you have to raise cash and you have to meet your investor redemptions, which means you're just going to disappoint your investors, right? They're not going to get as much return as they expected for taking that illiquidity premium of investing in private credit. And so we just think some of these products were missold, overpromised returns. And it's going to be the great disappointment, unfortunately, for a lot of these retail investors.
41:55Melissa Lee:Yeah, Terry, you know, you focus on these companies, right? And you're focused on the underwriting there. You know, our banks have a lot of exposure, nearly, what,$2 trillion or something like that. We were just talking earlier about the BKX. That's right. Maybe it's that yield curve, flattening. But how much do you think is sentiment around the lending to these sorts of companies? So, yeah, the banks have about$1.9 trillion in exposure to non-depository financial institutions, right? You know, the Fed wanted, the government wanted the banks to reduce their exposure and take direct exposure to corporates after the GFC.
42:26So private market participants stepped in, and that's great because risk is off the bank balance sheets, which means there's less of a chance of a, you know, necessary for a government bailout. However, when the banks start to look at their exposure to the BDCs, to other private credit vehicles, whether it's nav lines or warehouse financing or term loans that they've issued, you know, and lent to the private credit managers, that stuff is termed out. So they're not going to be able to pull in that risk. So they're going to look around to the rest of their balance sheet and say, where can I pull in risk, right?
42:56Repo to other funds out there, hedge funds out there, other types of non-bank lenders. And we've actually started to see that. So the most conservative banks out there have started to pull in a little bit of their repo exposure, raise haircuts. And this is in the context of a really bad macro environment. We're at war. We have potential for stagflation. We have slowing growth. And so credit cycles don't turn just because of one thing. There's usually a confluence of things that sort of conspire to cause capital, you know, a risk-off environment, capital to kind of just get sucked out of the markets.
43:30And so, you know, people think private credit is kind of operating in a vacuum by itself, but everything is connected in the financial markets, right? And it's usually connected through the banks, but it's also connected through the investors at the other end, right? Those investors, if they can't get their money to the private credit markets, where else are they not taking risk and where else are they going to pull their capital from? We don't think there's a big crash coming. We think that we're at the very beginning of a cycle. We don't know the magnitude, and we don't know how quickly and how long it's going to take for the cycle to turn, but we definitely think that we're at the beginning of the turn of credit cycle.
43:58Terry, thanks for coming by. I appreciate it. Yeah, really appreciate it. Thank you. Coming up, a robo-taxi milestone that made your mark hit by Waymo and what it could mean for the competition. More Fast Money in two.
44:13Welcome back to Fast Money. Waymo crossing a major milestone, hitting 500 ,000 paid rides per week. Double the number of weekly rides from just a year ago. Shares of Waymo parent company Alphabet down over 3 % today, while RoboTaxi rival Uber sank roughly the same amount here. Doesn't get much credit for Waymo, does it? But this is a big milestone. It's a lot of rides a week. It is a lot of rides. And I am sort of hoping that at some point Waymo is broken out the way they finally isolated YouTube and you could really get a sense. And it would be interesting to see that. Also, relative to Tesla, I think that valuation would be really interesting to know.
44:48I saw my first Waymo in Manhattan yesterday. You saw it? Yeah.
44:51Melissa Lee:Yeah, but they're not. Yeah. They're just like mapping stuff and everything. Well, he was definitely gumming up traffic. I mean, it was annoying. Yeah, come on. Keep moving, you know? I mean, I don't know. But it's a Jag. It's a nice-looking car. Dan rides them. I won't. No, they're great. I mean, I've ridden them in California. They're amazing. And, you know, the question is, do these things scale, right? Like, so if you look at the Jaguar, I mean, they're really starting out. They want everyone to have this great experience. There's a lot of hardware on there. And, you know, to the point about Tesla, I mean, they're not doing LiDAR.
45:18Melissa Lee:They don't have all this equipment. They're using cameras and the like and AI and stuff. So it'll be interesting to see once those things get on the road how much they can do, how many rides they can do, and whether they're safer than Waymo's. Yeah. I mean, 500 ,000 paid rides, but how much is a car? I mean, LiDAR is much more expensive than cameras. So that's another issue here. Yeah. Well, that's the thing. I just wonder where is the place to be? This is what the market's been grappling. Are you on the hardware? Are you asset heavy, asset light? Are you integrated? I mean, Uber seems to be whiffing in the integrated side.
45:48Up next, final trades.
46:02Final trade time. Timothy. I guess I'm in trouble. It was a nice, tight little group tonight. Really kind of special. European Pharma, AstraZeneca, AZN, trades here. I think it's highest quality name in health care there. Karen? Yes. So VIX, we talk about it a lot. I am long. I am staying long some VIX. I do think we'll go higher in New York City. Dan?
46:26Melissa Lee:Yeah. I feel like everything we talked about tonight would be negative for small cap, so I'd be a seller of the IWM. Thank you for watching Fast Money. Mad Money with Jim Cramer starts right now.
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From the publisher
Shares of Meta sinking as the social media giant faces penalties in 2 separate lawsuits. The small slap on the wrist in terms of fines, but the more impactful drop in shares over the last month. Plus, Rate hike odds increase as inflation forecasts rise, the impact on airlines as DHS shutdown continues, and the robotaxi milestone Waymo just cleared.
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