PRO: Watch CNBC's full interview with Charles Schwab's Jeff Kleintop and Bleakley's Peter Boockvar

So Jeff, let me start with you because if I'm not mistaken, you're bullish on the banks here? Well, I mean, I think you can buy banks here, but I think more importantly, you want to look at European financials. They've outperformed US financials by 10 percentage points, and it's true internationally overall. International stocks are outperforming today. They outperformed last week, year to date, and last year as well. It's what we call a trend in this business. And I think it's when you want to focus on low price to cash flow companies, including in financials, outperforming. I'll let you probably can say this faster than I can bring up the chart, but I was going to ask Jeff, how good of an investment have European banks spend over a 5, 10, 15, 20 year period of time? Oh, they've been awful.

And one of the reasons for that is the fiscal austerity in Europe that weighed on them for a long period of time. So many different problems as they rolled through the European debt 2011 and 2012. But we've started a new cycle, and new cycles mean new leadership for behavioral and fundamental reasons. European financial trading at six times earnings. And they're actually, you know, the data that we're seeing is actually encouraging as it relates to the economic front. We just got the German IFO data today. That's an assessment of the German economy came in not only better than economists expected, but better than any time in the past year showing improving economic momentum.

I think the concerns are going to return to inflation and growth being too strong rather than worries about a financial crisis. One more question on this, Jeff, are these trades for you kind of an opportunistic, you know, get in, get out quick as sentiment improves? Or do you now think these companies are investable for a year, a couple years, a longer period of time? Yeah, the latter. I do think this is a longer period trade. I shouldn't even say trade and investment. I think, again, focusing on low price to cash flow and international equities out of favor for a long time, a real opportunity for long term investors. Peter, I know in the past you've talked about looking at maybe some energy names, if I'm not mistaken, in Europe. What about the banks here? Well, the European Bank Stock Index is down about 75% from its peak in 2007.

And most of the big ones trade well below book value. So there is tremendous value there. It's just a question of whether it's going to be realized at any time soon. So, but I do agree. I think there's a bastion of value to be had there. And finally, European banks have had positive nominal interest rates. I mean, negative interest rates was a killer for European banks.

It was a tax on capital. And just having some of the yield curve in positive territory would be beneficial to European banks. And to your point about energy, large European energy companies are trading at half the value as US one. So we like those as well. And I just wanted to lay that that backdrop down as we start to turn our attention here to the US. It's, you know, in some cases US banks have done better and others not. You know, we were talking the other day about Morgan Stanley kind of having gone nowhere over the past two decades.

And that's one of the best so when I spoke with an investor a couple of weekends ago in the middle of all this turmoil and said to him, you know, would you be picking up some of the banks on the big sell off here? He said, no, they're still overvalued. He's not looking for them to go above. He's like, somebody shouldn't be trading at book because their book is bad. That's what we're learning from the from this crisis. So it's, I just don't know. You mentioned the reaction of the bank stocks as the day goes on. And it just doesn't seem like there's a lot of people really excited, right? No.

And that's the point. I think every time you've seen some of these rallies kind of happen, they've been met with some fading momentum either intraday or over the next, say two or three days past some of those big rallies. It speaks a little bit more to just how much price discovery is going on for these US banks because there isn't yet a lot of clarity. Despite the massive amount of government intervention and regulation now on the heels of Silicon Valley Bank and Signature Bank and their collapse, you still don't know whether or not the book value. So those carrying costs for those assets really are something that you should be paying for or paying a discount for. Remember, if you look at the rescue that just happened for first citizens in SIVB, they paid a discount to acquire those assets. So it's not to say that in a distress situation, every regional bank should be marked lower, but there is still a moment of pause that a lot of people are feeling right now.

And by the way, this is all playing out in this kind of reversal that we've seen over the course of the last year, where the value stocks were supposed to keep that momentum higher this year. And they're just not right. Energy and financials, two of the worst performers in 2023. Meanwhile, tech and comm services, as we showed you in the top of the hour, the real outperformers. You wonder if that's about to reverse, you know, just even is today a microcosm of that, Peter, I'll let you weigh in. Energy outperforming, tech is lagging, or maybe it's just a pause. Well, people piled into tech, of course, over the past couple weeks thinking that they were somehow safe havens, not realizing that all their customers, small, medium, and even large size businesses are about to see a notable slowdown.

So that was just a rotational thing, more than anything. I think what's very interesting today is the stock market reaction to first citizens. The stock's up 50%. And that tells you that a lot of M&A and take place within the small and regional banks that can cure a lot of the ills of the badly managed banks. And we can somehow get through this without this blanket coverage on uninsured deposits that some are calling by the way, Kelly, to speak to Peter's point there, there's a reason why it's also kind of foaming its way through the fundamental case here. Earlier this morning, we had analysts over at Bear Downgrade Caterpillar shares. And how am I going to link this to the financial woes that we have? One of the reasons why was they were saying that U.

S. non-residential construction was already facing headwinds going forward. The regional bank crisis in their mind, in their estimation, is now going to put a little bit more of a freeze or a little bit of a freeze on those regional banks who do a lot of construction lending. If that were to happen, what happens to the construction activity? It starts to maybe slow down even more, which affects companies like Caterpillar and United Rentals, who leases a lot of that equipment out. So there are reverberations that are happening outside of the financials in the banks. Absolutely. So Jeff, let me turn to you as we kind of put this back in the context of the broader markets here.

Is this just, I forget how Goldman put this earlier just today. They said a headwind, not a hurricane, all of the drama we're living through. Would you agree with that? That's fair. I mean, we're in a rolling recession, right? We've been in manufacturing and trade recession, but construction and retail and services have been doing well. We may now start to see a downturn in, you know, we just talked about construction, right? So maybe in retail and maybe in services, we start to see a bit of a roll over. Even as manufacturing has shown some signs in the PMI surveys to be picking up again. So we are in a rolling recession.

It's not over anytime soon. The banks are braced for that in terms of their valuations. Other parts of the market may not be. Where would you real quick be looking? You know, if we talk about, I don't know if it's, I don't know how you want to kind of, you know, parse through everything, but where do you think has the most opportunity? I think it's really simple. It's a low price to cash flow screen. I mean, Peter talked about some of the areas that are attractive. I think energy falls into that category, but look at companies that have strong current cash flow, not those that have great cash flow growth potentially in the future.

That would be tech. That might work if the Fed aggressively has to reverse course and cut interest rates. That doesn't seem likely to me in the stubborn inflation environment. So focus on low price to cash flow across sectors and across countries. All right. We'll leave it there. So much news.

We've got Groomberg headlines. We've got Netanyahu headlines. We've got an auction to get through. You guys, thank you so much for your time today. We appreciate it. Jeff Klein, top Peter book bar and of course, Dom Chu.