Belated happy new year. Just wondering what you think about where we are today given the year weve just finished and people are talking about this move in rates. You said everything when the ten hf year goes up to 272, the First Quarter is going to be a powerful earning lift. The market hasnt overly discounted that. The non u. S. Part is strong. Currencies are going to provide a tail wind. The second part which is more confusing is that in the Fourth Quarter in the last two weeks of the december, a lot of companies did a lot of things like putting extra money into their Pension Plans and were still working our way through that secondly, the the analysts are just adjusting i have 40 analysts that work in my team and theyre still figuring out what theyre doing on the team and the tax rate now youve got earnings are going to be good good the second quarter. Then what happens is the multiple thats a function of psychology, which is powerful. Rates. Then the flow of funds to buy the same stuff then youve got to last three day of the month, which who knows what happens with all the various dynamics that occur m bottom lip, im still very optimistic over the next six to nine months. Looking into 2019 and tomorrow night, youll get infrastructure military spending, which is long overdue and a fair trade which helps a lot of my companies, particularly in the industrial world. Its really hard to argue with the case that mario makes stocks have discounted how much of that i dont think we truly know to your point, marrimario, the r of this tax reform, which is transformational it is going to lead to higher cash flows to higher earnings, mario hit the nail on the head though its a question of what multiple you think stocks deserve right and that is the only issue that we have to determine. How much of stocks discountried. T not going to be news to anybody that the tax plan and cutting back on regular lations helping earnings roughly 80 of the companies had beat on the top and bottom line. To me as i look at it, theres an expectation youre going to beat, but its really about the guidance Going Forward look at caterpillar. It was a nice quarter. The stock is trading down after they reported it to me, thats a r very, very lofty valuation. So its always, i think the president will stay on script in the speech, which will be good for infrastructure talking about it for a couple of months, im there and i think it could run. I dont know if you get a pass or not but i think you have to start think about when easy money like this is going to hit what we saw on friday was as close to euphoria as were quoing to get. The market closed on the highs it was a ridiculous move weve seen that often. I dont know if its in a quarter or two quarters, but the buying without penalty is going to stop. Do you feel, mario, that we are in this euphoria stage, which is traditionally describe ed as the last or final stage of a bull market . You know, its not like 1999 when doctors were looking at their quote machines while operating. But it is not dissimilar because of what part with crypto curr currency, you have really stoked the animal spirits and the question is how far along have you gotten are we see iing fish com go pubc like you did in may of, february of 2000 . No you know, but you see a flow of funds. Is it too much not yet. Its still in progress i dont think so far in 18 is the in terms of a portfolio strategy maybe youre look at the bond like proxies because of the rate move ewe toilties rates. Its playing out as we have talked about youre seeing the rise in volatility the lower dollar momentum is still in charge. Maybe you have a bit of concern about the way apple is trading i think its now lower on the year modestly maybe thats a mild concern. But the year so far is playing out as scripted and you have as weve talked about the fundamental Drivers Behind it and you get more tomorrow night, probably thanks for raising the apple point because thats whats on my mind. Were talking about the markets and i think theres a little bit of hammering in here are they going up too far too fast i like looking at individual stocks apple is down. Could be a buying opportunity. I know well talk about i, but the point being, there are other stocks that are not up as much as the markets theres still value in individual stocks. You have to know where to look for them we got mario, a great stock picker here today. Hell help us with that. But the point being, i dont think we need to hammer him so much about the overall market. If youre pennsylvaniaive vin toes r, maybe, but if youre active, there are opportunities out there. Mario, do you feel as though volatility is going to pick up in a more meaningful way you know, the market volatility as measured by all these five guys, the vix, yeah, its going pick up but independent of that, volatility and individual names, look what happened on friday just with michael bels companies. One was up 20. Other one one down 15. The problem however is that theres lack of liquidity in the overall market for reasons we all know and its exacerbated by the fact you eliminated the uptick rule to accommodate these atfs what does it say to you when the vix as you just mentioned, its been rising on days when the stock market has been going up not when stocks are selling up some of my best friends are clients and ill let you guys talk to them do you feel people are too complacent about whats happening . No, i can see theres a cult saying im only wup 22 i want to be up 40 those are the same individuals that were afraid of losing money. Theyre starting to get in and the individual investor is losing his patience with discipline thats not good. Who sasz the easy money has been made its not a new thought e h he had yesterday. Hes one whos more sanguine over what returns will be. Why is that wrong . Nothing wrong with that when i started the firm . January of 1977, stocks were selling three or four times ebitda duh. Its hard to have a margin of safety when you want to claim that the tenyear is going to go to 272 and if it pops up to three brauz draghi changes, you have a challenge nothing to constant, but if you keep one element constant, raise Interest Rates at three and a quarter quickly. You got a problem. I wonder if the risk is to the upside i keep thinking about the ina e inability for people to have a real good handle on where earnings are going to be. Are they really going to get out of hand that quickly i think given the tenyear, the risk is more imbalanced. The risk is not necessarily youre going to miss out on the upside i think well see 3 by mid year thats troubling liesman had a good point youre trouble d by that . Im not if we get there the right way. The yield curve is telling you Something Else to worry about. Just looking at the numbers. About 60 basis points. Steven is making a great point because hes underscoring were getting there the right way. And i agree let me be clearment im happy were on the march to 3 plus on the tenyear the 60 basis points, i think thats what im reading there. Thats troubling telling you the economy is not growing as fast. We can explain it away by international rates, which are not moving higher. So i think this is all good. Youre right still at eight bips on the jgbs still at a 12 long the vix. What are we worrying about i think that the risk is very much in balance now. Could still go to equity, but if theres better value in europe i dont think so. We can buy a Company Located in atlanta, georgia, that youll make 50 in the next three years. And the question is, why not own it its a unique asset. Should by buying it or going and looking for a comparable business in london Live Entertainment is hot. Last night, you had people watching this funny music thing. Where do i make money. I walked in today, never did i think dr. Pepper was going to get this kind of a kiss. Were seeing a lot of that then west rock comes in and buys a Company Calls capstone so youre going to see a surge of Merger Acquisition activity and what is that underscoring and where are the bargains those are the things we look at, scott. You u dont have that much supply relative to all the other bargains 19 1u9, you had supply coming on weve got Company Buybacks shrinking stocks massive m and a that were start ing to see really pick up. That was on pause. But you have apollo raise a record fund 24 billion kkr behind them raising record funds. They dont generate fees until they deploy that cash and were starting to see it so with companies being rich isnt it harder to find value given the kind of market environment were in but theyve got to grow its getting better, but supply has been shrinking, so i think that could keep you going more you got to be careful about the sectors. But if companies see the opportunity in terms of the tax plan were all seeing here, you want to take advantage of it well, i think jay clayton with all the companies, the problems with the rules. Whats the problem with regards to Suing Companies on ipo. Even think iing about why bother in the u. S. When you have all this contingent teammates out there. Looking to do deals youve talks about the massive see ofly quickty now youre adding upon that all this excess Free Cash Flow does that that not suggest what steve is talking about the only place youre going to see this i have companies that put extra money into their Pension Plans. Why . So they get a 35 deduct a 7 earnings on that cash and theyre going to pay less in 2018 so you, when you look at the numbers in the rearview mirror, its not good. This year, 2018, the cash flow is going to be extraordinarily powerful, so where do they put the money . I have an article here in the New York Times where people are going to buy aircraft, private planes and get 100 of reduction so they dont have to pay the soft tax theres a loft things that are going to happen that will create great opportunities so one of the stocks ooip looking at, who makes private aviation in business gifts and how do we play that . Theres a lot of Companies Like that lets talk about chashares o apple. A report in nikkei says theyll cut simply lets bring in tony who has a new note out tony, welcome back thanks, scott you asked the question front and center today what the impact on the stock is going to be. Whats your best guess look, numbers are coming down for the remainder of the year and the question is do they come down more than what most people are thinking and i think thats the debate so apple reports thursday after the close. We think the december quarter will be fine there has been so much noise out of the supply chain that iphone unit, particularly the iphone 10 are being cut from a production perspective. Its difficult to know apple has underperformed since its last Quarter Report by 13 last two weeks, by 8 . So clearly, folks are bracing for top numbers going in the question is where will the guidance be relative to that expectation and thats really where investors are wringing their hands now. Are you afraid that the guidance could be below some of the more cautious expectations our sense is that theyre thinking about iphones and maybe march quarter iphones will be 50 to 55 million to give you a sense. Consensus now is at 62 million we think that kind of haircut is what investors we talk to are thinking about apples not going to say how many u iphones they expect for march. If you are thinking 50 to 55 million phones, that translates to around 62 to 64 billion so my sense is look, if its that number or better, the stock is probably fine and thats what expectations is thinking about and if its lower than that, we could have more of a downdraft youve mentioned the shares over the last several weeks if not month or so and you asked the question today, is it in the stock . Is the lowered expectation in the stock you think it is or no . Its difficult to say because theres lot of different twists and turns that can happen. Were assuming the rate goes to 18 . Engineer earnings will come county bert than the street and when we look ahead with a lower tax rate, we think fiscal 19 earnings could be over 13 and expeck tastations are abl 12. Thats before apple using a buy back of its repateuated cash every 25 billion in extra share repuchlss rchases is is anothero earnings if possible, apple could do 100 billion. In extra repurchases that would push earnings for fiscal 19 well over 14. Again, expectations are at 12. So a lot of sentiment is going to be based on not only what the guide is, but apple says its tax rate is going to be and how its outlook for other businesses are doing as well. Cant wait to see what happen this is week super bowl is on subd, but thursday night after the bell is going to feel like our own super bowl thanks so much what do we think here . Stocks an underperforming and a singular story not trying make a Broader Market call this is not a market call. The question is, are you supposed to sell it. I think what happened here is they reach nd the average selling price with the iphone 10 they havent sold as many iphone 10s or at least the supplier rs saying that q2, the quarter win is not going to be as many sale. The reason im not that worryie about it and the reason im till holding a large position in apple is is because whatever you think about the reach of the arch selling price of the iphone 10, those selling prices are not going down what is happening is that consumers are taking longer to get used to but theyre taking a four digit price on their iphones, but theyre getting used to it theyre selling. I dont see that. I dont agree with it. You think the prices are going down i think theyre being accepted he said the average sell iin price, hes raising. Six week, guess what, my daughter got hers in a week. Theyve got two shipments. They said you looking for an iphone ten i think theyre a company in transition 6 Revenue Growth last year. Looking for a big uptick this year they need new management 345 per speaker. The leader in technology youre getting new management at apple do you own the stock . Yes buy more then. Apple is an 850 billion market i brought my own after its done, im going to still drink dvp. You know whats interest sg that for prior years, its been a product story for apple. 2018 if the stock continues to appreciate, its a cash story. What do they do with the cash theyre going to have this year . So all the growth players leave it to people like jim to buy it. The stock is selling at a 15 multiple, which is a ben fair y beneficiary of the price stocks up 38 over a year. They need new management terrible. I cant believe i own it exactly i barely want to entertain that. But i feel guilty letting it go hold on so many times. I own it. I own it i sold all my calls and im glad i did, but you tell me, what have they done fundamentally tell me what they have done fund men matally versus microsoft, versus microsoft, am sop x versus netflix to deserve that first off, the 15 multip mul. Youre insinuating apple trades too high . Thats a premade to historical valuation. Is apple expensive i want you to buy the Atlanta Braves because i can tell you what the value is. Msg theres another one. Theres an opportunity i want to be nor more in the big apple. Has management done a good job managing the cash . Thats not my favorite compliment im still waiting to see what they do with the cash but for me, thats an opportunity. They do one of the biggest buybacks of anybody. So do you pay, what multiple do you pay for a company thats buying back stack versus one thats growing revenues . Whats an appropriate mull principle for apple . I think ratio on the stock, the peg ratio is 1. 3 if dwryou strip out the cash, cs tore 1. 1 think about the brand name how many of these iphones theyre selling. A great exercise. The bottom line is that cash is ive said many times is a pe penalty for them they could have bought netflix at 50 billion. Theyve done nothing youre right. Ive got a ceo who has been late with every Product Launch has not innovated at all since hes been there and has been a terrible stuaeward of the cash. So you tell me, does it need new management or not . It does not back at hq. We have a market blast for us . I do. We want to call your attention to whats happening with shares of vn where the Technology Company is off its session lows, but still down by about 8. 5 this on the heels that the company could be a way that dell becomes a public u company again. Theres a reverse merger being contin contemplated where by dell would be acquired by vm wear in reverse merger a lot of share to buy up what have you know, dell has to offer there in terms of its merger consideration. That is having an adverse affect on those shares. Down by about 8. 5 certainly a stock were going to watch in the trade iing. Back to you guys no doubt. Thanks so much that stock down nearly 9 . Wynn shares under pressure today on the allegations against the chairman and ceo, steve wynn mr. Wynn resigned from his role as finance chair of the Republican National committee over the weekend mario, you own wynn. Large position we own approximately 300,000 shares the stock has been terror rick 2. 5 million shares of mgm. We want you to buy it. The question is suitability in massachusetts. So i think its okay, i think las vegas, theyre going to go through the same suitableties and sfooef is going to be a very practical guy and figure out what hes going to do. He owns 12 million shares at 160 or 70. Elaine owns about ten million. In a power struggle as to what the stock is and theyve got every massachusetts is a question mark and thats one of the reasons who is every wants the indians want it. Indian tribe jim of mgm is located in western massachusetts and then sheldon wants to be b in that market soz so what does he do would you want to own wyn without wynn i have no problem with that. I think steve has left his mark. The Belagio Hotel has done extremely well it flourished. Steve is brilliant in terrors of his conceptualization. He went public in mccow when he needed to jumpstart the stock mgm followed that. Theres a lot going on do i want to own, another company with the ceo change iin . Theres a 2 million cap do you think he should step down no, the question is what are the rules in massachusetts, hes got a major project. Thats going to generate 4 400 million of ebitda. How do you solve that problem in massachusetts . Hes got a challenge then in addition to that, you have the s