Halftime report starts right now. Good to have you with us on this friday. Our Investment Committee today. The cio of santo Global Advisers and lindsay bell is back. Lets begin with the markets with stocks rebounding today basically flat for the week. Our focus today on what has been happening on the ipo market. Peloton down again. Endeavor pulls the ipo. Actually quite encouraging, because the Public Markets are being more rational in valuation than the private markets that are just awash with cash and you have the soft bank effect of putting so much money in the companies. Its selffulfilling prophecy. Public markets says this is crazy. Lyft, theyre not going to make money for we dont know when. Uber. Endeavor is well. Theyre saying we dont want to do that. Unfortunately, its impacting some of the higher valuation equities in the u. S. Market. We see you take a stock like roku. Take a look at whats happening to that stock and others. I dont think it means we have a sustainable move into socalled value stocks, but i do believe the pressure will be there for a little bit. Totally agree with what steve just said. You have this thing where you had these huge pools of wealth like the vision fund. You just had the sense that you can keep raising the ante and it would always pay off. They would point to examples of that working on the nasdaq in Public Companies. And then that stock, i actually think that if uber were 70 right now, wework would be coming public today and would be getting the full 47 billion whatever they wanted to do. I think uber was a sea change. I think that forced people to look and give much more scrutiny to the s 1s being filed by Companies Like wework. People said im not buying into this. I think that that vision fund effect very much has changed the mindset. And ipo investors are pushing back. That is what should happen. That is healthy. Investors should say you have all the votes. This is being valued as though its the 50th Largest Company in the s p. People are now saying these things and they should have been saying them for a while. That being said, i do think that not every recent ipo is the same or of the same quality or has the same conflicts. I think opportunities will be created as all of them get rounded up. I spoke with sort of one of our regular kind of tech and guests who agreed with the take that you have that its been healthy that in his words just the pretenders are the ones who you work out there, who are blowing up and who are sort of resetting the market the way that some had suggested may happen. Lets remember what was said a week or so again. We can react to what he said as to whether its healthy or not, whether the market can correct itself. Lets listen. The thing we have to ask ourselves is what did we expect to happen bhiel this is probably what was going to happen anyway. How can you course correct if you cannot, its really up to the Public Markets to draw a hard line in the sand and say enough, no more. Thats whats happening now. The market is saying enough no more. We have been here before. Way back in 2012 when facebook went public, we had the same thing. It went public at a valuation that was too high. It became more of what i call a show me stock which i think is happening to many of the newly Public Companies where public investors are saying show me you can execute on the plan. Show me you have this business figured out, and then i will take a toe hold or invest in a more meaningful way. With facebook as a reminder, it took it a year to get back to the ipo price. I dont think this is incredibly uncommon. This is a sign that the Public Market is a little more rational. Is it a sign of a blowup . Or are we overreacting to what we have seen bill gurley tweets which one of the following Companies Traded below their initial ipo price . The point hes making it chill out. All of them did and things are fine now. If you are going to be an investor, give the investments time to play out. The second way of looking at the question is what does it bode for the market overall. Traditionally, when you see an ipo market sputter it does bode ill for the overall market. This problem is located within the ipo market. Companies have waited too long to go public. That pendulum will swing the other way by the mechanism. I went back to him yesterday and i said what do you make of whats happening in the ipo market is it a sign of stress in the overall market hes like would you relax . Hes like the only part of the market that was overvalued is the ipo market. There are no broader implications for stocks generally. I think the issue is in the private market. Youre not seeing the exuberance. The ipo market is not shutting down. There are still high quality ipos that are able to get through the door. I think thats a positive sign. I think everything we discussed is a positive sign for the overall market to continue to trend. If you look at beyond meat, i can argue thats still way over value. Its holding up. The news is good. The momentum is good on the news. Thats what these ipos trade at. I dont agree with the example on a lot oeft companies. Yes, of course, they traded down early. Yet they were able to show that path to profitability and didnt come out with exorbitant excesses like were seeing. Not all of the companies came right out of the gates with the great path to profitability. There are other names on the list that are doing fine now. Facebook didnt turn until they got mobile ad right. Some of the news has been negative the other way. If youre a growth investor, this is not a negative development for you unless you are fully invested in whatever the peak price is. Its come down ten points in the last three weeks. Did it deserve to . I dont know. Did it deserve to be at 85 maybe not. If youre a growth investor this maybe has created a longer term opportunity for you. Its very clear that zm is an incredible business. Its down 30 in 2 1 2 weeks. Because the market is scrutinizing these names. My point is if you looked at zoom and said i missed that one, heres another bite oeft apple. Maybe you like it better 30 points better than where it was two weeks ago. I think people will. I was going to get one quick comment in here. If you have the path to profitability, you can go public and you can have a good stock. If the valuation is too high, i think thats what were seeing here. Companies know they are scrutinized more than ever now. I think you hit the nail on the head when you said you spoke to a regular guest who said it is just the pretenders. There is the sense that you have sort of your pretend Tech Companies and your more pure play Tech Companies. I know they have come off their peaks. Some might argue that that is healthier. What you are seeing is the weworks, the endeavors, the smile direct clubs that dont actually come from silicon valley. Those are the ones that are struggling. The other part of this is soft bank. Who comes in and bids up private companies and gives them a much higher valuation just before they ipo. You saw that with wework and uber. This is from about a week ago this is keith verboy. He said welcoming all converts. This really tells you what sort of the view point is here, what people chatter about in the valley. I wonder for the people youre talking about if they expect some of the vc money to be a little more selective in where it goes moving forward now. I think they might say that it always has been selective. The big high profile names that we have been talking about, uber, wework, lyft, these have been bid up a lot. The ones that we dont talk about quite as much, data dogs, crowd strikes, some of those, they might argue that they have been selective and have been able to fetch higher valuations in the Public Market. So perhaps its these really sexy high profile names that are sort of Tech Companies, sort of transportation, sort of real estate, sort of dental companies. One of the other points is that it goes to this conversation when you talk about the split between enterprise and consumer. If you have to oversell yourself to the Public Market investor, thats a red flag in and of itself. If you list that youre every kind of company under the sun, but at the end of the day youre selling bikes if youre wework and a Real Estate Company but trading at tech valuation telling everybody youre this Technology Company or you can name a number of other ones, too. A lot of this is timing. There is a mood in the market. Sometimes you have to read the room. I really believe that uber was the Tipping Point for this kind of scrutiny to actually matter. We have been scrutinizing this stuff. One thing i think we are not saying yet but maybe becomes more important is if we are gleeful, i dont know if thats necessarily the best thing. You look at Something Like control labs which is a private venture company, probably would have gotten a big ipo at some poi point, really Exciting Technology about computing and the human brain working together, sold itself to facebook this week for a billion. Would they have done that absent all the screaming about ipo value . Now were back to this place we had been in prior where you say google, facebook, these monopolies are eating up all the technology by buying the companies out before they become public. Which do we want do we want a fertile atmosphere or do we want facebook to own everything i dont know that were quite at the happy medium. We are oscillating back and forth. The only reason were so consumed with this is because the sheer dollars that are involved. Invcs are pretty smart. There is money raised for secondary funds. I have so many friends that owned uber preipo and owned all the companies preipo. The other side of vc selling because they know the Public Markets take you higher. You want to joshs point talking about maybe uber was the Tipping Point. I think there is a really important conversation. To go back to about timing, when uber came to Public Markets and lyft came to Public Markets, their best growth days were behind them. Look at uber. Ride sharing grew two percent last quarter year over year. I think that also vvs and people are getting into these companies before they go public through a secondary share offering. Who is left holding the bank to your point of saying that uber is the Tipping Point. It is a somewhat specialized story. It went public i think a lot of people say too late. They had a lot of governance issues they had to deal with as a result of some stuff. Thats why they went too late. Maybe uber sort of pushed the view of the ipo market to the edge of the cliff, if you will, and then wework is the one that actually pushed it over and caused the market to really get upset. Thats what i think happened. Its not that people wind up being skeptical about the companies as they were private unicorns. Everyone was always skeptical. Its that the resepsception on street was horrendous. That was a signal that this aint going to be so easy to take the next 20 billion company public. This is not going to be a walk in the park anymore. Its not fundamentals that are changing. Its mood and sentiment toward these companies, not just to the valuations, but to the overreach of the visionary founders where they can act however they want. There is no governance. They have family members on the board. That part of it is i think a big part of the story. One other thing i want to mention, whats unique now about what we had seen in previous ipo booms is the degree to which mutual funds that invest money for regular people are in the mix here. And im not saying they shouldnt be or its bad, but they have growth funds that have a sleeve within them that own these companies preipo. Do you think that changes do you think theyre more selective moving forward everyone. Yes. Why wouldnt they be the argument for them to be in early stage deals and to be in preipo, the argument that theyve made is we have to be because historically we have captured the upside in these Growth Companies in the Public Market. Why should we not try to capture that in the private market for our shareholders i respect that argument. Unfortunately, now, youre seeing the down side. Thats why it relates to mr. And mrs. America. Saying how can i get whether they like it or not. Whether they know it or not or like it or not. We talk about whats happening with the overall market. We did have the news or reports of developments related to investing in china. Lets get to eamon javers now. He has more details on those headlines. That was a bloomberg headline. Their headline. My understanding is that this is accurate reporting, there are conversations going on inside the white house about how to restrict American Investment in Chinese Companies particularly ones that are listed here in the u. S. All of this is preliminary. These are early conversations. Nothing has been decided yet. There is no timeframe for a sdi decision. This discussion includes options. Where that lands is anybodys guess. Of course, that potentially impacts quite a bit of global capital. So it would be a very large step from the u. S. Side. You can see it in the context of this overall trade battle back and forth between the United States and china as the u. S. Is looking for additional levers of influence to force china to make a decision here beyond just tariffs which they have come close to maxing out on. Josh brown has something for you barg in mind, of course, that this is a bloomberg headline that eamon javers is doing deep reporting on. I just think everyone that watches the show knows im not a fan of trade war and all of this stuff. I think this is a situation where they better be very careful about what theyre talking about here, because there are trillions of dollars of wealth indexed or benchmarked even active against the International Global indexes. This year announced a doubling of large caps in their International Index from five percent to ten percent. By this november, they can get up as high as 20 . Soap china has fought very hard to get the inclusion of their stocks into these indexes and its something that looks like its been in progress all year. And i do think that maybe there will be opportunities created, but there will be a lot of fear on the part of not just investors, but the people that manage money for them, because they are benchmarked to the indexes. And so i think that this is something that should not be discussed lightly without a really Big Conversation about the ramifications. In other words, if they really did Something Like this, that would be a massive story. It would be a massive story for investors. Absolutely. I think that officials inside the white house are aware of just how large those very large numbers are that you just heard from josh, but the buzzword you hear around this here is investor protection. They see this as an effort to protect american investors from investing in companies that may not live up to some of the scrutiny of u. S. Exchanges in the usscc. Thats the framework that theyre approaching this with. Whether they get to an allout ban or something many steps short of that still tbd. All of that is under discussion right now. Im suing a Chinese Company right now, second largest. The story is that the management went with the family that owns enterprise car and said were going to buy you for 1350 a share. The board agreed to it. The problem owns over 20 and said we will offer 1550. They went together and buying for 1225. Its also the family from enterprise. Heres the secret, though. The Chinese Government has tried to stop from listing. You actually can invest in the revenue stream. Nobody owns controlling shares in alibaba. Thats what you own. I think its like you said that ship has sailed. If you say you cant invest then youre going to cost mom and pop tons and tons of dollars. Its ridiculous. Thank you for coming on with us and giving us the reporting that you have. Keep an eye on the fxi. Thats an index. Its a little bit convoluted. These are publicly traded companies that are chinese. Look at the k web. Youre seeing the move. You have invested in this. I dont know if you still are today, but you have. These are the Large Cap Technology companies from ten cent to alibaba. Chinese stocks do not punch at their weight class in the indexes. They are smaller in the International Indexes in terms of representation than they are in market cap. A lot of that is because they dont conform to the same regulatory standards that American Companies conform to. Thats been slowly changing and we have been adding them more into the indexes. Thats why there are ramifications for every investor. I think its this one sign that the trade war is not close to coming to an end. And so to the extent that it continues to impact Financial Markets in some way such as this, i think it presents to me its a sign there is going to be ongoing volatility related to trade. Lets take a quick break and see what else is coming up on halftime report. A big drop for amazon this week. The price target just got raised. Should you buy now the Investment Committee debates it in our call of the day. Keep your questions coming. You can reach us at cnbc. Com halftime or tweet us to hftalimred in ask hfte. Alime report is back in two minutes. Its not pretty good or nothing. Its not acceptable or nothing. And its definitely not close enough or nothing. Mercedesbenz suvs were engineered with only one mission in mind. To be the best. In the category, in the ind