Short bet. Traders take their positions fast money Halftime Report starts right now all right welcome. Big show today our Investment Committee is here joe, stephanie, josh brown lets begin with the markets those comments from paul jones, what he told cnbc in daf as about what he calls the explosion driving markets. We are just again in the crazies craziest monetary mix in history. Its explosive it defies imagination. And i dont think anything is changed. It reminds me a lot of early 99. So early 99 we had 1. 6 pce 2. 3 cpi we had ex act same metrics today. Thats out in davos josh brown, turn to you. Answer the question. Time to worry or party like its 99 i think most investors are doing a little bit of both the data does not show that any segment of investors, whether talking about institutions, hedge funds, retail, Family Office foundation, there is nobody out there right now acting in word or indeed as though its 1999 you just dont see that form of euphoria out there in the market do we have stocks that are extended 100 up 11 above the average in the s p. Thats somewhat closer in extreme. 4 to four to five stocks somewhat extreme. So wouldnt surprise me at all if things get a little over blown and then sheort term there is a pull back but i dont see anybody screaming there sa new paradigm. Antidotally i dont see is that. Thats fair smile direct 53. Tesla 32 uber 23. Last week, we had a fund manager talk about tesla 6,000 those are certainly signs that you would say, well, maybe thats a little bit of euphoria. The question is to the group, ste stef, is whether this cocktail of fiscal and Monetary Policy has us so intoxicated that we eventually fall over and fall over hard . I dont think well fall over in the near term i think a lot of this ends on earnings and growth. We talked about Earnings Growth how i think its going to be better than expectsed this year. A lot of it has to do with business confidence. If you list to brian this morning on the ceo bank of america he actually said last year small and medium businesses did invest it was the Large Companies that did not because they were impacted by global trade and global uncertainty so to the extent that trade is a detaunt resolved somewhat, and you have Global Growth stabilizing, i think you will get Business Investment therefore lead to better earnings and i think there are pockets in the market, energy, that are still very attractive, health care. All right last week sat here saying hes getting a little nervous calls this fly me to the moon market those lyrics could be an investor frolicking in stock market as a person in love they bumped the s p up to 3,600. 8. 1 upside from current levels. Whats this mean so, im going to echo what you said i think there is a lot of value that investors are in but starting to chase. Again seeing this story again of high flying stocks the ones you just mentioned five, up 30, 40 . I could have mentioned a ton of other ones. And i think you have to be careful as an investor dont fall in love with one part of the market which is stocks trading on 30 expected growth for the next five years. You need to rotate you need to manage your risk and you into he had to have exposure to areas that have better fundamentals like energies some health care and cant be in 45 , 50 in that. That was 99 when people were 40 to 60 in technology andsaid i dont want to touch the value side and the next three years after that value actually had positive returns. Paul department say this was late 99 right. Like on the precipice of doing a tip over. Six months to get out. Great. He said its early 1999 that you are starting to see maybe more signs of euphoria based on this powerful or explosive mix of monetary fiscal in the market. Thats what it is, i dont know that weve spent enough time really understanding the catalyst that it is. Its about supply and demand in markets. Its about a limited amount of supply in this tremendous amount of demand in a low yield environment thats just chasing Growth Opportunities so you could have said that the right strategy in the last three years was to make sure that you were kind of diversifying away from growth into more value names. How did that work for you . In the last three years growth is up over 100 . Value up 17 we are seeing the evidence again. So far in january, growth as measured by the sgx is up it 5 while value is only up 1 . So what is the market seeing okay and what is the catalyst behind that i go back to its supply and demand its the actions of the Monetary Policy its a search for yield. And tell me when that changes. And until its going to change, you stay the course. But if we grow faster than expected, though. I would love, i hope we do. Me too. But thats the point. If we do that for the last five, seven years. I get what you are saying but no great mystery as to why the market is going up. No. The question is, is it going too far, too fast . So when we say the market, its really tough to paint the whole thing with a broad brush, because so the big narrative about what happened over the last 12 months is multiple expansion. Okay we get t people got less afraid of certain big geopolitical issues the fed came in too. A lot of confluence of a bunch of things happened at once oil prices stayed tame employment got better. And people said i im willing to pay more for earnings. But now when you break it down all stocks werent treated that way equally. For example, Growth Stocks got 43 . Take the russell 3,000, break it in half, it got the benefit of a 4 three or four 4 expansion multiple only got half of that, 24 . So we didnt do the same thing for all the expectations for all of the stocks. In the meantime more growth in russell than russell 1,000 Growth Stocks. So you do have opportunities intra market you may not have as much upside entire market in general given how far things have come so i agree with him, look at your portfolio if you are 30 apple, 10 tesla, 20 alphabet and facebook, its not that you cant make money from here. Its that you are definitely making more of a bet than somebody who is more diversified or hoping towards cheaper stocks. So they asked a question today how overbought is overbought you know, paul jones is not the only one kicking around this question they talk about. Com bubble in 2,000. There are legitimate reasons why we have accelerated and manner in which we have and its time to let it ride not worry so much. Stef said earnings are going to be better. Yea, stef. Others have said out expectations are too low. Look. I think the comparison to late 1999 or 2,000 are off the mark we just dont have the excesses in valuation, in flows, in sentiment that came after that are we a little low . I think we can agree on that the problem for me is im looking for the positive catalyst. Stef you mentioned higher than expected growth and better than expected earnings. I agree that could be positive catalyst absent that im at a loss. Im really looking for other positive catalysts to offset some negatives. We havent seen Business Investment in years. If we start to get that. Thats where the Earnings Growth is going to come from. Get that late in the cycle youll bank on that . You better get it thats where the Earnings Growth will come from. But to joes comment flows in terms of liquidity, at some point the fed is going to stop expanding Balance Sheet. Good luck predicting that. That just doesnt happen. You also have an election coming up. So all im saying here, i want to finish the point right now the risks and rewards seem balanced where i come down from that is trimming i trimmed win baggo today. I continue to trim the out size winners which is just routine portfolio management. Thats the actual positive catalyst because im speaking from very positive tone about the conditions that support global risk assets but what am i doing doing the same thing jimmie is doing im trimming equity exposure for the better part of the last year. That behavior signals you know what, this isnt 99, euphoric moment this is a moment that i dont know its an activity that signals maybe you guys are getting a little nervous about where weve come in a relatively short period of time. Are you going tell me thats not the case but thats the exact Human Behavior thats wrong in the moment and exact Human Behavior that means there is more to come to the upside. Heres the flip side though because im going to give you that im a little nervous, a little late 1999, no. But the trimming that ive done which is raised cash to 10 . I havent put that back to work. Im not going higher than 10 . I think thats wrong however, having dry powder for drawdown in the peculiar ket, 3, 4, 5 which happens routinely we can bet on it ill have the dry powder. I agree im doing what we are talking about trimming and finding that im sitting with a little more cash because now im looking for an opportunity to say, hey maybe after earnings season or some other catalyst comes and i get better. Sure. So the interesting question is, taking really right off the page of what you guys are talking about, is this idea of going to cash ray weighed in on that today heres ray on davos. The issue is you cant jump into cash. Cash is trash. You have to have a well diversified portfolio. First you have to be global and i think you have to have a certain amount of gold in your portfolio or something thats hard. Maybe this feels to me like a little there is no alternative argument based on where rates are around the world, negative. Its impossible generalization to make and ray is speaking to how hes managing or how his firm is managing a hedge fund with investors with all different time horizons. For sure. Not the only one hu. Suggestion though about this there is no alternative. Let me finish my thought. The regular person investing, they may be using that cash within the next five years, and in that case cash is nottrash. Cash is not going to drop 30 because the wrong tweet about china trade negotiations goes off. So its only trash if you have an infinite time whore eye son or being jumped on returns on bridgewater. That is not the case for most people watching. So cash or cash equivalence or even tips or short term treasuries they are part of a balanced portfolio if you are going to use money in different durations, 3 years or 30 years, thats how you are making that decision you are not making a decision how you feel on the s p. Its ridiculous lust premise. To his point, if you are whatever 60 years old, and 35 run in the market you are out of allocation and right now the thing to do is go to cash and figure out what you want to do because you are preserving the downside you are protecting not trying to say you are not making a signal to the market that, hey, i got to get out. Its you have to stay within your objective. Counter to tina, which i thought was happening too, a lot of people when they talk about tina is go to yield stocks what are the biggest yields . Energy just as an example of a high yielding energyplay, the stock was down friday. Down again today so at least in the context of tina being a search for yield oriented stocks certainly not working in that regard. Part of my point discussing this issue, for the trimming, trimming thats been going on of these stocks. Not here. Right our point of these guys and joe. I dont see any of you telling me, well, we took the money and put it x, yz ticker, we put it in cash and waiting. I would bayou nighted health care on a pull back if we get a pull back in the market. That fabulous quarter. I would buy citigroup and bank of america those three companies have good earnings and yield not united but the other ones. But also massive runs. And financials have lagged for years soy think you still have up sides. Those are the names on pull backs. Earning season you always get your chance as looks and overreactions thats where you want to do the job the buying the quality names on sale. If i would have lead this show different question if its time to party like 199 and or if i would say its time to get out you have your big winners would you will an of you said yes . Im getting out of my some winners and not going to cash. Im going to places like today dont feel too good, thats emerging markets, and chinese equity its tips. Its other nonequity type of Asset Classes to give me diversification. It doesnt feel good today but i think its going to work for me in 2020. Im going to eog, United Health care. Financials i have 20 in financials im still sticking to financials and taking other ones ive done well. Increasing your exposure in areas like that with proceeds what you are trimming. Yes, but im still raising a little more cash than i thought i would. And wait for something to blow up in earnings. I would buy win today down 5, 6 , great story. Recovery Great Management Team sochlt there are certainly pockets. Youll get your chances. This plays perfectly into your next conversation so one of the stocks has been apple, you know that, doubled over the last year, set a new high today remarkable gains for sure, but is it time to sell or trim some of your holdings if youve experienced those kinds of gains. Our next guest, one of morningstar ultimate stock pickers did just that with a third of his Apple Holding bill nygren live with us from chicago. Bill, welcome back. Thanks for having me. Play so central into the conversation we are having why dont you tell us why . Why and when well, as you said, apple stock doubled over the past year went from a stock where all you had to believe was that apple was at least an average company. And you could argue for a pretty significant gain because priced at such a discount for the market now its priced at a premium what we do oak mark is sell whats popular and get to full valuation in our numbers to recycle that capital into things that are cheaper you are talking about how excessive some pockets of the market are getting and i do agree, there are some things that remind me of back in 1999 money coming out of value funds, going into growth funds. The pe spread getting so large from the companies that are loved to those that nobody cares about. One of our Large Holdings is Ally Financial it sells seven times earnings, below book value, buying back a lot of its stock each year people worry that the average car loan is increasing in duration up between five and six years now. Well, kind of for getting that over the past 30 years the average age of the car on the road is up more than 50 we just dont see an investment in ally at seven times earnings as being at all equivalent to an investment in some of the names you talked about earlier that are up 30 in a dozen trading days this year. Right but you are making a statement that apple is no longer a value stock. Apple is approaching our fair value numbers. And ally is selling well below the price we would buy it at it doesnt make news if i say ally is at 30 and i think some day in the next two years it will sell at 50. That will be like 11 or 12 times year ahead earnings two year out earnings but i think thats the kind of opportunity thats there and in the meantime, you are getting a 2. 5 yield which is almost what you get on a longterm treasury bond. I want to take a look at the shares as well we are continuing to look at apple. But you make the argument though that, and maybe this is somewhat controversial to, especially given your position on apple, to argue that what you have recently, that google and netflix are value stocks i think people would certainly, i dont know what their reaction would be, one of disbelief that you think netflix is a value stock. The difference is we think gap accounting does a good job of reflecting the value at apple. And at the current pe you need to believe ap sell a significantly better than average company just to earn average returns. Netflix, for example, we think gap accounting does a great disservice to them as they are increasing their moat by growing subscribers. Hbo subscribers, hbo is charging maybe 40 more than netflix is they were valued at about 1,000 a subscriber when at t purchased them at that same valuation, netflix today you are not paying anything for its future growth a name like alphabet, there is a lot of cash on the Balance Sheet thats hardly earning anything and then youve got all the investments in other bets which on balance lose money but are building tremendous value in things like waymo and autonomous driving. Not to mention youtube which has more minutes of viewing than any other video streaming service. If you valued that at half what Cable Networks are valued at per hour viewed you would get Something Like 100 an hour in alphabet so when we make the adjustments we think google as Search Engine is selling at a market multiple or less and we believe its a better that than average business. Hey, bill, its josh brown. Youve been known to take on unconventional perspectives on companies and find ways of which to find value not appreciated and certainly worked in your favor. So im curious if youve ever kicked the tires on uber and if you think the netflix analogy about the ways in which gap accounting maybe doesnt tell the story of how profitable they could become or how their user base should be looked at from invest tor per spec i have it love to hear your thoughts stocks up 21 in the last 30 days. I dont have a specific comment on uber other than its kind of in that same category of companies where there is a tremendous investment going on to build the Customer Base and gap accounting just doesnt give you any credit for those in tanksable assets that go into increasing the Customer Base we have looked at uber and we havent been able to get to a point where we think its selling at less than two thirds of its business value. But those are the kind of names that at the end of the year last year took a pretty big hit because there is the frustration with Companies Whose value growth wasnt being reflected in earnings and its entirely possible that names like that can be value even though they arent cheap on price to book or price to earnings. Have you been r