Portfolio funds, and our own rick santelli. As mentioned, were seven points out from an alltime closing high on the Dow Jones Industrial average. Karen, whats it mean to you here . It means that we could definitely go higher. Its just a number, and everything is coming in better than expected, Economic Data, corporate earnings. So, i see us going higher for the rest of the year. Looks good. Everythings coming up roses. Michael pagino, do you agree . I would say those are all true, but for every one of those positives, theres a negative. You know, housing has slowed down, equity prices are not cheap, theyre fairly valued. So, values are harder to come by in the market. Youve got geopolitical risk that i think investors are largely ignoring at this point, its impact on economics, because everybodys been focused on the u. S. And the fed lately. And so, i think there are some negatives, but i would agree, as long as the moneys easy and corporate earnings and top line growth continue, then i think you do have some more up side here. Peter anderson joining us also from Congress Wealth management. Peter, are you seeing clients come out of the woodwork, people you havent heard from in years who suddenly now want to start buying stocks . Well, you know, weve been telling them all along that they shouldnt be on the sidelines. And thankfully, most of them have agreed. But absolutely. You know, i think you start to see these late adopters right now, and theyre saying, hey, the party, its twothirds over. Why am i on the sidelines still . And to those people that are on the sidelines, i still think theres a lot of fuel left in this market. Ive heard the prior comments, and i agree, but i also want to tell you that look at lower Interest Rates. I mean, the treasury market is still really low. And we have not thats the one thing that makes me a little bit concerned. I would like to see the treasury start inching up, because then i think wed have the perfect rally. The thing that bothers me is that treasury rates are signaling that we dont see inflation yet. And were going to see inflation, and thats going to be good for the equity markets, because equities will still have room to take off. Well, thats a longstanding debate, whether inflations good for equities. But sam stovall, this idea of a perfect rally, what are the ingredients and how many of them are we looking at here . Well, kelly, i think one of the important things is that were looking at very low Interest Rates, low inflationary environment, but more importantly, as michael had mentioned, that we are trading at relatively fair value right now based on current earnings estimates. Yet, an interesting thing is that the topdown or strategisteconomistdriven estimates are substantially higher than the bottomup estimates that s p capital iq is showing, and thats usually a rarity. Usually, the bottomup, the analystdriven, are much more optimistic. Yeah, exactly. So, we could be looking at something that surprises many. So, youre saying explain this for one second. Sorry, brian. Because usually, like you said, youd expect people when theyre building the bricks, stacking them all together, that adds up to more than the toplevel guys see. Why do you think its reversed right now . Whats that say to you . I think that says to me that maybe were having underestimation or not fully applying the kind of growth that is expected around the globe. Its expected were going to be seeing about 3. 5 gdp growth globally in 2015, and maybe were underestimating that growth here in the u. S. So, if you were to apply those kind of earnings, that would be looking at numbers that are close to 2,200, 2,300 on the s p 500, not the 2,100 number that the lower estimates point to. You know, rick santelli, were talking a lot about why the stock market is higher, and the points make sense, but i submit to you, sir, that a 2. 39 yield on the 10year is a pretty doggone good incentive to be somewhere other than bonds. Is the bond market actually leading the stock market here . Well, first of all, i think your first comment is way off course i love it. The total return of 10s and 30s is better than the stock market, or at least close on the 10s. Its a little over 8 total return when you take price appreciation and income stream, and its closer to 19 plus on a 30year bond. Now, i understand that maybe that party will end, but i think at this point that nothing is going to derail the equity markets until things actually either start to get better, because when things get better, boy, a lot of moving pieces for these Central Banks to deal with, but i think right now the proof and most of the longevity of this rally is in the hands of the european sector and mario draghi. He has eloquent words, and when it was asked whats the liqueli that makes this work, what are the ingredients . Id say one part central bank, one part ecb, one part bank of japan and maybe half a part the bank of england, but those ingredients wont be around forever. And you just made my mothers ghoul yosh as well. But let me follow up. I think its 35 of the s p 500 have a dividend yield above 4 . So, if yields keep going down, for whatever reason they are going down, doesnt that drive people into income wherever they can find it . Oh, sure, because everybody lives for the moment. Now, what happens if that dividend stock thats paying 3 , its value gets cut in half in a year or two, does that change the equation . Its a good question. Im probably not the one to answer it. Karen, do you have an answer . Yeah, i want to hear this one. The thing is, what rick said is that people keep living for the moment. I think clearly thats the biggest investor mistake thats been going on. You always want your bonds, you always want your wide diversification in bonds and stocks. Theyre your diversification, theyre your risk control. People arent making that mistake. Theyre just piling in and piling out of what they think is the best asset class of the moment. You always want bonds. Bonds are there so you could own equities. And thats been a clear mistake, and i think people have been missing a broad Global Expansion thats been going on, been very u. S. Focused. The u. S. Is a great place to be, but people are missing that broad Global Expansion thats going on. Now, wait a minute, two people now have talked about this expansion, you and sam. I dont see it either, kelly. I dont know what globe theyre looking at that makes three of us. Yeah, so, we im seeing it because the good the good u. S. Companies are already out there finding that growth. If you take a look at s p 500 companies, 50 of the sales come from outside the United States. How are they growing their earnings . How are they growing their Topline Revenue . Theyre out there. Theyre looking at these markets. There are a lot of markets that are coming in look when someone like starbucks goes overseas, of course, look, it has a lot of room to grow, but thats different than saying that Global Growth is strong and that thats going to be something that necessarily supports the performance of companies with global exposure if theyre not increasing their market share, in other words, if theyre just constant. Like burger king. Ones really big, ones really little. Yeah, exactly. So but global gdp is twice what it was ten years ago. Yep. So, even at 3. 5 growth, thats on a larger pie than we ever had. So, there is clearly growth out there. And the companies are finding it. Sam, can you just give us a sense, too, as to who might be best exposed here to this story . Well, i think, you know, basically, the question is what is the market doing . I think its anticipating the kind of growth. Were not seeing it right now, but the market is trying to anticipate six to nine months down the road. The prices tend to lead the fundamentals. And i think thats one reason why we are moving as aggressively as we are, not only based on the yield but also based on expectations that the economies will be improving and that we will be hitting more of the topdown kind of numbers as compared with the bottomup ones. All right. But as mentioned, as rick brought up, this is on expectations the European Central bank may be doing more quantitative easing, responding ultimately to slowing there. Supporting markets today, were hitting record levels intraday. See you guys. Thank you very much. With 52 minutes to go, whether, brian, we can go out at some of these record levels as well. The dows up 50 points off its session high, 17,127 is the level there. 17,138 is the closing high. All right, 17,138 is the number, then, we are watching, kelly. Plus, billionaire investor Mario Gabelli is here to tell us where he thinks the s p goes from 2,000, and youre going to want to hear his latest value stock picks. Also ahead, investors saying its time to short these markets because stocks and bonds are headed for major potholes dug by the fed. Yes, bill elken stein will be here to state his case. And later on, did billionaire Warren Buffett open up the flood gates to more tax inversion deals . Did he back the burger king buyout of tim hortons . The president s come out against these deals. Buffett is an ally. Does this make way for other companies to make similar deals . That and more ahead, if you can believe it. Cute little guy, huh . This guy could take down your entire company. Stay with me. On thursday a hamster video goes online. On friday it goes viral a network choking phenomenon. Why do you care . Hes on the same cloud as your business. The more hits he gets, the slower your business may get. Do you want to share your cloud with a hamster . Today theres a new way to work. And its made with ibm. We are just 16 points away from another closing high for the dow. As kelly said, 17,138 is your record high number. The s p, by the way, which is at 2,001, is already at a record closing high, kelly. Yeah, and a lot of names in the green today. Our Morgan Brennan covering the big movers for us. Hi, morgan. Hi, kelly. We begin with best buy, moving lower after posting a secondquarter revenue shortfall. The Consumer Electronics retailer also warned that sales would continue to decline for the rest of the year as people continue to increasingly shop online. Meanwhile, tim hortons continued to rise as burger king finalized its bid for the canadian doughnut chain. This as Warren Buffett backed the deal with a 3 billion investment. But Sanderson Farms fell as the poultry producer produced, well, less poultry than expected. And we end with ann inc. , moving higher on news that ann taylor reportedly hired jpmorgan to explore a possible sale of the company. Brian and kelly, back to you. All right, morgan. Thank you very much. Well, 2014, the year may bring 2014 on the s p 500. In fact, were up just 5 in the past three months. But will these levels also bring some caution and some selling, kelly . Yeah, you might think that a dow and s p at record highs would push a famous short fund manager to get back into the short selling game, but its still not enough for our next guest. Joining us now in a cnbc exclusive is bill fleckenstein, president of fleckenstein capital, on the cnbc news line. Bill, welcome. So, this is the question. You know, were at alltime highs. Does that make you itch here to finally short the market or no . No. I mean, i dont think its debatable that stocks are expensive, but you could make the argument theyve been expensive all year. The bond market is i think drastically mispriced, and as a consequence, so is the equity market. And that mispricing is a direct consequence of the policies of the fed and the other Central Banks, which are really the problems. The fed is the problem. Its not the solution. It created a bubble in 99. The response to that bust was the real estate bubble. The response to the real estate bubble is the misallocation of capital that is going on in stocks and bonds. But if youre going to make money as a short seller, as a dedicated short seller, like i did in the past and i intend to do again when the time is right, you really need a certain backdrop to allow the fundamentals to matter. And quite frankly, even though the fed has been reducing the amount of money its printing, its still printing enough money that, apparently, the stock market continues to go up. So, the right things arent in place for me to want to get short, even if the market was going to make an alltime high tomorrow. Hey, bill, its brian sullivan. When do you think, then, the time will be right for you to go back in . Whats going to come together and you will say, this is the time, right now. Oh, boy. Well, if i knew the answer to that question, id have more money than buffett. But i suspect theres going to have to be some sort of a quasi revolt or reaction in the fixed income markets of the world. You know, we like i look at the treasury market and it makes no sense to me, given our policies, but when i look at the jgb market yielding 50 basis points with a japanese intentions of having 2 inflation and a weak currency, that makes no sense. And i can go around to the swiss or the brits. These bond markets all make no sense. And i think they are going to have to sort of say theyve had it with these qe programs. Now, i dont know thats going to play out that way. Thats one idea. Thats what started to happen earlier this year, and i thought it might be time, but it never played out, which is why i never bothered to get short or finish raising the capital limit. I dont disagree with you about some of the things youve said about the u. S. Bond market, but let me follow up with this, then, bill. If i look at say spanish 10years right now yielding 2. 18 , theyre yielding much less than that in some other countries with seemingly worse economic and fiscal issues than the United States. So, my question is, are we then the least out of whack market in the world . And then ostensibly the best looking . Well, you know, yeah. I mean, i think the yields on european debt is even stupider than ours or, said differently, the risks are higher. On the other hand, because of the constraints or the quasi constraints in europe, theyve had to do more work on reducing their budget deficits. Weve basically monetized ours. So, yes, theyre maybe not as goofy as ours, but that doesnt mean anything. Thats like standing thats like we had a discussion in 2000, march of 2000, when we were debating internet stocks and you said, well, those are 500 times earnings, this is only 80, so its not so bad. You were still going to lose your ask if you owned them. So, its relative stuff. It doesnt change the fact that theyre all mispriced thats true, but you know they call shorting jgbs the widowmaker, right . 20 years this has been going on. Correct. So, if thats the only catalyst is that the only catalyst you see out there . No, no. The bond markets get repriced at a more rational level and that forces stock markets to price that . Is that the only way you think that the current trade ends . No, im not saying the only way. I was just giving you a reference of this is where problems the japanese in the past didnt say we aim to destroy our currency and create 2 inflation. Here, take 40 basis points for a 10year piece of paper. They didnt say that. Now theyre saying that, so its worth paying attention. We may find out the economy is weaker than we think as the fed tries to stop qe. And listen, the possibility of the stock market crash in the nottoodistant future is far higher than most people think because of the fed policies that are now slowing it down and all of the modernday financial things sorry, financial changes with algos and things like that. Im not saying it will happen. Im just saying you have to be mindful of the fact that it could, if Something Like that started to happen. That would be obviously something you would want to react to. Indeed. Well leave it there now, bill. Appreciate your perspective this hour. Bill fleckenstein, president of fleckenstein capital, brian. Thank you very much, kelly. As we go to break, lets give you an update on the markets. Minutes before the bell, the Dow Jones Industrial average is up 48 points to 17,124, 12 points or so off its closing high. The s p 500 also up about 0. 2 . And once again, the nasdaq outperforming, up 0. 4 , kelly. All right. Coming up, is the middle class back or is it being left behind . That was a huge topic on the show yesterday, and were going to follow up on that in just a few moments. And up next, did billionaire Warren Buffett inadvertently give his blessing to tax inversion deals by backing burger kings takeover of tim hortons . The pros go to town on that one right after the break. From 2000 to 2011, on average 17 manufacturers a day shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. 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Keeping a close eye here to see if the dow can close at another record high, having hit it intraday earlier today, but after we started out the strong session, we have definitely been pai