Scott walker will be talking to th gundlach in a moment. Long emerging markets. Tim sea mour, youre an eem merchant. This is a trade ive been long for a long time. I actually think emerging looks good against the etf. If you spread it over the spy, you can see the ratio, somewhere around 16. 8 right now. Some key levels to break through. Emerging is absolutely out from the s p. A lot of the bogeys for em, really, the big hurdles for em have been dollar related, growth related. Those economies are starting to move. If you want to see a trade, we talk about this on the show, this is the trade. Emerging is underperforming the s p by almost 60 from the peak of april 2010. And if you want to look emerging markets that took fire in 2003, 2004, 2005, youre back to square zero. Thats exciting. It feels like the short spy side of the trade might be a little trickier. We were talking about how its difficult to not be long at this point. The s p 500 with the volatility so low. Listen, i cant speak for mr. Gundlach, but i dont think hes looking for a complete wash on the s p as hes looking for significant outperformance in eem. The s p short is just sort of more of a hedge, i would imagine, in my opinion. He can speak for himself. Tim, real quick. I think 07, 08, weve never gotten remotely close to the eeo 5. Youre talking about something that probably has the wind in its sails. You have to wonder how the short position is being put on with volatility so low. There are a number of ways to do that. Its cheap to do. You can do it with options. Think about what this trade structure looks like. If youre betting on eem rg betting that chinas going to do better, because thats a huge portion of it given the data well, we actual l i saw weak data. Weve had really smart people come out and say, you know what, theres something going on in china thats not good right now. At the same time you had d. J. Com come out with unbelievable earnings. Its unclear to me whether or not a longrun prospect, or short run china will have a problem. If you are long china, and china blows up, youll be fine. It looks like a decent hedge. It is absolutely a hedge. I think tim nailed this. Youve nailed this for a while now. The data coming out of china scares me a little bit to go longers em being short u. S. Right now. I would rather be long europe than long the u. S. So i would actually put that trade down versus what gundlach suggests. We need to believe that Interest Rates will remain relatively low in order for that side of the trade to work. I think you do. I think you need to believe the dollar is going to remain this strained. The underperformance has been currency related. Were at a place where i think maybe the dollar in the short run is stuck here and thats good for the eem. Lets go out to the sohn conference and scott walker. All right. Melissa, thank you so much. Listening to the confers, we will just pick up with jeffrey gundlach. Great to see you. Welcome. Thank you. These guys on the show were just talking about the call you just made. Short spy, longers em. Yeah. Why this call . Its the valuation of emerging markets, is half the valuation of the s p 500. When you look at things like pricetosales, pricetobook, and i think part of that valuation difference has been based upon, one, the dollar had been strong. From 2011 until 2015. That usually correlates with em underperformance. I think thats part of it. The rest is that i think passive investing is something to use a word i dont like, bubble, where i think people greatly overbelieve the idea that passive outperforms. Theres a birth right to outperform all active managers. In fact, theres incredibly predictable cyclicality, and the passive outperformance has been very similar to how long theyve lasted historically. So i think that youre going to have active management, as i said, to use the mark twain quote, the reports have been greatly exaggerated. Theres a lot of really, a macro call based on valuation. You do have to consider the dollar as part of this. So youre suggesting that so much money has been flowing into passive investing, that it is overstretched valuations versus of the s p 500 versus you can use europe as well. Europe is more popular. People feel more comfortable with it. I just think em has more potential upside than even europe. So, yeah, i think you look at market share global stock markets, u. S. Is over 50 of the global stock market. But its under 25 of gdp. So theres just something wrong with this picture. I used an exhibit of if we didnt use the Morgan Stanley world index which is capitalization, but used gdp weighted, then the market would be much lower, the world market. Its the u. S. Thats dragging it higher. I think its a herd mentality that is based upon kind of the repetition of the idea being extrapolated out indefinitely. And i use the metric which i thought was the biggest idea of my presentation that passive investing doesnt even exist. Its just rules based. And the s p 500 isnt even rules based. Its run by a committee. A lot of people think its the biggest 500 stocks in the country, but thats not true. Its a committee. Now, they dont change things a lot, but the chairman, david blitzer, actually was bragging about the fact that they were active managers, and that bill miller called them good active managers. But youre hiring an active manager, youre supposed to look into their selection process, youre supposed to look into their research, how they make decisions. People are blindly handing over their money to an Investment Committee they know nothing about. Its almost a breach of fiduciary duty on the part of institutional asset pools without understanding what exactly is the daytoday. Lets be clear as well. Even though you say short spy, youre not calling for the s p to fall out of bed overnight. In fact, you said during your presentation that the s p could outperform in the short term. I said on your show, on fed day, march 15th, i said, you asked me can stocks move higher with your Interest Rate call being correct, which was that we would get a tradeable rally off of slightly higher than 260, the global 2 and a quarter. My answer was yes, you can have both of those happen. Because the bond call has more to do with ridiculous positioning in the market. Its not really based upon tremendous economic softness. The s p 500 will not have an attitude change just because the tenyear goes down by 40 basis points. Thats what ended up happening. I did think if Interest Rates fell, and they did, that financials would probably have a shortterm underperformance. We talked about that, too. Because people like to see Interest Rates go up at the long end in particular when theyre interested in financials. I thought that was a countertread move. I thought it was very interesting we did get below 225. My target was 218. We got to 217 on the close. I always use closes. If we go back above, particularly above 230, well, were rejecting this sub225 level which means the rally could very well be. Now were up at 238, which is solidly back in the range where we spent so much time. The only thing that is theres a couple of things that i argue against significantly higher int rates, which is copper to gold. Gold has been weaker lately. Copper had been weaker earlier. But that ratio was indicating lower bond yields. Another thing that was indicating lower bond yields was absurd overpositioning, short the bond market. The day, the week that the tenyear went below 220, you went from one of the largest short positions in history to the specs actually went long below 220. All these people positioning short at 260, many of them canceled that trade and somewhat long at 217. I think that thats that alleviated the oversold. Are we in now the strengthening yield trend . Or is this shortlived . Where is the tenyear yield going to be at the end of the year . I dont fall for that trap anymore. One year i said it was going to be at a level and it was there three days before the end of the year. Then it moved like 20 basis points the last few days, so they said, you were wrong. Ive been talking about this since 2012. So its coming on five years. The history books will say that Interest Rates bottomed in july of 2012. The twoyear bottomed in 2012. It was rejected in a matter of a day or two. I think were in a longer term secular upmove in yields. But that doesnt mean you have to be terrified of bonds yet. Because i like to quote earnest hemingway the sun also rises. How did you go bankrupt, bill asks . Two ways. First gradually and then all at once. Thats the way bond yields bottom. I made a statement in my july webcast that i think the next president ial election, or maybe a year after, but somewhere in that context, the tenyear will be at six. People need to listen to you when you talk president ial elections, by the way. I predicted every president ial election correctly since 1976. Actually, 1972. For those of you who dont know, last year here at sohn, you said donald trump would be president. I said that in january before the primaries even started. So its memorialized there. But i think that you could easily see a perfect storm of bond issuance, thirst for nominal gdp, Corporate Bond maturities rolling. Qe has to be rebought by the fed or sold out to people like me. On behalf of myself and my clients. So i think theres going to be tremendous bond interest. And then theres the deficit. I alluded to it briefly this year, donald trump i think is very comfortable with debt. Hes built whatever empire he says, he said, i love debt, he doesnt want a strong dollar. Trump in one year ago just about today, may 5th of 2016, had a quote, i showed my presentation, a strong dollar sounds great but in reality causes trouble. Its not nearly as good as you think. A month ago, in april, he came out and said, i think the dollar moib too strong. So i just dont think donald trump can get satisfaction delivered to his voters with a significantly stronger dollar. Its just not going to help american jobs. It doesnt you know, higher rates, it doesnt lead to higher dollar, which leads to no, i showed that in my presentation. Its an urban legend. Everyone says, if you just say this to a crowd, everyone will move their head in a northsouth direction and say, oh, yeah, fed tightens, dollar goes up. Ive been trying to disprove it for 18 months now when i turned nur tral on the dollar from the move from 75 to a hundred. Its just not true. Theres been many instances of sequential fed tightening that the dollar just went sideways. It happened in the 08s, it happened in the 90s, and its happened this time. The feds started tightening in december of 2015. The dxe was above a hundred that day. Its lower than a hundred today. The dollar is not strengthening. Weve raised it three times. Im not saying that the dollar must weaken ive been neutral. Ive had moments of negativity. I havent had a bullish dollar fall really though since i was bullish from the middle of 2011 until december of 2015. These markets, particularly currencies, are tremendously anticipatory. The reason the dollar went from 75 to a hundred, there was the understanding that the fed was itching to start raising rates. They anticipate. So its after things become obvious, or that theres momentum in a move, where suddenly everybody gets religion. Like the short sellers of the tenyear when it got to 201. Suddenly they give up on their short. Rules based investing can be accomplished in a rules based way. The s p 500 isnt even that. I have a rules based fund. Its called dseex. Its outperformed the s p 500500 basis points every year since its inception. So its possible if you have a good economic theory behind the rules based investing, but just some Shadow Committee choosing your investments, im very against that idea. And i really think that its a fair trade, as you said. Not that im short the s p or bearish on the s p, its a relative performance game. Like my pick a year ago, i said long the mortgage reits, its up 40. 7 that time period. I wasnt bearish on utilities. It was a relative value. Im glad you explained that. Last, but certainly not least, twitter has its newest yeah. Newest tweeter. Yeah. Ive been trying to avoid social media since it came into existence when al gore claimed to invent the internet. Basically i have seen so many articles and reports about my investment strategy, my results, calls not made that i never made, that im just tired of getting false news out there. So i decided when i see something thats factually incorrect, rather than trying to get a retraction that nobodys going to read, its going to be on truth gundlach. We started this morning, i set up the account in the car on the way over here, with one tweet, which is test. So thats all there is now. And one follower. To whom to test it with. Now i think we have a few thousand already in the last hour. I think you do. I think you have a lot of people following you. Jeffrey dpund latch, thank you so much. Thank you. That is jeffrey gundlach. Melissa, back to you. In fact, 2,047 followers so far. Jeff gundlach elaborating on his call. But also, talking about a number of other things, including the falsehood, had esays, and the belief that rates and dollar must move in tandem and the overreliance on passive investing, mainly through the ets, and what that causes. In the first place i want to go to is starting to show with his short skp, long eem, wasnt necessarily bearish on the s p. Its more of a hedge. I think we tried to clarify that. And mr. Gundlach just did. The trade probably does make being long eem on its own probably makes sense. The passive investment that he laid out there is a important thesis. Its where is the money coming from. It is institutional money, retail money. Right now, its been for a long time retail money flying into this market. Hes a hundred percent right when you look at the valuation of the stocks. Especially the s p 500 near the etfs. Their valuations are sky high. It goes both ways, though. It does. It can also drag down valuations unfairly as weve seen. For instance, right after the Hillary Clinton i tell you what, if youre an investor looking for a hedge, its never been a better time to use etfs and index funds as hedges. As a hedge fund manager, investors used to give us a hard time saying we are hedging with spies. It was always taboo to talk about this. When these trades werent so crowded, it probably was, we called it like it was basically a sleep at night hedge. It didnt mean anything. Now when these are right now, being short triple qs, you think have value, is a lot of sense to me. I just the dollar has been sideways for a long time. And its going to stay that way. Comments on the dollar, it has been sideways, right . Hes saying donald trump does not want a strong dollar. Weve got details, plus the Telecom Space is on fire. What could be the next big deal . Later, the oracle of omaha, what they are and why hes so bullish. Much more fast money still ahead. 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Liberty stands with you™. Liberty mutual insurance. The shlike a bald penguin. How do i look . [ laughing ] show me the Billboard Music awards. Show me top artist. Show me the top hot 100 artist. They give awards for being hot and 100 years old . Well take 2 [ laughing ] xfinity x1 gives you exclusive access to the best of the Billboard Music awards just by using your voice. The Billboard Music awards. Sunday, may 21st eight seven central only on abc. Welcome back to fast money. The airlines sinking despite encouraging words from billionaire Warren Buffett. They said the industrys worst days could be behind it. It was a suicidal business for a long time. Having the consolidation that came about through the bankruptcies made it an extremely competitive business. I dont think its a suicidal business anymore. Buffett also commented on the viral video of the removed passenger on the united flight saying oscar munoz made a mistake with the initial response. Is Warren Buffett right and should you bet with the airlines and bet with buffett . Tim . I do. I think you should. I think airlines are very different businesses. I think theyre trading in many cases, look at delta as if the economy is in a recession. If theres growth there, theyre certainly to be owned. The function as airlines as efficient players in their own market is what it all comes down to. Delta, analyst on the 11th, always a good day for the stock. These are dividend plays as well. Efficient player is the key. Warren buffett said if capacity gets out of control, if they put out too much capacity, thats going to be a problem. Thats the key metrics you have to watch. In the short term, how the stocks traded, i would wait for a little pullback. You might take another week or two before you get in these. Its probably not a bad trade. Valuation is compellincompel. Priceline made an alltime high today. Still, i think very reasonable valuationwise. It will be interesting to see how they perform after earnings. A lot of people raising their price targets. Raymond james today just had their earnings. Its all about pricing, all about managing capacity properly. I think brians right, i think you wait and let this group trade a little bit. Im looking for lower levels. If theres one stock to buy, it would be delta. Still ahead, two big travel stocks, hertz and marriott reporting moments ago. Hertz tanking, while marriott is higher. Im melissa lee. Youre watching fast money on cnbc. In the meantime, here is what else is coming up on fast. Lets make a deal thats what telecom and cable executives are about to do. Well give you the names that could be the in ex target. Plus fast money is going to las vegas. Hitting the strip in search of the hottest trades and talking to the biggest names in sin city. Steve wynn, mark cuban and wayne