A flurry of retail results. Some good, some bad. I wonder if restoration or maybe its devastation hardware. Its brutal and they blame the market. Maybe thats the final proof that the high end customer has rolled over. Has pulled back at least. I dont know necessarily were talking about rolled over but theyre blaming the market and theyre talking about volatility and all the things going out on the markets each and every day and i they when you go through the retail environment its good to see howell home depot did and tjx did also. When you look at the names doing well they have some form of exposure to the housing world and where the spending is going on and maybe other names. Macys surprised us sitting here on the desk. Expectations have been so low. They could have gotten over that bar. But they did. That was the real key. Thats why that stock reacted the way it was. They have been punished and pricing in a lot of the negativity. Youre helping me make my point though steve. Restoration hardware is down 22 . William sonoma cut their guidance. Some of the other names are highly suspect at this point. If a high end consumer has rolled over so to speak is every other consumer next . Well im not so sure its rolled over. It may have rolled over in terms of goods like that that youre seeing in merchants like ralph lauren and so forth but it hasnt in terms of experiences and in terms of autos. So we can argue all day about whether autos are falsely inflated but the facts are the auto numbers are extremely strong. So i just think its a transition from buying goods to experiences and, you know, also saving and yes, i mean, i wouldnt i dont buy restoration hardwares excuse that its the market. They had issues before. They just went through a restructuring. Maybe theyre telling us what we started to suspect. That the problem in the stock market is hurting the overall economy or it will have a bigger impact and especially at the high end and make the argument much more exposed to the stock market and youre starting to see that show up. Its a whole confidence issue. Its not just the stock market but also the president ial election. How do you know if you should spend money or save money . So you have all of these uncertainties in the Global Economic climate in the president ial election so i think the consumer, it only makes sense for the consumer to hold some cash. Do you guy a kohls . Do you buy a target . Do you that we didnt own enough if any of us owned it. I didnt. But this has been a if he no, maam no stock. So to your point when terry came on and told everybody how bad things were going to be and lower that bar like you say so that an ant can step over it, he did come out and put up some phenomenal numbers. The guidance was descent as well and the stock is up 23 in a market that s p is down 7. So you look at tjx up 4 . You look at best buy up 5 . These are year to date numbers and things. I think that the consumer is just fine. Sporting goods, they didnt spend as much because we had a lousy winter in terms of getting people out to ski resorts and things like that. The winter hasnt cooperated with that and barely cooperated with doing some outdoor hockey. Im just wondering what leaves you to believe the consumer is just fine. If you look at the results and weak guidance and some of the stocks that are up because of buy backs and dividend increases what leads you to believe that the consumer is just fine . Because theyre spending the same as last year. Thats what retail sales were. You take out some of the volatile things. Thats what it was. 2 . In other words theyre spending what they spent last year. That doesnt scare me about the consumer and i think obviously a stock like smith and wesson, one of my favorites. They continue to spend their stocks up another few percent today and the president isnt even talking about this today. Our next guest is optimistic on the u. S. Consumer for that matter. Lets welcome him back. Its good to talk to you again. So youre still positive on the things we heard from Corporate America and what we have seen. I think so. The markets were starting to anticipate this, not just a world recession but it will drag the u. S. Down and the u. S. Consumer but if you look at retail sales and they adjust for inflation its up 4 so i agree the consumer is spending and youre also right apparently theyre doing well enough to save money because they have gotten this wind fall. So i think the consumer is in good shape. I like the u. S. Economy. I like the u. S. As the place to invest on a global basis. It looks great. You dont buy the fact that the higher end consumer may be pulling back more substantially. They may just have it all i think a lot of people are maxed out on the goods side of it. The goods side of retailing is extremely competitive. If youre looking for deflation its been in consumer durables. So consumers are getting used to getting bargains all the time. Theyre not waiting for sales. Everything is on sale all the time. You go to macys and go up to the Cash Register and they ask you, do you have a coupon and if they dont theyll give you one. Youre making the case of why you need to be concerned about the retailers. What youre telling me is that margins suck. The market has become a market for stock pickers. You have to really know your companies and while the overall consumer can be in great shape that doesnt mean youre going to buy anything related to the consumer. You have to look at the companies and the competition. You have to be selective. You cant just say its walmart or target. Its target. Target is killing them. Theyre destroying them in the big box area. Tjx is destroying them and by the way, strong margins. There are places and its all about selection and its which stocks and which companies have the best management right now and those are the companies that are doing well and those that are blaming it on the stock market for instance, that would make me concerned right there. Theres one word that you mentioned that has me concerned overall. And thats the biggest issue. Markets arent going to go up in a deflation nary environment. We have seen deflation spread throughout. Thats a very important point and the reason we have deflation is the markets because markets have become extremely competitive. They have been competitive on a global basis. Companies are managing the business for margin. They used to just Profit Margins have peaked. Well. Last year they peaked. They arent going to get much better. That all time record high but im saying companies will do whatever they can. Like use technology to reduce costs where ever they can. Let me ask you this. Do you they the chinese, the yuan whether they want to do it or not is devalued or not . I think theyre going to let it creep down. I dont think theyre going to do a massive 10 shocker. Id say its got to go down 25 . The average currency valuation is 34 . If they do a slow basis its going to get worse. Capital is coming out. Its really a tough call. But heres my point. Even if they do thats exporting deflation because were going to be less competitive. Germany is going to be less competitive. So isnt that like a real warning sign . Again this gets to the whole select ift issue. Theres companies and industries where things have been so commoditized. Who follows the calculator industry . Who cares . And loi otolaryngology businesses being commoditized too. Health care, bio tech, theres good margins so its very selective. You still think were in a bull market but you, yourself, you pulled back your target by some 300 s p points. I got ambushed. I wasnt the only one. I think we all got ambushed at the beginning of the year by two fed officials. Fisher and the fellow over at the San Francisco fed. Both started talking about were really going to increase the fed funds rate four times this year and the market just doesnt get it. And jon williams. So as soon as the market heard two of these key officials and really intent on four rate hikes it got hit and now the fed is trapped because if they raise rates because the stock market is doing better and the economy is looking good theyll get hit again. So i think the fed is done. I cant see how they raise rates after the reaction. The whole year. Why would i buy a financial stock right here and now . A sector that you like . Well if the fed is done, if were worried about exposure to oil and gas and everything else, why would i do that . Theyre cheap. Thats the only good reason i can come up with right now and i do think that they do have a problem with the yield curve. But i think this is not 2008 all over again and some of these stocks are priced like, you know, jp morgan selling well under asset value so i think theyre just cheap and we have seen how the market has come back since february 11th at this end of the world scenario and maybe this is going to be all right overall. Maybe that was the low. We did that. The bottoms done. I really thought that january 20th was the ka pitch you lags low and we contested that and went lower on february 11th and i think we tested it. I think its going to hold. Were looking at a choppy market. Kind of sideways action last year setting us up for a resumption of the bull market next year. Next year im looking for 2200 or maybe 2300. Were already back at 1930 and you know its like for this moment. For this moment, exactly. Its good to talk to you. Thank you. Coming up a ray of sunshine for the Cloud Companies and dominos delivers while todays big earnings movers ahead in the blitz. Apple and the government taking center stage on capitol hill. How tim cook and the fbi director are each making their cases today and it can get pretty fooisty when the brothers have a difference of opinion. He should dump some losers from his portfolio but they disagree on which one. The battle of two ponytails coming up. Youre watching cnbc first in business worldwide. [plumber] i need to be where the pipes are. So i use quickbooks and run my entire business from the cloud. I keep an eye on sales and expenses from anywhere. Even down here in the dark i can still see were having a great month. And celebrate accordingly. I run on quickbooks. Thats how i own it. Welcome back to the halftime report. Shares of hp falling after the companys First Quarter revenue fell nearly 12 on continued weakness in the pc and printer markets. The company is projecting 2nd quarter earnings below analyst estimates. The worst day since november. The last time that they reported as one company. Thanks so much. Apple ceo tim cook speaking out about his refusal to crack open the iphone of one of the San Bernardino killers. The fbi director was on capitol hill earlier pressing his case. Josh. Well, scott, the battle lines are drawn here and neither side giving ground in this fight. This morning on capitol hill, fbi director james comey made the governments case saying the fbi is not trying to establish some broad precedent here that this would apply to one phone. Take a listen. I love encryption. I love privacy when i hear corporations saying were going to take you to a world where no one can look at your stuff. I dont want anybody looking at my stuff. Law enforcement which im part of really does save peoples lives. Rescue kids. Rescue neighborhoods from terrorists and we do that a whole lot through court orders and search warrants and search warrants of mobile devices. So were going to move to a world where that is not possible anymore, the world will not end but it will be a different world than where we are today. Now comey also noted that apple has been cooperative but the two sides reached an impasse on this issue and meanwhile tim cook took to abc last night to explain his side of the story. We have no more information about this phone. The only way to get information, at least currently the only way we know would be to write a piece of software that we view as sort of the software equivalent of cancer. We think its bad news to write. We would never write it. We have never written it and that is what is at stake here. Now cook suggested that he is willing to take this case to the Supreme Court if necessary. Apple remember has until tomorrow to formally respond to the court. Scott back to you. Josh, thank you for that. As if there wasnt enough maybe for investors to already be thinking about when it comes to apple where the stock is going to go. Is now this something that we should be worried about if youre an investor in apple . Theres two ways to think about it. One is that theyre very concerned about the security of their phones. The data that goes in the phones. Thats a positive thing and some arguments put forward. The other way i think they could turn this into a much better positive is instead of being defeated say they can come up with the Software Solution to provide Law Enforcement and really build their network security. Public opinion on this has been pretty split which tells you there is the possibility that you could have some sort of buyer backlash down the road. Does it not . Yes. Except theyre not going to be the only ones so its going to be spread out so all devices in the sector. So whether its even the tv that youre watching, your phones, your ipads, your computers, its all the same. This happens to be lightning rod right now. I dont think so. I think theres other issues facing apple such as, okay, whats going to be the next killer product. They havent come up with one in a long time. Anybody have a difference . There could be a negative form as far as the pr. But the leading president ial candidate on one side calling for a boycott of the company. He uses an iphone and tweets out pictures and i think a lot of us that love the product are behind mr. Cook when he says i want to keep this a secure network. I dont know if its 50 50 split or 70 30. Its not a majority, a serious majority that want this to just be an open key that the fbi can read all of your tweets, ims, instant messages. Thats what he done want to give him. He called it the software equivalent of cancer. I think it would be a cancer for the stock if they just collapsed and did it. What happens if they say no. They court and they found something on there that was a terrorist attack or someone getting killed by information on the phone they could have prevented. Thats a worse Case Scenario for apple then because all of these protests will then take root and could have saved lives. Does this hurt the stock . No, tim cook is doing the right thing by fighting this and if he ends up going to court and they push him on the whole thing and they have to develop something scott, he stood by his principles, he stood by apple and the government itself stepped in and now its on the government and not apple. How worried should you be about big Bank Exposure to the energy crash . The five star manager whose focus on the financials separates fact from fiction for us and hes arguably the greatest investor of all time. But even warren buffet makes some mistakes from American Express to ibm. At least right now those stocks have been under pressure. John and pete combing through the portfolio for the stocks they think he should drop. Its a brother versus brother debate and its coming up next. As we head to break a look at some of the names hitting all time highs. Church and dwight, campbell soup, kimmer by clark, reynolds american. Were back right after this. Every insurance policy has a number. But not every Insurance Company understands the life behind it. For those whove served and the families who supported them, we offer our best service in return. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. We are back and if you have been having a tough go of it in the market this year at least you have some wellknown Company Including that of the worlds most famous investor. A look at warren buffets Berkshire Hathaway holdings show big declines in names like American Express, ibm and others which is why we put john and pete on the case to decide which names the oracle should sell. Buffet hardly ever does that but well have some fun anyway. He did that in the case of, what was it, exxon mobil, pete, where he took a huge hit on that one. Hes taking a huge hit on the number of the names we had up on the board. The one i think he should dump, General Motors. He loves buying when theres blood in the streets. He wants some sort of competitive advantage and excellent management. I dont think these guys have a competitive advantage. I think they have more like legacy problems than they have a competitive advantage and as far as mary bara im not hanging all of this on her but i think she has not proved shes an excellent manager so two of his three criteria General Motors no longer meets that criteria. Thats why i picked American Express. I look at this name and when you take a look at the chart of this name going into hast year and 2015 it looked strong. It ended up hurting me and the reason was part of the other issue, cobranding. Theyre not competing at all. Not only did they lose to costo but they also lost to fidelity. Theyre losing to other areas as well. Thats why its American Express losing to visa and mastercard. Theyre going through an entire restructuring so theyre addressing these issues and the problem is this stock is still going to be stuck for a long time right where it is right now which is well beneath the 50 day and well beneath the 200 day and its going to be down here for quite sometime because the only growth they have is financial engineering. Neither one of you said wells fargo. From a dollar loss standpoint its the second biggest in the portfolio as of the last filing. I think to the point earlier, the one thing is looking at these financials theyre just so cheap. There is a possibility. At some point in time when that comes we dont know. When we start to see the yield curve change a little bit that will help all of the banks but in the meantime i think youre satisfied looking at this name as a name that could start moving based upon where it trades from a valuation perspective. They have some potential. Look at the names john and i are talking about right now you just wonder in the environment theyre in are they truly one of the Top Competitors which is something they always like to have. I dont put them right there right now. No one said ibm for that matter either. I was leaning toward that one. I almost went to that one but im going to give him a little credit here. Here