More bullish than two decades . Absolutely. Because the risk that youre taking is so much less than it was any time since the financial crisis. We made our big sell call at 1999 and because we saw all sorts of additional risk whether its leverage and the types of loans the banks were making and the lack of oversight now its night and day. The degree of oversight on the banks, i mean, you know, jamie dimon cant leave the building without someone watching what he is doing. What were talking about here is the amount of capital at record levels. The liquidity is at record levels. The oversight, record levels. The First Quarter it was a terrible environment but you know what, the quality of loans even with energy, its fine. Book value is still growing. These are resilient banks. Theyre banks that are becoming more one way or another and the valuations are pricing in levels that werent perceived. Does that give me upside . What generates the rally here . When youre going to see revenues have been over the last three years so they should be better the next couple of years. That is efficiency and efficiency should be better the next few years and the risk, i mean, you can charge off another housing crisis over the next five years and still have more capital than you had before the last downturn. And by the way, this is not like invest in these banks and walk away. Were recommending these banks and were Holding Teams Accountable by going to annual meetings. April 26th, you have a bank of america. April 27th you have bank of america with a meeting. Its efficiency so this isnt a recommendation. Were there along with invest s investors. We displayed here what is it best performer here do you think. Jp morgan . Which returns the best . They are the a and b students. Citigroup is a d student that we think will become a b minus student. So going from a d student to a b minus student that creates a lot of upside and citigroup was the only one of the large 8 banks that got effective pass. I like the banks and they made a lot more investment in yields. Its better and it seems as though that is leading. How can banks grow when they dont have the talent they used to have . I dont want banks to have to be so smart and they have to out smart the rest of the world. I want banks to go back to basics and you have back to the future with regard to u. S. Banks. You dont need the smartest guys in the room. You need to stick to the bases and not swing for the fences like you did before the financial crisis. Youre not seeing that outrageousness you saw before. I see your excitement from the down side being protected. I get that. In terms of the upside, theres upside but were never going to see the valuation we saw before. The banks are atms for the government. They have taken away the ways. Also the risk, granted but never get wealthy by being scared and just worrying about the risk. They have taken away the upside from the other business that they had so verse 20s years ago theyre shadows of their former selves so to increase their returns on investment so i think theyre cheep but i dont think that excitement is warranted. Youre a smart guy but you made a mistake in what you just said. The banks are not utilities but they have more utility like out comes and news flash remember to the investment community, other stocks that have annuity like or utility like outcomes have skyrocketed this era of low rates. Go ahead and look at utilities. It might trade higher. Banks trade at 9 or 10. Just to be clear here youre suggesting that they have bond like qualities . They should rally . Thats what youre saying . Theyre obviously in yields. For steves comment if you adjust the dividend yield for buy backs that adjusted dividend yield is better than activities. That adjusted for rates is the highest in history so we are saying that banks have more utility like outcomes. You just skoeldgot me for sa that. I think what we need to find out is what is the best bank to go with. Best Management Team jp morgan. Management teams dont matter. But i think they to. But thats the best Management Team but the bank trading the cheapest is the one i want to be in right now and you look at the liquidity is bank of america. You only have a 16 price target on there. That seems low when you consider the fact that book value is closer to 20 or 22 a share. We recommend bank of america for the first time in several years. You flipped on that one. We did. He came on board. They have the most upside right. I was on your show and i talked about it and as much as i hate their oversight and the lack of accountability for management i love the franchise and book value. Thank you. And one other bank though thats not being, we upgraded for the first time in over two decades. Theyre many michigan, texas, and california. The stock is trading at tangible book value. They have the efficiency among the regional banks. They havent changed a director this decade. Is that a good thing . They have the lowest returns and havent changed director. Sounds like theyre not accountable. But this is the most flammable Shareholder Base at a major bank in years and i think this flammability leads to structure or change. Ill be there. You want to mention jp morgan which is your top pick . I do. I disagree with the premise that the loss of strong intellectual capital and the lack of incentive for people to stay in these Financial Institutions like there is right now could be a positive thing. You need the best of the best in these institutions to grow their earnings. To grow loans. To take the other side of the rhetoric coming out of washington d. C. Which we all agree is obstructing the growing earnings potential. Were at the later stages of these legal settlements. Youre not concerned at all with the rhetoric in the president ial coming election from the democrats . Look if you want to break up citigroup, if you want to break up bank of america and break up the regional bank, fantastic. Investors will have a field day. Youll have Elizabeth Warren and you can get carl icahn all dancing together because theyll all be happy. Leave it there mike. Thank you very much. Yeah. Clsa. Heres whats coming up on the halftime report. Still ahead, extreme investing. Gopro hires an apple design executive and john buys the stock. Will it pay off . And the pfizer allergan deal. Treasury secretary jack lew defends the crack down. Plus chipotle all on the move. Those stories and the trades are next in the blitz. Its all coming up on the halftime report. I could get used to this. Now you can, with the luxuriously transformed 2016 lexus es and es hybrid. You can fly across welcome town in minutes16, or across the globe in under an hour. Whole communities are living on mars and solar satellites provide earth with unlimited clean power. In less than a century, boeing took the world from seaplanes to space planes, across the universe and beyond. And if you thought that was amazing, you just wait. Man 1 man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Our partnership with habitat for humanity at pg e, we believe solar should be accessible to everyone. Allows us to provide the benefits of solar power to the types of customers who need it most. Pg e provided all of the homes here with solar panels. The solar savings can mean a lot, especially for lowincome families. With the savings that i am getting from the solar panels, its going to help me to have a Better Future for my children. To learn how you can save energy and money with solar, go to pge. Com solar. Together, were building a better california. Kate spade do its focus list and raising its price target to 42. That would be to the upside from here. She joins us. Its the way that you like kate spade. We have liked kate spade for quite sometime. And its our focus list today and in this world of volatility especially consumer discreti discretionary this is one of the Better Stories out there. Its the consumer and secular concerns with regards to amazon and other concerns. Are you suggesting fundamentally that this is a stronger one. Its not so much that kate is the best its how they carry it as a brand. Theyre very tight with their promotions and that is better overtime. Its to out perform. So its been great and we recommend it. How do you get the valuation for more upside Going Forward . Its not a cheap stock and its got that in there and its in pretty good shape. We actually dont have an expensive stock. Youre looking at it on a pe basis it looks expensive but you need to look at it on a paid ratio basis but it rarely exceeds any of the other companies in the apparel and footwear space. So its only trading at. 6 times. Its really closer to one so we think thats the opportunity and we support our valuation with the discounted cash flow and thats pointing to 32 for us. Last quarter they had great concern in terms of the growth there and thats what everybody always points to. Thats what were always looking at is can they grow online . Can they continue to grow at the pace in which they grew last quarter . We think so, yes. Theres a couple of attributes that we really like. 75 of its business is direct to consumer which means they are in control of what theyre selling to the customer. 20 of that business is online. Thats double the industry average in terms of online sales penetration but what we like about the upside potential is the propensity for increased productive and thats stemming from the fact that a lot of their stores are under 2 years old and as the stores get to 4 years old thats when you start to reach much better sales for square foot and better productive. Theyre also introducing a lot of licensed product in their stores and it will just drive the comp, we think, further. Thanks for sharing the time and your analysis with us. Its good to see you. Thank you. John are you a buyer here . No. I think she made a good case. Especially with the online numbers, simon but no im not. About a month and a half ago there was strong activity in the underlying stock and in the options but that was when it was 18 bucks. Up here at 24 it keeps hitting between 24 and 25 so until it can make a break out im not going to be interested. Kate has underperformed relative to coach and if you look at the last part of the inventory up 21 . Sales growth up 8 . I agree with john. You get out of the stock. It had a nice run here. Take your money and look elsewhere. If you want to stay in the handbag space maybe look at kors or coach. Theyre all competing with each other. Theres a lot of handbags in the world. Thats the issue. Theres enough competition out there but i bought into macys today because of unusual activity and i have been waiting to see that. Look at what this thing trades at from a valuation perspective. We always talk about Management Teams. Its important. We talk about jamie dimon. This is a guy you want to bet with when hes trading right now at forward pe right now is single digits. Macys is going higher. I dont like spade here because i dont think you look at your forward growth targets as to say thats a valuation. Thats the price theyre valued on. Look at their historic growth. It hasnt been that great lately. So a agree here on macys however im disgruntled and hasnt been there for a long time. New today for me. Guys we have some breaking news. We need to go to d. C. What do you have for us . New dow jones reporting just hitting the wire. Saying that microsoft has filed suit in a federal court in seattle against the u. S. Department of justice over whether or not the department of justice can go after and investigate computer users, files in the cloud without telling the ultimate user what that information was all about and who is being searched. The report here says that microsoft says in its filing in federal court that it received 5,624 requests over the last 18 months but 2,576 came with gag orders that preventing the company from telling customers the government were looking at their data. To Southwest Airlines this is another big instance here where we have a tech Company Going against the us. Government on this issue of privacy and security. So similar to the apple versus fbi fight but a very different issue here at court but once again we see the Tech Community on the west coast at odds with Law Enforcement here on the east coast guys. The doj is controversial for many. How did you trade this guys . Whats the view here. When it came to the apple case we all said why is this going to effect apple in anyway, shape or form. I dont know wln this is going to actually effect the stock price quite frankly in terms of microsoft. Coming up on the program, at least one ceo called the governments new rules on tax inversions on america. He was headquatered in ireland. Sarah has spoke to the treasury secretary jack lew earlier today. Sarah. Well, simon, i got secretary jack lew to respond to those comments and criticism that what he did was unamerican when it came to the antiinversion rules. He responded and it came as a total shock. Ill share that with you coming up next on the halftime report. By debating our research to find the best investments. Dplsh. Welcome back to the halftime report. U. S. Treasury secretary jack lew crack down on tax inversions. A couple of weeks ago. Sarah has caught one mr. Lew in d. C. Today to talk about some of the backlash. Sarah take it away. Well, simon in response to the Companies IncludingAllergan Jack Lew says its wrong for a company to merge with a Foreign Company in order to gain a more favorable tax rate like pfizer and allergan planned to do. Secretary lew says the companies should have been paying attention. It was our third action and we had vowed to go against inversion. So i asked how can you plan a business when at my moment the government can swoop in and change the rules. Everyone who engages in business knows that its subject to changes in law or rulings an important thing has been unnoticed for a very long time. It hasnt been a secret that this is an area of deep concern. Bipartisan concern. My only frustration is that legislation hahn been enacted to deal with it in the best way but we remain focused on what administrative tools do we have to stop the pipeline as much as we can until congress acts. Importantly treasury secretary jack lew has more actions when it comes to inversions and he also reminded us that most americans in his words are offended by these practices and this is an issue that gets bipartisan support. Interesting i did talk to the managing direct tore of the imf about whether it was more harmful or helpful. She doesnt get very political. She did say s backs governments to take action to improve taxes but also noted its important to be transparent and open and engage in dialogue and that is something that the treasury is getting dinged on when it comes to actually implementing the new rules that broke apart that deal. Back to you. Thank you very much sarah. The world bank imf meeting. Steve whats your view . Its not only americans that have done it. We only have one player that was involved in allergan. And nine months we do something. And shame on them. However what the government has done is taken it away. Congress hasnt passed this. Jack lew should be that congress hasnt passed revision to put it in a Competitive Position with other countries. Rhetoric coming out and the government told you they were going to do it. The government is very consistent. They told you what theyre going to do as it relates to business. Theyre going to continue to tell you what theyre going to do and theyre going to do it. The answer and solution to me would be Corporate Tax reform. Im not in politics but that would be the easy thing. More important in this instance one of the most powerful lobbying on capitol hill is the pharmaceutical lobbying. Its inconceivable that they didnt know this was going down. The break up fee was much reduced if it broke up for this very event so clearly they saw it coming. Whatever they were saying in public they thought it was a risk worth taking. They didnt know it would be a look back as well. Thats fair. A agree with hank paulson who was also of course treasury secretary before and its a bad one. So, you know, these are two and actions at these companies. However the president needs to stand up and take some of the responsibility here because he has said that he will not sign anything coming out of congress that done include an increase just to the 1 . Thats what he has said. So when mr. Lew says you havent seen congress act thats why they havent acted because its as useless as trying to charge for air. You cant do it. And so i think that the president should get together with congress and they should reform the tax code for syringes as well as corporations. Coming up on the program, the debate over two pro. John is the lonely bull on the stock and bought it yesterday. Is the companys big design hire enough to get it going again . Well debate that. Plus betting on batteries. Its an Old School Technology thats getting a second wind. Our experts will weigh in on the companies that benefit. P . P . O . Gv Sharon Epperson has the details. Nancy pelosi says lawmakers in the house are making progress on puerto ricos debt crisis. Charges include securitys fraud, wire fraud, and conspiracy. And the chairman of parliament in what could mark an end to a month long government policy. The out going this week after weeks of pressure to step down. And Rutgers University announcing that president ball balm will deliver the graduation address at his 250th ceremony on may 15th. Sit the first time in the University History that a sitting president has agreed to speak at his commencement and what an honor for those students and alumni. Thats the update at this hour. Back to you simon. Thank you. Gopro holding an event in San Francisco as we speak to a