Business, microsoft going into the cloud. This week we are looking at more of the retail channel which is apple, which expectations are so low, could very well turn and stock is dirt, dirt cheap. Im looking at buy for the first time in a long time. Linkedin is also more on the retail channel, jobs and so forth. They are two different worlds of tech. That wont matter. Tech as an umbrella has been bad. You look at the performance last week, alphabet down six, ibm three, amazon three, Hp Enterprise down three as well. Does this turn this week or get wor worse . What we are seeing, we talk about rotations all the time. Maybe this is what we are seeing, rotation within tech. Microsoft up 24 in the last year, google up over 30 . When you look at intels numbers, this stock was trading in the very low, towards 30, actually right after earnings, then flipped around by the time we opened the following day after earnings. Stocks moving into positive territory and holding on to some of the gains. That was a name that was beaten down. It was well off of its 34, 35 high. It seems like right now, the appetite is hey, look, we are going down for the beaten down names and the names, unless they absolutely crush it, we are going to sell some of that off, take some of the money off the table and start to reallocate somewhere else. Is there a difference between enterprise tech and retail tech . Consumer technology, yeah, i think there clearly is that distinction. I think whats happening right now is technology is having a lousy month, down 2 for the month and it is not contributing to the s p 500s ability to extend through last mays high. Theres two different worlds when you look at this. You look at the short term mentality, you say okay, these names are in decline right now, it is disappointing, do we want to buy them right here. What you want to do is look out six months and look at the quality businesses, look at the ones that are focusing on the digital space, on the cloud space, look at an alphabet, a microsoft and yeah, maybe in the moment youre not going to be rewarded but six months from now, im willing to wager that a microsoft or alphabet is going to reward you in your portfolio. Thats the right trade to put on looking forward out six months. For now, its probably going to be a time where i moves a little sideways. Big week. Twitter, apple, ebay, facebook, linkedin and others. It is a big week. Apple is the biggest of them coming tomorrow. The question in my mind is how conservatively did they guide at the last quarter. Go back a year ago, they were beating their guidance expectations by over 25 . That dwindled to almost 0 in the Fourth Quarter of 2015. I think that they really went conservative in the guidance for this quarter so they could handily beat it and start propelling the stock higher. Either way, the expectations for the stock and i think steve may have mentioned this, are so low that its almost impossible for them not to beat it. You agree with jimmy that apple is sort of the one to watch this week . You can make the case that facebook is the one. This is a stock that has killed it. Zuckerberg has killed it. All of a sudden if you see weakness from facebook in a stock you expect to continue to be good, then what do you do . I think it goes back to the near term mentality. I think there is a high probability that apple and facebook could disappoint in terms of price, in terms of the Business Model looking forward six months, i dont know if i necessarily agree with that. Yes, that leads to a shortturn rollover but lets have a distinction between quality businesses we want to own on a longer term basis and i would make the argument that facebook and apple are clearly two of those names. You asked me on thursday what i thought of the tech area. I dont care about this quarter. I still dont care about the quarter that just passed. If you look long term to future times, have you to keep going to the cloud. However, facebook has been the bellwether because they have continued to perform ever since the ipo came out when they didnt for the first six or nine months. Thats the one you dont want to have roll over. Amazon also. You want to see amazon come back with a better quarter. Those are the ones i will watch. Let me point out that i think this speaks to the ongoing discussion we have been having about value versus growth. If you look at intel, for instance, by the way, they beat their earnings estimates for the quarter past but they disappointed on guidance Going Forward. The stock went up and that indicates to me that value is coming back. Put that in contrast with, say, a netflix which disappointed and the stock went way down. I think when you look at apple tomorrow or facebook coming up, the responses may say more about whether value is leading technology and whether thats going to stay the case. If you look at stocks like that, maybe people were buying the intels and ibms, maybe because of what you said but also because of moves in the dollar and a hunt for yield and even whether the recent move in the tenyear will upset those kinds of trades down the road. You know, it could mean certainly intel is one that has got a dividend yield that is exciting to many. But 3 , 3. 5 , not as high yielding as some utilities or consumer staple stocks we have been talking about so much. The dollar has been a backdrop for the last 18 months. Thats going to continue to hit not just the tech sector but basically anything that has an export quotient to it. Certainly that includes cyclicals, manufacturing, transports, et cetera. To me, at least, this is more about value starting to outperform and it does have about three Percentage PointsLarge Cap Value of yeartodate outperformance versus large cap growth. If you are looking for apple to be the savior of tech, what would give you any confidence this is the quarter, the past one, thats going to deliver . We know iphones are slowing. Revenues will be a decline year over year. Where you hanging your hat snnchlgts i thi. I think a couple things go hand in hand. One is the product refresh coming up with the iphone 7. We have to wait and see how the stock responds to earnings tomorrow. Again, as i said earlier, the expectations are so darned low that its almost im not going to say impossible. Seems hard for them not to exceed expectations. If the stock responds positively, again, it speaks to value coming back i think a lot of that is about the technicals. One thing is if you look, which names are extended. This is something i brought up at the very top. The names that are extended, those are the names that have fallen back. You look at the ibm, great example of that. The names that arent that have underperformed, call them value if you want tosh, had been underperforming. If you look at the technicals, 50 or 200 day moving average, all of that together seems to be the case where people are making their decisions. What do you call apple . Sitting right on the 50 day. Id say that has a better chance for the upside if earnings are at least decent and guidance obviously for the next quarter is okay, that made my thinking go higher. Lets get more on the state of tech. Danny fish is Portfolio Manager with janis, manages the Global Technology fund. Hes live with us from san francisco. Welcome to the program. Nice to have you. Thank you, scott, for having me. You have been listening to this question conversaticonvers. Is this the week that saves tech or makes it worse . Actually, if we go back to last week, and we think about what we saw, in aggregate, the composite was only down about 1 despite some of the large Adverse Reactions we saw out of google and microsoft. So if you look kind of beyond those names, we actually had some solid reports as well. A good example is a company by the name of service now that we own in our portfolio that is actually tied to some of the broader trends around Cloud Computer and software as a service and had a really nice reaction. I think you just have to be selective. You have apple as one of your most significant underweights. Why is that . Yeah. We do. With apple, we dont really look at it on a quarter by quarter basis. The biggest question for us is over time with the normalized Growth Profile the companys going to be clearly its an inexpensive stock. What you will see is, we are entering a period in that name where, for example, this quarter will be the first time that iphone units have been down year over year and they will likely be down significantly because we have moved from a penetration Story Worldwide in smartphones to a different narrative. That narrative around apple is what the Business Model, the normalized Growth Profile looks like over time as it shifts to more software and services. Thats where we spend a lot of our time. We are just not entirely comfortable there yet. Steve weiss. I have owned that for awhile also. I will buy if they miss big because stock will be down big rather than if they make it or surprise. What level would you consider buying apple or the margins on the phones too high and the uncertainty in the pipeline too much to keep you any interest at all . We are just i couldnt actually give you a level that i would buy the stock at right now. Its just we need to get more comfortable with the longer term Growth Profile of the company. What i would bring you back to is if we think about last week and thinking about those reports coming into this week, microsoft and google were two really, really interesting reports and your panelists have even commented, i think what we have to keep in mind is those were really strong stocks over the last year and when you have a really good run, obviously Investor Expectations are very high and i think in both cases, its an interesting example of where if you have the opportunity to look out over a reasonable time horizon, the underlying metrics, particularly in googles case, the growth was very solid in the core business, you had desktop search that grew, you had the mobile search mix continues to be a powerful part of that story, youtube continues to be a powerful part of the monetization story and we were given Margin Expansion so all in all, it really lined up with our thesis there and thats one of it is the largest position in our fund. Then on microsoft, i think just what happened, if you look through at the underlying metrics of the cloud transition elements of that business, they were fine, just albeit a little bit, maybe just a little bit softer than investors may have expected. I think where investors are struggling a little bit in the near term there is just on what the margin implications are for the business as it transitions, but all in all, i thought both reports were fine if you focused on what mattered, but Investor Expectations were high and hence, we had an adverse reaction in the stocks. Sounds like to get back to apple, you are making quite a statement here. As the manager of a wellknown Technology Fund that a lot of people may be invested in that you need to see a heck of a lot more from apple before you are willing to get involved with that stock, that you are questioning where the company is at the present time. We are questioning what the longterm Growth Prospect is. If we can get comfortable with that, obviously we would have it higher in the portfolio. But for now it is our largest underweight. I appreciate the time today. Thanks so much. No problem. Thank you. Denny fish, Portfolio Manager, Global Technology fund manager. What do you think . I think he points out in his defining the landscape of the Second Quarter but again, im looking forward, what is it going to be like in q4 and q1 in 2017. Again, lets talk about the cash on the Balance Sheets in technology and the capital al vacati allocation strategies which are disappointing. Buyback for Technology Space looking maybe to rise 5 , 6 , maybe 7 . The other side of that is m a spending, last year up over 100 . Looking at a 40 to 50 decline. So what do they see . What is out there . Is it the political uncertainty, Central Bank Policy that might change . What is it . They are being hesitant right now. I do believe i have confidence that that comes back at the end of the year into the first quarter. Thats why a lot of high quality names you want to buy. Best name to buy in tech right now . I think microsoft on this dip. Its absolutely unjustified, the selloff there. By far, the upside is the greatest i think of all the big name techs we talk about all the time. I like google. I like them. Cisco. They have been buying things that are going to propel their growth further. You are not worried about enterprise breakdown . Im not. Im not. You also have to realize with cisco, i will say this again, the cash. They have about 35 billion of cash against a 130 billion market cap. I like that. Trades at 11 times earnings. 3. 5 dividend yield. A lot to like. Add oracle and there you go. Heres whats coming up. One analyst says its time to add this to your Shopping List. Its our call of the day. Plus, barron says one hotel chain could rally 30 . Is our desk buying into that bullish call . And hedge fund giant kyle bass called china a ticking time bomb. We have the exclusive details and how hes doubling down on his bet against china. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. From virtually anywhere. To warn of danger its been smashed and driven. Its perceptive enough to detect other vehicles on the road. Its been shaken and pummeled. Its innovative enough to brake by itself, park itself and help you steer. Its been in the rain. And dragged through the mud. The 2016 gle. Its where brains meet brawn. Lease the gle350 for 599 a month at your local mercedesbenz dealer. Billions are spent to confuse and, dare i say it, flummox the american public. 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What they talk about in their release was the pressure on generic business, right . Costs keep hitting them, prices keep hitting them. I think its problematic. You may see them get another bid. Lets move to the financials. Goldman sachs under pressure today. A note put out saying the bank has gone through a lost decade. Stock up just over 1 over the past ten years. We are joined on the phone. Strongly worded note. You take a shot at the ceo and c. O. O. For their high pay. You say its been a lost decade. In what way . Well, if you take a look at the pay to both those gentlemen, its been half a billion dollars in the tenyear period from 2006 to the present. If you take the Closing Price of the stock in 2006 which was just a little shy of 200 a share, its now down substantially from that level in a market which is up 49 . The company has underperformed the market by 67 . If you would take a look at the basic numbers, its pretty easy to understand why. Basically, the revenues are down from where they were, the earnings are down from where they were, the core businesses have shown deterioration meaningfully trading is actually lower than it was in 2005, half of what it was in 2007. Investment banking is down from 2007 but up from 2005. Clearly they made the wrong decision at Goldman Sachs six, seven, eight, ten years ago in that they didnt see or understand how devastating the change in the Financial Sector would be as a result of the Government Intervention and they picked out the wrong side to be on. You could make the argument that maybe whether you make the claim that mr. Blankfein or other executives at Goldman Sachs may have missed the boat, you could say, could you not, that others who was to anticipate the kind of sort of punitive nature that the banks would operate under over the last many years and just the way the industry itself has been restructured just looks differently and is operating in a more prohibitive environment certainly from a regulatory standpoint. What does that count for . Im glad you said that. Im glad you asked that question. Because in 2005, jpmorgan did 5. 9 billion in trading. In 2015, they did 10. 0 10. 1 billion in trading. They doubled the size of their business almost in this tenyear period. That was the highest level of trading revenue that jpmorgan has ever had. So not everybody missed the boat. Not everybody didnt understand that dramatic changes had to be made. In the case of citigroup, you knocked off 26 or roughly 1 trillion worth of their assets. In the case of bank of america, you have gone through this massive restructuring of the business. In the case of wells fargo, you have doubled the size of the company because of the acquisition of wachovia. In the case of Morgan Stanley you are doing as much in trading almost in 2015 as you did at the peak. S