Transcripts For CNBC Fast Money Halftime Report 20160518 : v

Stock s are reacting some turbulent traffic ahead. And is that welcomed . Yes. It is, because of the optimism for the economy itself, and the appearance of inflation, and the 0. 4 on the pricing index is for anecdotal because we have Domestic Companies with sales that are up 30 over last year. We are are rocking it in america right now. And im telling you that there is no recession, so why not a rate hike, because we could take 25 basis points right now. And doc, neutrals on the stocks in the next 12 months, and the bank of america says it is a swoon, and why are they wrong . Well, kevin, like the optimism as always. And honesty. Yes, but i am not optimistic on the markets reaction it to, and the market can take ut and 25 basis points is not going to knock the wheels off, but the market will sell, and sell hard if they raise rates minutes after the rates increased. And why is he wrong . Didnt we get an indication of that and a couple of people talking about rates and the market will lose its mind. Yes, and teleco rates, and it are will, but the enhanced margins and the earnings, and dont be whiners and be diners, and go long on these things. Look, i dont know what it is going to do with the day on the rate inkrecrease happens, when happens, but the question is about the brexit vote in june, and spanish elections two weeks after that, so i think that they should go, and it is late alrea already, but 25 bips we can handle that and 50, and if they do 50 at once, it is not going to work. And what does that mean . Because the market said that we cant handle the conversation. Well, you cant read anything into the markets because the volatility is tremendous, and the day before you had the fed govern governors talking about that rate increase, and this is the mantra lately. And now it is a drum beat with lockhart, two to three rate hikes, and john williams, two to three, and rose en gren two to three times. Well, if they are going up, it is because the economy can withstand, so i dont know what the short term is going to be no m matter how violent, but i am worried about the market for other reason, and i see nothing good about it, because despite the companies growing, we are in a earnest resession and we saw it. China is a house of cards and they will devalue at some point, and not maybe for three or four months. So you are with the bank of america talking about the summer swoon, and she went down a laundry list of the things that the market should be worried about it. I cant see anything that it should not be worried, okay, i have the brexit, and 80 said they would not leave and 80 said that trump would not be elected so you have to take some risk off and hedge, but if you go forward into the summer, you will hear so much coming out of the Election Campaign to put people back on their heels, and the companies and the ceos dont know how the to allocate the capital. There is a spending freeze on that and so i want to be cautious and the market and the multiples increased while the earnings have come down, and so we have gotten multiple expansion in a period of time that we dont deserve it, and that this is the issue for me. Pete, what is the story here . Well, the things that you hit on most importantly resonate with me is the shortterm, and the shortterm is a sell, and we will see the market pushed down, kevin, and it is not meaning that it is not a great buying opportunity, and however, williams and lockhart are saying, hey, the economy is not so bad, and not great, but not so bad, and we have low unemployment, and there are reasons that we should expect that even though the numbers are e shog it right now, a june rate hike, and the likelihood is much greater than what we are seeing for the number, and it does not mean that jon is saying a sell, but that is the opportunity to protect yourself. You want to be in some of it, and you trim some of the position, and i have been trimming a lot recently, scott, but other than trimming, finding the ways to hedge yourselves to the downside to hold the positions to add to them if there is an oversell, but to give yourself a period to be in the market. It is a dry powder period. And we have another special guest with us, marty moab who is here with us on set making a travel layover. Good to have you here. And you think that the market is going down, and down hard . I didnt say down hard, but it is overvalue and my work is driven by a 155variable computer model that took me nine years to develop, and when i put in the computer names, only 10 of them are coming up to catching my interest at all. You have 20 of the names in the s p 500 right now trading at less than 13 times speck yu ula estimates for next year, and half of those hundred names are value traps. So people who look at the value as i do, we have a few dozen names to even consider right now. And you dont think that we are going back to test the february lows . Yes, we could test the february lows. You say that the market is going down and down hard and that is not hard . Well sh, i thought that you were, i thought that you were talking about 20 or more. I think that we could test lets hope not. I think that we could test 16,000 on the dow jones again, but dont bet of going below there, but it would not surprise me going to 15,000 which is below the lowest that we saw recently. What is the issue . I love this pessimism, and you know, the issue here is that we know that there is lot of an neck dotal evidence that the Domestic Companies are having a good run, and what you are ta talking about with the s p 500, 40 of the revenue comes from outside of our jurisdiction, and that is what you are complaining about because the head winds are not with them, and the dollar will go up if the fed raises 25 or 50 bips, but it does not mean that you cant find the doe mes names trading below the p. E. S and in an economy growing somewhere of 1. 5 to 2 is where you should rest the dollars or exit the markets and sit on cash and make nothing. Thank goodness i am here, you know that. I look at the valuation, and as a value player, 70 of the names will not get consideration of me. Then you hate the financials for sure then . Well sh, by default, you are forced into the sectors of a value play, you are forced into the financials, industrials and the health and the tech names that are trading at 10 or 11 times earnings. But they are value traps . I wont pay 18 for staples name with zero growth. You have zero upside there, and the only reason to go into the names is because they may be are less Downside Risk than the names if the market goes down. It is not a reason to invest. It is a good point to sort of turn the conversation in that direction in that the places where the inves ves or thes have been going, the utilities and the staples, and the yield is raised, arent they more attractive, kevin . Well, you tutilities after t february swoon when they were looking good as a safe haven, they are turning around to be bad because of the concerns on the radex. And usually in utilities and tellcos and reits, and that is bad, but you dont have to invest there, when you think for certainty 50 bip or 75 bip raise. That sector is going to be flat to down and worth revisiting after the fed is finished, but i dont know when that is going to be. And where do you go then . If the others are perceived value trapped. Well, it is overvalued, and you dont like the 17 p. E. , right . Rightment and another thing that i rarely hear people on wall street talk, i run 100 names through in the telecom and the utilities and the other sectors you have 200 or 300 names to choose from and if you are looking to put money in the defensive sector like utilities or the telecom, there are a few dozen quality names in each of the two sector, and what happens is when you have the Portfolio Manager looksing for the place to hide, they are rushing into the few dozen names, and then they become overvalued and that is why they look attractive. And your thesis is that the p. E. S are going to compress, because if you take Stable Companies with flat earnings, and flat sales, because that is what the earnings are telling us now, and say that the market stays where it is, you can garner a 2. 8 or 2. 9 yield off of that, and now, sitting in them, and just waiting, and you are saying that you cant do that, because you would rather be in cash making money or you think that they will be down 20 . That is the thesis. Let me jump in there, because the 2. 9 yield is going become a 3. 5 yield quickly, and it is going to take you a year to get that yield, so you are assuming to sit there for a year and get that. I this they the dividend investing and you love it and i love it, too, but it is only one element, one factor in any stock. And take bhp and they cut the dividend by 90 . So i sort of lost more in the stock price than i ever going to be making in the dividend in the near term. And the name, and you say that you run the names on the screens in the computer, and twitter came up to you as a buy. Yes. Why . I was a little bit early trying to pick a bottom on it when it dropped 75 off of the high, and i decided to take a shot at it. In my opinion, the market is very good at downgrading names after bad news comes out. And upgrading names after good news comes out, so i do the opposite. Late to the party. They are always late. And where is the price to find value . The fact that it came down 75 Means Nothing when valeant got cut by 50 , you still would have had your lungs ripped out if you had bought it. So where is the value in twitter . I rarely if ever recommend names trading at 10 or 12 or 14 times earnings and i made the exception with twitter because it is trading 22 , and they have 8. 66 billion in cash, and the market cap is only 10 billion and i dont think that facebook should be trading at 33 times the valuation of twitter. And the market is very good at reacting to the most recent press release that is put out. So that is the biggest position . I was on cnbc and i blacklisted apple on ethical and moral grounds, and that got a lot of attention, so i dont go near apple. And other than that . But it is going to score one according to the computer model. And what about j and j . I would not go near it with a tenfoot pole. That is why there is a market, my friend. Nobody on wall street is assigning probability to the headline. But it is a speck you lashgs and they have not returned capital since the inception. It is reporting 20 learning and i am expecting Revenue Growth next year, and they have 3. 3 billion in cash. And that is radioactive waste. And dom, you have news on the move . Yes, it is a stock with no dividend yield and always a point of contention for the valuatio valuation, and we are talking about the shares of tesla solidly higher today, and helped along with an upgrade over there at Goldman Sachs and they have 18 higher than where it is currently trading. The positive part of their end is the drop and stock prices, and the bullish orders for the model three, and the model production problems are to be priced into the stock, and fallen by 20 since early april and down 14 over the last 12 months, and certainly one of the hot topic stocks. Back over to you. Thank you sh, dom. And so much has happened in the small time since you were on discussing it with us. And you have a cell rating iing. I saw the report and i dont agree with it at all, and you had me on the 8th of april and i initiated tell la with a sell recommendation and the stock dropped from 208 to 104 and today, a bounce from the cat off of the goldman upgrade. I could not look at a tesla with the valuation that is now the equivalent of mazda, fiat and porche combined. That makes as much sense as comparing kobe bryant to Michael Jordan the day he entered the nba without having played a game in college. 10 or 15 years into the career well, he proved himself pretty good. That is a good buy. And 10 or 15 years into the career, you can compare the two, but to compare tesla and almost put them as an equal of General Motors when they have 150 billion in revenues and 5 billion in profit, it is ridiculous. And you want to buy kobe with no titles or five titles . Well, i am saying that the argument to compare kobe with Michael Jordan when he came out of high school, i understand it, but it is let me speak to you in five to ten years and see what you have done. I wrote a 23page report on tesla. No way to justify assigning a valuation to this company that was almost approaching that of General Motors when i put this sell recommendation out. I am keeping the target of 180 and i would not pay 180 for that name. Any comments . I would go j a j than either one of those. And perhaps goldmans is putting in a flag saying, yeah, one of the investments bankers that we are doing that. And the two top production guys left despite promising that they will have production models. And gravity is going to be visiting tesla, and it is insane, because it has a 50 downside. It is a car company, and so what with the electric battery and big deal, because so does bm with, and a lot of competition coming. I have an important point to make, 1 of 8 people in germany right now is either directly or indirectly tied to the automobile industry, and they are not going to be sitting on the sidelines and let tesla eat their lunch. They were sleeping behind thele wheel, okay. And they gave tesla now a 3 to 5year head start, but by 2020, 2022 and tesla will have a lot of competition on their hands. And i have to leave it there and split for a couple of minutes. Thank you for coming on. And ronnie moas, thank you. And this is what is coming up ahead. Apple prime. If they the apple maker acted like amazon maybe they would hit 1 trillion market cap. The number one analyst on the street makes the case for the apple bundle. And plus, target misses the mark. Is the retailer more than just a store problem . And the nightmare travel stories. Put your grubby little paws off my bag. And it is not like i have a bomb in here. And why missed flights and threehour long lines at checkpoints are likely to get longer. It is all coming up on the Halftime Report. Most rare and m. Which provided for their every financial need. And then, in one blinding blink of an eye, their tree had given its last. But with their Raymond James financial advisor, they had prepared for even the unthinkable. And they danced. See what a Raymond James advisor can do for you. With usaa is awesome. Homeowners insurance Life Insurance automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. P . P . O . Gv enis really built into theat foundation of the company. Whole foods market is engaged with pg e on many levels, to really reduce energy and reduce our environmental footprint. For a customer like whole foods, saving energy means helping our environment, and we can be a part of that. Helping Customers Save Energy is a very important part of what pg e does. We can pass those savings on to the environment, the business, and the community. Pg e really is an expert in saving energy, and that partnership is extremely exciting. Together, were building a better california. Welcome back to Halftime Report. And looks like we are watching the shares of lending club which are up solidly 7 , and they are the subject of negativity as of late. We have interesting headlines coming out from dow jones citing sources saying that new yorks top financial regulator the department of Financial Services has subpoenaed lending club over the Business Practices and looking for again, the sources say for dow jones, information on the Interest Rates and fees and what not charged to new york customers. This new york lending club probe is unrelated to the ouster of the founder and ceo that has caught a lot of headlines as of late. It is interesting and again, the stock did not move in reaction to the headlines, but this is the third time that a regulatory or Law Enforcement body has been looking into the lending club, scott. You remember the d. O. J. Has issued a grand jury subpoena for lendingclub, and it is the subject of at least the inquiry from the s. E. C. , and that is going to represent at least what it looks like here, the first time a state regulatory body has put the attention on the shares of lendingclub. Back over to you guys. Thank you, dom. Pete, at that point and you were long on the options, but you are gone . Yes, and this is the beautiful thing about the options, scott, it was trading at 4 when we saw the activity, and they were trading about 45 cents on june, and 45,000 or Something Like that traded on the day we saw it. So we cited it and talked and it, and yesterday, the stocks down to 3. 50 and the options was still there, and i said, it is a mess, and the doj is all over them, and soy exited yesterday. It is not to say that the thing cant take off and the options could perform, but i thought it was a good idea to get out of there and move on. So now over to apple ready for primetime, and toni sagunacchi is back with us, and now, how is this going the work for apple . Well, the challenge for apple is that it has a transactional Business Model which is principally selling the iphones, and the challenge with that is that the replacement cycles are e elongating and the prices will fall, which means that over time, the iphone business will decline, and so apple should make all of the hardware businesses a subscription much like microsoft has done with the office 365 oar the adobe has done with the software product, and the notion is that you would sign up for in my familys case we have four ipads and three phones, and we pay a monthly fee with that and hoping that apple would add some compelling services is such as apple care and apple music and future Apple Television offering, and our analysis says that apple could come up with the compelling bundles between 100 and 200 per month per family which is a lot less than most families are paying for Domestic Companies<\/a> with sales that are up 30 over last year. We are are rocking it in america right now. And im telling you that there is no recession, so why not a rate hike, because we could take 25 basis points right now. And doc, neutrals on the stocks in the next 12 months, and the bank of america says it is a swoon, and why are they wrong . Well, kevin, like the optimism as always. And honesty. Yes, but i am not optimistic on the markets reaction it to, and the market can take ut and 25 basis points is not going to knock the wheels off, but the market will sell, and sell hard if they raise rates minutes after the rates increased. And why is he wrong . Didnt we get an indication of that and a couple of people talking about rates and the market will lose its mind. Yes, and teleco rates, and it are will, but the enhanced margins and the earnings, and dont be whiners and be diners, and go long on these things. Look, i dont know what it is going to do with the day on the rate inkrecrease happens, when happens, but the question is about the brexit vote in june, and spanish elections two weeks after that, so i think that they should go, and it is late alrea already, but 25 bips we can handle that and 50, and if they do 50 at once, it is not going to work. And what does that mean . Because the market said that we cant handle the conversation. Well, you cant read anything into the markets because the volatility is tremendous, and the day before you had the fed govern governors talking about that rate increase, and this is the mantra lately. And now it is a drum beat with lockhart, two to three rate hikes, and john williams, two to three, and rose en gren two to three times. Well, if they are going up, it is because the economy can withstand, so i dont know what the short term is going to be no m matter how violent, but i am worried about the market for other reason, and i see nothing good about it, because despite the companies growing, we are in a earnest resession and we saw it. China is a house of cards and they will devalue at some point, and not maybe for three or four months. So you are with the bank of america talking about the summer swoon, and she went down a laundry list of the things that the market should be worried about it. I cant see anything that it should not be worried, okay, i have the brexit, and 80 said they would not leave and 80 said that trump would not be elected so you have to take some risk off and hedge, but if you go forward into the summer, you will hear so much coming out of the Election Campaign<\/a> to put people back on their heels, and the companies and the ceos dont know how the to allocate the capital. There is a spending freeze on that and so i want to be cautious and the market and the multiples increased while the earnings have come down, and so we have gotten multiple expansion in a period of time that we dont deserve it, and that this is the issue for me. Pete, what is the story here . Well, the things that you hit on most importantly resonate with me is the shortterm, and the shortterm is a sell, and we will see the market pushed down, kevin, and it is not meaning that it is not a great buying opportunity, and however, williams and lockhart are saying, hey, the economy is not so bad, and not great, but not so bad, and we have low unemployment, and there are reasons that we should expect that even though the numbers are e shog it right now, a june rate hike, and the likelihood is much greater than what we are seeing for the number, and it does not mean that jon is saying a sell, but that is the opportunity to protect yourself. You want to be in some of it, and you trim some of the position, and i have been trimming a lot recently, scott, but other than trimming, finding the ways to hedge yourselves to the downside to hold the positions to add to them if there is an oversell, but to give yourself a period to be in the market. It is a dry powder period. And we have another special guest with us, marty moab who is here with us on set making a travel layover. Good to have you here. And you think that the market is going down, and down hard . I didnt say down hard, but it is overvalue and my work is driven by a 155variable computer model that took me nine years to develop, and when i put in the computer names, only 10 of them are coming up to catching my interest at all. You have 20 of the names in the s p 500 right now trading at less than 13 times speck yu ula estimates for next year, and half of those hundred names are value traps. So people who look at the value as i do, we have a few dozen names to even consider right now. And you dont think that we are going back to test the february lows . Yes, we could test the february lows. You say that the market is going down and down hard and that is not hard . Well sh, i thought that you were, i thought that you were talking about 20 or more. I think that we could test lets hope not. I think that we could test 16,000 on the dow jones again, but dont bet of going below there, but it would not surprise me going to 15,000 which is below the lowest that we saw recently. What is the issue . I love this pessimism, and you know, the issue here is that we know that there is lot of an neck dotal evidence that the Domestic Companies<\/a> are having a good run, and what you are ta talking about with the s p 500, 40 of the revenue comes from outside of our jurisdiction, and that is what you are complaining about because the head winds are not with them, and the dollar will go up if the fed raises 25 or 50 bips, but it does not mean that you cant find the doe mes names trading below the p. E. S and in an economy growing somewhere of 1. 5 to 2 is where you should rest the dollars or exit the markets and sit on cash and make nothing. Thank goodness i am here, you know that. I look at the valuation, and as a value player, 70 of the names will not get consideration of me. Then you hate the financials for sure then . Well sh, by default, you are forced into the sectors of a value play, you are forced into the financials, industrials and the health and the tech names that are trading at 10 or 11 times earnings. But they are value traps . I wont pay 18 for staples name with zero growth. You have zero upside there, and the only reason to go into the names is because they may be are less Downside Risk<\/a> than the names if the market goes down. It is not a reason to invest. It is a good point to sort of turn the conversation in that direction in that the places where the inves ves or thes have been going, the utilities and the staples, and the yield is raised, arent they more attractive, kevin . Well, you tutilities after t february swoon when they were looking good as a safe haven, they are turning around to be bad because of the concerns on the radex. And usually in utilities and tellcos and reits, and that is bad, but you dont have to invest there, when you think for certainty 50 bip or 75 bip raise. That sector is going to be flat to down and worth revisiting after the fed is finished, but i dont know when that is going to be. And where do you go then . If the others are perceived value trapped. Well, it is overvalued, and you dont like the 17 p. E. , right . Rightment and another thing that i rarely hear people on wall street talk, i run 100 names through in the telecom and the utilities and the other sectors you have 200 or 300 names to choose from and if you are looking to put money in the defensive sector like utilities or the telecom, there are a few dozen quality names in each of the two sector, and what happens is when you have the Portfolio Manager<\/a> looksing for the place to hide, they are rushing into the few dozen names, and then they become overvalued and that is why they look attractive. And your thesis is that the p. E. S are going to compress, because if you take Stable Companies<\/a> with flat earnings, and flat sales, because that is what the earnings are telling us now, and say that the market stays where it is, you can garner a 2. 8 or 2. 9 yield off of that, and now, sitting in them, and just waiting, and you are saying that you cant do that, because you would rather be in cash making money or you think that they will be down 20 . That is the thesis. Let me jump in there, because the 2. 9 yield is going become a 3. 5 yield quickly, and it is going to take you a year to get that yield, so you are assuming to sit there for a year and get that. I this they the dividend investing and you love it and i love it, too, but it is only one element, one factor in any stock. And take bhp and they cut the dividend by 90 . So i sort of lost more in the stock price than i ever going to be making in the dividend in the near term. And the name, and you say that you run the names on the screens in the computer, and twitter came up to you as a buy. Yes. Why . I was a little bit early trying to pick a bottom on it when it dropped 75 off of the high, and i decided to take a shot at it. In my opinion, the market is very good at downgrading names after bad news comes out. And upgrading names after good news comes out, so i do the opposite. Late to the party. They are always late. And where is the price to find value . The fact that it came down 75 Means Nothing<\/a> when valeant got cut by 50 , you still would have had your lungs ripped out if you had bought it. So where is the value in twitter . I rarely if ever recommend names trading at 10 or 12 or 14 times earnings and i made the exception with twitter because it is trading 22 , and they have 8. 66 billion in cash, and the market cap is only 10 billion and i dont think that facebook should be trading at 33 times the valuation of twitter. And the market is very good at reacting to the most recent press release that is put out. So that is the biggest position . I was on cnbc and i blacklisted apple on ethical and moral grounds, and that got a lot of attention, so i dont go near apple. And other than that . But it is going to score one according to the computer model. And what about j and j . I would not go near it with a tenfoot pole. That is why there is a market, my friend. Nobody on wall street is assigning probability to the headline. But it is a speck you lashgs and they have not returned capital since the inception. It is reporting 20 learning and i am expecting Revenue Growth<\/a> next year, and they have 3. 3 billion in cash. And that is radioactive waste. And dom, you have news on the move . Yes, it is a stock with no dividend yield and always a point of contention for the valuatio valuation, and we are talking about the shares of tesla solidly higher today, and helped along with an upgrade over there at Goldman Sachs<\/a> and they have 18 higher than where it is currently trading. The positive part of their end is the drop and stock prices, and the bullish orders for the model three, and the model production problems are to be priced into the stock, and fallen by 20 since early april and down 14 over the last 12 months, and certainly one of the hot topic stocks. Back over to you. Thank you sh, dom. And so much has happened in the small time since you were on discussing it with us. And you have a cell rating iing. I saw the report and i dont agree with it at all, and you had me on the 8th of april and i initiated tell la with a sell recommendation and the stock dropped from 208 to 104 and today, a bounce from the cat off of the goldman upgrade. I could not look at a tesla with the valuation that is now the equivalent of mazda, fiat and porche combined. That makes as much sense as comparing kobe bryant to Michael Jordan<\/a> the day he entered the nba without having played a game in college. 10 or 15 years into the career well, he proved himself pretty good. That is a good buy. And 10 or 15 years into the career, you can compare the two, but to compare tesla and almost put them as an equal of General Motors<\/a> when they have 150 billion in revenues and 5 billion in profit, it is ridiculous. And you want to buy kobe with no titles or five titles . Well, i am saying that the argument to compare kobe with Michael Jordan<\/a> when he came out of high school, i understand it, but it is let me speak to you in five to ten years and see what you have done. I wrote a 23page report on tesla. No way to justify assigning a valuation to this company that was almost approaching that of General Motors<\/a> when i put this sell recommendation out. I am keeping the target of 180 and i would not pay 180 for that name. Any comments . I would go j a j than either one of those. And perhaps goldmans is putting in a flag saying, yeah, one of the investments bankers that we are doing that. And the two top production guys left despite promising that they will have production models. And gravity is going to be visiting tesla, and it is insane, because it has a 50 downside. It is a car company, and so what with the electric battery and big deal, because so does bm with, and a lot of competition coming. I have an important point to make, 1 of 8 people in germany right now is either directly or indirectly tied to the automobile industry, and they are not going to be sitting on the sidelines and let tesla eat their lunch. They were sleeping behind thele wheel, okay. And they gave tesla now a 3 to 5year head start, but by 2020, 2022 and tesla will have a lot of competition on their hands. And i have to leave it there and split for a couple of minutes. Thank you for coming on. And ronnie moas, thank you. And this is what is coming up ahead. Apple prime. If they the apple maker acted like amazon maybe they would hit 1 trillion market cap. The number one analyst on the street makes the case for the apple bundle. And plus, target misses the mark. Is the retailer more than just a store problem . And the nightmare travel stories. Put your grubby little paws off my bag. And it is not like i have a bomb in here. And why missed flights and threehour long lines at checkpoints are likely to get longer. It is all coming up on the Halftime Report<\/a>. Most rare and m. Which provided for their every financial need. And then, in one blinding blink of an eye, their tree had given its last. But with their Raymond James<\/a> financial advisor, they had prepared for even the unthinkable. And they danced. See what a Raymond James<\/a> advisor can do for you. With usaa is awesome. Homeowners insurance Life Insurance<\/a> automobile insurance i spent 20 years active duty they still refer to me as Gunnery Sergeant<\/a> when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and im a usaa member for life. Usaa. We know what it means to serve. Get an insurance quote and see why 92 of our members plan to stay for life. P . P . O . Gv enis really built into theat foundation of the company. Whole foods market is engaged with pg e on many levels, to really reduce energy and reduce our environmental footprint. For a customer like whole foods, saving energy means helping our environment, and we can be a part of that. Helping Customers Save Energy<\/a> is a very important part of what pg e does. We can pass those savings on to the environment, the business, and the community. Pg e really is an expert in saving energy, and that partnership is extremely exciting. Together, were building a better california. Welcome back to Halftime Report<\/a>. And looks like we are watching the shares of lending club which are up solidly 7 , and they are the subject of negativity as of late. We have interesting headlines coming out from dow jones citing sources saying that new yorks top financial regulator the department of Financial Services<\/a> has subpoenaed lending club over the Business Practices<\/a> and looking for again, the sources say for dow jones, information on the Interest Rates<\/a> and fees and what not charged to new york customers. This new york lending club probe is unrelated to the ouster of the founder and ceo that has caught a lot of headlines as of late. It is interesting and again, the stock did not move in reaction to the headlines, but this is the third time that a regulatory or Law Enforcement<\/a> body has been looking into the lending club, scott. You remember the d. O. J. Has issued a grand jury subpoena for lendingclub, and it is the subject of at least the inquiry from the s. E. C. , and that is going to represent at least what it looks like here, the first time a state regulatory body has put the attention on the shares of lendingclub. Back over to you guys. Thank you, dom. Pete, at that point and you were long on the options, but you are gone . Yes, and this is the beautiful thing about the options, scott, it was trading at 4 when we saw the activity, and they were trading about 45 cents on june, and 45,000 or Something Like<\/a> that traded on the day we saw it. So we cited it and talked and it, and yesterday, the stocks down to 3. 50 and the options was still there, and i said, it is a mess, and the doj is all over them, and soy exited yesterday. It is not to say that the thing cant take off and the options could perform, but i thought it was a good idea to get out of there and move on. So now over to apple ready for primetime, and toni sagunacchi is back with us, and now, how is this going the work for apple . Well, the challenge for apple is that it has a transactional Business Model<\/a> which is principally selling the iphones, and the challenge with that is that the replacement cycles are e elongating and the prices will fall, which means that over time, the iphone business will decline, and so apple should make all of the hardware businesses a subscription much like microsoft has done with the office 365 oar the adobe has done with the software product, and the notion is that you would sign up for in my familys case we have four ipads and three phones, and we pay a monthly fee with that and hoping that apple would add some compelling services is such as apple care and apple music and future Apple Television<\/a> offering, and our analysis says that apple could come up with the compelling bundles between 100 and 200 per month per family which is a lot less than most families are paying for Wireless Service<\/a> or paying for the cable television. So the notion is that to try to move away from the selling of point progress to subscription s service which is much more predictable in nature. Steve weiss has something for you, toni. Well, it is a great idea. The issue is with the companies he cited. They are more business subscription models, and you are talking about the consumer subscription model which would not replace some of what they have, so it would have to take the capital or the fees away from somebody else or add the costs which is significant. Do you think that they would do it or might it not push others away from more a la carte to samsung phones or what have you . Well, certainly, there is a risk both in terms of the consumer acceptance, and some carriers may not like it, because they feel they are losing lez control of the customer, but i think that there are lots of examples. I mean, adobe is a consumer and office product, and sold its services, but think of the car rental, because zip kcar is a cr rental service, and amazon subscribe and save and that is a subscriptionbased model, and even razor blades are sold on the Monthly Subscription<\/a> basis. So when the offering is compelling, that theres consumers wo can embrace that and the question is ultimately can apple assemble the bundles that are compelling economically because you will get the music for free or the icloud storage for free, or reduces the up front price poom are paying, and that is the challenge for apple to create various sorts of bundles that resonate with the consumers. Now, apple has the upgrade program today which is just an iphone that is financed and you pay 32 a month, and you can get a new iphone every year, but really, what we are seeing is an opportunity to dramatically broaden these set of offerings. Interesting business idea, to toni, and we can play our own game of shark tank here sh, a you have presented the idea in front of kevin oleary who is here, and he can assess it. What discount to the market multiple should i receive because you want the reinvent the companys Business Model<\/a>, and it has a lot of risk and you are not the only person to suggest that the company has to make Broad Strokes<\/a> of change to sustain the growth and be relevant, because it is starting to look like a Consumer Electronics<\/a> company, so i feel that i should be getting a material discount to the pe in the market if i am buying into the story again, because you have reinvented the company, and you may be right, but dont tell me it is not fraught with risks. Well, some risks, kevin, but it is not a forced migration. So the multiple today is reflecting a, you know, a b business that is ultimately highly transactional consumer trading at low margin business with which is not unusual. And my suggestion is not to force people into the subscription model, but ultimately present alternatives to the current transactionbased model which is compelling. I think that there are, there have been millions of consumers signing up for the apple upgrade prom gram, because they like the fact that they can pay 32 and if the phone breaks, they will get a new one, and if they want, they can get a new one, and that is a compelling proposition, and what i would like to see apple do is to come up with more of the option, and not necessarily to force people, and if 20 or 30 or 40 of the devices could be sold as part of the compelling subscriptions, that could have an enormous impact on the multiple that the investors are willing to place on the company. And tony, i have to run, but is this pie in the sky pipe dream talk, and is this something in your mind that could come to fruition and come to reality for investors the chew on . Well, it is not black and white, and it is a continuum, and apple is taking a baby step. If apple were to bring to market what is widely talked about a television service, that is a true subscription that the consumers are used to paying fo for, and that is a vehicle by which apple could start to bundle the hardware products around in a way that is compelling. So, yes, aspiration ally, they get to 100 as a service, and it is probably a pipe dream, but could apple get to 20 or 30 or 40 of the business over the next several years if it creates the bundles, and can add compelling services, i think that it is a realistic aspiration. Toe toni, thank you very much. Tony sacconaghi from bernstein. And so now to assess the stock on a daily basis, but to be in a position to reinvent the Business Model<\/a> as you coined it. Yes, and what worries me, and there is a good argument, and i got out of apple last september, and i am glad based on the Balance Sheet<\/a> issues, but we had set this around the ecosphere of apple around the music and the content of the phones that they have moved away from the idea of itune, and they use streaming service whether it is apples or spotify, but they are no longer hardware dee pendent on the apple story, and recently i picked up the samsung 7. 0 edge, and now, apple has to catch up to what this thing does, and im not a spoektsman for either of the companies, but this thing does your laundry and everything, and twice as fast. They have to come to match this, and then the other guys are going to be coming and i smell some margin compression, an consumer depression, and i remember this motorola and akia and blackberry, and i have to be paid for the risk. And there are a heck of a lot people say, hell no. Well, im not in the name. Im not in the name. And the anniversary of facebooks ipo is going be in the debate. We will talk about it. To d today, the financials and tech and health care leading the way, and the stocks are trying to bounce higher, and the s p is up 3. 5. Coming back right after this. Th. speaking japanese exactly. I can understand nuance, context and idiom in seven languages to help companies all over the world with everything from retail solutions, to banking, to cyber security. speaking japanese . Hi, everybody, im sue he herera, and this is the cnbc news for the hour. One of the girls that was abducted has been located after two years in kidnapping. The mass kidnapping of 128 girls in nigeria sparked an international outcry, and the girl was found wandering around a forest. And mitsubishis president has announced he will be stepping down. And not to be outdone, suzuki says that the fuel estimates were not done in line by regulatory requirements, and they apologized at a tokyo news conference. And a Record Number<\/a> of flyers will be trading airlines for america are predicting more than 231 million will fly between june and august which is an increase of last years alltime high. And if you are going through Ohare Airport<\/a> like i was yesterday, along with the carryon, bring a sleeping bag. That is the news for this hour. Halftime report is back after this quick break. Working 24 7 on mobile trader, rated 1 trading app on the app store. It lets you trade stocks, options, futures. Even advanced orders. And it offers more charts than a lot of other competitors do on desktop. You work so late. I guess you dont see your family very much . I see them all the time. Did you finish your derivatives pricing model, honey . Td ameritrade. My name is jamir dixon and im a locafor pg e. Rk fieldman most people in the community recognize the blue trucks as pg e. My truck is something new. Its an 811 truck. When you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you dont hit them when youre digging. 811 is a free service. Im passionate about it because every time i go on the street i think about my own kids. Theyre the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then ill drive it every day of the week. Together, were building a better california. All right. We are back on the halftime are report and the dallas index is hitting a threeweek high. And down the Jackie Deangelis<\/a> with the futures gang. That is right, scott. We are seeing a bump in the dollar index ahead of the fed minutes to be released later in the session. But, bill, the move in the dollar, is this actually based on the fed in anticipation of today the or just the time of the year that seasonally, we do see the dollar moving higher . Le with, it is a seasonal time of year, and going back to 2007, the dollar has been positive every may except for one. And you know, the Economic Data<\/a> comes around in this time of the year, and as well, we have hoggish fed members who spoke yesterday, and two of them mentioned the possibility of the fed rate hikes, and it is going to continue to gain fraction into the june meeting and to the tai is a hurdle to get over, and we close at 20, to 29, it could go higher. And we are still in the down trend market, and yes, we have bounced off of the lows, but we need to get higher here. We need to see the fed do something, and get some indication that yellin is not doing to be dovish through the election, but the Dollar Strength<\/a> over the recent weeks and seeing the commodity streng strengths as well tells you that there is inflation in the market, and raise the rates now sooner than later and take people by surprise, and so certainly, a fed hike before the elections could be in the cards. For more on the futures go to futuresnow. Com. Thank you, scott. And now, kevin oleary is looking for the next best idea, and now he says that he has found one overseas. I am looking now at giant conglomerates in the asian japanese australian market. They have had the stuffing kicked out of them, because of the concerns of asia, and it has been rightfully so . Yeah, yeah, yeah. And i like it when people hate a market so much that they say that it is never going to be coming back and it is going to be a disaster, i start to nibble, because i have been through this so many times, and i want to buy when you get the pes compressed like this, and it is what you buy that matters. You start to think about the company, and i have a list here that i thought that they were interesting, and i put in positions on the japanese robotics that provides the robots to every sector, and nobody has heard of it. They pay a whopping big dividend and the pe is low. Japanese company . Yes, absolutely. And the third point in there, dan loeb . The one point . I think. What is the ticker on that . And the stock has been crushed. And you look at other name, and the ones in australia which i always find interesting is Something Like<\/a> the west farmers, and it is a massive conglomerate that captures every sector in the australian and asia servicing to the china market and i like it. So i am putting on the position, because i have to put the money to work and im not seeing something that i am in love w h with, because the pe is compressed and so i am hiding in the weeds. I no you guys are going to make me look at them again when i come back, and we will can check. And bhp, and why . What is the trigger for bhp . Well, everybody is concerned that the Business Model<\/a> is broken into perpetuity and it is never going to to work. I like that story, because when you have absolutely no institutional demand anymore, you are will get p. E. Compression out of the wazoo, and that is what is happening here, and the company is not going away my friend. And i didnt mean to interrupt you, i apologize, but the stocks, bhps and ree e owe, and freeport, ands, you know, obviously, they rallied off of the ridiculously low base, and maybe they were primed to do that, but isnt that, isnt that with the potential of over . No. You have the look at the Balance Sheet<\/a>, and say to yourself, if i have a sector that has had the living stuffing kicked out of it, i want the one with the biggest Balance Sheet<\/a>s, because the intrinsic assumption is with the consolidation of the weaker ones, they are swept into bankruptcy, and so it is the others who will buy it at massive discount, and it happens every cycle. Now, look, you may not get the instant gratification, but you r are being paid to wait is my point. So you have a lot of the gratification from the february 11th bottom. Yes are. And you know i cant time that and nobody can. The b the bottom. And you never ka. And vallay for example in three months and not that you are recommending this stock specifically, but valley is up 15 . And yes, the Balance Sheet<\/a>s are primo, and the investments are three to five years and i go to the Balance Sheet<\/a> and i am generally rewarded. Look, im an investor, and not a trader, and i say, can i sleep with this Balance Sheet<\/a> and sleep with the downturn . Yes. And the company is not going to be going bankrupt. And steve, when he sees a house of cards, i see them pressing the pause button, and that is not going to be there forever, scott, and so when it turns around bhp is going to be turning around, too. And here is the issue, they have been masters of getting the capital out of the country, and one of the ways, the legal ways the do it is that they can buy copper. They use copper to be a major financing tool. And final point. And carl, too. And so if you own a bhp, you have to be right in the stock and the underlying commodities and the global economy, and i like the japanese idea, and at some point the yen is going to be going lower which is what they want it to do and the stocks are going to be unbelievable. And i like to own something that is infrastructure element to it, and when, because you know, people are saying that china is doing to the zero for a long time, but it is still it could happen, but it is posting a 6 gdp growth and we would die to have it domestically, and we wont get it. Now, you could say that 6 is not real, but i have been going to europe to talk to the companies servicing china and asia, and i dont see it when i go there. And maybe i am taking a chance here and 3 waiting, i will take a chance. And coming up, four years since facebook went public, and the shares are surging, and the social giant is not the head of the 2012 ipo class. Eric is going to be breaking down the list of outperformers next. And now, the portfolio board, and there is Joe Terranova<\/a> in the lead at better than 11 . You can look at the trades, and we have had a number of them especially by dr. J. Take a look at his buys and sells. The Halftime Report<\/a> with scott wapner is the place for marketmoving interviews. You dont call the company a sewer because they made a mistake. We are short tesla and solarcity. And debate. People think that globalization is hurting the businesses, but it is not. It is technology that has hurt businesses. If you cant charge hun h dreads of thousands a year, there are no drugs. And the most Profitable Trading<\/a> hour of the day. I get a tweet about the show, and now im on the show, and that is the best day of my life. The Halftime Report<\/a> at noon eastern. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets<\/a> and drive forward with broader possibilities. Cme group how the world advances. Break out the birthday cake, because it marks the fourth anniversary of facebooks ipo and that stock returning 200 since, but how does it stack up to the rest of the ipo class . We are here with the latest details, and what did you find eric chemi . Well, we could think of it every four years for an election as well. And so now, ranked from 2012 to now, which is pretty good, but it is not as great as we might think given how much attention they have gotten. And how many ipos since then . More than you can count. Yes. So in the top 5 . And the top 10 of that year, of that vintage, but if you are looking at the names that did better than facebook, you are looking at the Big Companies<\/a> like wage works, proofpoint and vanta, and they did better because after the first ipo, facebook went from 38 to 18 and the other thing of the 2012 class, they were better than what we saw in 2013, and 2014 and 2015 and just having an ipo at a time when the market went up, the earlier the better. If you had an ipo in 08 or 09, yo you would have done bet ter. So it is flat for the average company return, and facebook has been pretty good, but not the best. Obviously, yelp, and most of the gains that ever happened were on the first day, and it was up 65 that day, and flat given the ups and downs. And the other thing, is that by the 2012 ipo class, you select names . Yes. Select. Facebook has a larger market cap today than all of the others combined . By far. And yes sh, it is in the earnings and the wageworks in the market cap, and wageworks is a 2 billion company. And the entire 2012 ipo class was 52 billion so it had onethird of the entire years. But you have a much bigger market cap, and much larger Investor Base<\/a> with facebook than any other names like faceworks, and so you dont own Facebook Though<\/a> . No, i dont. The way i look at the names now is that i ask myself, if i am putting dollars to work today, what is the growth thesis for facebook to sustain the multiple, and we have people using it for 55 minutes a day and whether it is two hours instead, would you get another billion people from the emerging market to have facebook or a competition or are the digital ad dollars are going to go to facebook and nobody else, and what should i buy into the the take the name and say i am the market for the next year. But the biggest reason you wont own it is the voting. Right. We dont touch a nonvoting shares from the compliance basis, a i could buy it personally, and yet i dont. But the question is why should i buy it today . I think it is a fantastic company, but what is going to be changing about the rate of growth that is not built in all of the acquisitions they have made, and instagram, and what they paid and apple and well, zuckerburg is the best at buying, and the whole 3d thing that we got excited about, i dont see a lot of people shelling out 6 60 right now may have to wait a litte longer for the whole vr world. Im always positive. You know me. You are positive. Youre a positive guy. Im just saying, heres a company that does not return capital shareholders. Ive seen this story before. I saw it before in a Company Called<\/a> yahoo. Every time i compare yahoo to facebook, people say are you out of your mind . Its different. No, it isnt. There is a time when people loved yahoo 2 and then poopoo happened. Youre definitely positive on things you like. If it pays me cash, scott in, cash i trust. I got you. Eric, thanks. Coming up, Summer Travel<\/a> approaches. Get ready for get ready to wait longer. Phil lebeau at Chicagos Ohare International<\/a> airport. Weve seen the videos and heard the horror stories. Its only going to get worse. Thats right, scott. When you see the numbers in terms how many more people will be flying this summer, youll say to yourself, how early do i have to get to the airport . That story when we return. Power lunch starts in less than seven minutes. Coming up, inside the feds head. New clues on what policymakers are thinking when it comes to raising rates in the months ahead. It could be a major market mover, the fed minutes. Time warner shares rup 10 this year. David favor joining us with an exclusive interview ceo. And should airlines get rid of baggage fees to disincentivize a lot of carry on which would then maybe reduce the security lines at airports . Well speak with lawmakers who want to interfere with the Business Model<\/a> of airlines. Halftime is back after. This power lunch is at the top of the hour. Can a toothpaste do everything well . This clean was like pow. It felt like i had just gone to the dentist. My teeth are glowing. They are so white. 6x cleaning , 6x whiteninga in the certain spots that i get very sensitive. I really notice a difference. And at two weeks superior sensitivity relief to sensodyne i actually really like the two steps step 1 cleans and relieves sensitivity, step 2 whitens. Its the whole package. No ones done this. Crest healthy, beautiful smiles for life. All right. Summer travel season upon us. The Airport Security<\/a> lines are about to get even longer. Our phil lebeau is live at Ohare Airport<\/a> in chicago. Phil, it is as bad as they say . Yes. You want some proof . Take a look at this video. This is from before 6 00 a. M. This morning when i arrived here at terminal three. This is the american terminal. The line was at least an hour and a half, probably longer. At one point i koment make it up to the security checkpoint. Thats how long people were waiting this morning. Now they are adding tsa staffing, adding more overtime here in chicago. That should eventually alleviate the long lines. But tell that to the people waiting this morning. I think tsa, they should divide the lines better. Honestly, there is just one long line. Terrifying. Terrifying. Brutal. Straight chaos. Its unbelievable. Its disgusting and its uncalled for. Whoever is at the head should be fired. Its unlikely anybody is going to be fired any time soon. But its going to be a rough summer, especially when you consider how many more people will be flying. Airlines for america out with the Summer Travel<\/a> forecast. We will see a Record Number<\/a> of people flying this summer. More than 231 million passengers. Thats up 4 from last year which was the previous record. As we take a look at the airline index, i got this question from people. If there are long lines, eventually will people stop flying or decide not to fly . I dont think thats going to happen. I think people will say i dont like it but ill have to show up earlier at the airport. I wont stop flying. I think the cpi data showed air fairs were actually ticked up when they were supposed to be down, too. I cant believe that video is before 6 00 a. M. Phil, thanks. I watched it live, man. Its crazy. And the part that phil addressed as far as will people switch . They will. Anything under 500 miles, people will not put up with an hour and a half or two hour wait to then get on to a plane for the hour flight, judge. I think we can see how terrorism manifested itself in our society. This is the cost. This is the cost of terrorists. What about these Airline Stocks<\/a> as investments . I owned american for a long time going through bankruptcy and cut back. I added to it yesterday. I also trade around dealt yachlt i added delta. Somebody came out of a conference and said American Airlines<\/a> was a short. Its three times eps. Guess what . Even if they cut that eps in half which wont happen, its still cheap. So they made matters better. I think theyre compelling buys. Let me talk about one more stock. Cisco systems. Reports after the bell today. What are your thoughts on that stock . My thoughts are a Company Called<\/a> wallway. When i go to europe and arab yashgs i dont see cisco brand anywhere. I see wallway. Its like a third of the price. And, look, theyve got competition out the wazoo. This is a kmad tcommodity. What they make is the toasters of internet. They provide the routers. I love our Domestic Companies<\/a>. I love this company. I lot of ceo. You have juniper ceo on yesterday. They were optimistic. Take a trip to it a business in europe. We dont let the wallway routers in here. Thanks for being here. Power lunch starts right now. You got it. If there is a countdown clos clock, it must be cable. Market nearing session highs. We closely watch that countdown. 59 minutes until we get to the fed minutes. The news takes on added drama and importance as the odds increase that well see potential june rate hike. Hello. Im with brian, melissa and tyler. Lets get to the big countdown to the fed. Heading us is a member from janiuar janus capital","publisher":{"@type":"Organization","name":"archive.org","logo":{"@type":"ImageObject","width":"800","height":"600","url":"\/\/ia800302.us.archive.org\/30\/items\/CNBC_20160518_160000_Fast_Money_Halftime_Report\/CNBC_20160518_160000_Fast_Money_Halftime_Report.thumbs\/CNBC_20160518_160000_Fast_Money_Halftime_Report_000001.jpg"}},"autauthor":{"@type":"Organization"},"author":{"sameAs":"archive.org","name":"archive.org"}}],"coverageEndTime":"20240625T12:35:10+00:00"}