Bonds selling off, too, with a yield on the tenyear topping 1. 5 , first time in a couple weeks. Has us wondering whether the early signs of 0 great rotation of under way. Kevin oleary, is that the case . No, i dont think its the case. Why ill hold back, i want to see the rests of the earnings season. I think what will happen, best case, flat on earnings, because usually analysts sandbag 3 . Going in being down 5. 6 year over year. I think well come out flat. Im concerned about forward, because youve got two camps. People saying its going to be great. The next three quarters spectacular. Waiting to hear from the companies themselves to see what theyre saying. They now have big headwinds on currency again. If soft on numbers, this correction will, or this optimism will be short lived. Wow. I was expecting you to be more optimistic. Stephanie link, is kevin oleary right on the market . Yeah, i think so, to some degree, but i also think you can play some cyclicals. I have kind of a 75 cyclical event in my portfolio, 25 defensive, not the right call, but i think youll see a pickup into the second half of the year. In the year, telecom, bonds. I also wanted to play cyclicals. So cheap. If youre going this a bar bell, still stick with the quality cyclicals where you can find dividends and Balance Sheets and Dividend Growth and in the end markets within the cyclicals, say in industrials kinds of are things railed and energy certainly, also offset that with housing and nonres, which has been working. Staples, a place for it. Look at p g, Philip Morris and coke, yielding 3 . Better than the 10 or 30year. Theres a place for both and you have to maneuver it as we get earnings and more clarity. Pete, i see the makings of a great debate here. Is the great rotation underway in its very early stages . Are people going to move in waves out of bonds finally . And out of these defensive plays of utilities, telecom, staple, bond proxies into more offensive areas of the market . My opinion, people will stick with the names you mentioned. Some utilities, telecom, dwesive names because of yield. Money on the sidelines already in the names pulling some off and waiting and looking for opportunities, those are where i think the money is coming out and coming into those tech names and some industrial names and energy names. Look at the way the xle is trading. This thing is now once again pushing towards 70. We talked about how technically held up well. Energy space strong. Part dividends, exxon chevron, conoco philips, cut, but nigs yields. Energy, nice yields. People arent necessarily getting rid of parts of their portfolio, rotating from cash and putting into the market. You dont think the worst of earnings is over . The earnings recession will end and things will be more optimistic . I did something yesterday knowing we would be together today and i did every beginning of earnings season four time as year. About 19 institutions i know the offices of. These guys only care about preservation, not market against markets. Most conservative, generally hospitals, schools. Something remarkable is happening. Not buying fixed income the cash is stockpiles like ive never seen. Average amount of cash, catch, nipped up to five basis points just to keep cash in an account, 30 . So theyre not convinced yet to go into the equity market to pursue that 3 . Theyre nibbling on it but now sitting on the largest cash position i can remember in 20 years. Glad you brought that up, because yesterday we raised the issue of a conversation that i had had with a very large money manager who said thats exactly the case. But if people get a little more confident, youre going to see that rotation from bonds, and youre going to have no choice but to buy u. S. Stocks. What else are you going to do . Heres the big debate. Generally speaking, these mandates are so conservative, theyve always been around 30 , 40 bonds. Stockpiling and holding them back, they wont pull the trig on fixed income. Two said, i got to a dozen out of the 19. I love to talk to these people. He said it bothers me a lot when i see fixed income and Government Debt hitting new lows, energy stopping its move, and i know the xles move, the fact is, stocks are moving, noted commodity. I got to see the long bond move before i feel comfortable ak equities. Ive been watching 100 years. Guys a vampire. When i see it slow a great conundrum, after friday you should have saw a big, big selloff in bonds and you did not. The question is today, are you starting to get more of a followthrough after yesterday, when you said the ten jeer at 150. In the 130s last week. If these are the earliest signs, joe that could be underway . You wont know the answer until you get another 75 to 100 basis points higher in the ten year. Youre talking about the ten year which has now 19 base points above a historic high. You cannot doesnt that bother you . You cannot make any, any confident decision that its the moment to rotate out of safety. Safety is right now where you need to be. Now, you cant dismiss the fact the s p is at alltime highs. Think back two weeks, scott. How wrong including everyone, myself, all of us wrong on brexit. We were wrong on the followthrough of brexit. A sideways market . No one expected the violent snapback in the marketplace now. I think theres multiple Asset Classes you could be in now. One place stands out to me where you should make a decision is financials. Earnings coming up. Go in financials . If you do, what part do you go e into. Answer the question, doc, into financials, if so what part . Dealing with a sector down 2 . You cant. Every day. Feeling more optimistic where rates may it go. Im shot puts and citi. My Long Exposure to financials in this country. Barely a toe, then, in the water . Yeah. Today i saw like your little toe. Very little toe. Today i saw some buying in the Morgan Stanley, and it was a call spread. All theyre betting on basically a 1. 50, 2 move. Not a big upside, a small move people are betting on in financials. Since im not playing for small moves im looking for bigger moves doesnt mean i always catch them, but look at the airline stocks. One of petes favorites. These things sold off so hard since brexit youve got american airlines, which, giving him his props. He said this is the one to buy. American airlines. Since brexit, up 25 . Delta and united are up 10 and 12 over that same period and, yes, there were upgrades today, but today isnt whats kicking them in the pants. Its from 24 to 34 basically american airlines. That is a big move and so a lot of that cash that kevin talked about, what did they go looking for . Things really beaten down, but that had solid fundamentals. And those airlines are back. Is risk in the market right now, kevin, more to the upside or more to the downside . There are some people i talk to think the market could go up 10 between now and the election. Its others say. Listen, no, no. Like goldman. That announcement of brexit was excellent, because it caught every off side. Were not getting Earnings Growth here. Everybody knows that. Were getting pe expansion. And if if youre thinking as a preservationist, as i am, you tend to trim the fat on the high pe stocks. Why i dont own amazon anymore. I cant remember. Is it 1,000 or 2,000 pe . What it is. Its hitting new highs, all fantastic, but when you have that kind of euphoria, having lived through this many times. You think this is euphoria . Its getting there. The only thing that cautions me, listen to the institutions sitting on 30 and 40 cash. And its because i think of the low rates, but the point what im looking at knew is s now, saying, the one pillar left behind, every time we talk about getting back into financials, you get your heinie smoked a couple months later. How do you make money when the ten year is only 10. 4 . Cheap relative to rates. In our lives at the table, pillar of the s p the financials. Its been left behind in the dust, and its remarkable that every time we want to give it life and throw dollars into this seconder you get slaughtered. Get a sobering view this week with earnings, right . No think under the new Regulatory Environment and 104, i dont think they can make money. Theyre going to say that this week. Are they not . Thats not good news. Anybody buying financials today . Doc has his little toe in the water. I am some, for sure. The valuations are extremely cheap, and that doesnt mean theyre going up tomorrow. You need a yield curve to steepen for these to work. I think you either play this as a trade, because these guys got hid so hard on brexit they were down 12, 15, 18 from brexit, because people got freaked out because of the european banks. These are not european banks. Better capitalized companies, and a successful c car, companies are buying back stock and issues higher dividends. Thats a good thing. Does that mean stocks go up because they can put ow earnings . They cant because of the yield curve. You can trade them as a reversion trade in the short term or you have to take a longer term horizon if you believe that rates are eventually going to go higher than they will work. Funny, look at another sector as well as on a day were talking about the nasdaq. Eclipsing 5,000, even getting a little above that is tech. A higher weight to the s p. Pointed that out yesterday. Tech only up a couple Percentage Points year to date. Youre going to see the Portfolio Manager sitting in disbelief at what the market is doing who has to be forced in by the mandate of his portfolio 20 waiting in the s p. Okay. Ive got to ramp up exposure to technology. Versus financials, which contracted significantly over the last years. That Portfolio Manager is looking at financials saying, huhuh. I dont want bank of america or Morgan Stanley im playing mastercard, visa, play the exchanges. Unless youre worried about, as kevin is, about earnings. Right . The dollar is still higher than a year ago. Thats a problem for Companies Like tech. Their revenues getting 70plus overseas. All that exposure. David costin, by the way, the other thinking he pointed out, did you see this . How so many clients are using call options to be in this market so they dont miss the move, but the last thing id say about tech, we talked about tech, the day after brexit. Talked about it monday. It was getting beat down. If you have growth and you have yield, thats where people want to go. Why is the xlk at 52 week highs . Because tech names are where people want to put their money. The thing you want to talk about as it relates to earnings. What are they saying in the see sweep of energy on their loan book . Talking about one two quarters ago. One plus for the banks. Is it a plus . Will they be confident enough more than a few months ago. That the worst is past. Not building reserves. Shocking last quarter. Release reserves . Its too soon. Probably not going to have to raise reserves, a decent thing. The thing that freaked everybody out last quarter. A big surprise. As if they needed that along with where yields were, that interest margin. Breaking news on the hyper loop. Josh lipton has it for us out west. Josh . Well, scott, this is an explosive lawsuit just dropping here. Really involving some of the most wellknown players here in silicon valley. You recall, scott, a couple weeks ago brogan bambroken left hyper loop one, futuristic Transportation Company he cofounded. Left abruptly and now filed a lawsuit against his former partner theres including shervin and joseph lawnsdale two very well known vcs. Cronyism and nepotism occurring at Hyperloop One spacekly saying over the course of his employment it became apparent continually using work of the team to augment their personal brands, enhance their romantic lives and line their pockets and those of their family members specifically he charges shervin pish avar began dating the company the p. R. Vendor and increased her salary to 40,000 a month, more than any employee at the company. Also alleges he instituted what the suit call as pay to place scenario by pressuring potential hyperloop investors to invest in his own funds sherpa capital. Lonsdale, alleging he insisted the company hire his little brother with no notable experience. The suit goes on to say, scott, that shervins brother, also the chief legal officer of Hyperloop One at one point left a hangmans noose on bam brogans claire and the suit includes photos of bam brogan holding up this hangmans noose. He says that fearing for his own personal physical safety, he was forced to resign from Hyperloop One, of course, scott, as you know, Hyperloop One a startup that attracted a lot of media attention, and a lot of money. Its raised close to 100 million from investors. We have reached out to shervin pish avar and will bring you his response if and when wep get it. Josh, thank you so much. Let me ask you, if these two dudes come in front of you, a great idea. Aggressive dating, the romance and then you got, what i always loved about the hyperloop idea, put this in california between Major Centers like los angeles and san francisco. The number one area in the world where you have earthquakes. Sitting on this thing doing 500 miles an hour. Have an earthquake smplgts that a problem . Youre road pizza. Can you imagine what happens to you . A round about way of saying, i pass . First of all, whoever is raising money for that fund, theyre toast. Tell you now from a serious point of view. That even if half these claims are true, thats really bad stuff, but i love it when theres a noose and a girl. Thats a great story. [ laughter ] probably a good time for us to take ta break now. You think . Halftime report is just getting started. I think. On this recordbreaking tuesday. Stocks have never been higher and they are at the highs of the day. Coming up next, were going to have a fight on amazon prime day and fighting over amazon itself. Kevin is steering clear. Stephanie is not. Were going to battle it out, next, on the Halftime Report. Like coffee. But theres one thing you do. You guys okay . its called predix from ge. The cloudbased Development Platform thats industrialstrength strength like cologne. Y things you dont want in industrial strength morning but theres one thing you do. gags its called predix from ge. The cloudbased Development Platform thats industrialstrength strength 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. Were back on the Halftime Report. Big day for amazon. Hitting another alltime high and prime Holiday Shopping already under way. Not a fan of the stock, despite a record run. If its in a portfolio its a time bomb. When this puppy finally meets gravity, grown men are going to weep. Laughing with joy. Stock hitting another alltime high. Im not right yet. All i can say. The way i look at it is, if youre concerned about any kind of market correction, these high pe stock that have no return of capital are going to get killed. Now, i use the product, its a fantastic service. Theyre clearly particularly in the Cloud Business, a lot of my companies on shark tank use them, for example, and theyre small businesses, but when youre trading 2,000 years of earnings ahead, i think the romans were around here 2,000 years ago. Thats basically what youre talking about with amazon. Assuming everything goes right forever. Even long after youre dead. Ive seen this movie before. I dont know when its going to correct. To what . To me this is asking for a perfect environment for this company in perpetuity. What this pe says, and, look, even if im going to be a contrarian on it i still wouldnt buy it today. Theres no instrument i can buy. I used to own gave me 11 yield back in the late 90s and owned them seven years and enjoyed the run, but theres no instrument i can get capital back with this company. I have to believe, believe, believe, believe, and one day were going to show this video and ill get you back in a wicked way. Its going to be down 20 , 30 . Steph, you believe . I believe. Expectations are high into the quarter. Short term no idea how the stock is going to trade. Do i hear you wavering . No, no. For the long term, i like it. This is a secular growth story a game changer. A company thats changing the way people are doing their commerce in general. Thats the retail side. I think prime is just in the beginning stages and this could be a billion dollars in incremental sales over the long term. They havent even begun in terms of prime growth. Thats going to be interesting. Kevins point, continue to get everything right. They could. A 133 forward times pe. The story cannot afford even a half a page where theres an issue. Right. Maybe the short term. I dont think the landscape changed in terms of the secular changes on the retail or aws. The Cloud Business is its staggering how much this is growing, and the top three players in the cloud have only 5 , 7 , market share. They can actually continue to grow this business. Margins will be under pressure as they grow out this business, but these guys are the leader in the industry, and so, yes, youre going to have fits and starts each quarter but this is a winner longer term. Let me ask you this you take 133 times to pe. Yeah. If amazon had a dividend. Yeah. Would it change your view . Because theyd still have the pe. Still have the issue. Clearly they will never declare a dividend if they can convince every participant willing to buy their stock they dont ever have to return capital. Why would they . Thinking in a hypothetical world. Sure. Does a high pe stock that pays a dividend change your view . I dont really look at pe when im looking at a companys ability to return capital to me. I mean, i care, but its not the number one factor. You overlook that . Im not against high p