About it in a second. Maybe you have an answer. Joe is here. Stephanie link, barbara. Did you hear what they told me . Its pronounced like duran duran. Thats my that might be a little after my time. They different than the beegees. Senior Portfolio Manager with new york bridge partners. This is a pleasure from las vegas. Kevin oleary. O shares chairman and halftime have you gotten any sleep at all . Are you coming straight in here, kevin, or are you well rested . Im well rested. I got in from rome last night, and i spept tnt the debates and whole lot of time in zurich and geneva. Very interesting. I want to ask you about cuban and what you say to each other off camera. I dont know whether thats whether we can do that or not. You think about that. For more on the sector rotation going on in the markets right now, lets bring in cnbcs senior markets commentator, Mike Santolli live from the new york stock exchange. Hello again, mike. Ive heard some of your thoughts on this already. You have. Thats the benefit of working a double shift. Right . You get to kind of mull this stuff over. The market itself, basically nothing since july 15th. S p 500 flat. Within the sector, if you look at the high beta etf, bahisticly the fastest moving most aggressive stocks in the s p 500, thats been outperforming segmentally over the last few months. Of course, on the down side is those low volatility stocks that were so popular in the first half of the defensive groups. Stable businesses, dividends, all the rest have not been winning. Now, whats really going on. Within that high beta or more cyclical area, semiconductors, transportation stocks, machinery. You saw country pillar at a 5 itweek high. Emerging markets. All this stuff is getting people to wonder if this is sort of sniffing out a Global Growth bounce or maybe an acceleration. You saw the stuff that got expensive because of their yields have backed off. I do think we have to ask the question, is this an economic signal . Have we basically had the markets pricing in, for example. Todays ism number, which is stronger or, in fact, is it a sector rotation and you have Portfolio Managers looking for laggard groups that maybe will be able to help them catch up in the end of the year. Thats what i think we have to figure out over the next couple of months. All right. Youre right, mike. Were going to kick it around and trade it. I had initially the same feeling as an article in the wall street journal, which is actually taking the other side that the Fourth Quarter will see continued strength in bond prices. I mean, this implies, joe, that nerf and zerp are over. Are they over . Is there any indication that were finally going to see a back nup rates . You have to at this point think of the capacity of parallel versus linear thought process and how much risk you want to take. Really taxable fixed income, yes, it works in your portfolio, but think about for a second where could you absorb the bigger loss . Could you absorb a big loss at fixed income market . My answer is yes, you can. Going into the Fourth Quarter right now when you look at your portfolio, the question is one where you do want to be a little more defensively oriented bad right now everyone expects it to be okay. What did you say at the top . Linear versus when you say stuff like that, does wapner he ignores me. He moves to stephanie. How do you know the difference between i dont say dead cat, a dead rock bounce and something thats actually going to continue because if we can notice it already that offensive is starting to work, doesnt it mean we could head back down and this isnt just as a false start and doesnt continue . Near term the tell will be earnings, right, to see how the reaction these stocks react to earnings and last Earnings Period some of the cyclicals where they roushtd disappointing quarters say Union Pacific or caterpillar. Bad news was rewarded with a strength in the stock prices. That reaction was interesting. The earnings reactions this quarter will be very telling. Now, i would say that i think sec li cyclicals can continue. Its getting a little bit better. Jobs, wages, pmis, isms, et cetera. Not runaway growth jobs, but better growth. If you have oil prices stabilize, dollar stabilize, i this i that thats a good recipe for earnings going forward. I dont think three q will be great. Maybe 4 q and first q into next year might be better. Then that visibility will give this lag a little more upside on the cyclical front. Domestically that sounded good to me, but can we assume that will japan, europe, china, will everybody on the same forward track as the United States, or are they stuck with nerf and zerp . Well, i think the u. S. Will continue to be the place to be. I think japan has its issues. I think china recently has had some very good numbers in terms of retail, auto, even imports, but i think they have serious structural issues that will take some sometime to work out. Most particularly the Banking System and debt. I dont see china being the driver for quite some time for world growth as its been. I think the u. S. Will be the big driver of world growth. Anybody can answer. Kevin, i know youre listening as well. Do we need we had an analyst on this morning talking about the tenyear saying 177 if it gets through that, maybe we go higher, but is there any reason to think were really headed that way versus the other way, kevin . I think were going to be sub3 even sub2. 5 for a long time. Thats not just domestically, but globally. Maybe the fed does 25 bips in december. Even another, even 50 bips. It makes it historically low. If you look just at the last year in terms of performance, and i know we love to debate sectors, but if you had a more defensive dividend or yepted return of capital based portfolio, youve done 11 in change, versus the s p which is 7 and change, and that trend i think will continue. If your company is not returning capital and take companies that are paying 2 , 2. 5 dividend, i think the market will only give you 6 . You get half your bogey from cash distributions, thats the way to play the next 12 months regardless of the election. I just think that the defensive is still going to work, and i really still hate the financial and Energy Sectors. I think theyre going to underperform dramatically. In fact, i peeled back going into q4 in energy, and i still havent bought any banks yet. I think the environment is the worst its ever been for them. You mentioned at the top, and i think its important when you look at portfolio, and i differ from what barbara is saying and steph is saying because i want to be defensive, but i think you have to look where consensus is. You said before, rightly, dont we already know that . Havent we already seen that performance . Think about energy. Opec last week announces were all skeptical of the surprise cut. Are you supposed to go into energy now . You know im transitioning into energy. You done this for a while . Wapner ignores me. Think about kevin, if you think about the Second Quarter of this year, joe, no one wanted to own energy. That was the moment to own energy. You look to the Fourth Quarter. The one thing no one is talking about, youre talking about rates, the biggest concern for the market right now could be the u. S. Dollar. U. S. Dollar. Kevin, you think energy is over . No, heres the problem i have with energy. Im a Balance Sheet guy, joe. I look at Balance Sheets. They always tell me about the future. In the last 12 to 18 months the large energy names, domestic, international, you name it, have them sustaining their capex and distributions of dividends with debt. Theyve been borrowing at incredibly low rates, short and longterm. Take dutch shell, for example. In the last 18 months its increased its leverage 1100 . I dont want do own anything thats sustaining its Business Model with debt because if rates do go up at some point, that chicken is going to come home to roost in a bad way. The truth is about energy, the Balance Sheets look horrific. Theyre not getting any better because everybody thought we would be at 60, 65. Here we are at 45 to 50. A lot of tease companies can make money at 45 and 50, and its the number one or number two players in the Energy Sector and within each sector within energy. Like the integrateds, chevron, exxon. Those are very strong Balance Sheets, and they make money at 45, 50 oil. Im not saying buy the low end, the very levered names, but on the integrated side, you could certainly pick from a basket there. On the enp side, thats where the growth is. Something like an eog or theyre well funded. These companies have already come back to the marketplace. They are able to continue their operations and grow, and i this i that the Bigger Picture on energy is youve got some opec overhang. Now, things may change in november if they dont come to an agreement. We may see a pullback. The overall supply demand metrics are getting better, and with all this global Monetary Policy out there and potentially fiscal policy, you can make a case for 2017 being a whole heck of a lot better than 2016. Im not saying dont own energy. I believe you own energy. The moment to own energy was much earlier in the year. I said before i have a concern about the u. S. Dollar. Think about what the Federal Reserve has done the last couple of years. No one expected the shale Production Growth that weve had in this country. That was built on the back of the Federal Reserve giving everyone cheap rates. Those wells were built on cheap money. Do you think thats going to continue . I dont. I dont think any of us think thats going to country. Those companies will be the survivors. Theyre going to take market share and do m a and grow and thrive. Those are the names you want to play. The number one and two players you want to own. It was all about High Yield Energy. We dont talk about that anymore or those bad Balance Sheets. There was not a lot of debt maturing in High Yield Energy in 16. Theres really not that much many the first half of 17. This Time Next Year . Youre going to be talking a lot about all the wave of debt thats maturing in the second half of 17 and 18 and High Yield Energy. Can opec come back and be the are producer i thought no. I think thats i think does it matter what they say and what they agree to . I think this is a fairly desperate effort on saudi arabias part, and you have them exempting libya and nigeria, iraq from this. Theres always a fair amount of, lets say, excess production that goes beyond the agreement. Assuming they can come to an agreement. They have not been in the past because of these issues. I think that even if they can come to an agreement, i think its going to spur all the nonopec producers to step up. Youre still going to have more supply coming on. I think their hay day is over in terms of being able to call the shots. And you can make money in shale at 45 . Theyll still some can. Not all of them. Whats the highest cost producer . What does he need . What does it need . Some need 80, 90. Some of them, sure. I think the high quality number one, number two players in the industry, 45, 50. Thats what they say. So does exxon and chevron, by the way. Youll know when the worst has passed when we see consolidation in space. Thats the question, do we buy energy here or do we wait . Look at the rally last week. I mean, it was it was amazing. Had you missed that, you missed a whole bunch of basis points in your portfolio. Thats a shortmaterial trade. I think you have to have patience. Youre going to have fits and starts. I think you have to have exposure to the space, for sure. Kevin, you were a big bear on apple throughout this year. Now youre buying the stock, and you just the point you made about energy, its already moved. Hasnt apple already moved, and now you decide its time to go . I wanted to wait through the upgrade cycle. The only thing i care about in apple, and you do have a split between the yea and nay sayers about apple now. People dont want to own the stock are those that think its just a Hardware Company that think it will go into a toasterlike business. I decide that its starting to look at the services business, and i think it will grow as much as 1 a quarter going forward, and thats going to buoy this stock. This upgrade cycle, some is anecdo anecdotal. I watched this stock from the point of view of users, which i stay in touch with a lot of them. When you upgraded, whether the 7 or 7 plus or the existing phones with the new operating system, you were pushed into a new data plan to service all of the memory you are going to need. The double, the triple the size of the photographs, the new services on itunes, all of that pushes you to more i cloud, more monthly charges, and thats all i care about. Thats 100 margin business. Im now in the bull camp of apple. Its a 5 waiting. Its zero two months ago. I think this name, in addition to its near 2 di dend, will give you a 6 to 7 animal return for the next few years minimum. We have some fancy four star guy coming on that doesnt like apple at all. You got to stay tuned. Thats what i love about this stock. You know, i like a market where not Everybody Loves it. You show me a name Everybody Loves, i dont want to own that. I want a little disconcerted people saying dont buy that because you need that. You need some wall of worry to scale. I think this name will work as Services Grow to 15 in the next 12 months. No one thought that this latest upgrade would do what it did, but you dont like it anyway, right sf. Listen, very candidly, i got up this morning and do what i do every day. I make a ton of mistakes, and apple was one of them. I dont know this. Im not busting your chops or anything. No need to be defensive. Does wapner do that. He ignores me. Pete will do that. He will be on later. He could change his mind. Listen, give credit where credit is do. Pete has been on apple. He has been on apple the whole run. He has done a great job. Is he the goodlooking one or the he is the minnesota guy. He will be on theyre both goodlooking. Im kidding. Did he go to ryder cup . He was in minneapolis. I think he did. You got to follow him on twitter. He tweets a lot of stuff. I follow very few people. I have been cutting down my will you follow me . Its a cess pool. He is not answering. I might. I cant guarantee it. From one joe to another. Apple . Apple of your eye . I own it. I was buying it pretty aggressively in the low 90s. I think at 112 to 115. Its taken a pause. I get it. Its had a nice run. I think expectations are still low. Valuation works. Cash works. The product cycle store i think is well understood. I think the big bang is the next cycle. You have to either hold this for the longer term into the next cycle or you could trade around it. I dont think i would be adding to the position here. Ill hold it. This job is so cushy. Heres what else is coming up. Normally i would have to say all this stuff. Theyve got somebody else thats already, like, prerecorded. Wapner this is so great. Anyway, thank you. Thank you, kevin oleary. Thank you. Watch this. Watch how i do this. Heres what else is coming up on the Halftime Report. After being stuck in neutral for the past few years, some of the out er the. Stocks are up double digits. Are they finally ready to break out . Plus, speaking of autos, teslas Third Quarter sales doubling from a year ago. Weve got the trade. And a four Star Tech Fund manager tells you his top plays for the Fourth Quarter. Get involved in the conversation. Follow us on twitter. More Halftime Report ahead. 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. Steve, other than making im here atme move stuff,rade trader offices. What are you working on . Let me show you. Okay. Our thinkorswim Trading Platform aggregates all the options data you need in one place and lets you visualize that information for any options series. Okay, cool. Hang on a second. You can even see the anticipated range of a stock expecting earnings. Impressive. Whats up, tim. Td ameritrade. Welcome back. Auto stocks are on the move. U. S. Auto sales. Tap the brakes, though, in september with the two biggest automakers reporting declines yearoveryear. Stephanie, you are not surprised auto sales have peaked . I think, yes, theyre peaking. I dont think were going to see a massive decline from here, but i think for the stocks to work, i think for the multiples to expa expand, you need sales to increase. I think theyre cheap. The oes especially. If i had to play auto, i would go to parts. They get exposure globally, and theres underlying growth in c technolo technology. I dont own any of them at this point. I was going to say that ford, you know, after all the trouble, it moved, like, five years ago, and it hasnt moved since really. It says that ford has had a nice rally over the past three months, but a lot of good news was in that stock almost immediately after the recovery from the bailout, right . I had owned it a few years ago and made some good money, but basically where i sold, it hasnt moved. I think were very long in the tooth in terms of recovery in pentup demand for autos. Its one of the first top ticket items close to 2008 that you saw consumers buying. That continued because at the time you saw the used car and people were holding on to their cars much longer, and a lot of that has been satisf