Stocks. Bullish stocks. You short the tenyear. Where are you today . The same. I think were at a secular bull market that began in march of 2009. I believe we hit Double Bottom in bonds, and were going to it would be nine bare market in bonds with 5 year bull market in bonds and its over. Some who say theres nothing thats attractive. I think the word cautious is the one that overrides almost every part of the conversation weve had. Here is david tepper, who was on with us. I want you to react to it on the other side. David tepper. Margins that may be under pressure because of wages and now the dollar seems to be getting stronger again. It would be okay and then you have to deal with the election. You know, generally speak, you know, pretty cautious on the market. Certainly not alone. David costa takes out their s p 500 earnings forecast. Secular stagnation. Peaking margins. Are they missing something . No, i it think i mean, look, david tepper is one of the great investors, and i think the difference is your time horizon. Clearly true. Secular stagnation. Im not in that camp in the sense that i would rather rephrase that as an excess of savings over good investment opportunities. I think that secular stagnation is the bearish way to put it. I think excess of savings is a different way. I think as long as stocks yield more than bonds, stocks are attractive. What do we think here on the desk . Well, i think the time is running out for that bearish argument in the near term here, and we were concerned going into earnings that if there was a window for a correction, a garden variety corrections of maybe 5 in the marketplace, this is when you are going to get it. I think now were getting to the point for investors getting comfortable that earnings look good enough to propel us to the next level, and i think it goes back to what we discussed in the beginning of the quarter. Is this going to be a chase for performance where you have Money Managers never getting that correction and now, okay, we get past the election. The end of the year is coming. We have positive numbers across multiasset classes. We want to save our jobs. We have to race to get into different asset classes. Are you looking to actively buy stocks in this current environment . Do you have cash . Youre waiting for have no cash. No cash. Fully cash is zero. Why do i want something to earn zero. Stocks just in general yield 2 . We have an income fund that has a yield around 7 to 8 after expenses. Thats not a commentary in your thats how run your money . A little bit of aboboth. Everything in expensive in 1987. We had both. Generally youre not sitting in cash. Generally yeah, generally. Absolutely. Certainly if you had a more negative view of the market, you may not be fully invested. Weve had to give as much as 30 , as low as zero, which is what it is right now. It varies. The s p 500 is exactly where it was trading a week ago at this time. A month ago at this time and the month before that. Let me tell you whats changed. Back in may you look at the consensus for the forward four quarter earnings per share on the s p 500. It was for less than 1 Earnings Growth. The earnings recession starts to come to an end in peoples minds. Now that number is closer to 4 Earnings Growth over the forward four quarters in the s p. Again, markets, the indexes have done absolutely nothing. 64 chance of the fed raising rates in december. We seem to have grown at least immune to that. Were certainly not panicking about it. It doesnt mean its going to happen, but its a pretty high probability being priced in. In addition, youve got leadership from cyclical stocks, companies that are related to construction are leaving the market. Ewe got leadership from technology. Youve got leadership from small caps over large caps. Youve got a lot of things internally lining up with this more positive earnings outlook and to joes point, look at the calendar. Youve got an s p up 6 . Emerging markets up 18 off the may low. Youve got people that have a lot of ground to make up, and its doubtful theyre going to troo i to do that with cash. You think, bill, that you get sector rotation . I know you like the financials. A lot of people like the financials. They havent gone anywhere, in part because Interest Rates havent gone anywhere but lower. Do you see if rates continue to creep higher. Yield falls out of favor. Things that work with higher Interest Rates. I think what you are seeing with the utilities and safe stocks in the market, consumer staples, theyve done poorly for the last few months. I think if you look at the market over the last 18 months, its really done nothing. I think the chase for performance is always dangerous because if you are a manager, you have been sitting there, and you say where am i going to chase or go . Its kind of difficult to chase performance. You sort of hope the market comes back to you rather than you going after the market. Its not run away from you. I would say, look, you can have optimism. Everybody a lot of people i have talked to believe that there is expectations of a yearend rally. Particularly as we see clinton distance herself in the polls from trump. Thats put to bed. Now we need to see the republicans themselves from the democrats in terms of keeping the house, and then if you can get there with schumer, who is more reasonable than the prior house leadership and ryan and clinton who i this i is more probusiness than the way shes letting on to get elected, then you can get a tax holiday, and you get some fiscal stimulus which gets you to the next leg. Absent that, youre in a low return environment, and you look for bargains. Bill is specialized because he will own a value stock, like a b of a and also an amazon. For him to be able to find bargains is easier than a pure value player or pure growth player. Let me ask you about a specific financial wells fargo. You own the stock . Warrants in our partnership. What have you loaded up bad phrase, but have you bought more of any financial stock as theyve sort of sat at these levels hoping that they would go higher . We bought the short answer is yes. The most dramatic example of that is one main financial, which is the largest subprime lender. It was 50 a year ago. It was 19 in the spring. So we have a lot more of that at that level. Its about 29 right now. Still crazy cheap. Do you see more opportunity in places like this rather than the large banks that are more sensitive to Interest Rates, have to deal with regulation, and more that could be coming, et cetera . I think some of the smaller financials are more attractive. Stuff like magic and radion, and the mortgage insurers. We own a lot of jp morgan and citi. We like all of those. Bill, it sounds as though youre far more optimistic than many we had on the show last week. Nelson peltz to his credit talked about the negativity, and he believed that was one of the reasons why he would work higher. He said it was unwarranted. In that negativity itself, when you look at that and you see so many people, who are negative, and you see the other side of that. These are just negative conditions that have been around, and you have climbed that wall of worry in the 30 plus years that you have been doing this. It was such a shock. It was so painful where housing prices went, and i think it put a heighterned risk consciousness on the part of everybody to the fore. When that happens, what happens is typically the opportunities on the other side. If you were long beta since then, you have done pretty well. Weve had a great period since then. I think the caution in terms of the real world is warranted, but its already expressed in the overall market. Again, the stock market is just ridiculously cheap compared to bonds. People are still taking money out of stocks. In fact, i think the money has gone out of the equity market this year at the fastest rate since 2008. What people are doing and what theyre saying sometimes are very different. Right now what theyre saying and what theyre doing is the same, which is theyre cautious or negative or worried. Lets turn to the other big story this hour. That, of course, at ts 85 billion deal for time warner. Btig, rich greenfield has been critical of the media space. Wonder what he thinks about this deal. Rich, welcome. Its good to talk to you again. Thanks for having me, scott. Do you like the deal . I think this is a great ending for jeff buccus and time warner. You know, he this found a buyer. You know, you think about the facts of life. You take the good and bad. They found a buyer in at t who is willing to take the good stuff, which is Warner Brothers and hbo and take the not so good stuff which is the Turner Networks, which are secularly challenged, which weve talked to you about many times in the past. Its interesting. I mean, is it a victory for time warner, or a defeat . You would say its a victory they got the money. They could run. Kara swisher says, no, its not a vikt railroad for for time warner. Maybe its a realization and a resignation that they couldnt come up with their own Digital Strategy so they have to do a deal like this. Look, the Media Industry is facing a changing consumer behavior. Were moving away from live linear tv. Look at tv ratings. Across the board, everybody is getting slaughtered. Its not just the nfl, which is the headline grabber. The entire linear tv ecosystem in primetime is really getting beat up badly. I think the reality is as we shift to an on demand World Without commercials, as we move to a mobile first environment, the Media Industry the legacy Media Industry, meaning the Cable Network product that kind of has been the basis for all of the media stocks, is very challenged, and i think this is literally time warner going, look, we have a buyer right now. In two years its going to be worse. We found a buyer right now willing to take our business. At t is diversifying. I dont think they love the Turner Network business, but theyre diversifying away from their wireless business says which faces intense competition. This is not a statement that media is now back in favor. This is very much a statement that media is challenged, and you are seeing time warner get out, and i think jeff will go down as one of the smartest ceos ever in the media space for knowing when to exit stage left. We have a number of places we can go. Why are time warner shares lower . What does that say . Number two who is going to be next, and who is the pressure on now to do a deal . Number three, will there be Regulatory Approval . One and three are somewhat linked, right . The stock is trading down this morning because there is fear of will this close, right . Jeff bewkes was on cnbc. I think he was on with the team this morning, and i think his comment was they have not been approached by others. I think theres certainly a fear that there arent other buyers. Youre looking at a 12 month or so regulatory process. While there is no clear obvious legal basis for blocking this transaction, the reality is will there be a Grassroots Movement much like time warner and comcast . Time warner cable, that is, and comcast where the grassroots kind of political momentum literally destroyed the chances of the deal getting approval. I think the reality is theres good reason to believe why this could get approved on the legal merits. Theres a fear of kind of the big is bad without much teeth to it so far in terms of, like, what would be used to block this transaction legally or with laws, be and so i think thats why investors literally are not really sure what to do, and its why i think you have people taking profits in time warner and not willing to wait the 12 months plus for the deal to close. What stock what stock should be higher today that may not be or that could be higher in the weeks ahead because there could be another kind of deal of this magnitude on the horizon . Absolutely. Thats a great question, scott. He made comments up at bc a couple of weeks ago where he said that great content, even disneys great content, pixar, marvel, disney, lucas films, all of that may no longer be enough. They may need access to the consumer. I think when you think about, well, who has access to the consumer globally on a distributed basis, a stock like netflix becomes center of focus. Thats a stock weve loved. We continue to think its a must own here. I think that is the type of stock that when you are thinking about how would disney fix its problems, i dont think disney is a seller. I would be really surprised if bob sold his company. I do think that there is a good chance that disney tries to make an acquisition to fix this distribution problem. Netflix, while expensive, would go a long way to fixing disneys direct to consumer distribution problem. I dont think the rest of the Media Companies i mean, look, fox is not a seller. Theyre owned by the merdock family. They want to buy something. Viacom is going to merge with cvs. Theyre not a seller. The rest of the companies discovery, ac, scripps, these are all basically pipimples. They dont fix a problem like tim time warner would. Thank you. Good to see you. Talk to you again soon. What the deal segment nauls and how you view this space . He is exactly right. All up and down the line. He has done an incredible job by spinning off the cable business. Time and then what he has done right here in terms of getting a partner. I think thats a great move. One of the things that didnt get mentioned is the giant direct to consumer distribution and content. Which you liked. How long have you owned it . Since the ipo. Wow. Awfully long time, obviously. Best decision we made was buying on the ipo. Worst decision is ever selling a share. I want to talk to you more about amazon a little later in the program. Its one that we talk about on a regular basis as you have sort of gotten this fight over fundamentals and valuation growth, et cetera. What else is it . I think rich greenfield, i agree with i bill. Rich did a fantastic job really defining what this is all about. The one thing i would say and you asked them the question well, who is next . I dont think anyone is next. When you look at the vertical integration, the key thing to understand is that time warner was one of the fooe few Companies Left that didnt have that controlling shareholder. All these other companies have the controlling shareholder. That makes it a much greater hurdle. The one company that is similar to time warner is disney. I just think thats too big of a bite. 150 billion plus market cap. Why dont you own netflix . If, in fact, you dont. Weve owned netflix twice. We owned it from way, way back when from 8 to 32, and then we owned it after they tried to split the company up when it fell from 300 back to 50. We bought it then, and we sold it about, well, maybe eight months ago, nine months ago. Probably should have bought it back. I think he is netflix is an incredible company. Its very expensive. Netflix is next. I actually bought it after close on friday when the deal now sold this morning because i didnt get enough position for it to matter. If you think about this, apple was mentioned, apple radio, now not in the conversations, apple tv. Now not in any of the conversations. Apple is rumored to be interested in time warner. Theyve got for buy netflix or somebody else is going to buy them. Netflix is next to go. All right. Next up, three stocks. Bill miller has a lot to say about amazon, twitter, valiant. Also show you shares of one main. Its one of the financials that bill miller said. He liked that stock is on the move. That is an understatement of 4 1 3 . 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. I want to talk about your Largest Holding again, and that is amazon. How you make the decision that one big high valuation stock is worth buying versus another one that may not. Cant touch it for the valuation. I hear it on this desk every single day. Why is a guy like you able to pull the trigger . Well, first of all, i think people have misunderstood amazons valuation almost from the beginning. When they talk about amazon not making any money, my comment is how do they go from a 400 million market cap to a 400 billion market cap without making any money . Thats very unusual thing to have happen. When you sort through the math of all this, says that means that Value Creation happens roughly at the same rate as sales growth happens. Amazon sales are growing 30 . An incredible company. That also means that the underlying Business Value is growing at 30 . I think for that kind of thing, what do you pay for . If you look at Something Like the interview value ebida its not expensive. Its about 14 times two years out, and thats a crazy low number. A friend of mine who is an expert in retail has said that jeffs big insight was that if you are running a retailer for profitability, basically you end up topping out at 5 growth. How come no one else has had this idea. Its been 20 years were watching this go on. Why are there no other amazons to invest in . Or are there . I think you have a guy who is a Phi Beta Kappa from princeton and then worked in the Hedge Fund World and did this. Amazon is a data driven company. What they every decision that they do is scrutinized. Everything is put on an analytical table to look at and see if its a good move. I mean, the aws was brilliant. He spoke at our conference in 2002, i guess it was, and kind of laid out what was going to become aws. Comparing it to the electricity grid in the u. S. And how jp morgan in 1895 had the First Electric lights, and he had a generator in his basement. No, it makes sense to have an allout distributed, and thats what the cloud is. When i look at amazon right now, i say to myself i want to move to twitter. Theres no viable competitor. Do you see that . Have they insulate the themselves in such a capacity that theres no one that can really challenge that model right now . Yeah. I mean, if you take a look at amazon and compare it to facebook or google, right, gre