Investors, whether u. S. Stocks are really still the place to be and lets waek in jeremy with us once again live from philadelphia. Professor, welcome back. Good afternoon, scott. Professor schiller at the beginning of the week saying stocks could go up another 50 from here. What do you say . I said are you bullish . It could go up 50 . It could go down 50 . The word could does not really mean that thats what he expects. But you know, the momentum is there. The earnings momentum is is there. I think actually its very, the dollar being down is very positive. Especially for the s p 500. Thats why you see the strength in those stocks. Yields, two and a quarter for the ten year. Can you do any better than that . No competition. And we talk about overheating, we talk b about the tech sector. The, i just looked up the pe ratio of the tech sector. On estimated 2017 earnings. Of the s p 500. Its still under 20. 19. 3. We have amazon, netflix, we have a few of those that are really you know, in over 1100, but look at apple. Apples still under 20. The most value babable equity i world. In 1999, the tech sector of the s p 500 had a pe ratio of 90. So, you know, are we in danger of overheating, theres always that danger, but are we in a danger zone yet . I dont think so. You know, professor, i could throw out and you really are focusing on something that i want ed to talk about and that is the narrowness of part of this move. And our good friends sending around a note today pointing out that five stocks are accounting for nearly half of the s p 500s gains. Apple, facebook, amazon, microsoft and google. S p on the year is up 8 . If you take those five stocks out, the s p is up only 4. 5 . Are we too top heavy . Well, you know, i was told by someone else that isnt that unusual. There have been other times when you know, you take out some of the biggest techs that do, not just techs, any stocks that do well. You get a very different picture. They say if you take out like the ten or 15 best performances daily on the stock market, that overall returns go down 2 and 3 , so you could always pick those big winners. That being said, there are a lot of momentum players. In this market. You know, ive been in ak deem area for almost 50 years now. We used to talk b about fakctor, small stocks, value stocks. Momentum is surging as a fok tor. Theres a lot of players out there. They go with the trend. They have their stocks under those trends. If it falls off, theyre off and i do think some stocks are perhaps subject to these momentum players that are riding the train and ready to jump off if theres any sign of trouble. So, yeah, there is some momentum in there. But usually, overall, i dont think the stock market has the overwrought momentum we saw before. I still hear people, even somebody today on this Network Earlier in the day saying this rally is not based on fund m fundamentals. This is still the sugar high. Of Central Banks take a look at what yields around the world with doing, that is evidence of that. Then youve got elliot managements paul singer with a note of a real dire warning down the road about what stocks could do. I want to read you his quote and get you to react. We think its a good time to build a significant amount of dry powder. We think the low amount of volatility will exist until the disenchanting moment when it does not, then all hell will break loose. What do you think of that . Well, you know, the implication obviously is this is going to end badly. I mean, the s p reached 30 times earnings in 1999, were in a much lower Interest Rate volume. Created by the Central Banks. I think the low Interest Rates are due t at a fundamental factors in this economy. Low productivity growth. Low gd p p. A lot of risk aversion. Still out there from the crash of 09. An older investor class that is naturally risk diverse. Regulatory demands for liquidity. All those things are if it was only the central bank, it would be the tenyear. It would be at 5, 6 if it thought there was artificial stimulation from the central bank on short side. Those bond vigilantes out there say guys, this low Interest Rate environment is going to be in place for many years to come. Its not just a central bank phenomenon. You told us the dow was going to go to 20,000 and a lot of people said hes way out over his skees, hes going to tumble down the mountain. Now that we are where we are, where is the dow going to go from here . How high do you think the dow is is going to go . Short run, its unpredictable. Given this Interest Rate environment and even the perspective tightening and you know, a negative tapering i guess you would say, release some securities, i think stocks are very fairly valued. I think theyre valued for a gain of around 7 . 2. 5 in the long bond. Thereats a long margin. Back in 2000, you were getting Something Like 6, 7 on treasuries. That was crazy. This is not crazy. Not saying it for every stock, but overall in the market given the Interest Rate environment, and perspective Interest Rate environme environment, i think stocks are still the place to be for investors. Its josh brown. So, when you think about, talking about schiller, which i think you probably more than anyone have done a lot to get into the nuance why its not quite so important or ak as maybe it could have been because of accounting changes or anything like that. But just broadly speaking, lets accept that it is a decent way to think about the next ten years returns. So you have a u. S. Cape ratio of 30 times. Look around the world, substantially lower. Smart investors are allocating outside of the u. S. At least a portion of their portfolio. Foolish investors think it goes up, its the only game in town and theyre all in. So, when you think in terms of that, is there an argument to be made that the 0 t 9 losses, they roll off in like 18 months. What is the new cape ratio like . Much lower. Is that in favor of keeping allocation to stocks even if you accept that simple ratio has some Predictive Power . I think youre right on. For overweighting europe and especially merging market frs quite a while. Europe was 13 pe for a long time until this recent rise. I guess its up to around 15 times this years earnings. 16, maybe. Were 20. Emerging market is still about 15. Sill under the u. S. You could buy euro for i think the biggest argument now for u. S. Stocks to stay there is the dollar going down. This is going to help the s p 500, the multinationals. The euro is worth more in translation into dollars, so theyre going to get double pumped. 40 to 45 of the profits of s p 500 come from aboard. Were getting to a more even allocation than we were a year ago. Right now, about half the worlds equity valuation, you know, i would maybe put 40 , 45. So jeremy, the average investor, vanguard says the average investor portfolio is 80 u. S. Stocks in the equities side of those portfolios, so if you assume half of the other 20 is europe, people are substantially underweight the best performing market they could be in this year. And even though flows have now gone positive into europe, its like six or seven years of net flows being negative. Might serve as the catalyst. People just feel uncomfortable investing aboard and by the way, that thats true around the world. So, europeans you know, theyre invested in u. S. Stocks. Its been around for a long time, part is psychological. It doesnt and part of it is just, but youre right. U. S. Citizens are underinvested abroad. You made a few references, its curious to me, because i go back there, bernstein had some very hard times, now, at the same time, 2000, the s p 500 went down and investors had great returns. I look at todays environment, weve had ten years, also 1,000. 14 . T the russell 1,000 was up 3 . P if this market breaks, will they look and say wait a second, maybe i should look at a stock trading at 12 times earnings. That was my point so many momentum players. If a stock is on a trend, make the trend youre friend. Theyre jumping on. They have stocks underneath and they will go to those value stocks. One also has to remember, tech has done extraordinary this year, but over ten years, what really one of the factors that really heard the value stocks was financials were mostly in the value stocks just before the financial crisis. And the energy, so those two factors have really been i think more than 100 of why value has underperformed. Energy, we can argue what the price of oil is going to be, but financials are still selling at what, 13, 14 times earnings. In this environment. So, i agree with you. I think when it breaks, if the trend breaks, you will see a Movement Towards value and away fr growth. Professor, thanks so much for being here today. Enjoy the long weekend. Doc, just play it the way you think about where the markets going to go . It can does. If were overheat, theres steam out there. Things are boiling, theres steam. In 99, 2000, tenyear was 6. 6. Were at 2. 55 for the tenyear mortgages rates are four. I dont see that same sort of steam or overheat ng this market. I think we can keep making these. 4 of a percent, thats the seven vix. Just keep kroul to the upide. It doesnt give you pause though that these five massive stocks are accounting for such a large portion of f the s p 500 . Its always like that. Looking at returns since 1994, top wreten are roughly part of return. If you want to pull these out, you want to say that were leading the market. Cant you dont know absent tech. What if crude oil were 80 right now. Do you think google would be outperforming the exploration stocks. Youre going to have a bull market, stocks that come to the emblematic of the era. Sometimes, tech, sometimes, its not. It could just asly be a health care market. Why isnt celgene and amgen leading the market . This is a forever thing. This is how bull markets manifest. They revolve around big winning, large cap blue chip stocks. Thats true, but we have to talk about its not always the same five stocks. You know this and i know that. So the question is, when do you get off the train of the bellwethers running this thing higher. Its faang and other stocks, nvidia, great call on your part. But youve got to look and say, okay, when this breaks and t going to be technical, something youre seeing in the charts, josh. T not going to be valuation that knocks amazon off the pedestal we know that. Just reached a technical level that was resistance of 2400 on the s p and north america people feeling more bullish now. If you look at let me finish this quickly. You have to be aware that at some point, it will break and if amazon is down, you know, two, three, four days in a row, all of a sudden, people are going to get queasy. What is your sell signal on one of these bell weather stocks and if you sell, where are you going to put your money . It could be cash. I dont think thats the case and i was alluding to this with professor siegel. Thats when people are going to look at hey, valuation matters. So, heres the thing. There could be a big gap between when those attractively priced value stocks start to help you. After a complete market pique and you cited value coming back into favor, post the dot com meltdown. Not for a little while though. In fact, the only benefit to being in the value socks during the dot com meltdown was not that they made you money, they lost you less then started to turn. Youre right about being patient. Thats not the example you want to use. Just because value stocks did go up in a year 2000 that the s p 500 was down 9 , but regardless how did they do in 01, o 2. Theres a gap. What i just said was when you make, when you see that break, which is going to come. Weve been doing this for decades. Here valuations are in high dividend high cash paying stocks. The ciscos of the world. Theres a third option. Its you get a stagnant market p for a few years and we just had it. You had a stagnant market. It wasnt a crash. We had some corrections that were bigger than 5 dips. They resolved relatively quickly. Nobody really panicked about the individual events that caused the slowdown like the oil crash et cetera, but you dont have to be going up or down. You can be consolidating. We had a consolidation period, then another 50 return in tech for example. And dividends will matter in that period. They will. 3 to 4 dividend yield in a 2 tenyear environment is pretty good. We are going to leave it there. However, were going to continue that conversation on the market. This coming tuesday with investing legend, leon cooper ma cooperman, his first interview since his settlement with the sec. Halftime report just getting started. Next up, a big downgrade for an oil giant. See why the analyst behind our call of the day says get away from chevron as soon as possible. Plus, with google and amazon near 1,000 bucks a share, were look at another tech titan hitting a major milestone today. Microsoft. The traders are back in two minutes. Theres nothing traditional about my Small Business so when it comes to technology, i need someone that understands my unique needs. My dell Small Business advisor has gotten to know our business so well that is feels like hes a part of our team. With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. Hey ron theyre finally taking down that schwab billboard. Oh, not so fast, carl. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Chevron shares down 10 this year. Now, one firm is calling for more downside. A 100 price target. Our call of the day. It is the only sell rating on this stock according to fact set. You got 16 buys, 13 hold, now, one sell. Doc. I wouldnt go to sell on it. I think there are better stocks that are going to move faster than some 200 billion monster like chevron. A lot of the stocks petes talk add b about. Neighbors or natural gas. Theres nrng plays that i would rather be in, but i wouldnt be as cautious on chevron as this analyst is. Which names woulder be in . Neighbors yesterday, i talked about that one. Ive got one now for unusual activity in about 20 minutes ill mention. Thats seeing fast money flows. Thats a tease. Yeah. Those are the types that id be in. This is a battleship. Its perfectly correlated since the beginning of the year. That tells me if a play on oil, i know theyve got big projects out there. Borg nn australia, and these things will matter, but wont overweigh its time to oil. I think oil is stuck in a trading range here. Every time it goes higher, you see the recount up higher and knock the price back down. I dont see us breaking out of that. I think like this gets to the heart of our are you a trader or investor. If youre an investor, and own xle, which chevron is a big component of. This is the type of sector where d the hold and own it. Here, you have the stock thats below a flat 200 day. You have a yield of you know call it 3 or 4 . If yu nood to be long, put a stop there. Were in the Market Making new all time highs. Why are we looking at losers. Focus on the stocks going hire. Taking it to 100. Jon is tracking unusual and bullish ak tifttivity in a chip stock. Hell take us through that coming up. Plus, deere, mcdonalds, boeing, microsoft and cognizant. Thats coming up in the blitz. Thats next on the Halftime Report. I joined the army in july of 98. I did active duty 11 years. And two in the reserves. Our 18 year old was in an accident. When i call usaa it was that voice asking me, is your daughter ok . Thats where i felt relief. It actually helped to know that somebody else cared and wanted make sure that i was okay. That was really great. Were the rivera family, and we will be with usaa for life. Usaa. We know what it means to serve. Call today to talk about your insurance needs. Deartheres no other way to say this. Its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced, our senses awake, our hearts racing as one. I know this is sudden, but they say if you love something. Set it free. See you around, giulia im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. We sent jon tracks the Options Market to the telestrator. You got a couple for us today. Whats first . Friday two for. First one, chip stock, take a look at the nice rise weve seen out of micron. They were buying the june 31 calls. Very aggressively today. Stocks over 29. As you can see, average volume the pretty small. I got right in there with them. Probably be in this for two to three weeks. Then an energy name. Because you were talking energy. Range resources, again, 1. 5 move on a small move out of the energy complex, but they were in here buying the a call spread, the 24s. Which is right tat the money. The 24 strike call, they were selling the theyre looking for a quick bounce and could turn a small investment into about four times their money in the next several weeks if we see more climb out of range resources. Im in that one as well. I was going to ask you if youre along for the ride. All right. Doc, back over here. Over to sue. I do. Thank you very much. Heres whats happening at the hour, everyone. Bmw is recalling more than 45,000 older cars because the doors can open unexpectedly. Covers certain 7 series vehicles from 2005 through 2008. Excuse me. It is still working to find a cause and develop a fix for that. A federal marshall says a a man opened the gallys service door of an American Airlines flight and jumped on to the tarmac at Charlotte International airport. When a Flight Attendant and two passengers tried to stop him, he bit the attendant. He was arrested. A michigan sports doctor accused of sexually assaulting female gymnasts was in court this morning. He is accused of molesting girls at his clinic while we horked for Michigan State university. And Melania Trump and four other first ladies toured a bit of sicily. They took a helicopter ride to see mt. Aetna and aetna is also europes tallest and most active volcano. The it has been very ak thif year. Thats the news update this hour, now to brian with whats coming up on power lunch. Hi, brian. Thank you very much. Coming up at the top of the hour, it is a friday face off on power lunch. We