Whats a longterm investor to do . Well start by asking one of the greatest Value Investors of the last two decades. Bob olstein, i want to start with the political climate. Does any of that come into your philosophy for the investing. Whats going to become law and how does it effect the Free Cash Flow of companies or industries we are looking at. But we cant twhroins all this stuff from politically active people. Gary the fact that you have the political extremes going on in this cycle . The market, 80 of the market. Hedge funds that arent there with the spreads anymore. When the trading has become ridiculous. The analysts are look at if somebody has beaten the estimates or not. We have record volatility we take advantage of it. Gary so you are working more on the fundamentals and less on the news and currents information thats out there. There is a difference between an Investment Decision and market decision. Most analysts, there are Real Companies behind those stocks. And you have to value the businesses. The values of those businesses do not change as rapid as the stock prices do. Gary well get into the specific companies later. By want to address two things you and i have spoken about. The first is the difference between buying an index funden buying an active manage more picks individual stocks. And the second thing is you have a philosophy, you dont want to talk to company management, you upon want to look at the numbers. So should people be thinking about index or thinking about active management, understanding you are an active manager who produced outside results against the index over the years . I believe its peoples job to find active managers. The governor of pennsylvania says there is no risk in the indexes. They bought enron, all the money is going into deking. They are add together p. E. Ratio of net flex averagflix and amaz. Its creating pockets of overvaluation in the index. Gary the index has beaten 90 of active managers if you quantitative easing since 1999. I dont look at statistics. If you put 10,000 our fund its now worth 60,000. Gary you hear executives come on air and talk about their results. You always told me you dont want to do that. Longterm performance, the people who tear about individual companies. The longterm performance of the people who make the fewest errors. Its the mag tiewched your error that determines your longterm performance. If they dont write about the people who march over the cliffs trying to find it. If the 48 years in this industry i never had a management ever tell me or ever say if you dont vacate my stock, you are going to get burned because we have problems we cant solve. Why would i ask somebody or talk to management. I care about management but i look behind the numbers. Well talk about looking behind the numbers today and the falsity going on in accounting today. Anthony index investing, you buy in whole. Value investing. Inside or outside that index that are fundamentally longerterm attractive than the index. By thes super hard for the average investor to understand the difference. How would you summit up in 30 seconds. Find people to manage your money unless they are going to do the work we create volumes of information on every company we look at. Looking behind the numbers. If you dont have that ability, then i guess you have to bite index. But there is no guarantee. If you dont want to be in a plane being flown by robot. I want Anthony Scaramucci flying that plane. Gary well be right back. Announcer next bob olstein tells you stocks that are under va gary we are back with bob olstein of capital management. Gives some ideas what you find tractive . What we find attractive is usually what other people find in trouble. Getting the right price is the key for longterm investing. Bed, bath and beyond be everybody hates it, we think this company is real, its relevant. The rar nins will drop to 10 . Thats enough to produce 6 a share. We like the problems because we get the right price. We think Equity Capital can move into the stock. I remember talking about petsmart. This company is the type of stock under valued, 10 Free Cash Flow. Gary when stocks are trading count average Retail Investor gets scared and starts selling them. They sell them to us. You could have a stock a value track is where the problem is not team prairie like we think in is not temporary like in bed bat. And basically you want to stay away from it. It looks attractive on a valuation basis. But that stock is jammed in. You can have a stock cheap at 25 times earnings and a stock expensive at 10 times earnings. You have to do your homework. On lucent when i believe it was the most widely shelled security anyone vestors around the country. It became public in the mid90s. Then was a high flyer. But as you points out. You were negative on it. It doubled and eventually collapsed. What are some of the names that have the red flags, most overvalues wrtd stock price doesnt line up . I would say its netflix. That to me is so unrealistic. They are in a competitive environment. They are spending billions. 120 million in earnings which are not real earnings because they are getting stock compensation back. A billion dollars is being spent in programming. I would worry about the 2 billion. Gary some investors are look at the number of new subscribers. Your point is they are putting them as subscribers but they are losing money object a cash flow basis. The Business Model says they have to buy more and more programming to keep their programming relevant. 20 . 20 of all expenditures on programs make it. They have 12 billion in future liabilities. Its one of the most overvalued stocks in my history. Anthony scaramucci you were criticizing amazon and stocks up 20 since then. I said netflix was the most overvalued. The stock was 129. Amazon is if you were just the earning, for the fact there is full payout with no cash flow and they add back stock compensation. There is no Free Cash Flow there. They have a good Business Model. But when they have gone from 4 billion to 135 billion in sales and there is still no Free Cash Flow. Anthony scaramucci you are looking for cash that treeches your bottom line. The bulls say it will become profitable at some point in time. I buy all my goods in amazon but i wouldnt invest in it, its too much risk. I how do i protect myself he if im an investor. Anthony is going to fly a plane. Hes probably had two years of lessons. Anthony you dont have to worry, im never going to be flying a plane because i understand risk management. Value investors are often applauded for their rise be management. D their risk management. What are some of your risk managements. Free cash flow. We buy companies with 9 Free Cash Flow. Why do they have them . Valued companies, what great about valued companies is while you are waiting for the public to know what going on. You are adding to the value. So Free Cash Flow is our safety net. Gary stay right there, well be back with more in a few minutes. Announcer coming up. Kyle bass breaking news on this show talking about a looming recession in the u. S. Is he right . Well break it down why bob olstein, and Melissa Francis next. What do you got to offer us today . Balance transfer thats my game bank you never heard of, thats my name haa thank you. Uh, next. Watch me make your interest rate. Disappear. Theres gotta be a better way to find the right card. Whatever kind youre searching for, creditcards. Com lets you compare hundreds of cards to find the one thats right for you. Just search, compare, and apply at creditcards. Com. A one, a two, a three percent cash back [bassist] two late nights in blew an amp. But good nights. Sure,musics why we do this,but its still our business. 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They have a giant credit bubble that has reached its atrophy level and its going to happen the next three or four years. Whether that causes a main or minor recession, its 40 to 50 chance in the next year. Anthony scaramucci thats kyle bass talking about a possible recession in the near future. Bob olstein is here with. Sandrahere with sabdr. Smith an. Melissa this is one of the flash points to. There are so many things going on. You look at earnings this quarter which are projected to be very weak. But there are a lot of different data point piling up and not looking great. Add to that, we have the weakest recovery from the financial crisis ever in history. And there are a lot of factors pointing out the weakness. The stock market is up. Its back to alltime high. Melissa does that give somebody a job or increase their wages . Its only one aspect to it. We are look at stagnant wages in this country. Through earning season we have seen the profits arent that great at u. Scorporations. When you look at china, it should be a red flag. First it was property, then chinas stock market. Then it turned into chinas credit bubble problems. Gary i think donald trump said 100 . Sam zell said well definitely have a recession later this year. Do you agree with that and does it matter when you are thinking about investment . Way wonder about is something nobody is talking about. We are finding 8, 9, 10 Free Cash Flow yield companies which tells us there is still room not tied to the market. 2 to 3 years. What i worry about is the fact there is a recession in china is already in the market. Anthony scaramucci this is a tale of two different countries. The middle class is stagnating. What can be done about that . Melissa the Federal Reserve juiced the markets and forced people to go out and chase yeelt yields. D and chase yields. The middle class jobs people can count on are gone. So many people are trying to live and parttime and minimum wage jobs. We have seen a great divide. Im afraid of what the remedy is. A lot of the jobs have to do with Computer Programming and technology and things you need to be trained for. These are the jobs going overseas. But thats not a quick fix. Sandra donald trump has won over so many voters by sticking to the economy and making things better. Anthony scaramucci do you think government can cure the problems melissa is talking about . Sandra we dont want to look to government to cure our economic woes. But we need to relieve business of some of the regulations weighing them down. Obamacare has been difficult on a lot of companies. With free cash this country. Anthony between 5 and 10 . Everybody is complaining. Where we are in business to make money for our shareholders, and thats critical. Gary are you trying to make the point could you have problems in china and the United States but as an investor you can still find companies that will offer returns to investors . 23 im a viewer of this program, why should i even care if there is a recession. If you work in Financial Services or the energy space, you havent been in a rescission, you have been in a depression. So i just ignore it all . In my business im not a politician, im not in government. People mir mead d people hired e them money. Since the crusades there is no person on this earth who has projected where the market is going to any regularity. Melissa government is important, one example, the war on banks. Talk about break up the big banks and confiscating their profits. Look at hillarys ties to wall street. Thats the life blood this country. Gary maybe she should vilify government. There are more crooks in government. Melissa you knead banks giving consumers credit to keep the economy flowing. Every time they crack down on banks they have to raise fees so its harder on the consumer. This is one example of having a government so hostile to business and the economy. The question i have for all of you, the next 2 to 3 years bullish for stocks mel. Heather it depends on who is elected. You think a republican would be better . Melissa yes. Sandra we know the policies would be more business friendly. And taxes in this country. They are a huge burden on the American Consumer and business. Gary bob you said who wins the election wont affect your business process. Who do you think would be best for the economy . I cant answer that one because i dont know. People say a lot of things. Trump wants to change everything, hillary has more experience. I just dont go out there. I look what thes going to happen. Gary you look at Free Cash Flow. You got it. Next week our guest is billionaire t. Boone pickens, well see you then. They say that in life, we shouldnt sweat the small stuff. 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And trump is so committed to making that pivot, that change, hes now practicing delivering at least some of his speeches with the help of teleprompters, a tool that president obama, of course, relies on constantly, but a tool that trump has used as far as i know, only once over the past ten