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tv   Fast Money Halftime Report  CNBC  August 9, 2016 12:00pm-1:01pm EDT

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that pin that needle, under the haystack, sort of the mattress for michael phelps. one of the few areas he has not been absolutely dominant. so, guys, a lot to get to over the next few hours. meantime, back to headquarters and check in with wapner for the "half." carl, thanks. welcome into the "halftime report." i'm scott wapner. betting on zero. it's the title of a new film documenting bill ackman's fight against herbalife. since the movie's release, a key question remained a mystery. who finance md the film jp a mystery no more. scoop overed weekend short seller john ficktorn and not ackman was the money behind the movie. he's with us today in a cnbc exclusive interview. also with us on the desk, joe terranova, stephanie link, jim lebenthal and josh brown. welcome. good to see you. >> good to see you.
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>> why did you do this? >> well, you know, we had been looking at herbalife in the industry really since 2004, since we started our firm in 2003. it was always a fascinating story. right? there were always sleazy things going on in the background, our opinion, and always an industry we thought was harming people, yet over the years they seemed to be growing rabidly. not just herbalife, but the whole industry, an industry we realized co-opted up a critics. co-opted the internet. type in herbalife scam, knnuski someone co-opting. never heard the story. obviously co-opted wall street. nobody with a sell recommendation. two analysts that cover the industry, and they had co-opted the government in that so much money had gone into the system that the government just was, had been because it's and paid for and finally co-opted the ftc. it the government regulator's
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role to protect consumers and nobody was doing that and didn't make for a good short at all. the industry's going through $150 billion, dominant and how could you stop it? just it was a bee in my bonnet. couldn't figure it out. we thought we need to get the story out in a credible way and ultimately we hired ted braun to come out and tell this story as to what's really going on. the harm to consumers and really appeal to people in an emotional way and answer the question i think everybody has of, you know when you're approached as a party by your brother-in-law trying to get you to get into this great business opportunity, you wonder, is it a scam? it was a, a movie that would help people answer that question. >> you knew that people would suspect that bill ackman was the money behind the movie. in fact, that's what herbalife has said since the movie was released. why did you remain silent for so long? >> well, you know, i didn't want to get in the way of the story and knew i would get in the way of the story. i didn't know they'd necessarily point the finger to big ackman.
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an ability to build a story they have no evidence for. >> you had to figure likely people would suspect given where the story was at that point. if anybody was behind the money it may be ackman himself? >> we didn't really know what the response would be to be totally honest with you. and obviously now looking back, okay, it's obvious, they say it was ackman. you know, there are a number of reasons i didn't want to go public. i wanted to remain anonymous and had concerns about the industry. highly contiguous, an industry that's gone amp assailants i pointed out in a previous segment. so now, though, the ftc has come out and stamped their seal of approval on the movie. so i was getting in the way. right? the company was using the lack of a financier to say this is not a credible movie. fact of the matter is i'm not in herbalife stock, haven't been since we started the movie in 2014. i had no interest in the movie other than i financed it and don't care where herbalife goes and it was time to come out and
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get this out of the way as an issue. >> why did you cover before you made the movie? >> because ted braun is, who's the director, is the most ethical guy you will ever come across, and he wasn't going to make a movie if i was short the stock. and i said, that's fine. you know? it makes for a terrible short anyway and thank god i wasn't shorted. maybe a stroke of luck. >> didn't want to make a movie seen on behalf of a short seller? >> yeah. here's everything i got, made him a challenge. i challenge you to make a movie that's positive about this industry, in fact, i tried to get a number of guys long the stock to participate in the movie, and interestingly, wall street, you don't take a more's argument to wall street. they own the stock, have great cash flows and grow but aren't willing to stand up publicly and say we love it, other than carl. i challenged him.
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maybe i'd be long -- >> you said the ftc put a stamp of approval, your words, on the movie. yes, the language the ftc used in the settlement was harsh. it was scathing, and they make the company make significant business changes. they didn't shut the company down. they didn't brand it a pyramid scheme. the company is still allowed to operate. how do you sort of reconcile all of that? >> i think selling shakes is not illegal. and that's what the ftc allowed herbalife to do. herbalife can go sell shakes, as many as they want. what they outlawed effectively it the peer mid-'s nature of the business opportunity they're selling. two businesses. one is the pyramid scheme and one is selling shakes. no one we've spoken to makes money selling shakes. it's all about the pyramid scheme. if the ftc enforces the rules they've made the entire concept of the multilevel business opportunity recognized as illegal back in the '80s will disappear and affect the entire
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industry. not just herbalife. >> we asked herbalife for a comment, what their reaction to this would be. >> they said, who? >> we've yet to hear back from the company. i gather they would have some thoughts, but they could say, you know, part the argument that i just brought forth. look, ftc had its opportunity. didn't shut us down. maybe we had bad actors back in the day. we've shut them down, made changes to our business model already. and this is nothing more than a short seller hit job. it may not be ackman, but another guy with an ax to grind and a point of view that paints us in bad light. and you would say -- >> i would say, a, i'm not sure of the stock. not a short seller hit stock. indeed, we'll find out. right? in a year -- go online now and still see the herbalife reps out there lying to people about the business opportunity. that is -- indisputable. they stand up there and do their webisodes. quick your job, make millions of
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dollars. that's what the ftc is trying to stop. if they're successful, i don't think there's a business beyond that other than slinging shakes. see if they make the changes. we'll find out in a year. now the industry is in a different place. an analogy here between mlms and for-profit. fought that for years. no regulator on duty, then they were. death by 1,000 cuts. i think the ftc is on duty and here to, you saw the zeke execs thrown in jail in charlotte. back lib the same complaint with herbalife. >> you are still looking for a distributor for the movie? >> we are. >> been more difficult than you expected to find one? >> i think a problem with the ftc hadn't ruled. so who's going to buy a movie where what if the ftc said this sbis great! that guy's crazy. right? i understand that risk. now that risk is out of the way. i think frankly the ftc ruling and the continued uncertainty in the fact we still have to have this conversation is it a
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pyramid scheme or not actually makes movie appropriate. we've seen it. change the cards in the end, put in some of the ftc footage. given everything you've said and the point of view that the movie puts forth, which obviously has a point of view and it's pretty one-sided obviously to say the least. are you surprised by the way the stock has traded? the fact we're sitting here as the stock is at $66, given everything that's happened. the stock is up since the settlement? >> well i think a couple of things drive that. stocks largely decoupled from fundamentals. the fundamentals at herbalife are still fine. right? the enforcement hasn't taken effect. won't for ten months. right? herbalife beat the ftc to the punch and between them and carl icahn made it materially inaccurate statement saying that the ftc ruled this was not a pyramid scheme. the ftc said they did not endorse in their own press conference. beat it to the punch and stock was up. stocks with a lot of computers
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trading them carry momentum, it's fine. not a pyramid scheme, controlled the spin. the question what is the outcome, i think bad. currently the guys who run the companies are denying it for all intents and purposes. >> hearing you say that, gotten past the point of the movie being out therened a the revolution you financed it, would you ever consider shorting the stock again? >> absolutely. i think -- we're still restricted in the stock. i'm still not short it. right? but i think as you look forward it's really not something i'd say you have to short this today. >> uh-huh. >> but i think over the course of the next year -- >> could see yourself taking it -- >> like for-profit ed, this industry hit its peak. regulator's on duty, death by 1,000 cuts here on out and you'll see a change in herbalife, nuskin, medifast, all of them. >> you've seen the people did the same amount are work if not more concluded this is
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investable, at the very least, not going away. from bronti capital, his argument, show me the smoking gun. where are the warehouses upon warehouses filled with product? and because that hasn't turned up, maybe that's been one of the things holding back a breakdown in the stock? what do you think about that? >> we could drill down in the details of where -- are there warehouses of product in lebanon where they shipped tons of product to and theoretically lebanon wasn't even a buyer of their product, but -- >> saying that exists in the company says it doesn't? >> it's online. pull up an entire story on shipments to beirut, but you know, at the end of the day, you sit there and look at the pitch. the pitch is a dishonest pitch, which is what the ftc pointed out. they give the dishonest pitch to get people into the scheme. they can't give the dishonest pitch they won't get people into the scheme. talked to people at a nutrition club. the whole story for years.
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nutrition clubs. and yet the ftc endorsed that no one in a nutrition club makes any money running a nutrition club. they make money by duplicating and getting people to start more nutrition clubs beneath them. it's that duplication. not the warehouse or inventory or accounting all the other things part of the story going backward. the basic business opportunity scam that everyone sitting around this table knows, none of you are in pyramid schemes, nobody anybody making millions doing it. that is over, in my opinion. >> let me ask you this -- there's a difference between sort of the investment and the thesis itself. you could say i think that x, y, z company is a fraud. it's another thing to sort of make an all-in bet. would you yourself have bet on zero? >> i went through it a number of times. right? i didn't put 20% of my fund into
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herbalife going to zero. or any of the other ones. frankly, our first really successful hit which gave me a taste for success in the issue was manatech p. a company that sold placebos and purified water as a moisturizer. existing today but blew up, on front line because it's a business opportunity. i've had years of doing this and understand how bill could look at this and go, wow. this is a real scam that i found. but i also realized how difficult it was. i think if you take a long-term view now, there's a good shot he's going to be right. >> sounds as well you're making sort of a greater point about multilevel marketing companies in general. are you short other names? right now? in that space? >> our biggest short is priamerica. others are slow to fruition. nuskin, others i tend to think are shorts but have different
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elements going on in china or frankly share buybacks driving the stock price prior. p primark kaw the ftc ruled against the business level in multilevel marketing but the department of labor ruled the thing they sell, which in this case isn't health shakes like everybody else in the industry, it's overpriced financial products, is also illegal. now you have a company with both its business model outlawed and the product it sells effect lively outluoed. sells front-end mutual funds and overpriced life insurance. department of labor law came in said you can't overcharge retail consumers for buying generic financial products anymore. that one and 80% in the u.s. ftc has control. >> how long have you been short that name? primark kaw? >> on and off, five, six months. >> a fairly new investment? by a typical standard. >> yes. haven't been in this space much as all until the last five, six
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months when we thought the ftc was heating up and maybe a rule wog come out. >> you thought residual impact of what they said about herbalife would have a broader implication on the overall space? >> possibly. it didn't. >> you'll be with us a while. get to the markets. s&p 500 and nasdaq making new all-time highs today. guys what do you make of sort of where we are? an economic report kind of ho-hum. david costham of goldman sachs on xwt x"squawk on the street." average stock, trading 18 times earnings. high end of the historical range. time to be cautious? >> always time to be cautious where the s&p is going is a difficult thing to figure out. i can tell you looking at all evidence both on where asset pricing is right now, a lot of the economic indicators over the last couple weeks to me it makes zero sense for the federal reserve not when they go to jackson hole to telegraph to the
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market a 25 basis point hike is coming in september. i fully expect that's what will happen. >> i actually agree. i think jackson hole is a big deal. get through the rest of earnings for sure. a big week in terms of consumer. what i'm watching for. >> discretionary not doing well. >> not at all. no good news. >> coach down on earnings. gap down on earnings. >> right. okay, well -- yes. let's see what the other companies have to say. see what disney, department stores have to say, underlying trends. not thinking that great but valuations are depressed. one particular area of the market that's interesting to me with the yields. we got to get through earnings first. it's interesting underare lying the market now you have the cyclical trade. cyclical bet working, industrials, energy tech, financials, banks. to joe's point, people are sniffing out the fed is going to be a little bit more forthcoming in terms of where they're going with rates at jackson hole. >> i think the market keeps going higher.
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reason why in my opinion, people are getting nervous we're in august, getting towards the back half of the year. if they've been cautious earlier this year, they're probably behind the benchmark and that means they have to play catch-up. >> becoming a fear of missing out? >> absolutely is. absolutely is, scott. to the point stephanie made, sectors going up, value sectors. behind the benchmarks, got to get in it but don't want the buy the high-flying stocks. be safe. buy what will reward me. >> this market makes sense at these levels? people from larry fink weeks ago say that it does not. others say, no. the market's prime to go higher before do you come down? >> for me it's the twilight zone. right? you know, we have a market led by utilities. like that makes any sense. we keep having a phrase in our office. oh, the bottom at the top.
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cyclicals recovering but never corrected at least to the fullest extent and still in a down cycle. so -- we see concerns with the consumer that we're concerned about. yes, stocks keep going up but i see, talk about the fed raising interest rates moop cares if they raise rates? interest rates are up. three-life from 25 bips to 81 bips. that funds $150 trillion of assets that people are buying and financing short term and buying long term. a huge interest rate increase people don't seem to talk about. i think that is going to about tightening and why the fed's on hold. i think you're going to see this risk retention role come in at the end of december, further reduce securitization volumes, that's going to hurt auto finance, credit card finance. there a tightening going on that people just don't see happening because the fed's at zero. >> not to mention, take a break after this, not to mention the de facto tightening of other central banks going negative, and/or cutting rates in their own right as the bank of england
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just did. >> i mean, we like to say it's dangerous to catch a falling knife. it one is lying on the floor maybe pick it up. that's the way we look at government bonds. right? you could short a lot of these zero rate bonds and we're going to look back in ten years, that's the big short. right? you can't lose much. and either three-month libor or the fed succeeds. hallelujah, new growth. talk more. what else is coming up on the "halftime report." >> announcer: more with short sellers and the area of the market shorting and the names buying. plus, one auto stock is stuck in neutral for the long haul. it's our "call of the day." and reading the tea leaves. what the charts are telling us where the financials are headed. all coming up on the "halftime report" with scott wapner. there's a lot of places you never want to see "$7.95."
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back back to the "halftime report." talk about the other ideas from a short side you have. a note today, a negative one on ford. it was a sell call at jeffries pap hold on general motors. you have thoughts about the auto industry and how to play this from the negative side. what is it? >> well, you know, talking about the weakening consumer. kind of part and parcel of the same idea. right? what you're seeing is used car
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sales slowing. sales slowing in general, part of that jeffries reporter. seeing an off-lease wave of supply coming on further pressuring car prices and sitting here going, prices are headed down. what the consumer shows up with to trade in. right? effectively the new car or trade-in is getting more expensive for this guy to a large degree, and you're looking at a wave of cars, a technological shift. the cars from six years ago, no comparison. didn't have tvs in your car, gps totally different. against a backdrop that's weakening, rates at zero. car loans are at seven-year durations. never saw -- guys start a car loan two years in negative equity. you've got all of a sudden a backdrop of prices decreasing, delinquencies creeping up, and all of it seems to be kind of the beginning of a down cycle
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where you pabasically pulled fo as much sales as you could and have to live through the hangover. car max is biggest risk in the groom. harley similarly at risk. both have finance units. wearing a lot of subprime paper with regards to the securitization comment i made earlier, securitization will be inif a netley tougher the back half of the year. not seeing those come off and you'll see these guys really with a lot of risk of inventory they can't move and a customer that doesn't have the money anymore. >> shore car max? >> yes. >> short auto nation? >> as well. >> been for a while? is this new? >> yeah, yeah. been for a while for both of them. >> so, when you look at the automakers themselves, they trade at a 50% to 70% discount to the overall market. people have said the market has already figured this out at peak auto and some go further it's worse. not cyclical it's secular. auto in permanent decline
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because of a change in the way we do transportation, whether ride sharing or autonomous vehicles. where do you weigh in on the bigger picture story than what could happen in the next six months? >> mention before you answer that, the narrative we're discussing here is, yes, sales may be slowing, but there's a good debate whether they're really peaking, peak auto and still at a sales pace of 18 million, you just had in the last -- >> if technology is right peaking not for the cycle but forever. that's maybe even the more interesting way too think about it. >> i do think there's a technology shift coming. right? i don't know whether autonomous and fleet vehicle and ride sharing is in the nix two, five, or ten years? some elements of that will probably come into play certainly over the next decade. we're not short the auto manufacturers as much as we were. for cracking the other day, got us to cove, still short pewsho,
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weakest player to chineachina. our big short in that particular group. i don't know how to weigh it. don't know how to disagree. tesla, i should disagree and obviously not that other side of the trade. >> long gm. a little of what josh said but to be more strong about it, we've been talking about peak autos over a year now and scott pointed out, plateaued between 17 million and 18 million, by any measure is a very large number. your point is well made about seven-year durations of auto loans i submit with the labor market at strong as it is those subprime loans will be good and the reason anybody would fear the automakers at the valuations josh was talking about is that if you saw a recession coming which i just don't see any signs of. what's your thoughts there? >> i don't disagree on gm. it's cheap. so is ford. cheap stocks. they've been cheap a long time
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and still cheap. i don't think they're bad stocks to own. i do think that you're having a problem with recoveries. i think the used car values -- look. car prices have gone up $10,000 over the last ten years because rates have been low and so your monthly payment's been the same. now you have car prices appreciate, but nobody's noticed it. going down now. that's a problem for consumers. money in their pocket they don't have the to trade in for a vehicle. >> go down a little and actually i dispute that. look at the oems reports you do see that asps average selling prices, at least are stable at a very high level. minting money at these levels. if they go doan. >> especially because of trucks, but, yes. >> trucks are part of it, but cars, asps going up and incentives at gm at least very disciplined about incentives. back to, creating 2 oo50, 190 j
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the last six months demand should be there plus the average age of autos is around ten years, and should be replacement demand. >> i look at the trends i see in subprime paper. right? you say the money should be good, but they're creeping up. right? we're seeing delinquencies creep up in the uss. recovery values plummet for portfolio recovery and encore. we're seeing it start to show up in the subprime space. harley came out, said subprime default rates normalizing from abnormally low to back to 12-ish. don't disclose the exact number. that's just where i see the problem. i think we're going to miss sar for the year. not 17.8. the first part of the year was too soft. yes, sales are okay. look at the ynlder l eunderlyin trend. everything is easy and starting to go bad from a high level? that's where i see the risk. >> short harley? said that. >> not short tesla. >> we are short tesla.
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>> i figured that. >> how could be not be as short seller. you have to do that whether you want to or not. >> take a break or do that -- next? right now? okay. want to talk about stocks long as well. take a break but -- >> something with god. >> almost compelled to. >> the control room is like god. i do what -- jarome tells me to do. sort of bill you as the short seller, but you do have long positions. what are your -- your most favored places to be long right now? >> you know in this market, we tend to look very ed oh sink creakily for ideas. think there's less market risk. one of our biggest positions is vonnage. a value stock acquired a component. 18 times revenues and vonnage barely over one-time sales and a reasonable multiple on cash flow of 12. a new google management team. we think the growth's going to start to accelerate from here as
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they cash flow their core business and add these high-growth business voiceover ip and the twilio business, a communication app you find inside your uber. i think that's an interesting turnaround/growth story that's cheap. we own semi stocks as well turnaround stories like marvel and micron, beaten up. >> oh, man, beaten up. >> everybody, it's funny, everybody loved micron, could do no wrong. stock at 30. makes no sense at 12. or 14 now. so we think the industry consolidated and the bull case from two years ago will come true in the next cycle. >> josh, inner its of chips, made the case nor nvidia sending that stock up. mittsed out, add midded but now are in. >> a small in. stock doesn't run so i can buy more. curious what is there to like about something like micron where they have essentially no
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control over the cycle, sales. do have some operational and execution control where they can do a little better. they can have less costs. end of the day don't own their future and can't see past the next six months if an oem cuts back orders or a financial economic weak spot somewhere in asia, it could throw off an entire years's worth of projections. why be a shareholder in that? >> buy cyclicals when it's gotten killed. check. it's cheaper. also looking at price are starting to move up, seeing content increase for deram and nand. >> can't trust anything management says, though. >> that's why you don't buy it at 30. right? but you do buy when everybody else is throwing it out. the first time i really owned a lot of micron i bought the debt at 30 cents on the dollar. the industry consolidated
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pricing moving in the right direction and capacity move and i do think that you've got disc drives disappearing and nand will take that slot and that's happening in ever increasing rates over the course of the next few years. >> steph, this space or square? >> i like the space. i'm in lam research for that very reason, for deram exposure. i curious of your thoughts a&m in general. do you think sy lien is around? >> i liked the industry. two players, now just one. >> one. >> and good company. i think they're gone. >> who do you think makes the best fit with them? >> well, it's not intel. >> right. >> but -- i'm not sure who's going to be the ultimate guy to pull the trigger. all right? it could be ti, any one of a number of the large guys who just want to get into that space. an attractive space, decent
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margins. >> talk about sky? >> another one killed. people hated it. i hated skyworks up at 100. the smartphone cycle is tricky. bad news priced in. look at it. reasonable catch flow multiple leader in the space primarily and i think the management team is solid and a decent long-term growth story in wireless. not just in phones but in all kinds of other aspects of our lives. >> good having you here today. thanks for coming here sitting on the set and spending a lot of time with us. see you soon. and coming up, a string of box office hits including "finding dory" and captain america be enough to help disney deliver on earnings? taking a look at the numbers, next. what's critical thinking worth? a basketball costs about fourteen dollars. what does it cost to build a new sports arena?
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what's team spirit worth? a telecommunications system isn't cheap. what's it worth to talk to your mom? what's the value of one more tree? a forest? a walk in the woods? what's the value of art? art open to the public. the value of capital is to create, not just wealth, but things that matter. morgan stanley. capital creates change.
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hi, everybody. welcome back to the "halftime report." here's what's happening this hour. iraqi forces battling isis. about 21 miles west of baghdad. the district is the last important stronghold of isis in the anbar province. thick smoke billowed from targets as armored vehicles moved around that area. pakistani lawyers staging a nationwide strike a day after many of here to colleagues die didded in a suicide bombing that killed at least 72 people at a
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hospital in southwest pakistan. 60 of those slain were lawyers who had gathered to mourn the assassination of the president of that country's bar association. a new study by bankrate.com finds hawaii has the highest mortgage closing costs in country at an average of about $2,600. new york is the second highest. the lowest costs in pennsylvania at about $1,800 followed by wisconsin. look at this. a woman -- whoops. there is goes. trying to take a picture of a dolphin in seaworld in florida with an ipad got a bit too close. the dolphin snatched the device out of their hands, tossed it in the water. the woman managed to retrieve it, when they say, the dolphins can get to your devices, they really mean it. that's the news update this hour. "halftime report," back after this.
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all right. coming up at the top of the hour or "power lunch," oil doing already lately. up 9% in a week. morgan stanley head of commodities. where he sees prices going from here. liongate down more than 30% this year. the company's vice chairman joins us to discuss the deal with starz and his movie
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pipeline. and controversial plan that provides a boost for online gambling in america. should online gambling be legal all across the country? we're going to have that debate. right now, though, scott, back to you. >> thanks. disney may claim to be the happiest place on earth the same can't be said about the stock with shares down 9% and the company set to report earnings today after the bell, taking pixes before those numbers hit. jim, long the stock. why? >> i am. bad news we all know is espn and subscriber growth, lack thereof and skinny bundles worried for a year. mu enough time bad news in the stock. positive things on the studio side. the marvel franchise, animated stuff and "star wars" with "rogue one" coming out. a lot to like about the stock including valuation here. >> anybody else? >> watching it. i want to buy it. >> what gets you then to do it? >> lower. >> come down more?
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>> yeah. 16 times estimates, 11% growth, not that compelling. >> too expensive? >> i totally agree in that expectations are totally low. stock's down 12% in the last year. everybody know the about ot tcht and espn and the competition in that tart part of the business. the film business will be great but a very difficult comparison. sort that whole thing out in diggs, got to get more clarity about management in that change. >> problem wib the magic kingdom, no magic looking from a chart perspective. the technicals, a stock since february has traded in somewhat of a range throughout while the s&p rallied. i think when you look at it, you need to see some form of a technical breakout to the up side. not playing the downside. failure, tow so to speak on bad earnings. don't want to touch that. don't believe in shorting disney but you need significant upside broik out technically before you step into the negative. >> i hope they miss or give so-so guidance.
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stock trades down. 86 the low last time they disappointed. maybe this time a higher low. aagree with stephanie. in the midst of a technological transition. transition periods people wondering, worrying how is content going to be delivered? will espn translate into the next era, whether tablets or now talking streaming. the next thing in five years. these are the moments you buy disney, because in the end, they have the content. how they deliver it to people gets figured out. they always figure it out. and this company is a cash machine on the other side. so i hope it's not a great quarter. i'm not in the name. love to get in it. that would be my moment. >> all right. don't miss disfli chairman and ceo bob iger, first on krcnbc after the numbers on the closing bell. ahead on the "halftime report," banks jumping 8% over a one-month period. one technician says, there is more room to run. he joins us, next.
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announcer: "halftime report" with scott wapner is "the" place for market-moving interviews. >> you don't call a company a sewer because the company made a mistake. >> announcer: real money -- >> we are short both tesla and solar city. >> announcer: -- real debates. >> people think that globalization has hurt businesses. it's not. it is technology that's hurt businesses. >> competition is a good thing. i don't want to go back to a single marketplace. >> announcer: the most profitable hour of the trading day. >> i love this show! all i do is get to tweet about this show! i'm on the show. this is the greatest moment of my life! >> announcer: the "halftime report." weekdays at noon eastern. i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare,
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"halftime report." financials now positive year to date. our next guest says the charge is signals the rally could just be getting started. joined by chief market technician jonathan. waiting forever for these financials to do anything. why is now finally the breakout? >> well, the first thing to recognize it's already been happening. look at performance over the last six weeks or so finances nerd best performing sectors, happening already. not necessarily anything new. the call here is that really for the first time in about 12 to 16 months, financials are no longer in a down trend. look at that chart of the financials since the 2015 i-s, peaking, turning favorable, our
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call pick at stronger financials. not saying to buy the european banks yet. not saying buy everything under the sun in financials but there are charts that are really telling us that the trend is shifting in favor of the bulls here. >> to which one specifically? >> we highlighted a number, a couple regional banks. zion, jpmorgan. berkshire hathaway. insurance names. a mixture of names and as the bret breadth strengthens out. >> making the point none of the other large financial institutions are on your view list of saying they can go higher? >> it's got to -- >> regionals have been well thought of for a while. >> right. >> i don't hear you saying, okay, i like morgan stanley, jpmorgan, goldman, this, that, the other, citi will break out? >> think of by the time every
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stock in a sector looks great it's probably a little late tactically to get in there. right? put it on radar, pick away at the better names and as it proves itself get more involved in the sector. >> so here's what worries me. maybe you can make me feel better. we're in this moment now where market breadth is the best i've seen it in years. right? you actually have cumulative events leading the s&p. when was the last time we've seen that? banks looking better than in 16 months. some of the charts you show, european cds prices collapsing. so a lot less stress in the system. you've got small caps breaking out. now the biotechs are going. is it too going to be true? when you see all the stars aligning, are we at the end of a move rather than what you would hope is the beginning of a bigger breakout? >> from a short-term p perspective, you're right. indicators short term perhaps getting extended. think about it this way -- went 18 months in a sideways trading range in the overall
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market. had an equal weight s&p 500 lost peak to trough. if the s&p 500 had 20% draw down, calling for a bear market might have a different view. an internal bear market and the s&p broke out of that range. think about the s&p made-the-first 52-week high in everybody other a year back in early july. that's only happened 20 times in history. 19 of 20 times higher than a median of 20%. a lot of things going on in the bigger picture -- >> you're making a bullish macro call that -- that has you believing that the financials will join the party? >> they already have, scott. that's my point. since early july we're seeing this rotation out of dividends sector. not an interest rate call. interest rates are flat over the last six weeks seeing telecoms, utilities, down. banks, materials, up. >> particularly the ten year, up
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a lot, since the lows. >> rates could go higher. trend lower. look at a positioning standpoint, ten-year treasury futures, large speculators, the most net long since 2012, which was the last time we saw interest rates rally. >> saw interest rate rally. >> there's more to this story than rates and it's specific to what's going on in the tech sor. at the end of the month you have reits which will come their own sector. performed incredibly well. you're also seeing exchanges. you're also seeing the asset managers which were obliterated the beginning of the year, they're coming back again. this is more when we say financials this is more than just a banking story. i agree with you on the bullish call. but the bullish call is not just specific to banking, it's financials -- >> anything -- big banks are the worst of the many industries within finance. >> correct. i think the thing you have to think about specifically for a portfolio manager is when you look at the financial sector weighting, the second biggest sub sector is reits. now that's coming out of financials, what is going to
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happen to the sector itself when reits come out? that happens at the end of the month. >> we actually think reits are a little vulnerable. we think they're the best of the high dividend sectors, but we think within financials reits are probably going to see some underperformance as some other areas of the market kind of makeup for that. >> jonathan, thanks for being here. >> thank you. from gap, valeant, coach, headlines behind today's biggest movers are next. where we explore. protecting biodiversity. everywhere we work. defeating malaria. improving energy efficiency. developing more clean burning natural gas. my job? my job at exxonmobil? turning algae into biofuels. reducing energy poverty in the developing world. making cars go further with less. fueling the global economy. and you thought we just made the gas. ♪ energy lives here.
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we are back on "halftime report." and we do have on the telephone right now one carl icahn, who has just tweeted about donald trump. carl, you there? >> yeah. how are you doing, scott? >> i'm good, thanks. thanks for calling in. you tweeted just for those who may not have seen it since it's just happening a little while ago, you believe trump gave a great speech, you say, referring to his economic vision laid out yesterday in detroit. you say how many of our presidents even our great presidents would have handled the antics that went on in that auditorium as well as he did. you're speaking to the dozen or so interruptions that took place yesterday during that speech. why do you think that was a great speech yesterday, carl? >> well, i think he's right on about the economy. in fact, i'm going to tweet about that later today. he is exactly right on. and our country can exist when the government is at war with business. and that's exactly what we have.
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you know, today, productivity was down i think the third quarter in a row, growth in productivity. and the reason really is that our companies -- this is no secret. nobody can argue our productivity is at a low for an economy that is not in a recession. because -- excuse me, our capital spending. spending on plant, equipment, machinery, is at an all-time -- is really at a low. and you can't blame workers for not being productive when they're working with worn out tools. and we don't compete because the ceos -- and i never thought i'd say this, but even the mediocre ceos can't be blamed of being scared to hell by our regulatory agencies such as the ftc, the epa for instance are putting the epa really with some of their regulations i don't even think they mean to do it are bankrupting a lot of our
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refineries. and so the ceos of our country, you can't blame them saying the hell with it, borrow money at zero rates and buy back stock. stocks will go up, they make a fortune or make a lot by cashing in options or they breakout for the rest of their lives and the workers are sitting with no jobs or very few good jobs. don't be fooled by these numbers that, oh, we have employment. the employment are not in good jobs, they're not in service economy, the democrats excuse and say, well, the pundits say, well, this is okay because we're a service economy. what does that mean? we keep texting to each other? they just keep sending tweets to each other more and more. and it is wonderful because of problems you'll have zero interest rates so just keep printing our money and i think janet yellen is scared of this
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until the bubble bursts and we go over the cliff. and really, you know, i look at things simply and i made a lot of money just looking at a simple truth. this is the simple truth. we have a massive problem and donald is addressing it. the democrats are not. donald gave a speech that was to my mind right on about it. and if he sticks with that economic theme, he should definitely win hands down because i don't know why you wouldn't vote for him. >> what do you make -- >> go ahead. >> well, i was just going to say you say he should win hands down. what do you make of the fact his poll numbers have been steadily dropping. some of the controversies he's invited himself by some of the things that he says. have you started to question your own support at times of the platform? and the man? >> i support because i really do think -- i've known donald for years, and look, at times he does, you know, speak too
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quickly. however, i thought, maybe you could correct me because you're right there, i'm not there, but i thought the polls were narrowing again. i thought that over the last week. and i thought after the speech the polls narrowed somewhat. but you probably are on top of that better than i am, scott. but is that not true? >> i think certainly the point over the last maybe week or so is that controversy with the gold star family, the khans, started to escalate, that his poll numbers were dropping. you've had several republican lawmakers come out and say they in fact wouldn't vote for him. you've had the members of the military, the former members including barry mccaffrey, four-star retired general come out and say he's not qualified to be president. >> let me address this, at least the way i look at it. the real issue is what i just talked about. the issue isn't what he said about one guy, he blew up and said something about it. okay. that happened. but i think if you stick to the economic message, there is no
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question that you cannot -- an economy can't exist, a capitalist economy can't exist when the government is perceived to be at war with business. and therefore you have a bunch of workers in this country that understand that. and can't get good paying jobs. they can't get manufacturing, good paying jobs, because you have worn out tools. all that is true. do i defend what he said about khan? no, i don't. i think people make mistakes. that was a mistake. and i think he's smart enough, and he is a very smart guy. i've known him for years. and i think he's smart enough to understand that. and if he sticks to what he's doing, i certainly do not understand why any worker, any middle class worker, you know, the archie bunker of the world -- that was a great show, i used to watch it. those guys are going to vote for him because they're smart guys.
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they know they're getting screwed. and that is what i think will happen. and it's just what i said. it's sort of open and shut. how do you have business exist? how do you have people put money in -- i own 20 companies, i got 93,000 workers and i take chances and i'm scared to put more money into equipment and manufacturing because i'm frightened about what the epa is going to do to me, what the ftc is going to do and on and on and on. i don't think they're bad people of the epa, but they look at -- or ftc, but they look at that as their mandate. and they're not really interested in the economy. and you have to reign them in. you have to tame them. so i just say to me if you just look at the question at hand, you should really see trump win. but i agree, scott, the last week he

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