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tv   Fast Money Halftime Report  CNBC  August 31, 2016 12:00pm-1:01pm EDT

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turned positive on a tweet from elon musk about new developments to autopilot. >> more good news, just when needed. an update. saying we'll be better than ever on autopilot and going against the fears from before. >> that does it for "squawk alley." over to the judge and the "half." all right, guys. thanks so much. welcome to the "halftime report." i'm scott wapner. we begin today with a special guest this hour. hedge fund legend lee cooperman. the chairman and ceo of omega advisers. also with us the hour, joe terranova, stephen weiss and jon and pete najarian. lee, always great to you have, and especially now. >> nice to be here. >> with everything going on in the market this year, the election, a couple of months away. you have a possible rate hike, a couple of weeks away. so how does the market look to you today? >> you know, everything's been
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turned upside-down, to be honest with you. you marvel about it, but switzerland borrowed money and negative interest rate. hard to think about. somebody gave money to switzerland, give it back less than 50 years. japan negative interest rates. germany, negative interest rates. i'm trying to operate in a world where i have to figure what's normal. so normal to me is maybe an economy grows, the labor force and economy grows about half of 1% per year. productivity of labors for, 1.5% a year. basically makes a real gdp. 2% real gdp. add on 2% inflation. 4% nominal gdp. that kind of world, normally fed rates 2% currently 37.5 basis points. current government around 150 now. may take two, three years to get to those rates. that kind of world i think the market multiple would be about 17 times.
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people could argue 17 is too low relative to interest rates and inflation, or too high relative to other issue, profit margins and country moving to the left, those kind of things, but 17 times my estimate, 127 next year is 2159. s&p around 2165. market is fairly, but fully valued. okay? i would not expect the market to do that much on the upside. we have to accept the reality that if interest rates belong where they are, that's a slow growth world. we turn to the equity, lower than historically. i accept that fact. >> yet you have a federal reserve which appears to be growing more hawkish by the week. you had that from jackson hole, stan fischer on this very network. >> hawkish? ten year government, 155. on average, the thing i've made this point in the past, past programs. eight interest rate psycycles se
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the 1950s, on average market rose. market's not discounting 37% fed funds rate. the market knows it's got higher. question, slope. gradual slope, i think gradual, fed's afraid to move. i thought move two years ago. employment going up 200,000 people a month, automobile sales running near 17 million. clear they're concerned about the dollar strength and going slow because our trading partners are keeping rates very low. interest rates are artificially low and the market understands that. >> what happens if the fed moves in a couple weeks, as i said? >> you know, you get the clue on friday. if the employment report comes in say 200,000 or more, go for sure in september. coming in 150,000 or less, probably wait until december. i just see that as a tactical one two, three, four percent correction, not the end of the market cycle. the rising interest rates are indicative of an improving economy, rising earnings. rising dividends, and you know,
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it's not competitive. the rate levels that you're talking about. in the last 50 years, the market multiple was 15 times, ten year government was like 6.6 something and the treasury bills almost 5%. currently 25 basis points. so i think the market understands interest rates will be higher. >> you do think, though, that there would be a correction albeit a -- shallow one? however you want to characterize it? >> yeah, yeah. you know, a little bit of a sell-off. crazies run the market. all the machines. and you have to get used to the volatility and i'm hopefully smart enough to capitalize on that volatility. questionable, but -- >> we'll talk so much more about the markets. i know the guys at the table, though, want to join the conversation, too. joe? >> yeah. lee, you mentioned profit margins. concerns? six consecutive quarters now of contraction in profit margins. >> i think that's a little bit of a misnomer. take out energy. non energy profits are not declining. look where corporate america what they're doing, not telling
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profits are declining. dividends growing in the last 12 moss, corporate buybacks about, shrinking the cap by 2%. i think corporate america is comfortable with earnings outlook. wouldn't see dividend growth or buybacks. take out energy, doing okay. >> interesting you mention dividends, and certainly there's been a hunt for yield on, because of where interest rates are and you document sort of the environment that we're in very clearly. do you think because of the fact that the market knows that interest rates are going to go up, that those so-called dividend play, whether the utilities or the telecoms are going to fall out of favor and you'll get more of a move or a rotation into more cyclical areas of the market where there's not so much focus on a hunt for yield? >> yeah. i agree with that motivation. the manufacturing sector seems to be coming out of its mini recession. and gaining traction. i think mostly high-yield stocks in the consumer staples area are fully valued. i would not want to traffic in
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that area. more of the opportunities for possible short sales. >> hmm. >> lee, if you -- if you go back to the strength in the dollar and the hesitancy of the fed to raise before because afraid of dollar strength if they do hike rates, that's sort of takes some of the burden off draghi and perhaps off japan to further cut, because it's a de facto ease for them for the dollar to strengthen. that sort of puts 40% of the s&p, the nutmulti-nationals at k because of stronger currency for earnings offshore. following that through, would you then prefer to go to some russell companies, smaller cap, which are, tend to have more on shore earnings profile? more based in the u.s.? >> depends upon the degree of strength in the dollar. i'm very bottom up. vie to look at each individual security, in its own merits. i think that we may be
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misunderstanding the effect of negative and low interest rates. one of the things that concerns me is, you know, how do you retire today? you spend your entire life working 30, 40 years. if you're lucky, accumulated some sum of money. go to your financial adviser. what it's my return on savings? the answer, guy can't afford to retire. the feedback, younger people have less opportunity because the people aren't retiring and not opening up opportunities for young people into the labor force. i think the academicians running monetary policy might be better off with rest rates starting to be normalized sooner than later. >> what you said at the top of the show, the market being fully valued. does ta mean you're hesitant to buy stocks today at current levels? you want to see some kind of pullback and would be more inclined to buy stocks or activity looking in the market, any day, to buy stocks? >> we have lots of stocks, talk about later, we think are very cheap within a market that's fully valued.
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we have to accept the fact that what you earn in a stock is a function of what the economy grows at, what the rate of inflation is, how corporate profits are performing, and what you can earn in alternative instruments. whether that instrument a short-term bill or a ten-year bond. and you know, if the world is relegated 2%, 2.5% real growth and profits growing say 5%, inflation sub2%, earn less than 2%, earn nothing in cash you're not earning 10% or 15% of stock market. lucky to earn 6%, 7%. that's the world we're in at the moment. >> are you worried about the fed making a policy error? >> i worry what i'm missing. when smart guys like larry summers comes out says the fed shouldn't move, a think fed policy is inappropriate, i wonder what i'm missing. you know? i worry about everything. end of the day, i worry most about the 70 or 80 stocks i own and the companies performing and understand the fundamentals of the businesses.
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>> lee, speaking of uncertainty, i've got two to shoot at you. one, treasury secretary lew breaks up pfizer allergam, changing the game in the middle of the game. apple with a tax we just are hearing about, the eu basically saying to ireland, you've got to collect $14 billion from apple. those kinds of uncertainties, are those things that could be catalyst for some of that volatility jump you're talking about? >> i think more, trump is probably the big catalyst in volatility. you know? it's unfortunate the country's moving to the left. the administration, fran antitrust standpoint more engaged in negative context than they've been in quite some time. this is the reality of life, and i think you're seeing albatross spreads lie humana, spreads because of uncertainty what's going to ultimately happen. government intervention, is really something that has to be
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weighed in your decision-making. as far as apple is concerned, not followed that closely. we're not involved in the stock but about $230 billion in cash. $12 billion,s $14 billion sounds like a lot of money but they got the dough. a disagreement between the eu -- >> and might be years before that appeal -- >> we'll take a break after this question and run through names i know all of you want lee's thoughts on. ubs put on an interest toing note last couple of days, talking about corporate profits where they may head from here, witnessing the end of the credit cycle and a crash is coming. saying that companies are going to have a harder time using credit because of these low interest rates that they start moving up, to juice corporate profits. thus at the end of the cycle and that's going to cause a crash in the equity market? >> i doubt it. i mean, plenty of companies have cash on their balance sheet that are being adversary impacted by inability to earn on cash and
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companies have to pay interest and will pay more interest. i was blessed to be in data processing 20 years and that company sat on a huge sum of cash ant part of their pricing strategy, earning on the float and that disappeared. so sought to rise adp, ibm, google, benefited and some adversely affected. you have to do analysis. switch gears to tesla, because unusual activity today, which could be why, doc, this stock has been moving higher. there was an elon musk tweet about autopilot, but sort of behind the scenes under the surface, if you will, some trading going on that you've been paying attention to, by the way, on our program, pointed out earlier. >> yeah. and he made a nice heads up on this one. somebody stepped in, judge, bought 10,000 of the 235 calls out there in october. sold the 255 calls. this is about 1.5 million dollar trade, because 10,000 of one
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thersz 10,000 of another. simple term, putting a mall and a half on the table, if the stack is over 255 by that third week in october, this is worths 20ds million. so that's the kind of leverage you're getting with this. they probably wouldn't be in it that long, but they're looking for a very fast move over the next 52 days or quicker, and if they get it, obviously it's a big winner for them. >> you told me when i took a look at the spallanzani e-mail and came to talk to you about it, you said to me something to the likes of we don't see these trades all that often of that size. >> right. you see those trades in apple. 10,000. probably lee cooperman when we do, but -- when i see something like that in tesla, i don't see a lot of 10,000 lots. that's in one single trade. somebody came in, bought 10,000, sold 10,000. it's not total volume. >> it's a 20-point spread? >> yeah. >> paid -- >> $1.50. >> to make -- a. great
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risk/reward. >> to make 18.5 basically net on that trade. that's a big bet, and most probably, you know, somebody that -- any of the hedge fund folks that we talk to on the show, probably -- >> why wouldn't a mutual fund put that trade on? >> they could. i don't see a lot -- >> hedge funds don't cause aids. >> it's not a bad thing. not a bad thing. >> a great and smart trade. >> with all of the concern about hedge funds, wondering whether president obama and elizabeth warren would take up a collection for us? >> well, we'll get to your political thoughts coming up. ever been involved in tesla, though? >> not really. been in a car a few times. it's a beautiful car. >> why not inclined to buy the stock? >> i'm basically a more value oriented investor. assuming somewhere down the road general motors or somebody buys tesla when the stock collapses, but it's -- highly competitive industry and has a market capitalization probably greater than the auto companies that are generating big revenues and profits and really a subsidized
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company. tax authorities are giving you big breaks. it's not in my wheelhouse. my opinion on tesla is irrelevant. a quick break and back with lee cooperman with us today for the hour. we're going to talk about the stocks he likes, the stocks he doesn't and do that when we come back.
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narrator: it wasn't that long ago. years of devastating cutbacks to our schools. 30,000 teachers laid off. class sizes increased. art and music programs cut. we can't ever go back.
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ryan ruelas: so vote yes on proposition 55. reagan duncan: prop 55 prevents 4 billion in new cuts to our schools. letty muñoz-gonzalez: simply by maintaining the current tax rate on the wealthiest californians. ryan ruelas: no new education cuts, and no new taxes. reagan duncan: vote yes on 55. sarah morgan: to help our children thrive. all right. back on the "halftime report." with the hedge fund icon lee
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cooperman of omega. with us for the hour. love to talk additional stocks. went big picture kicking off the show. talk individual names. alphabet, google is your top holding? >> yeah. trades like water. for what it is, it's not expensive. you know, we have a multiple on next year's earnings. i think something around 18 times next year's, 18.5 times earnings. a premium to the market, which is 17 times, but has, you know, fortress-like balance sheet, grown 20% a year, creative, innovative management. doesn't take special intellect to be long google. seems fine. most of our stuff is complex. example, one we like a lot, trading, so i don't misstate anything. nine times our estimate in a 17 multiple market, a first data. everybody hung up on their balance sheet. company the got $19 billion of
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debt, virtually no maturing debt next five years. a billion dollar cash-free flow. looks extremely cheap. 8, 9 multiple points lower than its competition of companies that do similar things. credit card processor, relatively non-cyclical business, kkr and not exactly fools. buy something at nine times earnings half a market multiple and a bunch of things like that. >> i know at least from, i take sort of 13 fs with a grain of salt. never know the timing. company citigroup as a holding. in the name? >> we're out. it's okay. you know we sell a stock for one of four reasons -- the highest reason we sell a stock, bought a stock at x, thought worth y. went to y. nothing changed and we sell it. second reason we sell something is i tell my team, stay on the
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company like flies stay on you know what and talk to the competition. to suppliers. talk to the company. try to see what you can understand and learn and sometimes things are not unfolding as you anticipated, and let's get out before we get murdered. okay? the third reason we sell is we're not the federal reserve board. we cannot keep buying without selling. we develop an idea with a ratio of reward to risk more attractive than something in the portfolio might rotate out of one name and go into another. fourth reason to sell, change your mind about the market, become defensive, reduce exposure. start selling futures, options. end. day, you got to sell physical inventory. those are the reasons we sell. it's hard. we have a bunch of financials in the portfolio seem cheaper than citi bank, but i think they'll work if interest rates start to rise do you think we're entering an environment, finally? >> we might guess. interest rates, the bigger problem for the market, in my opinion, i could be dead wrong, but the bigger problem for the
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market in my opinion is a year from today we're sitting around asking whether fed's going to raise rates by 25 basis points and they're here. saying something about it a disappointing pace of economic activity. the stock market anticipating growth and rise in corporate profits. but, yeah. i would say i would expect interest rates to rise and i think some of the interest rates and stockless do better. >> the other stock that jumped out in a lot of people, from the 13 f was netflix. >> gone. >> you're out? >> gone. >> how long -- >> darn it! [ laughter ] >> i'm still in it. hoping you were going say you added to it. >> well -- it's -- no particular reason. you know? basically, again, it's the -- doing other things. you're looking at an allergan, gotten crushed this year. down substantially because of the disappointment couldn't deal with pfizer. probably buy back 10% this year, now a proprietary drug company, rid of the generic business and sales awfully low multiple. take that money, put it there.
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but given my overall view of the market, we're only about 65% exposed to equities at the present time. and, which is low for us. >> very low for you. >> yeah whashlgts would . >> what would be typical for you? >> 85, 90. >> only 65. >> yeah. >> sitting on a lot of cash? >> no. we have a credit exposure. about 8% of portfolio in select high yield credits yielding 10-ish percent. 8% to 10% feel comfortable about and my credit team is doing a fabulous job for the firm in structured credit. maybe a quarter of our book. high yielding, fixed income and some equity exposure in credit. you can't read anything -- ultimately netflix will work but somebody buying the company at a nice premium. >> is that what drew you? a bottom-up guy, a high valuation stock. a lot of questions about it. you could raise parallels to some of the things you said about tesla and yet you were drawn to netflix?
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>> i think tesla -- netflix is an acquisition candidate for somebody, again, another idea came in. i didn't want to raise my exposure and sold it and went into something else. you can't read anything into the 13 fs. don't know what he's short against, long, how he's trading around. you need to fill a news hole. we write about it, but i wouldn't go too crazy about it. >> guys? >> you talk about trading around, curious about this. the past you've used the derivatives market. been involved in options a lot. i remember initially putting out apple positions in the past did that through options's do you still use options particularly now in this low volatility environment, tight ranges? >> i don't want to give away anything propriety, but 25 years in business i've made money 24, 25 years. sell a lot of s&p index options. we have a view of a range in the market. okay? so i think the top end of the range, 2250, bottom end, low 1900s. worse case, 1850.
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beginning the year sell a put, a level you couldn't get near for $25, $30. somebody out there, a black swan fund, invest with us, never have another 2008. paying extraordinary prices for puts. were then. pays less so now. it's a strategy we look at. to take away the mystery, we try to make money for our investors five ways. over our 25-year history, each way is played a role. first way is, stocks are high risk financial assets. short-term bonds low risk. spend time trying to figure, is the market undervalued going up, overvalued going down? fairly valued going up or down? determine the risk you want on it. the markets fair value, don't want to be fully investored. >> why you've reduced your risk? >> exposure. made sales into strength. second thing we spent a lot of time on, i have a fabulous credit team to help me basically is we look at asset allocation,
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and every one i've read on returns, being the right asset class. we look at stocks versus bonds. with bonds look at government bonds, corporate bonds. high-yield bonds, structured credit looking for the so-called, you know -- as i call it the straw hat in the winter. in the winter people aren't buying straw hats. what's on sale, what's mispriced? not a lot today, by the way. the market -- face it, fed policy and central bank policy around the world elevated all assets. it's hard to find things that are terribly mispriced. when that policy changes, all of these assets floated up will be adversary affected. third way we make money, our bread and butter business, undervalued stocks on the long side. value oriented investment. our bread and butter business. fourth, and fif, 2% of capital willing to risk it on the macro side. long or 140short bonds, equity,
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away from the s&p 500 and the team works very hard, gets in early in the morning, stays late at night trying to fig are how we can do well for the investor. not easy. >> well, look, difficult, and we'll talk about the difficulty in delivering alpha, if you will, for active managers over the last couple years. a thought on another sector before we take a break. you correct me if i'm wrong as well. i don't notice too many pure oil plays in your portfolio today. what is your view? we're witnessing oil, it's shy of 50. down for a few days in a row now. >> it's in formation basically. we do have a couple plays. we own hess. we own g port, gulf resources. i would say that in my view, if we're right, the economy grows, 2, 2.5%, the price of oil will be higher in 12 or 18 months, and, but you have to believe in capitalism. let me explain what i mean by that. take the current price of oil and gas, the u.s. oil and gas
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industry, take the current price level, subject out dividends and capital investment, running a negative cash flow of an industry almost $100 billion a year. the same analysis for opec. take their revenues in oil and gas sales, subtract our capital investment and social courts what they need to run their economy, running a negative cash flow $500 billion a year. unsustainable numbers. laid down rigs, reduced drilling. demand grows. there's a natural decline rate. i think you get up to 60-plus dollars a barrel in a year. my call. trouble is, because of the market as a whole it's elevated, oil stocks as a group are discounting probably $65 oil. we're going slow. >> the dollar is obviously at play, too. right? if you have a prolonged now stronger dollar, if rates are going to go up, you do have the prospects of lower oil as well against that. >> possible. but i think -- >> why i'm shorted -- i've been shorted since last week. the uso. based on strength of the dollar. a short-term play.
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i don't want to get into the politics of opec. >> we're investors. not traders. every hedge fund has their own style and approach but we tend to be investors. deep die, call companies, do research. try to understand business prospects and look at business value versus market value. we motivated to act. >> something quick? >> reduce stake in facebook, reduce stake in microsoft, reduced stake in alphabet. out of apple. carl icahn was on the phone a couple weeks ago. can't tweet our way in the economy going forward. does that say something for where you believe technology is right now? >> no. that's says something about dealing with redemptions and the reality of life. >> okay. >> you know, i have very firm view that i will never, ever, ever, ever, three evers, gate capital or not honor a high water mark. in other words, you go down as a hedge fund, you're invest hear
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an asset. you have to make back that loss before you get paid again. and a lot of guys and gals close up, go out of business and here's your money back. i'll never do that. then you deprive an asset, investor of an asset. and when people want their money back i believe they should get their money back, assuming per the contract. i have to be in a drooct refund redemptions. we've had them. nothing dramatic. a reality of life. >> a reality of sort of just -- as i said, delivering alpha. right? >> no question the hedge fund industry today, i have strong views. >> i want to talk to you about it as well. let's take a break. do this. we'll come back and do that. it will take a little time pap ma the jorty of active managers trailing benchmarks this year. what's happened to alpha? lee cooperman will weigh in on that and future of hedge funds. plus a multibillionaires funds on this bizarre election season. there it is. more "halftime" back after this.
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according to the pentagon. one defense official calmed russia's claim a joke. the federal government plans to spend more money to fight opioid abuse and addiction. the obama administration announcing it will distribute $53 million to 44 states in an effort to curb the abuse. it's also asking congress to provide $1.1 billion in new money. when it comes to weight loss procedures, gastric bypass appears to have longer lasting results. duke researchers say gastric bypass patients had a nearly 30% greater weigh loss than though who did not and better than those who underwane gastric banding or sleeve gat troeectomy. and pelting each other with ripe tomatoes in spain. all part of the annual tomatina street battle inspired by a 1945 food fight between local children. no word on whether anyone went out for a spaghetti dinner
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afterwards. all you need is pasta. that's it news break at this hour. "halftime" a back after a quick break. you just have to lay back in temp-pmy tempur-pedis... ishr and it just kind of forms toy body. it ces up to you, likeey, there yoare... hey, the you are.. i'm going utou to sleep now. it keeps us comfortable
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all right. show you the market picture. dow jones industrial average showing a triple digit loss this hour down 105 points. coming off the lowest levels of
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the session, though. 18,350. s&p down 12.5 now at 2163. nasdaq has a loss of 1 half of 1% today, just shy of 5,200. a tough time for hedge funds trying to beat the benchmark. new numbers show only 14% of active managing investing in big bap companies are beating the s&p. i've said it a couple times. what do you make of this difficulty in delivering alpha by active managers this year? >> everything is sek clicyclica. written by a favorite reporter, one mpt most distinguished business writers on the staff of "fortune." 1970 wrote and articles, "hard times come to hedge funds." 1970. the largest was steinhart.
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and clearly a call over time was wrong, because the industry as an aggregate floebl 1970 was less than a billion and grew to something like $2.5 to $3 trillion, but it's cyclical. what's going on, i think, okay, the golden period to my industry was 2000 to 2007. we became cocktail party talk, aided and abetted by your kind of program and the money coming over. why? because hedge funds were outperforming conventional managers. outperforming the indices and we became cocktail party talk. i'm with omega. i'm with pershing square. i'm with, you know -- >> third point. >> glenville. third pointe. i'm with appaloosa. all of a sudden 2008 hits. now, the reality is, the hedge fund industry performed their role. the average hedge fund in 2008 was down 16%.
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the s&p was down 34%. >> sure. >> a lot of people went to hedge funds not knowing what they were doing. thought it was a license to make money, the question, how much money will we make? when they lost a lot of money they decided to want to get out and the hedge funds i think hurt themselves doing two things i talked about a moment ago i would never do. date capital and not honor a high water mark. get past '08, you get to the 2009, 2010 period. that trend, a bull market. if you've elected to be a hedge fund manager, you expect them to be hedged and in a trendable market you'll underperform. okay? so people now have turned away from being absolutely turn oriented, focusing on relative return. and they don't want to pay sum variation of 2 and 20 to lag some "mindless index." seeing redemptions. >> do me a favor. hold your thought two seconds. come back for the rest of the story. over to michelle caruso-cabrera, break ngz out of brazil.
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officially removed from office by the senate in an impreservement trial voting 61-20 to convict him of breaking budget laws. a moment long expected but certainly still is a watershed moment for this country which actually, market rallied dramatically so far this year. 33% year to date on expectations this would happen and a more market friendly, not necessarily less corrupt government, would come to power. a more market friendly one certainly. now we'll see how the market reacts. speculation that there might be selling on the news once this actually happened. especially because there are still so many issues in brazil when it comes to their economy going forward. scott, back to you. >> michelle, thanks. michelle caruso-cabrera, latest there on what many people expected, but the news is official this hour our brazil. >> shows you importance of bottom up selection. one of my best stocks quality corp. a health care provider in brazil. all their problems, stock went
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from 12 to 22. if you bought something right. can't go crazy. >> the stock market itself has done in brazil i. like that alpha. >> back to the conversation. >> so what's happened, basically, is people are tired of paying a premium fee for sub-par performance and a certain amount of redemptions. i think the industry is breaking down into two sectors. one sector is doing well, and that is the quantitative alga rhythmic. >> machines. >> machines. i happen to have a view, which is not as developed as i'd like it to be. i don't like to pontificate about things i don't know about. there is cases of front running in that sector. i confronted the president of the new york stock exchange, how can you justify co-locating computers, high frequency traders in the stock exchange to give them a split second advantage over the public? if we don't do it, somebody else will. rather than the high road, the
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morally wrong, get the sec involve and level the playing field, retore confidence in the marketplace and individual. so that's sector's doing okay. whether front running or something else, i'm not the expert, to be 0 honest buy you. t with you. the warren buffett long-term value investors will win out. warren buffett didn't get to be worth $60 billion big an index. trouble with that sector is, if you are facing monthly, quarterly, semiannual, annual redemptions worried be aliquidity, yushaliquibout liquidity, you had a guest on, not on your segment, bet a friend of mine sponsored a seminar about eight months ago. and the seminar had nothing to do whatsoever with investing. the title of the seminar "closing the gap." i have a big interest in income disparities. taken the buffett pledge, giving
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all my money back, not half. a futurist spoke at this conference. before i tell you what he said, i will tell what you warren buffett says about forecasting the future. tell you more about the forecast than the future. having said that, the biggest problem facing the economy in the next decade was 45% of all drugs performed in the economy replaced by automation. no alternative employment for displaced workers. i went home that night and i thought about it. and i said you know, maybe the implication of the investment business is passive versus active management? okay? and you cannot charge a premium fee, whether 1% mutual fund, or whether some variation of 2 and 20 if you don't deliver premium performance. okay? you're going to lose assets. i think basically this is what's going on. and so -- money is leaving the business. and the question whether it's leaving at the right time or wrong time only time is going to tell but you have to deliver
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premium performance for premium fees. >> some are going to say, look, you've said it cyclical. some say maybe secular. a longer lasting trend going to passive versus active. if you follow the flow you follow the money. sort of -- wherever the money's going. >> everything is cyclical. there's implication, no the just for hedge funds. think about the brokerage community. on average, turnover 3%. active turnover on average, 30% a year. huge reduction in commission pool for the goldman so maman s reassign to a new reality of revenues and basically less liquidity in the market. less turnover, less liquidity, get things done. look at the money managing business. mutual funds 1%. hedge funds, variation of 2 and 20%. can't deliver alpha, a compression of your fee structure. >> quick. a break and talk more after.
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>> regulations coming in that make the wealth manager justify picking the mutual funds that have higher fees. so they're saying, edward jones came out 1esaid we're going to essential hi passive in your i.r.a. you can pick a manager. they don't want to get sued. >> everything is cyclical and we have to accept the reality, which makes sense. money goes where money is treated best. it may take a bear market to get the hedge funds back in style. because they're outperform. maybe stem the flow of money, judgment as the money stopped flowing into hedge funds when they lost money in '08. maybe the money stops flowing into the index fund when they say there's no pan sseepan see panseeum. i don't talk about myself. in this case i am. first generation born in america, first to go to college. high school, college in the
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bronx. walked to all of those schools. okay? i come into wall street negative not whether. do well at goldman sachs, better in the hedge fund word made a lot of money. the opportunity exists. work hard, have a little luck. opportunities exist. >> last word and a good word a that. election day. believe it? 68 days away. lee cooperman's thoughts on the election as a new poll shows something striking about this odd election season. we'll talk about that, next. 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.
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this is the greatest moment of my life! >> announcer: the "halftime report." weekdays at noon eastern. but what'st co to modernizschoo? what's criinking worth? but basketll costsutfouren dlar. what does it cost to build a nea what's team spirit wth? a telecommunications system ist chp. what it worth to talk to your what's the value of one more e what's ta forest? wth? walkn the wos? what it worth to talk to your what's the value of one more e whataropen tcreate,ublic.the vao not just wealt but ings that matt.
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morgcapil creates change.
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welcome back to the "halftime report." presidential candidate hillary clinton's unpopularity rating reaching a new high this month accordings to an abc news "weekend update" poll. the poll finding the candidates are almost equally unpopular. 59% of registered voters have an unfavorable view of mrs. clinton.
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donald trump negative numbers in at 60%. okay. you tell me. what do you make of this election? who do you support? >> well, you know, the two people i respect said things that resonated with me. hank paulson said, country over party. i happen to be a registered independent. barrackly saying that he could not vote for donald trump. and mitt romney a wonderful interview with wolf blitzer, about a month or so ago and explained why he was not voting for either candidate and i'm in his camp. i think the world is turned upside-down. >> voting for no one? >> well, i'm going to vote for somebody. >> write it in. >> i'll write it in. basically -- >> mit? >> mitt? four years ago, president obama made romney's wealth and success a liability. we now have a guy, get up on tv and say i'm wealthier than you think and people love him. my opinion is, he's not wealthier than we think but that's besides the point. i don't want to say anything and
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assume and libel him, but i don't think he's an anti-semi or a bigot. but he's not presidential. you know? when he got up there and mimicked, a "new york times" reporter afflicted with cerebral palsy and says repeatedly, guess he apologized a little bit, that john mccain isn't a hero and so many other things he said that i just can't relate to, i think he's dangerous. and i could not bring myself to vote for him. i have problems with hillary. it's a funny story. i don't know if you have time for a three-minute story. >> quick, quick. not three minutes. >> i got solicited to contribute to hillary's campaign by my neighbor in florida. and i said you got to understand i'm negative on hillary, but if i can ask her a question, i'll contribute. it's $1,000 a person to go to a cocktail party. says what's the question? i said i listened to every democratic debate between her and her opponent bernie sanders, and both of them fall over each other to criticize wealthy people without regard to how hard they worked to make their
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wealth and what social good they do with their wealth. as far as i'm concerned she's pandering to the so-called 99% telling them they're being screwed by the 1%, when we know in reality that's the furthest thing from the truth. most people i know, these people are your guests, they're giving back more to society than they spend on themselves. so i'm looking for a candidate that can rise above. guy says to me great question. i said, okay, i'll come over. and gave him $1,000. three days later i get a call from the campaign saying mr. cooperman, we're appreciative of your gift but we are confused. what's the question? said they gave me back my money. the truth is i'm better off getting the money back, but she's only going to tell me she knows who she's talking to. i wouldn't fault her. most politicians know who they're talking to and they give you a message with whom they're talking to. >> real quick, we got to go to break i want to do some stuff before we let you go. who would be better for the market? >> of the two? >> yeah.
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>> hillary for sure. now, let me just say this, events shape the person, the person doesn't shape events. president nixon was a hard line on communism, he could turn out to be a great president, i don't want to experiment. i don't want to take the chance. she's more predictable. does she move to the center? who knows, but she's more predictable. more presidential. but this country of 330 million people deserves better choices, unfortunately. >> quick break. come back, we'll talk more stocks with lee before we let him go. ♪
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we're back on "halftime report" with our special guest lee cooperman, chairman and ceo of omega advisors. i want to pay jim cramer royalty. i'm going to steal his lightning round thing. airlines, you increased holdings, delta and united. you still like airlines.
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>> yeah. >> why? >> stable fuel costs, rising prasm. change at 5.2 times what we expect them to earn next year. third quarter lower buy back 8% of their equity. so buying back stock, low multiple, rising earnings, the industry's concentrated so it's more of an oligopy -- we have a hedge trade. we're long one and short another. we missed it, unfortunately. >> i noticed a good bit of retail exposure, coach, pvh, tjx. >> the only one that's relevant is pvh. >> talk to me about it. >> again, you got to understand what we do. s&p is an index of 500 companies, yields at 5%, grows at 5%, sells at 17 times earnings, earns about 15% to 16%
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on equity and before that you're paying 17 multiple. so you got a pvh grow more rapidly in the market by a factor of two or three times. not much in the way of yield. we think a 12% grower and trading about 14 times next year's earnings. and they're doing well business wise. >> got a minute left. who's got something? >> what would it take for you to get back into apple? we got the new phone coming out. >> i'm not the expert. >> you've been in and out, right? >> let me say i have a lot of visibility and get a lot of credit, but i have a team of 16 analysts. my concern is apple's best days might be behind it because there's nothing to replace the iphone. so it's a company that generates lots of cash but may not -- may be a smaller company in three or four years. we put our money elsewhere, say google or facebook, which we think has more visible growth. >> quickly on health care, you mentioned just the brazilian health care name, that's a one
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off. >> been hurt this year in health care. we've not properliest mated the impact that hillary, the candidate, is having on the industry. but i look at allergan at 236, 235, looks very cheap to us. shire looks like a fabulous franchise. selling at a very low multiple, big free cash flow generation. we're inclined to buy some of these health care names on weakness. >> it's been great having you. thank you so much for your time today. >> pleasure to be with you as always. >> leon cooperman, chairman and ceo of omega advisors. does it for us today. see you tomorrow. thanks for watching. "power" starts now. what a great interview that was. i'm melissa lee. mastering the art of market manipulation. the direct shot one big money manager just took at janet yellen. also ahead what to expect from donald trump's surprise swing south of the border. and later a look at big money bets on the final frontier. buckle up, "power lunch" starts right now.


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