tv Fast Money Halftime Report CNBC November 11, 2016 12:00pm-1:01pm EST
thank you so much, rick santelli. that is it for us here. dow down 32. limping to the finish. long week, right? >> we didn't even mention disney. >> i know, but there's a lot more to come next week. don't forget, gundlach with whop ner on "the half." let's get to hq. p ♪ >> thank you for watching ""the halftime report."" i'm scott wapner. the post-election rally and whether it is now running out of gas. with us for the hour today jim levinthal, steve weiss, john najarian. stocks are taking a breather today. still, however, going for their best week in a couple of years. the dow is on pace for its best performance since 2001. josh, what is it? a breather because this trump rally is ending or a breather that is going to resume itself? >> so, i was on the show wednesday, and what i said was that i felt it would eventually subside, and i also felt and i
still feel, scott, that we should not mistake people taking off protection trades and unwinding hedges for this massive new shift in sentiment. the most important take-away that i want everyone to is have is that the markets are not any more excited about president trump than they would have been about president clinton. what the markets hate more than anything is uncertainty, and then when they get certainty, no matter what that certainty is, typically the reaction is to buy. the reason why is because people sit on their hands, they worry, they think about worst case scenarios. the fact that we got a president, we had an election with a clear cut outcome is the reason why you saw this exhalation and everyone went back and bought the things they've been waiting to buy. it has nothing to do with one person's policies, another person's power, et cetera. >> however, even if you thought, steve, that you would get stimulus of some sort from either candidate, maybe there's an easier path to growth at least initially under a president trump. they both -- >> rate cut, infrastructure. it's easier to get it through
with the republican controlled congress, a republican president to be. >> yeah. i agree. i do think it is different with trump being the president because it is so much clearer. a pro-economy, pro-business, anti-regulation environment. >> what happens if the markets prefer gridlock? we're going to throw that out and trade it in for the markets, like all three branches controlled by one party? >> i think the markets love that, actually. >> i think the markets like growth over gridlock. >> well, right now it is the narrative, and there's -- it is the narrative that the republicans control congress and the presidency, accident and until further notice, that narrative is going to control. i did buy the vix yesterday because i thought that the market had brought its course for now. you haven't even changed the presidential seal to the trump logo yet. we have some time yet to -- >> you haven't even changed the logo. >> we can chat later. >> hold on, josh. >> i think it will be gold. >> i do think that it's very
positive, very pro-growth, very inflationary. we haven't had the rhetoric die down completely yet as this transition team is talking about the social issues and so forth, but i'm pretty excited about it and optimistic. as you know, it wasn't necessarily what i wanted to see, but how can you not be? in terms of the stocks, some of the moves in the stocks are ridiculous. u.s. steel, ridiculous. china is still the major buyer of steel in the world. that i would let come down. i like health care. it's run ahead of itself. what i am staying with are financials because those regulations should die. they've really -- we're looking at a fund that loans out at 18% to 24% as a factor to small businesses. ludicrous. >> let's do this. cramer last night talking about the rally. here's what he said. we'll react on the other side. >> now, let me just say that i think this rally could be after today getting out of hand. there's no way that the velocity of these moves, both up and down
can last more than a few days past this election. >> that's right to your point, steve. biote biotech, up 13%. the banks up 12%, the best week since 2009. defense, up 8%. the best week since 2009. industrials, up 8%. the best week since 2011. is this just out of hand? >> well, it's not that it's out of hand. it's that -- well, look. let me draw this distinction. you don't have to have a crash from here. you can have a pause that refreshes. what's happened, and josh, this is a little bit to your point that it doesn't matter who the president is or at least that's how i took it. underneath all the election vitreal over the last few weeks, the economy has been doing a lot better than people expected. you had third quarter gdp coming at 2.9%. this quarter so far is tracking around 2.5%. scott, that would be the first back to back 2.5% plus quarters in over a year, and that's something the market has been waiting for that leads to the end of the earnings recession, that since this summer the market has been pricing in. all the market is doing right now is saying, okay, the sugar rush is over.
the presidency is announced. is elected. now let's focus on the fundamentals. there's enough to keep going from here, but not in a straight line. >> i got to say this. it's killing me. the market was set up for hillary to win and trump to say it's illegitimate. that's how the market was set up. that was the worst case scenario, and that was what people were hedging for. i'm in cash. i have the most gold i've had in five years. i have puts. sorros is buying puts. this one is out. that is what the market was expecting. the fact that we didn't get that is why you had a massive rally this week. not because of such and such pro-growth policy, blah, blah, blah. that's the new narrative. it's false. >> here's where you are wrong. we finally got what should have happened a long time ago. the narrative also was -- >> what should have happened? >> if you let me talk, i'll finish. what the market was also set up for was a stalemate, was four years of gridlock of nothing happening, and that's where the surprise is.
what it's set up for now, okay, is the handoff from monetary policy to fiscal stimulus. okay? the fed lowered rates to zero because they had to. because they had a government that didn't work. >> look at the stocks that have worked. the reflation trade. >> because you have fiscal stimulus. you have -- that's going to work. >> both parties were talking about stimulus, number one. number two -- >> but they couldn't get anything done, josh. >> number two, number two, says we know they couldn't get anything done, and that's not because the democrats said, ah, forget it, let the fed do it. it's because you had an obstructionist party in both houses that refuse to allow anything to happen. >> you're saying the banks would be up 12% if hillary clinton -- >> i'm not going to tell -- i'm not going to tell you why -- >> i'm going to tell you the market was ready to rally. >> absolutely not. >> the market was ready to rally on anything that wasn't trump saying the election is -- >> also, the market did rally those last couple of days before the election. >> i was -- >> that's because comey said she's off the hook.
>> they thought hillary was going to win. they didn't think it was going to happen like this. >> i said if the market rallied on the clinton victory, i was going to probably short it, okay? i didn't short it. i have no short ek posure except for the vix, which is a trade, frankly, not a hedge. fiscal stimulus is extremely powerful. >> we haven't even heard from you. let's fut it thput it this way, more inclined to sell this rally or take a break and sell more? >> what pete and i were doing and for clients as well as our own accounts, we were taking profits in u.s. steel. i know steph was big in that one. i know you were too. >> not me. >> u.s. steel and mt. these were crazy good trades. to josh's point, i think one of the things, josh, that's a little different than as you are describing, it is it would have been an obstructionist congress. they wouldn't get things done going forward if it was hillary clinton. now that it's trump, you will see regulations rolled back that they would not have done under ms. clinton, and you'll see some of the fiscal policies that steven is talking to enacted.
>> all we're talking about is the initial knee jerk followed by this huge move that we saw to the up side. i'm telling you, people are saying they're glad the event is over. >> true. i agree. >> that's all i'm saying. i'm not saying some groups won't do better going forward. forget about that conversation. i'm saying -- >> that's what we're going to do. >> we have to focus on it. >> it needs to be put in context. we're still in the range we've been for for months. we're 1% higher than may of 2015. 18 months we've gone up 1%. >> watch this one. >> gold -- somebody big just dumped 85,000 contracts. every one of these contracts is 100 ounces of gold. that's $10 billion hitting the market. when you look at that gold chart today and you see that waterfall, that's why it happened. >> maybe people are following out of the door. >> whoever. >> it's somebody big. >> did you sell a watch? >> i was putting one of these on
ebay. >> for more on the markets, let's go to eddie perkin, the chief equity investment officer eaton vance. he is live in boston. eddie, welcome back. it's good to talk to you. why don't you weigh in? is this too much too fast? is it justified or not? >> i think you have to go sector by sector. i think it's difficult to call the market overall, but if you put things into buckets, it helps you frame how to think about the way forward. so i put things into categories of those things that are very likely to happen, including dialing back regulation because that doesn't require the cooperation of congress. that's something he could do on his own. those things that are probable to happen. i would put things like corporate tax reform into that bucket. then things that we're all just guessing at, and that's growth, reflation, interest rates, currencies. i would fade the rally in things that are drin by unknowables. >> like what? what does that mean? >> i think anything that is rate-driven i would be on the other side of it. i'm selling bets and i'm buying utilities. >> you would fade the banks?
>> i would. they benefit -- they benefit from the lighter touch regulation, so that will be a positive. the more domestic banks will benefit from corporate tax reform, the international banks a little less so. the final thing is interest rates. i'm not convinced that we're going to stay above 2%. we'll see how that plays out in the coming months. >> eddie, don't you hear everyone talking about the reflation trade and now rates are going to have to rise because deficit spending is going to explode and all of a sudden we're going to see this massive inflationary move? you don't buy it? >> i think if we see meaningful improved growth, which is very much a question mark, but if we see that, then i think we'll have higher rates. i'm not convinced deficit spending is going to drive hire rates. look at where japan is. they're near zero rates, despite massive fiscal deficits. i'm not sure that i would count on deficits driving rates higher. >> but, eddie, you can't compare the demographics and the culture in japan to the u.s. i mean, it just doesn't -- it's night and day.
you've got a society there historically savers, that's aging, doesn't have that other generation coming up versus the u.s., which is much different. i would take the other side of that. i would be looking for 2%. a lot quick canner than anybody else. we got there quicker than i thought. i don't think we see below 2% again. i think we see 3% pretty soon. >> you might be right, but i think it's going to have to be driven by economic growth. not by fiscal deficits, and i think the other thing to keep in mind is at what point do -- at what point do pension funds, large insurance companies, those who have long dated liabilities start to find a ten-year at 2, 2.25 really appealing. i think the german bund is around 30 basis points denominated in euros. would you rather buy the german bund or the treasury rate denominated in what is now a stronger currency? >> you would be a buyer of bonds rather than a seller? >> imauto not a bond trader, but i like bond proxies. >> you are making the case.
>> yeah. i like -- the way i would play it in the equity market is i like some of the bond proxies that have sold off in the last few days, so utilities and consumer staples. you can begin to nibble at some of those names. >> you just described, though, just as scott said when you were talking about bond proxies and so forth, you know, half the table is lining up on one side saying rates going to 3, and the other half say we'll be lucky if we hold 2 here, and that's great for the fixed income guys. the banks that you sort of po poo-pooed saying they weren't going to have a lot of trading, exactly what you are describing is great stragd trading for these bairngs where are for citigroup as well as those international banks. maybe you should skew your view a little more towards those if, indeed, it's supper a toss-up on where rates are going from here. >> yeah. i think they'll benefit in the short-term from the volatility and their businesses skbrks they'll make some abnormal profits, and their fick business forces a quarter or two. the real benefit to the banks that have large deposit
franchises koold comes from a steeper yield curve and comes from being able to earn a spread on those deposits, and that's the part where i'm not totally convinced of the move up in rates. >> enjoyed the conversation today. thanks for being with us. >> good to be with you. >> eddie perkin, eaton vance. a lot more ahead on the halftime reported. >> coming up, double line's jeffy gundlach. there's nobody better to talk with. that's straight ahead. tuesday on "halftime" prepare for a market moving line-up. goldman saks's chief operating officer gary cohn, john boehner, and the cme's terry duffy. that's tuesday on "the halftime report." put it in your calendar now. the greatest population shift in human history is happening before our eyes. sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications
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>> shares of tiffany up doubling digits over the past now. now cowen thinks that run is just getting started. today that firm upgraded the stack to outperform saying luxury is coming back, and tiffany is well positioned. it's our call of the day. jim, you own the stock. >> i own the stock. god bless him, but the run is not just getting started. the stock bottomed out several months ago at 58. it's now at 80. look, in the long run he is going to be right, but in the short-term this thing has gone too far too fast. it's no above 20 multiple, and frankly, over seas in if particular where they get a lot
of sales, growth just isn't strong enough to support this. >> they say luxury is coming back. >> let me be clear i'm not selling it. the growth just isn't there. >> he is going to say it's coming back. >> the stock has gone from 50 to 80. now it's time to pull the rip cord. >> that's not what i said. it's not going higher in the short-term from here. in the long-term it's going to earn $4 a share and have a 24 fiemz multiple, which will be at 96. that's a 20% return. from today when it's been up about 45% in the last seven months, this is where it pauses and just bases here. >> if you want luxury go to lgmh, not tiffany. i think. when i was looking at it today, jim, fresh 52-week high. almost $30 off that low that you spoke of. wish i owned it down there. i didn't. up here i'm not interested in jumping on it. >> i'm not selling. okay? i own it. it's a core position in my portfolio. all i'm saying is that the
enthusiasm from this call is way early. it's just way early. >> or way late. >> okay. >> all right, let's do the trader blitz. first up on the top and the bottom line, they announced a buyback. 2 22% dividend hike. you own the stock as well? >> i think it's going higher from here. it's had a huge move. i'm certainly not someone saying, okay, rush in and buy it right this minute, but i think you want to think about this as the intel of the new era. look at where they're finding success. video games, data centers, cloud computing. all of the areas that are the next thing for technology. nvidia is systemic to these areas, and i think this is the way to play it best. >> all right. disney missed on the top and the bottom line. it's moving higher, says though after some optimistic comments by bob eiger, the ceo. >> it's almost $7 off the last night after hours low, judge. this was a phenomenal move. >> do you have calls? >> yes. i had calls going into this.
luckily, didn't get spooked out of it last night. that was positive. as soon as he started talking about the losses, the subscription losses over at spe espn, not being as big as october, that's when the stock bottomed, and it was straight up for me. >> baba. steve, singles day. what do you do with the stock? >> let's give o'leary, came on pushing disney a few days ago. >> yes, he did. i'm glad you said that. yes, he did. >> baba, singles day. singles day was slightly disappointing in terms of the pace versus last year. still pretty good day. the market, i think, is just taking it with the market moves. it's okay. if you liked it before, you have to like it now, and you stay with it. >> we got a lot of ownership of these blitz stocks, including jc penney with you, jim. >> not a good quarter. a stumble in the long-term plan for them. >> when is the last time they had a great quarter? >> great is always relative to expectations, and, frankly, the last several quarters have been great in that regard. they're well on track to be profitable for this full year and growing into next year.
they have been doing well, but this quarter was not good. >> when was the last time they had an unqualified great quarter? >> how about the last three? really. look, scott -- >> tiffany, jc penney -- >> the reason the stock is only down a little bit is because their verbage going forward was very positive in line with kohl's and nordstrom's. >> he correctly predicted a donald trump victory and the jump in yields. jeffrey gundlach of double line capital is coming up. more hatch ti"halftime" back in minutes. i got it, dad. ow! ♪ we love to keep them safe. so we made the nest protect smoke and carbon monoxide alarm. it speaks up and can alert your phone if there's a problem. or let you know if everything is just fine.
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unlimited data for everyone. get four lines just $35 a month. >> welcome back to ""the halftime report."" let's take a look at the mexican peso. it is pairing losses against the u.s. dollar. still down about 1% against the dollar as investors try to assess what a donald trump victory means for relations between the united states and mexico and, of course, a lot of focus on trade as well if the president-elect does scrap nafta. we should also point out that industrial production numbers out of mexico did disappoint. again, down 1% against the u.s. dollar. now to courtney reagan with a news update.
>> thank you very much. here's what's happening at this hour. departing senate minority leader harry reid said donald trump's election has emboldened the forces of hate and bigotry, and he now must lead a time of healing. fear is rationale because trump has openly talked about doing terrible things to them. british foreign minister boris johnson says it's time we snapped out of the general doom and gloom regarding trump's victory. he said that trump had a very good conversation with the prime minister theresa may. more than 3.5 million smoke and carbon monday ongs i'd alarms are being recalled. it involves kitten nighthawk talking alarms. they were made june 2004 to december 2010. a woman's hike in the woods put her face-to-face with hillary clinton. she was heartbroken after the election, and she took her daughters for a hike in new york where the clintons live. the two hugged and posed for a photo taken by none other than bill clinton.
cnbc news update for this hour. now back over to you, scott. what a fortunate meeting. >> yep, all right, courtney, thanks so much. courtney reagan. honoring our members of the armed forces, next on "halftime" four veterans who made the move from battle to the boardroom. that includes one of our very own halftime traders. plus, bond king jeffrey gundlach is coming up. more halftime back in two minutes. this is my retirement. retiring retired tires. and i never get tired of it.
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i'm a substation electrician my nwith pg&e.ck varela. when i was 17 years old, signed up for the united states army and i started serving and i now get to serve the customers of pg&e. i get to help other families. and that's what it's all about. when i came back from iraq, couldn't find work. then i found pg&e's power pathway program. here at pg&e i'm successful living in eureka with our two beautiful kids with a brand new career
all because of the power pathway program. if you are a veteran, go to pge.com/powerpathway and hopefully your life will change like mine did. together, we're building a better california. from the battlefield to the boardroom. we honor those that have served, including our own lieutenant jim levinthal. he served in the united states navy where he was awarded two commendation medals and four navy achievement medaled for his service on a nuclear submarine. also, lawrence doll, the chairman of the investment bank drexel hamilton, a service disabled veteran of the u.s. marine corps. he is also the recipient of two purple hearts. john martinko is a managing director with the firm. he served as a captain in the elite army rangers where he was deployed to iraq seven p times, and matthew caldwell, the ceo of the nhl's florida panthers, a veteran officer in the u.s. army. also, a former vice president at
goldman saks. it's so good to have you with us today as we honor our veterans. >> excited to be here. >> mr. doll, i'll start with you. what does this day mean to you? >> it's honoring all the people, men and women, who have served our country. we remember those men and women who serbved with us who didn't make it back, and we also remember the wives and the children of people who are serving our country right now, says and are in harm's way, so it's a wonderful day to remember. anybody affiliated with the service, but especially those right now who are serving and their families. >> your firm does a lot. >> we do. >> tell us about it. >> we match a veteran of the war with a veteran of wall street. we have approximately 50 veterans who work with us. most of those have combat-related injuries. we tried to offer them something, scott, that is a profession for the rest of their lives, and they come in, and we
give them a stiepen, a monthly stipen and let them sit -- >> i'm wondering how being an elite army ranger has helped you in your day job now? >> well, i think it helps every veteran. veterans are known for leadership. they work extremely well in teams. as drexel hamilton, you can tell on our floor there's a sense of urgency. everyone has a task and purpose and is really trying to contribute to the bottom line, and i think just like we operated overseas on the battlefield, we're doing that now at drexel hamilton to all contribute to our growth. >> you work in capital markets where you are managing director. how do the markets look to you here? it's an amazing few days. >> the capital markets obviously we think the primary issuance with the ipo market has been pushed off to 2017, and that's probably due to delaying of the filings because of the election. however, just like we saw with the hilton transaction last night or yesterday, it was worth of a $1 billion transaction, we
think you're going to see more block trades into year end and the equity capital market will finish strong with block offerings. >> diverse background for you, matthew, from your time in service to goldman sachs, and now to the national hockey league. >> yeah. it's been quite a ride. it's been -- i think the military has set that up for me, and that's why i'm so grateful on this day to recognize veterans and everything i learned at west point and being in combat and being overseas. you know, i'm using it every day here with the florida panthers when i worked on wall street. >> what about this idea of paying it forward? it seems to be one of the most overriding thoughts about this whole day for veterans. particularly ones who have gone from, as we've said, the battle field to the boardroom. >> i think especially at the florida panthers we believe in paying it forward. just last night we had military appreciation night for all our fans and we had -- we invited all veterans out it a game and donated money to a local nonprofit that helps get homeless veterans off the streets. we're really proud of what we're
doing day to day, and we think everything we do on a daily basis is helping the military going forward. >> jimmy, last but not least, you're a trader, an investor, and i'm curious as to those times in the united states navy and how they translate to what you do every day. >> well, like all three of these gentlemen here, we know a little bit about hard times, scott. we know about sacrifice. you know a little bit about being a long-term investor from being locked up in a submarine for months at a time, and truthfully, that's how i became a value investor as opposed to growth investor. you're couped on a submarine. i do want to say how much respect i have for the three of you. i was in during the cold war. although three of you at different parts were in hot wars with people pointing guns at you and pulling the trigger. my hat is off to you. it's a reward for me as a veteran to be able to sit at this table with you guys today. thank you. >> thank you very much. >> not to mention i do want to mention at drexel hamilton, you will -- you have your veterans day call to action. >> that's right. >> will you tell us about that? >> we're having a veterans day call to action. we're supporting three
charities. the hedge fund project, the army ranger lead the way fund, and the gary sanice foundation. >> you will done aate a portion the equities commissioned to those projects today? >> this is truly veterans helping veterans. our revenue production today, veterans on the trading floor executing trading and commission dollars going back to veterans that helped pay it forward for them and their charities. >> i would like to say that i had an opportunity to meet gary sanice. you have never met a more patriotic person, a giving person, and one thing i like about him is he likes to be around veterans. i would like to say jim cahill is a president of our company. he and his lovely wife cathy lost a son on 9/11, and that's the reason he is working. i just want to get that in. >> i'm glad you did. i'm glad you came here to talk to us today. lauren stall, matthew caldwell every well, our own jim levinthal. >> thank you so much.
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oh, mucho gracias. only at td ameritrade. welcome back to "the halftime report." the bond market might be closed today, but it's been an amazing week of yields which have surged on the back of donald trump's victory. our next guest called mr. trump's win and the move months ago. jeffrey gundlach is live from los angeles. it is a halftime report exclusive. jeffrey, welcome back. it's nice to see you again. >> thanks, scott. a shout-out to all the veterans here on veterans day. thanks for all your sacrifices, and we always look forward to november 11th here at the firm because 11-11, that's two double lines. >> well said. very well put. so you thought trump would win. you thought rates would rise. did you think they would rise in
a making tut in which they have this week? >> well, i don't know about in the compressed time frame, but back when we turn maximum negative on treasuries, which was july 6th which the treasury was at 132, unbelieve ble we got it to the day and the basis point. we said in the web cast just a few days after that in july, the ten-year would be above two before year end. by the way, i have another web cast on tuesday on asset allocation. people can register for that. yeah, we expect the ten-year to go above two, and the 35 basis point move since the election is not that surprising given the narrative that's developed about the trump victory. i do think this rate rise is about 80% through. at least this leg of it. i think we have really critical resistance on yields up at about 235 on tens, maybe 180 on fives. about .1 on the two-year, and we should get a tradeable rally off
of that level. if we don't, then things are in really big trouble because the rate rise so far is sufficient to start having a little bit of economic impact. not so big yet, but think about how interest rates have been sort of at that 2% or lower level on the ten-year for so very long. i mean, think about the residential housing market where so many mortgages have been priced out at 3% over the last many years. what happens if mortgage rates go up further for what they've gone up so far. you would be looking at monthly payments to prospective home buyers that would be something like 20%, 25% higher than where they were at the embedded lower yield levels, which just has to lead to, if it happened, some correction in pricing in the residential housing market, and also for yields break up above that resistance point, you're going to see some impact on some of the financial engineering and buyback activity i would think in the equity market.
this is getting to be a critical level. i remember are way back, scott, in pre-taper tantrum, we talked about the 235 level as being important. i don't know if you remember that. that was quite a while ago, over three years. when it broke above 235 in may of 2013, you blinked, and it was at 275. i think we have a little bit more to go on rates moving higher, but we should, you know -- we should and hopefully will get a tradeable rally off of a level not too far from here. >> what's a reasonable yield to expect by the end of the year putting the fed into the context as well? >> i think that we will see yields a little bit higher than where they are, but i don't think we're going to get above 235 by the end of this year. one of the reasons i was negative on bonds in july was that the inflation expectations that were priced into the tips market when you compare the price of treasury inflation protected bonds to nominal bonds, the inflation rate was
sort of insanely low. that was priced into the markets. i mean, cpi is driven at the headline level partially and significantly by movements in wti. the yoear-over-year is not goin to be zero or negative anymore. even if oil just stays where it is today. i mean, oil bottomed out in january at about $26 a barrel. let's just make the math easy and say that come january late in january wti rallies a little from here and makes it to 52. that would be 100% year-over-year increase in the price of oil, which to our analysis at double line would correlate to a 3% year-over-year cpi. now, here we were in july with break evens on tips to nominals at, like, 1.5%. there's just no way that you're going to be able to keep those inflation expectations nailed down at 1.5% when you are looking -- staring -- when it's staring you in the face that year-over-year cpi on the
headline is 3%. i think this is a really interesting part -- time in the markets for thinking about inflation expectations, what's rationale pricing. so it's going to be really kind of a fun time managing money over the next six months because the times there are changing where. >> so it's so interesting for someone who said that at one point not all that long ago that the stock market was whistling past the graveyard, you also said recently that if the s&p had closed below 2130 twice that it was a negative sign. now the s&p is at 2,163. the dow is knocking on the door of 19,000. are you more optimistic now about the stock market, or is that optimism tempered because of this swift rise in yields which could eventually put pressure on a whole bunch of sectors? >> yeah. basically i have a wait and see attitude about the stock market right here. when we did get those two closes we ended up having nine down days in a row that culminated in
something of a crash overseas when the news was getting apparent that trump was going to win, and that did turn out to be a buying opportunity. right now the market is in no man's land. i think you have sort of a 2,200 type of ceiling if you look at the charts, and you have, like, a 2,100 kind of a floor, and now we're sort of right in the middle, and the way i'm thinking about the stock market is let it prove itself either way. if we get a couple of closes above 2,200, then the bulls are right. if we get -- go back down to close back above 2,100, then probably something is going on with rates getting out of control, and so i just think if the stock market is cheap at 2,163, then it's also cheap at 2,200, and i would wait until i prove itself up to that level if it's really for real. i do think sectors are getting very important in the stock market. one thing about trump's win there's something about it. people just want something real.
they want to see things being made. they want to see policies being changed. they want to see something real. no more of this man behind the curtain stuff. it means that the financial engineering stocks and engineering stocks. i would say away from them in a big way. i think if you are going to buy the stock market, you want to look at stuff that's real. i know that trade location is terrible. i went through this today. clearly we'll get a pullback from these 4re68s, but i do think in a industrials, materials, and financials things that are real are what you want to be invested in,ing and i am feeling very strange because i've been negative on financials for ten years. i've been negative on tips in the bond market for ten years. as of two months ago i turned very positive on both of them. tips for relative to nominals. like in our flexible income
fund, which is an unconstrained type of bond fund, all of our treasuries in that fund used to be nominal treasuries, and all of our treasuries in that fund today are tips. our core fixed income fund all of our treasuries two months ago were nominals. now one-third of our treasuries are tips, and the financials i like for the obvious reasons, a real simple thesis. -- i've heard it on cnbc over and over again. i agree with it. it's steepening and positive for financials, and, of course, the trump win around the edges means less pressure. the moves this week are very big, but they're justified, but for the long-term, you know, not so much for the short-term. these moves are really, really overdone. >> so then you would be an obvious fader of any yield play, so-called yield play, a utility, a telecom, a staple, a reet, is that what you are hearing?
>> it's interesting you mention reets and utility. when i spoke at the hedge fund conference back on may 4th, my recommendation was to go long rem, which is the etf for mortgage reets and go short xlu, which is the etf for utilities. that trade has already worked -- i recommended it on a one-time leverage. it's already a 30% winner. utilities since then are down 5%, and the reets are up 10%. the s&p 500 has massively outperformed the utilities since then. i have just -- i am suspicious of yield plays broadly because of the tremendous crowding of that trade at midyear, although i'm less suspicious today. one of the reasons that i turned so negative in july was the incredible off side positioning in our view in the bond market. inflation expectations were ridiculously low, and speculative positions in bonds were an all-time high. the short position in the tlt was at an all-time low.
i think the move is 80% over on this leg of it, and that crowded trade is not crowded anymore. the speculative positioning long on bonds is completely gone. it's been short. the positioning is a little bit better. i do think that why yields logical rise more, we manage a lot of money, and a lot of bond funds here at double line. we've seen a lot of institutions and a lot of consulting platforms decide that their enthusiasm for bonds was too much, and they've allocated money in the last couple of weeks and particularly this week from bonds to stocks. i think that's one of the main reasons. i shouldn't say the main reason. it's one of the reasons. there's been a positioning away from bonds and stocks, and i'm telling you, we see it at double line. in size. i think is that fuelled some of this move, but it's not going to go on forever, and i think that when you move yields higher, i think that positioning is i
halftime exclusive. let's talk about fed. number one, do you think the fed will definitely in fact going december and also now if the fed believes it's not the only game in time, there will be an infrastructure spend, there will be some fiscal stimulus, whether you think there could be a risk that rate increases could be at a faster pace than some people think as the fed tries to get out of the way? >> first of all, if the fed doesn't raise rates in december they are never going to raise rates again. the bond market is giving them car carteblanche to raise rates. so december seems to me that the fed absolutely should raise rates in december if they plan to ever raise them again. this idea will they accelerate the rate increases with fiscal
stimulus is an interesting one. first we have to see if the fiscal stimulus takes shape and fit has any effect. i mean one way to do fiscal stimulus is to take people on welfare, receiving welfare payments and say we just won't give you money for being on welfare we'll tell you to go into the backyard, dig a hole, fill it in, give the same amount of money but call that a job. that does nothing to move the economy. if you get a fiscal stimulus that builds things like walls and airports and bridges and brings people who are under employed or part time employed into the workforce and they get more money from their job then i think you do have fiscal stimulus. but i think we're way ahead of ourselves on this. it's easier said than done and we're not sure what exact form it will take. you remember the shovel ready jobs they haven't made the shovels and when they make them
they will be made in china but the shovel ready jobs didn't lead to much economic growth. it's possible it will work. we'll let it take form. this is another reason -- my broad context here, scott, is i think these moves that happened are justifiable, they were predictable. i think we're more near the end of the near term of the, you know, sort of knee jerk reaction to these things and now comes the hard work of actually trying to see how it gets implemented. could the fed try to balance off fiscal stimulus? that's counter productive. okay, fine. all you had was the fed with the gas ped swral and now yal and n the brake. what's point to of having one foot on the pedal and one foot on the brake. why bother. you'll burn all your gas and ruin your brake. the argument the fed will 0 try
to offset the fiscal stimulus is a bad one. could they raise rates a couple more times? sure. one thing that people are missing nominal gdp, one of the reasons again why we turn negative on the bond market is nominal gdp is an exctent roxy for where ten year yields should be. it could be up around 5% when you get to maybe april of next year, maybe you get 2% real gdp which we sort of have going on right now. i know last quarter was 2.9 thanks to a huge soybean export. we're running around 2.0 real gdp. let's take 2.0. you throw 3% inflation right on that. you're rooking at 5% nominal gdp. what in heaven's name are ten year treasury yields doing at 1.50 if we have the potential for 5% of nominal gdp. we have a tradeable rally coming
to the bond market but there's a potential for another leg up in yields when we get into 2017. i've said over and over again history books will say july of 2012 was the orthodox low in bond yield. i know ten year treasury got a couple basis lower in july but then rejected it. that was a horrible chart formation back in july. so i think we have a tradeable rally but we'll get another up leg in yields when we get to 2017. >> before we go, your view on gold and the context of what was told "squawk box" this week, that he was out of gold now. and that he was short bubbles, in his word. i'm wondering how that shapes with your view of how to trade
this today? >> i'm pretty much in sync with that. i think they are all based upon the past. it changed on tuesday. so i think things that are real makes sense. gold, i don't think is a great place to be right now. it sold off a lot recently. i would wait for a rally to short it. but i'm not long term optimistic on gold now that mr. trump has taken over the white house. >> thanks so much for coming on the "halftime report". >> thanks. good luck to everybody for the rest of the year. >> jeffrey gundlach. bond king maybe election king as well. we'll be right back.
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jeer back on the "halftime report". reaction to mr. gundlach's comment. a new note from citi that says in part and plays into the interview we had. we make some major changes to our 12 month ahead asset allocation in tilt. we reverse our preference. >> i sold some facebook puts. i like that. that's not one jeffrey likes. he says sell those things.
that's what i did today. >> josh? >> well, i think it's a smart pose to posture to have. put people back to work you don't want to be in treasuries. >> you can be short bonds longer term. tech got destroyed. >> rates are going higher. >> thanks all of you. great weekend. "power lunch" starts now. good afternoon, everybody. i'm tyler mathison. the commander-in-chief just how hard is that transition? you'll hear from a person who knows, former vice president dan quayle. up in flames. why are protesters trashing one iconic made in america brand? the reasoning may surprise you. it's been a long week but we made to it friday. so take a page out of this lady's book and dance. she's got it going on. "power lunch" starts