tv Fast Money Halftime Report CNBC March 15, 2017 12:00pm-1:01pm EDT
their microsoft used to be a company in latin, nongrata in silicon valley. re reid hoffmann is one of the leaders. >> tomorrow we will be talking about the dutch. for those $1,000 parkas that you see all over. >> let's get over to post nine and the half. >> welcome to the halftime report. i'm scott wapner. our top trade this hour, decision day. stocks waiting on the fed. is a rake hike a foregone conclusion and is the market really ready? with us josh brown, steve weiss, john and pete najarian around in a moment. two hours until the fed delivers that big decision. there are the markets, in the green across the board. dow jones industrial up 48
points. that is the big question, is the market ready for a hike? >> the market is asking for a hike. the market is sitting up and begging for the hike, do the hike. you have a window. you have incredible momentum in the way people feel about the economy, all of the soft readings and things like small business confidence, home builder confidence, consumer confidence. this is the time to do these things. don't wait until the next geopolitical whatever, which is probably right around the corner. i think the market wants it and expects it. >> if the market for some reason doesn't get it, do you think the market is going to sell off, right? >> i think it would. i think it would come back pretty quickly. it is not only about the hike but about the language that accompanies the hike. in my view, not only do i agree with josh in terms of market wanting and being ready for it. i think it is also ready for some firmer language in terms of the fed being more aggressive going forward. everybody, consensus, is three hikes this year. i have been looking for that for six months already. i think if the fed talks and
leads that way, it will instill more confidence in the economy. >> steve liesman down in d.c. awaiting that big decision this afternoon. he will be in the room for the news conference with the fed chair as well. what should we really expect today. i'm looking at the atlanta fed's gdp model. what do you think the fed is really going to do today? more importantly, what is janet yellen going to say to you and the others in the room? >> i think the fed is going to look through that weak gdp number. there is no indication the economy is weakening to a point where it is really up sub 1% gdp economy. a lot of the data has come in according to goldman sachs better than expected. you saw some of the robust home building data. i thought it was pretty good when it came to putting january and february together specially in light of the late tax
refunds. i want to disagree a little bit with josh. i know we get in trouble when we an though pore more fiz the markets. i don't think the market wants a hike. i think it is kaya biding a hike. when i look at how the market has behaved, as the probability has increased, it has gone about sideways, hasn't sold off, hasn't gained very much. it has gone about sideways. i like the fact, scott, it has been able to incorporate two things, the march rate hike and more and more you can see they are building in that third rate hike. i like the way the market has behaved as this probability has shot up. >> as we've said in previous meetings, it has been the market that's been leading the fed. now, maybe the fed has a first chance in a while to actually start leading again. do you agree with that? >> i do see the market and the fed on the same page. when i think about what happened last year, scott, you remember the fed was calling for four rate hikes.
the market said, you can't have but one if you are lucky. going into this year, they are on the same page. i think they see the same things. what i do wonder is whoo happens to the fed in their outlook for three hikes this year if president trump gets his agenda through congress, if you do have these big tax cuts, if you do have this infrastructure spending. i think the market might be a little light. i believe these three rate hikes are neutral to a little bit of stimulus. if there is a lot, they may have to think about a lot. that is surprising it comes. there are two things. i don't think they can ratchet up the hikes expected for 17. they could with not very much work on a couple fed officials changing their mind. they could ratchet it up for
2018. the outlook is a sound outlook. i am fascinated with what they think of it. it is going to get to where it is going on a 3% track. it is going to end way below where it has ended before. that would be the surprise. if you want to tell me something that would wake up the market. if you tell me the fed is going to four and not three or five and not three, that's the wakeup call. if you tell me, i'm going to 3% by 2019, i think the market appears to be cool with that. >> maybe we will get some indication during the news conference. thank you very much. steve liesman is down in the nation's capital awaiting that big decision and then the news conference. i'm wondering how you think you should be investing in the back drop that steve laid out for us. also, one in which some on wall street are starting to question what the near-term outlet for the market is, goldman sax among them. they down grade global equities for the near term. they are still overweight for 12. people are getting a little cautious based on where the
market has gone and what lies ahead. >> i think it makes sense. when you are investors, you can't really trade around a three-month time horizon. the market undoubtedly, i think, is consolidating at the very least and has about 5% down side. it always goes down, 5%, 10% every year at some point. however, what i would say is that you want to have cash ready for when it happens. the three-month time frame makes sense. that's when the rubber will have to hit the road in terms of the real trump policies, tax policies, repatriation, infrastructure. right now, we will continue to go sideways. >> rick retore is the chief investment officer at black rock. what are you expecting? >> i think we will get the rate hike. we will be interested to watch these dots, can we be moving to a quarterly rate rise? can you get four rate rises this
year? can you get four rate rises next year? >> i think the way they described the inflation, where we are on inflation, is going to be interesting on the description. lastly, will there be any decents? i think everybody is on board doing this. >> what are the risks? if we think that the fed is going to go, it is a foregone conclusion, you read some other notes being passed around the street, they talk about things like rate shocks and the impact that could have on the bond market and stocks together. what do you think about that? >> i agree with you. i agree with what josh and steve said. the markets, we are ready. we are not moving. we are moving from emergency rate conditions to accommodative rate conditions. we are moving. i would argue we could have moved before this. we are moving to levels. we are not going from 4% to 6%. we are going to be very easy. this fed is going to be deliberate. if we don't get tax and the stimulus that is anticipated, this fed is going to slow down.
rates are moving up. they should move up alongside this. by the way, we have talked about this before. it is actually good for the markets, as we approach it. good for banks, pension funds, insurance companies and an aging population that needs the income. this is modern financial. it is very different than interest rates influenced 10 years ago or 20 years ago. i want to agree with rick. when you look at the individual stocks, you see a number of breakouts in the making, stocks that have had a big run, have paused and now are just waiting for something, whatever the catalyst might be. it could be the rate hike when you are talking about the financials. there is this huge misconception and rick probably agrees we have had this free-for-all, run-away rally. it is simply not the case. all of the performances occurred
in the couple of weeks after the election and then it stops since december 8th. the xlf is up 6.25. the s&p is up 6.5%. that is setting up the next leg. i bought charges swab, a $50 stock masquerading as a $40. i bought jpmorgan which i think should be triple digit. i'm not saying it happens on this next rate hike. these names have been waiting after a big rise from the election. they haven't done a lot since. i think they are going to have their moment. >> rick, you going to weigh in on that? >> i will say that banks haven't factored in the impact for moving a bit faster. it is one of the highest tax-paying sectors there are, there is across industry, if you got a real tax impact. it is domestic, which is obviously, a beneficiary from what is the new policy from washington.
without stating valuation-wise, there is still a lot of tailwind that could hit that sector. >> mike may oo was laying out t case that way. >> they paused and you saw a major stampede. it is financials. >> you can't look at the number beside what the stocks are up, either since the election or over the last six months. >> doesn't matter. >> if you do, you are going to be in that tunnel vision of, wow, man, they have run so far. how could you not take some. >> they have been a repressed asset class for the last eight years. they have been the piggyback for the treasury with $1 billion fines and on and on. i forget the fine level that bna paid. as you turn regulation the other way, become business friendly and more bank friendly, i think you see these financial institutions just keep going
higher. >> rick, before i let you go, to the degree that some would make the argument that the fed has lost its credibility over the last several years, how important is it today to get back on the path to restoration? >> so, listen, i think this fed is data dependant. i think there is one good question, what is the efficacy of data dependancy? >> we have hit a whole series of targets. the inflation numbers you got today, just to put in perspective. three-month moving average in terms of the three-month inflation top line cpi is 373. core cpi is 294. if the fed were not to go in the face of that, let alone a 4.7 employment rate, it would be an issue. i wouldn't be so concerned about their credibility today but if they didn't proceed down this path, it would be an issue. >> rick, it is good to get your
insights ahead of this big event. we'll talk to you soon. >> a big run for the home builders year to date as well. when do they get hit by rising rates? diane in olick gives us an answer. she covers housing. diana? >> home builders sentiments surged in march to the highest level in 12 years according to the nahb wells fargo. renewed confidence is about president trump's actions on regulatory reforms particularly executive orders easing environmental rules. 25% of the cost of a new home is regulatory compliance. big names like pulte, menard and d.r. holton. the builders caution, the jump will moderate as builders face rising rates and a labor shortage. what they say after a fed rake hike. >> sima is going to get in
position and do that report in a second. josh, you have some thoughts on the builders as we are talking about that? >> we call these breakouts in the builders in real time, about three weeks ago, we were talking about i.t.b., i.t.b. is up 400% from the lows. it is still 37% below its highs. keep in mind, this vehicle, the ctf, of home builders, came out in may of 2006. the xhb, which is a little bit less concentrated and has things other than just pure home constructions names, is just breaking out now, hasn't even really happened yet. the fact that they are doing that into a rate hike cycle should give you some end quags of what investors are thinking about. they are thinking about the potential for building, not what's going to happen with mortgage rates in the near term. >> they may not be. i am wondering if investors need to be. >> there are two pillars of the economy. with the economy, it is 70% consumer driven, auto sales and
home building, housing. we have seen home depot continue for them. now, it is amazing. the refi rate is up dramatic. i'm not talking about the interest rate but the number of refis. it seems people were sitting there just waiting and then we have the sense of urgency as you see rates going up. going out there buying homes and refinancing. autos are pretty much done. home building, a little more momentum there carried through. when you get giddy about it and pass cycles, take these to historically high valuations, is a time you have to worry. i don't think there is a lot more left. i would start taking some off the table. >> the number one cohort of age group ns t groups in the united states is 26-year-olds. we have had a huge delay in the process of house formation for this anyone group and older. that has first started to kick in now. in a lot of major markets, we are underhoused. rental prices are way too high. all that activity at the home depots of the world, that's boomers making their home so
they can stay there. that is not the wave of household formation. that is so crucial to the economy that's been put on hold. >> the upper-end homes around the country, as i talk to people around the country, they are not really going. it is more the starter homes, the step-up homes. that's where the growth has to be from. the realtors, i'm sorry, the home builders, they are light on inventory. >> let me ask you this. we are talking about home builders. in this conversation, the multi-family trade. these apartment reads, done? rates going up. if josh thinks we are going to get that trend back to buying houses. >> the rates have been hit. the yield stock vs. been hit. the fundamentals are different than the stocks. the yield stocks are going to come down as we see the ten-year and other yield plays go up. i think it is a delay.
multi-family has never gotten hit. it survived through the entire crisis. i think it still has some leg zs the conversation in the run-up to the fed continues. coming up, double line capitals, jeffrey gundlach is just moments away. one analysts confidence is growing. we'll see how high he believes that could climb. is happening before our eyes. shift in human history sixty to seventy million people are moving to cities every year. at pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha
welcome back. rally now 2% in the red. >> it has been a rough run. crude oil prices climbing today after we got the department of energy numbers. we had a surprise draw in supply, a big draw on gasoline too. can investors count on opec's production cuts to impact crude and keep them supported? >> i don't think so. part of the reason i say that, is because i am looking at saudi arabia's actions versus their words. they increased production and that contradicted what was in opec's monthly report. they decreased production. they actually increased by 235,000. we broke out of this channel that we have been in since the beginning of the year. four of the largest volume days this year have been down. i am going to sell rallies in crowd oil but not until it gets
to $49, $50. >> he is selling rallies. griz, what do you think? that critical level, right? >> i'm actually going to buy it, jacque. if you look at a chart right now, that is the 200-day moving average. if we settle above that, this market has another leg higher. even though the saudis did increase their production, they are still well within the agreement they agreed to a few months ago. >> okay. for more features now, head to the website, futuresnow.cnbc.com. scott, take it away. >> thank you so much. coming up next on the halftime property, a cnbc exclusive interview with jeffrey gundlach, ceo of doubleline capital. look at the stocks hitting all-time highs, amgen, philip morris and progressive. hey gary, what'd you got here?
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currently is. what do you think? they bumped their price target up to $155. pete, tower credit. you have been on the services bandwagon if you want to call it that. they site that and go to 155. >> what it allows them to get is some margin. when you are looking at focusing on the ecosystem and where apple is going and where do you find the growth, the growth has been in services. we all know hardware has been tougher and phone sales, even though they are record numbers, they aren't as impressive as they once were. they continue to be very strong numbers regardless of that. it is the ecosystems, services, seems like the community is now rally embracing this idea. 19% year-over-year growth. that's not bad in a margin era on top of the app store and everything else. >> i know that the services angle is valid obviously. maybe people should look no further than the repatriation.
jamie dimon says it is like qe-4. who has a boatload of money overseas? >> 2.5 trillion offshore. they are talking about a fiscal easing here of about $1 trillion if we got that on a spending bill. if you look at 2.5 trillion repatriated back to the united states, i think that's going to be huge. i agree with jamie dimon. >> i do too. >> don't forget, they have issues, as much paper as they want as 25 bips. bringing it back here means nothing to them essentially. they haven't made a big acquisition in forever. >> maybe they are more able to. >> they could have. maybe they have raised their buyback. >> they could have. >> with 25 bip financing, they could have. that means nothing to them. that's a quarter of a percent. i don't think it means a lot to them. i do think it means a lot to the economy, though. you have to be very selective.
i would love to see them make an acquisition. >> on the price action of apple, this was a stock that at the end of february, if you weren't in it, it was like a jump off the building moment for growth managers, for tech managers. rsi got to 90, which is like, as overbought as any stock could get. it is the biggest stock in the world. it was truly remarkable. rsi is now back down to 76. a reading above 70 is considered overbought. not that it can't make progress. i think working off that overbought condition without having the stock drop, keep in mind, it is right there, been pinned to that high. very positive. >> how about the upgrade cycle potential coming out of china. 2005, they have all the phones, 2017, and a new phone and the factor. that could be -- that's because we are into year two, right? now, it is the upgrade cycle. >> that's because their phones have come out with equal functionality or better functionality.
>> here is what guys like you have missed for a very long period of time, retention. let's be honest. guys like you. >> let me tell you something. buffet talked about this as well. he talked about this and sticking. this is warren buffett talking. that's why they got in. >> it is a luxury brand. you are either an apple person or you are not an apple person. people want to be an apple person. >> once you. >> narrator: the ecosystem, you are stuck and it is a black hole. look at the service map of android versus ios, a cosmopolitan conceit to be an apple person, that exists in china, spain, south america. >> this guy between us has a phone, a pad. he is the most apple person in the world. he is the apple guy on the desk. >> i thought you put the hatorade back in the fridge. >> you are wearing a lot of synthetics there. >> i want to mention quickly before we move i just want to
note twitter and the move lower today as chris saca, one of the earliest investors, throws in the towel and gets out. jason calacanis was on the previous program and said it is the worst stock in tech you could own. >> agreed. snap may be mind it at some point, by the way. i don't think it is all that much. >> don't tell that to your buddy, dave. >> davis in at 17, though. dave has some time and $4, almost $5 cushion. >> don't forget. >> okay, okay. >> sue herera has the latest headlines. >> i want to know what's in pete najarian's coffee. i think he has had a lot of red bull or something like that. >> just coffee, sue.
>> wink-wink, nod-nod. here is what's happening. a suicide bomber detonated his explosive vests inside the main judicial building in damascus, killing at least 30 and wounding many others. another suicide explosion struck a restaurant leading to seven more casualties. it all comes as syria marks the sixth anniversary of its civil war. a new duke university study says some women with breast cancer are getting more radiation than they need. it says 57% of women who could have avoided treatment or received a shorter course still got the traditional six-week treatment costing millions of dollars. a day of digging out for people living in parts of southern new york state. as much as 30 inches of snow fell on middletown, new york, on tuesday. the heavy, wet snow from the nor'easter, buried cars and made travel extremely difficult. >> a hotel staffed mostly by
robots is opening in japan. nine types are featured, including that little guy to welcome and entertain guests and also clean the lob by. human staff are available to help maintain the 140 robots on site. i'm not sure how i would feel with one of those things greeting me at the lobby desk. >> yeah, right. i don't know either. josh said it looks terrifying. >> it does, it does. i'll see you later, scotty. >> all right. sue herera. european markets are closing, the ftse, dax, cac, all finishing up. big story out of europe is the dutch election. we are following that closely as well. we'll have more on it throughout the day right here on cnbc. just about an hour and a half from now, the fed delivers its decisions on interest rates with most expecting a quarter point hike. so what will it mean for your money and for the markets. jeffrey gundlach is the ceo and
co-founder of double line capital. welcome back. nice to see you again. >> good to be with you again. >> what's the market expecting but what's jeffrey gundlayh expecting? >> you have to be on mars to think the fed isn't going to raise rates. we have been talking about this for the past two weeks. it was a big event two weeks ago. a little over two weeks ago, the probability based on the bond market that the fed was going to raise rates was down at 30%. then, mr. dudley and mr. williams spoke and instantly almost popped up to nearly a certainty. a week ago, we hit a 100% certainty. what's really interesting isn't so much that the fed is going to raise rates, which everybody knows but that the market is believing in the fed for the first time since pre-credit crisis. they are raising rates.
the bond market would laugh in their face and say, you don't have a clue on what's going on. you are not close to getting inflation going. now, when fed governors speak, the bond market is listening. the influence of the fed has greatly increased and the market, it is getting kind of old school where the marketables what the fed says. what's really important isn't the interest rate increase that we all know is going to happen. it is what happened with the fed's rhetoric. what happens to their dots an sense of confidence? do we start thinking about sequence rate increases, which is what i call old school where the fed basically says the base case is not wait and see. the base case is, we're going to raise rates unless the data changes. i think that's where we are. the fed had capitulated at exactly the wrong time, which is so often the case in this industry. right when someone is about to be right, they often capitulate.
they capitulated in october, lowering the dots, only to raise rates in december. we may be looking at sequential rate increases. a lot of talk about the yield cur curve steepening. you will notice today with the fed and yesterday as the fed redigr decision looms, what is going on. it is actually rallying. it is back below 260. it popped up above 260 on a close. that didn't cause the waterfall effect that some people said it would be. we are below 260. i think the bond market is set up for a rally coming up in the weeks ahead. >> it's interesting. i was going to ask you that very question. why do you think bonds would rally in the face of a fed which you, yourself, admit has gotten its mojo back or at least appears to have that. yet, you see the ten-year yield going below 2.25%, 25 basis
points, if not more, lower nan where it is today before starting to rise again? >> well, it has to do a lot with sentiment and positioning, why i think the plark ket market is g rally. there is a massive short position. five-year, ten-year, the whole bond market has a huge short position. it is tough for a market to go in a trending direction when there is such a crowded trade underway. why would it rally with the fed tightening? what's so bad about the policeman being on the beat. if the fed is going to look at the inflation rate and the unemployment rate below 5% supportive of raising rates, it means the case of them being behind the curve with rising inflation a year from now is much less of a strong case. when you are buying long bonds, you don't want inflation. we knew the bond market was going to sell off. in july, we turned negative on
the bond market, because we were staring down the barrel of an assured increase in the cpi to a level well above 2%. we are already above 2% on the headline in the core cpi. it may very well on the headline number go to 3% or nearly 3% the next month or two just because the effect of the oil price having gone from the 20s up into the high 40s and even low 50s recently goes through the cpi data. we know that the cpi was going to go up. you can't have the ten-year yielding 1.32 when inflation is up at 3%. it is almost insane. you need something like a wild qe program that's going on in europe. germany is a joke. their bonds yield 40 basis points or less. their inflation rate is similar to the united states up at 2%. it is a joke. the only reason that could be that way is because there is this experimental massive qe going on. we are not doing that here. so we can't have the ten-year residing well below the inflation rate.
however, we knew the inflation rate was going up to the high 2s. our work shows the inflation rate will then moderate. by year-end, we could very well be back down to a 2% or below 2% headline cpi. with that movement, that supports a bond market rally. the long end wants the fed to tighten. the long end wants the fed to raise rates sequentially. the long end of the bond market didn't sell off at all during that rate hike. there were moments of the rate going up. the yield curve flattened and flattened until it got inverted. i think that's what's going to happen if the fed goes old school again sgchlt will would y you. >> would you be a buyer? >> i think at 260. you have to use tight stuff.
we are right at the line of depth. it was going down every day. if we can hold at these levels, around 260, 265, you are in a great technical spot for a rally against the short position. the bond market is greatly hated. usually, america ket that's tma hated, gold was so hated. i am not a contrarian. people call me a contrarian because sometimes i go against the grain. in this case, i think the positioning is very lopsided and the bond market is going to rally. the long end of the bond market is a good place to be. >> be patient. let me take a quick break, come back and continue the conversation on the other side of this quick break. more with jeffrey gundlach after this.
we are talking about the big fed decision on interest rights and we are back with double line ceo/co-founder jeffrey gundlach sxwlchlt it if you think we are going to get a near term rally on bonds, that stocks and bonds can go up together? >> yes, i any stocks and bonds can go up together. one thing people have to watch out for is it seems like risk is starting to get risky. we have started to see some tired action in parts of the credit market, the stock market is going sideways these days instead of going up. the junk bond market, the jnketf. i look at jnk. risk is getting risky. the thing about credit, you don't really get the big blowout in credit in terms of underperformance and negative returns unless there is a recession coming. our work at double line, we don't see a recession coming at
all. back last summer, there was some dicey-looking stuff. the leading indicators were flirting with zero year over year. you had the pmi of industrials looking recessionary. all of that changed with the election. none of these indicators look recepti receptionary. gdp was just revised down at 0.9. first quarter gdp has always been weirdly seasonally weak. we haven't seen more than .5 real gdp out of a first quarter in years. even if we put in kind of a pung print of 0.9, it is actually an improvement over resent years. as i say, leading indicators are actually looking strong. the pmis look great. global surprise indices are rise riseing in a synchronized way. it is hard to be negative. i am talking about a
counter-trend rally. you pointed out something like 30 basis points, 35 basis points. that's not exactly headline news. that's an amount of interest rate decline that wouldn't be consistent with fear, deflation, recession t is just a correction out of what was a pretty big rate rise with the rates doubling from 132 to 264 on the ten-year. it is due for a rally. i think the stock market continues to grind higher. we talked about this november 11th, judge, three days after the election. i said if the s&p goes above 2200, it's a go-with move, if it closes above that. it went up another 10% above that level. that was a good idea. i still think you are in the go-with mode for this. the problem for the stock market will be when we get the next leg up in interest rates. everybody is looking for 3% on the ten-year. i believe that is going to
happen but first a rally. the pressure will come when interest rates are perceived to be rising again and creating some competition for the stock market. watch out for the fed today. if they really -- i'm a little worried they are going to be feeling so confident that the market has given them the "good housekeeping" seal of approval. they might come out on the hawkish side. that would be good for the long bond. more of risk is getting risky in the near term. i like holding into the next rise. >> your view is not away from the view of david temper, who made the case on cnbc next week, wake me up when rates get to 4%. there is not much in the way to hold a stock rally back until you get to a point where the ten-year yield becomes somewhat worrisome and inflation picks up to that degree, a degree higher
than the 3% that you mentioned would cause you to at least pause for a moment. >> i agree with that. i think, and i've been talking about this all year, i think investors should use the relative outperformance of the s&p 500 and other indices in the united states to diversify into more global investing. what international stocks and bonds go on a terror and outperform the u.s., analysts come out of the woodwork recommending buying foreign things after they have gone up. they usually try to frame it under the trojan horse of prudent diversification as a justification for going with the momentum trade. i work the other way. i think the valuation in the united states seems very high on dr. shiller's cyclical adjusted p/e ratio, the cape we use in our world beating smart beta equity fund which has done great every year since we started it. that ratio is a value-based metric.
the united states is very expensive on that ratio versus europe, versus emerging markets, versus other developed countries. i think this is a good time to be using the strength of the you sfa states to do that diversification. it is already working. my favorite stock market, india, i have been touting now for years, is doing great. emerging markets broadly are doing great this year. european stock markets are doing fine this year, emerging markets, the eem is doing very, very well. i love it when something has underperformed for a very long time like eem and starts to quietly start outperforming. it is really a great time. you are not catching a falling knife. you have got a very cheap valuation and it is already sort of working with the tailwind. this is a good time for investors to peel off a piece of their s&p 500. we talked about this in november and to take this strength and use the diversification when the valuation is on your side as
opposed to falling victim to that trap of buying something after it is up a lot. that's how i am kind of looking at it. i kind of agree with tepper. i don't agree with him, he said short bonds. i think it is fine to short european bonds. i think it is a joke where european bond yields are. once that policy changes, the whole thing is going to explode. there noise way rates can stay at these levels. u.s. bonds, i think it is a big mistake to short them. it is fine to be owning stocks and i would diversify into global investing at this time. i think the dollar, everybody loves the dollar. so many investment houses, number one conviction idea, for 2017, was go long on the dollar. the dollar is not going up. the pat argument is, hey, the fed is raising rates. they might go old school sequentially. there was a good technical case
made on "fast money." that guy, i think his name is carter. >> carter worth. you are exactly right. >> he does a great job. i like watching him. he pointed out, it is just not true historically when the fed hikes that financials outperform. the financial outperformance is greater when the fed is not hike than when it is hiking. he used a six-month horizon. there is always a mid about fed hike. it is definitely good for financials. that's not true necessarily if the yield curve flatens and also that it is good for the dollar. that is not historically true. if has been three decades since there was a real dollarable market. a dollar being sideways, which is my view. i'm not a bear on the dollar but i'm certainly not a bull either. that's very good for emerging markets. where you run into trouble is when the dollar is really rallying sharply. that's not happening. that's why emerging market debt is doing fine. they are doing very well. i think that's going to continue with the dollar bulls being just
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it's all about the fed. chair yellen's news conference. we're all over it with analysis and reaction, including janus' bill gross. are you ready for a 2,000-point drop in the dow? what a, quote, normal correction would look like now because we've risen so much. law of large numbers after this break and more of jeffrey gundlach on "halftime report." instead if getting caught up with the crowd, the investment managers at pgim take a long term view, teaming specialized active investing with risk-management rigor, to seek out global opportunities. we manage over a trillion dollars this way, attracting many of the world's leading investors. partner with pgim. the global investment management businesses of prudential
>> back with double line's jeffrey gundlach. >> one of the few sectors not doing well, reitz. what yield do you want to see before you get interested in that area? >> i'm not interested, really, in that area. i mean, it's a very diverse sector. one i've own ed is doing well. things that are mall related are in a bear market forever. we all know why and what's going on there. yields -- the rally i'm looking for in the bond market would be a good point to sell reits. when rates rise, reits typically don't do real well. i'm not a buyer, certainly not a brick and mort rachlt reits at all. >> i know you were in the
trades. this is going back a couple of years. is that still the most over-valued space? >> i guess so. anything that's a negative yield, obviously, is -- will be viewed as an historical mutant of, you know, grossly contorted. what's going on there. just crazy. s i was in japan and talked to the guy that ran the biggest pension fund over there, the head guy. and i said do you own any of these negative yielding japanese bonds? he said no, nobody owns them only the boj owns them. obviously that trade is 100% technical. nobody in their right mind would own them. certainly the german inflation rate looks to be high. that's up there as a poster child as one of the most overvalued things in the
market markets. >> is there something within the equity market or an equity market? >> not really sectorally. there are names, things that are ridiculously overvalued. i continue to think that chipotle is a good short. i've made a fortune on it. it's unbelievable what the pe is. away from specific names, the best thing to be short is european sovereign bonds. >> i want to be clear, though, you're short, as we speak, on chipotle? >> yep. yep. i have been for a long time. i lost money for a couple of years short and then i increased the short by eight times near the top. and it worked out pretty well. >> we're watching the stock right now, barely hanging on to 400 bucks of the. >> jeffrey, on the european theme, when do you think droggy
gets off the eu? >> soon. i think soon. i think soon. i think it's getting to the point where the inflation surprise index is sky rocketing and the gdp isn't really that bad anymore. and the deflation argument isn't there anymore. you'll be hearing rhetoric about reducing that support program. that support for the sovereign bonds could be reduced. probably not eliminated, but reduced here in 2017. and that almost assuredly with u.s. rates towering over european rates with the inflation rates nearly identical means that you're ultimately going to see that big problem in the sovereign bond market in europe. let's not forget that it's already started. those rates bottomed in july as well. they haven't risen robustly, but they're up too.
the trend is clear so i think droggy needs to get with reality with what's happening with the inflation rate. >> you predicted that donald trump was going to become the next president of the united states. you got bullish of stocks after that. are you surprised when you sit back and think at how far the market has rallied on president trump's perceived agenda and the hopes its pro-growth, pro-market, proinvestor, et cetera? >> i am surprised with the relentless nature of it, with very little setback whatsoever. i mean, it is typical for the market to rally in the aftermath of an election, when a new president comes in. but the hope that is supporting the market seems really fairly incredible, when you think about the fear that a trump presidency was attached to prior to the election. and how massively that changed.
people seem to like bashing trump, like with that tax return deal last night. the market is willing to hold on to hope even though an awful lot of policy, you know, implementation is in the future and not already on the books. the big thing, of course, is deregulation and tax cuts. they pay a lot of taxes and tax cut is supportive of the financials going forward. we owned the financials in the summer into december. we sold them broadly in december. it's been a good move. it's a myth that financials are on a tear. they're just performing with the market over the last three, four months. when we get to higher interest rates later this year, financials will outperform again. >> jeffrey, i really appreciate your time today. we look forward to having you back.