tv Fast Money Halftime Report CNBC May 22, 2017 12:00pm-1:01pm EDT
this is going to be the ultimate test if whether his deal making skills can translate. east there talking about a very ambitious peace deal, already criticize iing the last deal on iran. >> a couple of lesser loved tech stocks having a nice morning. go pro up 6%. blackberry, up 4. >> over to the judge and the half. a top trade this hour, where's the love? why even with stocks hovering near new highs, the evidence says investors still don't trust this rally. what does it mean? with us today -- let's begin with stocks. higher this hour. the s&p is now higher. for the month of may. a pretty good picture to tell today. yet, when you had a blip of fear in the market last week, people couldn't run out of this market
fast enough. why is there a lack of trust? >> i think every day, there's negative headlines. you talk about the middle east. north korea. what's going on in washington. the trump fade. there's so much negativity in this market, but yet, we saw strong earnings, housing is strong. you've seen employment strong and then if you add to that, this rush of indexing with all the money coming up to push up and propel the stocks, if you are taking the behavior rall view we do, don't p pull out yet. >> it's a slow creep higher. is it? is is the premise correct? >> i feel like we've been stuck here for many months now. you know, we did have that sell off wednesday, but it was over the next day, we were back on the rally. if you were going to have fear, i think you'd have follow through. look, love and emotions and their opinion, it's going to vary one from one to the next. i don't particularly trust this market, but that's been opinion. why? because the earnings was priced in nine months ago and i think
the trump agenda is rather wobbly, so i don't think i see a reason for us to go higher here. having said that, the earnings do place a floor on it. really, we're going to be stouc in this range of 23.50 to make get above 2400, but i think we're stuck, really. >> josh. >> here's what people are doing with their money. i agree. love, trust, all of that. you read what robert schiller had to say. everyone's comfort bable and believes there could be this sudden crash. that's a really interesting mix of emotions on the part of the investor class, and maybe they're not wrong. but look at price action. utilities have been bumping for for months and months, they just blew through that. staple, not as much, but the same thing. blowing through resistance, now coming back and making highs. these are the types of sectors that you see start to react to the upside when rate hike expectations get pushed back r
further and look at j and k. super bullish chart. lot of accumulation there happening and going much hire. that's the equity crowd. not the fixed income. the equity crowd is no longer thinking two, three, four rate hikes this year. that could change, but that's what's going on now. in the meantime, you have this incredibly bullish thing happening. another 52-week high today. >> you keep talking about the dpraetest stories to tell. >> this is where the money is being made right now. outside the u.s., 2-1, 3-1 versus what's happening in the s&p and also, big flow is now following that performance. and lastly, i want to talk about the chips. because we have this moment last week where the smh, semiconductors, was down almost 4%. everyone was freaking out. it, that was the blow off. take a look today, right back to year highs in the semis. almost as if nothing happened to your point. so, there are areas where people are making money and now, you're starting to see some of the areas where people are chasing yield.
come back at the favor like j and k staples utilities. there are all kinds of things happening here, but i don't think the panic of last week was following through it all. >> mike was at the new york stock exchange for us today. mike, the rally might not be hated, as it had been described for so many months, but it sure as he can doesn't feel loved. >> scott, doesn't feel like there's a depth of conviction. we have years ahead of us of a generous market, what the guys are saying is right. they're in, they're involved. equity exposures are high. fund flows, they did get a bump into equities, yes, it's all passive money, but just the past three weeks, the market stalls, wobbles and you have three weeks of outflows. the professionals say yes, this tape is strong, we're going to play it until it runs out. individuals are saying sure, maybe i can see it going higher for another year.
that's not a lot of valuation support and there's the sense that it's late, that we're just playing this kind of final stage overshoot. so that's where the tension comes in i think in terms of aggregate investor psychology. >> so, what does this mean? much ado about nothing? something to keep your eye on? any bit of rapid rise in vix or some sort of turbulent idea, people are running out of the mashlgt as fast as they can. >> not so sure the vix means what it used to. i think we're still stuck in that. with the flows we're still seeing, in terms of passive flow, i think it's saying something tos vix as an indicator. >> does the whole premise, does it make the rally more suspect? something to worry about? are we making something out of it? >> despite the concerns, there's complacenc complacency. i put up some hedges last week and felt like a genius for about
a day. long duration for me, but short otherwise and two days later, i'm covering my hedges because i thought the present came off a disastrous week with everything that could go wrong going wrong and the market would finally take notice. guess what, the market has sort of become immune to that and every other headline that doesn't portray earnings have been b great. and earnings are great. the it's a global economic, but definitely, a good shift and that's what the entire focus is on, so, where are xwrou you going to be? in credit, which is trading from 220 to 240 or equity, which gives you some upside there. i was with lee cooper for breakfast on friday and for the first time, he said he thinks ek wii theties are fully valued. usually, he said they're not tremendously undervalued, so, that's what everybody is dealing with. will earnings take it to the next level? a lot of the money is going outside the u.s.
europe still looks very atrack ty. we're seeing their manufacturing index, everything else. employment coming down. manufacturing going up. >> i think a lot of this conversation has to do with your view on why we're here, what got us here and what can get us to the next level. where the market now is so reliant on the trump agenda or simply the trump agenda was the spark that got things going and it's all about earnings. you're doubtful of where we are. >> you said you don't trust it. >> i don't, but i'm in with both feet. i did say i think the stock market is stuck. i think the ten-year is a representative benchmark for bonds is stuck in a range, 220 to 260. oil is stuck. so you've got to look at this. you know these things are not going to be stuck forever. do they break to the downside or upside and the one thing that's going to the upside and making more money for equity is u.s. economy. the u.s. economy is strong
without showing signs of inflation. you've got good labor markets here. industrial production doing okay. the dollar's weakness is help ing the u.s. if you have to make a call of whether to be invested because you think the market's going higher or whether to get out because you think it's going lower, you just look to the u.s. economy. >> what often hits the market, the decline in the markets and bare markets are caused by are rapidly rising interest rates to areas that make them sort of, not dcon deuce toif a growing economy. that traditionally has been somewhere around 3 to 5%. so as i take a look what can hit the market and what the downside is, sure, it could be trump, an impeachment, but if pence says i'm sticking with the programs, i think we stand a better chance of getting him through, but you have to think about that. >> i think we're ignoring the elephant in the room. "the wall street journal's" lead story today on markets was the
fact that 27% of volume generated on the stock exchange over the last year with coming from funds that are divorced from any of this nonsense about i trust trump or i believe in the agenda. literally, these are funds that are trading price and sentiment and data point, but not on feelings and that's double the representation of the market from 2013. in the meantime, you have this projection going on. you have people who are saying why should i be excite d about bull market putting me out of business? when you sigh 110% of the flows going to passively managed funds and you see zero net investment dollars going into active, then see them start to lose on that basis, why should people be excited about the rally? it's not that it's a hated rally because it's going up. it's because it is not being participated in by wall street in the way this it used to in prior eras and i think there's
some projection here and you can't trust this. it's all machines, index and passive. we've been hearing about this for five years now. >> and probably been hearing about it in different form for 50 years. michael at merrill has a great point on this, too. all the flows going to passive means the professional active manager is either suspect ed th move or really is pitching for a down market because they think that's where they're going to show their value. then you have individuals plugged into an assetal rati allocation. buying the indexes and all things equal, they'd like to market to go down so they could buy it at a low er level. you don't have the same lechl that's attached to hire prices. also, i guess, i don't know if i can ratify that volume number that the journal's putting out there, but it's clear when you watch this market, how it remisses quickly and sit there is. it just sort of gets to a level and hangs out. >> that's a reversion to the mean of a typical quantity
model. that's why you'll see the rotations. >>etf money. everyone that sits in my seat in this industry and we are the fastest growing segment, we have the same math in front of us. we have boomer clients, hopefully more on the earlier yeend than later, but still, th have a one in four shot if they make it to 65, of make iing it 95. they might have 30 year of investment for them. when we see the, it just makes our math look better if we're add iing at those levels! what causes people to -- >> just to jump in, one other piece of this is that you will not necessarily have to see some big public excitement, you forarea phase before it ends. let's not expect that to be the case. >> you know u, but we've heard
these things about why the market is hated. wasn't that long ago, it's driven by buybacks. that's why the market is going up or rates. there's always a reason. >> or a select group of stocks. those are symptom, things that people are citing, they still hate, they still wish it wasn't happening. >> do you want to go to the other side and all of us can jump? >>. >> no. >> what role does the political conversation play in the reason why the rally isn't as loved or trusted or whatever. >> josh calls it nonsense, but ds not. >> just say federal government you knew if there was uncertainty over the timeline of key parts of the agenda was removed, and you knew you were going to get tax cuts only -- >> i agree, there's an impact. i think it's nonsense as nobody with a straight face thinks they can trade the next statement that may or may not come out of trump's mouth. >> you're seeing it, it should be 2-7 to 3-0 if we knew the
agenda was going to be there. they're flat for the year, so you've got this rotation within the market. you've got the bulk of what happened last year, now flat. and staples and all the other defensive and multinationals doing really well because the dollar is is down. >> the reality is the economy is improve tog a level that people should trust the it more. it's built on fundamentals. >> on smoke and mirrors of trump. there are real possibilities of his agenda. >> this -- >> very good point and i want to acknowledge that you said and you've been saying it for a long time about the quantities taking over. it's a true stachlt what's also a true statement is there are a lot of guys like me. i'm an active manager. i'm a fundamentalist. i'm out there, looking at individual stocks and what sarratt said a minute ago is really important. there are a lot of different segment of this market having nothing to do with quaunts, a lot of these markets that are performing differently. growth stocks are having a great
year. value stocks are flat. i don't care if it's financials, energy, there are a lot of places that you can invest that has nothing to do with how expensive the market is perceived to be or not. >> that's not what -- >> just giving an alternative. >> i think you guys are still out there and i think that typically, you do have your moments to shine. but when you actually regress and look at when are the periods of time that active managers distinguished themselves, they need market correction, cash can't be a drag. number two, they need some degree of small cap performance regulto large cap and number th they need international stock performance because they tend to own large caps that are not in the s&p. so, you have a few of these ingredients. they're set up for potential. >> then we are positioned because the last five year, you had a 20% run in the s&p. >> michael, thanks so much. for being a part of this
conversation. see you back here soon. check out mike's latest view on the market. cnbc.com as well. there are always people who are going to point out small caps are lagging. that's a negative. transports are lagging. but then if you look at what's taken place in tech and the nasdaq 100 and the stocks that have absolutely outperformed and ripped, is that a sign of what they have, greatness in the market or point of worry? i see notes being passed around now talking about nascent signs of early stages of an overshoot. >> we said that in '14. during fang. and then we had a vet and it took 22 month, we all lived. wasn't the end of the world. i do think that what those names have in common and it's not just google, it's a bigger group. they have absolutely no need whatsoever for anything that the white house might or might not do. however, the cherry on top is if there is repatriation and p if there is some higher consumer spending because there is even
more tax reform, it would be good for those stocks, but i promise you, tim cook is not sit ng a room right now hoping crossing his first things that anything from the white house gets passed. >> nasdaq 100 has closed above its 50 day moving average for 113 consecutive sessions. if you talk about these stocks, tons of cash flow. the secular growth is what's keeping the bottom. if if you have option value on these, it rates move up, their cash makes them so much money and if taxes come back, they'll have more money. that's what's hold iing up a lo of these stocks as well. >> north america chemical attack is up three quarters of 1%. is yet again the outperformer. even with the dow up 10 points and s&p. >> on their plans regardless of what happens in washington. >> but the numbers with the nasdaq outperformer, you have to be irresponsible not to regard
risk being in the market somewhere. not saying you go to cash. but you can't count on stocks. multiples going from 50 times to 60 times to 70 times. just no great case for multiple expansion like that. maybe some improving economy in low rates, sure, but otherwise, you have to be aware of the risk and you can't hope that decades bear you out. we were in a decade of a down market basically, a ten-year s&p period there, where the market did nothing. >> how long can you bank on this trend continuing when some like this -- over at mkm, who watches the technical, starts to wonder about where it is. >> you should be doing to responsible thing. the s&p had a lost decade. from 2009. made zero. because you start off that period at the highest valuation in history. and you should not if we get toward that level, you should not expect to be bailed out by something. you should expect low returns
and the answer that intelligent people are coming back with is okay, i need to do something outside of just the best five names in the nasdaq. that's why you see now flows being driven to other areas around the world. and actually, you made money in small cap value from 2000 to 2009. a sector nobody wanted in '99 and 2000. >> would you rather that be with stand and a major market decline? >> over what time? >> come down, well, over you know, anybody could see on five years and ten years. >> can't see hoout, but asset allocation is the art of being humble is is to say i can't see out. however, i think if i buy cheaper thing, ultimately, i'll do better than the people who were just buying the most expensive. >> i think you need a balanced port fofolio. but buying cheap e cheaper for a long time, hasn't helped you. ford was cheaping for a long time, now, it's down 40%.
who would say ford wasn't quality? >> we are going to get there. certainly. coming up. a lot more ahead on the halftime report. ford's big move. relace placing the ceo, putting the man in charge of smart emotion mobility in the driver's seat. and see which auto stocks our traders see is the one you want in your portfolio. plus, the defense stocks. which ones are the best bet after the huge deal in saudi arabia? and blackstone on the move. up big today. see how high the analysts think it will go. the halftime report is back in two minutes. at fidelity, trades are now just $4.95. we cut the price of trades to give investors even more value. and at $4.95, you can trade with a clear advantage. fidelity, where smarter investors will always be.
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the big shake up at ford. what is next? busy morning, phil, you've within in the middle of all of it from the get go with your reporting. >> scott, and this is one of those days when ford is going to say so much firstablety because they're in for some turbulent times as they adjust to a new ceo. out is mark fields, easy to see why when you look at happened with shares. he took over in july of 2014. the stock was down more than 35% and during that time, he was trying to reposition the company
to go into growth areas like autonomous drive vehicles, well, today, bill ford talk ued with us about why he believes this is the time for somebody new to reenergize this company. >> we need to be quicker in our decision making. we need to have clarify in our message iing and communication that's something and we need a leader who's transformed a company before. >> who is that leader? this man. jim hackett. a one time board member of ford. long time ceo of steel case, the office furniture company and for the last year, he left the ford board last year to start up or oversee ford starting up the smart mobility division, the division that works on autonomous drive vehicle, mobility solutions and now, he's going to be bringing some of that along with a desire to redo this company. reposition this company to make it leaner, more nimble, faster,
see if it can move fast enough to catch up in terms of its share performance relative to certain tech companies and certain auto dpacompanies. ford versus tesla over the last couple of year, when you see the split in performance in particular, all of 2017, no comparison, ford has done nothing. tesla, we know the story there. guys, ford will tell you, this is not about trying to compete with tesla because they're trying to do their own thing, but make no mistake, when you see tesla with a larger market cap than ford shares, that has an impact this terms of ford saying we've got to make some changes. >> i just don't get it, phil. i posed this question on twitter. if you cannot grow your stock price, one that has been down, up 30% over the last three years, at a time when auto sales are at a record high or 17 or 18 million vehicles annualized, how the hell can you grow your stock price when sales have piqued, no matter who's running the
company? >> that's the argument you hear from a lot of analyst, time and again when i talk with analyst, especially on the sale side, almost all say the same thing. it is hard to get people intere interested, not only in ford, but other auto stocks. their belief is this is as good at it gets for these guys, but we've never seen them manage profitability during a recession. that's not to say we're entering into a recession, but we know at some point, there will be a recession and can the established automakers then show they can grow profits in that environment and that's why it's hard to get investors excited about these traditional automakers! you alluded to it. they have been spend iing a lot. to try and catch up, fields has been sort of spearheading that, even warning it was going take a hit to ford's profits. >> so, you have the guy who believes in what the future can hold. spending heavily to reach that promised land. and yet, it's not good enough.
what is hackett going to do that fields couldn't? >> well, the belief of bill ford and the board of directors is that hackett will make ford move quicker. that's a big task because you're talking about a company that's more than 100 years old. there's a lot of institutional bureaucracy there. as much as you want to say we're quoing to streamline, move quicker, not invest in areas where we're not getting a return on our investment, it's a lot easier said than done, now, mary barra has been doing some of that at swren motors and gets a lot of credit, yet you're still look at two large automakers and what jim is going to try to do at ford is to say we can move faster and i'll prove it to you. >> good reporting. thanks for coming on. phil lebeau in chicago. guys want to comment? >> we own gm and ford and gm is one of our largest holdings. ford is a good, solid holding, but the difference with this new
ceo, you're looking at a change agent. what he's done in the past is why he's in the position. >> the harbaugh finding was so good. >> when he was at steel cage, he cut thousands of jobs and actually looked and saw where the furniture world was going and kind of got them to where they are. he's a mobility. so he's part of the future. yes, you have u to cut cost, going to have to streamline your company. you have a core product. f-150s, really good product, but not getting any credit at seven times earnings. a payout rh owe and 5.5% benefit yield. >> what if he's right about the feature and he's a visionary, i don't believe that, fine, but say that's the case. turns out to be the case. the future is probably a lot less automobiles on the road because what every technologist in silicon valley knows is one, the average car is it zit ng a parking lot or driveway for 90%
of the time, which is absurdly inif i should and two, if we're going to make better use of the autos produced, maybe the better side of the business is in things like maintenance and software and there is no profitability to make the physical iron carriage that used to be b a profit bable product. >> i think what you're looking at here is when you look at these companies today, this is very different from '09. they have solid balance sheets and you have an intrinsic value here. i don't disagree. i think the future is so uncertain. nobody's giving these guys any credit because you haven't seen consolidation, cost cutting. you've seen, let's get back to where we are. but nobody cares about that. >> forget the downturn to the future. hang on a second. >> i think there's not a lot of downside. you're getting 5.5% dividend neeld to keep the stock f. you get a positive movement, he cut, look what gm isndia, out of south america. if ford can do these things, so
maybe they do that stuff. >> i didn't meanmy is jimmy is. >> instead of -- wait, wait, instead of having this argument back and forth about whether people are buying cars or not. i invest ed in these stocks 20 years ago. saw this exact same thing in the middle of the tech bubble when everybody wanted to own web van and e toy. actually, it's not and that's a mistake. and it's a mistake to think people aren't going to buy cars js buenos aires tecause the las have been an awful job market for me lineals. don't use the word had. you can't prove that. >> can prove that. hold on. >> households are being formed -- as for people borrowing each other's cars, i understand the argument about 90% not being used, but when families are formed and you have your kids and you want their
sippy cup in the holder -- >> serious question. do you understand that apple makes 90% of all the money being made on cell phones and everyone else is a marichal producer, literally paying their workers with rice and -- >> that's not true. >> barely assistance wage. no one is making money except for apple because if that's what happens with automobile, because if that's what happens, no, i'm talking about the phone, not components. if this is what ends up happening with the automobile where the operating system is where the profitability is, do you think that someone in detroit is coming up -- >> hang on. for a second. i think it's a really telling comment that you just made. i wonder if the suits in detroit are saying the same sort of thing. >> apple when talking about ford or gm. >> that's where the puck is going. >> scott, you're -- gl. >> guys -- here's why you're on.
you're comparing this -- >> tell me why i'm wrong and you're right. >> i'll tell you. >> good. >> here's why you're wrong about why this is no different from last time because last time, what you were talking about was an investor movement into higher pe stocks playing a momentum trade. what we're talking about this time is an attack on their business model. where you're going more to sherry. >> i'm saying that's wrong. renters are going to buying houses now. you just saw that movement. >> no millennial will buy a car. >> they're already buying a lot of cars. >> they had pique auto sales. >> we were at record sales. >> we were at record sales s. >> two months ago. we have been for the last few years. >> scott, he's right eventually,
but you'll see -- >> i didn't call. if you cannot grow your stock price during a period of record auto sales, when the heck are you going to grow your stock price? >> here's issue with ford. i applaud this choice because it has been a major performer in the stock, however, he seems to higher people with the exception of malawi, he promoted the head of u.s. sales and the head of european sales to be b head of global sales. >> but this is an industry out. >> he's an outside coming into a business where he was in a business before where he cut co cost. >> talk k about the heads of sales in the u.s. and europe. they've underperformed. >> he's a visionary from the furniture industry. don't question it. >> he's a cost cutter when literally, the only path to survival is spending more. >> the technologists, they put in charge of the mobile unit,
which is ridiculous. >> this is proof a lot of people are talking about this one today! trades on defense stocks, just ahead and we'll do that in our blitz. dow's up 94. back after this. hey, i've got the trend analysis. hey. hi. hi. you guys going to the company picnic this weekend? picnics are delightful. oh, wish we could. but we're stuck here catching up on claims. but we just compared historical claims to coverages. but we have those new audits. my natural language api can help us score those by noon. great. see you guys there. we would not miss it. watson, you gotta learn how to take a hint. i love to learn.
here's what's happening. a bomb blast at an army run hospital in thailand injured 2i people. it came on the third anniversary of a military coup. no one claiming responsibility yet. benjamin netanyahu tried to stop an israeli lawmaker from taking a selfie with president trump. mr. trump began shaking hands with a long line of dignitaries upon his arrival. when he reached the man, the israeli took out his phone and took the selfie despite
netanyahu's objections. cbs saying good-bye to sunscreens with a factor under 15. it is a fda's minimum recommendation. the american academy of dermatologists recommends a 30 rating. and clas rall lowering statens made do more harm than good for seniors over the age of 75. they found no significant differences in heart disease rate, but a slight increase in the risk of early death among the oldest patients. over to brian sullivan with what's ahead on "power lunch." hi, brian. >> hey, sue, thanks so much. ford's future shifting gears. they're replacing their ceo. that stock down 30% in three years. what is next for ford? plus, we highlight the specific american companies signing big deals on the president's trip to saudi arabia. these are stocks you've got to see and searching for the next janet yellen or ben bernanke as
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>> we don't. we missed this. but if you're going to look for a bupullback, but you've good t good tail wind. >> i didn't meanmy. >> this is a pretty bold call. obviously, it's in the mall space. look, it trades cheaply on earnings. it's close to selling at book value, but here's the thing. if you're going to be in the mall, you've got to wonder about a $500 million market cap stock. that's really risky. only for the not so faint of heart. >> i just realized it's -- heart. what about hardt? got to give props to hardt. >> who talks -- like the third partner gets left out. >> merrill lynch pierce and smith. we don't talk to that. >> that's how we roll. amgen is under pressure. that's not good for a stock, 153 bucks, down three bucks.
>> the partner stock, a company is getting hit much harder. a bigger deal for them than it is for amgen. really the issue is is that there was some increased cardiovascular stuff. they disclosed it. maybe that will have some impact on who this gets prescribed for. it's to prevent bone fakihturra. i don't think it's anything earth shattering. i continue to think this is one to have better names in the space. >> weiss, want to talk to us about blackstone? announcing plans to create a $40 billion infrastructure fund in mostly at u.s. projects. >> and clearly, blackstone is participate, but the bigger story here is steve schwartzman is the main adviser without a htitle. it will also benefit private equities. a few concerns about what they're going to do with the real estate deduction. i think this should allay some of those fears. >> sarratt, you own the stock?
>> we do. it's a great company. over 300 billion of assets under management. ten times earnings. most are valued at 20 times. that is good catalyst to quet the stock moving. j.c. penny shares getting a boost today, but down more than 40 this year. our question to the trader, most importantly, one trader in particular. whose name happens to start with jay. >> is it feeding time? >> when is it time to throw in the towel on a stock? jim will tell us next. >> i thought josh because -- erp all night. she said the future freaks her out. how come no one likes me, jim? intel does! just think of everything intel's doing right now with artificial intelligence. and pretty soon ai is going to help executives like her see trends to stay ahead of her competition. no more sleepless nights. - we're going to be friends! - i'm sorry about this. don't be embarrassed of me, jim. i'm getting excited about this! we know the future. we're going to be friends! because we're building it.
we're back on the halftime report. shares of j.c. penny are higher as the company starts its liquidation sales at more than 100 underperforming stores. hey, courtney. >> hi there, scott, so this location is one of the 138 stores that they have identify ed that will close by july 31th. 883 stores though will remain after that. i went inside and took a little look around because today is the first day of the liquidation sales and i have some photos and videos to show you i shot on my phone before we were asked to leave. they are working with liquidation expert hill ko to conduct the sales and that involves looking at every store's data when it comes to their sales volume. how quickly that can sell, the categories, how long and at what
price it will take to sell everything inside the store. right now, the discounts are about 40%. that's pretty typical. but they should get deeper as time goes on. all the fixtures are for sale, too. things like racks and shefling, even file cabinets from the office. there's also a sign showing shoppers where the nearest store will be at the cashier if they want to continue shopping in store once this one closes as well as directing them in line because retaining shoppers is really important. in some case, high price items are removed from liquidation, but at this one, the appliances are still there and they're 40% off, but they could go, like everything else, for as much as 85 to 90% off towards the end. back to you. >> thank you so much from new york. j jimmy, you're inside the stock. when do you sort of even think about maybe getting out? >> well, in a general sense, got to know -- >> if ever. >> you got to know why you got in in the first place, your
thesis for buy iing the stock, then be honest with yourself about whether it's changed. so on j.c. penney, i got into this after the ron johnson foray. i got in because i saw improvement in the cash flows and projected that was going to continue and it has. just today, they're retiring $300 million of debt early. they retired another 200 million earlier this year. that's 500 million of debt retired in the first five months of this year. that meaningfully reduces their debt. their cash flows quarter keep picking up. free cash flow and ebitda. so what saying, first off, i know why i'm in it. it's for the cash flows which i see increasing. the debt has been bought back and let's use numbers on this. debt that retires in the fourth quarter of 2019 p for j.c. penney trades at 3.4%.
an unnamed come ppetitor, but w know who it is, has similar debt retire ng the fourth quarter of 2019. trades at 18%. there in lies the difference of where cash flows are improving. and where they're improving deb situation which remains a central part of your thesis doesn't seem to be resonating enough with investors to raise the stock price. >> that is true. >> so why will it ever? >> it's a good question. it's a fair question. and i can't tell you when it's going to and nobody can. bhfr we talk about companies in any industry and the quality of their earnings, what are we talking about? cash flows. that's what we're always talking about. cash is the oxygen on which any company survives. cash building, cash growing here. i can't tell you when, scott, i know that at 4.7, and i've said this many times over the past two weeks, at 4.7 this is a buy. i know you think i'm out of my mind. >> when did you buy the stock? do you remember the exact price?
>> i've been in and out of it the last couple of years but around a 6.20 average cost. obviously i'm down. i'm not selling. my thesis has been confirmed. >> when you take in new client money are you putting new money to work in jcpenney? >> yes, i am. >> it's not just existing clients in this? >> yes, i am. i can't be any more demonstrative in saying. >> we get it. and i promise you i'm not trying to -- >> that's okay, just bring it. >> i'm not trying to embarrass you or anything, i didn't ask where you got in to do that. you obviously have a lot of conviction on it. some of the smartest, richest investors on wall street have had a tough time pulling the rip cord. >> and, again -- >> until it's too late. >> you have to know what your thesis is and you have to be honest when your thesis changes. if you go back on this name, there was a thesis that jcpenney could migrate to be a
nordstrom's or neiman marcus. that was clearly not the case and that's when all those investors threw in the towel. what if technology gave us the power to turn this enemy into an ally? microsoft and its partners are using smart traps to capture mosquitoes and sequence their dna to fight disease. there are over 100 million pieces of dna in every sample. with the microsoft cloud, we can analyze the data faster than ever before. if we can detect new viruses before they spread, we may someday prevent outbreaks before they begin.
[ inhales, exhales ] [ announcer ] cigarettes are not just dangerous when they're smoked. [ rat squeaking ] they're dangerous long after. cigarette butts are toxic. they release chemicals that poison our water... and harm wildlife. and millions... are polluting our environment. [ sniffing ] [ seagulls squawking ] qualcomm in focus today. that stock is higher. jpmorgan upgraded it to overweight. you both own it. we already got on you. >> this is another roller coaster stock. the time you own a stock like
this is when you're having issues with a supplier like a apple did with nokia. it has 14 times and they're about to make their largest acquisition which the market is telling you this is about to close and when it does it diversifies their chip business into something other than just mobile. this is going to be a good thing for the stock but a lot of people will not buy it until, "a," apple is over and the acquisition. >> jpmorgan says you try to look past the risk of the apple dispute and focus on the valuation. and that's what the call is. >> and history tells you, and we've been talking about when this happened the stock was below $. it's $58 or $59 now. there will be negotiations but i think it will come through and the stock will head higher after that. >> how comstock come stockholders, the bulls are
value investors and they like the royalty stream and they like, i don't really know, and then tech people don't talk about qualcomm at all. >> the bear case is what apple is going after the margins will go down and down and down. >> on base bands? >> the way qualcomm makes its money. >> what's next? what else are they doing? >> to your point i remember owning the stock in 2011 and had an $80-$85 target on it. it's never gotten there. i agree it's a good trade because of apple. >> you'll have to see it on cnbc.com. >> we'll be right back. question you ask, but one i think with a simple answer. we have this need to peek over our neighbor's fence. and once we do, we see wonder waiting. every step you take, narrows the influence of narrow minds. bridges continents and brings this world one step closer.
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welcome back. in a matter of moments the president of the united states, donald trump, and israeli prime minister benjamin netanyahu will make a joint statement, not sure if they'll take any questions but we will be there live just in case they do. we expect that to happen in a matter of minutes, probably very early on in the next hour here on cnbc. the next few hours up until the close, your final trades. what do snuff. >> you have to watch the defense stocks if they can hold this bid i think they will be good stocks. >> as history suggests they may be. >> financials. the pattern jim and i identified helps the financials.
>> do you think the ten-year yield goes up? >> a little more on the outside. >> it's kind of stuck where it is right now. final trade corvo, cell phone manufacturer. they have an analyst day on thursday. >> xrt bouncing. don't trust it. i don't think it holds at $40 level support. >> all right, thank you. "power lunch" starts now. and thank you, scott. i'm melissa lee. here is what's on the menu. the art of the deal. president trump speaking in israel, deals with the saudis, $350 billion and counting. defense stocks surging on the news. president trump and israeli prime minister benjamin netanyahu are about to deliver a joint statement any moment now. we'll bring you there live. mark fields out as ceo of ford after only three years in charge. that stock down 30% in that t e time. the road ahead now for the automaker. and a video that has gone viral. a sea lion looking for a