tv Fast Money Halftime Report CNBC March 27, 2018 12:00pm-1:00pm EDT
there's been long speculation about someone who might be interested at the right price. >> yes that would be according to rumor and speculation, kicking around the street right now, berkshire hathaway we don't have that confirmation. that seems to be driving the stock. >> we are looking for the first back-to-back gains for dow, s&p in a few weeks let's get to the judge welcome to the halftime report i'm scott wapner our top trade is the great market mystery who is buying shares of ge the stock surging this hour. it is the dow's tomorrow performer. has the one-time bellwether finally bottomed with us, joe terranova, kevin o'leary along in just a moment general electric shares up sharply today with all sorts of speculation about who might be loading up on the stock. we decided to have fun with that and will show you our wall
we put up some of the usual suspects the market seems to think maybe it's warren buffett. we don't have confirmation of anything we will just speculate it is the biggest intra-day move for general electric since october 2015 somebody big is buying this stock. >> someone big is potentially going to buy the stock i kind of disagree that someone is in there actually buying it today. i think there's speculation that there could be someone out there that will come in and if that is the case, clearly if you are buying today, you are getting ahead of some further buying going on in the future i think that's the reality of the situation. the good thing about it is it buffers the down side decline. just yesterday we were talking on this show about g e-trading at its lowest level since 2009 that is a good thing let's hope for those buying today there is a big buyer that's going to come in at some point. >> josh brown, somebody's got to be buying this thing >> well -- >> ge doesn't rise 5% for nothing. it was already up 5% before the dow decided to be up 200 points.
>> to joe's point, somebody doesn't have to be buying it there could be enough belief that someone is about to buy it. we don't know. maybe someone is one thing i would say about buffett, maybe some of the energy assets might be interesting for mid-america, berkshire, i don't know. the other way to think about this is it's not yet a rescue situation and when he has done these sorts of rescues, historically in the recent past, what he's done is actually make a deal directly with the company for preferred shares he did it with bank of america, with goldman so that is not totally out of the realm of possibility there's a powerful enough rumor coupled with the fact that this stock has already been slaughtered and people have been looking for a reason to bottom fish, that might be enough hopefully if you got in today just now, something actually does come along to confirm what people seem to think is happening. >> kevin o'leary, stock's up
5 3/4 as we speak. would you be a buyer today >> no. it's an extremely expensive stock. the best way to look at it, take a cue off what josh just said. let's have a private equity investor forget about the storied past of the stock or even what it's called today let's look at the assets of value. i'm going to assume the french utilities and all those power plays couldn't get back today what they paid for them. those are mistakes the market has made that decision the gems are the pinnacle of value sit in two areas, jet engines and medical device business so if i'm a private equity guy and i want to pay a multiple, let's say in that world, you are happy to pay between 7 1/2 and nine times before you add the leverage on, okay? that means you are willing to pay today 13 times the 95 cents of cash flow this company might make in 2018, no growth in 2019. that's extremely expensive what i like this name for, when i want to get into it, is sort
of in that 7.50 to 8.50 range. you say that's crazy no problem it's been there before started its journey there. easy to get back there let us have a little more corrective vibe in the market and get open to a $7 to $8 price. that's where i will buy ge >> does this make buffett sense? you could look at the wall we have and go down the list of names we put up there, whether it's warren buffett or barry rosenstein or paul singer or any number of other investors. nelson is already in it. wouldn't be so far-fetched you would have an activist get in regardless of all that >> buffett has a hundred billion. he's got fire power for sure they are talking about a $14 billion stake, that's 11% of the company. this is very doable. but i don't necessarily think he would go after the company maybe he goes for preferred because that's actually his style in the past. i actually do think there are
liquidity issues i do think they are getting to the desperation point. that's why i think maybe you are talking about a preferred situation. i have to tell you, this company still has to do a whole bunch of good will write-downs. they have accounting charge issues they have a lot of balance sheet problems at this point, not to mention the company end markets like kevin just mentioned, power gen is really very troubled which they have to right-size. there's a lot of things going on >> steph, what's the piece of ge that might be the most sellable right away to an interested buyer? >> health care would be, for sure, or aerospace, business jets for sure. i don't think they want to get rid of those pieces. those are the gems they have they have to right-size power gen because global utility markets are in disarray at this point. i just don't see that changing that's the problem with ge if they can get buffett in, fine that's great
>> will buffett change your perspective on the outlook for the company? >> no. >> or the stock, for that matter especially in the near term? >> no. because i think numbers have to come down and it's trading about 20 times forward estimates on the numbers that i think they are actually going to make and buffett is a long-term investor so he may give them two, three years. if you have two, three years, we are long term but i think in two or three years' time, that's a long time to wait. >> listen, i will echo what everybody else has said. i don't think buffett comes in at the common level. maybe he has warrants, i believe that's what he did ten years ago, but the point being he's going to get his return from being higher up in the capital structure. steph, to your point about whether the company needs cash or not, the one place it really needs it is the pension underfunding there that is a real need right now. that will give them time to invest in and get the costs down in power generation and oil and everything else. frankly, i have to say this strongly i really hope it is buffett. otherwise the other five people or anyone else could be getting sucked into a value trap
buffett is guy who goes directly to the company, says this is what the money is for, this is what i'm getting back. the other guys could be, joe, i hear you, i'm sorry to use the name, it could be bill nygren at 22 >> most of the guys on the list have experience in big industrial stocks. remember, we are just learning that ackman and loeb both have positions in united technologies >> yeah, but they don't have $10 billion to throw into the company right now. i know he's got more than that it would be very easy for buffett to write a $10 billion check. not as easy for the other folks. >> you were going to say something? >> yeah. why could it not still be a value trap if warren buffett is buying it? >> that was my point >> i'm not buying it >> warren buffett has been involved in value traps before i'm sorry, but ge is indicative of the old economy >> wait. is it likely that somebody comes in with a 13d and wants to go up against peltz?
doesn't seem likely to me. >> great point >> let him do what he does is probably a better solution for shareholders than, no offense, anyone else on that board. >> we have had multiple activists. we didn't even put icahn on the board. we had a situation in newell where you had starboard go public with martin franklin and you had icahn. you can have multiple activists. >> so you have a new ceo already. they have nelson peltz involved. why isn't that enough? why would you want now another campaign going on? is this a company that looks like it needs more distractions? >> it comes in at the preferred level. >> different story i agree. >> we aren't disagreeing i'm saying the details matter. if he were to do that which is what he did ten years ago, it doesn't mean he has to be a director does he have a seat at the table? yes. he doesn't have to go head-to-head with peltz or anyone else. most importantly, the reason he doesn't have to is because the preferred comes with a coupon that gets paid before any dividend on the common shares. last time i think it was an 8%
coupon i haven't had time to look back. maybe somebody remembers it's a meaningful coupon >> kevin, you really think this thing is going under ten bucks >> yes yes, i do. i don't think warren buffett will touch this. he doesn't play the game of overpaying for anything. it's not worth $13 it's not worth $12 i think we have got to face the facts, a lot of mistakes were made buying assets that aren't worth that much today. at the end of the day, it's a huge workout problem with all the issues we have just discussed. you want to pay seven or eight times cash flow for that you want to sell it one day back into the public markets at 13 to 14 that would be a good premise for a private equity firm to go in there with a spatula and scrape it clean there's no value at $13. if somebody gets an 8% pick on it, i don't want to be near the common that makes sure that i don't ever get paid a dividend until the whole thing has played itself out >> i agree with you. don't do it. look, we are having a lot of speculation here i know that.
but if buffett does this it would be a cash coupon no way a pick. >> that's not better that's worse that's cash going out the door i look at it and say to myself -- >> it's the terms of trade >> if we are going to pay 13 times free cash, which is basically what you are saying, it should be a very clean slate. it's not >> haven't you said in the past this was the kind of level where you would maybe buy ge $12, $13 now you are talking lower, eight, nine. what happened? >> now i have done the work. now i have looked at the balance sheet. go have a look at that balance sheet and try to figure out what the hell is going on it is a mess i'm sorry to tell the truth, but somebody's got to do it. this thing is a dog. it's a dog >> look how much the stock has fallen don't you think you are repeating what everybody else already agrees with? >> no. not enough, josh give me seven or eight bucks it's easy to get there not a problem for this stock >> people still have numbers at a dollar for earnings. that's not a joke at this point.
maybe 75 cents is probably what they can do which makes it an expensive stock. by the way, the new ceo has been doing as much as he can to try and fix it i just think this is a very hard fix. >> let's talk about another big stock. that is facebook the continued fallout there, the stock down again today as mark zuckerberg tells the uk no, thanks to their invitation to come testify about the data scandal. we have the very latest on that still developing story >> reporter: it seems like he's still dodging. british politicians are asking him to appear before parliamentary inquiry to explain facebook's role in the cambridge analytica scandal but instead, zuckerberg is offering up two senior executives, the chief technology officer and chief product officer. facebook's had a policy saying that mr. zuckerberg has personally asked one of his deputies to make themselves available, but that's just not cutting it damian collins, chair of the uk
parliament's digital culture, media and sport committee, responding saying that he would still like to hear from zuckerberg himself either in person or via video link we reached out to facebook again on the second request and the company just reiterated that these two are available and they report directly to zuckerberg. meanwhile, the whistleblower behind the data scandal, christopher wylie, did appear in front of uk lawmakers today, saying the 2016 election made him speak out about practices employed by the political data firm have a listen. >> i wouldn't say it's just because of donald trump, but donald trump kind of makes it click in your head that this actually has a much wider impact i don't think that military style information operations is conducive for any democratic process, whether it's the u.s. presidential or local council race >> reporter: now, as you know, here in the u.s. lawmakers are also upping the pressure on facebook and zuckerberg himself with a third congressional committee asking him to testify over data privacy standards.
facebook shares slightly lower today, now down nearly 2%, actually close to that bear market territory which it did dip into during yesterday's session >> thank you very much steph, you own it. this is laughable, is it not, zuckerberg saying i'm not the right guy? you have my associates, i'm not the right guy. that's so millenial. >> this is frustrating for sure. it just is but i own it i have not been adding to it i do think i'm going to add to it on weakness i want to let the dust settle. >> how much more dust needs to settle >> you had your chance yesterday. it was $149 and change it had a monster bounce. >> it is getting interesting >> the dust is not settling. >> i don't know if they will do $10 a share in earnings. some people are thinking 10 to 11 if that's the kashcase, it's trg at 16 times forward estimates. if you try to discount users going away and advertisers reducing exposure, but i come
back to where are the advertisers going to go, even if they do, even if the companies get regulated, where will the advertisers get that roi they are looking for? >> steph, i'm with you that they will not abandon facebook because that's where the users are. i'm 100% with you. it's what will the ads be worth if the amount of data upon which their placement can be done is lessened, watered down, dampened that is what's hanging over this everyone agrees facebook still has the best ad platform >> so they lower their pricing, so -- >> none of that has happened yet. it's so early. >> 16% in six days i think is quite interesting. social media is not going away snap and twitter and facebook -- >> i agree >> we go back to the stock yesterday. the dust didn't settle yesterday? >> no. now you have 37 individual states attorneys general that want in on this, and quite frankly, don't worry about england.
the police don't even carry guns there. worry about what's going to happen in america. then worry about the echo effect in places like asia, which is frankly all the growth and the expected growth for this company. that's honestly not in the stock yet. i don't think so >> kevin, is it a buy yet? yesterday was your opportunity if you're not in it and you were waiting for it to go sub-150, you had a very brief moment in time to make that transaction and maybe you missed the boat. >> no, i don't think so. i don't think until the display that's going to be happening during these public interrogations are over, this stock has much of a chance of moving we don't know what the headline risk is from day to day, attorneys general piling on, testimony in front of politicians coming, more international headlines. i go back to the core issue and why i think anything under 150
starts to get interesting. forget about the idea that you water down the platform because you take away a lot of the deep features the truth is the majority of companies, i have 40 portfolio private companies using this platform, it's not changing, the number one feature they use is geolocking the idea that you can buy ads for just amarillo, texas -- >> that's not new technology >> except when you tell the story on facebook, this is a sheer irr. it's really hard for me to see over the next two years that any of these companies that are spending are going to diminish their spend for any of the reasons being discussed by attorneys general unless we are actually going to dismantle this platform which is a huge competitive weapon for small business in america. how dumb is it that we would do that >> display banner ads over the last two years have absolutely
decimated almost every other website because of how many people, not everyone, but how many people have turned on popup blockers, ad blockers. it's an epidemic and publishers like time and fortune are being auctioned off now at fire sale prices it happened, like hemingway went bankrupt, slowly at first, then all at once. if something like that were to occur with social media, where the solution is from now on, private data is opt-in as opposed to the way it is now, which is you have to go in and opt out, that could very slowly erode some of the power of these platforms, not just facebook, and then all at once that is a risk >> you don't think the attorneys general stuff you are talking about is already in the stock, that zuckerberg on the hill with his hand in the air if it ever comes to that -- >> i don't think -- >> can i answer? >> i don't think it will crush facebook i'm just saying we are not in the eighth inning here we are not >> he's right. >> it's not in the stock and the
evidence is what you have to look at. this stock at some point will turn around. we are all i think sure of that. the sentiment, the sentiment surrounding this stock -- >> it did turn around. it turned around yesterday >> it went from 149 to 156 that's not so big. apple went from 156 to 174 i bought apple yesterday in one day i would much rather have bought apple and google i agree with that. but think about the sentiment. think about the sentiment surrounding facebook in the media. it is being perceived negatively on the street, people still love the stock. i gave you the statistic last week the statistic hasn't changed >> my point is for it to go under 150 and then bounce by $8 -- >> big deal. [ speaking simultaneously
>> there's a perception bubble that's been burst. what that perception bubble is, is that these companies cannot be regulated that may be true from a technological sense. i don't care if it is or not but what it can be is bled by legal costs when all of these attorney generals and all of these countries start doing investigations you have to start hiring lawyers, start hiring outside -- >> they have so much cash flow come on. that's not the issue no way no way >> you cannot undersell this you cannot undersell this. when every attorney general, the united kingdom, asia, the u.s. federal government, everybody starts -- >> 1998, when the court case about microsoft began, into the year 2000, microsoft was able to trade higher obviously with the overall market starting from june 2000, fast forward ten years, you earned a 0% return on microsoft and that is with a ton of volatility when
internet explorer being bundled with windows was found to be an antitrust problem even though that was ultimately reversed hold on. hold on. >> this might be worse, actually >> why do i have to be there if i'm not there already, i don't own the stock. if i own the stock, okay i'm doing the analysis, i might sell some, i might not otherwise, why do i have to be there? there's contagion in technology because of this. twitter is down 6% today does that appeal to you, josh? google being down, apple being down like it did yesterday >> because of a certain tweeter. >> to steven's point, yesterday, you don't have to play in facebook given all these conditions that are so not clear. >> do you really think google will outperform in the face of all of this as well? you said you like google >> over how long >> i don't think google or facebook will outperform in the near term. the valuation on facebook is getting to the point where it's much more interesting. >> let's talk about the market in general at this moment. dow is up 200. little more than that. yesterday obviously we had the big snapback some are trying to throw cold
water on it. we will speak to one person in just a minute. what about the comeback yesterday? believable something to hang your hat on? you guys buying into it? >> look, i'm already fully invested, okay i'm fully invested -- >> here we go. >> what? what's wrong with this >> fully invested. 100% invested? >> havei have 6% cash in my equ portfolios i'm not holding much back. the point i'm trying to make, do i think yesterday is ringing the bell, no the bell has been rung, the horses haven't been released from the gate until you see earnings come in you need fundamental catalysts to move this higher. earnings, it will come in two weeks. just be patient. >> i don't know. i kind of thought last week was interesting. i bought a couple things i wasn't in there like 100%. >> friday? >> all last week it was so volatile i was just looking -- >> you are a believer in the comeback >> i'm a believer in fundamentals, in earnings, in economic growth here in the united states and also a believer of global growth and it's going to improve.
that hasn't changed. i'm thinking if some of the stocks are getting hit on this volatility move, i get why it's volatile, but i got to look for opportunities. so i'm looking at chevron that's down almost 10% on the year. it's got a 4% dividend yield i looked at slcisco because data points are coming in very strong there are great pockets of tech. i'm looking for pieces on the weakness >> you are doubting earnings >> no. no no i'm sorry if i'm not being clear. >> you are mr. missouri now, show me? >> i'm very positive on earnings i think nothing we have been talking about, whether facebook's woes or the trade tariffs, i don't think any of these things upset the global corporate profit picture digital media may have a problem but corporate profits will still be very strong i have been very clear on this we have been in a correction i think earnings are what pulls
us out >> kevin, you are not fully invested are you a believer in the comeback >> i'm a big believer in earnings i think vol is back. i'm now 28% cash in equity portfolios, highest i have been in a long time the sector that has me fascinated right now and i'm doing most of my work on is energy oil prices have really kind of stayed where i thought they wouldn't and yet nobody cares. so those equities have not participated in the rally in the underlying commodity which has me fascinated. exxonmobil >> it's been painful that's why i was trying to figure out, chevron is a quality company with a good balance sheet and good dividend yield. so i'm trying to find the best in breed in a space that's really unloved hopefully the fundamentals will catch up and as to your point, maybe the stocks will do better. >> let's bring another voice into the conversation. mkm's chief market technician says don't call it a comeback. he joins us on the phone why not, jonathan?
why not be believers in that >> well, i think from a trading perspective, sure, we got the most oversold conditions we have seen since february last friday at the lows, 6% of s&p stocks above their ten-day moving average. that usually warrants a balance. maybe we can continue that bounce a little bit back towards the 50 day moving average on the s&p. but what really concerns us is a couple things. go back to the move off the february lows, the only sector to make a new high since the february lows was technology it's obviously the most important sector, the biggest sector, 26% or so of the s&p but what concerned us is when you only have one sector make a new high, what happens if that sector falters where is the leadership going to go to pick up the slack? last year, there was always another sector that kind of rotated in to pick up the slack. we aren't seeing that this year. not only that, when you made that new high in technology, what happened? it was immediately rejected. you saw the negative day on
march 13th you have a scenario where the biggest, most important sector is showing weakness for the first time in awhile >> why are you declaring tech dead maybe it was just taking a breather >> that's very well the case that's why we're not getting too overly bearish here. we are just saying we are much more cautious than we have been. we have been on the show numerous times over the past 18 months steadfastly bullish there's a couple other things that concern us. if we look in europe, we have the weakest breadth in europe, weakest since back in the summer of 2016. you have the dax showing monthly sell signals there are things that aren't as healthy as they were over the past 18 months we just need to be more cautious here >> all right we appreciate your time. thanks so much thanks to kevin o'leary. see you back here i hope sometime soon. kevin joins us -- >> got it. >> -- from beautiful miami here's what's coming up.
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welcome back we are currently watching shares of invidia on session lows on the news the company will suspend self-driving tests across the globe. reuters citing a source currently at the conference in san francisco, california. this comes after uber suspended its north american test of its self-driving vehicles after one of the self-driving cars killed a woman in arizona they are saying they are suspending their self-driving test in the wake of this uber
tragedy. reuters citing a source at the g gpu conference the stock is down nearly 2.5%. sue? >> thank you very much, kate here's what's happening at this hour, everyone speaking at a security conference in uzbekistan, russian's foreign minister sergey lavrov says moscow will not tolerate quote, obnoxious accusations from the u.s. and eu it comes in response to multiple countries announcing expulsions of russian diplomats lavrov said russia will respond to those expulsions. hundreds of taxi drivers took to the streets of brussels today for a day-long protest demanding belgian officials regulate uber as they do standard taxis blockades were formed at the entry ways of all major freeways. peruvian police seizing 1,000 pounds of cocaine destined for the u.s. authorities say the drugs were found in a water truck inside a warehouse in santiago. two suspects were arrested, three more detained. back here at home, many
americans say despite an improving economy and stock market, they are not able to save any money bank rate.com reporting that 20% of americans are not adding anything to their savings or they don't have an income. 47% say they are only saving up to 10% that's the news update scott, back to you >> sue, thank you. let's -- we did nvidia the stock moving josh, what's the deal here >> well, so a lot of the excitement about nvidia has to do with autonomous vehicles, electric vehicles, basically you can't use cloud technology to tell a car where to go >> this was one of the principal reasons why you loved this stock for as long as you have. >> i still do. big picture, you need a chip literally in the car to make decisions. you can't rely on software you can't rely on cellular communication. the chip is going to be a big part of autonomous driving autonomous driving is not going
to stop because a tragic accident happens we have tragic accidents every day caused by humans undoubtedly, it's not a great announcement if you are long the stock. just for today's big analyst conference, i'm sorry. >> you are buying, you are getting a discount >> my average cost is like 50. if it comes back considerably on something that i think is just a short term issue, i would probably buy >> let me rephrase that. your average -- >> i would not sell it thinking there aren't going to be autonomous cars because if you have a 5 or 6-year-old child right now, that child is probably not going to get a driver's license >> what about competition? whether it's -- i'm not just talking -- >> two years ahead of intel. i own both stocks. >> what about the fact he hasn't sold it since 50 that's unbelievable discipline that's a great job >> tune into my new show, slow money, tuesdays this spring. >> we should also tell you nvidia's ceo, this is a really
great get, there he is, that's thursday, 6:00 p.m. on "mad money. jim has been working on that for awhile that's a big, big catch. wynn those shares trading higher after jpmorgan raised the target to $214. it's a 21% upside from here. it's our call of the day we bring in pete najarian from minneapolis. you own the stock? >> i do. >> what do you think of this we have learned recently, we were joking about it the other day, wynn was getting out. why should we be getting in? >> well, because if he were still there and didn't have some of the allegations against him, which he's fully denied, i guarantee you he would not be getting out of his stock i think steve wynn has done an outstanding job over the years in terms of how he bought his own stock when it was getting beat up.
he told everybody by the way he -- by what he did with his actions. yes, sold out of his stock position going forward, there was parts of this put in place that are all the way through 2022 and beyond so he has set the table for the next ceo that's going to take over, and move wynn forward. you got to understand, they have a great position, they have incredible flows in terms of cash flows, and the fundamental story is there everything is still in place steve wynn won't be there, i think that's sad and unfortunate that he won't be leading his company with his name on it, but nonetheless, i still think this is very easily a $200 plus stock in the not too distant future. >> you don't worry about wynn without wynn >> nope. i do not because at some point in time, steve wynn was probably going to step away. he wasn't necessarily going to sell his shares but he was going to step away i think you just wonder at what point in their careers will they bob igor, that comes up every time we talk about disney.
everybody always looks at somebody's age and say how much longer will they do this i would have thought at some point steve wynn would probably say you know what, maybe a year or two, that's it. obviously there is a succession plan in place that will be stepping in. and the game plan's already there. they have the blueprint for what's going forward from here for the next five years for wynn i'm not disappointed in the fact that the stock is trading up as a matter of fact, i like it a loch lot. i think it will go higher from here >> are you surprised by mgm and las vegas sands they have not traded better on the belief they have gained market share because of the headlines we are hearing with wynn? >> yeah. you know, i think the reality is they are not going to gain the market share as you know, the bulk of las vegas sands and wynn are getting their money in macao they are positioned very, very well i own las vegas sands stock as well i think both companies can do very, very well.
i think they know exactly where they are going in terms of the asian markets and are doing a great job of execution it takes time and a lot of money. both companies put a lot of time and money into this and both will prosper going forward >> good stuff. thank you. coming up, pete follows bullish options moves in a big bank stock that's down 4% in a week we get his trade on it next. 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. and at $4.95, you can trade with a clear advantage. (barry murrey) when you have a really traumatic injury, we have a short amount of time to get our patient to the hospital with good results. we call that the golden hour. evaluating patients remotely is where i think we have a potential to make a difference. (barry murrey) we would save a lot of lives if we could bring the doctor to the patient.
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we're back, pete najarian seeing something unusual in one big financial name what is it >> it's going to be bank of america. it's actually next friday's expiring 31 strike calls, 30 cents, over 7,000 of these were bought today, well over the open interest the interesting thing here, too, four to one calls puts trading at about 200,000 options as of about 30 or 40 minutes ago very active call-based buying so far in bank of america stock's about flat, maybe down a little bit i also have xlf. take a look at the september 29 calls in the xlf 10,000 of those calls were bought as well financials are hot right now those folks that bought those calls also sold puts very bullish strategy. i bought the xlf i also already owned bank of
america. i did not add but i own calls in stock in bank of america >> safe travels east see you tomorrow look forward to that >> see you tomorrow. let's take a look at the stock market there is the dow, been all over the map. choppy day dow has been up by as much as 200, up about 130 right now. nasdaq is still not looking great. technology just does not want the resume that leadership role as of yet. facebook playing a big role there. nasdaq is still down about a half of 1% we will step away. what's critical thinking like? a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom?
welcome back i'm kate rogers. watching shares of tesla, the stock down nearly 5%, close to session lows on news the national transportation safety board has sent two investigators to look into a fatal crash friday in california that involved a tesla electric suv. it's important the agency says on twitter that it's not clear whether the tesla model x was operating on its semi-autonomous control. investigators will study the fire that broke out after the crash. the stock currently the biggest drag on the nasdaq scott? >> we will keep our eyes on that
stock. the woman who warned everyone to get away from the short volatility trade is on the hunt for the next biggest risk for investors. nancy davis, managing partner and chief investment officer of quadratic capital management leslie >> nancy focusing on the flattening yield curve and what that portends for the markets. how are you playing that specifically, and what do you think it means for the stock market, if anything? >> the flattening yield curve we think isa tremendous opportunity for investors who own duration and credit in their portfolio to actually own optionality on the shape of the yield curve. the risk-reward is incredibly attractive because the curve has flattened so much. the difference between yields and two-year bonds and ten-year bonds is currently about 26 basis points that's the flattest it's been in the last decade. it's at the second percentile. you can trade options on the shape of the yield curve which are really attractive and very
cheap and offer really asymmetric risk-reward because at the most, the yield curve very rarely inverts, meaning the two-year yield becomes higher than the ten-year. it doesn't stay there very long so the risk-reward i see right now is kind of at the worst case scenario, you can lose the 26 basis points but you could make 200 to 300 times with the steepening yield curve >> are you surprised the yield curve has flattened the way it has? there's almost no reason for it. you would think okay, economy is doing well, improving. we know the fed has embarked on this path to tightening, yet yields remain puzzlingly low >> yeah. i think especially in the back end. i think it's just a sign of how underweight duration many investors are. we have been in this low yield environment for so many years that investors are really forced out to earn longer dated bonds,
earn more emerging market assets, higher yielding securities i think it's just a sign of the quest for yield continues and it's still a carry environment world. but i think for every investor, insurance companies, for individual investors, for anyone who owns credit, private equity, duration bonds in their portfolio, owning these options on the shape of the yield curve is incredibly attractive the price of volatility on the options on the yield curve is almost half of just regular interest rate option vol so it's very cheaply priced. >> nancy, if the ecb, jeff said the reason the ten-year is as low as it is is because of the german ten-year. convincing argument we have been saying, if the ecb finally starts to get a little more hawkish, does that release the gates as far as interest rates globally going higher, the further out on the curve >> yeah, definitely. it's definitely a catalyst i think you can also look at where the euro is relative to the dollar the dollar has been completely
depreciating really since the highs of 2017. the dollar is off 14% and a lot of that has been strengthening in the euro. euro is 124 now so it's been incredibly strong versus the dollar >> it's also being blamed at least in part for the rise in libor. what's your feeling on that? is that something to worry about? >> you know, it's a sign of monetary policy, we are on a tightening path right now and people really haven't acknowledged that. most of the rate traders on the street these days haven't ever seen a hiking cycle. so i think it's kind of a change of mentality that maybe buying bonds all the time isn't the right thing. i think a lot of equity investors in particular are using bonds in duration as a hedge for their equities that's a little dangerous because we have had negative correlation historically, but in periods where we had higher inflation both bonds and equities would sell off together
and when you have that positive correlation, meaning equities go lower and bonds go lower, that's when it's quite painful for many of these portfolios that rely on the negative correlation >> maybe people don't want to believe we are on this tightening path. it's been so long. >> ray daleo writing in a linkedin post today that starting a trade war is like throwing rocks in the gears of the world economy, bringing in your thoughts about inflation. how do you see the protectionist trade? how are you positioned maybe with regard to whether it's inflation or potential trade war, some of these protectionist comments we keep hearing out of washington >> i definitely think the trade war discussion is kind of more of a negotiation at this point, but the price of volatility is mispriced because it's not pricing in actually having any sort of protectionism policies while equity vol has moved up a little bit, especially with the
sell-off in february, interest rate and fxvol is still very close to generational lows it's actually a really compelling opportunity to kind of look at sochl these markets, especially with the weakness in the dollar versus some emerging market currencies, specifically tied to asia, as well as in europe versus the euro >> sounds like you are pretty well-positioned from what you think would be more volatility and turbulence ahead is that fair >> we look across all asset classes in volatility. a lot of people think of vol and only think of the vix but there are different types of volatility there's volatility on interest rates, on commodities, volatility in different areas of the curve. it's important to look at the holistic world and twhaps we hat we do at our firm. >> thanks for being here >> absolutely. a pleasure >> nancy davis gold prices are lower today but still trading at the highest
level in more than a month wl t ad fm e weilgetresroth futures pits next. feel that? that's the beat of global markets, the rhythm of the world. but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow.
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we've had four positive months in a row, but the backdrop is a dollar this week, stays under 90 volatility, and jess gold is higher, but only moderately slow, so gold is really the only safe haven the reversal today i think is the beginning of more weakness. >> brian, what are the key levels here? 1350. >> to iuorio's point, over the last five years, the down trending resistance line that's occurred, basically when we got to the top of the channel, it sort off so i think that level will pose some resistance. we'll need a significantly lower weaker dollar to get to that level. >> all right thanks, guys meantime, on the live show we're joined by larry glazer he'll tell us why big tech is in the dangers zone and mike shoe maccer will tell us why the
ten-year note could spike higher r at's at the top of the hou on not.cnbc.com. halftime is back after this. this is my headquarters. this is where i trade and manage my portfolio. since i added futures, i have access to the oil markets and gold markets. okay. i'm plugged into equities - trade confirmed - and i have global access 24/7. meaning i can do what i need to do, then i can focus on what i want to do. visit learnfuturestoday.com to see what adding futures can do for you.
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we're back on the "halftime report." we want to show you shares of ge again, that is the best intraday performance for ge in more than two years. speculation that a big investor may be buying that stock whatever it is, ge shares are having quite the day today let's go around the horn for final trades. >> how about a reit. ess. >> why just -- >> 280 on the ten-year, looks like they're pointing lower. >> is there something wrong with that question? >> no. i just didn't know if we had enough time.
>> the longer you wait, we don't. >> defense stocks are on fire. i think the tail ends are very popular. >> transocean, set to a new higher range, this price is coming back up. >> i'm not selling nvidia. that's for us. "power lunch" starts now sglimpltse. i'm not selling nvidia josh, thank you. welcome, everybody, to power leverage lunch inpredictable spiking, trade fares, rising rates, the threat of technology of regulation, the biggest risk for the mark. and savvy trades for your money. twitter getting clipped, sliding by the noted short seller citron research, saying wait until the senate hears twitter's hidden secret we're going to take a deeper dive an