tv Wall Street Week FOX Business April 24, 2016 9:30am-10:01am EDT
ahhh the sweet taste of victcto! prilosec otc. . one pill ea morning. 24 hours. zero heartrtburn. does not need the gop establishmento deat hillary clinton in november. that's it for us. good night. >> announcer: is show has ner beenololely about investmements. we havtalked about anything that have afcted people and eir money. from fox business headarters in new york city, the new "ll street week." >> welcome to wall seet w wk. i'm thony scaramucci. gagawill bi'm gary kaminsky.
what's a long-term investor to do? 'll start by asking one the grgreatest value invtors of the lastwo decades. bob stein, i want t to start with the political climate.. does any of that come into y you philosophyor t the investing. >> what's going to becomome law and how does ieffefect the free cashsh flow of comnies or industries we arlooking at. but we can't twhroins all thi stuff from politally active people. gary: thfact tt you have the politicaextremes going on in this cycle? >> the mararket, 80% of th
market. hedge funds that areren't there with the spreads anynymore. when the trarading has become ridiculous. the ananalysts are look at if somebobody has beaten the estimates or not.. we have record volatility we takedvantage of it. ry: so youre working more on the fundamentals and leson the news and currents formation that's out there. >> there is a differenceetween an investment decion and marketecision. most anasts, there are real companiebehind those stocks. and you have to value e businesses. the values of those businees do not changnge as rapid as the stock prices do. garywewe'll g get into the specific compapanies later. by want t to address two things
yoyou d i have spoken about. the first is the differencnce beeeeen buying an index funden buying a an active manage more picks individual stocks.s. and the second thing is s you he a philosophy, you don't want to lklk to company management, you upon want to look at the numbmbers. so s should people be thinking about index or thinknking about active management, underststandg you are an a active manageger wo produced outsideesesults against the inindex over the years? >> i believe it's people's jobob to find activeanagers. the governor of pennsylvanania says there is s no risk in the indes. ththey bought enron, all the ne is goi intdeking. they are add toget p.e. ratio of net flex averagflix and amaz.
it's creing pockets of overvaluation inhe index gary: the index hass beaten 90% of active managersff you quantitatitive easing since 199. >> i don't look tatistics. y put $10,000ur fund it's now woworth $60,0. gary: you hear executiveves me on air and talk about theirr result you always told me you don't't want to do that. >> long-term performrmance, the people w who tear about individl companies. the lolong-term performance of e people who m make the fewest errors. it's the mag tiewcd your error thatetermines your long-term performance.
if they don't ite about the people w march over the cliffs trying to find it. if the 4years in this industry i nevehad a management ever tell me or ever saif you don't vacate my stk, you are going to get burned because have problems we can'solve. whwould i ask somebody or talk to mananent. i care about managemement but i look behind the mbmbers. we'll talk about looking b behid the numbers todayy andnd the faitgogoing on in accounting today. anthonony: indexex investing, yu buy in who.. value investing. inde or outstside that index that are f fundamentally longer-term attractive t than te index. by the's super harr e average inveor to understand the fference. how would you summit up in 30 second
>> find people to mana your moy -- unless they are going too the work -- we create volumes of informati on every mpany we look at. loing behindnd the numbers. if you don't have at ability, then i guess you he to bite index. but there is no guarante >> if you don't want to bebe iaa plane being fln byobot. wananthony scaramucci flying that plane. gary: we'll be ght back. >> announcncer: next b olstein tells you stococks that are undr vava (patrick 1) what's it like t to be the boss of you? (patrick 2) pretty great. (patrick 1) how about a 10% ise? (patrick 2) how about t 20? (patrick 1) w about done? (patrick 2) that the kind of control i li...
to separate expensnses just swipe. [passenger] i wowork for me. it estimates my taxexes,so i i w how much stays in mymy pocket. and ththat's how i own it. [announcer] ststay in the flow with quickbobooks self-employe. starart your free thirty-day trl today at join-selflf-employed-dot-co. gary: we are back with b
olstein of capital m management. gigives some ideas what you find tractive? > what we find attractive is ususually what other people find in trorouble. getting the right prprice is the y for long-termrm investing. bebed, bath and beyond be everybody hates itit, we think this companyny is real, it's relelevant. the r nins will drop to 10%. that's enough to prododuce $6 a share. we like the problems becauause e get the right pricice.e. we think eququity capital can me in the stock. i remember tking about petsrt. is company is the type of stocock under valued, 10% free cash flow.w. gary: whentocks arare tradg
count average retail invesr scared d starts selling em.. >> they sell them m to us. you could have a s stock -- >> a value trackck is where the problem is not team m prairie le we think in -- is nonot temporay to o stbed bat. away f fro it. it looks attracti on aa valuation basis. but that stock is jammed in.n. > you can have a stock cheapt 2525 times earnings and a stock exnsive atat 10 times earnings. you have to do your homomework. garyry: you made a legendary cas on lucenen i believe it was ththe most widely shelled secuty ananyone v vestors around the countrtry. it became publbl in the mid-90s.
then was a high flyer. but asou points out. you were native on it. it doubled and eveually collapsed. what are some of the names tt have the red flagsgs, most overvalues wrtd stocock ice doesn'n't line up? >> i would s say it's netflix. that t to me is so unrealistic. they are in a competitive environmenent. they are spending billionsns. $120 milli i in earnings which are not real eararnings because they are getting stock compensation back. bibillion dollars is being spe inrogramming. i would worry abt the $2 llion. gary: me itors are look at the number of new subscriberers. your point is s they are putti them as s sucrcribers but they e losing money o object a cash flw basis.
>>he business model says thehey have to buy y more andnd more programming to keep their progogmming relevant. 20%. 20% of all expenditures s on programs make it. they h have $12 billion in futue liabilities. it's o one of the most overvalu stocksn my history. anthony scaramucucci you were crititicizing amazon and stocksp 20% since th. >> i said netflix was ththe most overvalued.. the stock wass $ $129. amazon is if you w were just the earning, for the fact theree is full payouout with no cash flow and they add bacack stock compmpsation. there is no frfree cash flow there. ththey have a good business mod. but when thehey have gone from 4
bibillion to $135 billion in sas and there is still n no eeash flow. anthony scacaramucci yoyou are oking for cashsh that treeches your botottom line. >> the bulls say it will becomoe profitable at some p point i in time. i buy all mymy goods in amazon t i woul't't invest in it, it's too muchisisk. >> i how do i protectyself he if i'm ainveor. >> anthony is g fly a ane. he's probly had two o years of lessssons. thony: you don't have to worry, i'm never goi to be flyi plane because i unrsta r risisk managemement. value investors are often appldeded for their r rise be magegement.
d their risk magement. what are some ofouour risk managements.s. >> free cash flo wewe buy companiesith 9% free cash flow. whdo they y have them? valuedompanies, what great about valued comnies is while you are waiting for thpublblic to know at gng on. you are addingo the value. free cash flow is our safet net. gary: ay right there, we'll backck with more in a few minut. > announcer: coming up. kyle bass breaking n news on ths show talking about a loomiming receioion in the u.s. is he right?t? we'll break it down why y bob
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>> t they have a giant creditt bububble that s reacd its atrophy level and it's going to happenhe n next three or four ars. whher that causea main or minor recession, it's 40% 50% chance in the nextear. anthony scaramucci that's le bass talking about a p psible recession n in the near future. boolstein is here with. sandra:here with sabdr. smith a.
melissssa: this is one of the flash pointsts to. there are so many things goioing on. you u look at earnings this quarter which are projecected to be very weak. but there e are a lot of differt data pointnt piling up and not looking great. add to that, we have theeaeakest recovery from the finanancll crisisis ever in history. and d there are a lot of facrs poininting out the w weakness. >> the stock market isp. it back to all-time high. melissa: does that ge somebody a job or increase their wag? it's only one aspecto it. we arere look at stagnant wagesn this country. ththrough earning season we have seen t the profits aren't that great at u. s-corporations. when you look at chinana, it
should be a d flag. first it was property, t then china's stock market. then it turned intnto chinana's credit bubble problblems. gary: i thi d donald trump said 100%. sam ll said 'll definitely ve a recession later this year. do yougree with that and does it matter whenou are thinking about iestment? >>ay wonder about is something nobody italking g about. we a finding 8, 9, 10% free cash fw yiyield companies which tells s us there i is still root tied to ththe market. > 2 to 3 years. >> what ii worry autut is the
fact there is s a recession in china a is alrlready in the mar. anthony scaramucci this s is a tale of two different cntries. the middle class is stagnati. what can be done about that? melissa: the federal reser juiced the markets a forced peopleo go out and chase yeelt yields. d and chase yields. the middle class jobs people can count onon are gon so many people a ting to li and part-time and minimum wage jobs. we have seen a great divid m afraid of what the remedy is. a lot of thehe js have to do with compuputer programming an technology and things u need to be trained for.
thesare the jobs going overseas. but that's not a qck fix. ndra: donald trump has wonn over so mamany voters by stickig to the economy a and making this betterer. anthony scaramucci d do you thik government canan cure the probls melissa is talking a about? sandra: we don't w want to looko governrnment to cu our economic woes. but we need to relelieve b busis of some e of the regulions weighing them down. obamacarhas been difficult on a a lot of companies. >> witfree cash flow, what's the unememployment plate this country. anthony:y: between 5% and 10%.
>> everybody is complaining. where wewe are in business to me money for our shareholdeders, ad that's's criritical.l. gary: are e you trying to make e point could you have p problemsn china and the uniteded states bt as aininvestor you can still find companies that will o offer rereturns to investors? 23 i'm a viewer ofof this progr, whwhy should i even care if thee is a recession. if you work in f financial rvices or the energy space, you haven'n't beenn a scscission, you have been in a depression. so i just ignorett allll? >>n n my business i'm not a politician, i'm not in governrnment. people m m mead people hired mee them money. since thcrusades there is no person on this earthho has
projectewhere the market is going to any regarity. lissa: government is important, one exaxample, the wr on banks. talk about breakp the big banks and confistingheir profits. look at hillary'y's ties to wall street. that's the le blood this gary: maybe she e shouldilify government there are more crooks in government. melissa: knead banks givg consumers credit to keephe economy flowing. every time thecrk down on banks they have to raiseeeso it'sarder on the consumer. this is one example e of havinga governmentnt so hostile to busisiness and the economy. >> the queuestion i have for all
of you, the next 2 to 3 arars bullish fofor stocks mel. heatather: it depends on who is elected. >> you think a repubublican woud be betteter? melissa: y.. sandra: we know the polies uld be more business friendl and taxes inhis untry. they are a huge burden othe american consumer and biness. gary: bob you said who wins the election won't aect your business pross. who do y think wld be best for the economy? >> i can't answer th one because i don'n't know. people say a lot of thingsgs. trump p wantnts to change everything, hihillary has more perience. i just don't go ouout there. i lolook whathe's going to haen. gary: you lookfree cash flow. >> you g it.
next week our guest is llionaire t. boone pickens, we'll see yothen. ousands of people cameut today to run the race for reretiremen. so we asasked them... are you completely prepapared fr retirement? okay, mostly prepared? could you save 1% momore of your incomeme? it doesn't soundnd le much, bubut ving an additional 1% now, could mamake a b big differene over t t i'm gog be even better about sa.. you cadot, it helps in the ng r. prudential bring your challs
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