tv Fast Money Halftime Report CNBC May 30, 2018 12:00pm-1:00pm EDT
year >> it seems like there's been a shift and now everybody is asking questions about the tech companies that have grown so quickly, so fast we heard about amazon's shareholder meeting pressuring jeff bezos to not be both ceo and chairman, and snap and facebook controlled by the ceo >> you want to see this. at the same time, you hope you don't kill the goose that laid the golden egg >> a lot more later on today and tomorrow let's get to judge and the half. and welcome to "the halftime report." i'm scott wapner our top trach this hour, the bounceback for stocks. what are the fears out of europe, are they just overdone or heating up? with us, joe terranova, jon and pete najarian, and lori, great to have you with us today. let's begin with the rebound stocks are higher after posting their worst day in more than a month. maybe we should have known better than so many of these
flare-ups -- >> how many have we seen so far? >> on trade or north korea or yesterday it happens to be the italian political system >> creates opportunity >> creates a one-day fit of uncertainty and nervousness, and here we are back with a rebound. >> you have volatility over 17, everybody gets nervous about that the volumes start to get interesting once again after going on hiatus for a while. there's a lot of reasons to look at yesterday and say are there opportunities out there? i think there were yesterday there's a couple different areas where they really oversold them, but the strength of the semis continues to really show up. i mean, each and every day even yesterday, look at micron technology how well that was trading. amd, a lot of these stocks, intel, were holding up, and today exploding to the upside. the strength areas were holding on, but some of the weaker areas sold off for the right reasons energy, when you look at what's going on with oil and oil was four or five days ago trading $72 a barrel suddenly it's $67, there's a
reason energy is getting pounded. >> dow is plus 279 as we come on the air, joe you have the russell at a new record today, microsoft at a new all-time high. adobe salesforce, csx, cisco, tiffany, all-time highs. >> i like pete's using the word opportunity. i think there was opportunity on both sides yesterday for me, for energy, it was an opportunity. i still believe energy is right now in a very supportive state there's a lot of paper demand for the asset. and that for me was an area to get longer buying pxd, adding to the position in oxy. that's an opportunity. i think the opportunity on the other side was take a look at the financial exposure, and maybe there's a little bit of an awakening for me being long morgan stanley, citi, and saying i have too much long bank exposure let me get more regionally oriented >> because of a one-day bit of nervousness? you think it's more than that? >> morgan stanley i have been in
for quite a while. there was a bit of a technical breakdown yesterday, and discipline dictates when you get the technical breakdown and get to the level where you would still want to protect the gains that you have in the stock, you move out of it you take the capital, move somewhere else wynn trust financial, it's a regional in the midwest area $92 stock. that stock could trade close to $100 i'll take the capital from morgan stanley, put it there i like more of the domestic orientation. i still have bank of america, i still have interactive brokers just a little opportunity to reallocate >> lori, welcome nice to have you here with us on the set. you backed off your year end target by about 100 points, s&p points, about a month ago. but you're still very optimistic about where we can get to from today's s&p price. we're at 27.23, you're looking at 2890. let's call it 2900 what gets us there >> we still see the path higher. arguably, it's difficult to figure out what gets us there in the next couple months
i do think the elections are an overhang washington is an overhang. once you get past that, i think some of those hurdles and some of the things that are making people a bit more nervous will sort of fade back into the background, frankly. but look, i think valuations look fine. i wouldn't say you have to buy the market now because it's cheap. we need the news flow essentially to turn. i think the two big pillars of support we still see for the market are first off deals and cash deployment. think about financials, m&a, your regional call that's something that really has nlts played out. i think that's something that can get markets excited towards the back half of the year. >> are you suggesting the market is cheap >> it's neutral. >> not reason enough to buy stocks today >> literally the forward p.e. on the s&p 500 is sitting at the long term average and it has been for a while valuations aren't a reason to sell or buy right now. >> anyone want to take issue with that? 11% upside from here it's not so far fetched it's beyond the pale of what we have heard from other strategists
savita was here and said 3,000 is their target. then you have lee cooperman who said maybe you get a few more percentage points. you could reach a high on the s&p but you could just as easily fall back, you know, 50 points or so below the lows of before >> i think to everyone's points, days like yesterday, when you have a 470-point selloff where it was here yesterday during the show, and then it finished down 390 or wherever we were, those are obviously bigger opportunities because you can get overextended did we get so crazy with the financials that you just had to close your eyes and buy them i think you could have just bought a jpmorgan and a number of others, but that wasn't really where i was shopping. i'm shopping more or less where joe was. i'm looking in energy because i think pete said 72 last week or just over a week ago pulls back five full dollars a 7% almost 8% correction here out of crude oil
i like that as a setup so i didn't get rid of any of my oil stocks didn't get rid of any of the refiners or anything else. i'm thinking i get to buy them today we get an upgrade of exxonmob exxonmobil i like it. i like buying those ones that are thrown out baby with the bath water >> do you think we get the bulk of the gains that you think are left between now and the midterms and then sort of all bets are off depending on how that unfolds in november? >> my guess is you might need to get past the elections or close to the elections before markets can really breathe a sigh of relief >> i'm sorry, a relief of what >> a relief -- i think people are looking at the election and they just don't really know what to expect. >> if the democrats take either house, house of congress, are we looking at a big pullback for the market >> we did a survey on this in march, and we asked our investors, 271 people filled the survey out and asked what's the best outcome for stocks?
what happens if republicans take both chambers. 46% said that's great. what happens if democrats take one chamber and republicans take the other. 46% said that would be the best outcome for stocks i think the only bear scenario is if democrats take both. only 8% thought that would be a good outcome >> the old gridlock is good for the market mentality >> i hear that from investors. a lot of wall street republicans, essentially, are not lappy with some of the policies coming out of d.c not to bring politics in it, but i have been hearing that basically ever since we had the trade issue pop up and cohen's resignation. >> how do you factor in trade implications there was news yesterday on the new tariffs with china didn't get the headlines that the italian political situation did. there's the potential of a more hostile fed. i use the word, just a word that lee cooperman uses he doesn't see it, but that is one of the key risks to the market and more hostile fed. >> i think people are very nervous about the fed.
they're not used to what happens in the market when rates go up you know, it's something we have tried to talk to people about. when we actually lowered our target, one of the things we talked about is how much multiple contraction to expect historically, if you go back the last three sustained periods of fed tightening, you saw a 15% contraction on the multiple. we applied about a third of that this year, and just given how overwhelmingly strong the earnings backdrop is, even with the multiple contraction, you can still see the path higher for stocks >> i know you seem to think that investors have a complacency surrounding technology i thought stephanie link this morning put out a great tweet highlighting that value hit a 28-year low relative to growth, and it's down 10% over the last month. growth seems to be where the opportunity is, where the earnings have been technology is the catalyst behind that. why should we be so complacent why are we complacent then >> actually, it's not. we gauge the rate of upward
revisions in companies relative to value companies and this was a stat where overwhelmingly, it was in favor of growth last year, driven by technology health care helped out in the first half of the year, but on the year as a whole, it was tech driving that now, it's very evenly balanced between value and growth we have also seen that if you look at things like p.e. multiples, growth does not look cheap anymore. it did for its entire bull run starting in '06. you look at a peg ratio, growth looks overvalues relative to value now. some things have started to change, but i wouldn't just assume that growth and tech are the only games in town on the earnings front they're not. it's still good. it has a lot of company on the pedestal >> more on this conversation the flare-up in europe comes just ahead of the fed meeting in the next couple of weeks and our own steve liesman is here, our senior economics reporter with new reporting on maybe how the market is now gaming this. it's interesting we pegged this as sort of new reporting because there was this road map which suggested multiple hikes between now and
the end of the year, and are you telling us that that's not necessarily the case anymore >> the market is rethinking the multiple part of the statement i think it's fair to say we were on here a couple weeks ago the discussion was how many multiples. now, it's down to one, in fact if you could put up the -- >> one more hike this year >> i'll tell you what the market is saying and then i'll tell you about what i think about what the market is saying this is the two-bar chart. this is an 80% chance now of a hike in june, which is down, but it's still a substantial majority out there, the probability of 79% but look at september. just a 44% chance. and then a 19% chance in december and then let's go to the next chart, guys, the line chart. you'll see what's happened just to the december probability. that was all the way up near 45%. that's when we were discussing the idea of four hikes this year and now it's down to 19%, as we showed you in the previous graphic. that has collapsed >> why >> it's italy, i think,
principally, the main reasonic along with the strength of the dollar is another piece of that, and the idea of contagion. i think the market has overreacted to this relative to how they think the fed might react. i don't think the fed is very quickly going to dial back, certainly on two hikes, and maybe not on three depending upon what happens with growth we got growth numbers this morning. 2.2% gdp number prompted a lot of economicshes to say the second quarter will be stronger than i thought we're still running 3.4% on cnbc rapid update >> you're telling me the bar chart you just put up there doesn't tell the real story. doesn't tell the right story you think that's getting it wrong. >> the market reacts the way the market reacts. and i'm never going to sit here and say the market is wrong. i understand why they reacted that way i think it's just out of line with the fed's own reaction function they're not going to sit here and change their medium term forecast based on a couple days events in italy. look, if things happen and roll out the way the worst case
scenario is in italy, yeah, the fed is going to change i think the market is overpricing it >> what's more important, what's happening in italy and perhaps other parts of europe, or the numbers that you cited on the economy that suggest the quarter is going to be stronger than people thought >> i think the fed is going to be a judgment-dependent fed in trying to balance those out. >> they're nerve going to get off their you know what's then there's always going to be a reason to potentially not raise rates. >> i think that's right. i think you have the skew in that sentence wrong, scott i think the story is they're more likely to hike, and it's going to be very hard to knock them off of the path that they currently say they're on than it would be to take them off it >> so props to jon jon over the last few weeks has suggested the very scenario that the chart that you just showed is trying to tell. and that you didn't believe that the fed was going to go as many
times as other people thought. you thought maybe it was going to be a one more and done. >> right, and i think for the exact same reasons that steve is citing right now it's just flipped around as you say, steve, the numbers you're citing are mainly from traders. from the guys and gals who are in and out of the markets on a fairly rapid basis >> by the way, if i might. do a very good job - >> i'm not disparaging them at all. but they're going to be far more reactive than the fed. to your point, there's always going to be a reason not to hike but there's going to be multiple reasons for them to hike so it just depends when you're weighing that out, i think, are we going to get a much -- i mean, is it 3 to 1 if it's 3 to 1, they're going to hike i'm not talking about votes, steve. >> i'll send you all an e-mail at 8:35 on friday morning because i'm telling you that there's a lot that could happen in the jobs report that will make italy look like a footnote to the discussion of whether or not the federal reserve is going to hike. >> lori, you have taken
everything that you have heard from steve and how does that factor into your view of the market between now and then? >> in terms of interest rates? i actually have been telling my clients i'm more concerned about what happens when the fed stops hiking because if we sort of look at italy and think why would the fed stop based on that it would be the global growth concerns that's a scarier scenario, frankly. and i look, you know, i can't tell you exactly why that chart flipped. but i tell you the russell 2000 has been very strong if we really did have a seep-seated problem in the u.s. economy, i would not expect to see the index as strong. >> the russell 2000 also a dollar story the internationals are being whacked by the strong dollar if you're looking for a place to put your money, russell 2000 is sort of like, i hate to say this, but a safe haven >> from a dollar perspective if you go back over time, like the past three decades and try to look at the dollar relationships, when the dollar strengthens and small caps can do well as long as the broader market is not breaking down. >> i think your point also is over the same sort of part of
history, small caps are typically leading you on the way up and they lead you on the way down that's what you're citing as well >> what we have typically seen, not exactly the playbook everybody has in mind. they do tend to underperform late in a bull market. the last two, they have held up much better because they kind of got the pain out of the way earlier. but i would also keep in mind that we had a very big problem in the u.s. this year with crowding, and the crowding that occurs was specifically in mega cap stocks, specifically in s&p 500 futures. we didn't have that problem in the small cap space. the small cap space dealt with that last year they got very crowded after the 2016 election. but a lot of what we have been going through is just this unwind of this extraordinarily crowded u.s. mega cap s&p 500 trade. >> steve, how much of the federal reserve understanding of oil pricing is going to impact what happens here? jon and i have talked in the last couple weeks about the term transitory, and there's a chart that i would like to show you. over the last five years, when you look at the correlation
between oil pricing and the ten-year yield, in september of '13, oil prices reached their peak, three months later, yields reached their peak february of '16, oil prices bottom, july, five months later, there it is. yields bottom as well. how much if oil continues to move higher does that play into what the federal reserve is going to have to do, and they might have to respond because inflation expectations continue to rise beyond what they thought? >> you're right to focus on inflation expectations which i don't think have moved very much at all and i think that's where the fed keeps its focus. it also keeps its focus on the core inflation numbers so as a result, it's not going to be swayed very much i think what you're seeing there is one that reflects the market's view that i need to be compensated for inflation but not the fed's view which is that oil prices do not necessarily lead overall aggregate inflatio
in the economy >> do you think that -- we're having this debate as part of -- you knew i was going to bring it up, as part of the chart suggesting that, you know, oil -- which is leading which? are higher interest rates leading oil higher in part because of a view that the economy globally is improving and getting much stronger? or is it the other way around, which is in part what joe is suggesting by his chart? >> i think there is a -- what do you call one of these curves like this? a point at which it leads it higher, and there's a point at which oil itself has a self-determining outcome to the economy, which is that prices get so high that it ends up cooler off economic growth and you have a back. i am nearing a radically different idea about the impact of oil on the u.s. economy and it's born of the failure of the economics field and the stupidity of this reporter coming on air in 2014 and 2015 and waiting for the consumer and
the u.s. economy to pop based on lower oil prices it didn't happen because we are now heading to being the largest producer in the world, already the second producer in the world, the economics of oil on the u.s., i think, are radically different from how we normally think about them i will get a whole bunch of hate mail send it along, folks, when i say high oil prices are not necessarily negative for the u.s. economy i know they're net negative for the u.s. consumer, but when you look at the reaction to investment, when you look at the growing number of regions in this country that are reliant upon the intake of oil revenue and energy revenue overall, i think the calculus about oil is different now. i'm not going to make the same mistake again. >> so lori, do you think that growth around the world is as strong as we think it is or have been led to believe that it is? >> i think it probably is. i think there are some doubts that have emerged about that and that's one of the reasons why the market is struggling so much on these bad days in the market,
it's the financials and industrials that keep getting whacked. yesterday, materials got whacked badly as well. those are some of the most sensitives things to ism, so when the fears seep in, it's the global trade selling off it's that simple >> that's the thing that could change the fed's calculus. one of the things we maybe forget is what's helped the fed get to a place where you can talk about -- well, not necessarily, but three or four, the discussion about three or four rate hikes was made possible because of the unexpected growth overseas we're not quite sure why growth ticked up overseas but it changed the u.s. outlook and the fed's outlook. if that drops out, if the outlook for europe is measurably weaker, that could potentially change the outlook of the fed. >> i'm bringing up the policy error question again, are they going to know it in time, are they going to be raising rates into a slowing european economy and you're going to get further away, the fed is going to get further away from the other
central banks. >> i think that's possible you can't rule it out. they're sleeping with one eye open i think that's the way they're thinking about it. they're going to watch it carefully. if there's a big change in yourm, it will change the outlook for the u.s. and the fed. >> let's wrap this conversation up with one more conversation about a sector of the market, that being the banks you like the banks >> i do. >> even with rates where they are now, we're worried about all this exposure to italy and elsewhere in europe? >> our base case is rates are going to creep up and we focus more on the direction as opposed to whether or not it's x-many hikes. the direction is still strong. i think also inflation expectations, that's traditionally something that when those increase, it's good for the financial sector i mentioned m&a earlier. now that we have some of the policy hurdles out of the way in washington, you can finally start to see that play out remember, banks are already doing tons of difrb dnldz, a lot of buybacks. they have some of the biggest
coffers from tax reform. >> how about regulation? the idea that voker rule is going to be eased back and this community bank act that passed congress is there numbers inherent to the bottom line for banks because of deregulation >> i can't speak to the bottom line but i can tell you we went through all the sectors in the s&p and say where are there policy tailwinds out of washington and headwinds there are only two sectors you can make an argue there are good tailwinds. one is energy and the geopolitical risk. and the second is financials everybody knows this regulation improvement was coming down the pike i don't think it matters it's still good stuff coming and there aren't policy bombs. >> lori, thanks for being here great to have you with us. steve, thanks as also. >> dom chu has a news alert for us on, dom >> tesla >> we're talking about the first three-day win streak since pretty much april. the reason why is consumer
reports has now reversed course on their previous model 3 view they're now actually recommending the model 3 because of an update that tesla has made to the car's software that now improves its braking ability you may recall that when they first came out with the no recommendation on that car, it did send the shares a little off. it's fair to say, guys that the model 3 has been the battleground for a lot of analysts and investors out there because of the future prospects for this quote/unquote mass market vehicle in this case here, tesla perhaps riding a wave on the positive side given this new consumer reports recommendation for the car. back over to you >> thank you i mean, tesla, guys, has never gotten love from consumer reports or any of these whoever test drive the cars or for safety or whatever wonder what this does in the overall story. >> it can't hurt >> people have talked aboutresisantly, are they able to raise cash again if indeed
they have to raise cash. most of the desk thinks they do. because of that, here's a couple positive things for tesla. you're watching the stock as it bottoms near where it's been, if that was the bottom. near where it's been, and now day after day, getting good news, stock starting to rise >> into the solar play as well, judge. i don't mean because they bought the solar company that elon musk bought that he also owned. but i mean that when i talk about first solar and the run that it had along with crude oil, this is another stock that usually has some relationship with the prices that people pay at the pump. when they're going up, there's obviously a little more demand for electric >> when was the last time you guys were in tesla paper >> been in and out of it >> when was the last time? >> beginning of may. and it was mostly to the downside stock was over $300 and coming off. they were buying puts. they have cashed out of most of those puts now >> is there a particular reason
why you weren't in options in this one >> have been in options. have been in some options. >> until recently, right >> not as recently as jon. i have probably not been in tesla for over a month and a half >> we have breaking news regarding bill gross' janice fund down sharply, in fact 3% in a single day almost unheard of for the bond market brian sullivan joining us now on the phone with more details there. what can you tell us >> well, scott, yeah, confirm some numbers that came out earlier elsewhere, which the fund had a very unusual and very big drop of just over 3%, now down about 5% on really about the last 30 days or so a tough couple weeks and really yesterday was a pretty bad day for a bond fund, guys, to move that size is really heavily unusual. you have to remember that bill has said to us he's been on many times, and he basically called
for a short of germany back in march and april. and what we have seen in the last couple days that the yield on the german bond, the ten-year note, has collapsed by 50% and two people outside of janus, i want to be clear, i haven't spoken with bill or janus on this, but two people outside who have confirmed the performance to us have suggested this massive drop in yield in germany has kind of caught a lot of investors, including bill gross, on the outside >> i think, brian, it's probably fair to say that the drop in yields here has probably done the same thing it hasn't obviously been as dramatic as maybe we have seen elsewhere, but bill gross has told you on numerous occasions and he said it publicly in various forums that the bond bull market is over or whatever, you know, however he has framed it, i'm not necessarily sure he
saw, let's say for example, the yield on the ten-year being 2.85 today when it got above 3% >> i think you're exactly right, scott. listen, obviously, i have a close relationship with bill, and he's been good to me over the years. you have to give it time i think if bill was coming on, and bill, if you're listening, we would love to have you on any time you have to give this trade time bonds are not equities they're super tankers. they move very slowly. when they do move, they can catch a lot of people offguard i think that i don't know if anybody would have been out there and said to you or the halftime team, i think we'll have a political crisis in italy and they're not going to form a coalition and buyers will come back into germany and the u.s. 10-year. if somebody said that, please point me out i think everybody was on one side of the ship, maybe, including bill maybe they got on that side of the ship because of bill's call on germany a couple months ago who knows? i think this move, you're exactly right, in u.s. yields and in yields particularly in
germany, if you were short those things, you got burned i think that in part because of bill's stature in the industry as well, i mean, if he was joe blow who has been on the job for six months and he moved down 3%, nobody would care. because it's bill gross, a lot of people care >> if joe blow is on the job for three month and down 3% in a day, he wouldn't be joe blow on the job anymore. all right, brian thanks for calling in. interesting news you have a comment >> it is consistent to the performance you saw back in february i believe it was february 5th when the market was down 1500 points, and again, a lot of respect for bill he's had a fantastic day on that day, he saw a significant decline in the fund, down .8% what we saw yesterday, that underperformance, we saw that underperformance back in february and it kind of goes back to what i said to you yesterday. yes, i understand moers of our viewers don't care about
emerging market debt but if you're going to have bonds in your portfolio, you need to have a fair understanding of what they are and the risks surrounding them in times where volatility rises. >> all right, well, let's move on talk about ge. the widely followed analyst on that stock, steventusa from gm morgan has reiterated his underweight rating on that stock today. he says ge capital remains an underappreciated risk. there's the stock, not moving a whole tremendous amount. it's yet another, guys, reminder though from tusa, who is oftolla time where people were thinking perhaps the worst is over, in his mind, maybe it is not. he has an $11 price target on the stock. >> well, pete's got an even lower price target >> others have single digit numbers, pete. >> i mean, quite honestly, the one thing we point to is look at the massive amount of debt there's enough headaches right now that ge has to deal with, i
think, from where they're sitting and they're going to do their best they're going to try to sell off assets and raise money and do all sorts of things. in the meantime, why do i want to hold on to ge because of that, you see it just kind of -- it goes up 1% one day and loses a half percent for the next four or five. that seems to be the way ge is going. this is an $11 target. i said single digits if it gets near $11, i'm pretty close. >> what we keep doing is debating, is the worst over for ge most of us, we agree the worst is not clearly over. and the communication that you're hearing is not from ge, if you're looking for a positive catalyst, all you're doing is going from analyst to analyst. >> just because -- with all due respect, we like having them on the show and appreciate and respect his opinion, just because steve tusa says the worst is not over for ge doesn't have that in stone >> that's my point i need to hear something that gives me a high degree of confidence from the company itself that the worst is over. we have not heard that just yet.
and that's the problem >> i hear you. there are now questions about the history or the future of, again, of the dividend things like that >> the only positive commentary doesn't come from ge it comes from the analyst side last week, we had someone who upgraded ge. the street got excited, tried to buy it that's not what you do if you believe there truly is a bottom. >> we just hit 12:30 three seconds ago in the east. you do have the dow jones industrial average with a strong bounceback it's up 300 points the s&p 500 is up 1.25%. nasdaq is about 1% russell 2000, another all-time high today the outperformer, up 1.5%. all of those concerns about the political situation in italy, the movement in bonds over there, subsiding certainly for a day, as you have the dow up nearly 300 points at this moment sue herera has the headlines for us hi, sue. >> hello, scott. indeed i do. here's what's happening at this
hour, everyone president trump tweeting that he wishes he had not selected jeff sessions to be attorney general. the president has been openly critical of sessions after sessions recused himself last year from oversight of the russia probe "the new york times" reported on tuesday that trump tried to pressure sessions to reverse himself on that recusal. >> a russian journalist turned up at a news conference in kiev less than 24 hours after police reported he had been shot and killed ukraine security services said his death was faked to foil a plot to take his life. the man apologized to friends and family who had mourned his death. >> walmart is offering its employees a new perk affordable access to a college degree it will only cost workers a dollar a day the company hopes the new benefit will help it recruit and retain higher quality entry level employees in a very tight labor market >> and allergan is voluntarily recalling 170,000 sample packs
of a birth control pill sent to physicians nationwide. the company says some of the pills in those packs were placebos they have an expiration date of may of 2019. you're up to date. that's the news update this hour back to you. >> sue, thank you very much. >> here's what else is coming up on "the halftime report. the big call on one of the biggest players in the oil patch. see why this analyst just got so bullish on this big name >> before the break, our data partners at kensho on what happens to the russell after jumping at least 5% between january and may. the numbers say buy in the index is positive 100% of the time after a big run in the first five months of the year. up on average an additional 8.8% by the end of the year for more, go to cnbc.com/kensho. "the halftime report" with scott wapner a t tde ibandherarss ck in two minutes let's begin.
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energy stocks rebounding today the xle is pacing for its first positive day in the past six rbc out with a bullish call on exxonmobil they upgraded the stock to outperform we made it our call of the day joe, you get it first. >> listen, i know pete owns the stock, and darren woods is the new ceo. he's got a difficult task, i think, trying to after the earnings report we saw in january when the stock fell from nearly $90 down to $72 i think he's got a difficult
task getting the investment community back into it once again. it is a great dividend story it is about a buyback and it's about the future projects, and we keep talking about 2025 that's what the company keeps identifying as the target when all of these investments are going to come to fruition. for me, there are other places that you could find more alpha generation in the energy space so exxonmobil, chevron, maybe there's a smaller version you could go to which is conoco phillips, and clearly, that has performed so far year to date, and the last thing on exxonmobil, at a certain point, you would like to see the investment in natural gas come to fruition, be beneficial, and i till think that happens. >> that stock is getting a nice pump pete, what do you think? >> i sold most of my energy. i differ from jon on this one. everything i had seen was short term, everything it was expiring in may or pushing out to june, so i have taken off everything about a week ago except for kmi and xom.
all the ones we talked about - >> you're the biggest bull on energy >> i got out because they were all short term so to save me, right, because now we see the way oil has pulled back some but i think in terms of the exxon story, what's really great is the permian, that's why they're getting out of a lot of cash flow. this is a company that last year had $30 billion in cash flow $15 billion they spent, the other $15 billion is going back into the company they do everything you would want out of a company, and i still think they're undervalued because the price of the stock is still where it was when oil was $28. that's why i like it >> i like that one as well and when elliott management middle of may or so, when it was announced that they had put a stake in the ground for this one, we all talked about how it's so big, though, is elliott going to make a difference the issue is it's an endorsement of the team that's in there running the company right now.
and i think it's one you want to hold on to in the high 70s now it's back over 81. i think you can hold on to it here and you'll get other chances for this before it goes to $90 >> jon and pete are finding unusual activity in a beverage stock and a gamer. >> plus, sex and big money why hedge fund and private equity executives are searching for the best and brightest private investigators. what's that about? >> and brand new rich list see which hedge fund managers are on the top performers list we'll show it to you when we come back in two minutes
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visit learnfuturestoday.com to see what adding futures can do for you. all right, we're back. the najarian brothers at the telestrator with unusual activity we're talking beverages and international game tech. let's go first with that one >> rolling the dice here, judge. international game tech, igt, they came scrambling in, buying what was then the at the money call the 26 calls bought them in really big numbers. drove the stock up as they did that bought about 5,000 that's half a million share equivalent bought these calls very rapidly. and they're out there in july. so i'll probably be in these about three weeks.
i'll be looking to sell a higher strike above it if the stock continues to run like it is right now. another one real quick, and this one in full disclosure, comcast, paernlt company of the network, this is comcast, stock is flat on the day, but they came in buying longer dated calls aggressively so we see about 10,000 of those go rapid fire like that. they were october 35s. so i bought those as well. and again, full disclosure, this parent company of the network, not trying to pump it. just saying i'm following that unusual activity and surfing it. >> that's two full disclosures >> there you go. >> got you covered, scott. >> also has nothing to do with beverages. why did i talk about beverages >> i got beverages for you >> what do you got >> monster beverage. that chart looks absolutely awful. we all know that but has it maybe finally started to bottom, scott somebody seems to think so today, the june 55 calls, the stock was trading $51 when those were purchased june 55s, 4900 of those.
these are the june that expire the very last week in june the 29th so keep an eye on that as well they only cost 30 cents. pretty aggressively bought i love this type of a trade because you know what. risk/reward, it's a 30 cent option if it starts to move, and it started to move today, but if it continues the move to the upside off the lows, these could absolutely explode to the upp side i'm in these and will be in for three or four weeks. >> come back this way. big companies and private equity firms taking new measures to find sexual harassment in the workplace. leslie picker has more on that story. >> hey, scott. that's right we have seen this time and time again, the stakes are so high for companies that fail to root out sexual harassment. so many are turning to private investigators like dan nardello. he's been one for 25 years but says he's never seen an impact on his business like that from the me too movement. >> an ounce of prevention really
is worth a pound of cure here because the cost both in terms of potential drop in stock price, legal and pr costs, if there is a scandal, the possibility of the regulators getting involved, they're enormous compared with the relatively modest expenditure in hiring folks like us in order to rule out this behavior >> he says corporations and private equity firms are seeking his help in finding misconduct it's a top client request during due diligence surrounding hiring of board members and suite executives and even in deal negotiations he says some clients are even looking for possible predatory behavior in their competitors, a move that one of his clients calls weaponizing feminism his work oftentimes comes through references from lawyers. ed little is one of them you can see him there. he sought help with the other
side of the movement, clearing the name of a client who had been accused >> in representing somebody who has been accused, it's important to find out whether or not there's any credibility to the accusations. >> still, nardello says he's seen private equity firms walk away from deals and potential hires after discovering such sexual misconduct. and despite the recent wave of allegations, he says we may have only seen the tip of the iceberg, scott and as you know, these revelations come out by the day. just yesterday or the day before, we learned about athena health's jonathan bush, which is interesting, especially as they battle potential takeover offer from elliott, they made an unsolicited bid to acquire the company. we see this time and time again. that just being the latest example. >> what we learned, so everybody is clear on this, is that there was a story over the weekend out of the uk that more than a decade ago, jonathan bush,
co-founder of athena health, been the ceo for a number of years, had attacked his wife and admitted to it during a divorce 14 years ago the reason we're bringing it up here, elliott, as you said, is pushing for a takeover >> exactly >> in that company now, we're not suggesting in any way, shape, or form that elliott is the one that found this information or pushed it to a publication over in the uk you're just simply saying this is emblematic of what some hedge funds and private equity firms are doing to try and, i don't want to say get an advantage or do whatever, in the way they conduct their business on potential targets or whoever >> absolutely. we see this, nardello says he has seen this in activist situations, to be clear, not this specific situation with athena health and elliott, but he has seen this with activist situations in rooting out sexual harassment misconduct, potentially in a proxy fight where you look at the board
members that are up on a competing slate, whether it's the dissident slate or management slate to see if there's misbehavior there. if it comes to the surface, it can be an automatic way to potentially win a proxy fight. >> for the record, too, you asked elliott if they were the ones who leaked the information to i think it was the daily mail, and what did they tell you? >> they declined to comment on that they did not want to be on the record speaking about this subject at all >> yeah. perhaps not surprising okay pivot to another elliott story at least related you have a list of the top performing hedge funds and they're on it. >> they're on it, for good reason, because of the high-profile activist situations like we're seeing. speaking of paul singer, he's number 15 on institutional investors list of top hedge fund managers that list, of course, came out today. he's -- they do a multi-strategy
fund, and that performance is what allowed him to be number 15 raking in about half a billion dollars this year. of the top five, though, izzy englander of millennial management earned $975 million ray dollio come in at number four, raking in $3.1 billion, thanks to fees generated by bridgewater, the largest hedge fund, appaloosa's david tepper edged out the number two spot with $1.5 billion, and number one was mr. simons of renaissance technologies he took in a whopping $1.7 billion. and as my colleague robert frank calculated, hedge fund managers that brought in more than a billion dollars last year earned, get this, guys, $145,000 an hour. so during the course of this show, $145,000 or $2400 every second of the day. >> so much for the death of
active management if you're doing it well. and doing it right lee cooperman is on the list, about $500 million it says here dan loeb, $625. the biggest names doing all right. >> that's a distinction from last year where we sought saw a lot more quantity managers where the algorithms were in control, not earning the money, but the guys running the firms who had the algorithms made the top of the list last year >> thanks. leslie picker. >> let's get to futures now. jackie has the story on crude. >> well, crude is surging today. over 2%. rebounding after yesterday's sell-off, trading over $68 a barrel right now do you think we can get back to $70? >> i think absolutely. i mean, the weak dollar is certainly helping now, but also, we see the saudis to a certain degree are walking back the conversation last week where the russians where they agreed to increase production. other producers don't like that.
they like $70 to $75. they expressed their reservations about that. saudis, kuwaitis, and emirates are meeting this weekend to walk that back. so i think we're going to see less production and higher prices >> jim, what do you think? you're breaking down the key levels >> ijim, what do you think you are breaking down the key levels >> i think this move is largely technical. for two and a half weeks we tried to push out of the range to the up side when it got exhausted it came back it hit 60.80 andrejected it yesterday's movement and the day before exists within the realm >> futures now is back tomorrow. >> jackie, thank you. coming up, widely followed trading analyst dropped information on how europe will affect the u.s. banks.
first, michelle caruso-cabrera has a look at what's coming up in "power lunch" in nine minutes. >> coming up, global market fallout mark moabious is going to join us with his take on italy's whoas and wh-- woes and the impact it could have and the analyst who downgraded apple and decreased his price target joins us to make his case that and more when "power lunch" starts in less than nine minutes. the halftime report is back right 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,
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that's why we ask for their help. welcome back financials as you know coming off their worst day in several months one top wall street analyst is now -- i mentioned this note that mike mayo has he is with us today, a senior analyst at wells fargo securities good to see you. you felt compelled to write a note based on what we saw in the financials with the market yesterday? >> absolutely. >> why so? >> here we go again. and what the u.s. banks had to contend with you had the brexit you had the arab spring. you had the oil price decline. gibs par one, gibs part two, begins meaning greece, italy, portugal, spain you. >> didn't mention low rates. >> low rate temper tantrum
yet the u.s. banking industry has come through it has the most stability with bank earnings in over a decade the key word here is resiliency. we are not making a call on whether what happens with italy or europe. we are simply saying that the u.s. banks can withstand a body blow no matter what happens this will be nowhere close to the fed stress test. that's gdp down 7 public unemployment up to 10% stocks down 50%. that's the fed stress test banks can't return capital until they are assumed to be able to pass that type of stress test. and by the way that stress test is by the end of next month when banks will be allowed to return even more capital. >> are you just saying ignore the noise about what is happening with italy and worries about expose your and all that stuff? >> you have to pay attention the noise. the absolute exposure to italy no large bank has more than 1% of their ball an sheet exposed
to ill italy contagion to the rest of europe, that's 1% of their balance sheets it could hurt 5 or 10% but it could help with u.s. banks gaining share in european banks. they could wind up ownin productivity in bank out there i'm tired of this drill, there is a scare out there, sell the banks when you have record capital, liquidity, stress test. and more capital in sight. >> a stock was down 5.5% it had nothing to to with anything you just said it was about a specific part of that business, transactional revenue i think is what was talking about. how do you look at what happened with morgan stanley yesterday
and all the other banks that were already down because of italy. >> people have bias from the financial crisis every time there is a hiccup people think financial crisis. yeah, trading revenue might not be up as much as people expected maybe instead of being up a couple% it's flat. you are missing the forest through the trees. you have the strongest balance sheets in over a generation. for the first time in over a decade banks should generate returns above the cost of capital. and you have many eyes watching the banks. thank you regulators, for ensuring that the balance sheets at u.s. banks withstand a lot of things that are thrown their way. >> the me why the bank stocks then can't do so much. you painted a scenario, everything is great. >> people say oh, there are problems in italy. does that spill over to the rest of europe. who has exposure to european
banks -- >> my point is we are so scarred by what happened during the crisis -- you are even saying it doesn't take much to get people worried. when is that ever going to go away. >> buy the dips. every time we have had a scare, i rattled out the list we should have bought the dips i am a surprised we still have scares with exacerbated action in the bank stocks it is an opportunity. >> is one of the reasons because you think the ecb is less likely to be as punitive as they were in dealing with greece >> i'll grant -- let's assume there is a problem in europe let's assume they don't come to the rescue and it's not all salvaged. >> okay. >> banks can withstand not only one financial crisis but two financial crisis and still exceed the minimum capital levels required today. banking averages for u.s. banks declined from 25 times to 1 down
to 10 to 1 that liquidity on bank balance sheets has gone from $1 trillion to $2 trillion in assets we don't have to worry that the ecbwon't come to the rescue. u.s. banks will still be fine. >> buy banks because of c car. >> yes, that will be a catalyst. >> it usually is mike thanks, appreciate it appreciate you coming on to talk about this note you put out not long ago michael mayo, wells fargo securities. final trades pete >> quick on the bank, can i touch on that? >> sure. >> how about this, it was the largest one day drop in the ten year since brexit. i think it was less about italy it was about the ten year and how they travelled and how the algorithms jump on top of that nike final trade. killing it overseas. that's the reason. >> teck. a resource play guj. coal, steel, anything that gets
made, teck is part of it buy that one. >> palo alto continues to move higher and higher. stay long. >> we will appreciate it very much. all right. that does it for us. mike mayo, thank you again for being here big day for the dow. up 281 that does it for us. "power lunch" starts now i'm sarah eisen. well, that didn't last long, the pan over italy's political and debt crisis subsiding. was the fear overblown the trillion dollar race, microsoft hitting a new all-time high that stock up 15% this year, overtaking alphabet in terms of market cap for the first time in three years. what is fuelling the forgotten name. and president trump weighing in on the controversial debate over experimental drugs. also tweeting about roseanne getting the ax for the first time, firing back at disney ceo bob iger all the details straight ahead "power lunch" starts