Strength of the iphone our josh lipton starts us off with what is at stake today. Josh is live in cupertino. Reporter hey, scott, listen, the Shareholder Meeting is really just Getting Started right now, shareholders dpa gathering. Actually in the new steve jobs theater at the on the new apple campus thats where they introduced the world to those new iphones, the 8, 8 plus and iphone x last fall tim cook is going to be here and is going to field questions from shareholders, scott. Ive been covering these Shareholder Meetings for a while now, and i can tell you cook always does seem to appreciate and enjoy these meetings he seems to really like fielding these questions from his shareholders, which typically cover a very wide range of topics but i wouldnt be surprised if shareholders also do, to your point, scott, have some questions this morning about the iphone franchise the health of that franchise, the future of that franchise you know, apple did just recently report results. We saw iphone units in that holiday quarter, 77 million. That was actually below the streets forecast. But we also saw apple in that quarter really demonstrate very strong Pricing Power average selling price is up 15 to 800 so traders and investors listen carefully today what kind of color, what kind of insight do we get from cook about the health of that iphone franchise both now and in the quarters ahead, scott. Josh, thanks. I know youll be inside. Well get back with you later. Doc, what tone to those questions take from shareholders theres some serious questions about how strong the iphone is uninspired x demand, super cycle may have ended. That was the same quote i pulled from that not upgrade but from the nomura piece because they were really talking about the uninspired demand. When you go into the stores, the 8s are moving like crazy, but the x or the 10, not so much so i dont think that thats a bad thing they sold more of them than they expected to in the last quarter, but going forward, this wasnt the, you know, the phone that it was supposed to be this wasnt the latest, greatest the facial recognition, i get it. How big of a problem is that . I dont think its a big problem. The stock got down to 150 whatever then it bounced back as the whole market came back. Came back 13 just in the last two days. Hit 150 on friday made that very nice bounce that judge is talking about over the last two days and holding it barely gave anything back this morning after a huge rally again yesterday. Again, backtoback 6 rallies, thats pretty damn strong out of apple. Joe, whats at stake today as tim cook meets his shareholders . I think youre going to hear more questioning about the cash and what theyre going to do with it. Back on february 1st they talked about utilizing much more cash than they historically have, dwindling down the big pile of cash i think youre going to get those questions. Normally you get it around april or may i think its going to be pushed forward into this meeting. I do think thats very important. I have said over and over again we are shifting with apple from a product story to more of a services story and more of a cash usage story they referenced a 30 billion Capital Investment we want to get more of an understanding of what that was lastly, understand that apple before the market declined, apple was already beginning to decline. So apple was declining into the market decline i believe that apple will rally if the market is going to rally ahead of the market so its going to lead us out. One of the interesting things, steph, is that in this note they say secondhand phones are driving services growth. If your latest and greatest isnt driving what people say is going to be your next big area of growth, how much of an issue is that . They have 1. 3 billion active devices out there so thats pretty impressive in itself, i think. If you can sell maybe fewer x but at a higher price, to joshs point earlier, the margins actually were a little bit better than expected so this is certainly a story that is changing i dont think the super cycle story is totally dead, but that said, they do have other things that they can rely on. Subscriptions are growing, services, margins are growing. To the point on cash, you have 163 billion in cash going to zero, so that means buybacks and dividends, i dont care what they do in terms of buybacks or difficu dividends. I think theyll could both and a little m a i think the stock has gone from love it to hate it and theres a real value story here. Lets not forget, the guidance was disappointing we were warned that the numbers would probably be good, the guidance would not be good and thats exactly what happened it seemed to reprice the stock a bit and seemed to reset expectations about what this company is going to do going forward. So i think that happens once every 18 months with apple those are typically the times to buy it, not to sell it so heres the technical setup. Stock is back to where it was in august of 2017 this is the classic name that everyone says that doesnt own it, i want to buy it, but im going to wait for the pullback well, guess what, it was at its low on friday, 16. 5 off the high so i dont know what more you wanted that was the moment. Now its bounced it got below the 200 day but that was a false move. As they say, from false moves come fast moves. So it had a really nice bounce back. Still down 8 in a month. Corporate treasury, youve got a 200 billion buyer coming into this name this year and ive got to tell you, this whole thing with disappointment, relative to what because netflix manages to raise its subscription price per month from 12 to 13 and people go bananas. Heres a company that was able to release the 8, raise the price, and then simultaneously release a 1,000 version and get millions and millions of handsets sold. I really dont understand the concept of this being a disappointment i think its a 200 stock at some point i do not want to be a seller because of a general market correction. Doc, we were saying, okay, is 200 a formality not that many weeks ago. The market got all upset and the stock got all upset. Some have said that the way this stock trades will be a bellwether for how the market reacts in the weeks ahead. Its going to be a bellwether for all the suppliers that feed into apple, judge, i think thats a fact. As far as how the overall market moves on this one, i dont think so i think it consolidates in the 165, 175 range and basically it might be there for six months. And thats not the end of the world, especially for folks like us that are we try to capture a little cash flow from selling those at the money calls or just out of the money calls this is an ideal stock to do that on, so i see no reason to run away from it. Respectfully, i disagree. I think this stock is such a bellwether with Portfolio Managers, with the retail community, and everyone was asking the question in january why was apple underperforming in such a positive environment for the s p . The last couple of days as josh pointed out and you pointed out at the top of the show, the market lifted as the market was witnessing apple coming off the bottom so if apple is trading not 162 but 152, i dont think the s p is sitting where it is right now making the correction. And i do think a lot of the dependency of the overall direction of the s p is going to be predicated on what apples direction is going to be i think its more about jpmorgan than about apple as far as the direction of the market and so forth i know were going to talk about jp in just a little bit because of a note out there. No spoilers, jon. But i think this is a much bigger driver. You know, the financials and jpmorgan than is apple in the short term. Even considering, doc, what tech has done over the last 12 months minimum yep. Talk about the Biggest Company on planet earth. Right like i say, consolidation, i think, for this one. Between perhaps that 165, 75 range that i talked about, i could see it just laying there for a while in that range. I dont see it violating the upside by much weve seen a fair amount of shortterm bullish trades. A lot of those paid off very quickly. Now its just going to sit there. It was up 46 last year thats a really nice, impressive move maybe not as much as nvidia or some of the other highflying f. A. N. G. Names but it did quite well for you. Its crazy impressive. Unless you think it was too much. Its the biggest stock on earth and it added 50 to its valuation. Its crazy. I dont think its too much given the Balance Sheet, given that they have other areas that theyre growing. I know that iphones are really important for the story, but theres other things that are happening under the service. 77 million hand sets . 1. 3 billion thats huge. The market sniffed out the guidance we said going into the print, how often do you see apple shares lower going into earnings theyre usually ramping into earnings that did not happen this time and it showed that the market got it right. I think rightfully so a lot of Portfolio Managers were asking the question. But even if apple stabilizes, 165 to 175, and im long, i bought it on the decline here, so im happy with the recovery were having but 165 to 175, thats great thats great because then youre not questioning if the worlds biggest stock is falling apart, what the impact will be on the market. Lets move and talk about shares of under armour they are ripping today after the Company Reported betterthanexpected revenues along with a dip in inventory. So our question is this, has under armour bottomed. Joe . Yes. I think it was in a commercial break you asked the question i dont remember what answer you got but ask it today or answer it today. Well, the answer that i got was, no, that it hadnt. But the other side of that, which the person indicated to me, was that you could see a short squeeze. I think thats the first thing thats going to happen some say thats exactly why the stock is up 15. 5 . It is happening right now it is happening right now. And like it or not, we are back into a trading environment so what im going to speak to here is that this is a trade but for a trade i could see this easily pushing to 20 there is no doubt that the quality of the earnings were less bad the guidance was not very exciting at all. 18 looks the same as 17. That doesnt get me too excited. But for a trade . Absolutely the shirts the shirts, the shorts, thats a good parallel there. The shorts are clearly unwinding and continues to take it higher. The headline from a note today from Raymond James says overlook the short squeeze another rough year ahead in 2018. Gross margins were 150 basis points below expectations. Inventories were up 26 . Dtc growth was 11 , stores were 22 . You dont want that combination. You want the reverse actually to give you a clue as to the health of the brand and the product so i think this is absolutely a short squeeze. If it goes to 20, thats great i think you get out. Its already faded. This is not the year. This is not the year theres another note from jeffries which says the top line beat and strengthened direct to consumer and international proved the brand is strong globally. They bought those sales its too soon to just, oh, it bottomed because its having a great day. This is a stock that is down 70 from its 2015 highs going into this report. It was at 11. 11. Okay. Im just making the point, it was down 16 and change, you dont think it bottomed at 11. But youre making my point for me stock has been below its 200day moving average since 2016. We dont know if this is a shortterm bottom or the bottom. There was nothing that said theres going to be a huge change in the companys Business Prospects this year. If were just debating price, this stock is already, scott, 3 off of todays highs so lets take a look at what that candle says at the close before we all start ripping our clothes off and partying over a stock that dropped 70 and popped 15 but no way early. No one is partying, this one is ripping their clothes off. Speak for yourself. The show is early. Keep yours on we want the viewers to keep watching its a family show. What youre looking at, yes, its 3 off the highs, but look at where the gap is from yesterdays price action all im i agree with you, the fundamentals, nothing here gets you very excited but lets at least acknowledge how short the marketplace was and that there is a fact that this could be unwound and taken significantly higher. It could. It sure could. And kudos to you, joe, for talking about it yesterday. But its not a high probability bet. At least the inventory story is improving. It is we saw some very shortterm call buys in here today, judge. Pretty big like 8,000, 9,000 of the 17 strike calls in under armour just today obviously they werent as presient as joe has thinking do you think this could be to the upside and sure enough they did. There are a lot of people buying calls today and they are shortterm calls go back and look at a threeyear chart counting up the 10 oneday rallies. How did that work out for you if you overstayed your welcome . Not well. The other thing is its not cheap. Its not even close to cheap its at 76 times forward estimates. Its never been cheap. Okay. But for what are you again, just go back to the fundamentals what are you willing to pay for margins that are still depressed and also that stwep toinventori still elevated not a disaster if you look at the variance there, but still its not good. Youre worried about the promotional aspect still hanging around i worry about the promotional environment. Id rather own nike. They are more ahead of the curve in terms of the investment cycle. I think that under armour at some point will be a buy. Neither one of them, by the way, are killing it in north america. No one is doing it well in north america. Why nike is further along in their dtc strategy and they have been pulling back from the stores so they are a little bit more advanced in terms of the timeline in north america. Meanwhile, theyre far bigger internationally than under armour. All right lets take a look at the Broader Market it certainly feels, even though its a down day, its a much more calm day. Theres the dow, its down 77. Thats off the lows, s p off the lows too, down 3 well call it flat nasdaq is pretty much there as well, just dipping into positive territory. You guys had any opportunity now to sit back and really answer the question of did we bottom on friday like ive said yesterday, judge, it felt like we could test again at some point, perhaps not this week, perhaps not for weeks into the future, could test again down to that level. Wouldnt be a shocker. But record tax revenues. When they announce things like that, that were seeing record tax revenues collected, thats a positive as well because i know we were talking about some of the concerns about the budget deficit and all the rest of it that hasnt gone away, i realize that but weve still got this very large number that just came in and we might see several more of those. And the consumer now moving forward, to joes point about the firms that werent able to buy back their shares during this socalled quiet period or whatever before and after their earnings theres some expectations, by the way, once that ends youre going to see massive waves of buybacks. I think the rational person is rooting for a light volume retest of that low with much less drama accompanying it and maybe a better rsi, better momentum underlying it. We retested it. No, you didnt. The worst thing that could happen is retest the high and fail psychology, if you know anything about trading, you understand how tenuous psychology is right now. A failure to make a new high or a weak retest of the prior high is much worse than rolling over and revisiting fridays level. So i think if youre intermediate term constructive, you do not want a fiveday move back to the high and then a roll that would really suck. They came in today in the qqq, some pretty big trades went off in that one again today. On the lows of the day, they came scrambling in and bought the march 164 calls. They expire just after the first week of march. Whos they, you and pete . Yeah, me and pete thats the they. Congratulations, i hope it works out. We popped significantly off that that was very close to the bottom today pretty smart trade it looks like right now. And that kind of speculative buys on the call side rather than the put side are what you want to see as far as us stair stepping higher. So ive gotten some buys out of you guys over the last however many days. I dont feel like, josh, youre ready to buy this market at all. We buy every day. But tactically if we were to get shortterm bearish and take exposure off, it would be because youre in a significant downtrend. Not just a moving average, but in a downward slope. But i dont have you coming here and saying, okay, i bought i bought xyz shares today because i think they were oversold. I mentioned on the show last week that with the exception of apple, one of the worst aspects of this correction is, a, it happened you lost 10 from an alltime high in nine days and none of the high quality stocks really gave you a meaningful entry. When you look at the best companies, the ones that you really want to buy, theyre hanging in there way too well to say, oh, its a gift, everything is on sale you have stocks that are back where they were trading on christmas and no one is getting excited about a pullback like that i have my names, i have some ludicrous goods that cancel buy limits in. Hopefully i fill in a couple on the retest certainly didnt get anything on this last pullback by the way, another v. Another v recovery, which is probably not what most people expected i dont know why every single one of these episodes has been a v and this is no different so far last quick point . I dont know if i can make this point quickly i talked yesterday about equity and portfolio correction and there is distinctly a big difference and this is purely an equity correction. If you look at the equity correction, 2870 was the high, 2533 i think was the low where do we sit right now, 2650 . Thats not that big of a bounce. So the equity market is the one place that of all the Asset Classes looks the most vulnerable. It was a pretty big bounce in only two sessions. I would tell you that theres still if you look at a chart of the s p in the last month and youve got that 2873 high and the 2533 low, youre only at 2655 right now theres a long way to go, another 200 handles in the s p to retest those highs. Thats a long way to go. In the meantime the stocks that werent letting you in, quote unquote, they wont let you in, theyre still not letting you in at anything even approaching where the worst names are. So like if you really want a big discount, well, feel free, you can buy any utility you want, 15 off its high i have plenty of names that i found that were down 10 and 15 . Midcaps s p 100 names . There arent a lot. There are plenty of names, large cap names that i found that i actually nibbled on air products, textron, prudential there are a lot of names that were down 10 or 15 that you can nibble on. I think thats pretty attractive. Lets wrap this up. Were going to come back and bring in mark cuban whos going to join us to talk about what he is q in the markets right after thuick break heres what else is coming up on halftime. The cnbc program is sponsored by payden and rygel offering Global Investment solutions. Weve helped our investors stay confident for over 80 years. Call us or your advisor. T. Rowe price. Invest with confidence. Hey, need fast try cool mint zantac. It releases a cooling sensation in your mouth and throat. Zantac works in as little as 30 minutes. Nexium can take 24 hours. Try cool mint zantac. No pill relieves heartburn faster. You know whats not awesome . Gigspeed internet. When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids, and these guys, him, ah. Oh hello. That lady, these houses yes, yes and yes. And dont forget about them. Uh huh, sure. Still yes xfinity delivers gig speed to more homes than anyone. Now you can get it, too. Welcome to the party. Welcome back to the halftime report. Mark cuban as i said joining us now by phone mark, welcome back to halftime. Its good to talk to you again. Good to be pack. Give me your thoughts, your observations on whats taken place in the market over the last week. Oh, my goodness theres the old saying everybody is a genius in the bull market from the election, even before the election, things just kept on going up. So when things are working, people do more of it so we saw more people apply more leverage, do more leverage etfs and it all worked so they want on leveling up and it worked until it didnt. And so we saw what happened with the markets with the vixand th unwindings and so i took a couple occasions to jump in you know, there was blood in the streets with the vix everybody got leveled out so what did i do . I bought puts, not huge positions but enough to be interesting. I also bought some virtu they make money off of volatility and went back and read their transcripts from their Conference Calls if the volatility continues, ive got enough of a position that i can make some money there. If it doesnt, then ill make money off the vix puts so i played in both directions. Interesting weve had doug sefu who runs virtu and vinny viola who founded it on our air the past week so a lot of people are talking about the increased volatility and what it could mean for that stock. Is this the new normal now, more volatility its back and will be this way for a while . I dont know. Heres the uncertainty and heres why i dont know. You know, you get the tax cut. Whats the first thing that people do . Let me take a step back. When things are going great, like i said, everybody is a genius in a bull market. No one pays attention to the details because everything is working. And so we kind of ignored Th Administration and all the political side of things because it didnt matter we got the tax cuts, the gdp seemed to be going up, wages seemed to be going up. Life you know, everybody is happy, you know. Everybody is in mary poppins world. Then we saw these last few days where things were crazy. Now we have to start paying attention to detail because of the uncertainty. And so if you start paying attention to detail and start walking things through strategically thats what im trying to figure out first thing we got the tax cut theres good and bad to it but short term its great. What are people going to do with the tax cut . Theyre going to spend money what are they going to spend money on just the basic things they need, which is going to increase imports, which is going to increase the trade deficit now, in the past since the election, past 14 months we ignored all the political things, but if all of a sudden the trade deficits are going up significantly because americans have got a lot more money to spend, whats the how is the administration going to react . We kind of ignored that before, but now we have to know. Is there going to be a better reason to undo nafta now are there going to be more trade restrictions or reciprocal trade . There was an article in the journal this morning saying that suggesting basically if the trade imbalances continued that there would be a reciprocal actions taken. Well, thats a negative for the market overall then on top of that, you have the increase in Interest Rates that are most likely as the market heats up. How are we going to respond to that strategically when we look out ahead, theres more uncertainty introduced because of that Political Uncertainty and the fact that we have to Pay Attention to the details now and what the administration might do, i think thats going to increase the volatility, at least for the next year. So there are a bunch of Different Things to discuss with you on all of those points that you made you have a good read into both the tech economy and the consumer economy, obviously, through your sports ownership of the mavericks. Sure. Things seem pretty good yeah. You dont suggest in any way, shape or form otherwise. No, no, not at all. I mean, look, people got more money in their pocket because of the tax cut. But that short term is great we dont know how much its going to heat the economy. But again, because there seems to be a lack of economic understanding in the white house, youre going to see an increase in trade imbalances because were spending more money for the reasons you just mentioned, we have more money to spend. But whats going to happen next if all of a sudden we start seeing reciprocal trade actions . That changes the expectation of things getting better. The president continues to talk about redoing nafta. Yeah. Hes meeting with a Bipartisan Group of congressional leaders at the white house as we speak today to discuss the very issue of trade. Yeah. Up until last week we just ignored all that stuff because everybody was making money on everything when everybody is making money on everything and theyre just levering up and making more money and everybody is happy, except maybe if youre in the bond market, then you kind of ignore it. But now you have to Pay Attention to it and that introduces the uncertainty going back to the shark tank companies, the mavs, business is good there certainly is more money to spend. But theres kind of a race between are we going to increase gdp or increase productivity fast enough to pay down the debt or is all the federal debt going to skyrocket and Interest Rates go up quicker than we expect and now all of a sudden we lose that tax benefit because were spending more on interest and other things, taxes have to go back up. Do you think the bottom was put in on friday i dont know. I can make an argument both ways so thats why, you know, im playing it both ways if theres less volatility, ill try to make money using options. If theres more i try to make money as well. Theres some stocks that have moved that are in your wheelhouse what do you make of twitter . Twitter is up today almost 8 and its been an incredible comeback and rita really a cha the fundamental narrative. Im bad because i bought twitter at 15 and sold it at 22 so obviously left a whole lot of money on the table twitter has done a great job of using Artificial Intelligence to improve the way they deliver information. They have done an improving job allowing Small Businesses to buy ads on a selfserve basis. But theyre still not doing that very well. Theyre just doing it better but thats all their upside. Now, they still have the issue of trolls. I think they have reduced it some, but its still a problem you know, particularly if youre active on twitter, youre always going to meet resistance they havent solved that, but they have taken steps. So i think its definitely on the upswing. I sold my twitter, but my two largest positions are still netflix that i bought at 50 years ago which i think, by the way, you documented right after you did it on our program. So youre Still Holding it. Yes, still have it. Havent sold it. Havent sold calls on it on anything and then when trump got elected and amazon i sold amazon at 500. And then when trump got elected and amazon dropped, i went all in and bought a huge amount and made it my largest position at 700. I still have it all. Actually i bought a few thousand more more than a huge position for me, but as kevin would say wet my beak on amazon when it dropped. I wish he was here to rekindle that fiery debate we had not all that long ago. You know one stock you didnt mention, facebook. Im wondering what sort of Regulatory Risk you see around this story and if that is the determining factor as to why you didnt mention that name no. I think okay, facebook has got a few issues one is obviously trying to figure out what kind of platform theyre going to be and who their constituency is, particularly here in the United States outside north america, theyre a different product and they serve a different need but, you know, still i think north america still drives who they are and because of the russian interference, thats a big issue. Theres Mental Health issues that they have to address with their users and bullying and things like that they have got so many issues that are going on that i think we saw in their numbers that a big portion of the younger demographics, they may have a facebook account just because they have a facebook account, but theyre not really using it. My kids are 8, 11 and 14 the 14yearold wouldnt consider using facebook unless her grandmother posted something and she had to look at facebook. But on the flip side, even with the snapchat upgrade, theyre complaining about it, but theyre continuing to use it i think the snapchat upgrade will end up being a net positive for snapchat and i think their self service will be a net positive did i buy the stock . No, i missed the upswing if it comes back, ill take a closer look. I do think evan and those guys are smart. Ill wrap it up on a couple of other names im just curious, and throw them out there. Under armour were having a debate today as to whether that stock has bottomed i dont know what exposure the mavs have to under armour if any at all. Our rookie is with under armour i know kevin i dont know i think their worst times are behind them but i just dont know how theyre going to be able to grow or where the growth will come from. As steph curry goes and his sale of shoe goes, i think that will drive their upside but i cant say its i dont think you can get much worse i dont think theres a lot of Downside Risk but i dont know how much higher it will go. Youre not an investor in those shares personally . No, im not. And just to bring it full circle, apple, tim cooks meeting with shareholders today. Whats your opinion on apple today . I think i think theyre going to return a lot of cash to shareholders and i think thats positive if you look back at what microsoft did when there was a last repatriation, remember they did that huge dividend, like a 30 billion dividend, i wouldnt be shocked if apple did the same thing. I think thats driving a lot of the ownership. But ive got the x and its okay, but its not spectacular and i think, you know, apple is not going to fail. Apple is going to keep on growing. I dont know if well see the hypergrowth. For Value Investors its fine, for Growth Investors i think its a challenge. What are you looking for with the x . Its not going to hit threepointers for you. My threepoint shots failed long ago. Thankfully youve got some guys around that still know how to do that mark, thanks for calling in. Its always good to get your thoughts, especially in times like these when the markets are going a little bananas mark cuban joining us there on the phone. Lets move and talk about new accusations this hour and what might have caused an unusually high level of volatility in last weeks stock market hey, bob. Hello, scott. Through an attorney, an alleged whistleblower has written a letter to the s. E. C. Aalle alle the vix is subject to interpretation he said he had been working on by side firms for 20 years in what he called senior roles. The crux of his argument is that vix derivatives, futures and options, are subject to potential manipulation the vix is calculated using options one month out. Lets assume the s p is 2600 and its options price between 1800 and 3000 normally say a thousand or 1200 out of the money are nautical clatd because theres no price to them. The whistleblower contends that one of the only times that theyll see bids and offers in these far out of the money options is just before the settlement on options and futures. Hes asking to investigate why that happens his contention is that some traders go long vix futures before this and then put in bids and offers way out of the money and profit when the vix goes up just before settlement now, he says he has not personally observed anyone manipulating the markets directly, only claiming to have observed what he called irregular patterns in the market that impacts investors, he alleges. Finally his letter to the s. E. C. Appears to contain a serious error by twice referencing the cme when it should be referencing cbo. His attorney said it is a clerical error only. Theyre also alleging a brief of fiduciary responsibilities by the cbo. The cbo said the letter lacks credibility. Scott, back to you. All right, bob, thanks. We appreciate your reporting bob pisani on the floor. At least one money manager was warning investors last year about the looming dangers of the short volatility trade our leslie picker is here now with more on that angle. Thats right. Perhaps were still in search of answers as to what exactly caused the big swings in the markets, but i spoke with one investor last october who predicted the fallout. She said the prominence of traders shorting volatility could one day lead to a spike like the one we saw last week. Were in a very, very lowyield, lowreturn environment. And so investors have been forced to figure out other ways of generating yield in their portfolio, and i think a very common theme, and its kind of the best sharp trade out there has been selling vol the problem is everyone is doing it now the big short is people who are short vol. Now, that doesnt mean vol bill spike hugely at any point but it has the possibility to because so many investors are short volatility. Nancy davis joins us now. Hi, nancy. Hi, leslie. Thanks for having me. Thanks for being here we should just replay that thing. If that doesnt mean volatility is going to spike any time soon. Okay well, it took from october until now. What do you make of whats happened i think vol and the level of Interest Rates are very correlated i think as weve been in ten years almost a very low Interest Rates, people are looking to alternative ways of generating their return targets and that has created a lot of carry strategies that are frankly using vix and other volatility measures to sell volatility and their delta hedging so theyre extracting the difference between implied and realized, but its created a very large exposure of short volatility and i think its created a huge opportunity for actually owning vol in the market because everybody else is selling right now. There are a couple of things here was this simply a trade that reversed, there were too many people on one side of the boat, or was the volatility of the unwind accentuated because of something going wrong with the way these instruments operate . I dont think its something going wrong, its just the growth of aum in indices that are passive and that have to trade, like all the vixrelated products, they have to execute they have to sell futures to delta hedge to realize volatility that actually occurs in the market. So i think its just a sign of how many people have flooded into carry yieldgenerating strategies in the search for alternatives is really because weve been in a low return, low yield environment for so many years. Les. Have those shorts been covered at this point . Was that last week spike something that would indicate to you that a lot of that popular crowding in the short volatility trades is kind of over at this point or is there still more youre seeing in the market . I think its a sign of how much the market can actually move i dont think its actually over, but i think a lot of people who say theyre long volatility are long, very, very long dated option and short front dated options. I truly think the only thing to own in this environment is actually gamma because thats when you have the move its all in the front end of the options curve because thats where liquidity is. So its really rent, though its not own because these things may revert to zero. So its a trade that you think theres going to be a rash of volatility its not long term i want to bet on volatility, right, for the viewers . No, i dont think i like Trading Options directionally. So to get market exposure, and you can size it smaller by using shorter dated options. If you have say you have a dollar to spend, you can spend ten cents a month by owning front dated options versus spending a dollar to by an option that might not move i think the market has really changed. The Insurance Companies that used to be the big hedgers of volatility were buying very, very long dated options. Thats gone because the products have changed a lot of the funds are now in targeting strategies, start beta strategy, theyre in strategies that dont need to hedge on the pack end of the curve. So i think the thing investors really need for diversification in their portfolio is actually owning the front dated options to have that gamma sensitivity, the long gamma. Were you yourself short the short volatility trade so said another way long volatility, yes. Our firm runs a long volatility strategy, so yes. In other words, you said that shorting volatility was the big short. Thats why i asked it that way. It was a thing that everybody was in and that was the best short, meaning the xiv to be short that because i said the xiv is going to zero it did happen. It took four months to play out. How profitable was that trade for you . I cant comment about performance, sorry but do you think that that is now over do you think were in a new sort of era of volatility i think a lot of people are still in carry strategies. I think its quite popular still. I like to call it all the flow into systematic, into risk premia, into all these new buzz words we have that its really the same old thing, its selling vol its like longterm capital in 1998, what were they doing they were selling vol. Just like mortgages, mortgages are inherently short vol so the opportunity is still very real to own gamma in the portfolio but you have to be careful and not be fooled because a lot of strategies that are selling front dated gamma to finance that. What does the vix say to you now . The market is not settled down were not in smooth sailing anymore. People are still in the buy the dip mentality and you can see that with the amount of call open interest in s p and spydr options. A lot of people have been unwinding hedges, buying the dip. Do you think theres a complacency surrounding that you bring up a great point, the correlation between rates and volatility to themselves do you think theres still complacency that, oh, the federal reserve, theyre not going to be as hawkish as we think they are and that we could return to going into those short volatility strategies, which is going to present a bigger problem down the road . Definitely. I think the fed reducing Balance Sheet which started in october is negative qe the curve in Interest Rates has been wildly flat because weve had such flat curves, people have been seeking carry and yield in other markets, whether its carry strategies in vol by selling vol, whether its em countries by selling sovereign debt, but the search for carry is real and its alive and it will continue until we have these shock events that penalize investors who have been running short vol and also allow for other investors to normalize this market, because we are still in an abnormal market of very, very low Interest Rates and return expectations in my opinion are still wildly too high for equities and bonds, but other Asset Classes like Asset Classes linked to inflation are attractively priced like Agricultural Commodities because there are no real Inflation Expectations. Nancy, if we sit, if we dont have another thrust through 600 dow points or something lower, if we dont see that very quickly, how long do we hold 26 . How long does even 20 hold if we dont see another 600point downward thrust in the next week to ten days . I personally dont use the vix. I dont think its a great product for most investors its a way to isolate variance swaps and trading front dated options. I prefer to trade options directionally. On the s p probably, right . On all things in korea, in south africa, in turkey, in all markets and you can trade volatility on many different Asset Classes you can trade it on kmaut tecom, on rates, on credits and mark cuban was talking about Trading Options directionally. So its not necessarily betting on vix or the move and implied vol, its really more about taking directional views with no downside. Leslie thank you do you have another question im curious you mentioned that you are anticipating in investing with the expectation that there will be an increase in inflation. How could the viewer sitting at home play that specifically . What should they be focused on commodities, oil, what are the types of areas that you think is opportunity there . We like commodities quite a bit. Typically when you have hiking cycles, commodities do well in that period. Im not a big energy bull. I think energy is like laptops ten years ago where technology is making it cheaper, better and faster so i dont think energy is necessarily the thing to own but other commodities. And we gain exposure to that through options, so we have the con vexity on the upside so we like commodity options directionally to be long we also use products in the rate market that capture realized Inflation Expectations the problem with tips or breakevens, its front dated cpi and thats just kind of the thing that really matters is the shape of the yield curve every investor has exposure to duration thats in the private equity book, thats in their bond portfolio and their credit book. So we like gaining exposure to inflation. Lastly, any new warnings that we need to keep an eye on, things youre watching that youd share with us . I think private credit and credit markets, not sovereign, but the Corporate Credit market is definitely something to keep an eye on. The last shock we had in credit was in january, 2016, when oil fell so aggressively i feel like right now weve had the shock in vix, where vix spiked and various etns were falling but i think watching credit spreads, especially as we have the fed reducing Balance Sheet and what thats going to mean thanks for coming here. Thanks for having me. Leslie, thank you for bringing us this interview now, Jackie Deangelis has futures now for us good afternoon, scott well, crude is now off of session lows still in correction territory, though down nearly 12 from its recent highs. Jeff kilberg, lets get straight to you whats your outlook for crude oil here i think we spent some time at 60 but last week was the most significant selling pressure weve seen in quite some time. Certainly there was correlation to the stock market. But lets keep in mind were seeing baker hughes came out with 26 more rigs came on so that goal by the end of 2018 of 11 Million Barrels per day in u. S. Production, thats coming thats going to be the ebb and flow we also want to look at the u. S. Dollar and dpchgeopolitical tenn may be rising. Jim, do you agree directionally . And what are the levels . A couple of weeks ago we had a channel from 55 to 59. The market seems to be trying to get back into that, but it feels a little uncomfortable when it breaks through 59, so i think its going to bounce from here and all the things jeff said i do agree with. I think rig counts are going up, supply is going up its mostly a supply story but also a story of coming down 12 in the matter of a few days and i think it could be prime for a bounce. Meantime today on the live show were joined by the godfather of technical analysis, ralph a campora. Plus Peter Boockvar will join us all at the top of the hour on futuresnow. Cnbc. Com. Coming up, jon and pete, they have two new trades based on bullish options activity. Halftime report back in just two minutes. This is where i trade andrs. Manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im 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. Onnajarian seeing unusual activity pete joins us from minneapolis doc, youre up first tang a look at macys with the stock around 24. 60, he came piling in, bought 10,000 of the 25 calls thats not a huge move for macys, but nonetheless 10,000 options is a million share equivalent, so somebody is looking for a relatively shortterm move because these were march options again, not a home run, but probably hitting for a single here with this one, and they swung pretty hard with that block. Pete, what about you . Im taking an eye at u. P. S. Its really interesting. This was 135 the start of january, it dropped down to 127 when we got to february. All the way down to 102. I already own it at a much higher level, around 120, i like this company, i like what they dlimpd, i see some option activity everybody 107s, 108s, 109s, 110s, all expire on friday this is only a couple days that people are looking at. We know activists are around, but its the 108s that stand out. By the way, as i was sitting here, somebody reached out into march, the 115 calls, and they bought a couple thousand of those as well. So some pretty interesting accumulation theyre, a lot of it is very short term. Some of it out in march. I own the short, but the shortterm calls, looking for any kind of move. Pete, youll stick around well step away quickly, and llacto youre call of the day. Its on jpmorgan, then final trades after that. The markets change. At t. Rowe price. Our disciplined approach remains. Global markets may be uncertain. But you can feel confident in our investment experience around the world. Call us or your advisor. T. Rowe price. Invest with confidence. Oh theres one. A the sea cow manatees in novelty ts . Surprising. Whats come at me bro . Its something you say to a friend. Whats not surprising . How much money matt saved by switching to geico. Fifteen minutes could save you fifteen percent or more. Yourbut as you get older,thing. It naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Thwho hold themselveshe to a higher standard. They are called cfa charterholders. Demand the best. Demand a cfa charterholder. Cfa institute. Were back with our call of the day. Kpw upgraded to outperform on jpmorg jpmorgan s whats your read. I own the stock i think this is the kind of name you can own through volatility, even through a disappointment at the rate in which rates rise if they dont rise fast enough, its okay. The bank is in all businesses you want to be in, and some of the businesses you have not wanted to be in, that will be improving. So for a lot of reasons, i think this will be 150 stock. Pete . Yeah, you know, scott, i agree with scott the valuation we talk about all the time with the banks, and some of the growth jpmorgan is definitely the best, obviously, but i think theres other names with better beta, but jpmorgan is the right place to be if youre looking for the solid delivery obviously it starts at the very top. This is a company others, the Bank Industry are picking up for some of that. Cramer tweeting two minutes ago jpm is one of the best stocks innocent market agreed agreed. Thats what i told joe at the top of the show. If apple just churns, jpmorgan runs, well see the market a lot higher some of the other banks have lagged, like goldman sachs. Goldman and citi. Sure, but citi was great last year, goldman was terrible last year, so you have two years now starting off actually the valuation is better at goldman i actually think that fic will turn around. I think it get better, if you want to play that theme, i think goldman is the one. You think putting wells in the guillotine it did anything hell yeah geez. [ laughter ] do you want top in a stock thats not going to grow and its not cheap. The region banks are cheaper, like suntrust. If it was cheap and you cant Say Something about it, you know. The story still hinges on rates, though, doesnt it . It does, and lets continue to quietly the best performer of the entire group its bank of america again theyre crushing once again, and jpmorgan is probably going higher, but im going to stay with bank of america. I saw moynihan at the super bowl hes been in a good mood. Should be. Just got a nice raise. Maybe its maybelline final trades. Dallas tree. Disney. Bought it because of options at this time. Tweet tweet, judge, up 8 or very, very heavy volume. Stef . Financial down, its cheap. Joe regens financial. Tweet tweet i dont know whats in there. That does it for us. Power lunch starts right now whats in there free market, is manipulation of a popular index partly to blame for the recent selloff . If so, what can you do dont worry, we have you covered. Apple facing off with shareholders, tim cook grilled and the stocks relatively poor performance this year. We are live at appleses details are ahead