A little bit harder today. Give you a check on oil and gold and bonds too. Theres so much conversation about what the fed may do. Even here at delivering alpha have you heard from some of the largest and most respected Money Managers in the world with their commentary on the fed and the markets. Were going to talk about that. Also word today that atlanta fed president Dennis Lockhart is stepping down from his post in february. That is big news. Thats why we have senior economics reporter Steve Liesman joining us on set as well. Lets discuss whats taking place in the market. Its been an interesting few days. Josh, volatility is back, and it is back in a big way. No question about it. You had these giant bullish candles everywhere yesterday. We had erased all of the loss, and in some areas we were actually gaining from thursday nights close. When you see that kind of action and then the next day its completely negated as though it never happened, that tells you Something Big is going on. We look at the history of these kinds of minus one, plus one, minus one again days near alltime highs. This has only happened five times. I dont know 100 what it means, but when you see the tlt looking awful back into the postbrexit gap, and you see van garde real estate down 8. 5 from the highs, you have to look at this as a raterelated adjustment because the cues, the growth stocks, are hanging in much better than the yield proxies. It means buckle up. I mean, investors, joe, need to buckle their seat belts, put their shoulder strap on. I mean, maybe if you are a race car driver, you need to harness in too because it could get even more volatile from here. I described yesterday as a trading event, and weve now gravitated towards if you are a money manager, you need to be paying attention to whats going on today. If you did not like friday, you do not like today. I think the problem was waking up this morning at 4 30 and looking at the asian markets and seeing them really give up the strong games. There was no rebounds overseas. People really dont want equities unless theyre domestically focused. Thats where i think were going to have a problem going forward. Were in a vacuum period. The right strategy is to raise cash levels right now. You take your Equity Holdings back. Probably somewhere around 20 in cash. You have to clearly Pay Attention today. As i said yesterday, it was a trading event. I think i might be wrong about that. I think theres Something Bigger thats developing here. Bill miller was on the stage less than five minutes ago saying that his best idea right now is long the s p 500 and short treasuries. Yet, youve heard other opinions from the likes of paul singer and ray dalio perhaps. Well hear from them in a moment. Your thoughts first. That was surprising. Josh and i were both standing there watching bill miller, and i think he were with both surprised that that was his best idea to come out. Not the other side. Not the sell bonds side, but the s p side. I think what paul singer came out and said was much more typical of what i have heard in my conversation and other conferences i have been at, which is his best idea was take risk off. Sell g7 Long Duration bonds. Ive done what joe has suggested, which i mentioned yesterday. Ive taken capital off. One of my concerns has been complace ensy in the markets, and i think were seeing that complace ensy come out again today. If you had asked me yesterday after brainerd came out and tried to throw cold water on it, i wonder if yellin put him up on it or not, i have taken down my odds of a tightening later this month. I still think it will happen. I would have thought the market would have had some followthrough today. However, were back to the correlation with crude. Crude sells off meaningfully over 3 , and the market takes a dive. I think thats what you have to point to. The other thing i think this is very important is that you cant disassociate politics and the polls getting tighter and hillary now becoming you know, the pneumonia with whats happening in the markets. Its becoming more of a reality. I think thats whats going to drive the volatility and continue to drive it through elections. Weve referenced paul singer a couple of times now. We might as well listen to the sound that he had today. Of course, the famed Hedge Fund Manager had already said that were in the midst of the biggest bond bubble in history, but heres what he said about how he views the world right now, and a dangerous one at that. What they have done is created a tremendous increase in hidden risk. A risk that investors dont exactly know or have faced about their holdings, and i think its a very dangerous time in the Global Economy and Global Financial markets. Thats paul singer right there. I got Steve Liesman next to me too. They being in part, the fed. Not just the fed, but Central Banks around the world. The actions that have taken place, its just a dangerous time right now given the threat of pulling that away. Treasuries are not the riskfree asset, and that creates safe havens arent such. Theres no safe in the haven there or no hain haven ven in t. It creates a groundless investment matrix in that all investments are judged from the riskfree return. It becomes difficult to know if stocks are over or under valued relative to what could be a very potentially volatile movement in long bonds when it comes to the yield. What troubles me, though, is i think singer is a little bit more pessimistic than he ought to be in that i think that more or less, the returns on the tenyear are at least to a 70 or 80 degree determined by the market. If the fed were to stop really trying to keep Interest Rates down, i dont think they would skyrocket to 3 . One of the points that he made was that you could have both stocks and bonds falling together, and that would be a reversal of whats been going on now where stocks and bonds have gone up. And then thats exactly what Central Bank Policies have done. It has made a money manager very uncomfortable because you are taking correlations back to where everything is close to one. Everything goes up together. Everything goes down together like it is today. Thats the problem looking forward because you lose the hedging options. Its very important to talk about whats going on today in oil and think about last week. Where we are on thursday with the number they came out and everyone saying, oh, look at oil. The biggest drawdown since 1999, going through 50. Everyone positioned the wrong way. Bringing in the correlation to one. I always puzzle over it, ask approximate people say, oh, they get it. To me were talking about the greed trade and the fear trade are simultaneously overvalued. You have a ton of people who have piled into bonds in part because theyre scared of stocks, theyre scared of the future. Theyre looking for a riskfree asset. As a result, theyve created a nonriskfree asset, and very few people are afraid to go with the stocks. I dont know if i agree its a nonriskfree asset. When people use the blanket term treasuries, what are we talking about . Tbills are acting as a riskoff right now. Theyre doing their job. If were dawg abotalking about plus, no, you shouldnt expect that to be the riskfree if, in fact, longterm bond yields are at the focal point of what people are panicking over. Lets make it actionable then. If you cant invest in stocks because they look expensive and they could go down if the fed hikes and you may not want to invest in bonds because you are afraid that they go down and rates could go up if the fed hikes, what do you do . You endure listen, you endure some degree of shortterm volatility. Its the only answer. The other answer is you try to market time within an entire portfolio, which youre not going to be able to do. One of the things you can do is you could play for volatility to increase, but, again, the thing that is making everyone uncomfortable right now is as a money manager, how do you lay off your risk . Thats the first mandate you have when you are managing money. You analyze your risk. How do i lay off my risk . Thats the challenge for you right now because you cant do it using the historical Asset Classes. You cant do it laying off on the currency market or laying it off in treasuries. You can look at volatility right now. It also depends what your basis is, tax basis is. You cant go to cash if you have a low tax basis and pay taxes. For new capital, i could wait for i want to represent because what scott left out of his equation there, which has to be part of the conversation is you cant go into stocks because you also cant be in cash. You lost all of the return. Let me explain. This is important. For eight or nine years if you had this pessimistic view on how it was all going to end up with the fed, you lost a lot of money. You are well behind the curve because of that real fear that you had, and i think that remains an issue. This conversation is not about should you go into equities. Its if you are in equities, what do you do now . Most of our viewers and most of those here today, theyre fully invested in equities theyve been enjoying this sevenyear ride higher. What do you do with that . There are those on that point i was going to say people like carl icahn and this whole notion of tina. There is no alternative. His thing is thats malarkey. You could be in cash. Being in cash in a low rate environment is better than losing in equity. If the market is going to have an asymmetric dislocation, then being in cash is okay. The majority of investors already agree to that. When you look at flows, when you look at where financial intermediaries, financial advisors, planners, where are they allocating, theyre not throwing money at the spy. Theyre in various stratea of bond products. Prime funds, shortterm treasuries, et cetera. Nobody thinks now is the time to be 100 stocks. Theres no size fits all. It depends on your age, your risk tolerance, your volatility tolerance. Let me get to the other news of the day, as if its an afterthought, which its not, and thats Dennis Lockhart. This is a profound conversation. This really gets at the heart of the kwauquandry of investment. Part of being a d. A. Here lockhart is leaving in february. Lockhart is leaving in february. He is a centrist on the board. One of the few noneconomists out there. Theres no timetable to appoint him. Were going to learn a little bit more about the process in october. I guess its a couple of weeks from now. Lockhart has been at the fed since 2007. He is a guy i have known for a very long time. A guy who you follow when you want to know if its a close decision. If dennis is leaning towards a hike, its likely going to be a hike because he doesnt have a dog in the fight from a philosophical standpoint on Interest Rates. He is just a guy who came to really be a managing partner of private equity at zephyr. He had a bunch of banking experience, private equity experience. The kind of guy on the fed that if theres one other aspect worth talking about, theres been a lot of controversy about the lack of minorities there and the Bank President s. There may be some effort here to try to increase the diversification on the Federal Reserve among the Bank President s in the replacement of Dennis Lockhart. This adds another variable in the whole fed equation that we discuss seemingly every moment of every day. In that equation, steve, could you give us clarity. If donald trump were to win, would he have the ability to remove others from the fed . He would not have the ability to remove others from the fed. Part of the way the fed is structured is so it doesnt theres not direct overlap with the terms of the governors. Remember, the Bank President s are appointed by local bank boards, and theyre approved through some sort of strange process in washington, but ultimately theyre appointed locally, essentially. Then the governors are appointed by the president , approved by the senate, and their terms will run out in a staggered way. Thanks for being here. Were going to go to break in a second. Do you think that news is making the market a little bit nervous today . Is that is it just another addon to why stocks are down so sharply . I dont really think so. I think it just its part of the equation, but i dont think its whats causing the decline today. This is friday. We thought they were going to hike. Monday we decided they werent. Tuesday we decided they are. Is that where we are . The reaction to that speech yesterday when it hit in the afternoon is this is bananas. Why would they have six people out there talking tough and then send brainerd in to almost negate everything that we heard . I think you think about it wrong. As a preprogrammed thing, i dont think thats thats how the market is thinking about it. May not be a its what you can do with brainerds remarks is say this is the view of one governor. She has a vote. She i got to go. Ive got the i got to go. You told me you said last week that you were leaning towards them going in september. Yeah. Now what do you say . I think i think not. I mean, i think that its a very close call. Now theyre not. Okay. Im sorry to go back and forth like this, but herein the conundrum with what an investor has to deal with. The sum tells me theyre not. All right. Well take a quick break. Thank you, Steve Liesman. Next up from right here at delivering alpha, famed short seller jim chanos is talking about the stocks he is targeting and its only here on the Halftime Report. People get anxious and my office gets flooded with calls. So many thgs can go wrwrg. Its my wor nightmare. Every second that power is out, my citys at risk. Siemens digital grid mages and reroutes power, so service can be restored within seconds. Priority number one is it tes ingenuity toefeat the monsters that live in the dark. What powers the Digital World . Communication. Like centurylinks Broadband Network that gives 35,000ans a cutting edge game experience. Or the network that eps a leading hotel chais guests conneed at workand at play. Or the it platrm that powers llions of ecards every day for one of the largest greeting card companies. Businesses count on or communication, and powers llions of ecards every day communication counts on centur. Theres your market picture. What a difference a day makes. Yesterday we were up 200 and some odd points, and today it is a far different story. The markets are red across the board. All s p sectors are in the red. Four or five down days now for the dow, and the s p. We are, of course, here live today at delivering alpha. Dominik chu has been keeping a close eye on the action with the speakers in the room just behind us. Dom, jim chanos is up there now. He is making at least a bearish case, if you will, for shares of tesla. Now, this is nothing new. Jim chanos has made comments in the past about how bearish he is on teslas stock. However, he is reiterating some of those comments right now. He has not told us about a specific trade he would make just yet. However, we do have some comments with regard to what he is saying about tesla and solar city as well. He has basically said that he has made disparaging remarks about Corporate Governance in the past. I was being too kind with regard to the proxy with regard to the teslasolar city merger. He says they have cash burn of about 1 billion a quarter and will constantly need access to capital markets. He also goes on to say this is a high wire act in more ways than one. People arent paying attention to actual Financial Statements and the risk to it it raises to tes wills shareholders. Were going to keep a close eye on tesla and solar citys stock in response to what jim chanos is presenting right now. Again, no trade out there yet per se. However, the comments up to this point in chanoss presentation have been generally bearish on tesla and solar city, guys. Back over to you. I mean, i can dom, thanks so much. The trade is what weve known it to be. Short tesla and solar city. He has said that at the conference when he was sitting on the set with us. Well get more from jim chanos, the legendary short seller, coming up in a bit. Plus, the head of upss 30 billion pension fund is here to discuss how he is finding alpha for its more than 400,000 employees. Delivering alpha has been especially difficult, as you know. Well talk about it more from delivering alpha, the conference, here in new york city straight ahead. Hey ry, wh are you doing . So we can share our coamazing trading knowledge. Ats a great idea, buy donyojuto ideas,ven actual tdestwith mkets i know. Ur brain td my brain before you told my face. Mmm, blueberry tap into the knowledge of other traders on thinkorswim. Only at td amerie. Only at td amerie. Y, s been crazy wh school beinback so were constantling over our data limit. Oh, we, now all of our new plans come witno dat overages. Wo no more overages . So thaans. Go osay y. So thaans. Wellinally be in control. And weac introding new at t plans with no data overage charge wi dynaand botyling to, to stay ahead othe curve. The lexus , rxybridand rx. This is e rx, eleved. This is the pursuit of perfection. Whats going on here . Im val, the orange money retirent sirrel fromoy were putting away acorns. Re . U kn, to show the importance of saving for e future so youre sortf li a spokeserson . Mof a spes metapr. Get organized at voya. Com. Welcome back live from cnbcs delivering alpha conference today. In a year that has seen many active managers underperform their benchmarks, can the active Management Industry continue to deliver alpha . Our next guest was a featured speaker during todays what happened to alpha panel. Ryan pellegrino, the cio of ups trust. He manages their 30 million pension. We shared the stage a little while ago. Its good to welcome you to the desk. Where is alpha . You seen him or her . Its been difficult to find, but i think its defining what you are looking for in alpha. If you are looking at broad Asset Classes and trying to outperform broad Asset Classes, its almost nonexistent, but if you look at subsectors or special areas of certain Asset Classes, i think it still can be found in the area of real estate, private equity, and even in hedge funds we are becoming more concentrated or more focused on certain elements that allow us to generate alpha. You feel like were at a Tipping Point . I mean, youve heard some of the speakers who have been here from the most bearish of people like paul singer to the more optimistic, like bill miller. Where do you come down when you are trying to figure out where to allocate capital . I think you dont press. One of the panelists mentioned, you dont chase return. You have to be patient capital. You have to make sure that you have cash and liquidity on the sidelines, so when opportunity presents itself, you can act quickly. One of the things we talked about was our governance structure, which allows us to evaluate opportunities and make decisions very quickly and put capital to work. That structure allows managers to bring us opportunities because they know we can get them to yes or no very quickly. If its a yes, we can close on the deal very quickly. Does the is the hedge fund model still attractive to you . Yes, it is. We believe in hedge funds because theyre a diversifying stream for us. Were not looking to always outreturn or outperform the s p was a conversation on our panel. They serve a purpose in our portfolio. So just talking to you a little bit and hearing what you are saying now, the typical pension or endowment says we want low volatility. We want diversity of managers. You take a different approach, it sounds like. You run more of a concentrated portfolio. For example, ten to 15 managers. Doesnt seem in that regard you care about volatility. It sounds like you are using it more as an opportunity. As long as you get paid for the volatility. Not paid just for we care about volatility, but were more concerned on how that volatility for a specific investment behaves with the rest of the portfolio. Right . So its not fair to say were just going to avoid anything that creates volatility, but were also cognizant of trying to maintain a stable return stream to meet our obligations in the future. So your allocation looks like 40 stocks and thats a mix between u. S. And global. That is true. I find that interesting. Core fixed income, 20 . 14 hedge funds, which weve spoken about. Real estate gets 7 . Private equity, credit, cash get a little piece of the puzzle as well. Correct. The u. S. Global 5050, talk to me about that. Under an older model we had an allocation that had a dedicated u. S. In the equity portfolio, in international allocation, hedge Fund Allocation or, excuse me, emerging market allocation. So what weve moved to is trying to evolve into a true Global Equity portfolio that allows us to go across the globe. It doesnt separate u. S. From the rest of the world, so if the opportunity happens to be better in the u. S. , we could be in the u. S. If the opportunity happens to be better outside the u. S. , we can move outside the u. S. , and its more a flexible portfolio than a direct mandate. I appreciate your time. All right. Thanks very much. Good seeing you. Be well. Brian pellegrino, the ups group, the chief investment officer. Jim chanos up next joins us on the set. More halftime back. Well see you in a minute. Comfort food, youve had a good long run. But your time is over. Its time for something new, something simple. Grown right here in california with absolutely no antibiotics ever. Food were comfortable eating, making, serving. This is the new comfort food. And it starts with foster farms simply raised chicken. California grown with no antibiotics ever. Lets get comfortable with our food again. Welcome back to Halftime Report. The whole focus now is on leaving the bank and moving forward. Also that he will share and plans to share the wells fargo story at the Senate Hearings next week. Also saying that the sales goals changes are influenced by the settlement and the enforcement action impact. He says that there are no more sales goals intact. Once they continue to grow, but without those sales goals there, also that theres no incentive, he says, for employees to do bad things. All of these coming out, again, from ceo john stump over at wells fargo, and speaking of john stumpf, youre going to Pay Attention and want to watch this interview tonight. Jim cramer has john stumpf, the ceo of wells fargo, on mad money. Im sure he will go into detail about what happened at wells fargo and what theyre going to do in the wake of it. Back to you at finding alpha in new york city. Well look forward to that for certain. We are back with the Halftime Report from the sixth annual delivering alpha conference. I do want to show you what the markets are doing at this hour. Theyre falling out of bed a little bit. The you Dow Jones Industrial average is around the lows of the day, and its a loss of 250 points. The s p 500 and the nasdaq are following suit today as well. Perhaps an even more significant move today coming in the tenyear note yield. Take a look. You will see a spike on your screen. A textbook definition of one at that. 1. 73 is the yield there. Perhaps the markets reacting a bit to comments made right here at delivering alpha from paul singer, famed Hedge Fund Manager saying its a dangerous time for the Global Economy. A dangerous time for investors. Raise the prospects of stocks and bonds going down together. Perhaps thats causing a little bit of the move today. Thats, i know, joe, what you have been focused on. 100 . I think it is on pauls comments, and i think pauls comments were accurate, and i think the biproduct, the effect is what happens to the u. S. Dollar. Yesterday we talked on the show, and i made the statement. I thought the market could skyrocket. Well, it skyrockets under the condition that the dollar falls back again. If the dollar becomes the high yielding currency globally and the safe haven asset, were not coming out of the earnings recession. Thats the problem with the market. We do have the short famed short seller Hedge Fund Manager jim chanos. He is with us straight from the stage. Its nice to see you again. Hi, guys. As always. You have thoughts on whats happening . Some of the commentary, why i said earlier i love conferences like this, is you really get the whole dichotomy. You have paul singer saying its a dangerous time. You have bill miller, who is up there with you saying i want to be long the s p and short the tenyear. How does the world look to you today . I have no idea whats going on. The good thing is neither do a lot of other people. Yeah. Thats a potential problem. Its its a crazy time as i have ever seen, and the crosscurrents are there politically, financially. The Central Banks. I mean, its tough enough trying to get our companies right, and thats hard. Overlaying the macroon it these daysdening at best. Ill punt. Its not a punt because when i talk to some of the biggest Money Managers around, they tell me a similar thing. Its a crazy impossible market. They use the word impossible. Hard to figure out where is best to place your bets today. I dont care whether you are long or a guy who is famous for being short often. Yeah. I mean, the alpha generation, which is what this is all about today, right, has been difficult if if not impossible for fundamental guys for a number of years. Josh and i were talking a little bit earlier today, and what people forget is that when people do earn excess returns from being right about things, its not that nice smooth 1 a month. Its often lumpy. Its often years and years of no excess returns or negatives and then two or three years of hit the ball out of the park. I think that that is probably what were looking at. You know, depending on your strategy. Also, the lower rates of return generally you talk about the tenyear today. Just in things like riskfree rates, has reduced the returns for a lot of strategies that were just sort of clipping coupons, but their investors didnt know it. Whether its the other short rebates or a variety of other ways to carry trades. Those trades are gone. I think that thats reduced a lot of Hedge Fund Returns too throughout the system. What is a period of increased volatility mean to a guy like you . Approximate. I mean, all things being equal, we love increased volatility because, again, were fundamental guys. If the stock goes down a lot, for something were short, maybe not for the reason we thought, well cover it. Consequently, if the stock is running because algarhythms got up on the right side of the bed that day, well sell one. Thats a conversation for another day. Tesla, solar city, here we are again. Yeah. We were at iris zone where you said and i quote we are short both tesla and solar city. Then he decided to buy one. Talk to me. Yeah. I mean, we talked about it today because of the merger proxy, which came out a few weeks ago, and we did a deep dive in there, and buried in the merger proxy was this interesting disclosure that the tesla board took a pass on providing solar city with a bridge loan, and that really sort of puts the Corporate Governance question in stark relief where, if you are willing to buy the whole company, right arent you willing to extend i think your microphone just slipped off. Extend 100 million amongst affiliates for a few months pending the deal closings, and, yet, the board took a pass. I think thats very telling. Were you surprised when you heard the news of the transaction . When we talked to you at iris zone we realized that solarcity was running out of options quickly. That if nothing happened, they were going to hit the wall dp financially by the end of the year. We never dreamed that tesla would buy them outright. We figured they would make loans or space ex would make more loans, but we never dreamed from a Corporate Governance point of view that musk would try to get his shareholders to approve that. It may not happen, by the way. It only sounds like it emboldened your view, negative, on both. Were still short both companies, and if they do buy solar city, well be short more tesla in terms of what they give us. What if tesla ran up because they decided to drop a deal . They say, you know, theres too much controversy. Solar city will find another solution and tesla will move forward on something else. Wouldnt tesla share price at least initially have a positive reaction, not a negative . Yeah. I would think our solar city short would do well. Youre fine, but im saying just in general. I would think so. I think theres certainly a cloud. I mean, we pointed out in our comments today that if you look at a credit related score like the z score, i mean, tesla has put itself into the walking insolvents by doing this deal. I would assume the market would sheer if they walked away from it, but he seems pretty commit to try to get it done. Do you think tesla needs to raise more capital . Absolutely. Theyll have to raise capital by the end of this year, early next year. A lot. If you look at the competitive landscape, forget about the financial, you have mercedes coming out with a full line, bmw coming out with a full line. I was talking to another manager about extending their range to remarkable levels. When do we see that really starting to hit . The other problem, steve, is that the model three, as people think it will be configured, will never be 35,000. Like a lot of other tesla models, they come out with a price, and the real effective price is 25 to 50 higher. The model three, as most people would configure it, i think will be 45,000 or 50,000 car. Thats a big difference in the mass market from a 35,000 car. Lots of competition. Giga factory is still mostly uncompleted. Lots of competition coming. A huge cash burn. Then taking on solarcity on top of this. Forgetting whats happening at space ex. We point out that he mentioned over the weekend that it was not that they were looking to the fact that, you know, it could be an unidentified object that may have caused the explosion. I mean, this is this is a circus almost in every where were you on launch day, speaking of get it on the record. You take nowhere near there. Do you take any pause in shorting a stock . Its interesting because everybody calls tesla a cult stock, but if you take musks holdings out of tesla, almost all the shareholders are institutional, not retail. We have always thought this was a retail stock. Its not. Take a look at the holders list. It accounts for 90 plus of his shares. Its an interesting thought. Youll stick around . Well take a quick break, come back . Sure. Jim chanos will stick around. The sixth annual conference of delivering alpha. Well be right back. Its a performance machine. With this degree of telligence. Its a supercomputer. With this grade of protection. Its a fortress. And with this standard of luxury. Its an oasis. Introducing the completely redesigned eclass. Its everything you need it to be. And more. Mercedesbenz. The best or nothing. Weve just been hearing youre a digital company, yet here you are building a jet engine. Well, ge is digital and industrial. Like Peanut Butter and jelly. Yeah. Ham and cheese. Cops and robbers. Yeah. Nachos and karate. Ahh. Not that one so much. The rest were really good. Socks and shoes. Ok, ricky. Everyone thought i was crazy to open a hotel here. Everyone said its so hard to be a musician, but i canimagine doing anything else. Now that the train makes it easier to get here, the neighborhood is really changing. Im always hopping on the train, running all over portland. I have to go wherever the work is. Trains with innovative Siemens Technology help keep cities moving, so neighborhoods and businesses can prosper. I can book 3 or 4 gigs on a good weekend. Im booked solid foreeks. It takes ingenui to make it in the big city. What if 30,000 people im download the new app . Were good. Okay. What if a Million People download the new app . Were good. Five million . Good. We scale on demand. Hybrid infrastrture, boom. Ok. What if 30 Million People download the app . Were not good. Were total heroes. Scale on demand with the Number One Company in cloud infrastructure. Hewlett packard enterprise. Well have all the big headlines, the big stock ideas. Were all over this market selloff. Wells fargo under fire. The stock getting whacked today. Congress calling for hearings into the banks practices. We speak with the key lawmaker who signed a letter that is demanding answers from the ceo. Melissa lee with a look at whats coming up on power lunch. Jim chanos still with us. Valeant, are you still short . Yes. Bill miller said its one of his long positions. Thats what makes markets. Why are you still short . The rollup model does not work in reverse. We said on stalk i think the mistake that the bulds are contin bulls are continuing to make is they add back am omortization. If they werent counting their r d expense, they too would look cheap. Its just a simple matter of accounting. If i buy 40 billion worth of drugs that will roll off somewhere between four and 20 years, the s. E. C. Makes me write that off or 10 to 11 years. Thats about right. Valia valaan valeant doesnt do th. Analysts know if its going to be gone in ten years like a melting ice cube, you have to replace it. You cant from a valuation point of view capitalize that expense even though its noncash. You can use the cash, but you should use the cash to buy more drugs. Right . To replace whats gone. Thats been the problem from the stock from 100 to 290 to 20. Have you been short all along the way . We started shorting the stock in the low 100s. Added to it in the 200s. Choked on it at 290 but stayed short, and added to the stock as recently as early this year. At what point do you cover . Its at 27. How much worse can the story really get . Well, the problem is theres 37 billion ahead of you. Theres 37 billion in net debt and longterm viabilities ahead of the shareholders, and thats the real problem here. With the equity, this is Something Like a 47 billion, 48 billion total enterprise value. This is not a small company. The shareholders have only a very small and i think reduced claim on those assets. Thats at the end of the day whatever you might think about politics, the ability to keep raising prices which was their model and making acquisitions i think is over. You mentioned politics. My sources tell me a certain leader of the free world may be stopping by to a chanos establishment this evening for a fundraiser. I cant comment on that. I cant comment on that. You can comment, though, im sure on who you are supporting for president , and i know you have said in the past you are supporting whats that . I have no plans to go to his house. You are supporting hillary . I i am going to vote for im going to vote for the democratic nominee. As i say, i was a long supporter and good friend of the vice president. He didnt run for a variety of Important Reasons related to his family. I still think i wish he would have, but i think that that she will certainly be a far better far better candidate or president than the alternative. What if trump wins . What does it mean for the market in your idea. These sorts of things we can guess at. I remember the first bill clintonal gore election in 1992. They had a they had a pamphlet called putting people first. I still have it. It read pretty much like the communist manifesto. It was so far left and the markets were spooked. I remember at the time. You couldnt have had probably a better president for the markets in capitalism over that period than clinton, and so what people say and what they do are often two different things, and i think you have to be careful on that. It seems to me that both these candidates are reasonably corporate friendly despite what people might think. I think that i dont think theres going to be a lot of rocking the boat. Certain industries, Like Pharmaceuticals or defense, might certainly be impacted. Education. But as to being able to figure out what they mean for the broader economy, no clue. In a sense then youre also saying that some of the more extreme fears about what a Trump Presidency could mean for either the economy or the stock market are overrated . I have no i dont know. I mean, i dont know that we know a lot of the policies. I dont think he knows a lot of his policies. Then, of course, working with a senate that doesnt have 60 votes, which is filibusterproof, is problematic, of course, for legislation. You know, our whole system is still going to remain somewhat gridlocked, which is the problem. With that, the issues with defense with health care as well . Yeah. I mean, individual issues, hillary is all but said the pharmaceutical industry is in her sights. Right. I think when theyre that specific, you should Pay Attention. I remember that the Obama Administration made a point of saying they were going to clean up the for Profit Education business, and they did. They did, yeah. I mean, you should Pay Attention when someone singles something out. Beyond that, you know, defense spending going up, i think, is probably a reasonable certainty given the world were in almost under either administration. Let me ask you on china. I want to steer the conversation that way. Are you still as negative as you have been or has the story turned . No. Story has not turned. Were every bit as negative as we have been. Its people are sick of hearing it from us. I mean, the credit the credit keeps expanding. The economy just keeps nominally slowing every year a little bit more. The capx numbers are stunning. They continue to be large. All the private sector numbers are heading south. The Banking System continues to grow its assets. The Third Party Wealth management products continue to explode. Its the same story. It hasnt changed at all. Theyre still playing it. It goes on. Jim, do they manage the capital outflows, or are they managing the data . I think that they have managed its not as bad as 2015, but if you compare it to, say, before that, its still dramatically up there. I dont think the numbers are capturing everything thats happening, though. You know, every chinese person i know of a senior level is trying to get their money out by any way they can. So its a massive devalue coming at some point . Again, ill leave that to people that like to play currencies. We dont do that. Its the only thing that keeps everything in balance as a devaluation. Whether theyre going to do it to not lose face, i dont know. Jim, a lot of the conferences that i attend many people and i know you had a view on caterpillar, remember, years back. They talk about industrial growth. They talk about performance yeartodate, and he this talk about both candidates coming forth and bringing forward an Infrastructure Spending that will benefit both the economy and the industrials. Do you see that . Ive been hearing that for seven or eight years. Every quarter caterpillar guides down to more. Yet, the outyear numbers are still high. I mean, look, we had a super cycle in capital spending. One of the panelists referred to it today, that was unprecedented in if globally in both china and e. M. That peaked out in 2012. Steve has heard me give these numbers before. It was going to geometric growth in the millennium. There are the millennium there are so many projects already done. Yes, we need projects done in the u. S. , but if china cuts back, it is Infrastructure Spending by 10 . That swamps what were doing. So at the end of the day, still a china story any way you cut it. Speaking of a china story, you know, giosia of ali baba is here today. Are you still short baba . We are still short baba. This is a company where the cash is going out the door faster than it is coming in. Going to all kinds of affiliates, you know from herb greenberg, we cant tell exactly that is going on, but then again they dont want to tell us much either. Their disclosure is better than it was, but we still dont know who is paying all those guys on bicycles to deliver the packages. It is not alibaba. And the 49 or 48 Delivery Network company they own also contracts with companies below that. So, again, this is a classic china story. You see the money leave, you dont see it come in, theyre constantly going to be doing offerings or to finance it. Theyre making acquisitions, buying anything that is for sale, seemingly. On the balance sheet, it is just exploding. David faber referred amazon relative to tesla and people have compared amazon to alibaba, and it couldnt be further from the truth. Amazon was a Free Cash Flow machine in 2002 and always has been. This is the exact opposite of that. It is just burning cash in a dramatic rate. Well make that the last word. We appreciate you being here, delivering at alpha and stopping by and happeninghanging out wit my pleasure. Be well. Halftime report back after this. Now that fedex has hped us simpli our ecomrc we could focus on gger iues, like o passivereive were not passive agsive. Hey, hey, hey, ere are no b estions here. No matter how lame they are. Well said, ann. Ivelways admirehow u st say whats in your head, without thking. Brave good pnt ted. Youre living prf thatlooks. Thanwelcom so, fedex lped simplify our ecommerce business and this is nonoa paive ai just wantoay,onon you guys are dng a great job. And this is nonoa paive whatshat suosed to me . Dex. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. All right, shaping up to be a difficult day to say the least on wall street. Were at the lows of the day. The Dow Jones Industrial average down more than 260 points. The s p 500 and the nasdaq each with losses, either at or little bit worse than 1. 5 . And maybe, maybe some of the catalyst or some of the comments that have been made right here from the sixth annual delivering alpha conference, which, by the way, halftime is back from right after this. Were drowninin information. Where, in l of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 50 an can deliver insight person to person, on what matters to you. Morgan stanley. Ita very specific moment, the launch window. We have to be very precise. If were not ready when the planets are perfectly aligd, thats it. We need really tight temperature controls. Engineering, aerodynamics a split second too long could mean scrapping it all and stting over. Propulsion, stctural analysis Maple Bourbon caramel. Thas what were working on right now. From design through production Siemens Technology helps manufaurers meet critical deadlines. I think thisll be our biggest flavor yet. Thats why a cutting edgeworld. University counts on centurylink to keep their global campus connected. And why a Pro Football Team chose us to deliver fiberenabled broadband to more than 65,000 fans. And why a leading car brand counts on us to keep their Dealer Network streamlined and nimb. Businesses count on communication, and communication counts on centurylink. Jamie dimon says to raise Interest Rates you think thats wrong. Thats right. I think that thats wrong. At this stage, the risks are so asymmetric, like, there is no doubt that you can slow the economy. The world economy. The u. S. Economy. The risks are so much more on the downside. I mean, thats going to be the conversation between now and next week, virtually every minute that the stock market is opened. Well, the market has tightened for the fed in the last three days and thats certainly what its doing again today. The tenyear today is clearly the most significant story, right, 250 points on the dow, you wont fall out of bed over. The spike in the tenyear note yield is going to be a headline for certain. I think we had a pattern in place where stock volatility drove people into the tenyear. And into vehicles like it. And so yields actually got squashed. Now thats reversed. And i dont know that everyone running money has gotten accustomed to a new pattern where the vix and yields move in a correlated fashion and that may not persist forever, but while it goes on, youre going to see people act, i think, with an abundance of caution, maybe take some risk off in the yield proxies. Maybe yields are doing the feds job for it, steve, and that sort of i was about to say that. An excellent point. Maybe the fed said at this point, it is assumed in the market. We have seen this backup. Im surprised to see the work is done. The work is done. It is assumed. We have a freebie. Lets do it. If rates continue to rise, maybe not at this kind of a pace but paying for it anyway to steves point, lets just have it. Im surprised to see maybe youre having it. Yeah. The fed funds rate, lets have it. Ray dalio gets so worked up over hes talked about asymmetric risks in the past. I want to remind all of you, ill be speaking with carl icahn later today and john stump with jim cramer on mad money, dont miss either one of those, considering the markets and the wells fargo story. Thats it for us. Power starts now. Im melissa lee. Heres whats on the menu. Delivering fear, words like scary and dangerous being used at this years delivering alpha. Were headed there live straight ahead. Stupidly cheap, one legendary money manager using those words to describe this once struggling sector of the market. And were all over the stock slide with the s p down by 36 points. Buckle up, power lunch starts right now. Im brian sullivan. Here what else is happening at this hour. Dennis lockhart is stepping down. Hell leave his