Stocks. Bullish stocks. You short the tenyear. Where are you today . The same. I think were at a secular bull market that began in march of 2009. I believe we hit Double Bottom in bonds, and were going to it would be nine bare market in bonds with 5 year bull market in bonds and its over. Some who say theres nothing thats attractive. I think the word cautious is the one that overrides almost every part of the conversation weve had. Here is david tepper, who was on with us. I want you to react to it on the other side. David tepper. Margins that may be under pressure because of wages and now the dollar seems to be getting stronger again. It would be okay and then you have to deal with the election. You know, generally speak, you know, pretty cautious on the market. Certainly not alone. David costa takes out their s p 500 earnings forecast. Secular stagnation. Peaking margins. Are they missing something . No, i it think i mean, look, david tepper is one of the great investors, and i think the difference is your time horizon. Clearly true. Secular stagnation. Im not in that camp in the sense that i would rather rephrase that as an excess of savings over good investment opportunities. I think that secular stagnation is the bearish way to put it. I think excess of savings is a different way. I think as long as stocks yield more than bonds, stocks are attractive. What do we think here on the desk . Well, i think the time is running out for that bearish argument in the near term here, and we were concerned going into earnings that if there was a window for a correction, a garden variety corrections of maybe 5 in the marketplace, this is when you are going to get it. I think now were getting to the point for investors getting comfortable that earnings look good enough to propel us to the next level, and i think it goes back to what we discussed in the beginning of the quarter. Is this going to be a chase for performance where you have Money Managers never getting that correction and now, okay, we get past the election. The end of the year is coming. We have positive numbers across multiasset classes. We want to save our jobs. We have to race to get into different asset classes. Are you looking to actively buy stocks in this current environment . Do you have cash . Youre waiting for have no cash. No cash. Fully cash is zero. Why do i want something to earn zero. Stocks just in general yield 2 . We have an income fund that has a yield around 7 to 8 after expenses. Thats not a commentary in your thats how run your money . A little bit of aboboth. Everything in expensive in 1987. We had both. Generally youre not sitting in cash. Generally yeah, generally. Absolutely. Certainly if you had a more negative view of the market, you may not be fully invested. Weve had to give as much as 30 , as low as zero, which is what it is right now. It varies. The s p 500 is exactly where it was trading a week ago at this time. A month ago at this time and the month before that. Let me tell you whats changed. Back in may you look at the consensus for the forward four quarter earnings per share on the s p 500. It was for less than 1 Earnings Growth. The earnings recession starts to come to an end in peoples minds. Now that number is closer to 4 Earnings Growth over the forward four quarters in the s p. Again, markets, the indexes have done absolutely nothing. 64 chance of the fed raising rates in december. We seem to have grown at least immune to that. Were certainly not panicking about it. It doesnt mean its going to happen, but its a pretty high probability being priced in. In addition, youve got leadership from cyclical stocks, companies that are related to construction are leaving the market. Ewe got leadership from technology. Youve got leadership from small caps over large caps. Youve got a lot of things internally lining up with this more positive earnings outlook and to joes point, look at the calendar. Youve got an s p up 6 . Emerging markets up 18 off the may low. Youve got people that have a lot of ground to make up, and its doubtful theyre going to troo i to do that with cash. You think, bill, that you get sector rotation . I know you like the financials. A lot of people like the financials. They havent gone anywhere, in part because Interest Rates havent gone anywhere but lower. Do you see if rates continue to creep higher. Yield falls out of favor. Things that work with higher Interest Rates. I think what you are seeing with the utilities and safe stocks in the market, consumer staples, theyve done poorly for the last few months. I think if you look at the market over the last 18 months, its really done nothing. I think the chase for performance is always dangerous because if you are a manager, you have been sitting there, and you say where am i going to chase or go . Its kind of difficult to chase performance. You sort of hope the market comes back to you rather than you going after the market. Its not run away from you. I would say, look, you can have optimism. Everybody a lot of people i have talked to believe that there is expectations of a yearend rally. Particularly as we see clinton distance herself in the polls from trump. Thats put to bed. Now we need to see the republicans themselves from the democrats in terms of keeping the house, and then if you can get there with schumer, who is more reasonable than the prior house leadership and ryan and clinton who i this i is more probusiness than the way shes letting on to get elected, then you can get a tax holiday, and you get some fiscal stimulus which gets you to the next leg. Absent that, youre in a low return environment, and you look for bargains. Bill is specialized because he will own a value stock, like a b of a and also an amazon. For him to be able to find bargains is easier than a pure value player or pure growth player. Let me ask you about a specific financial wells fargo. You own the stock . Warrants in our partnership. What have you loaded up bad phrase, but have you bought more of any financial stock as theyve sort of sat at these levels hoping that they would go higher . We bought the short answer is yes. The most dramatic example of that is one main financial, which is the largest subprime lender. It was 50 a year ago. It was 19 in the spring. So we have a lot more of that at that level. Its about 29 right now. Still crazy cheap. Do you see more opportunity in places like this rather than the large banks that are more sensitive to Interest Rates, have to deal with regulation, and more that could be coming, et cetera . I think some of the smaller financials are more attractive. Stuff like magic and radion, and the mortgage insurers. We own a lot of jp morgan and citi. We like all of those. Bill, it sounds as though youre far more optimistic than many we had on the show last week. Nelson peltz to his credit talked about the negativity, and he believed that was one of the reasons why he would work higher. He said it was unwarranted. In that negativity itself, when you look at that and you see so many people, who are negative, and you see the other side of that. These are just negative conditions that have been around, and you have climbed that wall of worry in the 30 plus years that you have been doing this. It was such a shock. It was so painful where housing prices went, and i think it put a heighterned risk consciousness on the part of everybody to the fore. When that happens, what happens is typically the opportunities on the other side. If you were long beta since then, you have done pretty well. Weve had a great period since then. I think the caution in terms of the real world is warranted, but its already expressed in the overall market. Again, the stock market is just ridiculously cheap compared to bonds. People are still taking money out of stocks. In fact, i think the money has gone out of the equity market this year at the fastest rate since 2008. What people are doing and what theyre saying sometimes are very different. Right now what theyre saying and what theyre doing is the same, which is theyre cautious or negative or worried. Lets turn to the other big story this hour. That, of course, at ts 85 billion deal for time warner. Btig, rich greenfield has been critical of the media space. Wonder what he thinks about this deal. Rich, welcome. Its good to talk to you again. Thanks for having me, scott. Do you like the deal . I think this is a great ending for jeff buccus and time warner. You know, he this found a buyer. You know, you think about the facts of life. You take the good and bad. They found a buyer in at t who is willing to take the good stuff, which is Warner Brothers and hbo and take the not so good stuff which is the Turner Networks, which are secularly challenged, which weve talked to you about many times in the past. Its interesting. I mean, is it a victory for time warner, or a defeat . You would say its a victory they got the money. They could run. Kara swisher says, no, its not a vikt railroad for for time warner. Maybe its a realization and a resignation that they couldnt come up with their own Digital Strategy so they have to do a deal like this. Look, the Media Industry is facing a changing consumer behavior. Were moving away from live linear tv. Look at tv ratings. Across the board, everybody is getting slaughtered. Its not just the nfl, which is the headline grabber. The entire linear tv ecosystem in primetime is really getting beat up badly. I think the reality is as we shift to an on demand World Without commercials, as we move to a mobile first environment, the Media Industry the legacy Media Industry, meaning the Cable Network product that kind of has been the basis for all of the media stocks, is very challenged, and i think this is literally time warner going, look, we have a buyer right now. In two years its going to be worse. We found a buyer right now willing to take our business. At t is diversifying. I dont think they love the Turner Network business, but theyre diversifying away from their wireless business says which faces intense competition. This is not a statement that media is now back in favor. This is very much a statement that media is challenged, and you are seeing time warner get out, and i think jeff will go down as one of the smartest ceos ever in the media space for knowing when to exit stage left. We have a number of places we can go. Why are time warner shares lower . What does that say . Number two who is going to be next, and who is the pressure on now to do a deal . Number three, will there be Regulatory Approval . One and three are somewhat linked, right . The stock is trading down this morning because there is fear of will this close, right . Jeff bewkes was on cnbc. I think he was on with the team this morning, and i think his comment was they have not been approached by others. I think theres certainly a fear that there arent other buyers. Youre looking at a 12 month or so regulatory process. While there is no clear obvious legal basis for blocking this transaction, the reality is will there be a Grassroots Movement much like time warner and comcast . Time warner cable, that is, and comcast where the grassroots kind of political momentum literally destroyed the chances of the deal getting approval. I think the reality is theres good reason to believe why this could get approved on the legal merits. Theres a fear of kind of the big is bad without much teeth to it so far in terms of, like, what would be used to block this transaction legally or with laws, be and so i think thats why investors literally are not really sure what to do, and its why i think you have people taking profits in time warner and not willing to wait the 12 months plus for the deal to close. What stock what stock should be higher today that may not be or that could be higher in the weeks ahead because there could be another kind of deal of this magnitude on the horizon . Absolutely. Thats a great question, scott. He made comments up at bc a couple of weeks ago where he said that great content, even disneys great content, pixar, marvel, disney, lucas films, all of that may no longer be enough. They may need access to the consumer. I think when you think about, well, who has access to the consumer globally on a distributed basis, a stock like netflix becomes center of focus. Thats a stock weve loved. We continue to think its a must own here. I think that is the type of stock that when you are thinking about how would disney fix its problems, i dont think disney is a seller. I would be really surprised if bob sold his company. I do think that there is a good chance that disney tries to make an acquisition to fix this distribution problem. Netflix, while expensive, would go a long way to fixing disneys direct to consumer distribution problem. I dont think the rest of the Media Companies i mean, look, fox is not a seller. Theyre owned by the merdock family. They want to buy something. Viacom is going to merge with cvs. Theyre not a seller. The rest of the companies discovery, ac, scripps, these are all basically pipimples. They dont fix a problem like tim time warner would. Thank you. Good to see you. Talk to you again soon. What the deal segment nauls and how you view this space . He is exactly right. All up and down the line. He has done an incredible job by spinning off the cable business. Time and then what he has done right here in terms of getting a partner. I think thats a great move. One of the things that didnt get mentioned is the giant direct to consumer distribution and content. Which you liked. How long have you owned it . Since the ipo. Wow. Awfully long time, obviously. Best decision we made was buying on the ipo. Worst decision is ever selling a share. I want to talk to you more about amazon a little later in the program. Its one that we talk about on a regular basis as you have sort of gotten this fight over fundamentals and valuation growth, et cetera. What else is it . I think rich greenfield, i agree with i bill. Rich did a fantastic job really defining what this is all about. The one thing i would say and you asked them the question well, who is next . I dont think anyone is next. When you look at the vertical integration, the key thing to understand is that time warner was one of the fooe few Companies Left that didnt have that controlling shareholder. All these other companies have the controlling shareholder. That makes it a much greater hurdle. The one company that is similar to time warner is disney. I just think thats too big of a bite. 150 billion plus market cap. Why dont you own netflix . If, in fact, you dont. Weve owned netflix twice. We owned it from way, way back when from 8 to 32, and then we owned it after they tried to split the company up when it fell from 300 back to 50. We bought it then, and we sold it about, well, maybe eight months ago, nine months ago. Probably should have bought it back. I think he is netflix is an incredible company. Its very expensive. Netflix is next. I actually bought it after close on friday when the deal now sold this morning because i didnt get enough position for it to matter. If you think about this, apple was mentioned, apple radio, now not in the conversations, apple tv. Now not in any of the conversations. Apple is rumored to be interested in time warner. Theyve got for buy netflix or somebody else is going to buy them. Netflix is next to go. All right. Next up, three stocks. Bill miller has a lot to say about amazon, twitter, valiant. Also show you shares of one main. Its one of the financials that bill miller said. He liked that stock is on the move. That is an understatement of 4 1 3 . Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. I want to talk about your Largest Holding again, and that is amazon. How you make the decision that one big high valuation stock is worth buying versus another one that may not. Cant touch it for the valuation. I hear it on this desk every single day. Why is a guy like you able to pull the trigger . Well, first of all, i think people have misunderstood amazons valuation almost from the beginning. When they talk about amazon not making any money, my comment is how do they go from a 400 million market cap to a 400 billion market cap without making any money . Thats very unusual thing to have happen. When you sort through the math of all this, says that means that Value Creation happens roughly at the same rate as sales growth happens. Amazon sales are growing 30 . An incredible company. That also means that the underlying Business Value is growing at 30 . I think for that kind of thing, what do you pay for . If you look at Something Like the interview value ebida its not expensive. Its about 14 times two years out, and thats a crazy low number. A friend of mine who is an expert in retail has said that jeffs big insight was that if you are running a retailer for profitability, basically you end up topping out at 5 growth. How come no one else has had this idea. Its been 20 years were watching this go on. Why are there no other amazons to invest in . Or are there . I think you have a guy who is a Phi Beta Kappa from princeton and then worked in the Hedge Fund World and did this. Amazon is a data driven company. What they every decision that they do is scrutinized. Everything is put on an analytical table to look at and see if its a good move. I mean, the aws was brilliant. He spoke at our conference in 2002, i guess it was, and kind of laid out what was going to become aws. Comparing it to the electricity grid in the u. S. And how jp morgan in 1895 had the First Electric lights, and he had a generator in his basement. No, it makes sense to have an allout distributed, and thats what the cloud is. When i look at amazon right now, i say to myself i want to move to twitter. Theres no viable competitor. Do you see that . Have they insulate the themselves in such a capacity that theres no one that can really challenge that model right now . Yeah. I mean, if you take a look at amazon and compare it to facebook or google, right, great companies. What you have is facebook and google in their core business are attacking the global ad market. Thats where most of their revenues are coming from. Thats a 500 billion market. Amazons core market retail in the u. S. Alone is 5 trillion. Their total Addressable Market is bigger than any other company on earth right now. Lets talk about twitter. You still own it . Did you sell any or were you tempted to sell any when it got into the low 20s recently on this deal speculation . We sold half of our call options on twitter when the stock is, what, 22, 23 . Its obviously gone back down. What do you do with it here . Do you own it for any other reason than a possible m a transaction . Do you believe in the fundamentals . I think twitter is a unique ass asset. Twitter is a network of interests. What happens whats going on with dwiter is, well, first of all, twitter needs a fulltime ceo. It is insane to have jack dorsey be a parttime ceo at a company with the issues that twitter has. I mean, if a parttime ceo makes sense then so does a parttime cfo and parttime chief technology officer. That makes no sense whatsoever. Thats one impediment. Not that jack is not a great entrepreneur. He is. For twitter there are so many different ways to think about this. When Mark Benihoff said was all these companies, many, Many Companies are running their Customer Service on twitter. What are they paying for that . Zero. Theyre using the platform for free. I would pay 1 a month to get Larry Summers stuff on twitter. If twitter did a netflix and said, you know, were going to change the Business Model and try what netflix did. Netflix lost s10 of their subscribers when they did that. If twitter lost onethird of their subscribers are,ing that would still be, what, 200 million a month of Free Cash Flow. You would lose the worst subs arguably. The people that you most want to lose. Yeah. You lose the people that are, you know, attacking other people and use it for spam and stuff like that. Do you think that a deal for the company is still likely . Theres a rumor, i guess, on friday about soft bank. That made some sense. I would think that we on twitter because of the optionality of twitter, and it bounces off 15, 16. Its pretty well floored out at that level. If they show the live thing is good. Its too narrow in my opinion. They shouldnt be putting everything on live. If you are tweeting on the president ial debate or on a football game, roughly every ten tweets equals one new ad. They can do the math on that, and thats promising, i think. Just any type of monthly active user growth and the stock would be up 50 . You think that dorsey needs to make a decision on which company he wants to run . I think the board needs to get a fulltime ceo. Are you throwing your hat in the ring . No. No. Are you throwing your hat in the ring . No. Have you told people on the board that thats what you this i . I have told anthony that. Nodo. Yeah. We keep debating what were going to do on that with respect to the board. I mean, if anybody on the board is listening right now, they know what my view is. Do you think its a target for activists . I do. I think an activist, somebody like carl icahn could make a difference with respect to being on the board, a new ceo of that company. You have done a lot in your career. Maybe its time for that. Not me. Not now anyway. You come in and look at stock option compensation. Craze why i. Thats insane. What are you thinking . All right. Well, shes known for calling the housing peak and then the bottom. Ivy zelman has her take on where shes seeing things head now and how to play it. The one area of the sector he calls crazy cheap and how he is playing it, and well do that when the Halftime Report comes back. What powers the Digital World. Communication. Thats why a cutting Edge 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 nimble. Businesses count on communication, and communication counts on centurylink. Jake reese, day to feel alive jake reese, day to feel alive jake reese, day to feel alive this is the rx. Elevated. Rx hybrid and rx f sport. Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. As long as you love me, its alright. Shape the best sleep of your life. 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Its great to be on again, scott, and happy anniversary. Its good to have you. Thank you very much. How does the Housing Market look to you today . I think the Housing Market looks very good overall. Yeah . What about the builders . Well, i think were right now in what i would say is the early innings of finally the entry level starting to accelerate and really its been builders trepidation about bringing inventory into what we call the second or third rings, considering that the Mortgage Market wasnt open for business. They were all but concerned that consumers not only couldnt get a mortgage, but wouldnt want to go out to the suburbs, and i think that the language has really changed from two years ago. You know, the message was, hey, guys, if you build it, they will come. We have no inventory, and we have no areasonable doubt for believe affordable housing. It takes time to bring it to market. I really think were in the early innings. I think that the luxury market, contrasting that, in some cities in the country where there was a lot of development, especially in multifamily for rent and for sale, i think were already in the beginnings of a correction. We have a little bit, scott, of the tale of two markets with depending on what price point every market is different, but as you move into second time move up in luxury, there seems to be more of a mature market to luxury where theres arguably already a correction occurring and were seeing deflation and some of those luxury markets. Its interesting. You mentioned at the top of that demographics. You do have what if they never buy homes the way we expect that they should. Are you married and have children . I am. Its hard enough to be married. Imagine living in an apartment with 900 square feet and adding a few children. Lets face it. Millenials are just now starting to theyre in their early 30s. The great news is that woman over 25, birth rates accelerated in 2014 and an accelerated pace for the First Time Since the recession. Women over 35 are growing birth rates even faster, and i believe the American Dream is alive and well, but they have very limited choices. What were seeing is that they want to go to the suburbs. Millenials are buying. Weve got nearly, you know, 75 million of them just beginning to come through the pipeline. I know yours are too young. Mine are too young. Theyre going to come through the pipeline, and it starts usually with household formation with children. He owns you own linnar and tripoint. Do you have a question or comment for ivy . Full doisclosure, were a client of ivys. Most of what we know about hughesing, weve learned from her. We own linnar, pulte, tripoint, and we own taylor morrison. Yeah, we like them a lot. Ivy, why are those the right stocks to own . Linar and tripoint . Well, we like a lot of the stocks in the space. Bill rattled off more, and were recommending a whole bunch of them. I think its about there are builders that are strategically focused on not just the price point. That might be where you see the fastest growth, and also in the geographies that are going to show the fastest growth. Its about who are the best operators len in tr. We have a potential return of 40 . We have a potential return of 36 , which really led about the affordable price point with express offering. Tripoint a return of 36 . I think that the only area we like to building products, the home center, the only area we dont like that we have sell ratings on, are the multifamily for rent guys that we have challenged on the supply boom that has gottin ahead of demand. You think that shift has sailed. That the multifamily apartment reets, et cetera . I think you have to get more detailed than that. Understanding that the urban supply is where were really seeing the graert challenges. In fact, if i was in the multifamily business for rent, i would say its a great business. Great cash flowing business. Its not like the Home Building industry where you build a factory and you have to start over. They have an incredible Business Model, and the suburban class b work force doesnt have the same supply challenges, but i think the class a urban core is really where youll see more rent deceleration that will correct and take longer to get to a point where the demand catches up. They will lease those apartments. Its a question at what prices and what returns . The guys in front of me who i know has questions. Josh brown. Toll seems to have wanted to get into that urban millenials, like cities or trends or people spending big money on homes prefer to be in downtown areas, et cetera. Are they pursuing the wrong strategy based on what you are saying . This is a stock thats trading what it was in 2012. In 2006 it seems to go nowhere. Well, for toll brothers, remember, a very small percent of their business is city living today,ing and specifically like new york city today, i believe, its like in the single digits, 4 . I think toll is great operator. Recognizing that where they have luxury exposure, theyve been bucking the trend. I think that there is a more mature phase, and they may be in the sweet spot in places where the demand is still strong, what we consider luxury. I think that the city living, there are people, the aging baby boomer, the people that have the wealth that want to come back to the city, theyre offering the right product. Its just a question of the negative sentiment that might hold back investors. Everything is for sale at the right price, and we view toll as a top operator. The right valuation we would be compelled. Right now were just on the sidelines. Ivy, its steve. Just a question in terms of the ability to get mortgages and the accessibility of financesing. The banks were huge lenders. Of course, theres been a krip in that, and theres no sign of it coming back, and theres month no more asset based lending. Its all based upon income. In terms of the cycle going forward, its been stretched out, and its not only related to a lack of having land. Its also related to the inability to get financing. How does that affect in terms of household creation the cycle as we go forward . Well, steve, weve known each other a long time, but i have to tell you, youre wrong. Youre wrong. How is that wrong . The banks are the banks. Let me tell you why. Okay. The Mortgage Market is open for business. Nonbanks now have 50 56 of the purchase Mortgage Market. They are willing to underwrite down to what the government allows of 580 fico score with 3 down. Theyre offering product that goes with 3 down that wells fargo is now partnering with them in whats called your First Mortgage with the 97 ltd that goes down to 620. I think what were seeing is the shift that the banks seated so much share, roughly 30 points of market share, that theyre recognizing they cant grow nim. Theyre coming back to purchase now and incrementally offering more Product Innovation that they want to take back that market share because the nonbanks are having a great time. Look at the success of quicken. Sterns mortgage. Look at freedom mortgage. I mean, a lot of undoubtedly. You dont see people are watching television, and they dont know who the companies are. Undoubtedly theyre doing that. Is that what got us in trouble in fwait . 3 down. Nothing down. All the creative mortgages. Arent you, in fact, creating another bubble similar to what you are doing in subprime lending and auto . Actually, i would disagree with that respectfully as withal. I that i what got us in trouble in the downturn, which we spent a lot of time analyzing and called the top is that we had what was called liar loans, negative option arms. I mean, there was so much product out there that resulted in no one having skin in the game, and they lied about their income. These are well documented loans. Fha has been doing this for more than the last 70 years. We have an opportunity to create wealth. Would you rather renters that are getting gouged with rent increases anywhere from 4 to 12 every year of variable costs or should they be buying a home when its the best time in the history of our country with Mortgage Rates below 4 that they can actually lock in their fixed costs and create wealth for themselves . I disagree with you emphatically that what were doing today with sound underwriting from both fannie and freddie is the kind of risk that created the downturn. I dont know if ifls making a statement rather than asking a question. Can i ask one more question . No, no. I dont know if thats an anniversary present for us. Ivy, keep going. Keep getting him. Come on, honey. What do you got . Hold on. Ge says, hey, you know what, says we cant find great employees in the suburb, so were moving to boston. You have companies saying, hey, we need to go into the cities. What about that . Its not a negative position. If you look at the brookings institute, the pew institute, where we are seeing the greatest level of population and job growth in the excerpts followed by the suburbs and the last on that list is the urban core. Where we actually see population and job growth is in those outer rings, and guess what leads the entire economy . Roof topped. If the builders are finally willing to go into the second ring and be pioneers, which took them six years to get there, you will need, if you are out there with a roof top and youre in this field, youre going to need an anchor grocery store. Youre going to need a new elementary school. You are going to need hospitals. You are going to need all the aspects that come with roof tops. What i would just tell you is just getting started. The people that are looking at this crazy economy with 0 to 2 growth, guess what. Housing will be the tall its midget because theres not that many opportunities to get a tail wind with the demographics as powerful as they are today. I mean, my nephew just moved to the suburbs from downtown cleveland and has a son now. They want to have a backyard. They wanted the extra bathroom. Look at young people today getting married and having children. They cant find a house. We have a 30 year low in inventory in the united states. The biggest deficit in the economy is a lack of shelter for affordable housesing, and the builders that are capitalizing on that will have an elongated cycle that will show double digit growth and theyre being smarter about prudently investing in land and driving cash flow. I think its one of those opportunities that bill miller captures as a great investor to appreciate. Where else will you go in the overall sectors of the economy and find such a great demographic back drop instead of worrying about Single Family starts that are actually wrong because our builders are reporting double digit order growth . Investors are going to wait for the government to tell them, but bill, who is my client, is going to make money because he is going to listen to me. Ivy, thats a great conversation. Really enjoyed speaking with you. Again, hope to have you back soon. Scott, happy anniversary. Congratulations. Bye. I have nrn ivy for a long time. I was going to say, i disagree with you emphatically may be the most memorable part of that interview. Let me say two things. Ive known ivy since she started the business. Shes one of the best analysts i have ever worked with. Heres that conviction. And remains so. Built an incredible business. Her husband used to work for me, and i actually thought i paid him pretty well. Clearly, i shorted him on his last bonus. Didnt know it until now. That was good stuff. You want to just drop that part of the conversation with your thought on where we are housingwise . I need to own more of them. I think the key thing from my standpoint is the industry all these builders are going to grow double digits. So to 15 a year for the at least the next three to four years. The market is going to go up, what, 5 a year and earnings are going to go up 5 a year. Lenar is as good as it gets. The Second Derivative trade has fallen back. Thats the bulk of materials and louisiana pacific. I think all of those. Pulte. Dont forget. Major changes. Back with more bill miller after this quick break. I got it, dad. Ow we love to keep them safe. So we made the Nest Protect Smoke and Carbon Monoxide alarm. It speaks up and can alert your phone if theres a problem. Or let you know if everything is just fine. Because, ya know, we worry. Welcome back to it is Halftime Report. Im phil lebeau with breaking news. This is the Consumer Report annual auto Brand Reliability survey. Really one of the bellweathers in the industry when it comes to looking at how different auto brands are doing in terms of dpenld anlt and reliability. Its response from Consumer Reports subscriber, the top three, and this is newsworthy. Lexus, then toyota. Number three, buick. This is the first time in 35 years that Consumer Reports has ranked a domestic brand among the top three. Its never happened before. Buick has been improving its reliability, and thats certainly evidence in this year coming in at number three. At the bottom of the list, not good news for domestic automakers. Look at the bottom three in terms of reliability. Theyre all chrysler brands. In fact, the bottom four ram is ranked the worst followed by or just behind fiat as well as chrysler. One other note, guys, take a look at tesla and the model x. This is the first year that tesla is ranked in the survey because you have to have more than one model to be included in the survey. They didnt fair very well. 25th out of 29 brands. Heres the reason why. The model x was ranked as the least reliable midsized luxury suv. Consumer report. When we talked to them, they said its the model x, the falcon wing doors, a lot of problems with those. By the way, tesla reports Third Quarter earnings after the bell on wednesday. Guys, back to you. Phil, thank you. Ouch for tesla. Just quickly, unreliable car, reliable stock. Is that how you would say fiat. You own it. Fiat is the cheapest of them because it doesnt really generate any Free Cash Flow. We have great management. Theyre taking share. What keeps you out of tesla . Valuation. Gets you into other things, though. Why can you make the move in tesla . I think if you look at what were doing from valuation perspective and you mention amazon, we actually believe that amazon is significantly mispriced in the sense of its worth a lot more. We dont believe tesla is worth any more than its trading at. Its worth less. Elam musk is life jeff bezos, ae business genius, but the stock is expensive. You still like the airlines . Love the airlines, yeah. They went up 80 a year for three years, and thats part of the reason it was the single best performing fund in the country. They have gone down the last two years, and theyre down 15 , 20 this year, and i think thats digesting the move, but Delta Airlines is a 15 Free Cash Flow yield earning 25 on equity and generating 5 billion. Theyre going do return 75 of that to shareholders. They shrunk their shares. Theyll shrink their shares by 7 this year. Is that your favorite name in the space even though you own american and united . United delta is the quality name in the space. United has more up side. Its margins are depressed, and theyve got new management there. Thats probably got a little more up side. Quick break. More with bill miller coming up next. Is happening before our eyes. Shift in Human History sixty to seventy Million People are moving to cities every year. At pgim we help investors see the implications of long term megatrends like the prime time of urban expansion, pinpointing opportunities to capture alpha in real estate, infrastructure and emerging markets. Partner with pgim the Global Investment management businesses of prudential. This week, the big guests include jim chanos, maya gch gabelli, Michael Fichthorn at noon eastern. Theres no one road out there. No one surface. No one speed. No one way of driving on each and every road. But there is one car that can conquer them all, the mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. Lease the c300 for 369 a month at your local mercedesbenz dealer. What powers the Digital World . Communication. Like centurylinks Broadband Network that gives 35,000 fans a cutting edge game experience. Or the network that keeps a leading hotel chains guests connected at work, and at play. Or the it platform that powers millions of ecards every day for one of the largest greeting card companies. Businesses count on communication, and communication counts on centurylink. So i thought it thanks might be times, dad. To talk about a financial strategy. You mean pay him back . So lets Start Talking about your long term goals. Knowing your future is about more than just you. Its how edward jones makes sense of investing. Welcome back to the Halftime Report. Another stock that bill miller has been invested in, that is valeant. Are you still there . Oh, yeah. Oh, yeah. Why . Well, valeant is probably the most toxic stock in the everall market. It cost bob goldfarb his job. It is trading in the low 20s, come down probably our costs are anywhere from 20 bucks to 35 bucks in the stock. We just bought more last week. You bought more valeant . Yeah. What do you see is ahead . Why buy more . Valeant has valeant is laboring under two issues, the legacy issue of mike pierson, new ceo, new cfo, new business strategist at valeant and the debt lodad. A lot of money. We think the Free Cash Flow, though, 2. 5 to 3 billion on 8 billion market cap of 25 to 30 Free Cash Flow yield, so just on Free Cash Flow alone, and the 8 billion of proceeds they think they can get selling noncore assets, we think the stock doubles in three years. What would make you sell it if anything . We liked it but im wrong. On a quarterly basis, all of a sudden they surprise everyone or i think it is going to be hard for them to do that. I think the quarter will be a bad quarter. Ceo said the cfo would take a fresh set of eyes at the business. I expect writedowns this quarter. I would think so. Can they sell these assets . Yeah. Well, they can sell they can sell bausch and loam. You think thats they say thats a core asset . Theyre not going to sell bausch and loam. I think the values are there net of the debt. You dont think they get to a point where they have to sell core assets because of the debt load . No. Bond market isnt telling you that. We own the bonds in our income fund and they have done well for us. Were not seeing the stress in the bond market. A conversation on the break about energy. We havent talked about that at all. You have a view on Energy Stocks. Theyre overpriced. Where do you think oil is going . I think around 50 bucks is probably fair for oil and 40 to 60 range. But most of the oil big Energy Stocks are discounting significantly higher prices than that. Are we talking the likes of the exxon, she hachevrons . Yes. Natural gas also . Not so much natural gas. Natural gas is different. But in general, i would say if you lump natural gas with energy, i would say that sector is not terribly attractive to us. There are some names in there that are okay, but nothing that gets us excited. Let me get your view, one minute left in this program, we had it with every great investor who has been on over the last week this debate over active versus passive, whether stock picking is dead. Front page of the wall street journal last week, what is your view . Im a big fan of passive. Because most active managers dont add any value. And there is two reasons for that. One of them is institutionalized in the sense of theyre trying to manage the low tracking air area and closet index and fees are too high. If passive is 30 of the market now, 50 to 70 is probably the right number. Always going to be room for people that can beat the market. To me, it is kind of interesting, the argument for passive is that it beats most active managers, right . You had a bunch of i got a 30year record. People dont see it that way. Been great having you here, thank you for spending the hour with us. Thanks and congratulations and i hope to see you on the 50th and not the that makes two of us. Bill miller, thanks so much. Power lunch starts now. All right, well, it is a megamerger monday on power lunch. A ton of deals topping your menu. Lets see, at t buying time warner, might have heard about that. Rockwell collins buying be aerospace. With an activist government, will any of the deals get done . And why all the deal making may be a big warning sign for you and your money . Later on, break the curse. The cubs in the world series for the first time in 71 years. Big money is on the line, hide inju your goats