At the high of the day joe, the meltup continues. Steve and i were talking before the show. Surat and i also had a conversation about how methodical the rise it its almost like walking up that staircase. I think its interesting, tomorrow youre going to get the unemployment report. I think you have to begin to really price in is this also beyond just good earnings, scott, is this about growth accelerating is this about repricing the economy maybe towards 2. 5 , something that we didnt think was possible so getting yields of 2. 35 on the tenyear tomorrow you get unemployment. I think its very valid to think about this is an economy thats going a lot faster than we thought. People who are waiting for a pullback are getting run over by the day and it is so widespread now, whether its small caps or midcaps, transports or industrials, now technology tries to resume its leadership role youve got big news in netflix, an upgrade for microsoft, but the starts to take off within the last 20, 25 minutes or so. But you say it all. In the last couple of days weve talked about rotation, rotation, rotation how about the material space today as well. How about the fact that copper is near or through 3 a share. Take a look at an absolute and you can look atthat and tell you where copper is going. Financials, technology, materials. The rotations continue throughout all the different sectors. But when you look at those, scott, and everybody wants to say, you know what, the financials, they cannot go up any higher take a look at where rates are thats not been the case they continue to plod and go and continue to go to the upside. The financials are coming off their worst day in a month day in a month. Worst day in a month yesterday. And a pretty good month. But here we go with rates creeping back up, steve. Cramer and i were talking in the prior hour about the throw in the towel rally of the and thats what this is. You wait, you wait, you wait for a pullback, you dont get it just throw in the towel. Its almost seeming that its too easy if you buy a stock, even though the fundamentals havent improved when it sells off, you go into it because you can make money anywhere to me thats the caution now, that doesnt mean im turning bearish. It means id like to see a little more volatility. In what historically is the most volatile month for stocks, october. Exactly, exactly. If you go back to the market corrections, youve seen this volatility up off the lower base the dow up and down 100 a day. Here were making new highs every day but its eking it out. So thats the only thing that im concerned about. You always have to have something to be concerned about. The services were good, rates are steady. And employment is going to get a pass because of the hurricanes but i think what youre going to get is once we get through earnings season, youre going to the stockspecific volatility. The stock pickers, if you like Certain Companies and they missed for reasons that are not fundamental, i think its a good time to pick stocks. Are we so priced for perfection now in some of these names that they better deliver or to surats point, pete, its going to start out with the banks, you start to get these moves people are waiting for. Im less concerned about the banks. Id be more concerned about some of these industrial names. Take a look, wheres boeing right now . And ive been one of those, i love boeing. But the proof is in the pudding. If they dont deliver, thats going to be a problem. I think the financials actually, they have plenty of room and i think theres an easy runway for them to continue to deliver. In the face of the dollar getting stronger, thats going to hurt some of these earnings going forward, so expectations might have to come down and you could see that pullback. Lets say we have a big wheel, like spin the wheel, wheel of fortune youve got all the various areas of the market that are doing so well now if i say you have to buy one sector, one area, small caps, midcaps, large cap, growth, chips, et cetera, and i spin the wheel. Steve, where do you hope it lands . Im still in tech i continue to add to tech when they miss. Not necessarily miss, when theres a downgrade like Western Digital today. I bought some more, its been down i was talking to pete yesterday and we both own a lot of micron. Crap, micron is down 90 cents today. Pete says so i say so, but thats a move. Thats incredible. Thats how ridiculous it is. Its not when you consider where it came from. So i still like tech. What josh said yesterday about that being the new industrial, hes absolutely right. So were in an environment where weve never seen rates this low for this long and the market is not overvalued at about 18 times. Its not you can understand, though, joe, why some people hear this kind of conversation and say people are too complacent, its close your eye and buy the market, what could possibly happen. Absolutely. Are we too complacent or not . I dont think were too complacent at all. I think what youve witnessed throughout the course of the year is collectively this kind of perfect storm of whether its in europe, whether its in the emerging markets or domestically here youre seeing acceleration of growth in terms of corporate earnings and we keep overcoming these obstacles, macro headline obstacl obstacles. You asked before are you concerned about financials think for a second what financials have done over the last 17, 18 years. So i think that validates the point that theres plenty of opportunity on a valuation basis for them to move higher. Were going to lead with microsoft. It got this upgrade and the rally itself starts to accelerate but lets get back to microsoft and this upgrade its to a buy from hold. Weve made it our call of the day today. In fact were joined by the analyst who made that move, richard davis. Richard, welcome its good to have you on halftime. Thank you very much. Almost feel like this upgrade plays exactly into the kind of conversation were having now, a sort of throw in the towel and buy it, right . Youve been waiting and waiting for a pullback in microsoft. You say you havent gotten it, so that in a sense forces your hand, no it does you guys were talking about it, but the reality is if you just had one indicator and if it was accelerating growth, thats what you would buy. When we did our analysis, we think microsofts Revenue Growth will double from 6 to 12 in five years what really thats the key to the story because its obvious that this stock has had a pretty nice run, you know, since the beginning of the year along with all of these larger cap tech names, which are back in favor. Youre exactly right. I think whats happening is the narrative has come a little bit off track. People are focusing on op x and didnt look at the big Growth Drivers we think will start to materialize. Its xbox, the asoozure busines and the o365 upgrade. Its pretty interesting. As you go back over your career, when was the last time that you said over the next five years to justify a buy rating on stock . Because im not used to hearing analysts say that. Ive been doing this for a long time its over the next year or two i understand thats different for investors and me also like to hold for a longer term. It seems to me thats not a good time that you have to talk about the fiveyear growth in order to just fee a buy rating. On the existing valuation, its not bad if you look at microsoft, its probably a 10 discount. On an earnings basis its more or less in line with where the companies are. So our view is to get the double in the growth and the double in the stock, you dont have to have any multiple expansion. So youre kind of like right at a market multiple and discount on bid of Free Cash Flow so its not too far of a stretch, but good question. Richard, i totally agree with you on the accelerated growth and thats we pointed to for a very long period of time hes been the aggressor and going after the growth areas and thats been the transformative part of microsoft. Its why it went from 35 a share to 75 a share are they going to do anything in terms of acquisition we know about the cash, we know about all the repatriation conversation and all the rest of that do you see an acquisition somewhere in the near term for microsoft . Yeah. We kind of talked about that in the note basically the answer is yes. Obviously they dont share that with us, but theres multiple avenues they could go. They could buy in marketing. Where they could go is make a big move in the egaming space to bolster the franchise they have with xbox, so theres a bunch of different opportunities. Look, they generate 30 billion of Free Cash Flow. Thats a lot of money to throw around youre looking at a price target possibly by the end of calendar 2020. Thats not that far away. Right. 115 to 120. Thats a nice move from here. As i said, it doesnt really imply that you have to have a multiple expansion, its just keep the multiple about where it is hopefully its not too aggressive its good to have you on the show interesting call. Thanks so much. A lot of people talking today about it, richard. Thanks for coming on halftime. Well see you soon so to the extent that the rally needs tech, needs these names to be, again, in the leadership spot, does it or does it not i think you do. You do need technology and financials to lead it. I think specifically in microso microsoft, when they announce the earnings, if they dont beat and raise, i think you could see the stock pull back because expectations here are so high for the cloud and the other businesses having said that, we still own it i like the stock and would buy it if it dipped because they are in the right places and are going to keep on growing. Does anybody want to take the other side of that, though, that the rally needs tech hasnt it been born out in the last week or so that even without some of these f. A. N. G. Names, assume the top spot on the leaderboard, that were okay the market didnt really suffer when we saw these names coming down. The point moves a lot but the percentage moves werent all that much, maybe 5 . Heres a way i think youve got to look at the market also is that when the market cracked in 08, its because every economy in the world was going into recession. So now weve got low rates and every economy, at least that we care about in the world, is growing and expanding like weve never seen. Thats why josh keeps talking about that world index. Right, right. Which tells that story that youre telling now. Right what im saying is youve got that move on the reverse side. If you can go down 50 , im not saying you go up all that much more, but why cant you keep going on that basis. But if you have this Global Growth and get Interest Rates rising, Tech Companies have the most cash. Theyll benefit with increased rates because the cash is just sitting there. So youve got that option value with some earnings that nobody has built in. The other story as it relates to the f. A. N. G. Is netflix raising prices on a couple of plans and the stock was up 2 or 4 lets look at netflix and well see. Yeah. What about this move . Weve seen that in the past where they have made this move and everybody is completely getting out of it. I think it seems to me that the investing Community Seems to be embracing this by saying, we know the money youll have to spend, we know where the growth is coming from and content will be king for them as they have to spend that money, theyll have to do something. This is a bold move and i think the market is embracing it today. Real world example here i got netflix three or four months ago, okay 11. 99 a month when i look at how much my family consumes on netflix versus where im paying 400 or whatever the case may be, its an unbelievable value. So they have pricing power. But think about the difference between the pricing power. Youve paying a couple of hundred bucks for all these channels you never watch, versus you pay 11. 99 and youve on it all the time. 54 year to date 54 gained year to date. Another reason why the market keeps going. I sold netflix, made a lot of money, sold them in the 170s, right . I think you were there too. Yep. Now whats conditioning my behavior is seeing the stock up another 10 , understanding why its up 10 , this is a great move they still have pricing power, so that conditions for other stocks that i own. So its caused you to rethink your own placement within the market based on the stocks you have because of the exact scenario we talk about from the top. Thats right. You think a pullback is coming people were thinking in latter september, and it just doesnt materialize. You look up and now were going to be talking about dow 23,000 in a short order if things continue the way they have now. Im also talking about companies that still have great fundamentals there that normally taking money off the table, when its hit your price target, was the right thing to do. Violating that discipline is why people keep putting money into those names and recommending microsoft at this high so i dont think that ends soon. Were just Getting Started here heres what else is coming up on halftime. The state of the big banks wells fargo Senior Analyst joins us with his top stock picks in the space. Plus our desk will debate the sector and were tracking the traders in the halftime Quarterly Report what our experts learned in q3 well highlight a few of their big wins and losses. The Halftime Report with scott wapner and the traders is back in two minutes alerts wouldnt you like one from the market when it might be time to buy or sell . With fidelitys realtime analytics, youll get clear, actionable alerts about potential Investment Opportunities in real time. Fidelity. Open an account today. Fidelity. And her new mobile wedding business. Tte at first, getting paid was tough. Until she got quickbooks. Now she sends invoices, sees when theyve been viewed andtadahpaid twice as fast for free. Visit quickbooksdotcom. Welcome back to halftime. The financials have been the best performing sector since the election on the hopes of new banking regulation or less banking regulation today the Senate Confirms a new board member, which our next guest says ushers in a new era for the banks. Lets welcome bank analyst mike mayo, the Senior Analyst at wells fargo. So were talking fed first thats where you want to go . Sure. You think this is a big deal today . Yeah, i think this marks a transition from a period when regulations have been very tough and that followed a decade of when regulation was too lax and now were going to a period of regulation thats between the two. The hope is that we have more goldilocks type regulation i define that as not sacrificing one i ota of safety do you think whatever the next fed is going to be impacts how we should be thinking about the banks in any way thats not our theme at Wells Fargo Securities at the banks. We think the Banking Industry is transitioning from a period of value destruction to Value Creation without any new deregulation so any changes to reduce the complexity, reduce the red tape, to reduce the expenses, the regulatoriy cost is all gravy to our thesis you wanted to talk about citi weve made the point before they used to have your picture on the door this guy shows up. Send him out the door as fast as you can and maybe call the authorities. Now you love the stock its one of your top picks however, youre here today to with a little nuance into where the story goes from here. Well, its not one of our top picks, it is the Top Bank Stock selection. We think citigroup stock doubles over five years without any restructuring. However, if citi restructures, we think you could double the stock over three years. Youre saying they should restructure, though . We think they should restructure because they generate returns, return on equity, sting in the Single Digits until citigroup generates return on equity in the double digits we think all options should be on the table thats in contrast to what management said at their annual meeting, which i attended, i went on your show. They said our restructuring is over we dont think citigroups restructuring should be over. Why do you keep having a gripe with these people . The story is turned around you sound like me, mike the story is good look why cant you just sit back and love it . The stock is up like 50 year to date. Scott, what is your Football Team do you have a Football Team . Redskins. Washington redskins. Okay. So if the redskins have good offense and good defense and good special teams and they have a coach thats smart and likeable but still lose the game, then you say you need to do more. Theyre not losing the game the stock is up 26 year to date. So maybe its 55 over a year. October 12th, 2007, i was on cnbc when the stock was about 500 we put a sell on the stock the stock has gone from 500 down to 75. Until the stock goes over 100 a share, they have not reached their precrisis market cap losing the gain is generating return on equity in the Single Digits until they get a returning on equity in the double digits, we think all options should be on the table. Some of those aumgoptions we think they sold some of the wrong things. Whats the blueprint then of a restructuring . Well, the blueprint for a restructuring is lets see a list of assets at citigroup tha they should potentially sell whether thats selling a mexican bank or a consumer in asia, thats a possibility we think they made a mistake by selling their brokerage business i love financial advisers. I have a Financial Advisor i have a Financial Advisor and ill tell you why. My wife, a doctor, when she says you need a doctor, dont ask me, get your own doctor. When my wife wants a Financial Advisor, i say dont ask me, call the financial advisers. I love financial advisers, citi never should have gotten rid of that mexican bank is not plugged in to the same type of system as the rest of the company. What happens after mike oneill retires in 18, the chairman mandatory retirement for the chairman of citigroup by the end of next year one option is you get a new chairman another option is you promote the ceo to the chairman role i think he increases his chance of getting th