The omega Family Office. Nice to see you we just welcomed a conversation on stage. You just heard the Vice President who is on stage now describe the economy as booming, the stock market as near record high the fed cut Interest Rates yesterday. All makes a lot of sense. The administration wants even more what do you how do you make sense of it . Look, japan has had negative Interest Rates for 3 1 2 years what has it done nothing. Europe has negative Interest Rates. Their economy is doing very poorly the Vice President cited a bunch of factors, in of which on my list, Consumer Confidence is up, retail sales Strong Economy growing at trend, corporate profits are decent Corporate America if they were pessimistic, they wouldnt be buying back all the stock theyre buying rates are already low. I pity the poor guy or girl thats worked their entire lifetime when they go to their Financial Planner and ask for advice about retirement. How can they afford to retire . Theres no income. Good luck being a save ar. And budget deficit is going up when the economy is fully employed doesnt fit with Interest Rates being cut. Interest rates are already low thats not your problem. Ive said this before. The multiple of the market was 15 its currently 16. 5. And the fed funds was 5. Currently 2. So i dont understand investors fixation in the need for rates to come down negative Interest Rates are destructive to the system. Destructive to the system. All that said, the fed is cutting rates. Regardless of all of the stuff the fed is cutting rates because theyre being a prisoner to the stock market. The stock market is discounting fed policy its a mistake all this is building up for some problems down the road the market is okay now weve discussed this numerous times. Bull markets are born of pessimism. They mature and die in euphoria. Other than the ipo market, i dont see are we inflating a massive bubble that is one day going to burst because of fed policy that you say is not necessary yeah, i would say that what worries the market is okay now. One of the previous speakers said i was given to hyperbole. My way of saying the market would be vulnerable. The market is not focused on a change of leadership, particularly somebody like Elizabeth Warren given what she advocates. Im not i think america has been great the forpance in the economy has been terrific. I think all this dissatisfaction with capitalism is misplaced i love to quote winston churchill, very articulate man you dont make poor people rich by making rich people poor he also said the main vice of capitalism is the uneven distribution of prosperity the main vice of socialism is the equal distribution of misery all this talk about free stuff is destructive yesterday you had on your earlier segment ken nangone. Hes an example of what capitalism can accomplish. He made a ton of money and he is giving it all back thats the first one of the day. Hes giving it all back to the system i look at myself in a very humble Way Public School in the south bronx. High school in the south bronx, college in the west bronx. Came to wall street with nothing. Made a lot of money. Giving it all away to worthwhile causes thats what america is all about. All that said, youre not that constructive on the market. What i said earlier is that we are in an abnormal world. If you dont understand were in an abnormal world, youre not in touch, okay . 17 trillion sovereign debt has a negative Interest Rate makes no sense if you buy a home in denmark today, you get a check every month for living in the house. Its crazy so i have to spend my time figuring out what is normal. Normal to me is the labor force grows at 1. 5 . Productative tiivity labor for 1. 5 4 nominal in a 4 nominal world, i think the fed funds rate ought to be 3, not 2 and tenyear government ought to be 4, not 1. 8 it may take two or three years to get there because of global Interest Rates im willing to say 17 times earnings is reasonable were now past labor day so normally we turn the calendar. Lets look at next years earnings 175 in s p earnings a multiple on 175. If my mind has not failed me thats 2975. Call it 3,000. Thats fair value. Market cycles end at overvaluation. Are we going to go there . Yeah, i would say is euphoria on the horizon . It could put you up to 3200, 3300 in the next 12 months absolutely one thing we have to understand is if Interest Rates belong where they are, the returns in the stock market arent double digit. Returns in the stock market are best 5 or 6 . Its a Capital Market line when you earn in bonds, has implication what you should expect to earn in the stock market how do you get your arms around where we started the conversation an administration that is pounding the fed, cut rates, cut rates, cut rates, and you lay out a case where theres no need to cut rates let me just say this. Theres opinions on both sides i side with the two fed governors that were against cutting rates. Rates were already low just think about it this way you have a 35 , 45 marginal tax rate and gaining 2 on your cash thats 1. 2 . The inflation rate is running 2 a negative return in savings they are screwing the savers Vice President would say, hes in the room speaking. As we he was very careful what he said he said the president supports negative Interest Rates. It doesnt make any sense. He cited a bunch of things i cited a bunch of things plus some what is the basis for cutting Interest Rates maybe its we have the strongest economy. The insurance policy on what could be happening down the road its the trade war thats put the economy in peril, if it is in peril in any way. So the fed is being forced to react. The absolutely the weakness in the economy in my opinion is directly attributable to the president s dialogue on tariffs. What were doing with china, i understand, makes sense but threatening mexico, canada, europe, makes no sense this has created great uncertainty in the business community. They dont know where in put their supply line so theyre cutting back on cap ex thats the weakness in the economy. Europe is marching to the rules of germany with Interest Rates in europe where they are germany is thinking a trillion dollars on infrastructure to rebuild to help the economy grow relying on negative Interest Rates and negative Interest Rates have shown you in japan they dont work. Showing in europe they dont work and i dont think lower Interest Rates were necessary in the u. S. Interest rates are low enough. I nice housing number the other day. I borrow all the money i could borrow at 2 you hear companies saying, you know, everybody hears it you ask a company, why they are not investing the way that you would want them to nobody lines up and says, well, because the access to capital is too expensive. Money is cheap the access to it has been cheap. Its the uncertainty as a result of some which has been created by these policies and as much as i feel the market is okay near term, i am concerned looking out 2020 and beyond number one, the debt theres nobody in government seems to worried about the debt were creating no personally, i was very surprised by how abruptly the economy slowed in the Fourth Quarter in the face of a nominal increase in Interest Rates that tells me theres too much debt secondly, referenced earlier, i think theres shift to the left in the country is a real concern. You mentioned theyll open the market if Elizabeth Warren but how much lower do you think . What do you think . Elizabeth warren gets the nomination, what if she gets the nomination what does that mean for the stock market the significance of an event is a function of where the market is when the event occurs. Right now the market, assuming donald trump is reelected, if it looks like Elizabeth Warren is a credible, or Bernie Sanders is a credible opponent to trump, the market will not be higher. It will be lower by how much well, all i can tell you, i think it would be a bear market and they go on for a year and go down 25 thats i would say that basically her policies are counterproductive. Theyre negative for capitalism and the capitalism is what brought america to the position were in today biden what does he mean to the stock market well, hes more of a centrist i can live with his policies the question is how strong he is and whether hes willing to resist the progressives in his party and whether he gets the nomination but hes okay. Forgive me for stepping on you, steve please, join in. I think the issue is the market has complacency while i agree its fairly valued, the market has, because i believe as lee does, that the infrastructure of the market is broken it trades on events. Rather than having concern about china as we entered into the trade agreement and all the, trade agreements that were renegotiating so to speak, it waits for a news headline to correct. And the issue is that you have this complacency thats put a bid into the market that when it hits, its going to hit hard now warren if she gets the nomination, and its looking that way, the market you would think would have a little trepidation. But it doesnt have any right now. Its far in advance, granted, but unlike lee, while the fed may want an insurance policy, to me, the it was incorrect to ease because if you go back to janet yellen when she last appeared at jackson hole, her staff wrote a paper that said we need 500 bips of room to cut rates in the event of a recession. We dont have it i get those who were saying, well, they shouldnt have done it shouldnt have done it they shouldnt do anymore. The fact is they did so lets play the game thats presented to us, okay . You have an economy which the Vice President behind me just said is booming. The data, you know, suggested its doing pretty well theres some obvious worry signs but the fed is cutting Interest Rates. So where does the stock market then go in the environment that all of us have been talking about given the hand that were dealt. I think that were going to continue to see the market move higher through the end of the year you talk to the strength of the consumer we see that between manufacturing and the consumer and the reality is that people are discounting the weakness that were seeing in the manufacturing economy because they are attributing in entirely to the tariff situation. And so if you are investing, weve already started to see a rotation from momentum to value. Thats creating breadth in the market that can push that into euphoric levels rather than fairly valued and i think with the fed as a tailwind, even if we dont see messaging that theyre going to continue this ratecutting cycle, they are clearing erring on the side of caution and that gives the Equity Investor engaged. What the fed accomplishes is they push everybody out on the risk curve if you go back, the person that was very happy owning tbills says i cannot survive on 1. 5 . Im going to buy tbonds or take duration risk. The the tbond buyer says im going to buy industrial credits. Industrial credit buyer says i cant survive on 4 . Im going to buy high yield. The high yield buyer says i dont care about 6 or 7 . Im going to buy structured credit clos. And the clo guy says im going to put 25 in equities because i want to make more money. So everybody is on the risk moving on the risk curve the excitement is we dont really know the future for sure, but you mention it and i want to put some meat on the bone. Market structure scares the hell out of me. Goldman sachs and Morgan Stanley and Merrill Lynch traded stocks for 50 cents a share and the volcker rule didnt exist. The brokerage industry is no longer stabilizing influence in the market trading secondly, when i joined the industry, 80 or 90 of the volume was in the New York Stock Exchange today 80 of the volume is off the board. The specialist system doesnt work and number three, some unexplained ra unexplained reason to me, they eliminated the up tick rule that worked effectively for 70odd years. Enacted in 1938. This gave rise to quantitative trading which buy strength and sell weakness. Everyone i know with a lot of money buys weakness and sells strength you had a down move in the market in the Fourth Quarter last year, unaccompanied by any fundamental reason the worst since 1929 this is because theres no stabilizing influence in the market thats going to bite us one day. Let me ask you what shannon alluded to because theres been a pickup in conversation this week about value over growth that youre going to see a meaningful move back into socalled value stocks after all, the faangs dominating the headlines and thats where everybody was chasing do you buy that do you think its the answer is yes the answer is yes, but the truth of the matter, i dont buy into that whole argument because i own my second largest position in my Family Office is google is that growth or value . You know, its 20, 21 times value. A Buyback Program in place to me, thats value. So if you own it, its value if you dont own it, its growth so i look away from that the way i start out, first i try to set a table whats the market outlook. And my basic suspicion is ten years into a bull market, if something is really, really cheap, theres something wrong and you can take a risk. Theres something wrong. The market has been picked over. You said the stock you picked today was new media. You dont think its the best business in the world, and yet you think its cheap its cheap because people dont think its the best business in the world. Its not the best business in the world. Warren buffett says when a man with a reputation for brilliance taeblg tackles a business with poor fundamentals its usually the reputation of the business that remain intact. I look at new media. Stock is 8. 5 new zeala yields 9 . They agreed to merge with gannett. Should be voted on midnovember. If you look at the s4, 400 pages long, heavy lifting, and you look at the numbers, in 2022 projecting 4 billion of revenues, a billion dollars in digital revenue, 850 million ebitda 4 of earnings per share the stock is 8. 50 about two weeks ago, the chairman of the board bought 250,000 shares, over 2 million into the stock two other directors bought stock and here i have an 8. 50 stock yielding 9 currently, and if they earn 4 in 2022, the dividend will probably be 1. 30, 1. 40 and the stock is 8. 50 and i have insider buying. So i have a small position to me, it makes a lot of sense appreciate your time today. My pleasure always nice to be here always good having you with delivering alpha wouldnt be the same without you. Vote right in november and vote often we need your votes well, the people will either taki take your advice or they wont up next, jim chanos. Hes coming on set livfre om delivering alpha Halftime Report is back right after this its so late. Yay. It fights traffic. No parking. I told you. Oh, a spot hold on. It fights tension. Seriously, did you take my phone . Passenger light on. It even fights. Fighting. Innovation that keeps people together. The 2020 glc. Lease the glc 300 suv for just 479 a month at your local mercedesbenz dealer. Im aditi roy. The centers for Disease Control has just come out with an update on the mysterious lung illnesses that appear to be related to vaping they are investigating about 530 cases of this illness. Thats up from the 380 that it said it was investigating last week there are seven deaths associated wis this as well across 38 states now and one territory. They still dont have a cause for this, but a lot of the focus has been on ecigarettes most of the patients report vaping thc some say its a combination of thc and nicotine and a small number vaping simply nicotine. And altria shares, which owns more than onethird of leading ecigarette manufacturer juul, has seen its shares go down to a session low today. Theyre down about 1. 5 or so. Well continue monitoring the situation and provide you any additional updates back to you guys aditi, appreciate it. Were live at delivering alpha. Our summit here in new york city where the smartest minds in the investing world are unveiling their best new ideas for this market with us now, someone who did just that a short time ago, jim chanos, the noted short seller at kynikos josh brown here with us and joe terranova. Good to have you here. You came to delivering alpha and picked a fight with Warren Buffett and Berkshire Hathaway congratulations to you i didnt intentionally pick any fights, scott. They happen to be a large shareholder of a company im short. Which is davita dva for all of you playing wherever youre playing. They are in the kidney dialysis business they are. And i think that its the reimbursement model we discussed that i think is at risk. So we laid out you made your case on the stage make your case here for our viewers on why this company is towards the top of your watch list so weve been short this for a couple of years. The real problem is a set of developments that have occurred this year that i think put its model at risk. First and foremost, a lawsuit was filed this spring by florida blue cross which lays out the entire reimbursement scam, if you will i think it may be actually crossing the line based on a further development in which basically davita attempts to move its medicare, medicaid patients the vast majority of dialysis patients are old and lower income they try to move the patients into