Then Investment Committee is ready to go. Halftime report starts right now. Good to have you with us. Our Investment Committee is here with us today. Want to get right to the markets where stocks have hit an air pocket within the last 30 minutes. About 100 points on whi s off ow on the dow and the ten year yield lowest since early february a spike in gold. And by the way, has everybody searches for answers as to what is going on, karl says that iphone sales in china may fall by 40 to 50 in february and march compared with the same period last year so we have to keep our eye on all of that. Goldman sachs wonders whether were all underestimating the impact of coronavirus on earnings and the market at large. Very possible we could be and i think that it is important to remind everyone that it is a lot of fun when you have five or six stocks that are so gigantic that rallies in those names take the entire index with it but when people get concerned about for example an apple and take the name down, it does have annu an impact on the overall market averages but look beneath the hood. Energy stocks are flat utilities are flat ofafter five Straight Days of going vertical. So i think this speaks to the value of having diversifieded portfolio understanding that there will be days where the dow drops for a reason and then days where it drops for no reason at all. And if you have dry powder and ballast in your portfolio in the form of fixed income, equities that trade like fixed income, tips, treasury, municipal bonds, you are okay these days dont freak you out and address the question that we asked if were all too complacent especially when you look at the growing number of companies that are saying that our earnings will be hit as a result of all of this. Would it is not just apple, it is maris, proctor, and that list is being added to every single day. And yet up until today, the market doesnt seem to really care all that much i dont think that were complacent i think that were on tenterhooks, a little nervous at the big runs weve had but i dont think that ko complacent is the word we dont know underestimating we dont know plain and simple so what should the market do the coronavirus if it get, you know if it is not an event two months from now, should we have sold stocks, is that complacency . Were talking about a market style of 1 . Im fonot concerned about that im concerned about nobody knowing why it dropped people say who is right. Companies are releasing their exposure as weve released exowe sure, t i believe the market absorbed it but it doesnt point out where the risk is. The risk is in the beta stocks as is in every market. And, you know, microsoft which has survived the whole coronavirus scare has gotten hit. You cant celebrate all the way up when it is apple and microsoft and amazon and these other stocks and then be shocked when you have air pockets on the way down if there are profit takers in some of those names just because of the top heavy gains that weve had. Of course so as we sit here, the market was up as of this morning about 5 the s p 500, 5 . 13 alltime highs this year, 16 alltime highs for the nasdaq. And were beginning to face some reality that the earnings that people expected for the First Quarter and for 2020 may be overly high. So the market is not trading at 19 times earning, it is trading at 20 or 21 times earnings which means that we need to roll back some of the expectations. And this is not a freakout situation, it is just that we moved we have fast very far in the last few months. And i think that it is reasonable to expect that two things worth pointing out on that. I agree with you very much two things pointing out. John lynch did work on what were seeing from Fourth Quarter earnings so far and it looks like well have a pretty substantial wretch new beat for s p 500 components looks like about 3. 5 Revenue Growth year over year. New beat r s p 500 components looks like about 3. 5 Revenue Growth year over year. 65 of companies are reporting better than expected revenue and the average beat is almost a full percentage point. And this is not free stocks. Im talking about across 500 names. So that is the reality right now. And so then if you have to take down estimates for q1 and q2, this is rational given how much of an unknown this coronavirus is so maybe you have tobump up estimates. That is my point. You will hear tstrategyists pivot. So unless that we have it wipe people out in the millions, this is thought what the case is, you will have it now where they say were taking down q1 numbers, were a little concerned about q2 numbers, but we foresee a second half recovery and remember, hong kong is in shambles they just had the give plenty of like a civil war and now they are all under quarantine because of this deadly disease. Give plef like a civil war and now they are all under quarantine because of this deadly disease but relax if you think that they are going to sell a lot of iphones now. But it doesnt mean that you never buy a phone. So we mock strategists saying the back end loaded recovery that is not fake it actually is what happens. Delayed purchases get made later in the year. Scott, tuesday we had a big buyer, you heard us refer to him as 50 cent this trader buys options right around that 50 cent level. Bought 150,000 calls at the march 24 strike. That is when the vix was trading at 14. 60. It is 2 higher today. So a 14 move. There are some really big players, and the reason i bring that up, big players have hedged and part of it is certainly what you say that it is the yields, but certain parts of it are other people that panicked and basically pushed a very large portfolio in market all at once about 35 minutes ago and is that when the market rolled over. Was the catalyst exactly what you cited . Very possibly it was it was when that yield dropped to such a low level. Could have been the bond auction as well that occurred at 11 35 just before the show went on the air. But those kinds of things are what drives the markets and when you get everybody pushing on one side just like it did to the up side, we go down but i agree with the panel, id be more looking to commit capital here because 200 trillion debt in the worldore ws were jacking up rates. So the question, is the market ahead of itself on whether it will cut. But the rest of the world is going to cut i would say is that a slam dunk. But i dont think that matters. So they go from minus 30 bips to my in 60 you wont tell me that the next move from the fed is going to be up i agree i dont think markets really assume a next move from the fed. Look, ive been skeptical about the recovery in europe and the rest of the world all along. And i still think that that makes the u. S. Market better of course there is earnings. But to me complacency is not around the coronavirus, it is around what may happen in washington in terms of the Cabinet Meeting that trump is having on the 28th where they will decide if the u. S. Is going to prevent u. S. Companies from selling their technology to huawei and other foreign buyers. That potentially is more of a hit to the market particularly technology than anything else. So we dont though so he tweeted on tuesday that that is ridiculous we know that there are meetings going on this week that is where the risk is. If you think that well have a bit of a momentum correction as it were, do you think that some of these value plays that i believe investors like cooperman have been talking about, these left for dead Energy Stocks which nobody wanted to touch, is value going to be a place that you want to be as bank of america says that they are bullish on value and that macro conditions improving even with this virus which many people think is a short term hit, the global macro is better and thus value carry will be better so this is the argument that we saw in september. And during the period where there was a fear of a recession with the yield curve inverting and a rush toward swral value, o a while it outperformed growth in a strong way, i think that is a mistake because this is a very, very low Interest Rate environment as we said, this is the country that is growing versus the rest of the woshrld. And if the market is going to come back, if it comes down maybe corrects 5 , even 10 and it starts to recover, people will buy what is growing and energy is not growing, energy is still somewhat toxic because you get all of these investors who dont fuels you have institutions who are selling their centering. And they have to recover their earnings for there to be some improvement there. Banks and very low Interest Rate environment, that is just a tough sell and so i find it hard to make that case. I just dont see it i see companies that are executing regardless of whether they are termed value or growth that are going higher. I see company that is arent executing and unable to execute because of the backdrop like energy going lower. What about companies that are, you know how much could they possibly be executing if they are so young and growth process effe prospects are so high . Are they executing yet that stock is trading in a 15 range. Up another 10 off the open and now down a5 there is mechanical reasons it is supply versus demand, people shorting it it has nothing to do with the overall market i wouldnt use that as being a microcosm as anything. Just say this is interesting, weirdest thing ever. And the bifurcated market that weve been speaking about you want to make the case that there is euphoria like tesla is bigger and more meaningfully important to the conversation than think about how much time we spent talking about beyond meat over the summer and the thing lost lo80 f its market shortly after it is important that we dont look at these anomalies and try to te eger story. There is always something bigger going on so you have these anomalies on the down and up side. They cant be the dialogue. And we do have a story that is new at noon today and it is regarding tesla. Phil lebeau has it well talk about tesla in a bit. This all has to do with the Consumer Reports annual auto brand rankings and list of top picks. Remember, this is based on owner surveys as well as actual testing done by Consumer Reports. And here are the top three brands this year according to the killer reports porsche, genesis and subaru. And they are representing the model 3 as a top auto pick they say that there is better reliability especially since the model 3, they improved the production line. They noticed an improvement in the reliability as a result. As you take a look at shares of tesla, Consumer Reports has moved the ranking of the tesla brand moved it higher. So that is the Consumer Reports annual ranking of auto brands. Guys this, is one of those benchmark studies every year because it is owner surveys combined with testing done by Consumer Reports lets not make it an oh, by the way. Especially has history goes, it is a stunner because of where they have ranked this company and cars in the past. Correct and they are Still Critical of the model x. And i hear this from people all the time they say it sounds like Consumer Reports is more positive on tesla. Overall, yeah. When it comes to the model sxchlt, not positive at all. In 2020, does this actually adoes it matter you can make an argument that it does matter because look at landrover. It is always at the bottom of these lists. Their owners say they have terrible reliability and yet they had record sales. The elon musk tweet moves more cars in one hour than Consumer Reports moves in a decade that is just my opinion. Are you talking about moving the metal, but you need a benchmark study and this is one of them. If you are not going to have these studies as all, it is just whatever people are saying i was in the model 3 last night, loved it. It was fabulous. A lot of room. Beautiful vista. You now have a Company Whose financials appear to be in order. You have a blessing of the vehicle. In the past you could say that they need to raise capital, i dont know if the company can even sustain itself. The car is a piece of junk fair point. Lets say you are a shareholder. This would you prefer, that the first two things are true or they got this Consumer Reports thing on their side . Im saying all taken in total, it is an overwhelmingly net positive im not saying that it is negative whether they sell one vehicle off of it or are not, it helps the and there is no valuatio it is not as much no one hah has noticed that it is 900 which means valuation as a short is never a good short val bonds we that is what you the effect stiff yield. They are down basically to five now. So i would say that it is not just consumers, not just Consumer Reports, not just cars moving off the line. It is the fact that they think that this is a much healthier company now than it was a year ago. 100 . All right. The other big story today that could impact the way that you invest and with whom, morgan st stanley announcing that it is buying etrade, shares having their best day as you would expect here is what the ceo of Goldman Stanley tells us why he did the deal this gives us both the workplace and Core Financial advisory which is unchanged. And then for Morgan Stanley, just it is a capital business, part of the journey. And josh, i know you have a big take on this deal. Er just feel l ee eer i feel bidding against themselves e trade is fine. They corporate Stock Transfer and they open brokerage accounts but i dont think that it is worth 13 billion. And james gorman has been a great ceo. Hes done well i think in this case they are probably buying something that they think is way more than it is this looks like it is a gigantic iceberg, but it is floating on its way into 60 degree waters. And it will melt very slowly and there is nothing about the brand that matters to the consumer and really no business there anymore. Commissions on mutual fund trades, individual equity trades, option trades, if it is not zero already everywhere, that is where it is headed etrade had no choice but to co do this deal very smart decision to exit now 7 now. But lets hope the customers arent smart enough. And when you look at unmanaged accounts, average cash balance is Something Like 11 according to van guard so that is 11 where usually the money is just sitting in the money market earning almost nothing and then the Brokerage Firm can earn the remainder of what is being left on the table. If that is where the whole business is going to be, that these are basically Cash Management arbitrage companies that is not a greater business you could say Morgan Stanley will get access to all this data that is true you do have millions of accounts, you have people placing transactions, there might be value in reselling that data to hedge funds. Fine you might say there stock long business you might say, well, what if we can sell them a credit card or have them trade up to traditional wealth management. All of this is true. But i dont think that you have to pay this much in order to get the users. So on that note, speaking of influential voices, mike mayo, probably the best known banking analyst out there, he downgrades Morgan Stanley on this news. A to being that you own. He calls it value destroying says that there are strategic, financial and execution risks. Want to take issue with that josh talked about a lot of the potential levers that they would hope to pull and whether they are worth what they ultimately paid. They may have bid against themselves rumors was that goldman was looking at these guys and has looked at them ever since pete and i were working for goldman managing money so a ten year old rule or exa. Exactly and every time they looked at it, it was 2 billion and then 3 billion and then 4 billion and now 13 billion. And why do you think schwab didnt do it there isnt any cache associated with etrade beyond people that open their first account in 1999 meanwhile robinhood with all of the main share, 100 robinhood made it so etrade had no choice. Schwab did. But robinhood made it so schwab did what it did. But it is not fair to say about scottrade. They never considered looking at etrade. No, no, that is postcrisis they could have done that deal there is a reason this thing has been sitting here 21 years and nobody wants it. Gorman executed exceptionally well i dont really see the rationale for the deal because it is a culture clash. It will be die lieu differen coveted or he actually has a plan this gets me thinking about bank of america and merrill. And in that respect, that was somewhat of a culture clash. Still is. And wilfred asked gorman are you going to start wearing jeans and a button down. And this one though when Morgan Stanley, gorman and these guys decided that well take the citigroup brokerage under our wing, and now it is under the umbrella of Morgan Stanley, this gives them a very big Critical Mass to compete for investor dollars. So to your point, this is better than trying to build it yourself so Goldman Sachs is making a play for the mass affluent. Jpmorgan releae app and i dont know what kind of traction that is getting merrill lichbynch has merrill e, it is hundreds of billions of dollars that are being served by a combination of emails and a call center. Right . So Morgan Stanley does not have that so to your point, if they want to go that route and pursue the mass affluent, this was probably better than trying to build it from scratch, so why not lpl where does it leave interactive . Out in the cold unless the land grab continues it is tiny. More reason why it is what do you get with it though not lpl because you have humans that are brokers. And they left the Morgan Sta