This means. Welcome to the show once again. Good to talk to you today. You with me . Can you hear me . I can hear you now. What are you making of this news. Im holding the suit in himy hands. Is a big deal. You have one of the largest mutual funds saying your business was a fraud for a period of time and that you cost us 70 billion as a group. So this is something weve warned about and this isnt playing around money. This isnt write a check and move on. This is big news. At the same time was any of this to be expected just given where the news flow around valiant and filla dor had been within the last 12 to 18 months. I think so. I think when you look at the news flow for the first half of this year, we knew there was a problem. We knew what they said and did may not have been matching up so the fact that there are already other lawsuits, this isnt the first lawsuit, but this is from a big named company thats not used to going after companies they invest in so im sure they didnt take it lightly and reading the suit its pretty critical. I think investors who are invested in it should take a look at it. You have a sell on the stock if im correct in a which in which weve gotten a couple of upgrades for valiant, thinking the worst was over and the bottom had been put in. The stock is down today likely on this news, but its certainly higher than it had been. Yeah, if you ever throw a pebble down a steep embankment it bounces around a lot so i wouldnt take that to mean anything that its up a lot in a week. If you look at the people who are upgrading, they were the same people saying buy it at 200 and they down graded at 50. We do things differently. We ask ourselves would you look your mom in the eye and say you should buy this today . With valiant we just cant do that. Maybe others can. Youre not gonna make any friends with comments like that. Joe has a question for you. Obviously the mutual fund is looking for monetary loss coverage. According to the filing in june they only owned about 500,000 shares of valiant. Do you suspect that they would come forth and seek the same type of actions that youre seeing here . So we havent talked to them about this or the other mutual funds about whether they would join the suit or whether they would file their own suits. We know another fund has already done that separately and i think that i wouldnt be surprised if others join in, but t. Rowe price is one of their largest holders and probably looks at this as more serious. There was debt news today. Theres been something for investors to consider is if 30 billion worth of debt. How do we reconcile todays news with the continued issue of such a large overhang. So its very confusing for the average investor but the new debt agreement that they came to means that they can perform worse and not trip any con vents. You shouldnt view that as a good thing. You should view it as the business isnt doing as well as many thought before. It means they wont trip the cover nans and it gives them breathing room but the business is still weak. It doesnt give them an unlimited amount of time to pay off the debt it just means they have extra time. We expect they will restructure the debt. When they did their last debt it was around 5. 5 and they were investment grade. They are no longer at that grade. Restructuring is going to cost them a lot more money. Is the suit here and the issues around the company have any impact whatsoever on proposed asset sales core or noncore or other larger transactions. From an m a standpoint the company says they think barb and lawmaker is worth 20,000 or more. If that were true someone would buy the company. Thats not happening. Lets put that aside. I think from the asset sales theyre gonna do like they said a number of asset sales but theyre promising to do 8 billion worth of asset sales based on a multiple they set themselves. I think they will sell piece by piece so will be difficult for the average investor to figure out if theyre lowering numbers because the business isnt doing well or they sold stuff. They sent that stock up more than 20 in a single day seven to ten days ago at the most. Yeah. If youre going to talk to debt holders and renegotiate a waver are you going to say i dont think i can make the second half year numbers or you say as of right now if i close one eye i think im gonna make it and then go to them with the stock rallying and say now we want to change our waivvers. I think its going to be a challenge for them to make second half year numbers and thats one reason theyll be selling assets too. Wouldnt they have had every excuse in the book to say look because of all of these issues maybe our full year outlook is going to be challenged. In fact they didnt though you seem to be throwing shade all over it. Yeah. Just look at the prescription trends. Theyre largest product is starting to go negative. I look at it and say they had every incentive not to do that. So well see. Time will tell. Thats a great thing about the market is that eventually time will tell. What im saying is maybe they can get out of this. Im not saying its differeefin. If i owned the stock i would sell the stock. I appreciate you going to the phone and having this conversation with us today. We reached out to t. Rowe price and they said they will not comment beyond the lawsuit. Probably no surprise there. The bears dock on this name are going to say this is why weve said its uninvestable because you dont know whats going to come down the pike. Right. Tiaa is in there of course. Already has their suit going. This one was not a its not a class action. This didnt join that. This is a separate suit. A judge obviously is going to have to decide exactly what the merits of the cases are and then allocate co allocate some monies to the plaintiffs and it seems like theyre lining up. But the issues also is the magistrate likely to put them out of business, give them b basically a death sentence. I dont think they are. I have no position in the stock but i would be unlikely to be as bearish as david is. Its like tell us something we dont know, pete. You knew there was this potential of bad news. What was the case about the bullishness was restructuring and he talked about they can restructure this and david says the restructuring process wont be as easy as people expected it to be. I think the most important thing is weve said this is a no touch unless you love risk. If you look at the implied volatility it is significantly off not just a year but even in the last three months. Im trying to think of all the ways to push back and have a good conversation here but couldnt you make the argument that a lot of the risk has been removed, that the risk reward equation which is why i disagree with david and if i were an owner which im not, i would not buying the stock or selling the stock i would be buying puts because of what i said. We were talking about 300 implied volatilities at one point time. Three months ago it was high. And now its inverted and now its below historical average. The risk at 200 was big. The risk at 28 is what. Something we dont talk about with regard to class action lawsuits is theres been a wave among judges saying why should we punish existing shareholders for the sins of the past. There have been judges that said go after the individuals at fault on a criminal basis but dont punish existing shareholders to give to a select few. I think you have investors like bill ackman who are doing the opposite. Hes trying to fix things. Thats what should be happening here. When you talk about this on the equity side there has to be more to come. David presented a very bearish view because as pete rightly points out we wanted to hear how the debt reinstrustructuring wag to occur and there are positive things in that restructuring. It gives them a pathway to sell off assets they couldnt do before. Theyre going to issue shortterm bonds. Those are favorable things unless no one buys that debt which i dont believe that someones not going to do that but the last thing that has to happened is we have to know the legal costs. Whats the set aside legal costs for the investigation and things like that and then the equity becomes a possibility. Well make it a wrap for that conversation w conversation. We have a look at stocks right now. The private prison stocks that are grabbing the attention of investors as the Justice Department is reportedly planning to end the use of private prisons because theyre seen as less effective and safe for providing services. That according to the washington post. These are private prison stocks. Theyre under pressure. Theyve been halted a number of times in the last two hours. The geo group has resumed trade. Its down 40 and Corrections Group was down around 40 but it is halted at this moment. Well keep an eye on it. Back to you. All right. Wow, i dont know if you guys invest in these stocks. Hopefully you havent been in any of the facilities. Corrections group and there was a big crowd over there but i believe its still closed at this moment, halted. That stock four times normal volume just in the first hour of trade and that included a number of stops. So this is going to be volatile and an issue throughout the rest of the day just trying to get it restarted again. Down 39 and 40 for those stocks. Lets look at the overall market picture and talk about this hunt for yield. Trades that have worked all year long may have received an extension as it remains unclear if the fed is ready to make a move any time soon. Weve talking about the sectors that have led, the telecoms and utilities. I said it earlier today but at 159 yesterday those sectors looked like they were going to be sells and they had been down over the last month and then the fed comes out with whats perceived to be a more dovish minutes and then the trades back on. We dont know what to do. Its interesting. I think theres plenty in there that you could sink youre teeth into as maybe saying theyre becoming more hawkish. They saw a lowering of Economic Risks internationally and a pick up domestically and youve had more timely speeches from fed speakers saying september is on the table. What should you do here . Theres plenty yield out there theres not as expensive as the utilities and consumer tastaple. Theres Car Manufacturers or refiners that have good yields so look for cheap yields. Maybe theyre not that expensive if you think that rates are still going to remain low for even longer than we thought. Thats going to be the question. A considerable amount of conversations being had on our desk and others and other programs here of whether you should start rotating into more cyclical places within the market. Weve heard it every day and now i wonder if that is shefd by what the fed had to say in the minutes. Were looking for opportunity. Where has the opportunity been . Weve seen where tech had not been performing and suddenly theres a great push out of tech and you see yield and growth. Look at the nice moves youve had off of some of those lows whether its brexit or going back to february you can see where some of these names where youve got yield youve got growth and youre on the way to something great and if the story is there, if you look at disclosures right now i have an unbelievable amount of tech and energy right there now. Energy is driving it right now. Energy is about 48. About 50 for the first time in six weeks. Oil was 42. Think about the dramatic move right there. Oil surge is above 50. You can have a slant Going Forward because thats going to take the s p along with it higher. I love the way they said it was a split decision on the fed because split decisions for most of us might be like 21, Something Like that, a split decision. As far as a split decision with the fed it was unanimous in the june meeting that they wanted to leave rates where it was. It was 91 in the july meeting. Thats a split decision but i dont call that a split decision. I call that somebody trying to grab headlines. We have big news from the olympics next on what theyre calling watergate. The story on whether or not there was a hold up in brazil. Time to take chip stocks off the stable . Well answer that question next. Or stop to find a bathroom . Cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. Do not drink alcohol in excess. Side effects may include headache, upset stomach, delayed backache or muscle ache. To avoid longterm injury, get medical help right away for an erection lasting more than four hours. If you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. Ask your doctor about cialis and a 200 savings card we are back and more on this developing story about the u. S. Swim team in brazil. We are live with the latest. Andrew what do with he know now . Reporter this story just keeps getting stranger and stranger. Ryan lochte said heened a his teammates were held at gunpoint and now that story has changed and now theres questions about whether it happened at all. We have video to show you. This is from a Security Camera showing them at a gas station which is where all this did happen or may have happened and the story and the reports now saying a very different story happened. They were not pulled over at at gas station. They went into a bathroom. Youll see these guys go into the bathroom and they may have broken the door or something inside the bathroom, that an altercation may have taken place, perhaps a gun was then pulled at some point by a Security Guard there but they apparently paid the folks at this gas station and then left, which of course is a very very different story than the one that they told police and the one they told billy bush on the today show. That headline reverb rating around the world and playing into the scares about the Security Issues here in rio. The local people here of course this is an olympics, a showcase for this city and this is something that had damaged the city and its reputation, now new questions about whether that story is in fact true. Theres going to be a press conference at 3 00 p. M. This afternoon. Its a business story because there are sponsors behind these teams, lochte himself, Many Companies behind him. Well see whether they will stay behind him if in fact this is not true. Were going to continue to report this story out and bring you the news as we get it guys. Not the last weve heard on this one. We all know thats true. Thanks so much. Back to the markets now. The tech sector has been on a terror this quarter. Its the Top Performing secretary or up nearly 10 . Cisco announcing it will cut 7 of its workforce. The ceo was on earlier today talking about the quarters hits and its misses. What we really saw was a weakening of demand in q4 in our Service Provider secretary or around the world and emerging companies. Those businesses combined were negative but the rest of our business was up 5 . Overall good performance there. Okay. Pete, youre long on the stock. Im long on the stock and options as well. What do you do today. You have to understand what you need to focus on. Weve been talking about this is what are the companies focussed onened a are we focussed on that as inveszers. They are in this transition. We know about the transition and i think robbins has done an unbelievable job. This stock is off the 52week highs. I see were pulling back but i think the transition is in place. Security is one of those foc focuses. This cloud is another focus. Theyre moving out of hardware into software, that takes time. People have to understand that but i see the growth and the dividend yield fits perfect. Jim, youre in the name too as to whether investors got overly optimistic. It had one heck of a move. It was up about 20 in about two months. Theyre earn gings were okay. To the question of what you do with the stock Going Forward, i think you can hold it for all the reasons that pete mentioned but what youre looking for is what are they going to do with this cash. This is a cash had. Horde. This is over 65 billion. Thats a number they have to say what are they going to do with it. Are they going to recapitalize the capital structure and these ads of im going to buy jasper, thats not enough. They need a strategic decision of what theyre going to do with the cash. I want to talk about tech as it relates to chip. I bring it up because the s p is up 4 , the chips are up 14 . Petes been all over it. Clearly the earnings have provided the evidence that chips are the place to be but i also think there has been a little bit of a recovery in the emerging asset class specifically as it relates to ausha. The fact the u. S. Dollar has gone lower is benefitting. I think its more it was driven by the domestic demand initially but now you have global participation and i think that provides a continued tail wind. You want some crazy numbers, over the last three months ividia is up 63 , arm holdings is up 62 Texas Instruments, 21 , do you get the point . Weve seen some takeovers as well. This week we were talking about some of the incredible paper in micr micron. Intel is up 16. After earnings it was sold down and i think the desk collectively and i know you were one of the many said this is tupt on the pull back and now its trading near 35. They are doing the right things. If i can pick up on what petes saying this is a time where you need to be selective in the chip space. I look at micron and Texas Instruments and they make chips that go into things like toasters. Theyve had a great run but youre not going to get that much growth from the toaster industry. You need to look at the more specialized chip factories. They called apple a toaster company. Maybe the toaster is the new place to be. Certainly anyone who is picking stocks can have a different opinion than mine but i think in the chip secretaryto have to make distinctions. I like to be in video or a qualcomm which is gaining its footing as the iphone 7 comes out. If you look at the sis koe call i heard cloud lock and source fire. Those are two ways they are securing the cloud. Thats the future for sis koe and thats why theyre not going to need as many folks. Thank goodness its not 14,000 jobs lost. But 5,500 is going to hurt. A double dose of unusual is am cooing up next. One trade comes from the rails and the other from the road. First a check on the dow, 30. The dow is down 24 points. Walmart after its earnings is up 1. 5 . Thats the lead of the day. Sis koe is down one and twothirds . Oh watson, your japanese is very good. Thank you. speaking japanese exactly.