You know i presume you know by this point that he is short that stock. He is the founder of kinneco associates. We will catch up with him in just a few minutes. John and pete, ill gu to first. Tesla has this news that we are going to talk to chenos about. Theyve extinded their delivery date for three model 2 reservations. They have some dive an announcement today. You guys have never been involved in this stock, i dont think. Other than small speculative plays here and there. Scott, i think this is exactly why. All of that sounds pretty negative, doesnt it . Look at what the stock reaction is today. Sk stock is holding at the 200 level. It is one of the most difficult stocks to diagnose, and with elan musk at the helm and all of the different things, the polls that he is pulling right now, its really, really difficult to get your arms around this and say, you know what, this is an absolute buy at this point in time, and those that are trying to sell it, how difficult is that as well . We have jim chenos live as well. Hey, jim, thanks for being here today. Really appreciate it. Hi, guys. How are you . Were doing well. Lets talk some tesla. Youre still short. They have this right . I am, but im in Silicon Valley or just outside, so i have to kind of look behind my shoulders to see who is behind me. Theyre going to have this news today, which i guess musk says is unexpected by most, quote, unquote. Theyve now extended this delivery. He is he is going to saturn, i think. You never know. You truly never know. This news of extending this delivery date for new reservations of the model three until mid 18 or later, that was on the companys website. They say they are still machining to deliver their previous rez irvations in late 17. How do you take this news, and what do you think could be this unexpected by most announcement that comes in just a matter of could be minutes or hours . Well, first of all, the whole kabuki theater of the reservation website yesterday was pretty funny. Twitter actually got on to it around midday and pointed out there had been a change and that it looked like it would be late 2017 when production starts. Then it changed back to production beginning in mid 1917. To me the key is not deliveries. Its production. Thats the real problem here is getting geared up from the model s and model x, which are doing about 100,000, a little less, units a year, to what they hope for is an initial run rate of 500,000 of the model three. Thats an entirely different kettle of fish. The issue will be production, but, of course, weve got the vote, the shareholder vote, for solar city on november 17th. Then some, you know, brand new product being announced today, so its never a dull moment in tesla land. Thats for sure. Jim, i have Keith Meister sitting here with me today. I know you guys have met in the past. He, of course, with corvex. I think you have a question for jim as well. Ill defer to jim on tesla because he is much more of an expert than me. It at the outset that tesla should be trying how to launch it should seem like a fulltime job. I guess i would ask jim, does it provide warning signs for him that they went off and bought solar city at a time when they are increasing the burn, increasing the distraction, buying from affiliate when they should be focused on their core business . It seems like Freeport Mcmoran buying mcmoran oil gas, planes at a different time doing something that had limited strategic rationale, and it was the beginning of the end. I dont know if thats an analogy for tesla here. Jim. Well, hi, keith. Is as i recall, that purchase also had insider complicates connected to it, if im remembering right. It did. Thats what made me think of it. That was pretty harsh. Yeah. I was pretty harsh on the Corporate Governance aspects of this deal back when it was announced. Ill leave it at that. Im just dumbfounded again that the board, as i mentioned at delivering alpha, that the board would want to go ahead with this deal, but yet refuse to lend money to solar city over on a senior basis. What does that tell you about their view of the risk if the deal goes through . Major oem manufacturers were going to be putting out electric cars across the price spectrum. You know, this is he is in a dog fight coming forward, and this is a pretty big distraction. Jim, john nagarian. When you see this and you have obviously watched twitter play out as well where a very smart guy, jack dorsey, is being pulled in multiple directions because the two Different Companies he is involved with and musk has these three companies really, you know, trying to put a rocket on mars as well as the solar city and tesla, does that parallel is that one of the reasons also that you are so add machamantly bearish on this stock . Its just the nature of the business. He is trying to juggle three large balls. We dont really know what the economics are of it. Its got to be a distraction. Its got to be a distraction, right . Not for the shareholders. The shareholders dont seem to mind, although i will point out that we had sort of this same discussion a few months back when the stock was hovering in the 220s, and we couldnt figure out, you know, gee,ing it shrugged off bad news after bad news, skps now its shrugging off bad news after bad news in the 190s. You know, the fundamentals will win out here, and i think he has his hands full. Thats sort of an interesting question, says though, for a short seller. As well as you have done doing that crap for so many years, when you are, in if a sense, up against a story that continues to shrug off bad news after bad news. Theres a lot of stuff out there. Why bother . Yeah. Theres a lot of stuff out there. Why bother, indeed . You know, i dont know if if you have noticed that the ceo of cat just departed or will be departing, but caterpillar is a good example. It was something we talked about for years now, since 2012. We shorted that stock in the high 80s. Whats interesting about it, it hasnt it we want up to 110, and went down in the 60s and has come back. It hasnt gone anywhere with a little bit of volatility, but when we shorted kalt pillar in 2012 the estimates for adjusted earnings for 2016 and 2017 were 15 and 18. The estimates today are roughly 350 and 360. On an apples to apples basis. Tll you go. Couldnt have gotten the fundamentals more right, and the stock had been break even. On the shord sight these days is a victory. I would ask, are you still short cat . I mean, a lot of people are saying that the story has turned, that the fundamentals have changed, the stock was, i think, recently upgraded as of a week ago. Yeartodate its up almost 30 for over a year. What do you do with that . Are you still short . We havent seen any evidence of it. The super cycle in commodities that peaked out at 11 and 12, you have heard me say this was a once in a lifetime kind of thing, and the over capacity that exists in in mining, mining equipment, Construction Equipment is serious. In addition, i would point out, and everyone is sick of hearing it, but the great china real estate bubble and debt bubble has not happened yet. The collapse has not happened. The unwind has not happened. Thats ahead of us. Not behind us. This has all happened on the back of china still growing, you know, its cities and its construction budgets by double digits every year. The unwind that we foresee that started with too much supply in 2012 is yet to be played out because of lack of demand. Youll be with us in a couple of weeks. Ill save the alibabas until then. Well catch up with you next week. Safe travels back east, and ill look forward to seeing you soon. Thank you for being here today. Hey, congrats on five great years, guys. Thank you so much. All right. John and Pete Najarian are here. Well reintroduce Keith Meister where. He is our guest host for the hour, of course, with corvex. Jim is known as probably the most ardent china bear out there. A stock that you have been in for a long time has a china play, and that is yum. Doing the split. They just had their investor day here in new york city. Sort of selling the whole idea to analysts. Youre still in it, im assuming. Whats your view here . So im a larger shareholder of yum, and yum is about to complete the spinoff of its China Business on november 1st. Theyre going to spin off to shareholders and ownership interest in china, which should represent about onethird of the total value. I truly believe its an example of one plus one equaling more than two. I think well have two wonderful businesses. The core yum remain co will be at 98 franchised asset light business that will be in the business of growing its brand and providing its brands to entrepreneurs who want to put capital behind those brands to open and operate restaurants. A phenomenal annuity like business with growth. Really a unique asset. The China Business is an equally good business. Its a way of i think jim may be right over time or may not be right over what happens with infrastructure buildout in china, but i think the one thing he would not bet against is that the china consuming class is going to grow. Theres 300 Million Consumers today that are growing to 600 million, and theres a rapid mass urbanization, so jim talks about all the infrastructure thats been built. All that infrastructure and ashanization is going to ultimately support yum chooirn. Yum china owns and operates 7,500 restaurants, Kentucky Fried Chicken and pizza hut, and kfc is the mcdonalds of china, and yum went early. It went hard. They have a big presence and a Global Supply chain. They can go into tier two, three, four, five, six cities, and they can distribute and control the quality of the product that they sent to stores. Huge compelling competitive advantage, and over time theyre going to go from 7,500 to 20,000 restaurants as they deploy capital. They have a three or four year payback. Phenomenal returns. My guess is it looks like this. Its volatile and up into the right. Franchise company is a growing annuity thats much smoother. You can separate the two businesses and have a spin that makes each company better. China co can take its excess cash and it will generate a tremendous amount of Free Cash Flow and reinvest in china to grow and whether its kfc, pizza hut, or taco bell, open new restaurants, and yum franchise co, 30 billion company, has no use for cash. Over time your earnings goes up. Your denominator, your shares outstanding, what the earnings are shared over, go down. They put a plan on cash earnings by 2019. They said not 375. They said greater than. They said that gap earnings and cash flow were the same. If you look forward and take an assumption and take them at their word and assume some number greater than 375 for simple math, lets call it 4, a free, Free Cash Flow, that grows because every single day five entrepreneurs open a new yum restaurant. That to me seems like a compelling investment. You want to so it seems like we had a debate on the stage over there not that long ago about this very name. I recall you as the bull. The bull. Yeah. I was the bull. And i remain the bull. A lot of that is the lack of success that i think they can have success, and thats with the franchise that hasnt really kept up with dominos and papa johns and some of those, keith. It sounds to me like you would pick both those two yums. The yum china as well as the yum thats everywhere else, but it sounds like one of them sounds like so much more volatility. This yum will be expanding the restaurant foot pript, and the annuity factor is what you like best about that. I think thats exactly right. Lets go through whats going to happen. Yum china will get spun off and will need to find a home, and i would argue its a business that should trade at 10 to 12 times ebida. Restaurant companies that seem to trade at those multiples that dont have any growth. They trade at ten times. Yum china has huge competitive advantage and huge growth. Its under earning because its had some hiccups, because the chinese economy has not been perfect. Youre going to have it should be ten times to 12 times, and earnings should be a lot higher. I think it will get spun off, and it may trade at eight times initially. Theres a story to look forward when they perform the way they can that that 1. 25 looks like 1. 6, 1. 7, and the multiple doesnt look like eight or nine but 10 or 12. Be patient with yum china. The patient will do what it always does, right . Its not going to make it eeaas to own it, but i think thats where the best return will be. My opinion is it youll make a higher absolute return owning yum china. Youll make an equally good risk adjusted return owning yum franchise company. Interesting. Much more with Keith Meister ahead. Next, legendary investor nelson peltz joins us. Well talk about many of his holdings, including General Electric when we come back in two minutes. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Welcome back to the halftime report. From helping to reshape the Food Industry and pushing for change in some of the countrys industrial giants, nelson peltz has become one of wall streets most successful activist investors. Mr. Peltz, the ceo of triat Partners Joins us by phone. Thanks for being here. Oh, pleasure, scott. First of all, let me say maz mazeltov. Thank you for calling in. Why dont we start, nelson. Ive been asking sort of all of the big investors who have come on our show this week. How the world looks to them, how the markets look. I would looic to get your view when you look at the stock market. What do you see . Well, you know, prosperity starts to eat at people, and i think wall street is talking themselves into a negative environment, says and i think theyre doing it almost unnecessarily. I mean, the election sort of does cloud the future of bid. It looks like hillary is going to win. Its not a given, but it accident loo like shes going to win, and if she does and she takes the senate and the house stays democratic i think the market stays where it is, i think if by some chance she takes the house, the market goes down. If she doesnt get both houses, i think the market goes up. I have been listening to you all weeklong as i always do. I hear much more negativity than i should be hearing. You know, earnings have been pretty good. You have seen them so far. Uhhuh. Revenue is hard to get, but revenue has been hard to get for several years now, but these companies are realizing just how much cost they can take out. Theyre doing theyre doing an okay job in doing it, but theres way more to go. Its funny. Weve had weve heard from david tepper this week who i think was fair to say was more cautious. Carl icahn, and you have been buddies for decades, he has been cautious, and that certainly hasnt changed. I guess thats what you are speaking to. Kn you know, weve come so far since the bottom of 2008. The economy isnt doing great. The rest of the world feels like its doing better than our okay. Dont you factoror all that in sno how much higher can multiples go . Im not a macroguy, but i think my portfolio is cheap. Okay . I will say that to you. And i think that youre going to see a little growth in europe this year. I mean, for the first time. Its not going down anymore. I dont think thing are as bad as people want to i dont know why the hell theyre thinking about having an Interest Rate hike. I dont think we need a stronger dollar. I think things are not nearly as bad, and as i said, i think theres huge opportunity on the cost side. Latin america is a problem. I think europe is getting a bit better. Who knows on china. You can pick any number you want. I think our portfolio is in pretty good shape. You dont think the fed should raise rates . I do not. No, i dont think so, because who can afford more interest . I mean, theres not a country in the world that can afford more interest. We certainly dont need any more interest payments. Why make the dollar stronger, scott . It doesnt make sense. You hear do not continue to talk about exports, exports. Why make it more difficult to have exports . Let me ask you about one of your holdings. I believe it is your largest investment, and that is General Electric. Yep. Stocks coming off the worst quarter in some two years. Its under performed the s p dramatically over that period. Do you intend to have a more activist role . Is it not performing to the level you thought it would by now, and what are you going to do about it . Okay. First of all, you call me an activist in the opening of your show. Were highly engaged share owners. Were longterm share owners. We dont live quarter to quarter. When we get on the board of a company, were our average length of stay is five years. Within reason were not following these things quarter to quarter. We certainly know whats going on. The fact is ge has been a good performer since the since the announcement last year that theyre getting out of the credit business. I think ge has got the best set of Industrial Assets on the planet. Most of their revenue today, i mean, 85 , 90 of their revenue today is service revenue. If you look at the business, peak to trough through the great recession, and if you look at the businesses that are in there today, not the businesses that were in and out, if you pull those all aside, peak to trough, earnings were down 5 . You tell me you find other Industrial Companies that were down only 5 to the great recession. These guys have taken margins from 14 to 16 over the next couple of years. Its a huge opportunity for them. They said theyre going to stick to their last. Theyre going to make accusations that are both ones. Theyve got great businessed that i have said. I think its a good company. If this i dont know what this quarter is going to be. I have no inside information. You know, it is what its going to be. If theres a string of bad quarters, then we will hold their feet to the fire, but if theres if the quarter is off of it, so what. Were in this thing for a long time. Okay. Lets talk pepsi. Yep. You were an activist in pepsi. No, i was a highly engaged share