tv Fast Money Halftime Report CNBC December 6, 2018 12:00pm-1:01pm EST
remarks tonight at a housing conference, you can see we're off the session slow lows, which were down 700 points citi down 5.5% we'll get some people's attention today. let's get over to headquarters and the judge. >> we begin with breaking news, stocks falling sharply again on trade tensions with china and growing fears of a slowing u.s. economy. the s&p now on track for its worst quarter in seven years bond yields also dropping. the 10-year note yield hitting its lowest level in months we're going to discuss all of that with our team this hour. joe terranova, steve weiss and jon and pete najarian are here and we want to welcome in legendary investor leon cooperman who joinses us by phone. nice to talk to you. >> i would rather talk to you on
a different kind of day, but i'm here. >> we would as well what do you make of it >> i think you, your next guest ought to be somebody from the s.e.c., to explain why they have sat back, calmly quietly, without saying anything, and allowing these algorithmic-trend-following models to wreak havoc with what up to now has been the best capital market in the world, okay they don't seem to say anything. you know, in the mid 1930s they instituted the uptick rule to deal with the abuses of '29. it worked for 70-odd years they took it out in 2008 and created a wild, wild west environment in the stock market and the volatility is destroying confidence now what i know from 50-odd years of investing, bear markets don't materialize out of immaculate conception. they come about from certain fundamental reasons that the
market is seeing the number one cause of bear markets is the stock market is smelling an oncoming recession i won't cite all the economic data, there's no signs of recession. the adp, flash employment number the economy is growing number two, inflation. inflation is moderating, inflation is now below the fed's target the third it cause a bear market is a hostile fed if anything, the fed has been too easy and the level of interest rates are totally fall competitive to the stock market in my opinion. any kind of historical context the 10-year bond is now, i was out this morning, i think it was 2.8-something% >> and it may be lower at this moment it's 2.85. >> let me give you a statistic in the last 50, 60 years, the s&p mobile averaged around 15. we're using $172 in s&p
earnings, the market multiple is about 15 times in that 50-year, 60-year period when the multiple in the market was 15, the 10-year government averaged less than half of that and the average fed funds rate was 5%, currently a little bit over 2% okay so you know, relative to interest rates, the stock market is a bargain earnings are growing, maybe 6% to 8% next year. the pes are reasonable as you know, i often quote the great line of john templeton, bull markets are born of pessimism. where's the euphoria everybody is looking over their shoulder, worried about things so you know, i have to say that i would buy my favorite stocks here i know what the issues are we have extended profit margins. which tend to be mean reverting. no sign that the markets are heading down the country is possibly moving to the left which is a longer-term concern that i have.
the young people today don't embrace capitalism and that's a problem third we have a debt problem there's to question about that on when that hits and fourth we have an unconventional white house that destabilizes people periodically >> well what -- what if the economy, lee is slowing more dramatically than people think and for a variety of reasons >> ask me that question when the market is up 50 s&p points, now when it's done 50. all i know is earnings are coming in better than expected earnings estimates are going up. two or three companies reported this morning, i'm a little out of touch but my team sent me an email better than expected guidance was increased, effort . cetera in 1987 during the portfolio insurance, and i guess i should make the point, i lived through these periods in the past. if we had portfolio insurance, okay the market, one day dropped 22%, everybody yelled recession there was no effect on the economy
people are less involved in the stock market today than they were involved back in 1987 and the market is now down 10% from the high. it's just -- a correction. for the market there's no sign of a trend change but if you want to hypothesize we're going into a recession, sure we'll all be wrong, we won't earn $172 in s&p earnings, we'll earn 25% less, there's no signs of that you're just responding to a market. in january, your team was nervous that the market was going to the moon so it's, these trend-followers, basically they buying up market they sell a down market. they exaggerate the moves. and that's my position now i could be dead wrong. but my position is based upon no recession, inflation not a problem. the fed is far from hostile. okay bonds are not competitive with stocks earnings are growing and employment is growing. okay >> what do you make of the move
in yields? why is it happening the way it is >> i would agree with that, the 10-year at 2.85. >> i think it's a complex situation. if i put on my screen, bonds around the world, in germany, the 10-year rate is 38 basis points okay and italy, it's 3%, with all their problems and in spain is 1.5% okay in sweden, it's .4%. in japan, it's seven basis points can you imagine lending money in japan for ten years at seven basis points while lending money to germany for ten years at 29 basis points the low interest rates aroun the world are affecting our interest rates. >> you think the yields around the world are distorting our yields here rather than the bond market trying to sniff out a more dramatic economic slowdown. >> correct, correct. i could be dead wrong, but that's my view. >> what about the issue with
china? i mean that's front and center >> well there's no question that people are nervous at the end of the day, you know we live in a global economy. if china wants to sell their goods to us, that tough accept our monetary liability, a closed circular system. it's not in anyone's interest to push us into recession, create social unrest. paul of the whole move to the left is the unequal sharing of economic prosperity. the fed wants economic growth. they want more employment. so you got to assume that monetary policy and fiscal policy, and governmental social policy is desired to promote economic growth. you could come up with any scenario you want. i would say not to be a wise guy, it's not my style, as you know at the beginning of the year, i told you the market was in a zone of fair value. i think it's down 1% for the year a 10% correction when you guys had a special session tonight to talk about the market weakness that will
mark the bottom. >> did somebody pass you our programming notes? from your lips to god's ears. >> let me ask you this, you say a bear market doesn't appear out of thin air. can you make the case that we've had a rolling bear market since the beginning of the year? >> we've had a significant correction absolutely i would say that frankly, i would be the first to admit. if you were strictly a technician and looked at market prices, you have to conclude we're in a bear market i'm not a technician, i'm a fundamental. in my 50 years, i look at the economy, i look at inflation, i look at monetary policy. i look at valuation. i look at bonds versus stocks. and everything comes up you know, saying it's a great buying opportunity. and that's as simple as that i have a certain discipline. could i be wrong absolutely my mistakes to be paraded up fifth avenue five-abreast i think what's going on has a
lot to do with the mechanics of the market the technology is overpowered, the market's ability to deal with it in 1987, it was portfolio insurance, the rage of the day. you don't hear about that any more in 2000, everyone wanted to be in high-technology stocks. cisco is 100 times earnings, everybody is going crazy over google they should be using their balance sheet and their cash to retire their equity. you don't have the kind of excesses you had back then and you know we had nifty 50 i remember distinctly in 1972, i won't mention names, one of the star salesmen at goldman sachs, i was running research at the time told me we could close down thegoldman sachs research department all you got to cover is 50 companies, they're the world okay and in that 50 companies, avon, xerox, ibm, merck. and the philosophy of the day
was we don't care what we pay for the business, as long as they're a world-class growing company. and then 73, '4 hit, the opec embargo, inflation, recession and a bunch of those companies fell out of bed basically and it took in many cases more than a decade for them to recover in price. i lived through portfolio insurance, i lived through the high-tech boom the end of the day, 2.8 on the 10-year in a growing economy and a 15 multiple in the market, as i would want to be buying stocks i would change my mind, if i thought what was going on in the economy, in the market would dip us into recession. i pointed out, 1987, you had a 22% drop in a day. okay and everyone who was yelling recession. and you had no recession the economy continued to grow. and similarly now, you now we're down 10% from the high we're doing things more rapidly than i would have imagined basically it's a 10% correction, long overdue, long overdue
and it's painful but i'm more concerned scaring the hell out of the public i don't understand these models, maybe i'm old fashioned. somebody once said if you don't understand bitcoin, it means you're old i'm old. i know it's worked for me. and i say, that common sense suggests to me that the regulators have to focus attention on what this new technology is doing to the market the volatility is creating and you know, you saw it in january when everyone marked up their expectations for the year. you saw it in february when everybody marked down their expectations for the year. it's kind of crazy you got to keep your head around you, about you when everybody is losing theirs, i say that everything that's work ford me for 50 years of investing would suggest that we're near a low. >> lee, a couple of questions. it's steve first of all, i agree with you on algos, they're about 50% of market activity on a lot of days i also see no reason why the
uptick rule was ever removed from the market. and should be put back in the market that aside, there was some euphoria in the market when you take a look at some of the stocks that -- >> broad scale >> i agree >> look the public is looking over their shoulder. they remember 2008 they don't want to get caught again and they're very nervous >> but let me get to the point the point is that we had a big wall of worry that we climb. that got to the top of the market, everything was going in investors' way, rates were going down employment was going down. monetary policy, the world over -- synchronized global economic expansion now we got to the top of the wall, it's going the other way so why shouldn't the market correct? and why is 15 the right number when we don't know what, in 15,
maybe the right number, that's an average which means it can go lower to get back to the average. so, yes, you've got a fed that now is maybe going to pause a little bit but adding to that, to everything going against you, you've got an unstable administration, anybody would agree on that. that has not been honest coming out of the china issues, the china issues are real. you've got germany that showed some contraction, last economic numbers. japan -- >> germany is all tied to autos and autos and recovery. >> exactly but whatever it is -- >> steve you're making it sound like a stock market is very homogeno homogenous what's homogenous in the bond market, all aaa bonds trade within an eighth of a quarter. in terms of yield. the stock market is heterogenous, the average stock is 15 times earnings, but there's stocks at 20 times earnings and stocks at 8 times earnings amc network, 7 times earnings, citibank, 7.5 times earnings,
first data generating $1.5 billion a year, trading 11 times earnings less than 11 times earnings. alphabet is a little over 20 times earnings with a fortress balance sheet growing to 20% you're a smart man, you're losing money today, but you're a smart man. i'm not a moment-to-moment kind of guy, but i think the f.a.n.g. stocks are trading better than the market today, which may be a sign that we're near the end of the correction but you know, at the beginning of the year, i told scott that i thought the market was in a zone of fair valuation. the market went up a big amount in january, maybe made me look like i was too conservative and got clipped in february. i think we got to step back and you have to be disciplined in you're a technician, you've been trading the market well because a technician has every reason to be bearish the s&p 50040% of stocks down by 20%.
most money managers having a difficult year i step back and say i'm being repetitive, what do you think caused the big decline in the market is the economy heading into recession? is inflation accelerating? is the fed becoming hostile? it's bonds being more attractively priced than stocks. bonds that are more attractively priced than stocks, a lot of damage done in the high-yield market you could buy some high-yield bonds that we think are decent, 11%, 12% yields that are very competitive with the stock market one think i would say, after the 10-year government belongs at 2.8% and the fed funds rate belongs at over 2% and the fed is getting close to being done do you not make 10% to 15% a year in the stock market there's a linkage between returns you earn on fixed income and returns you earn on fixed equity you make 6 or 7% >> i say before the year is over, i'm guess, i could be dead wrong, the market will be higher than it is today at the on
december 31. i'm not a huge bull. i think the market's price is 6% to 7% returns. i don't like our fiscal policy i think we should not have cut taxes to wealthy people. we're developing a debt problem in this country. i just don't know when it hits and my favorite story, two absolutely distinguished citizens, were pete peterson and joe faler, both deceased i remember in 1972 out of their own pocket they paid for a series of ads alerting congress and the public to the evils of the budget deficit. 40-odd years ago, 1972, 46 years later, what do we have we have deficit worse than it was then and the lowest interest rates in the history of the world. who knows when the problem is going to hit all i know is that 2.8% 10-year government and 2% fed funds and a 15 multiple in the market with, earnings growing i'm not a huge fan of stock repurchase if i'm a typical corporation and my stock is anywhere from 12,
13, 14 times earnings and coy borrow money at 6% pretax you're going to see a tremendous increase in stock repurchase. >> unless you think that companies have borrowed so much money over the last ten years because rates have been so low and they've bout back all their stock that now they're using money that they have from the tax cuts to pay off debt to pay down debt rather than to buy back shares or to capital expenditures >> that's a very micro question. you got to look at stock by stock. because as i said to steve before, the s&p might be 15 times earnings, i'm finding a lot of things at single-digit multiples in a world of single-digit interest rates. and everything i know and i've learned, basically, would suggest that the market is overreacting again we're going crazy here, the market is off 10% from its high the market is, quintupled since the bottom at 2008 you know let's, let's just not lose sight of things, people looking for correction for three
or four years. >> understood. understood >> joe terranova has a question for you. >> i want to ask you about what is troubling the market today. the wean rear down so significantly. you mentioned it before. it is an unconventional administration when we were told to take it seriously, but not literally what about the potential that right now the market is pricing in this unconventional administration, the ability to knock down oil prices $25 in 30 days by making a phone call to the saudis a trade imbalance that we're fighting with tariffs, you wake up this morning and you have more of a national security question, when you're looking at the theft of technological intelligence what about the fact that possibly we are pricing in this unconventional presidency that you talked about >> well i think it's a factor that is weighing on people but at the end of the day, the, the president's conduct and deportment is more disturbing than his policies.
with the exception of what's going on with tariffs. we haven't seen the end of it. you know he professes optimism that 90 days they'll correct the problem. no one knows the answer. but basically, the president's policies by and large have been market-friendly. what's not friendly is his deportment and i keep saying you know i'm going to be the one to held him how to deport himself because he's the guy that defeated 16 opponents and won the election would i like to see him conduct himself differently? yes. am i a believer in the law of comparative advantage? yes. but you know, it is what it is >> well you've also said, lee, look, that you know, there are a lot of questions and concerns about the deficit. that is one -- >> that's a longer-term -- absolutely, unequivocally if you want to tell me the market today and yesterday meaning, you know friday, and two days ago and today are reflecting the market is waking up to a fiscal
problem, i don't know. i mean i would say that's probably you're reaching, you're reefing to try to explain the weakness in the market and i'm saying the weakness in the market in large part stems from the fact that it's an old cycle. people looking over their shoulders, worrying when it's go to end there's no signs that it's ending, they think it's like rejuvenating, inflation is moderating, you talk about the price of oil by and large, 6%, 7% of the index is energy. the rest is not energy the decline in the price of oil is a tax cut for the rest of the world. it's a positive. it's not negative, okay? >> well below 50, below 50 it's going to be a negative and in particular for the high-yield market we saw that with -- >> what percent of the energy market is high i don't know the answer. >> 15% of the high-yield market is related -- >> so you have a problem -- you know, you have a problem in there. i have been dead wrong i own neighbors, neighbors is less than two times cash flow. >> well the problem, the problem, lee, would be in the high yields. market for energy.
similar to what we saw in 2016 it would be a drag if it ceases. >> kerry firestone is here lee and has a question. >> i was pleased to hear that you have some positive things to say about the f.a.n.g. stocks being relatively positive today. and you look at what the nasdaq has done, it was down almost 2.4% and now it's down less than 1% which is the sign that you know, the sellers are out and maybe there's some buyers here what i'd like to hear about from you is the following on this economy, we live in a consumer world two-thirds or more of the gdp comes from consumers and think about what we know we know that there are more people working than ever before. wages have gone up, hourly wages, 3.1%. if interest rates are lower it helps with mortgages, not hurt and the lower price of gasoline is a positive. for consumers. they got a tax cut maybe not as much as corporations or the very rich got the biggest tax cut.
but still the tax cut is a positive so with costco saying they had a 12% positive comp it's really hard to see how things are collapsing and we're hitting a recession next year when every piece of evidence is that the consumer is reasonably strong and healthy. >> lee, that's your perspective. >> that's my point >> exactly right >> consumer sentiment is up basically and i come back to my buddy scott wopner, i say get somebody from the s.e.c. to explain why they eliminated the uptick rule and what do they think about these quantitative trading systems that's created a tremendous amount of volatility in the market? why have they sat back and allowed this to go on? maybe they have a good explanation? i'm 75 years old, i'm willing to learn. >> lee, you keep saying that you know, you've got this big tax cut, you know for the wealthy.
there is the issue of part of that tax plan. of the salt deduction being taken away >> it's a blue state versus the red state. >> we're talking about big populations. california, new york, new jersey, connecticut, illinois. do you think -- people say that's in part why housing has rolled over in the manner that it has >> guess what, what do you think the multiples are? i don't own the stock. lenar. very smart businessmen, knowing the business cold. lenar is seven times earnings, the market has not been asleep, okay and again i'm not making a case for all stocks, but i -- relative to a 2.8%, 10-year government growing economy, growing profits, growing employment, i think the bubble is fixed income, not equities we're all going crazy, with the market is down 10% we're going crazy, because of
the magnitude of the moves and i say the magnitude of the moves are related to these trend-following models not related to the economy i can't, you know, i can't keep saying the same thing. there are long-term issues that i worry about. but i don't know that the long-term issues are hitting in 2018 or 2019 i have to say the conditions that normally lead to a big decline are not present. and 10% correction is healthy, it could be 12%, 14% basically not a bear market. and i, i, i ascribe to what's going on to extended margins, people worrying about mean reversion and profit margins, more earnings exceeding expectations than not okay i think the country is moving to the left young people, one of my heroes, you know, i just love him is ken langon he wrote i love capitalism because he saw all the young people lining up behind bernie
sanders, abandoning capitalism and he looked at bernie as the antichrist and i think it's a long-term issue. you know, the republicans lost control of the house and you know, who knows what's going to happen in the senate and the executive branch we have a debt problem in the country. debt has been growing too rapidly. it's public-sector debt, not private sector debt. we have an unconventional white house. i know all the issues, we're not talking about a 17-multiple, 18-multiple market we're talking about a 15-multiple market. >> i completely agree with you on the algos, i brought it up on monday and last night on "fast money. along with the uptick rule, from 1938 to 2007 as a market stabilizer unfortunately they have yanked that away. there are a lot of folks that will say hey, look, pete you never mention that to the upside. it's far more detrimental to the markets when we see it on the down side because of removing the uptick allows the
computers, maybe it's 50%, maybe it's even bigger volume than people are projecting right now. i greet with you on that in terms of some of the buys that you talk about today, you talk about the single-digit type names. >> dow, dupont amc, alphabet. >> citi is the one that's interesting to me. i happen to own it >> which one >> citibank. what is going to finally get that stock to move the beginning of the year. i was one of the guys pounding the table, i thought it was going to 100, it hasn't done that >> it's buy orders they'll materialize, i believe citibank is buying back 10% of their equity annually. >> it's yielding now 3% or about 3% you know, i go back to january when the market put on the performance in january, everybody raised their price
objective for the market then all of a sudden february hit and everybody lowered their price objective. i is think you got to have a discipline, you got to have an approach my approach is fundamental when i look at the 15 multiple versus a 2.8% government if you can convince me we're heading into a recession, i would change my whole view recessions tend to happen every four or five years they last about a year, they take gdp down about 1%, they take the s&p down 25 that's a recession that will happen that's what bear markets are about. we're not looking at that. we're not looking at that. >> even if we were going to enter a bear market, do you think as some have opined we could be in a cyclical bear market within a secular bull market and it's a short-lived phenomenon, rather than some long-lasting game-changer where the goal posts have moved
dramatically >> i think that the tv programs create a lot of craziness. where we're in correction territory. bear market is not just a price decline. it's how long the decline go on for. bear markets last about a year they're confirmed by economic contractions okay they're confirmed by the breadth of the market. we don't have that all we have is a violent correction of a short-term nature okay it's going on for a couple of months it's not like a typical bear market a typical bear market lasts about a year and the market is reasonably efficient let's go back to 200 -- 2008 bear market. the average bear market was a decline of 25% that market was down 54% guess what, the average economic contraction in gdp is 1% peak to trough that one in '08 was over 2%. you had a twice as severe bear markets discounting twice as severe average recession which brought into play mr. bernanke who figured the best way to get
us out of the recession was creating wealth and the best way to create wealth was to elevate the stock market there's a certain rhythm to things i would say, being repetitive, i apologize, i don't know any other way, if you're convincing me we're heading into a recession, the short-term is, is the guys that want to have something to say at at all times. they'll say well the market is telling you something. what did it tell new 1987 when it dropped 22% in a day? it turned out telling you nothing other than portfolio insurance was a bogus concept, okay what did you learn in 2000 you learned that you don't pay 100 times earnings for technology companies okay and what did you learn -- you know in the nifty 50 there's no sure things, everything is exposed to the economy, exposed to competition. you think now back then that ibm and xerox and avon was 60, 70, 80 times earnings? these are companies that are now
aren't even being viewed as real so anyway, you got to keep your head about yourself. don't go nuts, i expect the market to end this year. this is a call that i'm not good at my hunch is we're higher on december 31 than we are now. arthur burns by once approached by one of his ph.d. students, who said now that i'm graduating what advice do you have for me he said forecast well, and forecast often if you give them a price, don't give them a date if you give them a date, don't give them a price. i think this is technical stuff and you should use all the influence you have to get somebody at the regulator level to come in and explain why they eliminated the uptick rule why they have not reinstituted what do they think they should do about these trends in the following models is it a cost to the market there's a cost to capital. you know by this volatility.
which i don't think is fundamentally based. i believe two or three companies reported today they indicated business is very strong i can't give you the guy's name. but i'm a member of a society of self-made men and women that have charitable instinct i went to a board meeting a little over a month ago. the head of the group is a guy that runs a major, major company. he told me during the cocktail hour, this is a man i would say is probably between 50 and 60, all of his years in business he's never seen the economy as strong as it is now. >> we've heard it, lee, we've heard it from other ceos as well it reminds me of the target ceo, brian cornell saying the consumer environment, he said this a few months ago, was the best that he has ever seen it is dramatic and it's somewhat jarring that the narrative has changed in the manor in which it has in the length of time that it has i take your point. i want to thank you so much for calling in i can't think of a better day, a better moment considering the volatility i can think of a better day, i'm
losing my tail today my view is my view we'll find out soon enough >> the one thing about the market, you find out whether you're right or wrong in in not too distant future. >> lee, we'll talk to you again soon. >> happy holiday season, everybody. >> leon cooperman. what's happening with the markets, a down day, decidedly so the dow is down 470, it is off the lows >> by 300 points. >> if you're just turning in >> we've cut 300 points off the worst level of the day it's been a couple of volatile days, where the market close, sandwiched in the middle there as we honored the life and the legacy of the former president, george h.w. bush, the markets were closed on yesterday remember you had the huge decline going into that. you opened and started selling off really right from the get-go got down to 700 or more points now we've cut a little bit off that the markets are nervous we're a whole host of issues
lee cooperman just joining us, i can't think of another better person to hear from right now. given all of the tensions with china and trade. the economy and everything else. our becky quick is live at the business round table ceo innovation summit in washington with the ceo of boeing dennis mulenberg becky, what a great time to speak to this gentleman. >> we are here with dennis mulenberg, the cheryl and ceo of boeing i know you didn't hear what scott was saying, but he's been running through the markets. it looks like the dow is down by 440 points, we were off 700 points or more and boeing was one of the big laggards, down 6%, so many concerns about china and trade. china is very important to you what's your take on what's happening with the trade talks with china right now >> well becky, i think you see some local volatility in the market because of trade uncertainty. >> we're hopeful coming out of the g20 summit that we're on the
thought coming out of the g20, that things were going well. the president tweeted out some things that sounded very optimistic the market has been a little less convinced as they think through how complicated these trade talks are, how many moving pieces there are and the idea that you could make come to some resolution in 90 days seems a little hard to get your head around what have you heard what are you watching? what are things that signal to you whether things are going well or not? >> i'm encouraged by the dialogue we heard. i think both president trump and president xi are motivated to find a solution. i think they've had a productive conversation i've had the opportunity over the last couple of days to talk with secretary mnuchin and larry kudlow and i think they've indicated a positive outcome is ahead of us. there's hard work to do on topics like intellectual property and technology transfer i think both countries are motivated to find a solution from an aerospace standpoint, both countries are motivated to have a healthy aerospace ecosystem. china needs the capability the
aerospace lift to help grow their economy b. 150 million new passengers in china every year need the harps here in the u.s. that's summertime manufacturing jobs, both countries are motivated to find a solution here that's lot of hard work to go. but i think the tone coming out of the g20 summit is positive. and i think both sides are highly motivated to find a solution we're certainly very engaged with governments in both countries, we going to do what we can to assist and help reach a positive conclusion. >> is this something if things if we don't reach some sort of an ammicable solution, is this something that's going to directly affect you? have you heard from the chinese leadership that they would not buy as many planes they would not take deliveries that there be would be tariffs slapped on things coming in there and that would weaken the demand >> well certainly something we're keeping a close eye on i think it's important we maintain the long view this hearo space industry is a decades-long view. we have a backlog of about 5800
commercial airplanes tharks the equivalent of seven years of production, while it's important for us to resolve the tactical trade matters, we have to keep the long-term view on our production planning. and the fact that we have these healthy back logs that they're globally diverse allows us to continue to invest and ramp up so we do need to find these trade solutions. at the same time we need to maintain the long-term view, continue to invest in innovation >> the planes will still be manufactured in the united states but i guess seats and different interiors will be put together in china is that still on track to open later this month >> we're opening a new 737 finishing center here by the end of the year. it's an important capability in china. we'll be flying airplanes off of our production line here in the u.s. and flying them to china and doing things like seat installation and paint and other unique capabilities for chinese customers to deliver those airplanes. we're growing capacity in china,
this is also part of what's enabling us to ramp up the 737 production line. here in the u.s. we've ramped up it to 352 a month. next year we're going to 57 a month. producing a total of 800 commercial airplanes this year, a new record before the end of the decade we'll be producing more than 900 airplanes a year can you see the growth that's being fuelled. largely by our growth in china and there's space here for win-win solutions. >> when you see this kind of market volatility on the short-term, how do you look at it does it affect any of the planning you're doing? does it affect ceo confidence from the airlines that you deal with >> not really. we pay close attention to it and market volatility again i think reflects uncertainty especially around trade at the moment this long-term business mindset is important to us we invest for the future the benefits that we've recently received from tax reform here in the u.s. are allowing us to invest in innovation
we're investing more in r&d and capital today than we ever have. we're growing for the future this aerospace market is going to continue to grow. passenger traffic is growing 6% to 7% a year, that's a long-term sustained trend that will allow us to fuel the future we pay attention to this local volatility but the long-term planning, l g long-term innovation makes this business work. >> i want to talk to you about lion air there was an article in the wall street that laid out how things have gone through it brought thup idea that boeing's long tradition of favoring, putting pilots in control over automation, could be at risk because of what happened in the latest go-round. the accusation that they've made, is that you weren't clear enough from the pilots, we've heard from the head of a pilot's union though loves the plane, says he feels very safe in it but said you didn't give them all the information he thinks they needed the. what do you say?
>> it's important that we express our sympathies and condolences to the families affected by this incident we know our planes are safe but at the same time any time something like this happens. it has our empathy now we're in constant communication with our customers, we're very confident that we're providing the information that they need we've been out engaging with all oufr customers again on the back side of this incident. we know that the incident here, the situation is handled by existing procedures in the airplanes. we've reinforced that with the bulletin that we've put out. which was further reinforced by the faa, directing pilots and airlines to these existing procedures but we're taking a look at that to make sure all of the appropriate train something in place and the communications with our customers are there it's very, very important to us. but i will say bottom line here, very important, is that the 737 max is safe. we're very confident in that we have not changed our design philosophy, these are airplanes that handled well in the control of the pilots, they're designed
the same way our previous 737's are, take advantage of those systems and the proof of that is you look around the world today, all of our customers are flying all of the maxes daily, around the world. the airplane is safe and we're very confident in that >> the "journal" suggests there wasn't more prevalence placed on this because you are very interested in making sure that train something kept to a minimum so that it doesn't put more burden on the airlines. is that a fair assessment? >> it's important as we transition from the 737, next gen, the mg to the max part of what we wanted to accomplish was seamless training and introduction for our customers, we purposely designed the airplane to behave in the same way even though it's a different airplane design, the control laws, that fly the airplanes are designed to make the airplane behave the same way in the hands of the pilot >> the accusation in the newspaper article is that it didn't it was a little more of a downward pull and not as easy to manipulate by pulling back up on the rudder.
>> that's why it's important to use the procedure that's actually been approved to that kind of situation. >> which is to shut it off >> a run-away stabilizer procedure. the approach for handling that is to hit the cut-off switches, the same exact procedure in the ng as it is in the max that's what's called out in the existing procedure which is why we've pointed bau back to that with the bulletin we've issued. >> the co-founder of lion air said they're considering canceling some of the future shipments that were due. they're your third largest customer when it comes to the 737 max. is that a realistic threat is that a problem if they do >> well first of all, lion air is a very respected customer of ours and we care about our customers. this is a tough situation and understandable that there's some challenges around that but this is a highly respected customer, we're in constant communication with lion air. we're going to work our way through this all of these contracts are long-term arrangements, these
are not things that can be exclusively canceled by either side you have to put it in the context of the long-term backlog. the 737 production line is a very healthy production line we have a lot of reasons to ramp up and the demand around the airplane around the world is very high. even though we're ramping to 52, 57 a month we're oversold against that profile. >> dennis, i want to thank you for your time today. dennis mulenberg, the chairman and ceo of boeing. we'll be back at the brt all day and joining us at 1:30, jamie dimon, the chairman and ceo of jp morgan. >> becky, thank you. becky quick down in washington wool talk about boeing in a minute i want to note a couple things about the market as you see we're off of the lowest levels all the way across the board in fact amazon and alphabet have now gone positive. you heard lee cooperman talking about the virtues of the of alphabet and the valuation which smaking that stock at least to him attractive, continues to
hold it. it's been one of his largest positions for a long time. i want to get a thought from you, doc as we go back and wrap this cooperman thing up. do you as he does, that we're making mountains, if you will, out of a bunch of molehills that are out there and getting too excited in a negative way about the economy, about the dispute with china and about everything else that seems to be wreaking havoc on the market? >> i think we're getting too excited about the market move. because the numbers are so large right here, judge. we all know, 200-day moving average breaking inverted yield curve as well as the china issues and the fact that it took four days for us to actually learn, that that woman was held by canadian authorities by huawei that is a big concern to me. because some people may have had that information it's not insider trading, but it's pretty damn close since you have news that was not widely disseminated until wednesday
and this happened on saturday. clearly people were able to trade ahead of that. so quickly, judge, as far as the vix that we talked about, big pop in the premarket today it told you everything you needed to know. because the vix popped to about 25 the market went down another 350 points and the vix went down we actually saw the vix invert in terms of normal activity in the vix. is you see calls trading 2-1 versus puts. today is flipped the other way, nerds who whoever had those big positions on took them off and was betting on exactly the sort of v-shaped rally that lee was talking about as he was on the show and as we came off, 300, 400 points out of the dow. >> what about the nibble if you want to call it that that some people are seemingly doing, you just saw the dow heat map. earlier today. every dow stock was negative now you've got three or four that have gone positive we've mentioned alphabet and amazon steve going positive as well
what should we make of that? >> can you tell me whether you agree or disagree whole heartedly with what lee said. >> i don't disagree with what lee said, if i gave the impression i was referencing the fact that he was talking about it being down. >> too much being made of all the negativity. >> i think the cfo arrest in canada is a nonissue and here's why i say that while traders didn't know about it the chinese obviously knew about it. on saturday. yet, yesterday they came out with statements and today the, the minister there came out with a statement saying we are moving ahead with what we agreed to at the dinner on saturday to me that's a nonissue whatsoever the market seizing on issues and nonissues. so yes i think there's values there. i don't think that citi is a compelling buy i would rather buy other stuff and i have to me visa is a compelling buy,
i don't know what gets citi going. i'm glad i sold it at 65 >> it's an interesting debate between the two of you and that's steve you and carrie. in that you sold apple carrie, you added to your apple. taking advantage of some of the, you know what's been an ongoing decline that we've seen. carrie, why was now the time to add to it? >> the stock is down 30% from its peak, a ten times multiple stock. i understand that a lot of the concerns about apple are the concerns that the market has about the trade and tariffses and if you believe that this will be resolved over the next few months, or at least a certain percent of it, which we do, then apple is a cheap stock, it's the same with amazon. we buy amazon two weeks ago, same thing, it came down, we bought it, it went down a little further and now it's up. >>. >> here's what i would say --
>> apt has gone through the life cycle of a typical consumer products company yet again we get more news that near not launching their 5g phone until 2020 at the earliest where samsung is launching next, next year, first half of 2019. continuing to be behind the 8-ball in technology and forgetting about that. the phones are too expensive in this cycle. >> what kind of phone do you have >> i can afford it >> with middle income, with middle income families in china making just a few thousand dollars a year, they're not spending $1,000 on a phone. >> you've sold city, you've sold apple. you've sold delta. buying it anything on the dip. at the top of the show i've added to visa
i do see some things that i want to own >> buyer or sell centre. >> i'm not selling here, looking to buy, i would buy marriott, blackstone, two names i believe in i said to pete before the show, i was worried about the composition of today's market thanks to lee coming on with kind of a cool, collective observations about the marketplace. we've got a nice rally off of what mr. cooperman presented to us but i was concerned about today. i disagree with you, i think the issue as it relates to the cfo being arrested is a much larger issue. it has nothing to do with tariffs and the trade imbalances, it's a national security issue >> i was talking in terms of that it shouldn't have impacted the market today. >> but that national security focus on espionage is not going to change and i think that's going to extend kind of the -- >> if it's yet another reminder, steve that this tension that exists between the u.s. and china over trade has yet another
reason to last maybe a little bit longer than people are thinking, if not get worse >> look, i also bought nokia and i added to it because going out opens the market for nokia and ericson, if you're smart, you can find things there, i agree with that. i applaud what the administration is doing with it, i just don't applaud their dialogue where now there's mistrust and so they snatch in terms of how i'm feeling, they snatch defeat from the jaws of victory. that's one of the endemic problems on the market >> the legit concerns. >> i think we combed some of the market, a lot of the different reasons in why the market has sold off as strongly as it has how about the boeing ceo talked about the dialogue, seemed good, he came positive as well, right? from the g-20, he said the tone seemed like things were moving in the right direction >> did he say anything negative?
>> he wasn't at the dinner >> but he's -- his perspective was, he's moving in the right direction. >> buy billions of dollars in goods. >> i can't even understand what's being said, because everyone is talking over each other. >> lee talked about some of the opportunities he's taken, carrie has as well. i added to my apple position, i added tjx to the position as well i see some of the names that get sold off for what i think are not the right reasons, cbs is another one of those names that has potential for some great upside have you to keep an eye on the daily news and the actual elements of how the markets are moving right now, have to be a factor and they are triggered, steve, like it or not, they are triggered by certain words and obviously overnight. but overnight, that shows you how important it was, what we did here overnight about the cfo. and that's why we saw this major selloff. now it's going to be interesting to see, how does the volatility
react now, john talked about it earlier, we had huge vxx buying today. that's a huge volatility that's a 25 -- as the market -- it pulled back >> as the market doubled its losses -- again, we won't beat that one up. i added to facebook, i added to apple here, bought apple 171.50ish. it's time i added to facebook in months and i bought it -- >> that's the whole market you're talking about >> you can buy individual stocks and get them at a price where it's their dip >> that atlanta worked either. >> i think the markets are trading well in the last couple days there's a bubble in fixed income, i wonder if that buying
the dip mentality is moving away, and maybe the real bubble is passive investing that's incredibly important. if you're going to continue to have this volatility, this strategy of passive investing that's continue to grow and grow in terms of market share over the last five years, if that mentality is not going to work, the investment strategy is not going to work. what is it going to mean for the market -- >> it's working now. averages are down 10%. i can show you numbers of funds, not only hedge funds that are down much worse than what black rocks funds are or vanguards >> all that zwsh. >> it is -- >> all that means is it needs to be a crowding out of people that don't belong in the active management space and that's a good thing. there are a lot of people performing well. >> i agree with that
>> as we're sitting here, i saw there are names, they get to a point, you know what, i started a position back up at home depot, i was in lowe's, i'm with you, steve there's some pain there, i like the levels where hd was today. i think it's over 175 in the next couple days, maybe. >> we could be 26.65 today 25.50 at the end of the week >> you raised your hand. >> i like that wash out feel this morning, i love the way the volatility products, a lot of them -- >> when you're talking -- i'm agreeing with you, if you want to call it a wash out, you're down 1500 dow points >> when you get that kind of thing, that's when you're seeing the whites of their eyes
that's when you wait, you pull the trigger, you wait until they're as close as possible, then you hit them. >> down 70% with 15 multiple on the market, then you're never going to buy >> unless you think it's -- >> it might go lower >> you're also -- since we are option writers as well, judge. we buy the stocks when they're really depressed as i thought both facebook and apple, i mentioned buying them today, and i immediately piled options into selling calls against it it gives you that insulation that you get -- >> the biggest perspective that you need is what your time horizon is, i haven't sold alphabet i've added slightly to it, i have a long term timerize on that useful consumer product company. there are other places i'd
rather put my money, lowe's being one, visa being one. >> all the positive reasons you all tried to cite and lead, did as well, is enough being paid to what appears to be fairly significant weakness in europe and in parts of asia, and thinking that we're just going to skate by all of that? >> the weak unlocked pointing out on twitter, moves in deutche bank being sick in his words. >> which has never been well since the crash of '08 >> you have to remember in points at time, when the market was selling off, we'd throw up deutche bank and some of these other european banks >> did you merkel, does the german economy, can they afford to let that one fail no can they afford to let the stock go away, yes do they have to nationalize that thing at some point? perhaps. i don't think it's that bad at deutsche right now, it hasn't been good for a very long time
>> i think europe is the weak link globally. the ecb is ending its corporate bond purchase bond you think about financial institutions, where is the technology that's deficient. and i think what's ailing, what's perplexing about the s&p composition is the financials and the weakness in financials are they collectively long financials we're not sure financials, that's what's most perplexing about it, this is a direct impact from what we're seeing in europe >> i don't know why there's a continued belief. >> i have almost no financials, by the way >> it's interesting that it's a sector that we have talked a lot about, and financials. it's really been -- >> why are they going to start working now? >> they're not necessarily going to start working out you ask about europe, and i would say that's what drives europe, financials and auto. auto is a small sector of the
gdp. it just is it's not that material financials are bigger, the market can go up, can go up as lou was talking about. 5 to 7% without financials our economy does not need financials to be strong. >> rather than go there, let's -- bear with me. jobs report tomorrow, haven't talked about it at all probability seems to be coming down in the market as to whether december is a full go. we're going to get perspective on wages and a jobs market which has been on fire. >> what do you need to see what are you looking out for >> what i want is an awful number >> you've seen the market tradedown. >> it would confirm all the fears. >> even if it suggested the fed
didn't go in december? >> you need like a goldielocks >> what if it was 140 and they revised some of the others down. would that be some of that goldielocks you're talking about? >> it could be, i don't think you see that there's always ways to explain what the knee jerk reaction would be -- look, if the markets go -- i can make the case that city and b of a are no more than they were three weeks ago. >> let's do some final trades. you mentioned a lot of what you're doing >> i'll go with home depot literally bought it 15 minutes ago. >> target.
>> charter, cable company. >> below 86 this morning, approaching 95 now >> more stocks continue to creep into the green that does it for us, thanks for watching, power starts now welcome to power lunch another major selloff, we're off the lows as they've just been discussing here is the slowing growth sparking concerns about the trade tip, between the united states and china is a tech cold war and harsh market winter brewing. oil tanking right now what about russia a way for the blessing of putin and putin's oil minister we're live the american economy, rate hikes and more
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