what a morning it's been there's a look at f.a.n.g., obviously huge play after yesterday's headlines and then today, powell headlines, the president, obviously, uber >> yeah. >> crazy news flow >> big reversal on facebook. also semis rallying big today with the stocks up 3%. >> let's get to the judge, see what the afternoon brings and the half >> i'm scott wapner. tech in tatters, tariffs on the table, a titan turns to treasuries, that hardly sounds like a great environment for stocks or is it? it's 12:00 noon, this is "the halftime report." >> announcer: big fed names weigh in on the next move as stocks stage a bounceback. financials are leading the way, up big but today, one widely followed voice in the sector says, buyer beware plus, a wave of analysts are telling investors, grab uber "the halftime report" with scott wapner begins right now. >> good to have you with us on this tuesday our investment committee at the

desk today, joe terranova, josh brown, stephanie link, jon najarian, let's begin with the markets, a turn around tuesday for stocks the question is whether it can be sustained for longer than a day or two with all that is going on joe, you got a little offensive in the last day or so and it's paying off at least for a day. >> can't i be happy for 24 hours? >> you bet >> without questioning whether it's going to be sustained we're getting the right communication. obviously t signaling from the federal eserve, whether i agre with it or not, is clearly what the bond market yesterday with the 207 ten year was screaming for. mexican officials saying there's an 80% chance there will be some form of resolution and the tariffs will never come about. i got lucky, played a little bit of offense yesterday in some of the names. really the one that's important is the smh i think that's the right trade we'll see how durable this bounce is, scott, but i think a lot of it is going to come down to friday. what's that labor report going to look like if that labor report weakens, does that embolden the argument for this

rate cut that seems now to be preeminent >> it's -- josh, you know, we put up this wall of worry yesterday and there's a lot on it but it is underscored yet again that maybe all it takes is a friendly fed and decent trade talk and then you don't have to pay any attention to a wall that's getting taller, whether it's the yields going down and this tariff talk and fed >> that is quite a graphic that's -- >> maybe none of that matters as long as the >> it's the font from "game of thrones. wall of worry. >> trade talk softens a bit. >> i didn't catch the show yesterday but i agree with all the points that you just made. it seems like we can, brick by brick, we can construct all the reasons why the market should sell off, but over the last couple of years, while we haven't made a lot of forward progress, we have been rescued, you know, from these selloffs, the slow ones and the quick ones, all of a sudden by what i guess you could call feelings, sentiment all of a sudden turns

on a dime and sometimes you're right, it's because of something that the fed said. now, the fed's remarks, by the way, what they basically said was they're not in a rush to preempt some kind of crisis. they're still talking about being in a position to react so i don't know, take that for what it's worth july is a meeting. it's a live meeting, whatever. but i think the bigger picture is this. two things number one, this still feels like an oversold bounce. the sectors that are bouncing the hardest today were the hardest hit like semis and things of that nature. >> financials. >> so xrt was destroyed up 3% today. that's the retailers, transports up 2.5%. they have been annihilated if that's where you're seeing the action right now, i think it still smells like an oversold bounce, a bounce to 2,800 on the s&p, by the way, that's the level that people are watching, but the thing i want to bring out, something remarkable happened yesterday that i think is going to capture a lot of people's attention and already has. you had a monster day of outperformance for the ive, ivw

ratio, ive is the value side of the s&p 500, ivw is the growth side it is, right now, at the lowest point that ratio since october of 2000. it's incredible how long growth has been destroying value stocks yesterday's move was remarkable. i think it took people's breath away you had this huge outperformance in value out of nowhere and people say, like, why would that all of a sudden happen what does that mean? >> give me a few negative headlines about some of the highest growth stocks in tech and you get obliterated. >> so you know me. i don't like these types of narrative driven things where, oh, here's the news and now we have this new trend based on it. but it wouldn't shock me, it wouldn't shock me, if you do see that trend continuing past one day. so we'll keep an eye on it it would be very interesting turn of events for the market this year to have value finally win one. >> all right, tiaa value >> would be nice >> investor. >> steph would love that for

that reason alone. >> would be really, really nice. may was very hard for value investors or core with a value bias, which is what i really am. i mean, what led is exactly what josh is talking about. it was growth, it was defensives and it was growth tech, right? it was software, software and services, the saas guys and f.a.n.g. and so you had some bad headlines yesterday with regards to f.a.n.g., i get it. by the way, i don't think we're going to hear for years on regulation so i think it was overdone but it might take a little bit of time to play itself out, mean revert, right, because they were such leaders but i would say -- >> it was so ugly yesterday too. my gosh. >> it was ugly and they're kroulded >> facebook was down more than 8% >> what's even uglier is the saas software guys, which is talk about crowded and they are starting to roll and that is because enterprise data points are actually starting to slow. not a disaster, but on the margin, when you have crowded trades like this, it doesn't take much, but this is a year about rotation and that's exactly what we're seeing. what we saw in may was different

than what we saw in april and now it's kind of coming back again. i mean, i hope that value is here to stay that's where i'm positioned. that's where i've been adding because some of them have gotten really hurt hard, industrials, financials, even discretionary >> that's why you're going to need growth to play ball to get the market back on its feet. >> you can't have a -- you can't have a recession because i don't want to own boeing or ge, which i really like and which i've been adding to, if we're going into a recession and i don't want to own a lot of the cyclical stocks in general i don't want materials or energy but at the same time, if we have a slow growth, a dollar pulls back a little bit, i think that sets up nicely for the cyclicals. >> i got some even suggesting you can't really have a sustainable move higher in the market without f.a.n.g can you? >> well, and you probably aren't going to see too many days as bad as yesterday for f.a.n.g in particular -- >> it's been a long, long time i can't remember one where you had -- >> i can't remember facebook stocks getting that kind of -- >> at least the majority of them

getting destroyed the way they did. >> it's both parties too >> right >> like pelosi is every bit as bellicose about the f.a.n.g. names as trump and his justice department and his ftc are starting to act. >> by the way, it's 11% of the s&p 500 waiting. it's 11%, just the f.a.n.g. names themselves >> that's why i'm saying >> exactly right >> yep >> you know, you can't afford to have -- >> when they both agree that these are the enemy and you're a portfolio manager, you're like, wait, how overweight are we? >> that's why he threw in the towel. >> i'm glad you did that it's the perfect segue stan druken miller, one of the greatest ever, speaking at the economic club of new york yesterday and says, you know what the environment, and i'm paraphrasing, the environment sucks, i'm out of here, i'm taking all these years of wisdom that i have had and i don't want to play in this sandbox because it's starting to smell in here so what does he do

when the trump tweet went out back in early may, i went from 93% invested to net flat and bought a bunch of treasuries because i don't want to play in this environment i actually own a lot of treasuries and when i bought them i wasn't sure rates were going to go up or down what i was sure was that they weren't going to go up >> can i say one thing about this for the viewer at home before they start freaking out here's the deal with druckenmiller, he's a legend and he's brilliant he's managing his own money and he's not answering to anyone if you look at what he did in '99 to 2000, he went from extremely negative on the tech to capitulating almost at the top to then reversing that before it actually crushed him he has that ability. nobody listening to my words right now or looking at this gorgeous face has that ability to do what druckenmiller does and should never pretend otherwise. one other thing. in 2012, he wanted you fully long gold, completely out of stocks if not short. like, it's not like there's a

great track record for those types of macro calls being made by anyone. >> he's not the only one who's talking about the environment being tough one to play in >> he's frustrated it's understandable. many of us are frustrated. luckily, since i am such a short-term trader, when i'm frustrated, it's usually for hours at a time, sometimes minutes, because the way the market moves i mean, even just today, from the initial up 180 to all of a sudden surging to 440, i mean, if you're on the wrong side of that, you're in a world of hurt. take a look at those fins, the financial stocks today, though you're looking at citi up almost 5% today you're looking at bank of america up 4%. you're looking at jpmorgan up 2.5%, even goldman, god forbid, is up 3% you've got a lot of these stocks just people and when you look at the flows, the block trading in these stocks, i'm not talking about options, i'm talking about stock, just big blocks, chunky buys, people just saying, it's

enough >> are they believable, though oversold bounce is these guys on the side of the desk were suggesting or is it more than that >> xlf hasn't done that bad this year i mean, the xlf has been tracking with -- now that's the c xlf. we know it's not just the banks i mentioned now. but there's a lot of flow into these names and they still believe that even in the low interest rate environment, it's going to at least track the s&p and that's what it's done. they're both up about 12%, i believe. >> and they're down about 10% from their highs, totally underperformed and they are actually attractively priced >> they've been cheap for ten years. xlf is a hamster wheel >> you can pick a few as your anchors, i think, and you marry that with some of the growth fin tech which have held up remarkably well, although they did get hit yesterday on the whole factor switch but you have to barbell they are values and they do have -- the financials have good capital and they actually now some of them have good

dividends. so, it's not exactly the value track that they used to be it's just try to time it and ta tactically make your bets. >> i want to go back to what josh has said. i agree with him that you might not be able to emulate stanley druckenmiller's actual actions in the marketplace but circumstances can dictate that you change your mind when you're looking at asset classes i think if anything about 2019 has given the investor community a lesson, it is that there are other asset classes out there. we spend the majority of our time talking about equities but i would offer in the month of may, circumstances did change that maybe made equities a little bit less desirable than they have been over the last five or six years and i'm curious what has changed in the last 24 hours that would stimulate that interest to where it was prior to may. i'm not sure we have the answer to that. so, there are still other asset classes out there that you can look at right now and pivot given circumstances that were

presented to us in early may that certainly dictate a little bit of a change in the thought process. >> you know, so you got president over in the uk, he made some positive comments, actually, made negative comments about mexico, basically, that tariffs are going to go into effect on monday you know, the chinese made some perceived positive comments about trade, maybe that's helping a little bit with things you have a number of fed speakers making the rounds today, charlie evans among them that steve liesman was speaking with earlier and i guess there's a perception that maybe they were more dovish today liesman is in chicago. steve, you there with us >> yeah. i'm here >> so, what are we to make of all of this fed speak today? i think we just lost liesman's shot we'll get that back up in a second but you had bullard yesterday, okay saying, well, maybe a rate cut is warranted you had charlie evans today saying, well, the market may be

seeing something that we're not seeing at the given time but we need to pay attention to that. and then powell himself, the chair, well, we'll act and we'll do what's necessary. >> and of course last evening, you had a cut from the reserve bank of australia. >> first time in three years >> it's very significant, scott, because outside the u.s., we are seeing economic contraction and that deflation is being exported to the united states so there has to be consideration given here on the part of policymakers about the economy, the concerns that they're seeing, and again, it goes down -- friday, the strength has been labor, what is the labor look like on friday? is that number weaker than we expected >> you can't ignore an inverted yield curve, even parts of the spectrum and that's what we've been seeing and that's what people are worried about, they're saying a recession is coming and if the fed backs off then make a recession isn't coming, the yield curve can steepen and the banks are rallying today it's no credit problems, that's

my opinion, and it's also a steeper yield curve so maybe they can make a little bit of money on their net interest income and obviously the growth environment doesn't collapse right in front of you and that's what people are being really nervous about and that's why the cyclicals are rallying, all these stocks are interrelated. >> the problem is whether the market has gotten itself completely offsides into where it thinks the fed is really going to make a move next, right? there seems to be this belief that the fed's going to come to the rescue and cut rates now, you may have gotten some accommodative comments today but you didn't get anything as close to, we're probably going to raise rates between now and the end of the year. market seems to think they are >> market seems to think the opposite, you mean cut rates. >> that's what i mean. >> the market is absolutely reading, i've said it here now for a couple weeks, that the market is screaming -- the bond market, screaming at us on the equities side that we're going to get some cuts we're going to get at least two cuts >> is the market offsides on that >> no, they're not and to

steph's point, the fed would be in trouble if they didn't listen to that. now, something might improve, scott. something might get a lot better the trade talks that you mentioned both with mexico and china, but we know there's other stuff coming with europe and the car makers and so forth. whether or not these things can get solved will be whether or not the fed does need to cut rates. if they don't, the fed will have to cut rates they'll have to listen to the inverted yield curve >> the problem, steve liesman, who's back with us thankfully, is that the fed, the last thing the fed, i would imagine, wants to do is to make a move based on what it perceives to be a temporary shock and then you have things get fixed and they're like, why did we do what we just did? >> yeah. i think that's right, scott, and i think that the talk around the table is very much the way i'm listening to the fed right now look, the market got a bit today. we had two fed officials talk,

evans and powell, both held out the possibility of rate cuts or at least a rate cut, maybe not as many or as soon as the market is forecasting but also that the fed is listening to and hearing what the market is saying, so listen to what charlie evans told me earlier this morning >> at face value, it suggests that the market sees something that i haven't yet seen in the national data. i definitely think that, you know, with inflation being a little bit on the light side, there's the capacity to adjust policy if that's necessary >> and of course powell later in the morning said he -- the fed would, quote, act as appropriate if the trade negotiations, the trade war were to change the economic outlook, so i think what's happening here, i imagine th the najarian brothers in the gym and they say, dude, you can bench 250. >> i can maybe 270, you can do

290 and all of a sudden they're bench pressing so what's happening is i think the market sends a message, the fed says, i'm listening to you, and the market says, oh, the fed's listening to us, let's go another step and then we listen to that, all of a sudden, and things are getting -- the most important thing that i heard today was what i didn't hear i did not hear powell or evans to this point push back against where the market is priced they're not saying, yo, guys, hang out, hang loose for a little bit, don't get too far ahead. they're not discouraging where the market is priced right now evans, quite the opposite, says, i hear it, i see where the market's price maybe has some information for me that i hadn't considered >> steve, do you think that the fed -- your own personal opinion -- do you think the fed has a full and complete understanding of the negative effects of the trade war and the tariffs? because one could easily say -- >> i don't >> okay. i was going to go there. >> i don't see how they -- i don't see how they possibly

could, scott i don't see how they possibly could, right it's been, like, what, 90 years since we've had a -- as big a tariffs imposed on this economy as are being imposed right now it was interesting when i asked evans. evans seems to look past the inflationary impulse, sees it as a one-time rise in the price level. i talked to an economist last night about these mexican tariffs and i think it's interesting the president said they're likely to happen, but he said we cannot estimate the inflationary impact of these mexican tariffs. he talked about a car seat and i don't think he had the number exactly right, but he said the car seat could cross the border like six times each one of those times would be a 5% tariff levied on it, assuming that's the way they work so you really can't calculate it in any event, evans sees this as a one time rise to the price level and seems to be more interested in the ackside, weaker growth, deflationary component of tariffs

>> i don't know how comforting that whole thing is, then, steve. i mean -- >> it's not at all >> if they have no clue on what the tariffs are going to do, and they're relying on their economic models as that's what they do for a living, the danger is that they're going to be way offsides or way too late or make a mistake like some say they did in december. >> right well, look, just for the record here, i'm not sure the administration does either we asked haset yesterday, the president's outgoing economic advisor, if he had run models on all this and he wouldn't say what he talked about with the president but he said i can assure you that it's going to be worse on mexico than it is on us i don't know how assuring that is but the idea that apparently they have studied this and they do see negative impacts on the u.s. in terms of growth is interesting, even though he wouldn't say that explicitly so, i don't see how the fed sees this and honestly, i don't see how the market makes a price on this

all you can do is make a price on a binary, are these things going to happen or are they not. i don't know what else you can do with it >> i don't either. it makes it much more difficult for investors to try and figure out what's going on and where we're going to go. steve, thanks. appreciate it very much. that's steve liesman >> one second, scott just got to tell you, 1:15, tune in, we got the vice chairman we're going to take aull the wapner questions, all the najarian questions, we're throwing them at the vice chairman of the federal reserve. >> let's turn to the financials, one of today's best groups after a rough period that has seen that sector underperform the broader market our next guest, a long time follower of the group, out with an ominous warning about the sector and the market in general. chris whalen is the chairman of whalen global advisors, so is wells fargo banking analyst mike mayo who disagrees with what mr. whalen's about to say, so they tell me i'll start with you, chris the headline for you that got me

to say, let's get this guy in here, is you think that we have this looming credit crisis >> well, so slow, ebbing credit crisis a year ago, i predicted that net interest income for the banks was going to flatten out and go negative and it did in the first quarter. small, but it's been going up for eight years. that was the gift that ben bernanke gave us with quantitative easing, lots of deposits, lots of margin for the banks but now the flip side of that is the fed reduces the balance sheet, which is tightening, let's remember, is that you're seeing liquidity increasingly scarce even though all of us would say, my god, look at all the cash around for different strategies and different sort of investment >> i thought you were calling for a credit crisis this summer. >> oh no, i am, i think we have a repeat of december staring us in the face, why high yield spreads with going up, we have a dearth of credit in the nonbank sector, particularly, i think of the unicorns like tesla that are

assumed to have market access to fund their operating losses, and then finally, the mortgage space where i spend most of my time, they're not making money we're hoping to get a bump from refis as rates fall, the ten year is going to go through too, by the way, but the lack of profitability in that sector goes back to what the fed did to the credit markets five, six years ago. so, to me, all you need is one externality, one little bump, and i think you could secret run away from all of these nonbank finance companies, mortgage lenders, et cetera, because investors don't have a big tolerance for risk right now >> mayo? >> first, i love chris's views because i love the healthy paranoia and as long as everybody's still paranoid about what can go wrong it reduces the chance we're going to repeat these mistakes i hope we have a repeat of december because that was such a fantastic buying opportunity >> i agree with you. >> like we have right now. and by the way, so, the theme here is 1995 1995, you had "forrest gump" won

the academy award, the 49ers won the super bowl, you had paisley prints that were in fashion, and it was the best performance by bank stocks in modern history from '95 to '97, bank stocks tripled, the market doubled, the best relative performance in decades, and you know what the analogies are in place for 1995 you have the end of a fed tightening cycle, i don't know if the fed cuts or not but it's the end of a fed tightening cycle. you have, you know, real significant efficiency improvement in the space we think the banks hit record efficiency in a few years. you have a degree of if not deregulation, more regulatory streamlining, if the reduction in deposit and insurance costs and the one difference, instead of waking up every monday, wondering if a bank is going to spend too much, banks returning historic amounts of capital, you have the fed stress test, what's called the ccar later this month, we look for a 15% increase in cap return, everything's lining up oh, one other difference versus

1995, the best value investor of all time, warren buffett, has his biggest overweight in banks in history so that's not why we recommend the banks but it's all lining up together >> but today is not 1959 1995 is the center line, by the way, for banks for the last 15 years, boring year, great year, but now you have creditic metrics that are so messed up. think about this every metric that you look at for bank-owned properties in the real estate sector has got negative credit, in other words, you can't lose money on a loan why? because it goosed home prices. will they stay there we don't know. but what you do know is that the markets are signaling to you that credit has no cost. when was the last time this was, 2005 it was two or three big banks, wamu, countrywide at the time, now it's the whole industry. so, the fed has doubled down on asset price manipulation, on messing around with basic credit metrics that we all use to do our work, and we don't know where we are so, for a lot of investors, it's almost better to get out than to try and figure this out because

we could say there's a dearth of liquidity on the one hand and you look at another sector and there's more cash than you know what to do with. >> i would say there's absolutely causes for concern with credit. there's always causes for concern but you better not start at the banks, all right? you look at the nonbank financial lenders and we can come down with a list, whether it's, you know, private equity or pdc firms or these, you know, clos or a host of other nonbank lenders that are getting in there, you know, bidding all kinds of crazy, you know, providing financing, you know, rates that they probably should not be offering it for but the banks themselves have structurally lower risk and that's what's underappreciated >> you guys agree with each other. >> no, no. >> not on the banks. the banks are fine here. >> well, they're not fine. >> stronger for longer credit losses >> they have low losses but they're not making any money the problem with what the fed has done is that funding is expensive right now. funding is off the front of the curve, right ten year is falling so there's no pricing for banks to get a

little bit more on loans, a little bit more on leases, a little bit more on their securities investments right now, nonbanks like reets, anybody who uses leverage is looking at inverted curve, what does that tell you, that carry has no value anymore, they're all running out of that sector and some of them want to buy banks but right now, resi reed or agency reet, you don't want to be there because if the curve remains the way it is, if the fed sticks to their guns and doesn't do anything to change policy until september when i think they're going to stop the runoff of the balance sheet, these guys are in trouble. last point every dollar that runs off the fed's balance sheet is a dollar bank deposit that's disappeared. deposit growth is lowest point in seven years and by the way, the economy can't grow you can't make more loans unless you have deposit growth. that's where it comes from you know, bankers start with, how much money do i have this month to lend? and that's how they figure out what they're going to do right now the growth isn't

there. >> well, i mean, i would agree with the point that, look, net interest margins, the best improvement has come and gone. i get it but 1995, the net interest margins got worse and efficiency still improved so as long as revenues grow faster than expenses, great things happen with eerarnings. we look for about double digit eps growth without a lot of top line growth and if you want a lot of time line growth in banks, get in a time machine, go back to 2006 and see how that turned out >> we've been surviving on that efficiency trade for seven years. >> yeah, but there's still a lot that they can do efficiency -- >> they can fire all their people, sure >> efficiency targets are -- well, they certainly will, unfortunately. but i get to what mike was just getting at so, fine, they may have pressure on nim and net interest income, i get all that why does that have to be a calamity of credit there's a difference, though >> that will come later. credit is two years from now >> so you were just saying that you were concerned about credit cycle this summer. >> i'm not worried about counterparted credit, companies failing, loans, mortgages, no,

we have no credit issues there i'm worried about the guys that the banks can cut off with a phone call >> okay. i understand that. but that doesn't actually mean that -- >> warehouse lines remember in december, the big banks didn't show up they all pulled back so all you need is the banks to decide that they don't like the risk on their nonbank warehouse clients and they're done they're out of business. >> these companies have not -- the banks have not had superior revenue top line growth for years. for years, right and it has been an efficiency ratio. >> totally that's how they've hit the eps targets. >> so an efficiency ratio story plus strong capital. >> excessive capital >> plus c-car so plus valuations, i think that you can make money and i was saying before it's kind of like a tactical thing but it's not a calamity like what you're saying, at least not in the near term >> you have one unexpected nonbank default this summer and we're going to have a very different conversation >> you mentioned tesla like you think it's going to be a high-profile or you're saying it's a slight uptick in the

constituents of the hyg? like, what -- >> that's a very good question >> is it a retailer? what blows up? >> if it just happens without any warning, in other words, i think they've been losing credibility, that's why the stock is down. stocks go up for hope, down because of credit. >> are you saying that's systemic for the united states financial system >> it will be another nonbank name we're not thinking of >> okay. so let me ask you this, mike and chris, weigh in. isn't it ironic when you say the banks didn't show up in december, isn't it ironic that the way the new regulations were written, it's to prevent them from showing up? >> oh, absolutely. >> so we don't want them taking prop risk anymore so who do you want to do that, private equity? >> the liquidity rules have set us up for a problem. the regulators said, oh, they need more capital, they have to be islands, they're not allowed to trade repo with one another anymore, we have no unsecured lending between banks anymore. >> so be careful what you wish for. >> that's right. in december, they were all told

that they had to show how much liquidity they have, which means they have to cut off 245their customers. great. and they were piling in the door with the firm i work with, with good collateral. >> mike, what do you think about that notion? >> there's absolutely crazies on the street we're just saying it's not the large banks anymore. you have this great oversight and what i would say to any bear on the banks, you saw them show up in spades in december, where do you think bank losses are going to go? right now, bank losses, total loans are 50 pass points, the long-term average is 80 basis points, and the financial crisis, it was 300 so, lot of people investing today weren't even around for a recession other than the great recession. >> in december, i backed up the truck, i bought u.s. bank, i was buying preferred because they all sold off >> where's the excess? fin tech silicon valley backed fin tech companies that are making nontraditional loans based on facebook likes is it private equity getting into lending direct? where is -- if i'm an investor

and i look at my portfolio, where are the holes? what should i be worried about >> the banks have the risk but it's exactly where you just said it's in they're customers. this is why all the regulators fret about nonbank risk. >> so, as long as the economy stays reasonably strong, maybe strong's the wrong word, reasonably well, okay? interest rates don't go up, companies can service their debt, you don't have a high-profile bankruptcy like the one you're talking about, your scenario doesn't play out the way you fear it will >> i just worry that the fed is mostly focused on their models they went all through the fourth quarter last year ignoring the fact that high yield spreads had blown out. there were over 500 basis points before the end of the year were they paying attention to this i don't think so >> so this goes to the conversation that we were having with liesman >> exactly >> whether they made a policy mistake in december at minimum there are others who say they -- >> they almost ran the ship

aground. look, issuance went to zero in corporates it went to zero in most abs categories you know, mortgages have been down for four months why -- what's going on >> what happens if they cut rates between now and then >> i think they're going to have to but it's more important to stop the runoff of the portfolio as much as i hate it, as much as i disagree with what ben bernanke did, you can't take it back because every dollar is a bank deposit and you've got to think of it that way the whole deposit base is slowly shrinking. >> maybe powell realized that. >> i think he does of everybody on the fomc, i put my money on jay powell because i think he at least understands these dynamics i'm not sure about the rest of the committee. >> look, what i would say, in a allow interest rate environment, people pay their bills, credit losses stay lower for longer >> yes >> chris might be right about some nonbank financials having issues at some point, but as far as the large banks, we come back here one year from now and you'll see bank credit losses still below the long-term average and i'll give you four

to one odds. what are we allowed to bet can we bet a coffee? >> dinner. >> i'll bet chris dinner >> my pleasure look, two things to watch. >> i want in on dinner >> you can come. >> high yield spreads and real estate prices because if you start to see real softness in commercial real estate, residential real estate, that takes you back to higher loss rates. >> didn't we see that in january, though? and it was a head fake >> i want to get to a break. >> didn't we see home prices drop suddenly, shock everyone, and then come back in the spring >> the high end markets have been softening for a while >> in our earnings models we have loan losses almost doubling over four years for the largest few banks and we have eps growing so higher loan losses is not a surprise and we think they're on a steady glide path back to normal not some sort of calamity >> it's the surprises that matter, mike >> they always are guys, thanks >> thank you >> chris whalen, mike mayo, great conversation, really appreciate your time today

here's what else is coming up on "the halftime report." >> announcer: the uber bullishness on shares of uber. wait until you see how enthusiastic wall street analysts are about this stock, still trading just about where it started plus unusual activity in the options market see what jon spotted and which way the stock is likely to move. before the break, our data partners at kensho on what happens after oil falls 10% or more in a month. it's happened 7 times since 2014 it then trades negative 71% of the time, down by another 6.46%. for more, go to cnbc.com/kensho. "the halftime report" with stt pnnd the traders is back in two minutes be good while i'm gone.

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you got to get that under control. [ dogs howling ] seriously? embrace the mischief. say "get pets tickets" into your x1 voice remote to see it in theaters. welcome back, everybody. here's what's happening at this hour in london, president trump holding a joint news conference with british prime minister may. he predicted eventual passage of a brexit deal. >> i would say i would think that it will happen and it probably should happen this is a great, great country and it wants its own identity. it wants to have its own borders. it wants to run its own affairs. this is a very, very special

place. >> the white house has told former trump aide hope hicks not to turn over documents to the house judiciary committee relating to her time in the administration committee chairman gerald nadler subpoenaed hicks and another white house aide on may 21st forbes magazine says rapper j jay-z has amassed a fortune worth $1 billion that makes him one of handful of entertainers to become a billionaire. his empire includes stakes in liquor, art, real estate and big name companies a diversified portfolio. that is the news update this hour >> a one man industry. >> exactly >> sue, thank you. sue herera all right, 20 firms initiating coverage today on uber all but one giving the stock a buy or outperform rating citi is the lone firm slapping a neutral on the stock it's our call of the day josh brown, you own it we see uber as the most

attractive internet ipo since facebook said one firm the superlatives are flying across the street today, transformational company said another. what do we think >> so, like, if this stock doubled like it wouldn't change my life. i don't have a huge position here but i just love what's going on with this because as a student of the market and somebody that just loves these types of situations here you have a company that is not going to make money maybe for six or seven years and that's if things go perfectly well. so in part, it's a bet on people's willingness to fund the company that's got 70% market share in a tam that's, like, billions and billions and billions of dollars and growing all the time you have price targets that came out this morning ranging from 50 to 90. what do you make of that if you're an investor, the stock's at 41. >> stock still below where it opened,right >> where it opened, where, for trade? >> on ipo. it's not back at $42 >> i think this is a very low

risk -- i'm almost using it like a call option. if this thing breaks below its volume weighted price from its first days of trading in the high 30s, i'll be out but if it doesn't and some of these analysts with $80, $90 price targets are vindicated in their enthusiasm, i'll be a part of it i'm very noncommit wei-ling tta one because it's so unknown. they have a great market share and they have growth and they have a lot of people that believe in the story and that's maybe good enough. >> mr. offense, you bought it the other day. >> i think it's a methodical trade more than anything else. 93 million customers, you have the ability to cross sell from uber eats to those potentially becoming uber riders, that's really not the theme here. i think it's about the low expectations that wall street had set for this company when i said i was going to wait for earnings to be released, i like that you've got the customer promotions being pulled back by the company but the bar was set so low and a lot of the reason why the bar was set so

low is that you're not going to get what the expectations and the price targets are going to be from the underwriters of the ipo. so, those that are coming out on this in advance, you're basically setting a bar on bearish sentiment. you've got analysts that are coming out and saying, okay, the reality of what the expectations for earnings are going to be incredibly low >> they stepped over that? are you holding it for a while >> i think it's a trade. >> josh is noncommittal. >> i think it's a trade. i think, you know, i began by talking about the ability to cross sell 93 million riders i don't know if i'll be in it that long. i think it's more trade than anything else and a low bar expectation. >> okay. coming up, jon's unusual options trades are next. he's focusing on healthcare today. let's give you a check of the s&p. it's a strong day across the street dow right now is up better than 400. s&p is got for 1.5%, good for 42, led by tech, financials, and discretionary.

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>> announcer: close to america's employment picture from the adp report are there any signs of trade turmoil impacting jobs tomorrow 6:00 a.m. eastern on "squawk box. ♪

welcome back to "the halftime report," options traders making a big bet on paypal and one healthcare name jon najarian at the telestrator with the unusual activity. doc, paypal's up 2%. >> yeah. they started buying calls when the stock was right around 107 this morning, scott. it's up $107.75 right now and these calls continue to move to the upside as you would expect they were buying short dated calls, though, july 5th expiration calls in here the earnings, i believe, are about july 24th so it's not an earnings play but between now and the time these calls, they're basically predicting about a $5 or some sort of pop to the upside. that would be huge you can see that we had big accumulations here on the 29th as well as what's going on today. i bought these calls, again, they expire july 5th so you have, give or take, close to a month in these i'll be in them for probably two weeks to three weeks

second one, take a look at what's going on in molina health these are september options so for folks that want something that doesn't decay quite as fast as perhaps those paypals, molina is up $5 right now, about 3.5% they bought september calls in big numbers and they're buying the september 150s they were selling the december 160s against it. they're actually doing that spread for a credit because those extra three months coming in as far as the seller gets to keep those, they have the right to buy it at $150, they're giving somebody else the right to take it at $160 love this one. i'll probably be in this trade about two months two very quick updates for you, scott. snap, we talked about it last thursday people were all upset yesterday when nothing was going on in snap and these calls that were 24 cents, now they're 64 cents so these are almost a triple right here right now, love that one. i also wanted to update pete

yesterday talked about kweb, about two weeks ago we had it for the downside with puts, yesterday, pete turned that around because of upside call buying and look at kweb now, back to $40.62 i believe it was under $39 yesterday. that's why you trade them, scott. >> good stuff. come on back over, doc >> all right, sir. >> appreciate it very much real estate is the only sector higher in may and now it's the second top performing sector year to date store capital is a commercial property reet heavily focused on the service space. that stock is up 30% in a year josh brown benefitting as an investor as you may know, he's talked about the stock multiple times on this show christopher is the cofounder and the ceo. it's good to have you here >> pleasure to be here >> let me ask you first, josh, to sort of tee this all up, of all the reits that you could be in right now, why is this one the one you chose? >> well, i think like a lot of investors it caught my eye when i saw berkshire file and take an initial stake and i really like

the concept of looking at store level economics for all of the tenants, you taking the real estate off their hands, you're giving them capital to grow their business and there really is no reason for a hairdresser to own a building. there really is no reason, necessarily, for a specialty retailer to be encumbered with real estate and debt and mortgage so what you guys are doing is unlocking capital and then the other thing that i thought was really interesting was you're avoiding businesses that are easily amazoned so you're focusing on tenants that are either experiential or the type of business that someone has to come into amazon can't mail a box to fix your puppy's health. and that kind of tenant. or restaurants so, i think that that's a really great differentiator right now because most people when they hear reits and retailer, they think these tenants and companies are dead >> you're more, as josh said, in the services industry with a larger concentration in the restaurant side of the business, right? >> we have a lot of restaurants,

but again, there are more restaurants than any other kind of free standing box out there so you're going to have restaurants. but we're heavily focused on service based industries and we have some manufacturing, about 18% of our exposure is in retail but that includes car dealerships, that includes furniture stores where people are getting financing, and they have to try the sofa, try the bed, so we're trying to make long-term bets but not big bets so if you look at our top ten clients, it's 18% of revenues. we have nobody over 3% i mean, we are a very cautious about how much exposure we take to anyone. >> how does the overall environment look to you right now? you obviously have given the businesses that you're in must have a pretty decent read on the economy and even the small business level >> we do, and it's getting better i mean, today, we have roughly closing out on 2,500 properties and we're getting unit level p&ls on them

we're seeing what you see. it's hard to push through price increases. we're seeing 1%, 2% same store growth but what we are seeing is growth at the ebitda level and the revenue level that's better than 10 and the reason for that is people are building new locations and building new locations and acquiring. so a lot of consolidation in the middle markets >> so about 69 million baby boomers alive right now and they have accumulated a lot of wealth and a lot is in the value of their small businesses and a lot of the value in their small businesses is locked up in things like real estate and property that must represent a huge opportunity on a secular basis for a company like your where the economy will ebb and flow, but there are still people that need to get their capital out and you still have a solution that is unique and better than many of the other types of solutions that they could hunt down if they want to get money out of their business. would you agree?

>> yeah, because it is a great way to finance a personal house, but you cannot finance a free standing piece of commercial real estate on a long term basis. so we are displacing some debt, but also displacing a lot of equity that people have to put into the real estate and then we're giving them a much more flexible and portable capital stack to be able to run their business so both are designed to make our clients a lot better off >> and joe, you own it as well >> yes, and i think that we own it in some of the funds that we have you mentioned restaurants versus manufacturing. just kind of explain the exposure. i think if you go back two years, you had two restaurants with a higher exposure manufacturing exposure is actually slightly ahead of restaurants. >> manufacturing is an entire sector sdrau restaurants is kind of an industry but yeah, manufacturing stuff has moved up probably stay in the range of about 15% exposure long term to

manufacturing. and these are facilities that make everything from multiplastic children's toys to chin link fence to metal fabrication. so very fundamental industries the restaurant space we love but we're also value investors and we find that we can't get the same kind of deals that we were getting before in some of the restaurant space just a lot of people chasing after restaurants. >> chris, appreciate the time. chris volk of store capital. xwl ten year is rebounding seema has more >> rates on the rise as trade tensions cool off for you now. jerome powell says he is watching economic developments very closely when considering the fed's next move. so let's bring in our traders. anthony, is this just a relief rally or start of a trend? >> yeah, i think takes relief rally. one day doesn't make the trend

the trend is actually lower at this point and also headline driven so one more negative headline and you will see the bond buyers push yields lower. and when you compare the 10 year on the rates around the world, we're looking very see the buyl coming into this thing >> and what are the technicals pointing to when it comes to the next move for rates? >> i agree except i think that it could last a few days now i'm shorten years. when it broke back through 126, i think that to me indicates a 126 even level if you want to talk rates there, that is probably about a bump back up to 2.2 i eventually think that you could go to 2.25 but i agree medium and longer term trend is down for rates, but we could easily have a relief rally that turns in to something interesting. >> thank you both. cze check out our live digital show at 1:00.

peter boockvar tells us why coin may be a good trade. what is coming up on "the exchange"? >> we have calls for a fed rate cut growing louder on wall street so will they or won't they we'll ask rich clarida, he joining us straight ahead. and plus food delivery services are giving a boost to one particular area of the real estate market. we'll tell you which one and why "jeopardy" star james holzhauer may be getting short changed on his winnings. that is ahead. ♪ ♪♪ ♪♪

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faang in pain. but the worst might not being over with. online now, read the article about how low facebook, amazon, netflix and alphabet could fall. and what prices could make good entry points go to tradingnation.cnbc.com welcome back we are at the highs of the day it is the best day for the s&p 500 since january 4th. best day for the dow jones industrial average -- february 14th for the dow a couple questions stephanie, from jerry in indiana, is at&t a good long

term difference dent hold in my retirement account >> yes it is a very defensive stock this and verizon but this company, i like the management team very much. you won't get a lot of stock appreciation, but do you get the total return with that yield trades at ten times. >> and joey, from nima in new york, broad com versus texas instruments. how are they different and which company is the better long term play >> so they are distinctly different except for having similar market cap somewhere about $100 billion better long term play. texas instruments. quarter of the revenue for broad com exposed to apple and both of these, understand there is a difference in the credit quality on the credit side texas instruments credit spread trades about 150 basis points less than broad com. and i also -- listen, they failed at getting -- broad com failed at getting qualcomm i didn't like the ca deal.

so i'll take texas instruments all day. >> all right good stuff about a minute left which means final trades >> gene therapy, amicus the therapeut therapeutics about 11.82 today. they priced at 10.75 and the stock is running almost 5% on that >> and so i have owned rentals forever but stock pulled back and any just delevered their balance sheet yet and i think it rerates higher >> i think the lesson with store up 22% year to date, vnq which is the hole reits sector up 17% year to date, that no one knows what is going to happen. everyone was a believer that reits would be rising and among the worst places to be in the zch. turns out to have been the opposite take all of the punditry you hear with a grain of salt.

>> joey. >> should i give my smh comments now? >> no. >> all right staying long though for a trade, i talked about getting 6%, 7% playing a little offense yesterday. i think that the etf is the right vehicle versus individual names. >> all right that does it for us. "the exchange" begins now. thank you, scott hi, everybody. here is what is ahead. the fed to the rescue. chair powell says they will act appropriately to sustain the expansion and stocks are surging. we will hear from richard clarida beginning just minutes from now plus privacy abuse, regulators have those issues top of mind. our guests will tell you which names are safest and who is most at risk. and the next round of the trade war may be fought underground. should authorities think twice about outsourcing our subways to the chinese?