← Halftime Report
Halftime Report
Assessing the Rally 1/8/26
00:47:05
Scott Wapner and the Investment Committee assess the rally and debate where markets are going from here. Plus, the Committee shares their latest portfolio moves. Also, Thomas Peterffy, Founder and Chairman of Interactive Brokers, joins us live to debate the surge in popularity of Prediction Markets and what it means for investors. And later, Josh Brown spotlights Energy in his "Best Stocks in the Market." Investment Committee Disclosures
Loading summary
Transcript154 lines
- [00:00]
Julia Boorstin
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities and even another passenger or three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. Edward Jones, Member, SIPC not sure if.
- [00:32]
Pippa Stevens
You have the experience to start your dream job. Good news these days it's the skills that count. Udemy can help you get those in demand. Skills. Want to be an AI mastermind? Learn with us. Game developer. We've got you covered. AWS Certified Cloud Practitioner. We can help you prep. You'll learn from real world experts who love what they do so that you can love what you do. Go to udemy.com for the skills to.
- [00:57]
Jenny Harrington
Get you started and get set for your dream job.
- [01:01]
Scott Wapner
I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in guys. Thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the everything other than tech rally and what that says about the state of stocks in this early year, we will ask the investment committee. And joining me today for the hour, Josh Brown, Jenny Harrington, Bill Baruch, Surat Sethi. Let's check the markets. We have had a nice turn in the market today. Certainly the Dow, the S and P, they are both positive. Nasdaq though playing to the theme that we're talking about today is in the red. The Russell is leading the way once again. As we said, the early year story has been the performance of things other than the mega caps and the NASDAQ financials industrials and as we said, the small caps. The Russell hitting a new all time high this morning. It's up almost 4% to start this year. And we find it interesting today that Bill Baruch is confirming his position in it. Why?
- [02:06]
Bill Baruch
Well, we own the IJR. It's a more more concentrated small cap ETF than say the Russell 2000. And we actually doubled our exposure in that in quarter four. We went from a 2% holding to more than a 4% holding. We look for some follow through now. The IWM really accelerated and outperformed the ijr, although over the last five years or so the IJR outperformed the IWM more significantly and a little disappointed that we're not getting that, that move. Now what we're looking at here is we, we TR down more of a rebalancing, bringing that back closer to a four, four and a quarter percent from nearly five. And what it's doing is raising a little cash for us because remember there is going to be some news tomorrow. There is going to be with jobs and Supreme Court rulings. But as you look in the year, I think really the important thing is this is going to be the first quarter. You need to make your money in the first quarter. I think the year could really level out from, from April to November and there's a little bit of a seasonal lull in the middle of January. So what we're doing is we're raising a little cash and some rebalancing, taking a little bit off the table here in small caps, seeing if that actually gets the breakout, maybe, maybe lean into it more.
- [03:12]
Scott Wapner
Isn't it already getting the breakout? I mean the follow through that you were allegedly looking for the end of the year into the new one is happening, is it not?
- [03:20]
Bill Baruch
And ijr, IJR has not made a new record high yet. So I'm ill positioned. So I want to look at where I can put that cash if I, if I raise about 60 basis points or so.
- [03:31]
Scott Wapner
I mean IJR is up 4% year to date.
- [03:33]
Bill Baruch
We have like four days and we trade. We've picked up from that ad in quarter four, we picked up 4 to 5%. And so that's what we're taking a lot the table low rebalancing. But it gives us that flexibility. And you want to have flexibility. If you're sitting there fully invested and you get, you know, a little bit of a knockdown or the market moves a bit, you can't be active, you can't do anything else. So what we're looking at here is we're trying to find some places, rebalance, raise a little bit of cash. And if we get that breakout in ijr, maybe I'll lean back into that. But I think there's better places. IWM is more clean right now of a breakout. You're getting more materials, you're getting, getting, you're getting those biotechs that are driving it as well. Where IJR doesn't have that, IJR has a little better balance sheet than iwm.
- [04:13]
Scott Wapner
What do you make of the complexion of this market so far this year?
- [04:16]
Jenny Harrington
I love it so much to be honest. It's, you know, it's nice to finally have stocks that are in favor. I really have been enjoying the rotation that I've been seeing and seeing it broaden out a little bit. And it makes sense to me. And my, my thoughts were last year that the winners of the last couple of years should take a pause. You know, they, I don't think their valuations in general were so, so rich that they deserve to have a major decline, but I think that they deserve to have a consolidation. And I looked at the last couple of years as all the money just got soaked up into a small, into a small portion of stocks. And there's other companies out there, like the ones in our discipline growth strategy, like the ones in our equity income strategy that just sat fallow, you know, Meanwhile, they had really compelling valuations, like perfectly great earnings growth. So I like it. It just seems like reasonability is coming into the market. Rick Breder put a piece out yesterday and I thought the headline was really interesting. He said, odds are changing, 2026 is a market for investors, not gamblers. And I read the article and what he's really fleshing out in there is that you have to do the work this year. You have to think about valuations. You can't just jump on the winning trade. So seems like it's working. But one thing on the small cap that I just think is interesting, and this is something I was struggling with as I was writing our quarterly letter yesterday. I was saying, oh, but small cap, you know, the Russell 2000 was up 12%, but the other one, right, the S&P 500 is up 6%. So as Bill's fleshing that out, like I think even going into this year and seeing differences in two indexes that.
- [05:42]
Josh Brown
Superficially sound the same, banks versus biotechs, the small cap 600, you have to be profitable to be in the index. As a result, a higher concentration of some of those older industrials with profits and obviously financials. The Russell 2000 is a junkier index. It's got a lot more of the nonprofitable biotech, a lot more of the nonprofitable tech, some of the more startup type companies. It's really just a reflection of whether or not you're in a high risk appetite or a lower risk appetite market, which one will outperform the other over very long stretches of time. They end up meeting up.
- [06:16]
Jenny Harrington
And it feeds in exactly to the Rick Reeder comment, which is again to me saying basically, you've got to do your homework. You can't just say, hey, small cap was up 12%.
- [06:24]
Josh Brown
Right? If you're investing in small cap, you should know the difference between we know.
- [06:26]
Jenny Harrington
Those two are investing in period. Like period. You know, you can't just say I want to own small cap and choose any old index. You have to do the work and.
- [06:34]
Scott Wapner
Know that there is a what are we in now? Are we in a higher risk or a lower risk market?
- [06:37]
Josh Brown
I I'm with I love Alpha Jenny. I am here for it like this. The season of Alpha Jenny is upon us. But I really want to make this clear to people because I don't think they understand. Just because all of the focus and the attention has been on the AI build out and the data center story for the last year doesn't mean that what's going on right now is anything new. In fact, the peak of the Mag 7 vs S and P493 outperformance was over a year ago. That outperformance peaked in December of 202425 was a very mixed year for the Max 7 and as a group they did not materially do better than the S&P 500. And now you see that following through this year, super bullish for stocks. Just looking at an interesting data point that we've been looking at every single sector positive except tech today. We've only had 10 other days since 1990 where every other sector was positive and tech was down. Tech was down almost 2% on the day at its low. There's no news, there's no earnings. The only thing driving this is people looking at their portfolio and saying, wow, you know what? There really are other games in town. Financials, industrials. There are other things I could be doing. The other thing I would point out here, and I think this is really important, if you actually look at this as a horse race in terms of like, do I have a barbell in my portfolio? Yes, I love Apple, I love Microsoft, blah blah, blah. But do I have enough on the other side of the barbell? Most investors would have to conclude no, I actually don't. And I think that that is what's driving the rally. Not just today, but this is a rally that's been building since September, October in these quote unquote other stocks.
- [08:21]
Scott Wapner
You continue surat to get a number of outlooks for 2026. Some are looking at seasonal analogs from past performance periods to look for what happens now, including Goldman's Tony Pascarello who suggests over the last 75 years, if you look at that, it's not a guarantee of anything. However, as he says, they seem to point you in the right direction. There's a look at seasonality for the last 75 years as, as he says, quote. But I do think they point you in the right direction. If you want to send me your brother in law's tweet why this won't work in a midterm election year, fine, I'll read it. But you know, if you use history as your guide, you're probably heading into a pretty good place. You also have those who, though they're bullish, suggest that it's not going to be a linear year, that it's not going to be that straight line, Tom Lee included, who suggests there could be a mid year bear market before you have another turnaround. What do you think?
- [09:19]
Surat Sethi
Absolutely. I mean, investing is never linear. We saw what happened last year in April. And I think the key here is when we talk about broadening, we think of it as quality. Right. What are the quality companies that you could have owned or owned over the last three to five years that didn't do anything, whether it's in health care, industrials, financials. And I think that's where quality comes up to where earnings are going to be important and valuation is going to be important. So, you know, if I'm buying the health care sector, what am I buying there? I want to own JJ in there, I want to own Summer Fisher in there. If I'm buying financials, I want Morgan Stanley. I don't want to own PayPal at this point, I want to own Visa, MasterCard. So for us, it's the quality play. Yes. And Josh is right, you can barbell with our tax, but where is the other alpha going to come from? And I think that's going to be important.
- [10:02]
Scott Wapner
You're hitting on a really good, good and interesting point of what we've been hearing the last few days from people on the desk that it's going to be a much more tactical kind of year than buy, you know, the S and P. And just look at it at the end of the year and you're up 15 to 20, if not 25% like it's been for two out of the last, you know, three years. You have to be much more tactical and you are pointing in that direction as well, 100%.
- [10:27]
Surat Sethi
And I want to be in the areas where it's not just multiple expansion, it's earnings growth and its company being recognized as we go through this period of a little more uncertainty globally. And really what are companies going to do specifically as if they're going to be in margins, tariffs that's all going to be really important.
- [10:45]
Scott Wapner
Well, it comes down to earnings, right? I mean earnings have 100%, earnings have to deliver, expectations are high. Some suggest maybe too much so. But it certainly is a good debate as to where we are. Wells Fargo today pointing out that the outlooks. It has to hold. It has to because you've exhausted all of the multiple expansion that you can get maybe to this point 22 times now. You've got to deliver really from an earnings standpoint.
- [11:08]
Josh Brown
Yeah. So two things here that I think are really important to understand. We had earned. We had multiple contraction last year for mega cap large cap stocks. We had unbelievable earnings growth far exceeded anything any anyone thought was possible. Especially around the spring. We worried about tariffs and large caps by and large delivered and did not get multiple expansion as a result of that. But we still were able to have a pretty good year. Overseas it was the opposite. Overseas they barely had earnings growth but what they did have was a huge sentiment shift and as a result massive multiple expansion. Japan, Germany, France, the uk, some very big markets overseas got a lot of that pen re rate higher this year. I think the thing is, can the mid caps and the small caps and the non mega cap large caps deliver the earnings that make them worthy of a rerating and maybe take some of the leadership burden off of the top seven stocks? Michael Semblis refers to this as the internal logic of the stock market. We're not just willy nilly putting a 22 multiple on the S&P 500 for no reason. Those companies have the best earnings growth and the biggest profit margins. Matter of fact we were talking about small caps before they sell it 15 times forward earnings. Why? The S&P 600 has a 5.6% trailing 12 month profit margin for mid caps at 7 and a half and for large caps it's almost 14. That's a really big difference and that's why those segments of the market have been sleepy because they haven't earned it yet. Can they earn it? Can I help these companies expand margins if that happens? Not only do I think you get the benefit at earnings growth, I think you also get a multiple expansion and a little bit of a rerating. Not to 22, but there's a lot of room between 15 and 20.
- [13:00]
Scott Wapner
Let's talk about one of I think the best. If you want to call it a comeback story, by all means go ahead and do that or a will show you story what's really going on. It's alphabetical. Look at the last 12 months of Alphabet. You'll see what I'm talking about. Today it surpasses Apple in market cap.
- [13:20]
Surat Sethi
Okay.
- [13:20]
Scott Wapner
For the first time since 2019. That's a statement in and of itself where people were talking about this stock in such negative ways eight to ten months ago. And it has defied all of those negative expectations. It's about $4 trillion knocking on the door of that. So it surpasses Apple. Cirada gets upgraded today to overweight. At canner, they cite the golden age of Gemini. The newest version of Gemini has seemingly put this thing right back in the driver's seat, according to some accounts.
- [13:53]
Surat Sethi
Yeah. And we were sitting here months ago and it was. Search is dead, Google's dead, Alphabet is, you know, gone. What do you have left? YouTube. Well, that is growing.
- [14:04]
Bill Baruch
Yeah.
- [14:04]
Surat Sethi
But you look at what's going on in the media space. But I do think they've come to the table and they've come back really strong and they're leading and I think it's going to be lockstep, one to chat, GPT, whatever. But they're there and their earnings are there, their cash flow there and they're growing and I think that's why people like them as the leader at this point. But I would be careful. I mean it's our largest holding. I like it, but if it gets too big we're going to trim it back because you just never want to get too greedy with stocks like this because we've seen what happens when something else comes in. Bill?
- [14:33]
Bill Baruch
Yeah, it is our largest holding. It's 7%. And I actually, I got roasted on, I think by you two here or when I added to it in May of last year, I think Jenny trade. Jenny was given to me giving me a lot, you're giving a lot of heat.
- [14:45]
Josh Brown
But this is, I was selling it, you were buying it.
- [14:48]
Bill Baruch
This is our, this was, our thesis was a call option on the tpo and it was the idea that maybe, just maybe that I could be a tailwind instead of a headwind. And that's what we're seeing seeing play out now. I do agree with you. It's become a 7% position for us. And at some point the valuation that it is seeing right here could be a little headwind to continued growth. So as everybody's talking about being a stock picking market, where's the puck going to go?
- [15:11]
Josh Brown
Yeah, so. So Alphabet was being very cautious about AI a year ago at this time, at a time where they could not afford to be, they had to decide, you know what we're Going all in. We're not worried about cannibalizing search ad units. We're putting the ad units right into the Gemini responses right at the top of search. And we'll let it play out. We'll see what happens. It was the right decision, was very bold when they made it. They were a little bit late to making it, but it doesn't matter. Stock went up 65% last year. One of the biggest winners, not just of large caps, but in the Overall S&P 500. But now you've gotten a lot of the credit for that. So I agree with you. It's not a and all clear. Just because the bet paid off, because it's not exactly one of the cheaper mag sevens the way it used to be.
- [15:58]
Scott Wapner
Jenny was giving you the business because she's like, hey, look at my Metta. My Metta is the one that's going to do much better than Alphabet. And that was at that point where, you know, you had a lot of talk about llama open source. They're putting all this money behind it. Surely they're going to, they're going to outpace people like Alphabet. And you know what? It just hasn't happened. In fact, the stocks have gone in opposite directions.
- [16:21]
Jenny Harrington
I think what I still, like, if we're being serious about this, I think what I still worry about with respect to Alphabet versus Metta is the monetization. And so even though Gemini has been really quite amazing and stepped up there, I really do still worry about the profitability of search in the future with AI, you know, with the way I work.
- [16:41]
Scott Wapner
Haven't they, haven't, haven't they proven that those concerns are not well founded anymore?
- [16:45]
Jenny Harrington
It's way too early. I think we're way too early for anything regarding AI to be proven out yet. We just don't know how it's going to play out. But I know, I know.
- [16:53]
Scott Wapner
Why do you have so much conviction behind your Metta?
- [16:57]
Jenny Harrington
Mana makes their money differently, right? Like, every time I go on, every time I go on Facebook or Instagram, they're popping something in front of my face that I actually pathetically find incredibly compelling to buy. And that's just a different ad mechanism than, you know, than when I search. And I have, I mean, I think my search year over year on Google versus Quad and Grok and, and ChatGPT. I think my Google search personally is down by probably 95% even with Gemini. And so they're just not getting those ad dollars. And I think we're so early innings on this, that I don't know how it plays out. So my concern is just like that we don't know. But I want to, well, I mean.
- [17:35]
Scott Wapner
The stock hold on before you move on. I don't, I don't want to get off this point the stock performance, but I seemingly has voted in terms of how the market sees all this playing out.
- [17:46]
Jenny Harrington
Okay, so here's what I think.
- [17:47]
Scott Wapner
That is up 5% but in the last 12 months, here's the problem with.
- [17:51]
Jenny Harrington
2025, 2025 for the most part was, was a year where the story of a stock drove the share price more than the valuation, more than the revenues, more than the earnings. So if you could tell a good story about how I was going to benefit, the stock price went up. And so then we saw towards the end of the year we saw some reconciliation of that start to start to step in. Like look at what happened with CoreWeat, right? Core, we've got up to $170 a share or something. And then once, once that, that dialogue started to change during the year from telling me a story about how AI is going to be amazing to show me the dollars for it, things started to fade. So you saw that fade in, in Oracle after the bloom came off the rose, you know, with the $40 billion, whatever it was, you saw it start to change in Core. We've I think or I think I think Metta. Sorry. I think Alphabet still has more story tailwind pushing the shares up because they can prove it out more than they're like smaller, less proven peers but it's going to take them some time for the numbers to actually come about. I still like matter the best because when I look at it, to me there is still the most, the most assurance earnings growth ahead and it still.
- [19:01]
Josh Brown
Has the worst look at the story of the group.
- [19:04]
Scott Wapner
There is who knows as Brad Gerstner was saying when he was on the other day, who no longer owns it.
- [19:09]
Jenny Harrington
Here's the whole point. Josh says the worst right now.
- [19:12]
Josh Brown
Right now.
- [19:13]
Jenny Harrington
He says he doesn't say the worst revenue.
- [19:17]
Josh Brown
Oh, Jenny, Jenny. They're monetizing reels. They're monetizing reels like there's no tomorrow. We agree it's not a fundamental problem. Investors do not believe that the avenue that they're not substitute story with strategy. Investors don't believe the idea of Meta doing the spend that it's doing is going to have the same ROI payback that Alphabet obviously already is starting to see. And if they don't believe it just.
- [19:42]
Jenny Harrington
Too early Like a year, a year and a half or two years of the actual revenues of the actual earnings to start to show up before we can say who is going to be the winner.
- [19:50]
Bill Baruch
Where my concern lies is, is we're actually seeing search get more normalized. Traffic is down 20 some percent over the last few weeks on chat CBT but you're not really seeing it bump up in traffic onto Gemini or elsewhere. So I think that's where one of my concerns lies in what we see kind of develop over the next few weeks. But I also think there's too much negativity around Metta. There's a lot of support around 600 bucks, but it's going to have a very difficult time getting above that pre earnings level which was what, maybe 740 or so. So you know, I think right here this is, this is why you're seeing these other sectors start to benefit people. The puck is going elsewhere and that's, that's.
- [20:23]
Josh Brown
They're launching a lot of things though that they're not getting traction on. And you can't say that about Alphabet. What Alphabet has done successfully with Gemini is they've integrated it into all of their verticals from Gmail to regular Google search to docs drive you meta just can't, they can't point to that. We know that they are one of the preeminent users of AI to drive profitability in their, in their ad unit business. We understand that. But we're not seeing all these things they're launching get the same traction that we're seeing at Alphabet.
- [20:55]
Surat Sethi
But Bill's making a really important point that we've been kind of start of the show on. These are good stocks if you want to own them. But there's other stuff to do also and we can argue day and night as to what is matter going to do. Is Zuckerberg going to spend another trillion dollars to do this, etc. But if we are seeing clarity in other sectors, that's what we want to talk about. What is the opportunity other than the big seven?
- [21:16]
Scott Wapner
I want to, I want to pivot away from this because we're, we're running light on time for our A block today. And I want to get your reaction, Josh, to that story yesterday. These social media posts. President Trump trying to ban large institutional investors from buying more single family homes. I know it's a hard right turn from where we were.
- [21:35]
Josh Brown
Yeah.
- [21:35]
Scott Wapner
But nonetheless, your invitation homes was down a lot.
- [21:38]
Jenny Harrington
Yep.
- [21:39]
Scott Wapner
Blackstone was down a lot. There was stuff related to defense too that we can get into later on. But what's your reaction to this move in invitation? Today's a bit of a meager bounce back relative to the pullback yesterday.
- [21:53]
Josh Brown
Yeah. So the stock's been, the stock's been basically listless for over a year. I think it's just not been a great environment for the rental home business relative to a lot of other areas that people could be invested in. So it's definitely in the bottom portion of my own holdings. That being said, we have to differentiate between suites and policy and we have to understand that for political reasons, there have always been people raising issues with institutional ownership of single family homes for very obvious reasons. We have a lot of housing markets in this country where there's just not enough supply. Prices are absurd. They don't make sense relative to incomes. They don't make sense relative to the availability of mortgages. And any time that becomes a political issue in the headlines, we absolutely see a reaction in any of the institutions that have a publicly traded vehicle that are involved in this part of the market. But it's not legislation. So as an investor doesn't mean that you just turn a blind eye and say, forget it, it'll blow over. I think you do have to pay attention to a very real possibility of things changing here. They haven't changed yet.
- [22:59]
Scott Wapner
Blackstone responding to this post, saying our ownership of single family homes is about 2% of our real estate A and 0.5% of the overall firm. We've also been a net seller of homes over the last decade with our holdings down more than 1/5. That said, we believe our current portfolio portfolio is poised to continue to perform quite well and operate at the highest standards for residents. That's sort of Blackstone sticking up for itself. That stock was hit especially hard yesterday. It too is getting a bit of a bounce. So let's do this. Let's take a quick break. When we come back, we get more moves today from Bill Baruch. We'll get Jenny's reaction too, to what's going on with the defense area today. And later, a betting boom brawl. Josh Brown recently talked about the prediction markets. It caught the attention of Interactive Brokers founder and chairman Thomas Petterfy. He reached out to us after that segment and said, I disagree with everything you guys are saying. I said, well, why don't you come on and debate it? And he is, and he'll do it today. We're back in two.
- [24:04]
Surat Sethi
Before we had AT&T business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn. An influencer even livestream the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [24:29]
Scott Wapner
AT&T business Wireless connecting changes everything.
- [24:35]
Bill Baruch
What made you confident that you could.
- [24:37]
Jenny Harrington
Do something that hadn't been done before?
- [24:39]
Pippa Stevens
I have no fear of failure.
- [24:41]
Julia Boorstin
Trailblazing women, changing the game.
- [24:44]
Pippa Stevens
One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [24:53]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday, wherever you get your podcast.
- [25:16]
Jenny Harrington
Foreign.
- [25:18]
Scott Wapner
Let'S talk about some more moves that we have today from the investment committee. We're staying in the metal space. Okay, Bill, we'll go to you. You trim the GDX ETF and also gold and silver, the cf.
- [25:29]
Bill Baruch
Yeah.
- [25:29]
Scott Wapner
What's up?
- [25:30]
Bill Baruch
Yeah, so just we talked about just trying trimming in a rebalancing area. So gold and silver and the miners have had a tremendous run. I'm not negative on them necessarily, but I think there is some, some froth that is building. I think everybody could agree with me. You see silver headlines almost every day if you're looking for it. The thing here about miners specifically, the cash flow is going to be terrific. These, the cash flow is going to continue to increase and be an amazing driver of margins going forward. But I think at this point, if you're not locking in monetizing some of the move that you saw last year, you're probably doing it wrong. And what you're also seeing is you're seeing from exchanges, the CME Group group as well as the Shanghai Exchange, they're raising margins on silver. So I think and then you're also seeing the commodity fund rebalancing. So I think we could be over the next one to two to three weeks we could be a little more of a consolidation phase. And again, I'd like to rebalance some of that cash and be able to be on offense as we look into the back half of let's be clear.
- [26:26]
Scott Wapner
Too, for the purposes of this conversation, that all metals are not necessarily created equal. When you talk about what is perceived froth. If you want to look at gold and silver versus some of the industrial metals like copper, for example, where there's a report today that Reuters was citing that aid to boost copper demand 50% by 2040. More mines are needed to ensure supply they suggest but nonetheless that's a big number that would play to what exactly I'm talking about.
- [26:56]
Bill Baruch
If you look at the supply a chart of supply deficits and copper out through 20, 30, 35, it goes like this. The deficit continues to increase every single year going further out and we do like copper. The thing here is copper is also against the July highs on US priced copper. And we're starting to see with tariff fears a little bit more of spread between the US price of copper and the LME price of copper. So that's also where that froth sort of builds in. I actually bought on my, my commodity fund did buy copper futures this morning. I think there's a lot of support around 570. So I'm looking at that to kind of be a sticky area. But if you look at it, I still like the metals in general. What we're doing is rebalancing the big move in gold and silver and I have a bunch of things on my radar that I'm looking at buying look at like the basic materials etf, it's breaking out right now. There's a lot of places kind of within materials that you can maybe look at as well.
- [27:46]
Scott Wapner
Okay, so Jenny, you own Freeport, you own Rio Tinto, but you're selling Anglo American, which happened late in December as the year was coming to an end. But we haven't seen you since. Tell us more.
- [27:56]
Jenny Harrington
So this was just working out of a position in our international income strategy, its portfolio management. It is not a comment on metals. So Anglo we've owned since 2018, we've got 130% return on it. We've collected a ton in dividends, but they cut their dividend and the yield is now below 1%. That no longer fits for us. So in addition to that we were disappointed pointed in the BHP takeover attempt that failed. The restructuring has been slow. There's strategic uncertainty around the Tech Resources merger and no yield. So we're like, you know what, this doesn't fit this strategy.
- [28:27]
Scott Wapner
But then what you're saying though is that your, your positive view of the space is better represented by your continued ownership in Freeport in Rio.
- [28:34]
Jenny Harrington
Exactly. And Rio is interesting too because you've got some aluminum and some copper there. So to your point, you're not making a huge bet on any one metal. You're saying, hey, I like, like this space comprehensively.
- [28:44]
Scott Wapner
Pippa Stevens has the headlines for us.
- [28:46]
Pippa Stevens
Hey Scott, The Senate voted today to advance a measure to block President Trump from using military force within or against Venezuela until he gets approval from Congress. The vote came just days after President Nicolas Maduro's weekend arrest by U.S. forces. Five Republicans joined all 47 Democrats to send the resolution to the Senate floor. It's not clear when the final vote will be. Ukrainian President Voldemort Zelensky says a security agreement with the US Is ready to be finalized with President Trump. Kyiv has sought strong guarantees that Washington and other Western allies will come to its aid if Russia invades again following a cease fire agreement. The US Endorsed the idea of providing these guarantees for the first time earlier this week during talks in Paris and the Miami Dolphins fired coach Mike McDaniel today after the team finished the season seven and 10 and missed the playoffs for his second straight year. The Dolphins went 35 and 32 under McDaniel after four seasons. His departure comes as the team searches for a new general manager. Scott, back to you.
- [29:48]
Scott Wapner
Thank you very much for that, Pippa Stevens. Up next, Big showdown. We were talking about Interactive Brokers founder Thomas Petter Feet. He's fired up over this debate over the prediction markets. He'll join us next.
- [30:04]
Jenny Harrington
Not every sale happens at the register. Before AT&T business Wireless checking out customers on our mobile POS systems took too long.
- [30:12]
Julia Boorstin
Basically a staring contest where everyone loses.
- [30:15]
Jenny Harrington
It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sale or two. Sometimes I do miss the bonding time. Sometimes.
- [30:28]
Scott Wapner
AT&T business Wireless connecting changes everything.
- [30:34]
Bill Baruch
What made you confident that you could.
- [30:36]
Jenny Harrington
Do something that hadn't been done before?
- [30:38]
Pippa Stevens
I have no fear of failure.
- [30:40]
Julia Boorstin
Trailblazing women, Changing the game One of.
- [30:43]
Pippa Stevens
My favorite pieces of advice Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [30:52]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts, I am.
- [31:05]
Josh Brown
Sure there will be a lot of people taking these prediction market bets. Most of them, the more they play, will lose money. This is not the same as investing in the stock market. If I buy a stock and I'm wrong in the first three weeks of buying it, it doesn't go to zero. I just I have to hold it for longer. It's. It's a trade becomes an investment. If you're Wrong. On a prediction, it's zero. Go next. Like I. How much of an appetite do we really think there is for that?
- [31:32]
Scott Wapner
All right, well, that was our Josh Brown a couple of weeks ago as we debated prediction markets and how more and more companies are racing to get into that game. Our next guest, he saw the conversation live. He reached out to profess his profound disagreement with some of the points that were made. We invited him on and he accepted. He's Thomas Petterthey. He's the founder and chairman of Interactive Brokers, and he joins us now. So we're grateful that you watched and certainly that you reached out and even more so that you were willing to come on and have this conversation. Welcome.
- [32:01]
Thomas Peterffy
Yes, thank you very much for having me. So about 10 years ago, I came up with the idea of asking yes or no questions in a $1 payoff about simple questions so that the probability is equal to the right answer is equal to the probability that the answer will be yes or no. And this was an attempt to teach Interactive Brokers customers about the probabilistic nature of the future. Now, I admit that it has happened that, that some people picked up on this idea and they come up with questions about the romantic life of celebrities and other frivolous questions. But basically the idea was to focus on economic and climate indicators, which are very, very, I believe, serious questions, as you on your shows frequently debate the question of economic indicators that, that basically explain how the economy has worked up to now or in the past, but not in the future. So if you want to look at the future, these kind of questions are very good at getting the consensus opinion and they can serve as a hedging mechanism. And, you know, the fact that they can.
- [33:40]
Jenny Harrington
The.
- [33:41]
Thomas Peterffy
Some of the answers can. Answers can go to zero. Sure. Just like options can go to zero. That doesn't mean the stock options are. Or index options are not good trading vehicles calls and they are good investments. Right.
- [33:59]
Scott Wapner
I will also, I think it's worth a disclosure, too, that Interactive Brokers has also expanded into. Into prediction markets a couple of years ago. So you obviously see the business sense in doing so. And I'm not necessarily sure that you and Josh disagree on the, on the key point. I think that some of the original ideas behind these have been somewhat corrupted. I'm gonna invite Josh into the conversation and let him make whatever points he'd like to, and then you guys can hash this out.
- [34:31]
Josh Brown
Thomas, thank you. So, thank you so much for joining us. And I'm a big fan of what you've Built in interactive brokers. Congratulations on all your success. I'm also a bull on your stock, so.
- [34:42]
Thomas Peterffy
Thank you, Jeff.
- [34:43]
Josh Brown
Hopefully that buys me, that buys me a little bit of latitude, some goodwill to say this. Would you agree with me? Just because there is the presence of things like, I don't know, zero day till expiration options, and that they can be used. Well, that doesn't mean the majority of the people who are in that market are making money from it. You'd agree with that premise. Right?
- [35:07]
Thomas Peterffy
So as far as prediction markets are concerned, only 49.5% of the people make money and 50.5% of the people lose money. Yes.
- [35:21]
Josh Brown
On options, which you're comparing this to. 10% of options are exercised, 55 to 60% are closed before expiration, and then about 30 to 35% of options expire, worthless. That's okay. People can make money and lose money. I have no issue with that. I think my broader point, point was how big will the market really be for people who want to place bets on climate change, for example, or whether or not Marty supreme will win an Oscar or whatever the bet is? My point was that's not going to be larger than the stock market anytime soon, maybe ever. That's, that's. I was trying to draw the distinction between a place to place bets, which is fine and valid, versus a place to, to invest.
- [36:05]
Thomas Peterffy
I agree with you about frivolous questions, but there are, look, there are incredibly serious. Climate change, for example, is a very, very serious question. You cannot deny that the sea levels are rising an ace of an inch a year. Right. So that really portends one foot for the next hundred years. And as long as that rate prevails, I think it's okay because we have plenty of time to prepare for it. But should it speed up? I think people should know. And there are indications that it may speed up. So it is important so that we can prepare for these things. The other question is, for example, elections. Elections are a relatively poor way of determining where we go on the continuum in between free market economy and communist dictatorship. Right. It's, it's. These questions are more important than, frankly, stock price.
- [37:07]
Josh Brown
I agree with you. And I actually prefer them as an indicator on things like poll, elections versus polls, because people lie to polls, but when they're using money, they tend to tell the truth because they're putting their money at risk. So as an indicator, I like them. I think they're very powerful.
- [37:24]
Scott Wapner
Let me also make this point, Mr. Peter Fee, if I could, certainly in light of some of the recent news about, you know, using prediction markets to bet on military action, certain bets that might have been made that are being accused of being nefarious and how they were done, whether there's an insider trading angle in all of this that needs be to, to be dealt with. How do you think about all of that? As I said, you're in the business. We have a partnership with Kalshee now. Anybody from fanatics, FanDuel, Coinbase, DraftKings, Robinhood, everybody's racing to get in here. But what about that question?
- [38:01]
Thomas Peterffy
So you know, the CFTC requires us to survey for manipulation and you know, basically inside information and other things like that. And by the way, they are not supposed to list questions about war or military action and other questions like that are supposed to be prohibited. So I don't know how that got by. But so look, just like any market, especially at the beginning, things like, you know, this has to be refined and regulated as we go along and it will be. But I think that these markets will be much, much, much larger. I'm sorry, Josh. I do believe that these markets will be much, much larger than the securities market because you know, it's, it's, it's all the questions about our future.
- [39:04]
Scott Wapner
You make the last point.
- [39:05]
Josh Brown
I believe that there will be huge betting volumes in these markets. I think you and I agree with that. I just, I question whether we're not making enough of a delineation between an investment that's a stake in a company that you hold for the long term versus a market where you can go from one bet to the next, moving your money as you win and lose. I just, I think there's a distinction that should be drawn.
- [39:30]
Thomas Peterffy
I agree with you. But one more point I'd like to make. So long term questions like the deficits for 10 years from now and things like that are I think very important. And you should know that we pay interest on the, on the prevailing market value of the, of the answer that you have purchased. So it, if you, if you buy a 10 year question that will be resolved in 10 years, you, you get interest on the daily prevailing value of that, of, of that answer. And so if you say you buy something 20 cents and if it moves to 80 cents then the interest of course is four times as much as when, when you, when you bought it and the interest is half percent under fed funds rates.
- [40:27]
Scott Wapner
Mr. Peter Fee, I can't thank you enough for your willingness to come on and have this conversation. The next reach out communication wise is on our part. You come Back and you talk about the markets with us the next time. All right. Appreciate having you.
- [40:39]
Thomas Peterffy
Thank you very much. Thank you.
- [40:41]
Scott Wapner
We'll talk to you again soon. That's Thomas, Peter Fee, as we said. Up next, Josh Brown's best stocks in the market, the two names that he is highlighting today. Halftime's back after this. All right, we are back. I said we're going to highlight a couple of stocks today in the best stocks in the market according to Josh Brown. Your spotlights on energy, you've been focused here for, for a little bit and rightfully so given what we've seen of late from some names.
- [41:17]
Josh Brown
So what's cool about being focused in this energy area of the best stocks in the market is there haven't really been that many of these stocks like they are. They're kind of a very small part of the list relative to the obvious areas like financials and technology, where I could show you a different name almost every day. That being said, the list obviously has expanded this week. Obviously, obviously, we came in Monday, we had huge gaps higher in a lot of the biggest stocks, the energy patch. And I wanted to update the audience on some of these because we've been covering these bullishly throughout the course of this year. Valero, which is my favorite name of the refiners stock, looks great. Had a big gap up. It's digesting that gap, but really not giving much back here. This could be a gap and go. This is a breakout to a new high and it's an obvious beneficiary whenever people are looking to buy more energy, get more energy exposure to their portfolio. This is more a play on gasoline demand, though, than it is on raw oil prices.
- [42:15]
Scott Wapner
Really important question regarding this.
- [42:16]
Thomas Peterffy
Yeah.
- [42:18]
Scott Wapner
Because this name has been so much impacted recently by news events.
- [42:23]
Josh Brown
Yep.
- [42:24]
Scott Wapner
Is there any risk in the fact that the way, you know, as you pointed out in the beginning, a tweet here, a tweet there, an action here and action there, a pullback here, etc. And then this stock doesn't look like it does because it was so recently news driven 100%.
- [42:37]
Josh Brown
So I actually had this conversation with John Malloy at CNBC Pro. And the obvious thing, I guess the journalistic mindset would be let's write about energy stocks on Monday morning. Right. And I said, no, we are going to, we are going to allow these gaps. We are going to allow these gaps a couple of days to see how quickly they fade. And that was the mature decision. And John agreed with me. And look at Chevron. He gave all the money back. If you walked in Monday morning like a Muppet, bought Chevron, you gave it, gave it all back. So the, the idea is let's give it a couple of days because Judge, you raised the right point. The other two names just quickly before I get the, the hook around my neck. Baker Hughes. We have to talk about Baker Hughes. This is one one of the better acting stocks in the energy sector all year. It's energy services. It benefits from increased activity. Obviously Halliburton, Schlumberger, they're all hitting the list right now. These names should be on investors radar. And you know, there are a lot of other names here that we can get into. But I think like those are a good focus because they're all on the verge of major breakouts or like Valero, they broken out already.
- [43:47]
Scott Wapner
You own Chevron, Ron, you want to just comment on this area?
- [43:49]
Surat Sethi
Yeah, I own Chevron on Exxon Brick, I'm in Exxon. Personally I like these stocks for reasons that we just happened this week because they are diversifies in your portfolio. And even if oil goes to 5,055, you get global geopolitical uncertainty. And you want to own these stocks. High dividends, great cash flow and they provide that base in your portfolio.
- [44:08]
Bill Baruch
So the thing is here, the, the US refiners can't really process this Venezuela grade. So you have this big spike up. The froth is coming out. But the names like Schlumberger or SLB I really do like. I think you're seeing a very nice technical bottom. The infrastructure idea within the space is very bullish.
- [44:24]
Scott Wapner
All right, we're back right after this. Welcome back. I want to show you a picture here. That is the Treasury Secretary Scott Bessant. He's speaking right now in Minnesota. He's going to do some Q and A with our former colleague Michelle Caruso Cabrera coming up. It's at the Economic Club of Minnesota. We're going to monitor that. We'll certainly bring you any headlines that do come from that want to move to Uber and debate this stock, which has been broken down I think is fair to say it's been added today to the UBS quote decarb list for the first time in part driven by earnings growth and total return potential. So it's rare everybody on this desk owns it today. Jenny, what's, what's going on here? This obviously is related to autonomous and fears that whether it's Tesla or Waymo or any number of others are going to be a problem.
- [45:19]
Jenny Harrington
So I think this is this almost Goes back to my comments from the beginning where I don't really love just stories. I like looking at the actual numbers and this is a good time just to go to the numbers. So here are the numbers. Uber is on track for 18% revenue growth next year. That's huge. It's like $52 billion in revenue. Whatever, whatever. Oh, thanks. Sorry. Whatever way it goes with Autonomous, we believe that Uber's platform is going to be a major component in that. And so we don't, you know, we bought this a few years ago at $22 a share. It's up 280%. Do we love it as much today as we loved it then? Absolutely not. Do I love it when everyone else is in it? No. You know, I like being in things that nobody else.
- [46:00]
Bill Baruch
Other people.
- [46:01]
Scott Wapner
Other people, for that matter, on the committee are no longer in it.
- [46:04]
Jenny Harrington
Okay, but on this desk, we're all in it, right today. Right. And sure, other people have sold it, but the bottom line is it's still a popular stock. And I think, I think the bottom line is for as far future as I can see the next two or three, four years, there is tremendous earnings growth. There is tremendous, tremendous free cash flow generation. And I do believe that that platform will be used whichever direction Autonomous goes.
- [46:27]
Scott Wapner
What's your, what's your take on the stock?
- [46:29]
Surat Sethi
Look, I think the market with Autonomous grows. It's like when a coffee shop opens next to a Starbucks. Everybody.
- [46:36]
Scott Wapner
It's going to back this out. Guys, if you would. Six months maybe.
- [46:40]
Surat Sethi
There is demand. I like it. And Jenny, we've owned this in the twenties as well because it was a value stock when nobody else wanted it. But I'm also kind of looking, going to look at it when it breaks through 100, because it's no longer a value stock. It is a fully value stock that has growth attached to it. And that always concerns me because it's a cyclical as well, because the economy will then focus on where the stock is going to go.
- [47:02]
Bill Baruch
A free cash flow story gets back above 90 bucks. I think you're going to see some really strong tailwinds and flows.
- [47:07]
Scott Wapner
In what sense? Like what are the tailwinds? Why would flows start coming back in the name? Just because it gets, I mean, a.
- [47:13]
Bill Baruch
Very, very good technical setup. A lot of indicators will start turning up. And I think you start seeing the flows because it never. It may have corrected. It was still a really great year last year. And so on that sense, you're going to start to see a lot of the algos A lot of flows start to pick into that.
- [47:26]
Josh Brown
Number one, It's. It's number one. It's not a technology stock. It's in the transportation sector. If you're a manager and you're filling slots in your bucket, what transportation stocks do you want to own that have the highest growth versus the lowest valuation? This is like number one, two, and three on your list. It's the most obvious thing in the world. Number two, nothing would be better for Uber than an autonomous future where a quarter to a third to half the rides on their platform are being driven by Nvidia powered machines. Doesn't matter who owns them. Private equity could own them. Mercedes Benz, Toyota, Volvo, Tesla, Waymo, it doesn't matter. What matters is Uber's ticket rate goes up because there's not a human driver necessarily doing every single ride. This is the most obvious thing in the world to me. They are the demand aggregator. People like to say, oh, there's no switching cost, I'll just download the Waymo. Okay, well, you could have just downloaded the lift app all this time and you didn't.
- [48:23]
Jenny Harrington
It's like catnip.
- [48:24]
Josh Brown
It's 185 million global users already on the platform and their biggest cost is a about to literally go away. I don't even know what we're talking about.
- [48:35]
Jenny Harrington
Resist talking about.
- [48:36]
Josh Brown
Sorry.
- [48:37]
Scott Wapner
Let me just tell you what's coming up at 3 o'. Clock. We've got Adam Parker, Chris Harvey, Doug Clinton, Torsten Slok, but also Walter Isaacson is going to join us. He's going to talk about the future of capitalism. In the wake of some of what you've heard out of Washington, D.C. whether we need to rethink about what the future of that looks like, he will help us understand that. And I hope you'll join us for that conversation. Final trade. Sarah, what you got?
- [48:58]
Surat Sethi
Morgan Stanley. I think you got great tailwinds in the wealth management business.
- [49:01]
Bill Baruch
All right, Bill Baruch, Leidos. The chart is almost as beautiful as the balance sheet. Look out above 200, which is why you bought more. I bought more of it.
- [49:08]
Scott Wapner
Okay, Jenny.
- [49:09]
Jenny Harrington
Okay. Enterprise products, if you like energy but don't want commodity price exposure. Enterprises where it's at 6.9% yield.
- [49:15]
Josh Brown
JP, Amazon, bucking the tech trend, going higher. Stock looks great.
- [49:19]
Scott Wapner
All right, I'll see you three. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [49:32]
Julia Boorstin
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer what made you.
- [50:08]
Jenny Harrington
Confident that you could do something that.
- [50:10]
Julia Boorstin
Hadn'T been done before?
- [50:11]
Pippa Stevens
I have no fear of failure.
- [50:13]
Julia Boorstin
Trail blazing women changing makes game one.
- [50:16]
Pippa Stevens
Of my favorite pieces of advice. Think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [50:25]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.