2:00 p.m., barely got a mention but they do say in the cleveland district drilling in the marcellus and utica shales declined further. something to watch further for us. thank you for being with us. does it for us on "closing bell." much, much more coming up on "fast money." we'll send it right over to you, melissa lee, and the gang. >> thanks a lot, kelly. take a look here. this is a live shot of our delivering alpha conference where billionaire investor carl icahn is preparing to take the stage with black rox larry fink in an unprecedented debate moderated by our own scott wapner. just part of the incredible day of cnbc's delivering alpha conference. we are just going to get to it. we'll go to it live. but for now it's interesting because we've got a lot of big stories and the nexus of what has happened so far in the after hours session and what is about to happen is perhaps netflix. netflix coming out with blowout numbers. icahn sold at the end of june. >> international net adds were off the chart. total net adds were crazy. again, it comes down to the fact that they continue to add subscriptions. that's the story. i get the valuation is

ridiculous. everybody tries to shoot against the stock on valuation. you can't do it yet. until they start to miss on the net adds you've got to stay long the name even with the move we're seeing in the after hours. >> well be interesting to see if i kaub says anything about his exiting the position. we saw a big move in netflix since the end of june to now. brian kelly, in terms of blackrock's larry fink, what are you hoping to hear from him? >> i think it will be interesting having these two on. larry fink big into the bond market. carl icahn, he's short high yield. so that should be a fairly interesting discussion as well as in light of what he said today he likes high yield and three or four years down the road it may be a problem. that will be something i'm watching for. when it comes to netflix, guy has been on this name. last week i said take your profits on that. i still think you should be taking your profits here. but guy adami's the guy to talk to on this because he has been long and strong. >> he's got his own original conflict, too. >> guy adami, too.

>> streaming guy. >> in terms of gunlock he said the two-year yield closer to 10%. let's get straight to scott wapner, icahn and blackrock. >> one i think is overdue and one that certainly could not be more timely. i should also say in the spirit of the recently wrapped up world cup knowing what could happen over the next half hour or so, i have a yellow and red card and i will not hesitate to use it if i have to. larry, i begin with you. what for the record is your position on activism? >> there's a role for activism. a big role. we're the longest of longest-term investors. $2.2 trillion of money that we manage on behalf of clients, index funds. so we have to own companies that are poorly run and companies that are well run. we own all the companies.

unlike active investors, and a lot of money we manage active too, our investors can sell those stocks it if they hate the company. we have to own the stock whether we like it or not. and the -- so we have a much greater responsibility in working with companies and hopefully over a long term working with the companies to build the proper returns we expect from them. and sometimes we will even then even agitate, we will do it privately and quiet ly. the role of activists -- and activists have played a much larger role. there are good ones and there are some bad ones. and indeed according to a study by houlihan lofi we have voted with activists 45% of the time, almost 50%, the other 55%

again against. and i wrote this letter to shareholders -- to ceos, to 800 ceos in the world. >> a couple letters, right? >> well, i've done it over the years. this past one was for 800 of them. and we asked the management and their board to come back to us and tell us what are their long-term strategies, what are their long-term strategies related to growing the company, building the company, part one. part two, what is your long-term strategy about inorganic strategy, weth it's acquisitions or divestitures. and three, what is your long-term strategy related to share repurchases and dividends? that will give us a guide post to manage -- and it allows us to have a dialogue with those companies. we could disagree or agree with them. but if we agree with that strategy and then all of a

sudden for one reason we start seeing them buying back more shares, issuing debt against it, maybe high-yield debt, that may be good for the short-term strategy but it could be perilous for the long-term viability of the company. we will be hostilely against things like that. we're just one component of the ecosystem and everyone plays a role in it. and there are going to be times in that role where we're going to be a quiet partner with management if we believe the management is doing the right thing and other times we can be privately pushing. sometimes we could go alongside an activist who's doing things more openly. and so we're not against activists. we believe they play an important role in the ecosystem. many of the times. and other times i believe they activate for a short-term profit and may be impairing the

company. there are many activists, though, that own shares longer than mutual fund companies and they're still called activists. you can't just bunch everybody togeth together. but one thing is interesting which we've noted. last year $900 billion was spent on dividends and share repurchases. it's going up dramatically. i just can't believe we don't have more opportunity to reinvest. the key issue -- and i know carl agrees with this. if they can invest, a better return in reinvesting the company and sometimes that's what carl has done in the past or other activists, we want you to invest more. other companies, if they're doing a poor job, well, no, we want you to do something different. but what i'm worried about, and i'm deeply worried about, putting my social hat on, that we have seen way too much behavior toward share repurchases and stock repurchases. some of it with debt, some of it

with high-yield debt, which will impair a company and the survivability of the company and more importantly it could be one of the reasons, i'm not saying it is the reason, could be one of the reasons we have a below trend line economy. but we're not investing for the future as much as we should. >> do you want to respond? there's a lot there. what's your beef with larry and blackrock? because you've singled him out. >> you don't have a beef. >> you've singled him out on a number of occasions by name. >> well, first i'd like to know if i'm one of the good activists, you know. >> well, you are a good person. >> okay. larry's a good person. >> we actually like each other. >> yeah. >> you may like each other personally but it sounds like you don't think that carl necessarily is a good activist. >> i never said that. don't put my words in my mouth or carl's mouth. i think carl has played a great role. he's one of the best historical investors in our lifetimes. and at times he's played a

fantastic role in some companies. i'm not going to go into other companies. we may disagree. there's nothing wrong with a disagreement, but i do respect carl and what he has done. >> what i would say, to start the whole conversation, and again, i really respect larry a great deal. i want to make it clear. some of this may come out the wrong way. i hope it doesn't. i don't think i'll be a good activist at the end of what we say. but i have to say that i don't agree with what larry says. i think he believes what he says. but even those letters that you write, those letters are sort of in a way brilliant because they obfuscate the real issues. the real issue that really is -- they're brilliant because they're almost -- >> i'm not a politician. >> i really think they're a sales pitch to blackrock. and that's as simple as that. because you're going in that letter, and i have them, we

wrote them, but i'm not going to start reading them. but basically, they're telling these companies, hey, look, we'll protect you if you go by -- if you go out and issue debt because this is the long-term planning has to be that you can acquire and issue debt. go out and issue debt which is great for blackrock because the more debt out there, the more people buy, it the more people -- investment bankers love it. and blackrock makes more money. so what they say is we'll protect you. go buy debt, don't buy back stock. i agree with larry, by the way, a lot of these companies shouldn't buy back stock. but these companies even with mediocre managements, the median income is up 40%, 50% over the last few years. and you have managements in there that larry protects without question and you have to admit that you now are extremely important with your $4.8

trillion, which is more than a lot of countries have, and you're there and you protect these guys as long as they do what you want which is hey, don't buy back stock, go in and literal literally go in and plan for the future. plan for the future is a euphemism that larry uses i think in those letters to say issue more debt, buy more companies. because how do you plan for the future? these guys will go out and do capital spending. but what about these guys that you want them to issue debt and spend money that have lost 8, 10 billion dollars? let's take motorola. xander at motorola lost 8, 9 billion. but you wouldn't vote for me when i said let's do something about this. and we came in and said let's save the company. can't even get through to you guys when you vote. i would say my -- just to say --

larry said some nice stuff about me as an investor. so if he thinks i'm such a good investor and i have over -- we added up today just for the little discussion, we made for shareholders offer a trillion dollars, close to a trillion. if you look at the capital that went up -- >> he said you're a great investor. >> this is for shareholders, all shareholders. therefore, if i'm a great investor, why is he protecting companies when i go to be on that board and i want to be on a board, or my people. you know, we can put two people on the board or three people on the board. larry will say to me and you know you say this, i can't get a vol call. i say what do you do if you can't -- well, it's not right. we've got -- i say why isn't it right? you control $4 trillion, or 4.7 trillion, but you have to talk to some kid. so i talk to some kid.

i think he got out two years ago from -- maybe he's got a good degree. i don't know. and you talk to him. i say well, can we come see you? no, you can't come see me. i say what, are you larry fink? you talk like larry fink. so i say okay, screw it. i added it up. we've been in 10, 12 proxy fights over the last three, four years. maybe we got votes. lair has differe larry has different statistics. we were talking in there. we're friendly. i said my statistics are vastly different. i think they voted for us maybe two times out of 12. and i can read the companies off. i have them here. i would say this. that i think blackrock is an extremely dangerous company. and i mean this. not that larry's dangerous. he's a good guy. what blackrock is doing, and i really mean this, and i'll just

say what i mean, i'm too old to not say what i mean, and i don't hold back. that what is happening is very dangerous in our markets today. as larry said, high yields are now $1.5 trillion. 450 billion of that is in these etfs and what have you. more importantly, they are overpriced because if you go down and look at the index, and now i could get into some arcane stuff, but what a lot of these guys do, i suspect, including blackrock and the others, is these things, these are high-yield bonds, as you know, and most of you know if you trade them. quite illiquid. therefore, if somebody wants to buy them, they do what they call a cds, they sell insurance on them.

you buy five-year treasuries. and then you go and they buy insurance from a guy like me. as a result i personally think the illiquidity increases. so these high yields are extremely illiquid and extremely overpriced. in the index, this cbs index, if you look at them, which is amazing to me, if you really studied them, and i would bet that -- i bet you that really know this. i'm not saying because you don't follow things. but it's sort of an arcane question. 70% of them are high yields. these things have risk. and yet they're selling a 2 1/2% yield, which is insane. >> you're not really blaming larry for concerns that you have. >> blaming larry -- >> over high yield. >> i'm not blaming larry personally. i'm blaming blackrock.

absolutely -- >> let's let larry respond. please. >> i'd like to answer when i say blame. i don't blame him in the sense that they're doing something nefarious. i blame the whole situation. i don't blame larry for making money. that's his job. blackrock should make money. it's what they do. i really think that the letter is a brilliant obfuscation but nothing nefarious. but what i am saying is the situation is extremely dangerous in this country and what is going on because of blackrock, blackrock, let me just finish it because i really want to say what i'm saying. i'm not saying they're bad people. i'm saying that blackrock sells the concept of liquidity. you pay more at blackrock. when you go in and you go into at blackrock, the h.y., you're paying more basis points than you are at vanguard. and you know what it adds up to? just on the passive stuff, where all you're using is a dumb machine that just tells you,

here's a lot of money, go buy the index. it's a dumb machine. the state can do it like a goddamn highway. and they've got to use it to help the homeless people. >> i've got to get larry. >> seriously. i want to add one thing. >> larry deserves a chance to respond. >> he will. there is no liquidity. that's my point. and that's what's going to blow this up. and now i'll leave it and you answer. because i don't think there's liquidity. >> where do i begin? >> i was going to say that when you started. >> i did. let me talk about carl's characterization of the letter. >> when & you know what, larry? at the same time, why don't you talk about the genesis of the letter letter. i don't think people know what the genesis of the letter came from from a conversation you that had with ceos and why you wrote this letter in the first place because i think it's important. >> i was at a meeting where

there was an announcement that day where another activist was attacking a company i was with a bunch of different other ceos. and obviously i saw that one ceo who is a target left. but i must say i saw many other ceos quite worried and they were probably thinking about deviating from their long-term plans. and i said -- so my target actually was the ceos to focus on their long-term strategy and their plans. and my other issue was i truly believe the cnbcs of the world empower activists because they use their platform on media where most ceos don't to talk about how they're going to change the specifics of a company. and it just became that i thought the narrative was too asymmetric. and so we wanted to write a letter to put more pressure on companies to do the right

long-term thing. and we wanted them to communicate to us and all shareholders how they're going to have a strategy to build long-term value for shareholders including share repurchases and things like that. and i must say i would totally disagree with carl's characterization. the feedback has been terrific. we've had better dialogue with more companies worldwide than we've ever had before. we had -- so we're more engaged, and it's our responsibility representing our clients' money to be more engaged with more and more companies. and so we are starting to see what i would call better behavio behaviors. let me talk about carl's phone call to me and about my two-year graduate from some university. it is very important for us to have the highest fiduciary standards as possible.

i am not, unlike carl, an investor. i mean, i used to trade a lot. and more importantly, it would be wrong for the ceo to get involved in any one situation because i am not the trader. i'm not the portfolio manager. i'm not the team. and so we have developed at blackrock more people to focus on proxy issues than any firm in the world. we have this whole process that's separated from the office of the ceo. i will -- if i get a phone call from a carl or i get a phone call from a ceo, i will say i got this phone call, can you respond. and they may not be immediate. they may not be able to do all that because they are working with a lot of companies. that's the process. and i believe we have as strong a process as any firm in the world today. related to carl's characterization of etfs for a second, etfs create more price

transparency than anything that's in the bond market today, especially high yield. to trade etfs every minute of the day you have to have a valuation of every bond to trade it. but the most important thing, and this is why most people don't understand how etfs operate. etfs trade like a stock. for every buyer there has to be a seller that matches. so the reality, etfs in the bond market actually -- and there was a federal reserve study that confirmed 37 it actually enhances transparency and liquidity in the bond market. i'm not going to suggest whether high yield markets are rich or cheap. that's a whole different issue. but the actual etf process enhances liquidity. so when you compare that to a mutual fund, a mutual fund gets throughout the day orders through their clients, whether it's a buy order or a sell

order. after 4:00 the market closes. everything's done at once. that has much more issues related to how that is handled than the continuous matching buying and selling of etfs every day. whether it's a stock, a pool of stocks or a pool of bonds. but the characterization that it creates -- that bonds are mispriced, that's just some supply and demand issues. obviously, there's more demand. so i'm not going to characterize whether it's cheap or rich. and there's going to be some credit that i'm clearly going to be -- that are not mispriced and there are some credits that are probably enormously mispriced. but in every academic study it shows that etfs are actually creating more liquidity and more transparency. >> i'd like to answer what he just said. >> i want to get back to really the issue of -- >> no, this is an important

issue. what larry said is not untrue as he said it. those facts are true. but the fact he's missing, and here's the problem. i'm not here to single out blackrock. blackrock is there to make money. that's what larry does. does a great job of it. that's not the issue here. the issue is obviously for every seller there's a buyer. so sort of obfuscation. you want to buy an etf, there's a guy that's selling an etf. of course. how the hell do you buy it? however. >> toulouse of ahat's true of a. >> that's true of any stock. why do we have to say that? that's sort of known. i'm going to buy something, you have to sell it. so that is like a little bit i would say which i don't really mean to be that critical but it's like your letter. let me just go into what i'm saying. that look, the etf right now are

sold where you've got 2 trillion of these things hanging out there somewhere in the world. and what i am saying is very dangerous. i'm telling you, in this country, the united states. and what i'm saying to you is here is the major problem in it. okay? and this is why blackrock -- i'm critical of what is going on. you have wealth management people maybe sitting out here, a lot of you, all over the country saying, hey, look, mr. jones calls them or even an insurance company and says look, we can't make any income, we need income. the wealth management guy looks and says you can buy high yield. they don't even know, high yield, what are the risks? blackrock got a good name. they sit with 4.7 trillion. that's pretty good. and we can buy one of their etfs. okay. that sounds good. why not? they don't know the price.

they don't understand what the price is. they don't understand what the risk is. they buy that. now they keep buying it. blackrock is sort of the name on there. and this is one of the problems you had in '07. we had brand names on a lot of these housing things. but worse than that, they believe and the wealth management guys believe there is liquidity here. here's what's going on in this country. let me just give you another statistic. that there used to be new issues, issues every year. 700, 800 billion dollars of high yield going back three, four years. 600, 700 billion. of high yield. but the bankers would own 350 -- 40% of those. they would own them. they would have them in their portfolios. 350 billion of the 700 would sit there. that was a great buffer because if anything really happened.

with the high yield. if it was a critical thing. greets blew up. that's not even that bad. but something even worse would happen. everything starts pouring in to sell. there's 350 billion of them sitting there. and those banks were buying. today you have this year a trillion and a half bonds in this country going to be sold, not high yield. but a trillion and a half bonds will be sold. and you know how much the banks own of those? 40 billion only. it's gone down from 50% to 4% or 5%. the vocal rule on july 21st comes out and it's going to be worse. but the volcker rule is very important and it's good. i think the volcker rule is good. banks should not be a last resort to sell. banks should not have prop desks buying them. i'm not here to criticize the volcker rule. but what it is very bad for and what we are going to is we are going to a cliff.

i was telling my daughter, who does my twitter thing, i said here's a great cartoon. you get this partymobile and everybody in the party, in this mobile, they're all having a drink, and in the drink they're all having this drink and having fun. and you know who's pushing that thing? they're pushing it. it's larry fink and janet yellen. pushing that. and they're pushing the thing. but i've got it even better -- >> i don't think that's fair. >> i'll finish my cartoon and then you can yell at me. now they're pushing this thing. fair or not, somebody should have said this in '07. and i'm telling you, in '07 i talked like this but i never really came out, and we should say it. this party thing is going. every once in a while janet, she wants to put the brakes on it, and larry says no, let it go. and the people in the party are yelling no, no, don't touch those brakes, don't touch it, this is fun. and they're moving toward this cliff, see. and the cliff is there.

and this thing is going to go over this cliff. and you know what's going to destroy it? they're going to hit a black rock. that's right. that's what i'm saying. and that's what i think happened. and by the way, i am not criticizing -- i'm not criticizing you. you do what you have to do. >> carl. >> you're not lying to people. >> carl, i don't think that's a fair characterization. larry. janet yellen and the fed, you can criticize what they're doing psh -- >> i don't care if you think it's fair. >> okay. i want larry to respond. >> carl, once again, you're a good investor but you're wrong again. you're just dead wrong. >> i've been wrong a lot. >> we all have been. >> we've all been wrong. so tell me where i'm wrong. >> we only have 13 minutes. i could talk for an hour now. >> well, we've got crews.

>> i don't know where to start. but i found it humorous, and it was a good fantasy. so you know, maybe a twitter. but the reality is the capital markets are the capital markets. i don't control the capital markets. the whole world controls all the capital markets, all the participants. your characterization of the capital markets and the bond market is somewhat accurate related to that the volcker rule and dodd frank has changed our capital markets. the banks are playing -- they're not playing a buffer role anymore. they don't have their balance sheet embedded with a lot of securities. at the same time we've seen -- and we are fortunate in our society that we have now a capital market that's doing much of the financing. that's why this economy has grown much faster than europe, because they have a smaller capital market. all the changes that you've seen in china, that is because they have a weak capital market. so the capital market has played

a fantastic role for society to allow people to access equity and debt. we don't have the buffer. and this is why we have been advocating more exchanges, you know, more public exchanges for bonds. that's what's necessary. but your characterization of etfs as the issue, it's just flat out wrong. you don't even have the process of what etfs do is wrong. it is just a tool for buying exposure. and so you know, to characterize etfs that way, i would be happy to spend time with you over lunch. i'll pay. and teach you over lunch. because your characterizations are wrong. >> let him pay. >> no, i'll pay. i'll pay. >> i'll be happy to pay. >> i don't know where else to go. i thought we were talking about activism -- >> we were. >> we spent 90% of the time on high yield. and i told him i was going to talk about the whole thing. because i really feel strongly

he should have told you. you should have told him. >> it doesn't matter if i was told. i disagree with your characterization. and i'm not going to waste more time. >> do you think, back to activism, do you think there are bad activists out there? >> yes, i do. absolutely correct. i agree -- by the way, i agree with larry on -- i don't agree with the short-term stuff. and i think it is really bad. and i think a lot of these guys do it. they're not bad people, these activists. friends of mine. but hey, they've got a big fund. and these funds demand -- they want to see every quarter. and that's bad. that's one of the reasons i got out of that stuff. i don't want to show every quarter. and i agree with larry. a lot of these companies should not buy this stock back. that doesn't mean everyone. because i seriously mean it. if a company has a great deal of cash and doing very well and selling it at a low multiple like apple they should definitely buy this stock back because they cheat. but you shouldn't just go buy stock back for the sake of buying stocks because some

activist is bothering you. larry is completely right about that. he's right on the short-term thing. the same point. there are good activists that want to hold us for a long time. i've said myself, we've held things seven, eight-year average. to other guys they just want to push the damn thing, start a proxy fight, scare the hell out of the board, and that's where larry's good because he comes and says don't worry about it, i'm going to save you. and he should. but that doesn't mean that you are right not to hold these guys accountable. a lot of them like you and say you're a great man -- >> but they voted with the activists half the time. >> not for me they didn't. i look at mine and they didn't vote for me. i don't have the statistics. >> i have itt here. >> i'll bring a forensic guy here and we'll study it. >> you don't like them? >> i just like my own forensic guy. >> okay. when larry is an activist good? >> that's a generalization, when

they're good and when they're bad. >> when should they target a company? >> you're narrowing it to activists. all shareholders have a fiduciary responsibility and the fiduciary responsibility of making sure they're maximizing return on beof half of our clients who have entrusted us with our money, and so whether you're a provider of index products or an active mutual fund or an active pension fund or a pool of money that carl is managing, your job is to perform as highly as you can. and if you need to do something with a company that the board has been inadequate in pushing the management team to transform the company or to even sell the company if they're not going to be a net survivor, then that could play a role. but as carl side, what we are more concerned, there is a

growing network of activists who have now focused on more short-term proxy harassment that they're in for one or two years spike the stock and we're going to hold the stock for tens of years, we're left with the garbage. there has been some activists who said to some very large great u.s. companies cut your r&d by $10 billion. i'm not going to cite, it but there are a number of them. and quite frankly, if you cut the r&d the stock would go up dramatically. but according to his or her scientists and these few cases and we sat down with their scientists, if they cut their r&d their future product line -- >> you're right. in a lot of cases you're right. but in a lot of cases -- that's a problem. >> i didn't say 100%. >> you're going to see motorola

by not cutting had i r&d blew up 8, $9 billion. like the crazy uncle in the garage, he went in and built a goddamn motor. it didn't work. he spent 12 billion bucks and then the goddamn board gave him a bonus when he left. >> i didn't say it's all perfect. we're trying to do our best job deciphering where the -- >> it's not a general thing to say the cut shouldn't cut his r&d. >> i was referring to one example. >> one specific case. >> one specific case. >> i'm sure it's true. and you're very right. look, i am not here to defend activism as activism. there's a lot of problems with it. another problem you're not touching on with this high yield, let me just say it. i -- it's part of what i'm talking about. what you do is say okay, the ceo wants to make money. that's what he does. that's@median is up so high. so he is short term in many

cases. >> i agree. >> the ceo. >> that's the guy you should be yelling at. >> that's what i said. that's what my letter is addr s addressing. the letter asked him what are your long-term plans? and if we see them spiking up share repurchases and issuing high yields and that was -- >> but can i just say one thing? that the short-term thing that's very dangerous is okay, i won't buy back but what they're doing today, they're going out and borrowing money at a very low rate and buying another company, overpriced nap other company is overpriced and they're buying that company and it will be good for a year or two and then all of a sudden -- >> we agree with that. we voted against m&a activity for the same ideas. you look at the fervor in m&a. >> i think it's crazy. >> does it trouble you, carl, that companies now are spending a greater percentage of their cash flow on buybacks and dividends than they were, say, five years ago and at the same

time spending much less of it and a declining amount of it on invaugs? >> the word innovation is a very general word. there are a lot of ceos that don't have the capability of innovating correctly. and those are the ones that -- >> they'll be thrown out. >> well, you've got to do it. you're the guy that owns all the stock. you're much stronger than any activist could ever be. when you're larry fink go in dish don't want you doing it. the other guy you have. >> we have just as many -- >> you know what i mean. that doesn't make it better or worse. you should go in and tell them. if you go in and tell that guy, hey, what the hell are you doing here? what are you doing on your sfreech building the goddamn thing in the garage over there and spending $20 billion. they'll listen to you. they'll listen maybe a little to me. >> they listen to you. >> but mostly they won't listen to me. and believe me they'll listen to

you more than me. >> we are doing that. >> so if i call you tomorrow and tell you five companies you should go talk to and tell them they're really screwed up, you can tell them that? >> i would listen to you. i'll mention that. over lunch that i'm paying. i'll listen to you and i'll bounce that idea off the people. but my researchers may disagree with you. >> i will happy to talk to them. >> i promise i'll set it up. >> let me ask you another question about activism in general. then i want to get to a couple things in the market before we go. >> high yield? >> you cite the statistic of 45% of the time voting with the activists, which may surprise carl. it may frankly surprise some other people. i don't know. as the largest asset manager in the world, many times the biggest shareholder in some of these companies, should you -- is it fair to ask whether you should be more vocal so that

numbers like that aren't surprising. that people know when blackrock takes a stand in a proxy fight. >> my response really is to my investors in those products. it's not going to be a public advocate. our job is to try to maximize a return on behalf of them. and that is what we try to do every day. sometimes we do it well, other times we don't do it as well as we should. >> what does that mean to be a public guy? what does that mean? >> we don't have to be a public advocate because of our scale to have a conversation. so we can be -- we can have a conversati conversation. we are having conversations. we are working with management when we believe that's the proper strategy. and we're discussing issues when we may have disagreements with the management. so i believe we have elevated

our responsibilities in a serious way over the past five years since we took over bgi. i believe as an industry eph raised the standards as to what is the fiduciary responsibility of an investment manager owning stocks on behalf of your clients. and we will continue to be in deep dialogue with companies when we have issues. >> carl, let's talk about the market for a second. not high yield but the equity market. is it going to be higher at the end of the year than it is today? yes or no? >> i honestly have no idea. i really mean that. i don't mean to be facetious. >> i know you're negative. you've said it and you've said it on my program that you're negative about the market. >> three months or four months. but i'm saying something much more dire. i think we are heading to that cliff i talked about. but i can't tell you when we're getting to that cliff.

i don't think anybody can. we have the same problem i saw in '07. and in '07 i did the same stuff with the cds. and i said it and i talked about it but i never got as vocal as i am now because i don't have you to get me on these programs and you know, get me into these things. >> but now you do. >> yeah, well, next time relate to larry what we're talking about. >> we're talking about activism. >> it's okay with me. >> with a pit stop in high yield. >> i'll tell you what the trouble with this high-yield thing, and i keep saying it, is that's the thing -- the problem i think in the market is going to be twofold. but it really emanates from that. >> just like housing. >> it's not going down unless the equity market goes down. >> i don't agree with that by the way. i don't even agree with that. >> i think that a great deal -- i'll tell you where the high yield's going down and where it's dangerous. even if the equity is good.

what's going to happen is as interest rates go up there are a lot of people that don't understand. these people go to cocktail parties, this and that, mrs. jones. they go, wow, you're stupid, making 1%, 2%, i'm making 5 1/2%, and my wealth manager's so smart i'm not only making 5 1/2% but do you know my h.y. thing, one of the etf stocks -- they don't even understand they own this high yield stuff. not only is that h.y. going but it's going up for me and i just made 10% on it. so now they're making extra on this high yield. some of the interest rates go up. forget even the market. the interest rates are starting to go up. then they go and say -- go to the cocktail party and the wealth manager says, rightly so, you just made all this money, you're up 10%, 12%, skel the

high yield. because janet yellen's telling you it's going to go down. she's raising interest rates. let's sell it and go buy treasuries or go buy stocks. it could be the opposite. stocks go up, high yield gets killed. but when this tha guess kilds and there is a run there's nobody there to buy that stuff. i don't know what ramification that could have it short killed the market when the housing blou blew up. >> housing market is based on leverage. >> who's going to buy the high yields? >> i 100% disagree with that characterization. first of all, higher rates, higher interest rates, which i don't think we're going to see that much higher, higher interest rates are going to move money into the bond market, not less. most insurance companies, their duration of their liabilities are longer than their assets. you have pension funds.

you also have a transformation that's going on in the defined contribution market where we are using more target date type of funds to find contribution. as we're all in this room getting older and as you get older you have a higher concentration in fixed income. so the reality is demographically there's going to be a real need for high yield -- for fixed income. secondly, as efrinterest rates e higher, more pension funds are going to lock in the higher rates. they don't want volatility in the defined benefit plan. when we see that in a large way in the uk where most companies have defused their pension liabilities. the reality is if we have higher rates there's going to be more demand. i am not suggesting retail who owns maybe a high-yield product

or something. should they sell if they have a high concentration? that may happen. we don't see rates moving up that much. we believe the federal reserve will begin raising rates in september. it will be modest. we can't raise rates that much because we still have another year of the ecb aggressively buying. we can't afford as a country having the dollar much more appreciated. which puts a clamp on rates. i'm not here to suggest are some credit markets overpriced? sure. but i don't see -- you're going to have id iosyncratic failures like you always have. but you can't relate '07 to now because '07 was predicated on dramatic amounts of leverage. leverage at the consumer level.

we all know about the leverage within the banking system, leverage in single purpose corporations. you don't have it. wills less capital leverage today than we've seen in tens of years. so you don't have that fundamental. that is not to say that you're not going to have failures at specific companies and high yield's going to be impaired. the characterization that everybody's going to be running out of fixed income, i'll take that bet anytime. >> i want to answer that a little bit. >> we've got to go. >> i disagree. let me just say one thing. i'm a very simple guy. i really am. i look at things simply. i reduce it to a simple question. let me ask you, why should anybody -- in the next year you will admit there's going to be defalse from the oil companies, high yield. there's going to be a bunch of defaults. now, you have to admit that when that starts coming you rook at corporate a, you look at

a-righted corporates. and the a-rated corporates today it is narrow with high yields. you're getting maybe 2% less. why should any human being with any sense at all to get the extra 2% in a high yield buy the high yield instead of the corporate a? that's what i'm saying. >> i don't tell anybody what to own -- >> okay. good. >> more importantly, most high yield are owned by institutions not by mom and pop. they're matching liabilities. they may have an impairment. you may be right, they'll have that. but it's not '07 by any -- >> listen, i can't predict you've got an '08 again. i'm saying that we're riding for a fall in this. and i don't know where it ends. but there is definitely a great risk out there in what this high

yield is doing because it's so big. you've got to admit -- >> but it's so big -- >> it's a trillion and a half bucks out there. >> the whole market. >> the whole high yield. >> then you have to be bearish on equities. >> you didn't sell netflix because you thought the stock market was going to continue to go up, up, up, and up. >> that was a valuation. >> that razz really valuation. i didn't sell it because i was bearish or bullish on the market even though i am -- larry is right. if what i'm saying's going to happen, the market will fall. but i'm not telling you that's next month. maybe not even next year. they will go together in my opinion. but i can't tell you here, hey, you know, what i'm really saying i'm bearish on the market. but i am very bearish on the high yield. >> i couldn't help but notice netflix was up 10% on an earnings beat. >> did you sell too early? >> i know you made $2 billion but still.

>> i've always sold -- most of the time i've always sold too early or too soon. i made aum this money selling too early or too soon. you're never going to get the top. once in a while you get it. it's like vegas. sometimes you hit. that's not what i do. i try to buy them cheap and sell them. i'll show you my portfolio. i've always sold too soon or too late. it happens. >> last yes. yellen, the fed chair, was on the hill today. does she raise rates this year? she seemed to suggest they were getting really close. >> she has been so transparent about what her intentions are. she frames out where she believes the u.s. economy will be. she talks about where unemployment's going to be. if that happens the next three months she's raising rates. do we believe the economy's on a fairly positive track? yes. do we believe that will mean she'll raise rates? probably, yes. it is certain i think we can say

after listening to her and every other governor they want to raise rates but they're going to be data dependent and i actually believe she means it. it's going to be data dependent. so if you believe the economy's on a fairly stable path that we're going to have somewhat rising employment and we're going to have a gdp of 2 sxork or 3% in the second quarter and we have the same type of activities in the first part of the third quarter she's raising rates. but she can't do it that often or that high because we're living in a global society right now. we're interdependent. we have greek issues. we have china. so we have all these issues. and she mentioned that in her speech today. we'll see. i would like to see her raising rates because i want to -- i think if we start normalizing

interest rates in a patterned way we'll avoid carl's worries because it will create over a slow period of time more -- you will have the id yo sink ratic problems, which might be the oil sector as you suggested, might be there. but if we don't have it we don't have to have a u.s.-based problem. my worry is if there's going to be a problem that creates systemic risk that's not in this country which create the high yield issue you suggested. >> i think my point is why take the risk of the high yield? why take systemic risk for another percentage? >> we are going to continue this conversation maybe by the bar because the bar is open. >> thank you, everyone. >> and lord knows i need a drink. [ applause ] larry fink, carl icahn. >> carl icahn and larry fink just wrapping up right now with aur own scott wapner at the

delivering ala coverage. let's get to some reaction from their comments because there are some really interesting things particularly said about high yield, carl icahn believing we're heading to a 2007-like situation although not necessarily with the conclusion that we saw in 2008. larry fink saying no, carl, you are wrong, there are many differences between now and 2007. >> the leverage is what got us there in '07. that's the word. i think banks were levered anywhere from 40 to 50 to 1-ish. now the leverage is on the fed balance sheet 80-1. we have a $5 trillion balance sheet orrin top of 65, $70 billion. you do the math. i would say they're the least qualified people to have that kind of lefrmg. i'm in carl's kilometer p on this one. >> in terms of-4 y.g. as a trade larry fink was put in the position to be a defender of eyg primarily because it's an etf that blackrock sells to a lot of people. >> i'm more in the carl camp.

i'm long hyg puts. to me that's my best there. the question is if '07 was a systematic event, so the question is the high yield sector big enough to create a systematic event? and i think it is. the problem is we don't see the leverage. we didn't see the leverage in the mortgage market back in '06 and 07. only a few people did. but i get calls all the time about people putting out these new debt obligations that are essentially equity tied to the bond market. it's this whole menage of crazy things. we don't know how big that is. that's the problem. in terms of hyg i'm with carl. you should not own that for an extra 1 or 2%. >> they're discussion at the end the notion of rising rates. larry fink saying he'd like to see rates rise so they can be normaliz normalized. all the discussion where broadly jeff gundlach saying even though he believes janet yellen said

today there will be a rate hike, that doesn't necessarily mean there will be one. >> mr. fink is exactly kraekt correct. they should almost do it as floating a trial balloon in a way. we've seen yields go up and our markets have been just fine. so for all intents and purposes i think they kind of have to tear off the bandide right now and let's see how the market trades. >> the only problem is most market participants have not seen a rising rate environment and that's scary. you can't factor in what you have never witnessed before. >> good point there. as we head to break we are keeping an eye on two big earnings movers today. 234e9 flix soaring. intel higher in the after hours session. bob peck and chris rolen for instant reaction on both those stocks, how to trade them tomorrow morning when we come right back.

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that's why i have the spark cash card from capital one. i earn unlimited 2% cash back on everything i buy for my studio. ♪ and that unlimited 2% cash back from spark means thousands of dollars each year going back into my business... that's huge for my bottom line. what's in your wallet? did general mills eat its wheaties? is it strong enough to keep up with the worldwide evolution of food? i've got the exclusive with the ceo ken powell. plus want to find the next big biotech deal? i've got advice you cannot afford to miss. "mad money" is next. all right. let's hit the biggest headlines from both earnings calls on netflix and intel. let's kick it off with bob peck of suntrust on netflix. bob, big headline here. >> the big takeaway is they obviously blew away the numbers and blew away the guidance as well. couple things to keep an eye on,

though. the costs continue to rise faster than revenues. both the cost of acquire customers as well as the content spend. and they also pulled back a little on china penetration. we'll see if they can enter the market next year in china. >> chris roland of fbr on intel. what was the big headline to you? >> pcs definitely better than feared here. additionally there were some disclosures about tick-tock. and it seems like that's changing actually to tick-tock tock as moore's law they admit is starting to break down. but intel will be up tomorrow. >> all right. so interesting to see this chart on init will here, dan. you've been following intel. you've been bearish intel all the right times, actually, into this earnings. >> last night we talked about them, said the sentiment was really poor heading into this print here. so to me it had to be a cover below $30 into the print. and i'm going to tell you one thing, it's already down a few percent into the highs in the after market here. i was hoping to see a $32 relief rally. i think you short it because a lot of the things that they said here i think the guidance was

fine for q3 but if china weakens dramatically, this is going to be again in the 20s and possibly as low as 26 and i think you probably get a good entry tomorrow on the short side. >> we're off the after hours session highs. we were making the point in the green room that even with the pop and the highs in the after hours session we're make up grund that we lost overt past couple few weeks. >> dan's been spot on for a while. this quarter as good, good enough to get a relief rally like we've seen but you look at some of the metrics, desktops down 22% year over year. it's not good. margins a little bit better, yes, but declining from the peaks that we've seen. so i'm sort of in dan's camp. if it gets up to 33 you probably sell it again. >> chris, quickly back to you. we've got skeptics here on the desk. what do you tell clients tomorrow morning? >> i'm a buyer here at 31, 32. i think we've got a mid 30s move coming here. pc again is better than feared. it's not dead yet. and windows 10, it won't be super strong but it will probably get this thing moving

again. >> let's trade netflix here. brian kelly, amazing move in the after hours session. >> amazing. amazing move. i would suspect some of it some short covering out there. i will still go in the cam that up take profits here. doesn't mean you have to short netflix but exactly what bob was talking about, their costs rin creasing and they have other on this treadmill where they have to come out with this new content. there's never been a company that's been continuously able to come out with this new content. not saying they're a great company. i'm just saying it's up so much take a little off the table. >> i don't know who could be short. doesn't have a huge short interest. and the shorts got rolled pretty badly over the course of the last couple of months. but for me i still think it's a sell. i think if you're long you have to sell this name. i'm worried about international growth. that used to be a huge tailwind. licensing is a huge issue for these guys. and i think people are taking a little bit too lightly. >> bob peck, in about ten seconds' time, tomorrow morning what do you tell clients? with this 10% pop in the shares in the after hours. >> we agree with b.k. and steve there and the main reason why valuation when you look at it,

you're talking about 100 times ebidta this year, 75 times next year or 50 times '017. i think a lot of perfection's in here. >> thanks to bob peck and chris roland. i'm melissa lee. see you tomorrow at >> my mission is simple, to make you money. i'm here to level the playing field for all investors. there's always a bull market somewhere, and i promise to help you find it. "mad money" starts now. hey, i'm cramer! welcome to "mad money." welcome to cramerica. other people want to make friend, i'm just trying to save you a little money. my job is not just to entertain you, but to teach you and educate you, so call me at 800-743-cnbc or tweet me @jimcramer. this market, we know, it's had a huge run. we've seen the dow jones industrial average almost triple since the