i'm bob massi.i'll see you next. man vocalizing ] trump does not need the gop establishmento d defeat hillary clinton in november. that's it for us. good night. > announcer: this show has never been sololely about invemements. we havave talked about anything that have afaffeed people and their money. from fox business headadquarters new york city, the new " "wall street week." >> welcome to wall s street w we i'm m anony scaramucci. gagar will be i'm gary kaminsky.

wh's a long-termrm investor to do? we'll start by asking one the greatest value invtors of the lastwo decades. bob stein, i want t to start th the political climate.. does any of that come into y y philosophy for t the investing. >> what's going to bomome w and how does it effefect the fre cashsh fw of comnies or industriese arlooking at butt we can't twhroins all thihs uff from polititicly active people. gary: thct that you have the politicaextremes going on in this cycle? >> t market, 80% of th

market. hedge funds that areren't there with the spreads anynymore. when theraradi has become ridiculous. thananalysts are look at if somebobodyas bten th estimates orot. have record volatily we takedvantage of it. gary: so you working more on the fundamentals and leson the news and currents formation that's out there. >> there is a differenceetween investment decision and marketecision. most anasts, there are real companieies behind those stocks. and you have to value e the businesssses. the values of those businees doothange as rapid as the stock prices do. ga: we'll get into the specific compapanies later. by want t to address two things

yoyou and i have spoken about. the first is the differencnce betweeeen buying an index funden buying a an active manage more picks individual stocks.s. and the second thing is s you he a philosopophy, you don't want o talklk to company management, yu upon want to look at the numbmbers. so s should people be thinking about index or thinknking about active management, underststandg you are an a active manager who produced outside resesults agait the inindex over the years? >> believe it's people'sobob to find active managers. the governor of pennsylvanania says there is s no risk in the indexes. ththey bought enron, all the moe is goi into deking. of net flex eragflix and azozon.

it's crereating pockets of overvaluation in the iexex. gary: the index hass beaten 90% of active managers iff y quantitative easing nce 1999. >> i don't lk k at statitistics. if y you put $1000ur fund it's now worth $60,0. gary: you hear exetivecome on air and talk about eir resus. you always told me you don't't want to do that. >> long-term performrmance, the people w who tear about individl companies. the lolongerm performance of the people who m mthe fewest errors. it's the mag tiewcwched yoyour r thatat determines your long-term performance.

if they don't t e about the people w whoarch over the cliffs trying to find it. if the 4 48 years in this indusy i nevever had a management ever tell me or ever sasay you don't vate my ststock, you are going to get burned because e we have oblems we can't solve. whwhy would i ask somebody or tk to managagement. i care about manemement but i look behind the mbmbers. we'll ta about looking b behind the numbers day and thehe falsy going on iaccounting today. thony:ndex investing, you buy in wle. value investing. inside or outstside that index that are f fundamentally longer-term attractive t than te index. by the's super harfor the average inveor to understand the fference. how would you summit u 30 seconds.

>> find people to mana your moy -- unless they are going too the work -- we create volumes of informati on every mpany we look at. loing behind the numbers. if you don't have at ability, then i guess you he to bite index. but there is no guarte if you don't wanto be in a plane being flby robot. want anthony scaramucci flying thahat plane. gary:: we'll be right back. >> aouncer: next bob olstein tes you stocks that are under va

i asasked my dentist if an electricic toothbrush was going toto can better than a manuaual. he said sure...but don't get just any one. get one ininspired by dentists, with a r round brush head. go pro with h oral-b. oral-b's rounded brushshheo break up p plaque and rotates to sweepep it away. and oral-b delivers s a clinically pron superirior clean versus sonicaree diamondclean. my mouth feels supuper clean! clinically pron superirior oral-b. know youou're getting a superior clelean. i'm never going back to a manual brush. gary: we are back with b

olstein of capital m management. gigives some ideas what you find tractive? > what we find attractive is ususually what other peoeople fd in trorouble. getting the right prprice is the key for long-termrm invnvesting. bebed, bath and beyond be everybody hates itit, we think this companyny is real, it's relelevavant. the r nins will drop to 10%. that's enough tproduce $6 a share. we like the problemsause we get the righprice. we thiquity cacapital can move into the stock. i remember talking about petsrt. this company is the type of stock under valued, 10% free cash flow.w. gagarywhen stocks arare adading

count average retail invesestor gets scad d and starts selling them. >> they sellhem to us. you could have a s stock -- >> a vue trackck is where the problem is not team m prairie le we think in -- is nonot temporay like in bed bat. and basically you wa to stay ay from it. >> it looks attractiven a valuation basis. but that stock is jammedn.n. >> you can have a stock chat 25 times earnings and a stk expense at 10 times earnings. you have to do you homomework. gary: you made a legendary cls on lucent t wh i believe it was ththe most widelshelled secutyty ananyone vestors around the countrtry. it became publblic in the mid-90s.

then was a high flye buasas you points out. you were n negative on it. it doubled andveventually collapsed.d. what are some of the names t tt have the redlagsmost overvalues wrtstocprice esn't line up? >> i wld say it's netflix. at to me is so unrealistic. they are in a coetite envinment. they are spending biions. $120 million i in earnings which are not real eararnings because ththey are getting stock compensation back. a llion dollars is being spepent inrogramming. i would worry abt the $2 billion. gary: me iestors are look at the number of new subscrerers. your points s ey are putting them as subscrcribers but they e losing money o object a cash flw basis.

>> the businesmodel says thehey have to buy y more and more programming to keep theieir ogogmming relevant. 20%. 20% of all expenditures s on programs make it. they h have $12 billion in fute liabilities. it o one of the most overvalued stocksn my history. anthony scaramucucciou were crititicizing amazon and stocksp since then. >> i said netflix was ththe st overvalued.. the stock wass $ $129. amazon is if you w werjust the earning, for the fact thee is full payouout th no cash flow and they add bacack ock mpmpensation. there is no frfreeash flow the. ththeyave a good business model. but wh they hahave gone from $4

billion to $135 billion in sales and there is stillo o free cash flow. anthonycacaramucci you are looking for shsh that treeches yourotottom line. >> the bulls say it will becomoe profitable at some point i i time. i buy all mymy goods in amazon t i wouldn't't invest in it, it's too much risisk. >> i how do i protectyself he if i'm ainvevestor. >> anthony is s gointo fly a plane. he's probably had two o yes of lessssons. anthony: you don't have to worry, i'm never goi to be flyi a pne because i understand r risk magement. valuinvestors are of apauded for their rise be nagement.

their risk managemen what are some your risk manages. >> free cash fw. we buy companies with 9% free cash flow. whdo they y have them? valuedompanies, what great about valued comninies is while you are waiting for thpublic to know at gng on. you are addingo the value. free cash flow is our safet net. gary: ay right there, we'll be back with re in a few minus. >> annouer: coming up. kyle bass breaking news onhis sh talking about a looming recession in t u.s. is he right? 'll break it down why bob

olstein,nd melelis francis next. you shouldn't have to go far

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lia: this is one of the flash poin to. there are so many things gng on. yoyou look at earnings this quarter which are ojojected to be very weak. but ererare a lot of different dataoioint piling up and not looking great. add to that, whave t w weakest recovery from thfifinancial cris ever in history. anthere are a t of factors popointing out the weakness. >> the stock market is up.p. it's b back all-time high. melissa: does that give e someby a a job or increase their wages? it's only one aspe to it. we a look at stagnant wages in this country. rough earning season we have seenhe profits aren't that great at u. s-corporations.. when you look at chihina it

should be a red flag.. first it was property,y, then china's stock market. then it turned io chi credit bubble proems. gary: i thinknk donald trump sad 100%. sam zell saiwewe'll definitely have a a recession later this year. do y agreeith that and does it matter wh you are thinkining ababoutnvestment? way wonder about is somethi nobodys talking about. we are finding 8, 9, 10% free cash flow w yield companies whih tells us there is still room not tied to thearket. >> 2 to 3 years. >> what i worry abobout is the

fact there ia recession in chinis already in the market. anthony scaramucci thiis a tale of t two different countri. ththe middle class is stagnatin. what can be done about tha melissa: theederal resve juiced the markets and f forced people to o go out and chase yet yields. d and chase yields the middle class jobpeople can count on are ge. so many people arerying to ve and part-time and minimum wage jobs. we have seen a great dive. i'm afraid of what the remed is. a lot of t jobhave to do with comter programming and technology and things you u ne to be trained for.

these arare e jobs going overseas. but that's not a quickck fix. sandndra: donald trp has won over so ny voters by stickin to the economyndaking things bett. anthony scaramuccio you think government c cure the problems melissa is talkingbout? sand: we don't't want to look to govent to cureur ecomic woes. but weeed to rieve business of somof the regulatioions weighing them down. obamacare hahas been difficult o a lot of companies. >> with frfree cash flow, what's ththe unemployment plate this country. anthon between 5% and 10%.

>> everybody is complaing. where are in business to make money for our shareholrs, and thatat c critical. gary: arare you trying to make e point could you veve problems in china and the unit states but as an vestor you can still find companies that willer turns to investors? 23 i'm a vwer his ogram, y should i even care if ther is a recession.. if you work ininancial servrvices or the energy space, you haven't been in n a reission, you have bn in a depreson. so i just ignonore i all? >> imy business m not aa politician, i'm not in govement. people miread d p people hired e them money. since e crusades there is no

person on this ear who h projececd where the market is going to a rularity. melissa: government is important, one emple, the war on banks. talk about break up p the big banks and confiscatiting their ofits. look at hillars ties to wall street. ththat's the life blood this country. gary: maybe she should vililify government. ththere are more crooks in government. melissa: youou knead banks givig consumers credit to keep the economy flowing. every time they crack k down on babanks they have to raise feeso it's hararder on the consumer. this is one examplple of havinga govemement so hostile to bubusiness and the economy >> the q queion i have for all

of you, the next 2 to 3 yeyes bullish r stocks mel. heher: it depends on who is elected. >> you think a replican would be betr? melissa: yes sandra: we know the polieses woululd be more business friendl and taxes in this coununtry. they are a huge burden oththe american consumer and bininess. gary: b bob you said who wins te election w't affecect your business prossss. who do you thinkould be best for the economy? >> i can't answer at one because i dot know. people say a lot othin. trumwants to change everything, llary has more experience. i just don'to o out there. i look what ththe's gogointo happenen. garyyou look at frfree cash flow. >> you got i it.

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becausu can't beat zero heartbu i take prilosec each morning for my fquent heartburn ahhh the sweet taste of victcto! prilosec otc. . one pill ea morning. 24 hours. zero heartrtburn. does not need the gop establishmento deat hillary clinton in november. that's it for us. good night. >> announcer: is show has ner beenololely about investmements. we havtalked about anything that have afcted people and eir money. from fox business headarters in new york city, the new "ll street week." >> welcome to wall seet w wk. i'm thony scaramucci.