valuation never matters. it's sentiment we're doing a tv show with tony and still talking about how expensive it is. the company has a ton of momentum the stock has been over valued for a decade it hasn't mattered once in ten years. tesla is unique. i don't think you can compare it to other auto makers i understand they will all launch evs and that will become a bigger part of the industry. what happens is you get so many public offerings of new electric vehicle plays. new hydrogen fuel cell plays nay will take fisker public structure. you have the fuel cell which is a $12 billion enterprise value what ends up happening is they choke the market with competie ing versions of tesla. that is what happened with the dot coms it's not that tesla will stumble fundamentally. they clearly have momentum in what they are doing. if those three are successful then you'll have six then you'll have 12. then you'll have 25 publicly traded equities that investors can choose between they will do secondary offerings. that's whe

valuation -- how do valuations look on that basis? >> it is high.t checked it in the last few days but it is in the vicinity of 30. i think all the way back to 1881, the historical average is more in the high teens. so it is high, but it has been i've for a while. ratio got upcape over 45. it could go up from here. i think of it as a kind of risky situation where our models, which were estimated over historical data, may not apply now. your sense ofe psychology and human history to judge what might happen now. ofoline: indeed, many sort fall on their sword talking about history when we meet such unprecedented times. in terms of also the psychology of the retail investor, the height that we get around ,ertain stocks like hertz basically a bankrupt country -- pickup -- bankrupt company. if you had to be a demand, which i am sure you are not, do you think that this rally can be sustained, and do you think retail will feed into that the same way? >> i have questionnaire survey data on my website. they are more confident at the moment about a possible cr

what you need to focus on is relative valuations. when the interest rate is pinned we are roughly the 10-year basis point and that is running deeply negative that growth over cycles is expected to be 2% on the normal basis. as long as that backdrop persists where you have that rate stocks, all things equal are attractive when you make all things equal >> when we talked about negative real yields. >> we throw these terms around to sound smart when you own government bonds, you are losing money adjusted for inflation. yet, people keep buying bonds. that's the hard part to understand i think there is a logic to buying bonds this is not talked about enough. there is a chance, let's say, the virus mutates. going to something larger, then there is a chance of a deflationary spiral. if that happens, your only real health against that is to fault free government risk you only have three choices for that, jgb, german bund and the treasury the outside of that bell is long equities >> look at the 10-year this morning, it is below .6%. if you bu

so the valuations have gone up a lot. and so that's why we're sort of scaling back a little bit in terms of the weightings in a lot of the big tech stocks we own amazon but not as much as we did earlier we used to own zoom. we're out of that one. but we're buying cheaper names we go, well, we think automotive is recovering. so we're looking at the semiconductor names that are heavily levered towards automotive and industrial which are trading much better in the sense that are a lot cheaper they're not up for the year. and so that's how we're trying to reposition the portfolio to manage on days like today. i mean we're making none day which is great because, as you said, said the video game stocks are up it is helping against the long wez have which are do you remember so i think balance and resizing your positions daily is critical in times like this valuations are pretty high >> those shorts that you mentioned typically, the kind of cyclical stocks, why did you up the shorts on them a couple weeks ago? clearly valuation

the valuation would be $44 billion.t is in talks with investors to raise $1 billion at a price of $275 a share. raising about a billion dollars at a price of $275 a share. unlikely to be completed before the fall and terms could change. spacex not immediately responding to a request for comment. spacex in talks to raise new capital, $44 billion, according to people familiar with the matter. we will be talking about this later on when we talk about tesla. this is bloomberg. ♪ ♪ vonnie: this is bloomberg markets. i'm vonnie quinn. got some disappointing jobless data but not entirely unexpected, given the situation in the country is not improving for those 60 million people on continuing claims. let's bring in our correspondent michael mckee. the biggest number of claims since march, but of course it is, because we are not seeing the economy is open, and the ones that are only putting the minimum amount of people that to work. mike: and a lot of people are no longer working as covid spreads across the country. governors ar

it's not about valuation but it is about there could be even we stop talking about doj stuff, we stop talking about regulatory pressure i'm not jumping out of a window on amazon. i just think that to have the expectation that they have the catalyst that they had during covid-19 to get the valuation higher, i don't see that. >> by the way, just come to think of it, guy, you'll definitely be tuning in tomorrow we have a football interview on "closing bell" tomorrow. the mls commissioner the day mls gets back to the season again. so there we go. >> riveting. that's hot that's hot. >> we got more on this special bonus hour of "fast money. no more football, i promise. coming up, we want to know what stock questions you have tweet them to our cnbc fast money and we'll answer them live but first, why the latest drop in mortgage bailouts might r eaally signal more pain ahd fothe housing market we'll explain when we come back. experience the adventure of a bigger world in a highly capable lexus suv at the golden opportunity sales event. lease the 2020 nx 300 for $339 a month for 36 months. exp

all these value plays are trading at trough valuations so my downside is limited there. i'd rather be a buyer of that than holding onto limited upside. >> let's get some more analysis on tech. it will be a big week for tech earnings the sector already hit hard this week carter says there are a few names in the space flashing even bigger warning signs >> it was a bad week for tech. not fatal, but tech worst sector on the week. what we also know is we're approaching a record that was only set one time before, which is to say the sector, s&p 500 technology, has now gone 96 sessions without having three down days in a row the longest stretch ever was 108. inve it was in the july to december period of 2004 after it ended, tech dropped 15%, twice the rate of the market drop in the period. let's look at a few charts what we know is that key tech stocks and by inference tech sectors and tech aggregates are all breaking trends. the first is apple apple is a tremendous performer. we know it's up 26% year to date you can see the well-defined trend line in effect since the march low

finally, valuations. you were noting some of these stocks been a little bit over valued five buckets and a lot to think about. >> certainly is. thank you. almost flat. today's session we already saw a number of new highs. microsoft, new record high today. pete you took notice of that apple hit a new record high. peleton, the stay at home stock, a new high today the analysts giving it a street high price target here on this one. steve, what do you stick with that is still fairly valued? >> i think you stick with what's got you here away from the ones that are in the stratoverse like square it's a problem if you look at the others, we too often, not me, perhaps not people on the panel come on and apologize for these big cap tech stocks doing so well and try to find a reason for why it's so wrong and so bad they deserve to be where they are. their growth has accelerated as more people stay at home and work from home you pull 5g, which i think will be the biggest technology innovation since the cloud you pull

andyou're starting to get street analysts question the valuation. bonawyn, i know you saw this call out on apple from goldman sachs basically saying the stock price is unsustainable they're questioning the launch of the 5g phone, saying it could be delayed by a month or so. they're starting to question this run that we've seen straight off of the march bottom to where we are right now. the stock finished down by more than 4% in today's session what do you think happened in today's trade and do you think it lasts for more than today >> that's a great question i tend to agree in large part with what karen said this is a momentum play. if we look back to a lot of the comments made think about move higher in large cap tech, this was never really a valuation play at least that wasn't the argument for these things going forward. really what it was was a flight to what is perceived value we are seeing rotations into energy, industrials, rails and some of the other names. what gives me pause is when i start to see rotation into names like some of the airlin

it will trade at a premium valuation but to guy's point here that valuation is a bit hefty.-term view here. >> we'll take one last question from twitter our viewer courtney is a big fan. thank you she says and asks what do you think of tencent and alibaba? >> i'm long on those stocks. i've been long for many years. the breakout in both of them this year, tencent broke out early in the year. all-time highs, the five-year chart looks fantastic but enough about the charts you had had a dynamic withquidi driver the valuation is attractive relative to mega cap tech and where you can have market dominance on e commerce and cloud. some of the same in amazon not too late to get into both of those plays. alibaba is a better valuation. >> thanks, guys. thanks, flip, for being part of the show. >> guy, dan, tim, fast money traders. continue to send the questions because we're back in the same slot tomorrow. yeah, another supersized show. don't go anywhere, by the way. stay tuned because "shark tank" is up next we're going through a really tough time right now, all around the world. and

see an outright decline in tech valuations.here has been so much crowding and selection names and portions of tech, software in the services groups where investors have had no tremendous amount of capital. you may see a modest rotation out of those groups. catcheral it should be a up, not his sara lee a massive selloff even though valuations do look somewhat extended. that's a big if. i don't have a ton of conviction that we are going to have this riproaring economy in the second half of this year and 2021. we are still hiding in those defensive groups. e how manyi'm people have high levels of conviction about anything right now. with you to catch up as always, gina martin adams. our colleague sonali basak pointing out that the cfo just said may and june are the easy months due to the government stimulus plan. out,any of the loans taken they have been so supported by the amount of fiscal help we had through those couple of months. will that assistance be there for the next several months? lisa: people are expecting a one upping

the valuation is ridiculous. think you can stay with it into earnings but they report at the end of the month july 30th, that's one where you got to take profits ahead of earnings, understanding it could ratchet higher, the prudent thing, the pragmatic thing to do is take money off the table in earnings that day. >> embedded in the question, question on zoom i mean, that's why i said multi layered. there is an ask about etsy dan and also about zoom. where do you go? >> zoom is interesting the stock is up 300% on the year and an $80 billion market cap trading 43 times sales and that sounds crazy except that this is obviously one of the single best companies positioned for this kind of work from home school from home sort of environment. i think the fact that it doesn't sell off tells you that people think that people are going to continue to work from home for the time being, at least until there is more detailed therapies or better visibility on vaccines and that schools are going to start adopting this and then

valuations there have been pretty stable. thank you so much, roche ganguly.raj it is time for a look at the bloomberg business flash. bill ackman's company has increased the size of its ipo. they are now seeking $4 billion for an unspecified acquisition. his filings have singled out large companies as potential targets. the company says it will also be targeting ipo candidates and family-owned businesses. one of the unlucky investors caught up in the waste management debt debacle is the federal reserve. the fed by $3 million of the company bonds last month. they will lose about $120,000. another corporate casualty from the downturn in the u.s. she'll industry. high crush has filed for chapter 11 bankruptcy. they have agreed with some bondholders to eliminate $450 million in debt. that is related bloomberg business flash. florida breaking the record for daily coronavirus cases in the u.s. dr. arturo casadevall from the johns hopkins bloomberg school of public health will be with us about his thoughts on putting the virus. this

the average ticket size is higher the gross margin is moving higher so is the valuation.o as one of those stocks, unfortunately there's a new of these on the sthow where i talk about not having been in the stock for the move and being bearish on the multiple. at some point i just wonder unless there's a greater share of the monthly pocketbook that's going to fast casual, i think this should be something that you should be fading this move it's priced to perfection. >> in your swap of big tech for value/reopening, are casinos in that basket? >> yeah, they have to be in that basket and i go with the one that's been the outperformer in a very down market has been las vegas, the one you just mentioned and you know the way i stand on this you get the us and you also get sing singapore in that. for right or wrong reasons, you get another levered pull they are definitely names that will rally aggressively once we get even halfway to the goal where we have to go. so i think they have to be in the bucket. >> be sure to catch kate rogers' exclusive interview with brian niccol >>> t

>> very difficult to imagine a higher bar here just because of the valuation that's been added to microsoft over these months and the fact that people find so many reasons to love it. we'll see how high the stakes are for that report. >> microsoft and tesla reports will be during "closing bell." fa"fast money" starts right now. >>> tonight's trader lineup, tim seymour, karen finerman, chris mil mills. big tech pulling back sharply after yesterday's rally. the latest news on the stimulus package. we'll bring you all the headlines. gold prices hitting a nine-year high today plus jeff mills, the general, he's got a fast pitch on one financial name he says can add to the 30% gains it's already seen this year no, it's not a bank. >>> nice trifecta reports for snap, united airlines and texas instruments. jew julia, take it away. >> with snap meeting expectations on earnings and beating expectations on revenue, while subscriber numbers came in half a million lighter than expected, what is is putting pressure on the stock, you see it's down over 6%, is guidance that snap is planning for t addition

valuation start to push me away from it.he thought was interesting from bloomberg news recently was a story saying over $1 trillion in sovereign debt is coming to market outside of europe, and central banks other than the ecb are not going to take up as much of the slack as necessary. they see yields continuing to rise. what do you think of that? you have and underweight but it has become more interesting. has. it we have boosted allocation to sovereign debt recently because of what has been happening relative to other assets. frankly it is hard to find anything that would get me excited of -- outside of emerging markets and yes, there will be more issuance. we have seen that already. this will continue the next couple of years. it is a question whether central banks to continue buying at the volumes they have done and keep those yields down. the economies recover that these seals would go up. i would look for limited returns on developed world sovereign debt. the only place i could get excited about is in emerging markets.

the valuation is very forgiving. the dividend yield is nice i don't look at this as a 5g play it may benefit in a derivative fashion. the continue to work from home and overall connectedness of the world will play well for their hardware sells but also for software an security sales they are a hybrid between the value routers and the more growthier software and security business >> we have another one along the docusign route cody in wisconsin has a question on zoom. with the current climate looking a little more like a home solution, are there any stocks you anticipate to rise more than zoom >> zoom has the benefit of being almost just a term that people use. i'll zoom you and so forth they benefitted in a huge way of course from covid. they are up 300%, dom, year to date microsoft is going after them with teams google is going after them with meat once people use zoom, they're very likely to stay with it. does that mean they deserve this inflated valuation i have been on for the ride and very happy with it i'm not

i don't like the valuation either i was taking profits a few weeks ago. whole thing. >> let's it will the twitter machine. donny asks -- >> $39.5 see, bang, i have an answer for you. we talked about that now kudos to the great dan nathan at risk reversal who power pitched that sucker. we've been bullish in twitter since mid may when president trump went after all the social media platforms. it's proven to be correct. i think it trades up to the prior high in february which if memory serves is 39.5 >> tim, do you have a level? >> you know, hard not to take guy's level. that has been a level that's failed four or five times. look, these catalysts and these drivers and big trades in twitter, we have hand a handful of them, and they are spikes tough to sustain until we can break out of there, that is the level to sell at i think the valuation of the company is sometimes misunderstood. i like the trends in terms of their daus and the ad revenues are what they are i think they have the ability to specialize the advertised targeting with the way that the data is

i just wonder if when a vaccine is found that the valuation will have to come in. you don't think that's happening for awhile, you like the name, then you can stay in it it just too -- one of those, i love the product can't get behind the valuation. >> the user base is incredibly sticky i don't want to just say sticky because that doesn't convey the whole thing. not just owning the bike and putting dirty clothes on it but i think that the average and recent initiation of the average number of workouts per month is 17.7 imagine, 17.7 workouts per 30 days or so, guy. that tells you about people who own these bikes, who really love using the bikes. >> yeah. absolutely this is a story that we've actually been on for quite sometime and i think tod damon's point. this covid environment worked unfortunately -- i say unfortunately because you don't want to be in this type of situation. peloton is a winner and people love the bike without question they aren't going away they will stay with it i don't thi i think the stock can go higher. i do think you can get an opportunity

but the valuations may be tested all of med -- all admit it shift in strategy. 200 billion dollars valuation tell us about how they arrived at that number. i think mid-2018, which was the last part of the venture capitalists fundraising, their valuation has been reaching 150 billion already. two years after that mark they are seeking 200 billion. it's not a surprise. i reckon that level of valuation is 45 to 62 times for price-earnings ratio if we are making assumptions that it will year as much as 40% from a end of march, 2020. we are still saying it's more expensive than some payment firms, such as the household savingike paypal, only for square, which is really another buster in that field. valuationcompare the jp.com --nt, alibaba, jd.com. they are trading higher than the variation. to investors it's in interesting proposition, but we need to wait. one i spoke to the former ceo, he said it was more than a payment program. they have wealth management products and all sorts of other utilities. what is the strategy going forward? knows theveryone anti-measure from the beginning, the payment

at reasonable valuations, huge cash flow. that's why i looked. that is picking up again if you look at oil prices, they've had a magnificent move you have all of these merging economies and middle classes will be energy dependent it is like the perfect storm to buy energy stocks. >> listen, you may be the only one out there saying that. maybe that's the point you are supposed to buy when everybody else is selling and sell when everybody else is buying appreciate it. >> thank you, brian. >>> when we come back, a look at your stocks to watch including qualcomm shares are soaring on the heels of a big deal with huawei. it was one of the best performing assets last year. the new worries surrounding municipal bonds. and europe may be our crystal ball if it is, it could be very good news for car dealers we'll tell you why we say that dow futures down 230 we are back after this you say the customer's make their own rules. let's talk data. only xfinity mobile lets you switch up your wireless data whenever. i accept. 5g, everybody is talking about it. how

jonathan: what is the appropriate valuation method? we have spreads at 500 basis absolute borrowing costs for investment-grade near record lows. what is the appropriate response, approach to this asset class now? bob: with the ongoing policy responses we are seeing, throw away the text books and the historic metrics, and find those companies that will pay you back. book that yield now because it is only going to go lower. those industries and companies, sectors of the market that look like they are headed to restructuring, get out of the way of those, let them head to restructuring, and then look to pick them up on the backend. jonathan: do you expect the same pain in europe? once the ecb stepped into credit, the data was irrelevant, and spreads cap grinding tighter. do you see the same thing happening in america? bob: i think so. this is less about buying bonds and more about an affordable funding rate for a recovery across corporate america. i do expect that. jonathan: walk me through how you would play the rest of the curve. many th

the fact that tesla's valuation doesn't make sense is just as nonsenseical as the entire market valuation a symptom of the overall market being incredibly overvalued for what's happening in the world right now. but we can't change that. what we do know is tesla is one of the most exciting, innovative companies in the world that's dominating several industries and we have known this the whole time but now it's all coming together and their competitors are just getting murdered. so the premium is very steep for tesla, but you know, maybe it's warranted. liz: matt, you were spot-on when you said if it plumbes around 200 bucks a share, pick it up. it was a smart call. what would you have to see it fall to before you say scoop up tesla once again? >> to really want to scoop up aggressively, i guess my point is this stock could fall quite dramatically. it wouldn't surprise me if it dropped below $1,000 before the end of the year at some point. doesn't mean it will close the end of the year that way. we have seen so many times, look at amazon, when it was in kind of the same stage of its progres

it will be valuations that have to catch up with the economy, which is not firing as strongly as valuations would suggest. we have seen a powerful rally built on optimism. it has incorporated expectation and overlooked negatives and it is driven by an injection of liquidity and stimulus payments, assuming theyy is will be able to reach consumers to a more fundamental recovery. back int the bounds april and may -- the bounce in april and may was warranted but theacceleration suggests odds aren't necessarily in equities favor. francine: if you had to favor equity and some equity investors, where would you look? what sectors would you be looking at? pau: i would take a barbell approach. of names a plethora that since april have been relatively left behind and i'm talking about sectors that are less exciting, a bit more boring, but they are able in an where down the years, stimulus checks will dry up and consumers go back to adjusting their consumption patterns. job prospects aren't going to be too good. in the future, we are looking at some of the consumer staples names, we are looking at big

the extreme valuations have been ignored. also where commerce is going there is a link that is some what justifiable you look at what you you are doing and noodle around on facebook and shopping on amazon and searching on google. you are still relatively working from home and staying from home. you are pulling up netflix it is not a manufactured craze whether or not the valuations are legitimate, time will tell yesterday, mark cuban was saying the tech bubble wasn't just a six month or one-year bubble it went on for years you don't pull out of what is working well because it may be a little overvalued. it may have years of being overvalued >> i get your point, mark. it is a certain demographic. you are ordering your amazon whole foods on your iphone and picking it up on your tesla and coming home to watch your favorite shows i get that some people think i'm insane others agree you've got these stocks running these etfs valuations may not matter to some point >> you throw in the robin hood effect you are talking about where al

earnings the magnitude of that will possibly highlight where valuations have got to understanding the argument that the stock market is attractive relative to the bond market. in stand alone terms, they've got a lot of good news in the price. difficult to know what triggers people participating on that and maybe the earnings season is the guide to the market from here. >> it will be interesting to see by how the second quarter looked and what lies ahead. can i take issue with the valuation and some of the tech executives have been noting that investors have been looking for potential down the track and looking hard to the community. suddenly very hopeful about the future does it seem this will be buying opportunities on the tech tad to look for opportunities for the investors. >> i don't think anybody running portfolios, very few will have the technology in it it will be the driver in the market i think the question is whether or not it continues to be the driver in the market it will be a lot healthier if the leadership broadens out. the centralization in terms of the leadership, top

i'm not so concerned about valuations.want to look at is growth channels and regulations and changing government in the u.s. i think about what happened earlier this week, it suggests that big tech is not out of the government crosshairs. if you have a change in leadership in the u.s. with democrats coming in, that will put more pressure on big tex. to me -- on big tech. to me i think there will be a slowdown in business on time -- in time. -- i think we have to engage with society again, and that is why when i hear these commentaries on the virus, i just feel that engagement is part and parcel of human nature, and if you don't engage, you have job losses. if you don't engage, you have mental and psychological issues. i don't see tech going away. i don't see valuations as an issue. i think people will continue to invest in tech. you have to invest in tech everywhere. i think the private markets are going to give you more upside on tech and the next two or three years in terms of private deals, than are the public markets.

the valuation of bank stocks relative to the stock market as a whole, they are very inexpensive. if you look at the debt markets, the $6 trillion investment grade bond market says that banks are some of the safest investments based on the bond yields yet the stock market says they're one of the most riskiest investments. we think the bond market is right. in absolute terms, on relative terms based on my 30 years of experience in covering the banks, bank stocks are inexpensive. not withstanding these are some very difficult times >> josh brown, you have a question for mike? >> i do. mike, jpmorgan said that about two-thirds of the draw meaning commercial loans that were borrowed in first quarter have already been paid back, which i think short term is not great for profits but maybe intermediate term it's great for capital ratios why are commercial borrowers returning money? do you think that has something to do with the government program or refinancing in some other way? what's your take >> i would say thank you treasury, fed and banking regular la regulators because they have s

is this valuation justifiable? >> that's a good question at the moment if you look at it as a stand-alone company, it started meeting goals and becoming profitable i think where the question comes in is where the competitors start to have their electric models available and you start to see some real competition and where we might start to see some shift on valuation >> on that note, we heard from bmx that they'll be closing down to prepare it to produce vehicles a lot of action on the way where they have massive capability and know how when is the time line that it could become a real threat to tesla. >> i think we are looking at a couple of years. in the shorter term, we are starting with hybrids. that buys them a little breathing space in terms of being able to meet new emission standards that come in in september. it gives consumers the chance for electric vehicles. at the time with the full electric portfolio, it could be another two years from now and we'll see some competition from tesla. >> coming back to t

is that still the case, or do valuations start to matter here?> i think valuations matter today, and if you just think about what happened throughout the day we started with some really positive news on a vaccine and the market ripped on that news. and then when we got bad news on rolling back and maybe having another economic shutdown the market turned around very quickly. but throughout that entire period the vix marched higher. as volatility rises with it you have to assume that rally is fragile and will not take much to turn it around. we are so dependent on the health data and, more importantly, we're dependent on the vaccine data and the treatment data here. >> one of the topics that's always been debated the last couple of months is whether the bond market or the stock market is predicting where the economy is going to go, i.e., will it recover, the economy, or collapse where do you stand on that >> i think the bond market has been consistently a better indicator, wilf. we saw that before the 2001 recession, before the great recession in 2

the valuation of tech and the growth potential when you look at the valuation and five, six, seven different ones, tech is getting a bit stretched on the valuation metric almost all of them except for one. that's multiple two growth the fact of the matter is the p/e to growth ratio technology is in line with the ten-year average and slightly cheap to the s&p. the reason why you do not sell tech, you add to it is because tech is where the growth is. look at this earnings report the q2 earnings are down 38% if you look at technology shares, they are basically flat. i think as you look out for the next several years, tech earnings will continue to out perform the s&p and therefore this tech shares should out perform. i just have hard time betting against tech when that will be the trend for the next several years. it's not a sell the tech situation. it's rotate within technology. cloud has been the big winner of the first half of the year this is where i would be looking at >> josh, you suggested some of these names were over valued they were over crowded but the technicals were lining up still

people coming out and saying this is a definite time to be buying chinese equities, even though valuations are steepening. really thatolitics before. we have the ministry of finance coming up that said the state

you see that in the valuations.nk this is the beginning of a strong performance of european assets, continental european assets, eurozone assets. francine: where do you find value in europe right now? what countries? joseph: you know, southern europe is interesting. i think financials are particularly intriguing. down to extreme levels, as though we were in the financial crisis. the balance sheets are a lot stronger. credit markets, credit markets are telling me that there is not such a big problem with the cost of risk. so i want to own those assets. there is a number of sectors which have actually been quite resilient and have not done very well, particularly the telecoms stocks. there is a lot of -- there is lots of prospects for further consolidation and greater discipline along those sectors. that is also the case for the banking sector, by the way. yesterday, we had news. i think that is the beginning of long-awaited consolidation process in the banking sector. francine: are you trying to buy the companies tha

but at some point fundamentals have to matter valuations have to matter. i think we're starting to seat beginnings of that whether it is tesla reversing off the highs we tweeted about a week ago we started to short that after being flong 2019 at the end of the day, they didn't beat revenues and eps but things were slowing. i think it is all of that together makes me a heck of a lot more nervous with the market at these levels. that's why we're doing what we're doing in terms of shorting our -- some of our favorite names which, you know, we can cover tomorrow until the market gets clobbered. but we covered some of the mock four shorts. malls, airlines, cruise lines and hotels they've, you know, got eaten up enough we need to switch the shorts we need to switch the shorts i don't like shorting. they are the best companies. you have a lot of retail buying into it which is driving these stocks to levels that remind me of 2000. and that's a pretty bad cocktail when you're having states like california shut down >> are there any pockets of the market where you'r

here's why companies like netflix, their whole valuation is what is called terminal valuation.t that means is they don't produce any earnings now they're just plowing the money back into reinvesting content. those companies valued on a ten year flash flow. and they're extremely, extremely valuables. that's why some of these companies can trade at 50 or 60 times earnings those valuations on tech can come down dramatically from 40 to 50 times earnings >> you really think cut in half, let's hope not let's talk about the market structure. very heavily weighted and the value of options trading in some cases now exceeds the equity market on which it is supposed to be based. in other words, if you have a hamburger where the dollar were trading options and $1.25 on a hamburger with a buck, are you worried about the market structure concept. >> the money is flying out of the cloud stocks, out of tech. it's going into, we're long berkshire, we're long some of the banks. emerging markets, metal, you're just going to see this rotation out of, remember, stocks that are exposed to ten year c

still looking around >> yep >> yeah, it's disappointing and that's why this thing has a $200 billion valuation it's definitely disappointing. i don't think it's going to be disappointing forever. i think there's going to be a period of fairly rapid catchup given that tesla's taken hundreds of thousands of units out of the hides of these very sophisticated, well-established oems >> phil -- >> andrew, in terms of -- >> i'm going to slightly push back against craig me and him have gone at this and discussed this separately.

kailey: let's pick up on the valuations. you mentioned the s&p trading at a pe multiple near two decade highs. we are about a week away from earnings season with virtually no visibility. how big is the downside risk when it comes to the second quarter corporate results we are about to get ako chris: well, it is a key risk that has to be watched closely. the outlook will be more important. a lot of companies are not getting outlooks and talking about what they think. morewill help equally if companies back away from talking or 18 months, 12 and that will be a challenge for markets. closely, watcht the segmented parts of it. i would watch the outlooks we get across the sectors. -- across a range of sectors. guy: you talked about the marketsy of risks the now face, you talked about the fiscal stimulus of monetary stimulus, the earnings season, the data. if you were to describe the asymmetry in the market, is it kind of slipped -- of 60/42 the downside, 70/30 to the downside? is there a big move down from here or a big move up f

markets where we see industries piling into large-cap growth stocks the matter what the valuation.tocks aregrowth trading at about 31 times forward earnings, which was at almost a 15 year high and a 30% premium to the broader market. any type of positive news about the pandemic people just pile and gives youcks a sense of vertigo, just how much farther we can push these companies out -- up. eventually, we know there will be some kind of economic reckoning that this is positive and ensure the markets will be pushed even higher. i don't see the sentiment changing or any signs where it , but it is just yet certainly something that most money managers are very concerned with when you look at the spreads and extreme valuations overall. >> i wonder how much more thesence will recession-proof stocks have on the broader market given how overextended we are already. clients thating my , certainly, i don't believe if you have higher growth stocks you need to get out, but i do feel that there will eventually be some return to normally -- normalcy and these types of valuations and preferences

i'm definitely not bullish disney here we talk about the relative weakness and just in terms of valuationa $270 billion enterprise value and that number might surprise some people but they have taken on debt since this began and the valuation of the business is not as cheap as you probably think and the peak of $318 billion and of course it is trading at a lower valuation and just consider that virtually every aspect of the business is severely impacted by what's going on except for disney plus. and of course as good as that is it is not enough to make up for the other things going on here. >> check out the web side. you can sign up for our newsletter ♪ >>> coming up, mike has a way for you to share a ride on uber. >>> plus, calling all options action fans. reach into the pocket, grab your phone and tweet us your question@options action. if it's nice we'll answer it on air. ♪ ♪ ♪ ♪ ♪ ♪ ♪ ♪ >>> welcome back if you thought the earnings train slowing down think again what if next the attractions are uber shares remain in positive territory. but instead of hitting the gas on the results cross

the thing is, do you think these valuations, which look stretched, have awaits -- a ways to go? >> they could be more selective because the range is quite wide. the portfoliok to , structural growth underpinning the rise in stock price, i would -- it is backed by fundamentals. that this haserns caused -- very quickly and there could be more cash flow. after we see a strong share price rise. have a question of the day coming from our team. let me ask you to answer it. will act tech -- big tech results revive the sectors mojo? >> it is difficult to see. in the midst of -- on the u.s. and asia as well, and a large part of it is -- this side as have beenctors that structurally --. apart from that, in terms of earnings coming out, samsung results.cs and other earlier whereo there are assets in pockets, strengthening because of structural growth in 5g that has not slowed down. -- of then has pandemic has accelerated industrialization. -- over the long term as well. you talk about: those structural drivers. in mainland china, you have digital innovation push driven by policymakers. doe

on the valuation side, getting rich this is a long-term look at the valuation price earnings multiple on a forward basis of microsoft. it starts on march 10, 2000. that was the peak of the nasdaq bubble back then that's when it traded above 60 times forward earnings here you see it's accelerated to the upside about 35 times earnings right now. it's aggressive by almost any measure unless you look at it compared to things like corporate bond yields under 2% today and other faang stocks as a premium to the market, 50% premium. 250% premium back then it can be expensive, it can build in expectations, it can be dependent on low rates but it is not like anything we saw in that bubbly zone 20 years ago >> the key question is whether an earnings report is something that refocuses investors minds on what that key multiple is or whether today and tomorrow will be like the rest of the last 18 months, which is we're willing to pay up for this steady cash flow >> willingness to pay up has been the main story. i do think over the last year or so the numbers for microsoft have also been stellar the

infiniteow, you get valuations.ou can argue the stock market should be 4000 and argue it should be 2000. guy: given that wall we are facing, what do you think the policy response is going to look like? the probably response is driving relations right now. scal fromsee more fi the united states and europe, more monetary reactions to what we are going to see. walk me through how you think the mix is going to work and what that's going to mean with asset prices. steen: i think the actual economic news will be far worse. that will be met by policy response which will be more of the same. an extension of the social aspect care the tapping in terms jobs, weg people in will be liquid insolvent. --japan, they kept underneath the economy, that's what's going on. in that process and what has government ising, being monetized by central banks openly. is the most open central banker we've ever had. he is an clear violation of the federal reserve act. he's doing it does the narrative is to maintain jobs. we know for a fact that

so where valuations are attractive, that is how we are playing this market. sebastien,t this, as cash as an asset. you are telling me equities are fully priced, bonds fully priced. at t. rowe price, is cash a legitimate asset? sebastien: it is an asset when you want to have short-term dry powder. a lot of our investors are very long-term investors, and they amounts of cash for frictional issues. but we have learned in this recent selloff that having dry powder when things get really bad and you don't want to have to sell credit, it helps to have in aon hand to buy stocks market selloff, which is what we tend to do. jonathan: what do you make from the quoted morgan stanley? "over time, cash becomes risky as opportunity costs mount. not everyone enjoyed the best performance performance for the s&p since 1938." some people believe if you stick in cash, there is some career risk. what do you say back to that? sebastien: completely agree, and i am talking about a diversified portfolio were you i'd 5% -- where you add 5%. in this market, now is not the time to be a

i think those are two areas that you can look at and feel comfortable at the valuations, your downed side is limited. >> by the way, we'll have more on tesla and the banks later on. in the meantime we're following another stock on the move right now. let's get to phil lebeau with a news alert on united airlines. >> united under pressure today, announcing it's sending off warn layoff notices those are required to be sent out 60 days ahead of a potential layo layoff it says they'll be cutting about flight attendants will take the biggest impact, more than half of the jobs with the union airport operations there, maintenance, the pilots 2,250. so here's how it works they're trying to finish negotiating buyout packages with the unions almost all of these workers are in one of the major unions they should have it finalized by next week. then by the middle of august, they will notify the remaining number of people who may be losing their jobs, yes, you are actually being laid off come october 1st. that's when the job cuts take effect, october 1st. we knew this was coming, melissa. you're g

valuation doesn't tend to be very predictive if you have a short time horizon.n't necessarily tell you much about what returns you are going to get over the next year. but if you have a 10 year long-term horizon, that does tend to be more predictive. for a long-term investor, it could be the entry point for small caps. but for the near-term, we still remain cautious. jonathan: just how much is it distorted by the big four, these big tech names that will be reporting to capitol hill today? jill: for the s&p 500 overall, we have recently seen a lot of the returns this year driven by mega caps and bank stocks amid all of the unprecedented liquidity that we have seen. we are equal weight the tech sector right now. we have seen pretty strong earnings trends. it has been one of the sectors that has continued to surprise to the upside, along with health care. fundamentally, the sector still looks strong, but you have seen valuations get where and more extended. one of the reasons we are equal weight tech within the s&p 500 is the potential for higher regulation, whethe

we be downgrading some of these companies to neutrals because we want to be conscious of the valuationthe gains we are making an clout , the gains we are making an e-commerce sales are still in the early stages. we talk about gainers of 25% to 30% 40 while pure let's offer 30% --rce -- to -- sales are still being done in bricks and mortar. some of the changes we have seen recently came in places where the virus is not a big problem, e-commerce changes are sticking. between quality stops in and quality stocks in general -- guy: an aggregate, are we in a situation where stock investors are still being too optimistic. there is the possibility the trump tax cuts get reversed, there's a possibility we will see sales taxes imposed on the tech sector, there is a possibility globalization will make for these big multinational tech companies life much more difficult. how will that trickle down into the bottom line and is the market too far ahead of itself in terms of profitability expectations? bhanu: a completely different question and the answer is absolutely yes. the market is expecting a lo

they are part of a new economy do valuations still matter yes. where we think these are solid companies. we are with not expecting a sharp v shape recovery you need to be looking for those companies general rating their own grooet they will do well after. they also did well during the crisis, if you will. that positive optionalty from the high growth names, we think is an attractive place to be in the market still >> rob as prices go up and we don't know what the denominator, the e will be. valuations was going up. we're trading at 25 times earnings on the s&p 500. at the same time the earnings estimates have come down more than 40% and about 190 or so companies have simply pulled their guidance do you have concerns about valuation when there's so much we don't know? >> yeah, it's really a tale of two markets. jim was getting to this. so was everybody else that spoke in advance of me you're having people hiding out in the new defensives. i would argue they have gotten pretty expensive when you look at the russell 1,000 growth trading at 27 times.

alix: that brings me to the screen you take when it comes to valuations.of analysts talk about the resiliency of stops in certain set -- of stops in certain -- of stocks certain sectors. you have a screen on the resiliency and what makes them important. aswath: it means you can scale your operations down in bad times and scale them up quickly in good times. this is what allowed tech companies to have an advantage over their status quo brick-and-mortar competition. in many ways, this crisis has exaggerated the effect and given a benefit to flexible companies. what it allows them to do is say businesses is not good, we will scale our costs down, but business is good we will jump back in the game. traditional companies cannot do that. whether it is investment or dividends of financing -- this crisis has reemphasized how important it is companies be able to move quickly. toncine: how difficult is it calculate the price of risk given the pandemic and all of the unknowns? aswath: it is not difficult. it just moves all the time. it is difficult to dale -- it is d

for growth stocks and chen cheap valuations, but pretty poor fundamentals and are they the best domesticlue sector right now? >> it's interesting. if you look at small caps on their own, they look expensive relative to history. and here is where the earnings numbers are very harded at least in the short run if you look at small caps relative to large cap, they're actually at an extreme in terms of how cheap they get, again, relative to large gaps we're talking 98 or 99 in terms of how cheap they have been over the last 15 years. so when we look at small gaps, we look at an asset class that's the asset class of choice historically coming out of a market bottom. 9 out of the 10 last market bottom small caps have outperformed coming out of the bottom they have not this time around so it's this -- these coiled springs, these valuations that are at extremes and it's the same for value versus growth and then the big key question for asset aloe kay tos is are we going to see some sort of rotation into more cyclical stocks the way we're playing it is to neutralize our stocks versus bonds allocat

valuation is high when using traditional metrics but growth stocks command a higher p/e. we believe tesla is the leader in the large cap universe. the first inning was a massive we are looking at earnings next quarter, july 22nd highest value car company in the u.s. if they beat, it will be 4 con sec tifr quative quarters. it's widely accepted in china. we continue to hold tesla. >> competition will be key especially in growth markets like china good discussion. thanks for joining me. >>> thank you. >>> still ahead, as covid-19 cases surge, state and local governments across the u.s. are forcing some businesses to close again. billionaire tilman says uncertainty and indecision from political leaders is making things much worse. it's tilman tuesday when we come back stock slices. for as little as $5, now anyone can own companies in the s&p 500, even if their shares cost more. at $5 a slice, you could own ten companies for $50 instead of paying thousands. all commission free online. schwab stock slices: an easy way to start investing or to give the gift of stock ownership.