Transcripts For WNYW Wall Street Week 20151206

City, the new wall street week anthony we are pleased to have keith banks. Tell us about where you grew up. Tell us about your family. Keith i grew up in a great middleclass town in new jersey. An of my neighbors were wall street titans or ceos. I didn t have connections that would have made life a little easier. When i got out of rutgers, i knew i had to get into a Good Business school, hopefully as a door opener. My summer jobs growing up, my freshman year in college, i worked for a landscaper making two dollars tweet five cents an hour. I spent two years working summers in the township where i grew up, which i thought was a cool job but apparently it wasn t. I had to figure out from there we picked up branches and all kind of things. My claim to fame was convincing the guy who drove the truck to actually let me hang off the back so my friends would see me, thinking i had a cool job. Role models. My neighbors weren t the big shots. They were good, hardworking men and women. So the role model was really watching people day in and day out, getting up, doing their job, feeding the families, taking care of business. I learned a lot about values , culture, what really was important. Anthony when you saw how hard it was to make the money and giving and given the foundation of what u. S. Trust is about, it gives me some insight on what you think about investing. Keith we take care of wealthy individuals and wealthy families. There are people coming to us who have already made the money. They took the risk already. They want to make more money certainly. But the main thing is to is or what they have, to grow it modest, but to protect it. The typical client we have is firstgeneration money. They are not people who came into money necessarily. They went out. They had the idea. They had the intellect. They took the risk. Gary tell us what u. S. Bank does. Keith we manage money for foundations. About 17,000 strategic growth clients. The minimum is about 3 million. Our clients range from that level literally up to s. Jpmorgan, head of research. You were at columbia before you moved over to u. S. Trust. You have this life experience. I want to share with the people you grew up with what they assets, how they should be thinking about it. Keith number one, have a longterm strategy. Understand what you want to achieve in terms of asset appreciation. But more importantly, understand the risk you re willing to take to achieve that outcome. For most people, they really don t want to take the risk. Everyone wants higher returns. But they don t really want to take the risk. And quite friendly, shouldn t take the risk to achieve that outcome. Everyone is a shortterm investor until they have shortterm losses. That is a big lesson. Try to stay longterm and think about these things. Gary you have to deviate your plan when something deviates in your life. The stock market should not give it your plan. Something the changes in your life should deviate the plan. Talk about the issue with multigeneration. You don t want to have a situation where you give a lot t go to work, doesn t respect the assets what is the solution . Keith that is one of the biggest questions we get asked. When the money passes, they want to pass it in an official manner. They want to make sure the family values pass on. They want to make sure the children are good stewards of those assets. And importantly, they want to make sure the children embrace philanthropy. Our clients are incredibly philanthropic. They want their children to embrace that. Back to the old premise, if you have, you give back. So they look to us to help educate their children. Anthony let s talk about what client s are saying now. Keith one of the main things we tell our clients is not to get caught up in the day today. Here s a good example. In the third quarter, the s p declined 6. 9 . , the fifth best increase in a single month since 1928. So the worst thing you can allow clients to do is zig and zag and get caught in that data point du jour frenzy. I think with good advice, everyone is capable of doing it. If you allow them to get caught up in a daytoday , invariably, they will be doing the wrong thing. Anthony back in the day when i was a salesperson in goldman sachs, used to cover you. You are a terrific stockbroker. You had a great rookie tatian. What sectors you like right now . Keith on the cyclical side, we like financials. We like energy. Although you need a longer timeline horizon. There is going to be a lot of dislocation in the near and intermediate term. Technology on the growth side of the equation. Gary hedge funds, private equity, is that part of your Core Portfolio . Keith a client should have anywhere from 5 to 15 of their portfolio in alternative investments. Anthony why though . I am super scared of the hedge fund industry. The media has me freaked out about that industry. Why would you recommend that to me . Keith number one, they can do things that a long manager cannot. A number of the strategies are also done such that that they are noncorrelated for the broader financial markets. We think of alternative investments as timberlands, we have the ability to acquire for clients a portfolio for him. Clients like the fact that those assets are noncorrelated. Anthony let s explain on correlation. That means the stock and bond markets are going in one direction. Assets like timber or hedge funds could be going in another direction and offer a balance or a buffer to the portfolio. Keith we are in the seventh year into an economic expansion and a bull market which makes people a little more nervous that we are getting closer to the end. We don t believe that is the case. Anthony what sector are you looking to avoid . Keith we don t like utilities or telecommute kitchens. Industries that tend to pay high dividends in the reason why people are buying them is for the yield. They will come under pressure when rates begin to move up, which we think could begin in december. Anthony we will be back with i am watching wall street week. I was a guest on the original wall street week and i am pleased to be in the brandnew anthony we are back with keith banks. Also joining us jj kinahan as well as james bernstein. James, you reached out to me and you said to me i ve got to show you some charts. The market is about to go down a thousand points. That was on a monday. And the market went down a thousand points that week, the dowd jones the dow jones. James there were mathematical indications. Sellers were controlling the market. Gary explain to the viewers what Technical Analysis is. Jj fundamental analysis is analyzing a company. Check no knowledge Technical Analysis, you don t care who the ceo s are the customers are or the businesses. You are looking at the action of how that stock is trading on a daytoday basis. Anthony what is your philosophy . Keith our shop is a fundamental analysis shop. Some will Pay Attention to the technicals but it is not a driver of what we do. Gary you are more longterm in your orientation. Jj my background was as a traitor. So i tend to look a little bit shorter term. So it s probably a little more technical. A lot of what i look at is from a probability point of view. Is different from what you re viewers are used to looking at the world. But i grew up in the options market. It s all probabilities. You can look six months at an option and it will tell you the probability we are going to trade at a certain level if you buy a stock. Unfortunately, it won t be which way we are going. But you can get an idea the range that we are going to go and allow you a little bit more folks ability and how you want to set things up. Anthony what is next for stocks . Jj with all the fed action etc. Sitting out there, having a big influence on what happens with stocks going forward, i really feel, as we headed to the early part of next year, because there is more certainty now with what the fed is going to do, you will the year. We have a great chance for, i should say. Obviously, barring any other geopolitical news. Anthony when the fed raises rates, what will end up of the curve will go down. Flatten. When i think is going to happen is that shortterm rates, what should have been raised years ago, will finally be raised. And the bottom market will say to the world and say, we are worried about the next slowdown, deflation, the next recession. Keith what we are telling clients right now is we want to be barbells. We want to own bonds on the short end of the care of and the long end of the curve. Anthony so protect yourself both ways. Keith at the long end, you can t want to be in the belly of the curve. We would be and are weighted. Gary when you say the short end , that is like six mons, two years, three years. The long and would be 10 years, personally possibly 30. As rates start to go up, those bonds will get hit. If you re in the short end, you can start rolling it to better yields, which protects her family. Gary and those spots may not get hit. The longer end of the curve up in price. There is a scenario where you may actually get that s where you protect yourself on both. Let s bottom line it. You are shortterm bearish and longterm bearish on the indices. Keith shorter term, i would be more bullish. Not longerterm. It is hard to believe the third or fourth interestrate move. They tend to happen quicker than people think. Gary this year, you think we had somewhere around 2100 on the s p. That will be the primary driver stock prices. Your talking anthony with the fed raising rates, will that curb the s p s move . James it will validate the fact that the economy is healthy and can stand on its own. Gary is that how millennials are investing . Jj they are looking for their break just like we were. James i find it shocking that never held an elected office be running for president of the united states. To the health of the u. S. Economy. Where do you think the economy is . Keith we feel good. The u. S. Economy can turn a number around 3 . Consumers is very strong, jobs being created. Gary the expansion is low growing. You still think it has legs. James we are was the middle part of the phase. Maybe break the record for the longest expansion we have seen. Jj jobs do tend to solve a lot. The one thing we are all wearing to see his wage growth. Something you have to take into account, as the jobs market gets healthier, you have people competing for talent. You see people out shopping. They are planning for the parties around the holidays. That is actually great time. You re seeing Companies Spending yes, wage growth is always the most important. You are seeing a lot of bonus type things being given, whether it is lunches, etc. That is part of compensation and that i think that is lost on people. James i think you are hearing more companies talking about the difficulty of finding skilled workers, skilled employees. I think the pressure is already there. We are stunning to see the numbers. We are at 5 unemployment. We have had millions of jobs created. We see over 200,000 jobs created for the last four years running each month. The labor market is tight. Gary as you look at the industrials and the consumer cyclical stocks and they say to the leading indicator we are going to have a recession in 2016. Jj i think you also have to killing it right now. Said, i think that there are so many people waiting for some fed certainty that, once get a clearer picture. The fact is there is an underlying demand for consumers. You see particularly in the car market. What we have seen in autos over phenomenal. Gary you look at car seals and t show that. One or two them will be right in 2016. More companies rotating out of money. Jj you look at nike, gm. Gm does 53 of their revenue out of china. China. Starting you are continuing to see people spend money on quality products. I do think that there is a bit of a concern that, as china slows let it, you always have to see their numbers with a grain of salt. Gary the u. S. Dollar. S a safe haven right now. It is winning by default. Emerging markets as an asset gone, as you can see. There are splintered markets over there. The strongest is the germany markets. But the smaller markets, they are small anthony if i want to buy one sector in the s p 500, your strong script is what . James consumer names. Tootsie roll, names like phillip that are really strong. Campbell s soup, also because of behindcrap situation because of the heinz kraft situation. Keith rethink housing has been on an upswing and will continue to be. It is an indication that the consumer is healthy, along with autos. Millennials have not come into the Housing Market in any kind of way. Gary they have no money. Keith they re one of the largest growing sectors of draw growth. Their building wealth. Their housing formations are increasing. When normally comes after wealth increases in housing formations anthony is that how millennial s are investing . Jj they investing companies s why you see a surgeon stocks like facebook, etc. Selling, people trade what they know. Time and it bugs me because the millennials ic, they are looking were. I ways feel like people say they are putting off buying houses, etc. There s nothing like a child or a marriage to make you want to buy a home. Those. Gary one of the things that the millennials saw was their parents go through the 2000 tech bubble, the 2008 financial collapse, many corrections. No wonder they are not confident in terms of thinking about longterm investing or making a purchase like a house. Geez they have a whole different perspective, especially on the financial markets. Especially feaster having children at what not and whatnot. I m not saying it is contingent on that. Anthony millennials will be longterm holders of equities . They are a little jaded right now because of what they have experienced. James i don t think so. I think it will take an entire generation. It will take an entire generation for people to believe in longterm investing and compounding over the cycle. Keith volatility does make people more afraid. But i also see a desire for people who learned because of what happened to their parents. But we see is people saying i m not going to let this happen to me. I am going to own my future. Gary they are going to be re going to learn had to be in an out. They are going to do a lot more lives. Jj you have this whole generational transfer of wealth. James i think they are getting married in their late 20 s and s. You also have tocareer households. It is extensive out there. The other thing that is important is they care about the companies they invest in. It is not just about making money. They want to invest in the kinds gary let s talk about the election in 2016. Will it have an impact on Capital Markets . Telling you what the trigger mechanism is going to be. You see the indices going up from strong the ownership to weak ownership. I find it shocking that you can office be running for president of the united states. Gary so you donald trump. Jj i think volatility next year. I think it will freeze frame people so we will wait and see who the winner is. Anthony will it have an impact on the market whoever wins . Jj that administrations posies. It is impossible to see who is going to win the election. The republican debates don t have a front runner. I agree with keith and that we the real longterm markets effect will be more regulations, etc. A look at what has happened the last two years with dodd frank, etc. , what new rules come into effect and volatility. Gary and there could be some level of the relation, too. My prediction is that there will be an unleashing of more investments going into the 20172018 timeframe. We ve got trillions of dollars on the s p 500 Balance Sheet and there will be capital investments. That means more growth than people think. Keith i think the texan version issue will come to a head. Jj we will probably get tax reform, either a democrat or republican. We are 29 years from our last tax reform. T go much further than that. Thank keith banks and jj kinahan and james bernstein. You can check in with us all. applause well god bless you. Its always a joy to come into your homes and if youre ever in our area, please stop by and be a part of one of our services. I promise you well make you feel right at home. But thanks so much for tuning in and thank you again for coming out today. I like to start with something funny. I heard about this husband and wife. They were celebrating their 60th birthdays together and an angel suddenly appeared and said god was going to grant them each one special request. They were so excited. The wife said, be able to travel all over