Transcripts For FBC Wall Street Week 20160528

Month the markets falling when investor thought a rate hike would come in june, and recently big rallies when sentiment shifted accepting the possible rate hike. Keith banks is the president of u. S. Trust bank america wealth management. Rick szelc the managing director of neuberger berman. Eight years later, is it all about the fed . All about the fed. More about earnings. We view it right now the p e multiples about 17 time, not going to expand much from here. To make a case for higher levels in the market, you have to make a case for stronger earnings. But 17 historically is a high number for s p earnings. Isnt typically 15, 16 the higher valuation. The high end of a range and, in fact, we just actually at u. S. Trust went more neutral on equities in a tactical allocation shift, and the reason we feel that way is with multiples at full levels, number one, and with the summer coming, with possible rate hike fears, u. S. President ial election, you got the u. K. Referendum, a lot of stuff to worry about, and we think that could cause downside in the markets over the nearterm, and so we pulled out to a more neutral waiting. Gary how do you see the world . The markets . The fed . The earnings . Gary, there are no layups. At the beginning of the year when the market dropped 8 in w frightening to investors. Very concerned what to do. Some called and said should we go to cash. A number of firm said oil might go to 20 or 10 a barrel. 40 chance of recession. There was a lot of anxiety. So today, the recovery from february 11th through the end of march, we had a positive return in the s p of almost 1 . Anthony rick, when youre talking to clients, eight years after the financial crisis, do they feel the palpable pain of the financial crisis being almost a decade away from us . Its a scar not a wound. It really is. It really is still there. When you see the volatility which we had in january, we had almost 65 of the trading days that market moved plus or minus 1 , when you see that visibly on all the shows throughout the day, clients, investors get concerned especially when they invest irreplaceable wealth. Gary keith, you look at clients, look at 2008, its fresh in the mind every day . Its not paralyzing but its there. The way we manifest ourselves with the client base and strategy is want to be fully diversified. Weve seen a real increased interest in tangible assets, things like real estate, farmland, timber land. People like those kinds of assets because theres a low correlation to Financial Assets which is good, especially to your point anthony, eight years in, and number two, people believe when inflation comes back its a good hedge. Eight years in means a likely recession on the horizon. Our economy goes in a recession roughly every 7 years over the last 80. We think we could be looking at another two or three years of continued expansion in the economy and growth in the markets because what youre not seeing this far in are the typical excesses. Interesting point, average Hourly Earnings, typically at this stage of the cycle would be growing in excess of 3 , closer to 2 . We dont see 3 average Hourly Earnings grow for another 12 months, and the danger zone typically is 4 . We dont see that happening out until 2018, 2019, which means the fed doesnt have to rear up and try to slow things down, and the big catalyst for all that is inflation this many years in still being so low. Gary lets look at the clients, the opportunity to work with and you work directly with your clients. Youve got incredible relationships. Thank you. Gary keith mentioned about the election, as well as a number of the other issues this summer. I have to imagine clients asking you how thats going to impact portfolios, the market. What do you tell them . Well, its a boom for the 24hour news channels, right . Gary well, we love it over here. Anthony the cable guys are good. Thank you, cable guys. Loving this election, because you dont have to have another agenda because the election gives you enough to talk about almost every single day. So when you see that, as an investor you hear that, it creates anxiety. The only thing you can really do is none of us expect to be in the situation, now where do you go from here . Is you have to protect your portfolios in a way of being more defensive, and focusing more on yield than growth. Gary are you doing that now or waiting to see what happens in november . Tactically youre doing it now. Anthony is this 1980, keith . People have something to fear but dont have something to fear . Interesting, despite the fact that this economic expansion in the bull market has gone on for so long, its been the most joyless period of money making ive ever experienced and gets back to the question you two have asked, which is, is it 2008 . People keep worrying about the next thing that could come. A lot of things people have been given to worry about. Fortunately, except for brief pullbacks, one at the beginning of the year, its not been sustained and the rally continued. Gary keith and rick. Stay with us. Well be right back with more. Announcer uncertainty reigning supreme in the market, jitters in the election, a weak economy. Where is the best place to put your money right now . Our experts manage billions of. Gary welcome back to wall street week. Joined by keith banks and rick szelc, the election is overshadowing so much of whats happening in america right now. Keith, you did a survey on client base, how important was the election in terms of people thinking about the economy and the elections . Wealthy individuals, it looms large. Interestingly among business owners, the election was the number one concern on their minds, and they think about the future more generally. People are more optimistic thinking that the election would bring about positive change or positive outcome. Anthony is that something you would share . Gary as you lead the Financial Services business . Our advice to clients, when you look back over time, interestingly elections dont have big impact on the broad market. They can have big sectoral policies the new electee comes in with. It doesnt have a sustained impact. Anthony when jamie dimon was on the show and said the election isnt going to have any impact, whether hillary is elected or donald trump. Remember that, gary . Gary yes. Anthony what do you think about that . From an investor standpoint, its going to make them more nervous or more optimistic. Gary rick, you talked about having to prepare now for what happened in november. Lets talk about how you position portfolios in terms of what you want to do for Asset Allocation which is preserving wealth and growing wealth. Gary, great question, thats all that matters. All this noise, what goes on globally, we cant control any of that, an investor cant control it. The way i looked at investing landscape, how much do you in growth and income . Where do i get yield against changes that could come . So today, were more defensive. Were more invested in a variety of different investmentis and would say were looking at a 4050 allocation to yield and maybe on the balance, on growth, because to keiths point earlier, the s p at 17 times doesnt create a lot of optimism. Anthony what sectors do you like, keith, specifically . We share rotation out of growth into cyclicalvalue oriented sectors and stock. Anthony this late in the cycle go with cyclicals . Yes, the overall performance is reflective and think it will accelerate moving forward. We like financials, energy, industrials, materials, consistent with the theme of cyclical. Anthony you cant expect a recession in 2017 if youre moving into the spaces now . No, were not. We think we could see another two, three years of growth. In fact, if we were to bet today, this could rival the longest expansion, which is ten years in u. S. History. Gary we opened the show saying eight years later, its still about the fed, every day, and what they say and tweek commentary in terms of what the market says. A fedcentric world. Gary if you know thats the case, how do you advise clients to think about the commentary in terms of a longterm strategy . We try not to get hung up and allow our clients get hung up on the data point du jour, good data point, bad data point, market up, market down. We have strategic Asset Allocation, number one, and tactically adjust it. Anthony you think clients get too nervous . You said they were asking about going to cash. They were asking about going to cash. Anthony is there a message for clients about being longterm and being more patient . Again, our view is you cannot zig and zag and i think you can make money. Impossible. I have no insight, they have no insight. Our job is to keep them on longer term course. Were comfortable tactically reallocating. We went to a more neutral stance versus equities. But if the market were to pull back this summer by 57 , we would go back overwhelmingly. Anthony this is a huge reason people need the services of you guys, to calm people down and trained to think about this stuff longterm. The market is a voting machine in the shortterm and weighing machine in the longterm. That is a great Warren Buffett aferrism. As i know and the four of us know, when you start thinking like in january and february. Gary is giving himself his own hair cut. That i know. Its better than paying 500 for this. Gary when you have the conversations with clients, some call it hand holding. Rick, ive been there, i see how you do it. How important is it to understand. Well have volatility to stay the course. Its huge, emotional changes that clients feel or want to make usually end up not delivering in a positive way. If you look at fund gary eight out of ten times, nine out of ten times. If you look at fund flows from investors, there is data that says if the s p returned 9 , individual investor return 3 because they use the decisions at the wrong time. I learned this from a colleague of mine. I have a threecall rule. By the time i get a third call or the person is upset, we make major changes. Anthony keith, thanks, rick, thank you for joining us. Well be back after this. Announcer washington first as american businesses, Great American companies vilified. The happiest place on earth in the crosshairs this week. Now Corporate America is. Gary welcome back to wall street week. During this election season, hillary clinton, Bernie Sanders and even donald trump had less than nice things to say about wall street. The Obama Administration has even scuttled proposed mergers, we all know whats happened with the war on coal and what its done to the industry. Anthony just this week, Bernie Sanders blasting disney saying it helps to create income inequality prompting a sharp response from ceo bob iger. Lets bring in the fox business allstars Charlie Gasparino and liz claman. Charlie . Offlimits, disney . You got to know you got to be a disgusting stalinist socialist to attack disney of all companies. This is a very progressive company. I mean, they were among the first to embrace gay rights. Bob iger is far from rightwing lunatic. And i tell you donald is calling him crazy bernie, right . He sounds crazy when he attacks disney. The overarching theme. Anthony okay, why is he so popular . The public educational system that peopl the failures of socialism . Look whats happening at the trump rallies. Leftist kids that are in college or just left college violently protesting. This is the scary thing about the election. Anthony those are paid protesters. Some of them are not. Some occupy wall street which i covered extensively was paid. A lot of it wasnt, they were kids. The animosity to free speech particularly rightwing speech that goes on on campus is basically overflowing to whats going on here, and whats going on in the election, and its very scary. Anthony to your point at disney. You look at disney, and put bob iger aside go back to walt disney, 1965, he looked at swampland in orlando and build it up, hundreds of thousands of jobs. Disney and Companies Like that have done what the government cant seem to do that, is create jobs. When you want to talk about dollars and cents and minimum wage, et cetera, or dont like the dress code, that is the one big complaint when you go on the websites of people. So what, you can figure those things out. Gary lets talk about wall street. Anthony and populists. Gary and populists, you and i have spoken for years. You are a fan of wall street. Gary in terms of the industry, whats going to happen between now and november in terms of the attacks on the industry, which as you know is already under tremendous pressure. Right, and somewhat bipartisan. Your friend donald trump has attacked wall street now that he needs their money, hes backed away a little bit. Funny how that works. Hes tapped into the populism. Anthony there is reasons to throw eggs in the face of wall street for having been bad actors. Lets rewind the videotape about the financial crisis. What was the financial crisis. If you listen to Michael Lewis and the big short, i watched the movie. Must have said wall street is ripping off individuals 400 times. As someone who covered that extensively and knows, and beat up on wall street plenty. I can tell you it was less of a ripoff of more of banks literally handing money to people that couldnt pay it back. That was the scandal. So the average american is gary imposed by the government. Thats right. Anthony it was a circus. You have a couple things going on. The liberal media proposing propaganda, you have basically reiterated and repeated on college campuses, and, you know, you have political candidates that are trying to seize on it, some at the far end, like Bernie Sanders, and some in a lighter way, somewhat lighter way in donald trump. Some of this is conversation, guys, the r word, regulation, if you want to go to the one thing that hurt businesses, whether its wall street or whether its small businesses, its the tens of thousands of regulations that have been imposed not just during the Obama Administration but george bush was hardly regulatory restraint and the model that held up to that. Anthony bernie moore said he could not start home depot today. Lets be clear, the last eight years, liz, you cant compare the regulations obama imposed particularly to doddfrank and what thats done to lending. Its hard to get a loan if youre a small business, not because of george bush. Im not saying george bush was perfect. But if anything, george bush was regulatory light compared to whats going on now. Gary liz, charlie brought up about the housing crisis, one of the highlights this past week is the Clinton Campaign released this commercial of donald trump saying he hoped housing prices went down, and then his end of that was because he is a buyer of assets when they go down. Do you think that backfired . No, people in the Real Estate Industry at certain points love to see prices go down so they can scoop things up at good prices. We talked to hovnanian, during the crisis, you have the plots of land going way down in price, and this wasnt just hovnanian, a lot of the Home Builders wanted to buy. Thats what you do, seven years of feast and you buy during the famine. Heres where it will be, heres where i think it will be, not politically effective now. Shes got a problem, she has Bernie Sanders. Shes fighting two opponents now. If she doesnt get indicted which is a possibility given the email stuff we keep reading. Stays in office, gets Bernie Sanders out of the way. Romney faced that argument and got crushed. I think it is different. Gary you traveled with donald this week. Anthony yeah, i did. Gary what did hecy when that came out . Anthony he said im a business person, thats what Business People are supposed to do. They want the problem fixed. Whos going to best fix the problems . And by the way, the problems are in the lower and the middle class. The country is struggling here. Gary susceptible to the class warfare argument. Im going to say this, i think we should tune out essentially whats happening now to a certain extent and think about what its going to be if clinton goes against trump directly. These type of arguments do resonate. And thats where its going to be rubber meets the road. Now a lot can happen between now and then, Bernie Sanders is not giving up. Anthony what if Bernie Sanders wins california, your home state, liz, what happens . That is going to be terrible for hillary clinton. If youre talking about smart money, big money. Barry diller said of iac, im going in, i will spend what it takes to defeat donald trump. Listen, there are two new york businessmen, if you dont live in new york, you know they might avoid each other. Its just business. He really does not like donald trump. He will put money in for hillary. Jeffrey katzenberg, eli bro, they want to fight. Gary money hasnt worked yet. Liz and charlie, thank you for joining us. Anthony next week our guests are Charles Schwab chief investment strategist liz anne investment strategist liz Anne Saunders a listerine® kills 99 of bad breath germs. Investment strategist liz Anne Saunders a this is 100 useful for a 100 fresh mouth. Whats it like to not feel 100 fresh . We dont know. We swish listerine®. As do listerine® users. The very people we studied in the study of bold. People who are statistically more likely to stand up to a bully. Do a yoga handstand. And be in a magicians act. Listerine® kills 99 of bad breath germs so you can feel 100 in life. Bring out the bold™. Working my canister off to clean and shine. And give proven protection. Against fading and aging. He wont use those copycat wipes. Hi. Doing anything later . The quiet type. I like that. Armor all original protectant. Dont be dull. Lou thats it for us, happy memorial day. Good night from new york. Announcer this show has never been solely about investments, weve talked about anything that affected people and their money. From fox business headquarters in new york city, the new wall street week. Anthony welcome to wall street week, the show of record for longterm investing. Im anthony scaramucci. Gary im gary kaminsky. No denying it. Eight years after the financial crisis, the markets continue to move based on what the fed says it will or wont do. Anon