tv Street Signs CNBC May 30, 2016 4:00am-5:01am EDT
government officials say prime minister abe will delay his sales tax hike to two-and-a-half years. return to sender? shares are now hitting a ten-month high after a breakdown saying it will not bow to pressure from protesters causing widespread fuel shortages. hi, everybody. welcome to "street signs." good morning. happy holiday. in the uk everyone is working. markets are off for trade, too. did you have a good weekend? >> i had a great weekend. >> lots of rest. >> went to the gym, yeah. >> actually, i did, too, and i think tomorrow will kind of, you will feel the aftermath of that kind of exertion over the
weekend. but anyway, the european markets are mixed this morning. fresh start to the week. >> absolutely. as you quite rightly said, the u.s. investors are out but we are seeing slight gains for the xetra dax down 3.5%. a touch of weakness in the area for the french market. the weakness is crude off .02. just below the $50 a barrel. opec is meeting this week. >> opec meeting, the rate decisions are coming up. >> payroll this week as well. lots of data from the u.s. yeah. busy. >> we are steadily watching what the fed is or isn't going to be doing this summer. consensus for the fed rate hike is building over the summer. and janet yellin says we should
expect a nuevo the -- a move in the coming months. >> the economy is continuing to improve. we saw weak growth in the first quarter of the year and relatively weak growth at the end of last year. growth looks to be picking up from the various gauges that we monitor. and if that continues, and if the labor market continues to improve, and i expect those things will occur, we'll continue to monitor incoming data. and also we'll assess risks to the outlook. but it's appropriate and i've said this in the past, i think for the fed to gradually and cautiously increase overnight
interest rate in the coming time and probably in the coming months such a move would be appropriate. >> so the probability of a hike in july now stands at 61%. and that is according to the cme dollar watch tool. the dollar/yen hit a one-month high. james bullard believes the market is getting ready for further tight anything. >> i sense that the markets are getting ready for a possible increase globally. and that this is not too surprising given our liftoff in december and the policy of the committee, which has been to try to normalize rates slowly and gradually over time. so my idea is that if all goes well, this will come off very smoothly. >> the chief strategist is the head of research of ged fed.
i think the prices have done pretty well considering. what do you think is going on here? >> been there, done that. in the view of many messes, this is not something that left the horror attached to it. so they know how this is going about. this is not tightening that we'll see very soon. this is very gradual and cautious. every once in a while a rate hike is on the table. although we don't think it's necessary, we'll probably have a rate hike before summer. which is not to interfere with the hot space of the election. >> you made a note, christian, that if you look at the u.s. bullish sentiment, it's back down to the lows of 2008. in the past it paid to buck that trend essentially. do you think it's the same thing here based on what you said, the belief in the market that even
if we do get a summer rate hike, it will be to ward off before the election? is that what you are seeing here, too? >> exactly. lately we are seeing such a bearishness or lack of bullishness. and therefore i think the compilation in late april or so is basically over. especially the u.s. market is in for a challenge of the all-time highs any time soon. >> good morning, krchristian, is louisa. if rates normalize without a correction in the housing market, we could risk seeing a crisis all over again? >> i think the housing market is nowhere near where it should be or where it should be when the fed isn't tightening. i mean, we don't see this
overheating apart from a few hot spots like silicon valley and the like. but other than that, you know, we are far away from 2006. in our view, more importantly is that a lot of the leading indicators have rolled over in the united states. actually, everything which is leading the economy into the economic data is on the weakish side on politics. although the most important labor market is holding out pretty well. so we expect the momentum which the fed crowds for a reason for further rate hikes is actually not in favor of a much stronger economy, which in turn then is a very good thing for some of the after markets because basically higher rates would kill the equity bowl. >> can i just ask you about a brexit possibility, that's coming up in less than a month now, the referendum, what happens if brexit becomes a reality? will it be a short-term
positive, do you think? because you'll see this drop in the pound, which could be good for the uk in the longer term? >> at this point i think it would be taken as a shock. basically, in the investors perception this is off the table. if you look at the mix approach of 80% staying in, all the more, if a brexit happens, i think we should see major shock, especially by a currency market. and the british pound usually goes up when the risk is up. really, this will probably give quite a heavy setback in financial markets. but we don't expect that, we think given the necessary -- if it materializes again, it will be a major shocker for investors. >> we want to move on to talk to you about japan, but let me bring you up to speed with what we have seen overnight.
shinzo abe's partner is on plan for the sales tax hike over two-and-a-half years. this comes after the finance minister was looking for the tax increase. christian, what do you make of this, because now that the g7 is out of the way, we see aggressive stimulus from japan, how likely is it to help? >> well, certainly this is a big thing, which is in the making there, you know, after the g7 and all the issues about currency wars. i think the latest segment actually paves the way for a major, a major monetary and fiscal easing. the performance of the rate hike, the potential yen fiscal
program, everything kind of puts more stress on what everybody expects japan to do, meaning printing helicopter money. so i think japan is desperate, really desperate to kick-start the economy, whether it will help, well, of course google evidence actually points to the opposite, but it's good enough for a boost in the second half of this year and that's actually what the financial markets are currently pricing in. >> christian, just tie this all together, we have a potential for a weaker yen if we see more stimulus from the bank of japan. we've got the impact on the dollar with the fed and the hike pricing we are seeing in the market. how do you play this? do you go along the dollar here? >> my recommendation is to go long u.s. equities, especially growth franchises, tech stocks, anything that is able to outgrow a very sluggish, bold economy that grows only at 3% or so in
2016. and i actually do have lists in the united states, but this is not like a currency trade. they are getting a boost by the current setup. >> christian, thank you very much. stay with us, we'll chat more just after the break. christian is with us here, you can get your e-mails and tweets to us. let us know if you have a question for christian. now coming up on the show, falling rises and rising patent numbers. we'll speak to the flight of qe.com about how to bag an airfare bargain. we'll be right back here on "street signs." ♪ 4 by 4 by day, 4 by 4 by night ♪ ♪ 4 by 4 the summer and for doing it right ♪ ♪ 4 by 4 more hours o' summer light ♪ ♪ where all the colored beach balls are black and white ♪
>> i think the lack of reaction in the market explains that. and banca carige denies report on capital increase. they have a new funding and strategic plan to introduce to the ecb this week. and airbus' ceo says engine suppliers are partly to blame for the delays in the military aircraft. in an interview with the german newspaper, the airbus boss said the firm committed a, quote, cardinal sin by letting itself get pressured by european lenders into using an inexperien inexperienced company to produce the engine. russian oil is just under the $150 barrel. they will gather in vienna for the first time this week since agreeing to the output in doa. the russian oil minister alexander novak says it's too
early to write-off opec and this can be christian, should we be writing off opec here? >> yes, we should. although they are working hard to keep up the facade to kind of manage the perception, i think anything which actually doesn't end in turmoil is already a success by friday. now that said we have to admit, you know, with the supply disruption in canada, nigeria and so forth, it is probably easier to close ranks and look a bit better in the meeting. but opec really struggles to kind of keep up with the supply glove. >> so you mentioned the supply disruptions that we see. if we take some of that out of the market in the next, what, couple of months, let's say, she says hopefully, where do you see oil then trading? and just give me that sense in terms of the broader market of
commodities, because there's broader sentiment, particularly eu from what we are seeing now. >> absolutely. i think there's the new normal for oil somewhere between $35 and $60. so depending on global activity, we'll probably revisit the lower end at some stage. but now we know it's pretty much holding up and we are on the upper end of this range. and we expect much more of a range in the markets as if the supply will take the economy to absorb, two to three years or so. i think this is a story that goes along with many other commodity rates. maybe the most extreme one is steel where we see structure low capacity where a peak demand is already behind us and also peak production. and also some of the industrial metals are in a well supply situation. so i think after a very, very nice run of this bounce since
mid-february we are in for consolidation at least, but probably lower commodity prices over the summer. >> christian, we are almost six months into the year, given that you're a chief strategist of research, what will you be investing at the moment, in general? are there any particular companies that standout? >> i think it's about technology. you know, a lot of concern earlier in the year, whether they are heavyweights in the united states will be able to make it as they have done. in the case of apple, this has really been put to the test. but a lot of it are the facebook, googles, apple, they basingly will drive this market. and this goes through to global tech franchises that will benefit from the current setup,
the lack of growth, and this will basically fuel names in the tech space and also in the bi o biotech space. >> christian, thank you very much. now u.s. markets are closed for memorial day as mentioned. phil lebeau takes a look at one of the biggest travel weekends stateside. >> reporter: a busy memorial day weekend for travelers here in the united states. 2.6 million people took to the skies. and fortunately for most of them, there were very few lines at airports. we have seen congestion, backup lines for an hour or two hours at security check points over the last couple of weeks in the u.s. but there were shorter delays, practically no delays at most of the major airports on friday as people were leaving for the weekend. travelers have also been arriving for their flights
earlier that has made for a lower stress level. and it helps the airlines are adding contract workers to assist the transportation security administration as they are putting all of these people through the security lines. it's going to be a busy summer. 231 million people here in the u.s. will be flying. record passenger levels. and it's driven by two things, lower fares and a stronger economy that has a lot of people saying, you know what? now is the time to book the trip and go somewhere. the good news, the start of the summer u.s. travel season has gotten off to a problem-free start. problem-free relative to what we have seen over the last couple of weeks. that's the story from here at o'hare airport in chicago, back to you. >> nice and crowded behind him. good news for passengers, though, because data from flight comparison website kiwi.com shows airline prices fell 12% from a year earlier. joining me is oliver, the ceo at kiwi.com. did i pronounce that correctly?
>> yeah, yeah. >> more or less. kiwi.com, you came up with that name when buying the company, why is it that you think kiwi.com benefits passengers? >> basically we are combining flights and prices of each other. so for example, we are able to combine ryan jet and compare it to another section to the customer. this way we are able to save 80% compared to any other website. >> what is the data telling you about the traveler right at the moment? >> well, basically after the effe effects in north africa, we saw it recover quite quickly and we are seeing huge growth in european countries.
>> how is it different from expedia? because i can get on there and book four different legs of flights and put me on all different things and can be cheap compared to booking alone. how are you different? >> so you are booking four different sections? >> yeah. but i pay altogether. i can do four legs of a flight going all over the place and it will come up with a -- so it is combining things like ryan air and so on. so how do you differ or don't you? >> we do. so expedia only combines the flight of the carriers which means the airlines cooperate with each other. kiwi.com will combine any airline with any other airline. so that's what we do. and they are different. of course, you can book separate flights by yourself, you can get on the website and make one
booking. but you are covered in case something bad happens. for example, if the first ryan air flight gets delayed and you miss your connection, you will get your money back. you don't want to get stuck in the airport. kiwi.com covers all the things that can arrive from combining a flight. so, for example, if the case i just mentioned would happen, you can call 24/7. we have a customer care in 25 languages and will help you in this case. >> that sounds expensive to you. >> for us. >> how do you make money? do you take a commission on each of the individual legs of the flight? who pays that commission? and are you profitable? >> so we are having to cover all the expenses.
if you find your flight on a site elsewhere, it may be covered however you are not covered in these cases. so we take a mark-up and from this we cover all the problems that could arrive. and the important thing is that we have really good customer care 24/7, which not many airlines do have. so basically we are trying to put the customer service into the fine. >> i read in some material that you have a 1500% year on year revenue growth in 2015. the sky is the limit. great to have you on. the site is kiwi.com. and fintech is shaping up in china but not without problems. eunice yang files this report. >> reporter: scenes like this are common in china.
enraged investors looking for justice at their lending company. these alternative investments that match investors and borrowers online have exploded in china but so have the scams casting a shadow over industry players like this man, who hope unconventional financing will still be a bright spot in the country's slowing economy. he runs a lending company and the f-group. a chinese financial technology or fin-tech firm. >> these are scams. they just happen to be happening in this fintech time. this did affect the adjective of the regulators.
>> one time is the financial technology. in china with funding from state banks out of reach for many smaller companies, this up and coming sector has ballooned into a multibillion industry. despite the potential, he expects 2016 to bring uncertain times as regulators wearily eye the new entrants to the country's financial world. >> there's a side of reservation that comes into play in this market. but it takes time for the players and regulators to come to some sort of harmony. as a regulator, it's very often that regulator didn't understand at the beginning when they understand and think they understand, they will overregulate. so when they overregulate the industry or the growth is lower. >> reporter: he believes no
company will be immune like apple. >> apple pay is a huge fan space. i use apple pay, but actually i don't know. anyone who wants to answer financial or the financial sector in china, the first thing is they need to talk to the regulator. it is very hard, not only for the financial players but any internet or technology company to try to offer data in china. it's different rules. >> reporter: as for shun, he's hoping to bring stability to the industry longer term. >> after this half-year regulation of more people, some people may be scared or maybe have lost their confidence in the beginning. but they are coming back. they are shifting from shake did platform to a more reputable platform. it's better to face the problem earlier. >> as long as he can survive any potential surprises along the
way. eunice yoon, beijing. we are heading for a short break. check out the world markets live blog running throughout the european trading day. loads of good stuff on there. you will find julie and i both on there. send us your questions and we'll see you in a minute. sign up at etrade.com and get up to six hundred dollars. thisproof of less joint pain and clearer skin. this is my body of proof that i can fight psoriatic arthritis with humira. humira works by targeting and helping to block a specific source of inflammation that contributes to both joint and skin symptoms. it's proven to help relieve pain, stop further joint damage, and clear skin in many adults. humira is the number #1 prescribed biologic for psoriatic arthritis. humira can lower your ability to fight infections,
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prime minister abe will delay his sales tax hike for two-and-a-half years. return to sender. shares in postml hit a high after a breakdown with belgian rival bpost. welcome back to "street sign signs." uk investors are out and u.s. investors are out. we are seeing a slightly bigger gain over in italy up .30. we are seeing the banks driving some of the gains. we have a weakness in the oil and gas sector.
you see the oil below $50 a barrel. but i think the key thing to point out is we have a load of data coming out in the likes of payroll, adp numbers as well. and i think investors are just taking the chance today. now the french prime minister struck a defiant tone over the weekend in the face of further street protests and civil unrest over a controversial labor reform. speaking to french media, he cautioned the government would, quote, lose everything if it gave into the street. meanwhile, france's powerful cgt union called for transport strikes to continue during the european football championship. and british prime minister david cameron heard an increase
in personal rhetoric over the weekend. >> i understand why people think the levels are too high, but the fact is the biggest problem we have is non-eu migration. and secondly, the reason why the leaf people have now really focused on immigration day after day after day is because they have lost comprehensively the debate on the economy. and what is now clear, and i i don't think they can really dispute is that if we did vote to leave, the economic aftershock would be severe and directly measurable in jobs and business confidence. >> that's a hard one, isn't it? because he can say that ultimately they have lost the debate on whether or not the economy will struggle. i guess particularly in the short-term talking about the ability to organize trade deals and be part of the single market even if you are not part of the eu, but the people understand that. do people understand? because the people i speak to
that are actually living and breathing this every day, they go, actually, we pay too much to the eu and, you know, we have an immigration problem. >> well, understand/do we care. not as in do we really care, but also exactly that immigration is the other big motivation that people are voting on, i think. all the announcements are you are voting on the economy or voting on immigration. i don't know what you do if you vote on them together, which scenario is better in the longer term, but a lot of people don't know what the trade deals are going to look like and it is hard to see through. >> i agree with you. back to your point on immigration, someone needs to come out and go, actually, can you prevent in some ways their freedom of movement of people. and a single pass of the market. because my understanding of how the eu works is unfortunately you can't take one without the other. so i think actually pushing that point and saying you can't stem one of those things and restrict the freedom of people if you
still want to the be part of the market. >> but, for example, the ceo of jd witherspoon is arguing that the movement of people, that that has less to do with the potential brexit. i mean, he very much needs people to work for this very large group, right? and you would think that freedom of movement would be a good thing for him. but he's saying it has to do with democracy and moving the decisions being made in brussels, moving it to a more national decision making process, bringing it back home. >> so he's saying that even though he employed people from other european countries, he's in favor of having some degree of restriction on them coming over because he wants centralized order in the uk. >> he wants to see more control being made or more decisions being made in the u.k. which is more motivation that a lot of people may be voting on. but it is not just the value
of politics, we have the u.s. >> we do. republican presidential candidate donald trump went to washington over the weekend. tracie potts has more. thank you for being here on your day off. >> reporter: well, thank you. it is not a day off for so many people who spent part of their many years fighting for this country. it's a day they remember our fallen. and donald trump was doing that over the weekend, rolling thunder, which is a motorcycle group that motors into washington around this time every year, came and donald trump was one of their featured speakers. you know, this time last year, he was not received so well from veterans after saying that john mccain whose appeal in vietnam was not a war hero. well, a very different reception with rolling thunder this year. applause, no disruptions as he talked about veterans and how
they needed to be treated better than immigrants in this country. now, today we won't see him, he's off the public schedule. but we'll see the clintons as they are expected to march in a memorial day parade in chappaqua, new york. she continues to fight the concern over e-mails. and bernie sanders has an event later this afternoon in california pushing back at donald trump for backing out of the debate they had talked about. trump's campaign chair says that he will wait to debate whoever comes out on top on the democratic side. >> tracie, thank you. the u.s. markets are watch iing the slump in campaigns. go to cnbc.com for the full story. and six people including two police officers were shot and wounded. nbc's morgan radford has the
latest. >> reporter: shots fired back to back, smoke rising and a scared neighbor running away. police cars rushing to the scene where eight people were shot, two of them killed. >> no, we do not know what started this but what we do know is they were shooting randomly. >> reporter: authorities say around 10:50 a.m. two gunmen started spraying bullets in a west suburban texas neighborhood. one hit a gas station causing a fire. residents were asked to stay inside while the gunmen opened fire on a police helicopter and responding vehicles. the police department saying two of their officers were shot but both are expected to recover. one gunman was killed and the second is in critical condition. when asked if this is an act of terror -- >> everything is open at this time. >> reporter: this one quiet community is in shock and authorities are searching for clues. morgan radford, nbc news. and in venezuela, lufthansa
us is spends flights from frankfort to caracas beginning june 18th. now, this as the violence in venezuela is escalating with 11 men gunned down by an armed squad over the weekend. non-governmental organizations say the crime is heading north into political and economic turmoil. let talk more about emerging markets and what we are seeing in emerging markets. because a lot has been going on, a lot of unrest in brazil and a lot of upheaval in venezuela. they are suffering there standing in line for hours to buy necessities with inflation spiraling. some say we are close to hyper inflation. we have a global emerging markets strategist at ieg investment joining us. martin, good to have you with us today. we'll start with your general thoughts on the emerging markets at the moment.
we are seeing some buy-ins back to the emerging markets do. you think this trend will continue or will we see more money go out during the second half of the jeer? >> the last few weeks have not been very good. so from january to the beginning of may, the emerging markets performed quite well. some weeks very well. and because of chinese data, the surprises, more elections over the fed, we have seen the market go sour. we have seen the sentiment deteriorate quite a bit. the high risk markets are underperforming again. so it is not looking so good anymore. >> what happens when the fed hikes? how much of an impact will we see directly on e merging markets? >> it is very important that the emerging markets have a lot of inflows during the year when the fed was dubbish. and i think a lot of that money can flow out. so we talk at the u.s. dollar
trade, i think it is still ongoing. so when people are set to hike earlier than expected, you see the nervousness about the flows. and i think the last few weeks have seen flows to the negative again in the emerging markets. >> if you look back at the rate crisis we saw in '99 and 2004, actually, they outperformed in many cases, but you can tie that back to the commodities market rally we saw in 2006. just to offset that, how important is the recent pickup that we have seen in commodities in order to lend some stability when we do see a fed rate hike? because at this rate we are only pricing in one hike. so i think you have to bear that in mind, too, surely. >> yeah. so indeed we have a pricing hike, which we could see a price in two hikes and the pressure will fall to the increase. but you're right, the commodity price is important. a lot of the merging markets are
dependent on the commodity exports. and we have to look for china. there's a lot of doubts in the market about china and there was a bit of excitement about a recovery this year. but i think a lot of the excitement has disappeared again because data has been disappointing. and you know about the structural challenges of the chinese economy, their whole debt position is a problem. so yeah, with china not moving much and china certainly not having a great growth recovery, commodity prices probably will not be very strong. that's a problem for emerging markets as well. >> do you think china holds steady at the level we're seeing, particularly in terms of the data we're seeing? because if you look at the credit growth, a lot of people at the same time say actually how long can this last? are we looking at two months or three months before we see the pink in that extreme credit growth again and then we're running into problems again, so are we looking at that for the issue for the second half or the back end of this year? >> yeah, i think the key numbers we have watched have brought on
the credit growth in china. that will start the decline again. we have seen a strong credit growth in the last two quarters but it could decline. probably the concerns about chinese growth will reemerge very quickly. so we definitely have to watch it. but so far china has the strong credit growth. it's probably not sustainable. but it remains above 20% and then you should not be too worried about the short-term outlook for chinese growth. >> so which emerging market, martin, would you invest in if you wanted to be invested in emerging markets? i had someone recently tell me that brazil is investable at the moment despite the fact they need the strategic reforms to be launched. venezuela is a bit behind. what are your thoughts? >> we have a preference for the bid more defensive market, so the countries are not big in balances or growth and credit has not been excessive. and recently i think with the size of a better u.s. growth outlook and the feds likely to hike maybe more than expected,
you probably want to have more exposure to the countries that benefit from stronger global trade growth to places like korea, taiwan, thailand, these places are more attractive than the commodity exporters like brazil, for instance, or south africa. countries also where politics is a problem. but there are countries without political problems and without the imbalances. and countries that benefit from the pickup of the development in market growth. because we don't want the markets that are very sensitive to chinese growth. that's not a theme we think will last very long in the coming years. >> martin, great to have you on this morning. we have to take a quick break, but coming up on the show, looking outside the box. investors struggle with low returns. can crowd funding come to the rescue? we'll be watching right after the break. sir, this alien life form is growing
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welcome back, everybody. you're still watching "street signs." does your portfolio need a workout? we both went to the gym over the weekend. i'm trying to do more yoga. >> are you? >> saturday morning i don't want anybody telling me what to do. it's almost easier to go running on your own. >> so yoga is completely the wrong thing for you. >> but you listen to the teacher or do it on your own. should you be sweating your assets a little harder? here's how to find out how to get your money moving. >> reporter: from cardio to core, back to buns, if you can press a button, you can do it anywhere. workouts on demand, online, there are thousands already. some for free and some for a
fee. >> all these old guys are killing it. >> reporter: all part of a business that is turning the traditional fitness model upside down. >> dvds have worked just fine for over ten years. but now this opportunity to have a two-way dialogue and the ability to support the customer and their result provided a meaningful opportunity to expand what we give the customers. >> reporter: at the santa monica headquarters of beachbody, the company that brought cult workouts like p90x and insanity into millions of basements and graduals around the world, on-demand is now in demand. launched just over a year ago, the service has close to a million subscribers who pay about $13 a month each. the ceo says the service gets 100,000 views a month and 68% of viewers say they want both dvds and on demand. >> instead of cannibalizing the business, it's actually enhancing it. >> she's shaking because she's
working. >> reporter: but the money flowing into on demand is fueling competition. pick and mortar gym crunch which has 150 locations in the u.s. now launched on demand classes two years ago. the service is free to most gym members or $9.99 a month on its own. >> crunch is a powerful brand. and we felt like adding the online digital experience helped extend our brand outside the four walls of our gym. >> reporter: it's following smaller at just 20,000 views a month, but the company is growing its library and its reach. >> we're not really looking at it as, oh, this is an online digital experience and investment in that wompltd it's an extension of that brand. is there going to be competition? will all the big guys consider that providing fitness program to tend user is of value? of course there will be. what we do that is actually effective is test this stuff in a particular sequence so that
people get results. >> reporter: beachbody's investment didn't take much, it already had the content. beachbody had big brands already but the competition here in america's basement is only getting hotter. and that means the players need to be more daring, more creative and need to fully embrace the new technology. >> if you take the beachbody model, there's probably a good analogy to what has happened with netflix. netflix began the same way beachbody has become a $200 million business in the consumption of mixed media dvd sales. but increasingly over time you'll see more and more content shift from fixed media like dvds. >> reporter: but he doesn't like the label some of his competitors have touted that they are now media company. >> nailed it. and cut. >> that shocks me a little bit. we are absolutely a goal
oriented body transformation company. >> reporter: and he'll keep making dvds as long as customers keep buying them. and right now they are still buying those discs at twice the rate of on demand. for now, at least, the old model is still working out. reporting for cnbc, santa monica, california. >> i'm exhausted watching that. i wonder if it is more of an american thing to watch stuff at home and workout at home. when i live in the states i had a flat -- >> do you use dvds? i have the good intentions to take them with me. >> i have a couple exercises i do when traveling. yeah, yeah, yeah. >> enough on the exercise routine. more investors are looking at alternative options. our next guest says crowd funding could be a good one.
joining us is greg from altz investment strategies. gregg flinn, what is it that you do? >> there are 12.5 million credit investors and only 3,000 of them made an investment into a private offering last year. so what we do is we utilize the power of the crowd. there are really two reasons why an investor hasn't been able to make an investment into an alternative. one has to do with the fact they just don't have access, they don't have access to the network that gets you into the uber or the next dropbox. the next thing is that the investment minimum is really, really significant. a lot of times it's $100,000 to $250,000. so what we do, as a result in the u.s. of the jobs act and tech not, we are able to basically gather up the crowd in
smaller increments. a lot of times as low as $1,000 to $5,000. by harnessing the power of the crowd, we are able to make an institutional investment. >> quick, how much of that is a reluctance because they don't understand what they are dealing with. i buy that you're giving them easier access, but i think there's reluctance to invest in something they don't understand. >> yeah, i think that is a really good point. one thing we have seen over time is that investors generally tend to be in leading institutions and endowments. in the u.s. we have seen a movement in the liquid investment fund that has exploded over the last couple years. we really think the next phase in this evolution is that investors will begin to embrace in liquid investments.
in reality, they are familiar with real estate and are shopping in these types of investments every day and driving past them at the solar farm. so we think using the power of the internet we can really deliver the information right to their computer, right in front of them, they can consume it, gain some familiarity and over time they will increase their allocations. given the current market environment, we think it is something investors have to embrace over the next seven to ten years. >> gregg, what are you preferred alternatives then at the moment? >> well, we're really bullish on infrastructure. and there's really two reasons for that. a lot of the infrastructure type products, for example, a solar farm, they give off a current income and they have incentive tax credits that allow you to offset the income. for example, our first offering is a solar farm. solar farm generates electricity, the sun is free. we have utilities, they will purchase the electricity.
so a great high opportunity here with the yield at 7%. which is really a very equity-like return. so in conversations with investor, people look at it as potentially an equity replacement, a small sliver of a fixed income investor who struggles to find yield. they look for this investment to help achieve their income goal. >> how much return on equity should i be anticipating over the next couple of years? what kind after an average should i be looking for? >> we were talking about equity markets in general. we kind of took a little bit of a longer term because a lot of the investments we're comparing to are ill-liquid. ten year is pretty typical of the investment opportunity. compare that to equity market, we think equity markets are going to perform over the next seven to ten years, more along the lines of 2% to 4% rather than the traditional 8% to 10%. if your investor has a typical portfolio, call it a 60/40 split coupled with a low interest
rate, you have a really challenge ahead of you. so having an opportunity like a solar farm and you got to be comfortable with ill-liquidity. it could be a ten-year hold, but 7% over the next year of high credit like utility, we believe there's a spot in people's pert folios for investments like that. >> looking at 4% of their portfolio at alternative informsments investments, how much of an increase are we going to see over the next five to ten years, i would say? >> i think we'll see investors generally mimic institutions. as i mentioned earlier, we have seen a lot of inflows to liquid alternative states. i think if we're talking private equity, that probably remains a smaller portion. venture capital at 2%, but overall a complete alternative portfolio made up of liquid and ill-liquid alternatives is
probably like 15% to 25%. it's obviously going to depend on the type of investor, where you are in your investing life cycle, but we think there's going to be a really strong move and an increase in allocations because of the markets themselves to demand that investors find new sources of revenue for the portfolio. >> greggrr, great to talk to yo. we have time for nothing else. that's it, lou. >> you're here for the show tomorrow. i'm legging it to paris to catch a train. i'll join you from there tomorrow. that's it for the show. >> i'll see you tomorrow. my name is fred and i carve heads out of cheese.
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