tv Wall Street Week FOX Business May 28, 2016 12:30am-1:01am EDT
he won't use those copycat wipes. hi...doing anything later? the quiet type. i like that. armor all original protectant. don't be dull. lou: that's it for us, happy memorial day. good night from new york . announcer: this show has never been solely about investments, we've 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 long-term investing. i'm anthony scaramucci. gary: i'm 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 won't do. anthony: it's true, and this
month the market's 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. isn't 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. presidential 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 near-term, 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 two weeks it was very 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 you're 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? >> it's 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, it's fresh in the mind every day? >> it's not paralyzing but it's there. the way we manifest ourselves with the client base and strategy is want to be fully diversified. we've seen a real increased interest in tangible assets, things like real estate, farmland, timber land. people like those kinds of assets because there's 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 it's 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 you're 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 don't see 3% average hourly earnings grow for another 12 months, and the danger zone typically is 4%. we don't see that happening out until 2018, 2019, which means the fed doesn't 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: let's look at the clients, the opportunity to work with and you work directly with your clients. you've 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 that's going to impact portfolios, the market. what do you tell them? >> well, it's a boom for the 24-hour 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 don't 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 you're doing it now. anthony: is this 1980, keith? people have something to fear but don't have something to fear? >> interesting, despite the fact that this economic expansion in the bull market has gone on for so long, it's been the most joyless period of money making i've 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, it's not been sustained and the rally continued. gary: keith and rick. stay with us. we'll 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
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. gary: welcome back to "wall street week." joined by keith banks and rick szelc, the election is overshadowing so much of what's 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 don't have big impact on the broad market. they can have big sectoral
policies the new electee comes in with. it doesn't have a sustained impact. anthony: when jamie dimon was on the show and said the election isn't 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, it's going to make them more nervous or more optimistic. gary: rick, you talked about having to prepare now for what happened in november. let's 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, that's all that matters. all this noise, what goes on globally, we can't control any of that, an investor can't 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, we're more defensive. we're more invested in a variety of different investmentis and would say we're looking at a 40-50% allocation to yield and maybe on the balance, on growth, because to keith's point earlier, the s&p at 17 times doesn't create a lot of optimism. anthony: what sectors do you like, keith, specifically? >> we share rotation out of growth into cyclical-value 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 can't expect a
recession in 2017 if you're moving into the spaces now? >> no, we're 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, it's still about the fed, every day, and what they say and tweek commentary in terms of what the market says. >> a fed-centric world. gary: if you know that's the case, how do you advise clients to think about the commentary in terms of a long-term 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 long-term
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. we're comfortable tactically reallocating. we went to a more neutral stance versus equities. but if the market were to pull back this summer by 5-7%, 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 long-term. the market is a voting machine in the short-term and weighing machine in the long-term. 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.
>> it's better than paying $500 for this. gary: when you have the conversations with clients, some call it hand holding. rick, i've been there, i see how you do it. how important is it to understand. we'll have volatility to stay the course. >> it's 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 three-call 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. we'll be back after this. announcer: washington first as
. 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 what's happened with the war on coal and what it's 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.
let's bring in the fox business all-stars charlie gasparino and liz claman. charlie? >> off-limits, 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 right-wing 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 people don't understand the failures of socialism? >> look what's 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 wasn't, they were kids. the animosity to free speech particularly right-wing speech that goes on on campus is basically overflowing to what's going on here, and what's going on in the election, and it's 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 can't seem to do that, is create jobs. when you want to talk about dollars and cents and minimum wage, et cetera, or don't 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: let's 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, what's 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, he's backed away a little bit. >> funny how that works. >> he's tapped into the populism. anthony: there is reasons to throw eggs in the face of wall street for having been bad actors. >> let's 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 couldn't pay it back.
that was the scandal. so the average american is -- gary: imposed by the government. >> that's 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 it's wall street or whether it's small businesses, it's 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. >> let's be clear, the last eight years, liz, you can't
compare the regulations obama imposed particularly to dodd-frank and what that's done to lending. it's harto get a loan if you're a small business, not because of george bush. i'm not saying george bush was perfect. but if anything, george bush was regulatory light compared to what's 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 wasn't just hovnanian, a lot of the home builders wanted to buy. that's what you do, seven years of feast and you buy during the famine. >> here's where it will be, here's where i think it will be, not politically effective now. she's got a problem, she has bernie sanders. she's fighting two opponents now. if she doesn't get indicted which is a possibility given the e-mail 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 i'm a business person, that's what business people are supposed to do. they want the problem fixed. who's 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.
>> i'm going to say this, i think we should tune out essentially what's happening now to a certain extent and think about what it's going to be if clinton goes against trump directly. these type of arguments do resonate. and that's where it's 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 you're talking about smart money, big money. barry diller said of iac, i'm going in, i will spend what it takes to defeat donald trump. listen, there are two new york businessmen, if you don't live in new york, you know they might avoid each other. it's 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 hasn't worked yet.
>> i'm very capable of changing to anything wants to change to. down* i'm sick of both these people and sick of the endless coverage of them. most of what they will do will be bad. the best comes from the private sector. but people look to government. they think it's sharing. so when people propose better, private solutions, they get