tv Wall Street Week FOX Business September 17, 2016 12:30am-1:01am EDT
speculation continues to build that the fed and fast-moving energy pricings are driving the stock market. anthony: all this is playing into the election season. rob, where do you think the markets are in the economy? >> we needed to pull back and that's what we are seeing. it's been modest. i think it will continue to be modest. remember what happened in brexit. there is a tremendous amount of money on the sidelines waiting to be invested. it's been a doubting thomas market the whole way. intermediate term we are still constructsive on risk assets. you have the backdrop of supportive policy, low inflation and accelerating growth.
if you look longer term, the effect few quarters into 2017, we think that macro backdrop continues to accelerate and earnings do well, so we are forecasting a pretty healthy risk asset environment after the sell-off. anthony: rob, do you see it the same way? >> we are stock pickers. and we have an overall vision of 5 to 6 to 10 years. we see wall street to main street dominating what goes on. the largest population group is 25-35 years old. we see a lot of weddings and babies and cars that fit car seats. the percentage of homes for sale compared to the u.s. population is so low it's almost off the charts. i love people saying things like we are concerned about a recession.
the reality is, until housing kicks in, you haven't started the economic recovery yet. you probably read people at the low ends of the pay increase. you wait until carpenters, miles per hour, electric tritions are in demands. the most popular major is computer science and in 5 to 10 years carpenters will be making more money. anthony: allen meltzer said the fed has lost some level of kred built here. -- of credibility here. do you think they will try to regain some credibility with a rate hike? >> we don't spend much time trying to figure those things out. but millennials will set interest rates for the next 10-15 years.
everyone is wondering when rates will go up. the only way rates will go up is if money gets demands. the largest population group haven't demands. people below 35, 15% bought a house. anthony: when did you buy your first house? >> i was 25. >> how old were you? >> 25-26. the demographic shift will be incredible. this is 88 million people. 28% of the entire population in the u.s. now and in the next 10 years, they are entering important decision-making time. when you think about how they grew up, they are the most educated generation. they are one of the most compassionate generations we have seen.
they care about their parents. they are rent aing generation. when they transition, what does that mean? >> we were looking for modest pullback. we were overbought. >> we are constructive on risk. anthony: what's the pullback, 5%? >> i don't think you will see a massive sell-off. don't confuse optimism with what millennials will do about the to be market. if you look at the positioning of the s & p 500. it's way overrated to computer science and not carpenters, plumbers and electricians. gary: when we come back from the break, let's talk about how as an investor you anticipated these trends. we'll be right back.
"wall street week" will be back in a minute. >> announcer: opportunity and chaos up next on "wall street week." rob sechan and bill smead talk about the market that may not about the market that may not settle down until election what is success? about the market that may not settle down until election is it a professor who never stops being a student? is it a caregiver determined to take care of her own? or is it a lifetime of work that blazes the path to your passions? your personal success takes a financial partner who values it as much as you do. learn more at tiaa.org thwow, it's nice.ew 2016 chevy malibu. let's check it out. do any of you have kids? i do yes. this car has a feature built in
called teen driver technology, which lets parent's see how their teens are driving. oh, that's smart. it even mutes the radio until the seat belt is fastened. will it keep track of how many boys get it in the car? (laughter) cause that could be useful. this is ahead of what my audi has for sure. wish my beamer had that. i didn't even know that technology existed. i'm not in the market for a car but now i may be.
gary: welcome to "wall street week." we are joined by rob sechan and bill smead. in the first block we talked about your optimistic outlook for the economy, not necessarily the stock market. as an investor, give us some ideas how you would invest given your outlook. >> our second largest position is in brian homes.
the fifth largest home builder. high free cash flow. the stock corrected in the last six months because in the last quarterly report their margins are down. their revenue growth has been substantial. but we are at the beginning of the housing cycle. from pennsylvania to florida and probably the best growth is in north carolina. that's an obvious and direct way. second way is. hataway owns the second largest brokerage, and the railroad. in portland, there was a burlington northern santa fe train heading east. 60% was heading east to build houses. gary: and he has a position in wells fargo.
>> the answer is we own 27 companies, and so we are very intensely interested in every one of them. we do own wells fargo. i would put it in the camp of owned companies that are so wonderful even a 2-year-old could run them. there is evidence there were 2-year-olds running around. buffet in this position. he has been in this position before with coca-cola. i would take full responsibilities for that. we own jpmorgan and bank of america and wells fargo. they have the deposits. if you are going to make mort gaining loans to any len -- if you are going to make mortgage loans to millennials, you have to have deposits. they also take roots in their towns.
so we like the local network tv stations and the newspaper business. anthony: carl icon is talking about the day of reckoning for the markets. >> anybody that's a skeptic on where markets are, and karl icon is one of the most prominent voices. they are citing duration of the market. this cycle is slower so it's likely to be longer so the duration could last. the other thing they talk about is valuation. valuation does not matter without context. you have to think about why prices are where they are. when you look at the set of investable alternatives. equities are relatively attractive. so we are of the opinion that now is a great time to think long term and think about some of the themes that bill has outlined.
if you think about the thematic theme of rising millennials and their impact on our economic trajectory you can see energy companies will do well. well brands companies will do well. think about the focus on wellness and fitness in this generation. in service-oriented companies will do well. this is a group that's focused on experiences more than anything else. >> there is an irony. valuation matters dearly. if you break the market out, all the academics, chief stocks out perform average. and expensive under perform average. the it's the highest it's been since 1999. it's marked capitalization way to deal with the s & p.
so amazon gets bigger. amazon is 58% of the consumer discretionary sector. how they got into the discretionary sector. if you look at the 100 cheapest stocks. they traded 2 times over estimate and they are load with financial companies, retailers, home builders, people that would benefit from a dramatically better economy or rising. where are p. pevment ratios overcooked? in staples. and glam' tech. but the irony is we are heading toward the points where good stock picking -- anthony: a lot of people ask how across the s & p advance from here. it's catchup because the sectors are doing well.
managers, how high up did this go? did it go up ceo? >> some of that is still being determined. by the has been acknowledged by the bank that firings of employees included hundreds of people committing fraudulent acts with accounts and people managing those people and people managing the managers. anthony: temperature the escalating wells fargo scandal could go all the way to the ceo's office. it was a scheme to generate fees and meet quotas. the bank is paying a fine to settle the case but in doing so without admitting wrongdoing. but word is the feds are investigating. wells far go ceo john stumf says the blame is on the workers, not
the bank. charlie, this is not a surprise. this is a culture of these banks. is it not? charlie: it's not suppose to be. i don't want to get into cultures and whether banks are set up to rip people off. but i will say two things. where is warren buffet on this story? because this guy talks about every scam in the world and it's weird this fight, don't get on his radar. but i think what we'll see is something i have been talking about a long time. these banks are too big to manage. there was a lot of scandal and scams going none the 1990s. they never really touched the
ceo. it's unclear if he was directly involved. there was a couple things where he might have known about analysts pumping up stock recommendations. they never brought cases against him. but one of the problems with prosecuting the ceo is these banks are so big, prosecuting jamie dinan. here we are 8 years. gary: that gets to the board of directors. the ceo is going to make 19, 20, million. melissa: within the bank what kinds of incentives are you providing to these employees that they are willing to go that far. open an account. you have got to think it can't only be going on at wells fargo. adam shapiro is making calls
asking other banks, do you pay the same kind of inventives. this won't be the only bank. charlie: we looked at every bank. jpmorgan says they don't have this issue. melissa: not having the issue isn't the same as not having an incentive. charlie: why isn't jamie dinan not indicted for london wale. melissa: this is 5,000 employees. anthony: the zero interest rate environment is putting enormous amount of pressure on these banks. they are finding other ways to create -- this is a list of ways
from the head down. you mention warren buffet. charlie: warren buffet, the largest shareholder of wells fargo, a gentleman who would typically come out in public and have a lot of commentary based on the past on subject matters such as this. he hasn't said whether he thinks the ceo should go. charlie: are you calling warren buffet a hypocrite? gary: i have called him a hypocrite before. if this was not his investment -- anthony: let's go to our next topic which i think is terrific. our friend char are you broke the other huge story this week -- our friend charlie broke the big story bayer all cash for monsanto to create a behemoth.
based on the stock price, the street seems to do it. what's going to happen? charlie: one of the problems, we have so much regulation, they couldn't catch something like this. we have regulation where it doesn't need to exist. this deal will be looked at 40 different ways to sunday because you have four or five different regulators from the e.u. to canada and south america to us. and they mate the notion that a company might produce genetically modified food. this is just a guess, the deal does not get approved. i'll tell you the ceo of bayer and his counterpart at monsanto and a lot of people surrounding the deal believe they have spoken enough with the regulators that they will get it through.
if you believe that, there is an enormous trade. melissa: when you looked at the market after the deal closed, you saw traders did not believe the deal would go through because of the gap between where the stock is and where the bid was. i think they can't handle the idea of gmo foods have gotten this negative label. if we are going to try and feed the world, this is where the technology comes from. >> 90% of the food is genetically modified. charlie: if you seen what it looks like if it's not genetically modified? it looks bizarre. i had this argument with deirdre. this is a good argument.
i said, poor people can't shop at whole foods, and they can't. we need top create food that's affordable. i understand you can always make it better. but to just label gmos as poison. they are like the people who believe in global warming. anthony: is it going to close, yes or no. melissa: i don't think so. charlie: i'll give you a 40% chance it will close. if you think it's going to close. it's a good deal. gary: melissa, charlie, thanks for joining us. anthony: next week thomas russo and a.i.g. chief counsel will
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