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Right now we gotta get back to the markets and Channing Smith is with us managing director and co manager of capital advisors growth fund is from Tulsa Oklahoma -- good to see you again thank you.
What do you think about the way these markets are reacting.
Well I think it there's caution in the markets and at Campbell rises growth on we would be cautious going the second half of the year.
But there's going to be a deal we all know that is just what is it gonna look like and the devil will be in the details.
But if you think about -- step back if we're gonna see three to four trillion cuts over the next couple years.
That's going to be a drag on the economy.
You have a consumers very weak if you look at the last thirteen quarters consumer growth -- consumption growth has been about half a percent.
Historically we've been around 3% and so economies very -- not only in the US and in Europe and China where we start to see is a slow down there in manufacturing.
So world economies are slowing.
And I think that investors need to realize today we're what is my starting point.
And right now today you're starting point is very high profit margins right now profit margins or about thirteen point 3% that's corporate profit margins as a percentage of GDP.
It's a very high and had to say the markets cheap yet to make an assumption that these profit margins are gonna not only.
Stay at the record levels but increased much more and we just don't -- think that's likely going forward.
Not only that if you look at valuation metrics on -- longer term basis not for peace but I assure.
They're also saying pay very high marks here and historically when markets are trading at -- levels that we are trading at today.
The future returns -- very again.
OK so what does that do and you know we're we're saying that.
You're saying that historically it's not looking great.
OK so deep and it will everywhere I go yeah we don't -- -- error -- right here right and that's it sounds like.
There are opportunities in the market there in large cap blue chips and global companies global multinationals that's where investors need to go.
These are companies like Abbott labs.
Johnson & Johnson Procter & Gamble the Pepsi's of the world.
If you look at the S&P 100 that's where the valuation opportunity lies.
A lot of these global companies that have exposure emerging markets that have great balance sheets that have nice dividend yields.
They have great free cash flow trading and a very attractive valuation so that is one part of the market's very attractive.
It's is in serious and is in the same -- for a while now though right the big -- as you gonna get a dividend and it's a play on what's happening in the rest of the world not here come right.
It's an accident down at mcdonalds -- locally could throw in the mix right you.
Caterpillar did really well the numbers were great.
So yeah that's where you're saying you putting the -- your money.
Right do you wanna you wanna become -- -- through dividends and a lot of companies I mentioned have given yields that are higher than the ten year treasury.
So that's an opportunity for investors to get it -- -- menial for that do any of the growth through time.
I assume that's -- -- be another area that investors can -- term as mobile Internet.
Look for secular themes and that -- grown any type of economic environment if you look at apple for example we still think that's stock is very cheap display network.
Even a 400 if you take out the cash you know -- have -- -- six billion in cash.
If you take that around the stock is trading below the market multiple.
This is that company that sold twenty million iphones last quarter.
We're gonna sell over ten million ipads.
They continue to do well we haven't even tapped into the international market -- so.
The runway for apple is still very large and we think five to 600 dollars is is very reasonable.
And I -- them.
Thank him who was.
For the 660 dollar price tag on her -- what do you think about it they're gonna grow their earnings and revenues -- And many multiples of what the overall market is.
And a string and a discount to the market says there needs to be area just not it's really like a value stock in -- the best growth stock we've seen in decades you know it's interesting you have a BS in entrepreneurship right DN university right.
So you know that the heart of this country is in a small business right but yet there are struggling.
They are struggling in one of the frustrations we haven't kennel license growth fund is.
Look we have all this in debt there and I think you can in our opinion is is that if we had government spending that was focused on investment maybe that's infrastructure maybe it's alternative energy.
The bond market would be a lot more receptive to that type of debt and instead we have entitlements but if we focused on investments that could.
Create economic growth.
That could bring down unemployment I think the bond markets would be very accepting of that.
And people need to be very accepting in this 'cause we -- at at present we don't have a way to bring down our unemployment rate and what they're doing.
In Washington with the austerity measures is not gonna help unemployment disagree with you at the same time -- the bond market hasn't been as freaked out as one would think it would be.
Right and so there's an ever waging a look at this right now I mean are aware the bond markets focus on what are they looking at what they're looking out what his economic growth going to be in the coming years.
And what the -- is telling you is that economic growth is going to be you know pretty lousy.
If you look at Japan in and then there's a lot of worry about what's gonna happen with the debt.
Ten years ago Japan lost or triple A credit rating today -- ten years bond is around one and a quarter -- and occurs he's very strong so I think.
It to take a step back and you know -- -- -- singers in the Armageddon.
You know the US currency is still the best game in town -- even envision a point if we lose our triple -- rating you know worried.
I think there might be a short term impact and longer term and I'm not worried.
You know we we still -- very strong country I don't think it's gonna impact people selling.
You know their bonds.
-- only that there would be a big big impact there -- people are still gonna buy a US bonds because there is not an alternative there's not a viable turn.
On that that brings me to my next question because it.
If you or more and such disarray.
-- China -- such an unknown right.
If the rest of the world was more stable -- our bond market be in disarray because of what's happening here at home.
I think it would be yeah.
-- and clean up the bond markets are gonna look at where interest rates going to be in the future and they're in they're going to be driven off economic growth.
And economic growth.
Is going to be lousy we've got austerity measures we have a we consumer.
Win businesses and are gonna spend because they're looking at this outlook concerns while and -- giving capital investment.
When I know the demand side there so where they are spending money is emerging markets outside of the growth this.
And so that's why capitalize growth on we're focused.
On that picking up a lot of these names where we're gonna benefit from that emerging market based multinationals are placed a big the place today.
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