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Omnivest CIO Tom Sowanick on the Federal Reserve’s impact on the banking sector and economy.
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-- even though the market is reacting to the GDP number today -- first guest says it doesn't really matter much he says that the big news is that the Fed and what's happening and Greece is more important to the markets.
Joining us now is on -- co president chief investment officer Tom -- Great to have you on again Tom and -- -- -- what you're paying attention to what vs what a lot of other people are paying attention to.
People seem to be sort of tired of Greece they seem to be tired of sort of the same old same mold that -- -- in 2011 be saying it still matters more than ever.
It matters because of the of the knock on effect of the contagion effect and that is if Greece is allowed to.
To go into default and it triggers the CDS market then.
Portugal comes up front that the next day and -- and the speculators or whatever you wanna call them we'll -- images drill the markets quite severe.
What do you make of that of the Fed's decision to keep interest rates low until 2014.
On you take it as a sign that the US economy isn't moving at a pace that we thought it would indeed GDP numbers today's sort of re confirming -- thwarted an overall positive that -- and have easy money flowing to the capital in the capital system for a long time to come.
I think -- both about.
First I think that Bernanke is a little bit different than Greenspan Greenspan my recollection is that he was generally optimistic.
A Bernanke is generally cautious.
And yes the economy hasn't responded as much as we've.
We would've like to and that's because one of the engines has been dead and that's the engine of the housing market.
In terms is the extension of of the zero rate policies or good thing I think it is and I think it's spectacularly good for the banking sector and for.
Corporation in general because it allows them to fix their funding costs.
With some degree of certainty not a 100% certainty.
But banks now can look at the next three years and saying zero interest rates.
We can borrow relatively cheaply -- -- -- for all and then they can about -- But see here's the thing -- the banks have had a good -- -- -- seven trillion in secret but loans from the Fed they got bailouts.
Why you know why do we care so much about the banks -- their help in these great deals for them hasn't done trickled into the rest of the economy because war.
The first half of that seven trillion whatever number that happens -- Unemployment was rising.
As opposed to now it's it's declining gradually.
-- initial unemployment claims have but I but I really.
Crossed the 400000 -- I guess -- people watching wanna know OK we were so concerned about these banks when does this somehow.
When we connect the dots in this money makes it to start making -- the main street.
Look at auto sales.
Look at look at.
Not.
New home sales look at.
Existing home sales and I think you start to see some life there.
Look at consumer borrowing where consumer barring that came out I think two weeks ago for the month of November.
It was at its highest level in ten year -- came in at twenty some odd billion dollars.
So there's a willingness to -- there's a willingness to land and I think what Bernanke did extending dessert and to.
Perhaps late 2000 Friday.
Is with the necessary don't know is that a positive yes.
We've got a couple of do's and don't you have for our viewers to take home with them first is don't read too much under Bernanke's comments in the second it was about banks but I think it's really interesting is a lot of people.
Are very bearish on the on the -- -- don't wanna touch -- -- -- Think that it's a good time this to start playing around.
Again they've we have Bernanke locked in that funding cost for another year -- so we have three years of essentially zero rates and banks have been given.
Get an extension of printing money if there if there's a willingness to lend and a willingness to borrow I think that's very positive.
Two I think we are getting closer to resolution with respect to Greece.
And from what we're hearing from different officials that it could be as early as this weekend -- -- as early as yesterday and the day before.
But once that gets resolved I think it will be resolved on a positive side as opposed to a negative.
But I think to be a lot of pressure off of the bank's three which is important banks are leading the market higher.
And we look at how the market's been rotating over the past.
Three months -- to the market to be led by small cap stocks emerging market stocks and financials and that's always a good next.
-- finite amount and that's always great to have you on Sony computer vice Alex Leavitt thanks again thank.
