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Stifel Nicolaus Managing Director David Lutz and First Asset Management Senior V.P. John Stephenson on the outlook for the markets.
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Atlas shrugged off bank downgrades but -- it -- Europe's debt crisis that question and it is time for a street fight to decide decide all as we have.
Are -- today is David Lutz steeple Nicholas managing director at -- bear Josh Stephenson first -- senior vice president John let me go to you first because -- -- -- provocative.
Point of -- you say you were beyond -- bearish what exactly does that mean.
Why I think it's hard to see any positive news whatsoever -- -- -- the fact that markets are cheap which.
You know could presumably be the bullish argument but I think when you look at the risks that are.
I've been faced by markets we've just extremely European experiment is blowing up in our faces.
It's like that chemistry experiment we keep -- chemicals until it finally get combustion that that was when I was always doing and high school -- I know it's a lot of -- but now we're doing it would real people real lives.
And it's about to blow up in Europe.
I mean Italy is becoming a problems -- -- problem of course last fall was was Greece which of course is on result.
So I think you're gonna see this whole union fracture you're gonna end up having -- Northern Europe.
Euro region and I think what Germany has faced with because there really isolated now that France -- gone.
Deep -- -- left in terms of electing a socialist government is that Germans will do the calpers and say look.
It's better to have the bitter divorce now and stay in the bad marriage.
Have a David I'm in which we you know we got talks have more stimulus coming here at home we think that they're gonna zombie Europe -- at some point can't be all bad can it.
Now I don't necessarily think so because you know what the nice saying that is all going into markets favor as far as the European crisis is concerned.
Is this is a slow moving train wreck and the market can deal with a slow moving train wreck.
And they're starting to feel like they have to get some kind of semblance of getting some.
You know active activity together as far shoring up their sovereign debt crisis is a sovereign crisis -- liquidity crisis.
But there -- a lot of catalysts out there that I could see the market taking out the April highs -- he compelling as high as 15100 towards the end of the year.
Between coordinated liquidity efforts from the Fed the ECB because we do have a slowing economy or both sides the Supreme Court rulings going to be huge next week the November election is gonna be Paramount because that could take off over hangs like the fiscal cliff -- some of the tax hikes that we could potentially be dealing weapons.
And there's a lot of potential positives in the market over the next couple weeks -- EU meet leaders meeting next week.
That's setting the -- up plans for Spain's recapitalization announcement that's going to be important.
We're gonna have heavy inflation and -- data coming out of Europe next week.
That's gonna set the tone for the ECB to more be more -- -- we have the Supreme Court decision next week and any repeal of obamacare to have a major positive impact because immediately.
People are gonna be jockeying that Romney is gonna have a great shot at the White House John.
Let let me do what that issue here is as not only David -- David Rosenberg dealt with a -- he's a he's a perennial bear he's become kind of bullish.
Based on the elections in Wisconsin based on what he thinks might happen in November -- with a health care about if all those things.
Are -- that is if we continue to see a little more rationality little less anti business feeling from inside the beltway would that make you more bullish John.
Oh yeah I would absolutely help if if things look bullish.
On the business front in the US and and obviously -- the fiscal cliff is coming up and that's a huge thing I mean that would in itself livid if we don't change course.
Could turn it -- of very modest -- weak recovery into it you know over session her or possibly worse -- anywhere from two to 5% off GDP.
So what I think it house to be reversed but you've got that as the backdrop to a slowing China.
And -- Europe that's about ready to explode into as an experiment so I think.
It's really hard to argue for the positives because there's so so small this point.
But David John is actually recommending you stay out of the market or you've been shorted at this point.
I gotta believe -- -- what percentage do you are you holding in cash vs equities then.
You know what I would definitely be advising people -- nibbling at equities at these levels and like next week we have a big pension rebalancing its gonna go on which is gonna help the market.
And one of the long term positive effects of what you're talking about before with oil prices is 85 cent gallon ought to drop that we've seen since April.
That's about a hundred billion dollar tax cut for US consumers across the board that's gonna benefit transports it's gonna benefit consumer it's gonna benefit the financials.
No I'm not arguing that the banks are very difficult place to be -- right now.
And I would sit there and say there's a couple of areas that are being Smart for people to -- whether it's long agency mortgage reits vivid green -- they're trading at all there's not a lot of credit risks there.
Party -- commodities commodities are in a bear market right now at a two year lows -- very attractive I'd be cautious about shorting oil here just because I think we're getting close to the Saudi floor around 75 but I'll tell you -- Nat gas is 40% -- Coal is getting very very attractive to a lot of our investors as well.
Our let's let's talk about picks where John for second John are you getting yield for I would think anybody is bearish as you.
-- -- have your money in such safe passage your -- you're getting -- yields at all how are you getting any yields -- -- kind of attitude.
Well -- not really I think that's set I think what I what open to do is live to fight another day since so I think you know -- number one investment should either be -- cash which is probably your your primary investment for most people something really safely treasuries.
And while I don't think the fundamentals are great I think it's -- the fact is US treasury market as the tallest midget in the room so.
I think you're gonna have that fight for safety if I'm right and the commodity is well I mean China's a driver of that and I think the reality is that that's a huge gamble for most average people be taking on.
And then short shorting the market opportunistically and avoiding the financial which you're gonna get where -- if you're comply.
Well I just have to say John did say that cash was an investment I -- hear you say that John first time earlier right now.
-- investment -- -- and they think they like not much of one but its us.
Here are able that is that is the phrase of bare cash being investment bank and great sound up guys David -- -- I -- the bullet to bring it David is looking for -- -- -- as in -- John it a hundred that is quite a little spread there David Lutz jobs Davidson thank you gentlemen have a good.
