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Stephen Sachs of Proshares Capital Market and David Trainer of New Constructs face off on stocks sliding for a fifth-straight day after the QE3 announ...
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Go to -- street right now for the bulls we have Stephen -- -- will share his head up capital markets and for the bears we have David trainer.
Is new constructs CEO David I wanna go to you first you tend to be more bearish on the subject.
The market is kind of hanging in as we just heard from works to bash from -- -- huge sell off today was a it was a slight pull off.
But you look at oil and gold and that seems to indicate something much more fundamental happening in the economy is -- not.
I agree I mean I think -- there -- major headwinds out there it's hard to be positive about anything.
Europe slowing doubt China slowing down we're printing money like crazy.
And you know when you're dealing with a world where the growth this coming from reducing friction as opposed to sort of increasing.
Rushed.
You know there's just not a lot of foundation that there's nothing solid that it that investors -- anyone can really stand on to be positive in my opinion.
And Stephen you know I didn't like what Ben Bernanke and is -- as buddies at the Fed did but but you have to admit that the fact that they did that.
Indicates that what they were seeing -- they have access to all kinds of data we don't have access to.
What they saw was something bordering on recession.
And otherwise they would not have gone all in as they did with key.
-- -- -- Yeah you know make no mistake from the longer term perspective I agree I mean then that negative impact of this easy money you know we'll catch up with -- but I think it's still several years down the road -- -- Probably comes most likely in the form of inflation but right now particularly the equity markets you know both here in the US -- globally.
It's the risk on trade I mean the fact of the matter is is that with with the monetary and fiscal policy that we have right now.
With where corporate earnings are in the -- corporate balance sheets look it's just difficult not to be long US equities particularly given the valuations this point really aren't that stretched.
-- David -- -- -- -- you can't fight the Fed I mean you can't fight the tape or the Fed.
And both indicate getting in equities right now no.
Yeah well I mean I think the Fed start to get tired right when we QE3 we're gonna be committee.
In the -- -- today's anti -- and ended we are going to QE infinity that's what QE3 was right.
That's right it and I think that's the point that look the Fed is gonna try and do whatever they can't because the Fed has to.
The with a fiscal regulatory environment and I heard earlier 55%.
Of small business owners wouldn't own -- new -- or open a new business.
The look you.
I would agree -- US second there probably the best equities in the world but there's no question that there's going to be a lot of -- separating from the chaff here you have to be really selective.
-- -- all you are selected let me let me foresee a little bit here David if you are selective what what are you buying I mean if you if you think that in in a pullback that's.
That's due to come which you see is as much stronger than what happened today.
What are you getting prepared to buy.
If -- by companies that make things cheaper and better for people.
I think one of the great examples of that is apple right -- about how many devices or thinks people used to have to buy that an iPod replaces alarm clock.
Maps flashlight videogame console the list goes on and on.
So yeah not those expensive but you think about the number of things you don't have to buy when you have an iPhone and you see the power of the apple product.
Pick another good place to be is in the high end high -- premium quality energy companies like Exxon.
Companies that have historically at very high returns on capital that have been able to create value.
For not only their shareholders but for consumers by finding more efficient ways to deliver something that we all need -- will need in the -- foreseeable future which is energy.
And audit -- you know it helps folks to lower their costs lower their phone -- you think that's a good bet.
A threat -- Vonage Vonage is trading at a price that implies is probably gonna permanently decline about thirty or 40%.
And when you're a business that makes things cheaper for people -- -- a high quality product they've recently been able to fortify their offerings with some.
Patents that they've gotten.
You know it's it's a great kind of business to be in and that's where consumers will spend -- deal with a world where 60% of all growth comes from consumption.
The consumers the -- -- the job market looks are in the tank.
It's very hard to be positive about growth about anything else except products sold by companies that make things cheaper and easier.
All right let me go to Stephen and as sort of the reverse question I can't Stephen.
Any areas particularly debt that even a -- such as yourself should avoid.
Well I think given what we've seen with the market over the last particularly couple of months since the early summer months.
The sectors that have underperformed I think if you look at industrial materials if you look at health -- and this is all relative to generally speaking the S&P.
500 those sectors -- underperform that haven't seen the moves that haven't -- more importantly.
The equity to cash flows that we have seen come and American markets.
Those are the sectors I would probably avoid -- again and environment there Loran.
You'd certainly yacht driven by a lot of momentum right now a lot of expectation.
A future growth.
Those underperforming sectors will probably continue to underperform.
And again those companies.
You know there there were mentioned there in the broader sectors of tech and Telecom in particular.
Those -- the broad sectors that have been vastly outperform in equity market here in the US over the course of the year and that's probably where the momentum is gonna stand alongside.
Hey David finally to you we have this battle going on inside the Fed again we all have -- own -- -- we have Plosser who was on our air.
Yesterday saying in fact that the Fed is doing much too much and then you have Charles Evans the Chicago fed president.
Are coming back today saying that if we hadn't done what we do what we did with QE3 where we're gonna have a lost decade.
Our troops already had a lost decade but -- -- -- another lost decade where do you think this is gonna end this battle within the Fed that frankly is is new.
I think they're gonna continue on the path they're taking.
With the argument that they've done too much comes from the philosophy that you know if you keep spoil the child who remain spoiled.
And the argument that you gotta do you gotta do is one where I think they are politically locked into maintaining because let's face it politically it would be.
Suicide for these guys to do anything but to make sure that the equity markets do not take.
Let me be clear I don't I think that's what they'll do that I don't see -- huge downfall in the equity markets I think regulators politicians -- everyone will do everything they can support that.
But the growth in equities or the bullishness it's gotta be really selective you -- roll up your sleeves do your homework and pick stocks intelligently you can't rely momentum.
On the upside -- the downside.
Well thank you for bringing -- -- -- is David trainer Stephen Sachs gentlemen good to see you both thank you very much appreciated decision.
