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Rick Nelson, Commonfund CIO, on how the markets and politics are so intertwined in today’s economy.
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I tend not for the markets our first guest says it's all about politics he's paying -- close attention to what's happening here and in China believe -- or not.
Joining us now Rick Nelson common funds cheap investment officer.
Rick I'm glad you're here I have to tell you all my years as a financial -- never has politics -- so intertwined in the financial markets.
-- it's it's amazing actually starting in 2008.
With the crisis.
The markets are continually looking to either monetary authorities were fiscal authorities in terms -- what they're going to do to help lead us out of this.
And of course as we know having politicians -- so that is they at least a volatile path that best.
But you're right it's really come to ahead and this -- November and soon to be this January so let's.
Talk about what's interesting also in this November November 8 the national people's congress they change hands as well.
That's very a once in a decade transition of the Politburo of the senior leadership is -- Yes and so this is obviously at a crucial time as China is slowing down we know on a cyclical basis but.
When secular basis if you will China moving from an industrial infrastructure led economy to a consumer.
Domestically oriented economy.
How they engineer that along with the problems they have -- their financial sector.
Is riveting the markets do you worry about China's recovery as part of our over.
Overall global recovery by yes I do because I think that China -- even at 7% GDP growth it's on a huge economy and so.
That driving force is important to to our economy as well politics here at home of course is Europe as well all playing a part of this market.
But you think halfway through 2013 we should have a little bit more clarity how that's that's right now we may not like the clarity -- who fight.
You're going to for sure you're gonna have this transition in China which starts November 8 and we expected the stimulus program out of that.
That stimulus program it's.
May -- more oriented towards a state owned enterprises are profiting from that the -- require some some careful investing right but.
So you have -- that the China situation.
Then in terms of the US you'll you'll -- the election these issues in terms of the fiscal cliff fool.
Come to a head.
And crosses that's right -- that we could talk about at the extent that that might be.
-- even in your I think that's as Europe continues to muddle through this.
We've got more bombs -- terms of Merkel herself and -- election is coming up but I think we'll get clarity.
Once markets see clarity.
Then they can act.
Yes because that's -- waiting force just to some direction regardless of what it is one of the things in you mentioned.
You know playing his carefully.
One of the plays that you suggest.
Is it straddles technical term but basically it's buying a put in a call.
-- -- options on both sides of your equity purchase that's right because.
Right now we think that the S&P -- -- fairly valued and if you look at the -- about 16% to sixteen today.
It's that did the markets aren't that risky so -- them what's happening if word fair value the root server and details.
Either the market could break out on the upside or we -- have significant problems with -- fiscal cliff and break to the down -- She'd like to buy a put to protect yourself the downside you'd like by a call -- -- they're expensive.
They're very expensive but it but the point is big swings in either direction or something you're anticipating -- this is a good safe way.
Albeit expensive way to play yes thank you very much thank you Rick Nelson -- common -- thank you sir.
Are coming up with.
