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Belkin Report’s Michael Belkin on the outlook for the economy and markets and how it impacts investors’ portfolios.
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Or pleased to be joined by Michael -- and he's the author of the -- can report he's been.
Putting it out for twenty years your subscribers include mutual and hedge -- sovereign wealth funds pension funds large institutions and Michael thanks so much for joining us first of all thank you for having him.
Our first question -- you've got this computer model you develop yourself it's called major tops and bottoms in both the dotcom crash and also the financial crisis.
And I -- saying this is that no new highs or possibly new highs but.
With a downturn dead ahead my.
-- cast is that this is a top similar to October 2007.
Or march 2000.
And that's not just a top in the markets -- an economic cycle so the business cycle peaked in 2000 and we had a recession.
And stocks go down in recessions -- I've studied the pattern going back 22 cycles to 1902.
And in every its recession and stocks have declined on average the Dow has declined thirty point 6%.
Over about fourteen months so I have a lot of clients in New York you know big hedge funds things like that and I'm getting -- -- -- forecast are not necessarily agreeing with me but I'm saying.
At looking -- fifteen months look out for downside market risk particularly in things like ten.
And so.
Is this a global downturn you're seeing or is simply a US recession area volatility this at this juncture it already is a global downturn so Europe is already clearly in a recession most countries there and technology companies are exposed to the international weakness because.
Fifth more than 50% of their revenues come from overseas so today we saw IBM and Intel both with disappointing revenues.
And earnings and it's no accident I think there are many more.
Tech companies that will be pre announcing disappointing.
Earnings and that's what makes the stock market go down in recessions I'd look upon it as a business cycle thing you're in business your revenue start going down.
Preceding use your heart you're not hiring people anymore you're firing people your closing plants that's what we're seeing an applied micro devices and at Indian and and companies like that they're cutting back.
Well Michael -- years you're fairly certain you've caught a bid that peak was the day after the Fed announcement so the market anticipated sold the news.
And we're we're basically done here and despite the old adage don't fight the Fed which is clearly pulling out all the stops here to to pump up assets including it would appear equities.
Correct now the Fed has done everything in its power its -- in the called the portfolio balance channel and it's really intent on making people invest in junk bonds.
-- equities in making them feel good to have high consumer confidence because.
It rightfully the Fed fears what will happen if the market goes down and so July in the last downturn in the stock S&P fell 50% right.
And people lost a lot of wealth how much of a decline are you looking for this time around well the base case is 30% for the -- which is not.
Enormous but if we are -- still painful.
Correct and if we are in the kind of economic environment that Reinhart and broke off.
You know suggest in their book it's different this time he they talk about the recovery economic recovery after a systemic financial crisis.
Being prolonged and takes a very long time to get GDP back up to the level -- before the crisis.
I -- think about it from an individual's perspective now you've you've got the Fed basically punishing savers.
Should people be putting their money into CDs into the traditional defensive stock plays dividend payers.
Where where's your bottle say is it is.
The place to go for in come.
Well I think we're gains I think gain I think.
You should be out of the market period if there are no utilities no Telecom notes say -- -- I think.
Yes he should overweight consumer Staples utilities and.
Health care.
However.
I do not have an absent upward forecast for those -- a case of you lose less money if they go down what about gold real estate hard assets that.
I have been friendly to gold and gold stocks and I just changed so I am changing.
As we you know in this week's probably in the next week's report on gold -- even with the Fed in inflating asset prices and in trying to to create inflation.
-- I'm seeing is this -- positive hedge I think gold has been caught up as an asset just and everything risk on risk off it goes up with a market goes down and I ultimately I think it will disassociate.
Not right now I'm nervous on everything and that one thing the individual investors can do as there are you there are reversed index funds inverse index funds right -- The value goes up when the market goes down.
And not say the leveraged ones that that is something I would suggest for some on.
You know instead of having positive exposure to the market -- negatives -- actually make money when the market goes down down lose money that goes out.
You don't like tech you've said that you famously called Apple's.
Fall in last spring for just before but missed the upturn here -- are you still negative on apple -- any other specific names intact yes absolutely.
So I am telling my hedge fund clients to sort tech companies and names.
-- funny because there's an overlap between Goldman's conviction buy list.
And hedge fund favorite -- and the stocks and I'm recommending to short.
So names Viacom.
Of course Hewlett-Packard and Intel party follow a lot -- they're down forty for 2% from their highs.
There -- stocks like apple that are still close to their highest.
Semiconductor companies like Al terra AL TR.
KL AC software companies like Oracle as a big hedge -- favorite long position I think it's going down so basically these are crowded trades -- your -- people to get out before everyone else is trying to get.
Correct I think there will be earnings disappointments coming across all these names and technology apple -- terror Starbucks is another name is not a tech company that.
-- -- stock -- really over overdone on the upside and -- on my last question does it matter who wins the election in and what about the fiscal cliff.
If you some of those issues are resolved could that change your forecast not really I think the big issue is the business cycle and what happens as earnings go down in the last two recessions S&P 500 reported earnings fell by more than 50%.
And then over fifty and I think that can happen over the next 45 quarters and -- earnings go down stocks were down suppose that alright Michael Milken to -- -- report.
-- joining us on Fox Business thank you for having.
