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-- stocks each eking out gains today but since the presidential election both the down the S&P 500 have fallen more than 5%.
So where only be by -- and David up next head back when used for him being asset management joins us now with his taken David.
It seems pretty straightforward to me if you raise -- tax on capital gains.
You know people are gonna buy less stocks so everybody's gonna sell out -- cash out realize they're games.
Before the end of the year it seems like the market's just going down to make it to think -- right Aaron.
Well you know I think policy it really depends on the outcome of the fiscal -- So we don't get -- compromised by year -- I think the market continues to out.
If we do get a compromise I think there's good upside in the market.
Why didn't we get a compromise that includes raising the tax on capital gains and dividends people are gonna get out the market now.
Yeah -- you -- -- reasons why we are bullish on the market looking forward assuming we don't fall off that fiscal -- -- one is the US economy and China.
Economic data is coming in better than expected here in the US it is driven by the consumer.
Housing is better employment is slow but it is better and consumer confidence is at a five year high.
If you look at the Chinese data it's really looks like their economy is stabilizing.
So that's good news.
The second reason that we do like the market is valuation and and this kinda gets to your question.
So on a forward looking basis this S&P 500 cells at about twelve and a half times earnings.
It's only sold below that twice in the past twenty years.
And that was the summer of 2011.
After we had our failed budget deficit.
-- -- negotiations and the reduction in our credit rating.
And also -- not 2008 when we learn how to hitting the Great Recession mini depression.
-- I to be optimistic about the US economy I mean it seems like it's growing very slowly if at all.
Yes it it is growing very slowly but what the market -- respond to.
Is changes -- -- so we saw second quarter GDP came in at one point 3%.
Third quarter came in at 2% that's probably revised higher because a better trade.
Numbers fourth quarter is going to be impacted by hurricane sandy but we should get that back in the first quarter so again the further you can get away from.
Potentially going into a no a recession.
That's going to be good for the market certainly if -- slowly.
And -- good humor you know further away from may be going into another recession but if you look at even just that could be earning season we just got through was her ring.
-- and the guidance was terrible I mean why do you think for example that our next earnings season isn't going to be terrible.
What you on the fourth quarter is going to be dad -- -- going to be bad primarily because the fiscal cliff companies aren't spending but consumers are.
So if we could get through this fiscal cliff if we do get a compromise and that's a big -- 2013.
Should be better and we do expect earnings to -- in 2013.
Mid single digit rate.
David are you doing anything to hedge your bet I mean your hot you're awfully optimistic.
I would love to be as positive as you are but -- it's hard to do it is there anything you're doing the hedge yourself in case.
Well you know our favorite strategies in this market -- dividend paying strategy so that is a hedge.
Those strategies are typically lower volatilities -- less risk.
You get current income from them.
And the dividend payout ratio is is is about 2829%.
For the S&P 500 which is about a 140 year low so we think there's room to go there.
As long as the taxes don't go back to ordinary income tax rates for senators are right deadlock -- David a -- -- thanks so much.
Thank you --
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