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Mainstay Capital Management CEO and chief investment strategist David Kudla and Bill Stone, PNC Wealth Management SVP and chief investment strategist,...
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Ring in our market panel we've got David -- -- this mainstay capital management CEO chief investment strategist and -- -- PNC wealth management.
Chief investment strategist bill wanna start with you because you were at Ben Bernanke's speech you got to -- the whole thing you heard the question and answer session.
What jumped out at you and what sort of rang true and what what point did you really -- you tell me what the feeling was there.
-- I think in terms of you know everybody saw the prepared comments as you -- look at those on the web so that the Q&A -- was -- -- in that -- one and thing in particular some things were more obscure but but in terms of a question about the fiscal cliff.
He was very clear that they really he didn't believe there was and I think he said similar things before but he was very clear he didn't believe the Fed could do.
Anything in essence if the entire fiscal -- hit -- -- -- -- say anything like we will go into recession -- the fiscal -- pets you know I think he's pretty careful with his language of course but what he did say is that the CBO.
RI AA expects it and then he also said there -- some other people within the Fed they've done similar studies friend so he was you know it's clears you're gonna get out of my face.
He was pretty specific he did imply that if we go over the fiscal cliff we would go into recession spelled out the reasons why but bill -- that data we haven't forgotten about you but I wanna stick would go for second because he was there.
This is a day when we also -- a speech.
From the Fed president for Richmond Virginia.
Mr.
lacquer Jeffrey lacquer who said some.
You know usually it's it's a kind old boys -- -- club at that -- -- the Fed reserve they don't really -- each other.
But he came -- came about as close to pushing back.
On Q -- as he possibly could in fact say suggesting either that that.
The congress may wanna step and he said at the Federal Reserve cannot limit credit policy of its own accord -- Legislation.
May be the best option -- does scare any of the traders.
You know I don't know that this is really did because I think at the end the day.
We do you know that that.
Mr.
-- is probably in the minority here in terms of you know what's been able to be done so far in terms of QE so.
I don't think that that necessarily scared anyone away.
David you get the -- don't fight the Fed to theory but you also say that people shouldn't look at it through fed colored glasses.
First of all explain what that means and then how should we be looking at the market and be looking at the allocation of our funds.
Well it is something -- we've been talking about since the thank you QE3 -- QE infinity came along.
Certainly we believe.
The -- don't fight the Fed especially don't fight the Fed when -- -- the Fed the ECB and other central bankers -- -- -- easy money policy.
It it is important force in the markets and provides underlying support for asset prices.
But -- -- you know keep an eye on other fundamentals as well they still matter.
Well David it you're picks suggest that you're your bullish on the economy in the effective.
What the Fed has been doing on the economy because they're basically all housing -- -- for Toll Brothers.
Your free eagle construction -- shares which is kind of a basket of housing stocks in the -- You really think that this housing housing boom is is could be that we could be right on the verge of of of of much stronger housing boom that we've seen.
Yeah well I think the data we've -- the last couple of days confirms that yesterday ten point 9% year over year growth in existing home sales today.
New building starts at a four year high.
Home builders' confidence at a six year high we've got bank lending increasing overall consumer confidence.
At a five year high so the data continue street firm that.
You know this bouncing along the bottom are doing and housing for quite -- -- over housing has turned to be higher and -- we believe were.
You know we're in the early innings of this isn't saying a multi year long term secular climb for housing.
And there's still a lot of a long way to go here on the that.
Housing -- -- show us the money mean you you have -- -- exposure to equities that's true but yet you still like names one is related to housing but consumer discretionary Agassi college but also you're looking at health care.
Yet I think in terms of consumers are -- -- I'd agree to we like home name and I know I've talked about before Home Depot.
I think the great thing is again in the bottoming out of of the housing market.
-- also you know are not that it's it's to benefit from this particularly but.
In terms of hurricane -- he provides an upside to Home Depot I certainly of our fourth quarter they were able to do better in the third quarter despite the fact that.
The -- actually came from other stores not the East Coast in the East Coast was still hurting from hurricane sandy back -- -- interesting kind of things there should hires a name you know over health care it's very interesting and has a phenomenal franchise in -- DHD.
-- act quickly and I think it's interesting because it has the -- it's indicated for both pediatric and adult cases those cases are growing over time.
We think they're gonna get the ability to expand in Europe soon and I I do want to mention I did not pick it for this reason.
But it it is actually the working on that that particular drug for ADHD they're also testing it for binge eating which is.
Probably a you know thing to think about around that Thanksgiving.
Bill overall are we gonna is there is there a chance and maybe you can give us a percentage of their chance that we would go into recession in 2013.
There's a chance -- I think he can't deny that we don't we that's gonna happen because we.
We believe we avoid the majority of the fiscal cliff so we're looking for although still.
I'd -- sub trend growth rate so low 2% -- of DP growth rates.
A quickly David are you getting out of -- you -- in dividend paying stocks it was a hot trade and now people are worried that.
The tax rates on dividends might change -- be hiked.
Yet well our our Barbell strategy.
High growth on one side high yield on the other side but are high yield areas are preferred -- -- -- allow bonds.
Emerging market bonds -- mortgage backed securities.
The high dividend paying common stocks.
-- there's more volatility there because the in the underlying share price so that doesn't affect our strategy because we've been and other areas.
That are affected by that increase in the tax on qualified dividends right even though it.
The dividend tax could go up three times when all is factored in including that Obama tax surcharge that -- maybe so but it it undoubtedly -- -- it will go ahead.
-- -- Yet but it won't affect areas.
That we're investing on our high yield side of the Barbell strategy that's the point -- -- -- What will be -- land is is the dividends on height on.
On dividend paying common stock -- -- David could -- they'll -- good to see you both gentlemen thank you very much well he's a man whose words --
