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Haverford CIO Hank Smith argues the fiscal cliff debate is creating opportunities for investors.
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Out headline risk.
As as we showed -- the market is practically clinging and hugging every word that comes out of Washington whether it's President Obama making comments speaker Boehner senator Reid.
Any ounce of optimism triggers rallies while the market tanks on any sign of disagreement but don't worry don't fret my next guest is here to tell you.
About how to behave in this atmosphere and in a way that he believes will make you money and he says -- that clip.
Joining me out of Fox Business explicit what -- should listen -- -- -- the pat referred.
Six point five billion in assets under management.
What are you teaching your employees you're -- traders your fund guys what are you telling them to do right now.
Well look -- for so we have to be communicating with -- clients you cannot trade this you can't trade this is an individual investor you can't trade this is -- -- what I yeah that's just said.
You have to -- be prepared.
If there is a precipitous decline which will happen if congress recesses without a bridge to get us over the fiscal cliff.
The market will go down precipitously perhaps a thousand points.
It will be the market's way of saying ladies and gentlemen congress let's come back you made a mistake just so they they did with TARP.
For years -- -- you say if the market dropped to a thousand points or what have you.
Get in it would be a generational by an opportunity.
Because this is -- based on fundamentals this is based on congressional ineptitude the fact is the economy has some tail winds.
The market is fundamentally attractive balance sheets are strong valuations are reasonable you have earnings growth.
-- we can bridge the fiscal cliff and then get a comprehensive tax reform and entitlement reform.
You would see a market significantly higher along with a much stronger -- -- -- Love to believe what you say but we've had some earnings that looked positively dismal at today Tiffany I mean credit that's an out liar because it is a very big.
Sort of pricey discretionary type of product that's out there.
But they missed earnings their outlook doesn't look great so that's a real fundamentalism that it.
It is but what if you still -- S&P profit growth that is positive.
It is slow down obviously cannot continue to have double digit earnings growth as he did for ten consecutive quarters were in that part of the cycle.
But -- we get through this clip.
And in the back half of thirteen.
Have GDP growth.
Re accelerate as we anticipate you're gonna get profit growth -- accelerating as well.
Your -- if you're if you're liking big multinationals which I know you do and many of them do business in Europe you don't like Europe hit you like the multinationals help me.
Wrap my mind around that.
Well -- Europe as a stock market is probably the cheapest area there is US large caps are cheap.
You can who most of those being multinationals -- have to cheats but.
They don't deserve to be cheap you can make the case that -- deserves to be cheap because there is no growth and it's going to be a while before you get a sustained growth.
You can't make that case for the US multinationals true -- -- business in Europe but it's relatively speaking a small part the big part of there.
Global exposure is emerging markets.
Let me throw this out -- you you obviously sound like a very bullish equities -- what happens to treasuries a lot of our viewers because you'd have to believe it watching.
Billions going to treasury bond funds are probably in their for safety.
They are.
And they shouldn't be in there with -- any return expectations because they are destined to be disappointed because it's not a question of if it's a question of when interest rates rise.
And those bond investors are going to be named Bert Fields are horrific -- -- -- Would you like a ten year treasury at one point 65%.
Or a ten year McDonald's bond at one point 8% or how about the stock at three and a half percent and you get growth of income.
And growth in appreciation on -- you wouldn't be five McDonald's at a high here because it's been beaten down a bit.
