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Ariel Investments’ Charles Bobrinskoy and FBB Capital Partners Portfolio Manager Michael Mussio on the fiscal cliff and what is needed to help boost...
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Report coming at higher than expected today is moving markets always this is is this all a sign of strength.
-- -- are right let's turn to our market panel Michael museum.
Portfolio manager at FBV capital partners and Charles on the try this Charles Bob Prince clay is -- aerial investment -- guys.
-- doing an army said Charlie you're the bull I suppose in the group would even call yourself bullish right now and if so where you put money.
-- long term bullish because people are so short term nervous that so many.
Negative headlines people are scared about fiscal cliff and all the problems.
And that tends to be a good time to buy stocks in particular when they're cheap and stocks are cheap particularly relative -- -- just the sector's really quick stocks that you like.
The people are nervous about financial so there are a lot of financials that even though they've done very well that we like we like KKR -- blacks down but like Morgan Stanley.
We like nor the contrast there are -- number of finances of people are worried about whose stocks are very cheap relative to book value and that's because of all the fear in the market.
Michael let us talk about -- -- what dividend stocks a dividend companies because there's always turn lot of interest obviously people are.
Are moving the dividend payments before the taxes go -- -- you say and then people say that even after you know after 2012.
There may be retrenchment would dividend stark.
Dividend givers but you say not so that even with the rising taxes.
There is still an advantage -- company did give out dividends explain.
Yeah -- quite simply.
We we think that's.
If you look at the alternative space right now and -- between fixed income or bonds and stocks.
And you look at blue chip companies that are of some Palestine two and a half three and a half 4% in terms of dividend yield.
In the same corporations are able to lever up in the bond market and issue debt at 23%.
Even if rates on dividends were to go back to where they were prior to the bush tax cuts being -- -- Your after tax net return is still better off in in terms of a dividend that starts out at a higher pace than a bond.
Finally let -- just break in for a second -- we're just getting breaking news that Expedia.
Is the most recent company to advance their dividend payments -- -- quickly.
Yet so averages say -- You some of this acceleration toward the end toward the end of the year certainly may be pulling away from -- growth in 2013 and beyond companies are certainly -- look at their balance sheet and what they're determining what they're gonna do with cash flow.
-- they may not grow dividends at the rate they have the last three to five years.
But I don't we don't think that they're going to be cutting dividends either.
-- tell -- this question for you that there were attacks has become a buzz word on both Wall Street and main street and of course in Washington.
Do you see companies perhaps getting a special tax holiday and bringing back some of those billions and billions and billions of dollars part to -- back here to -- less.
Yeah that's -- hope.
That we have -- we think that there are people advising this administration that a way to get the economy going.
Is to repatriate some of that cash the strapped -- you could reduce tax rates for a one time special holiday would tax it wouldn't go to zero.
But instead of the marginal tax I'm bringing your money back from.
You're -- being 30% you might make it 10% and we think a lot of money would come back.
To the US -- be good -- the -- -- from the chief economic advisor of the president on down with the administration they say no way they're gonna do that so what gives you any optimism that a might be done.
Biggest people need revenue and this is positive for revenue that money -- overseas in the US treasury gets none of it.
If you declare this tax holiday you get some one time revenue.
And then the money produces revenue in the US fill -- -- way that is I don't actually ancient mystery -- some point.
Let me go back to fill -- the CME are you hearing anything about this though because again when we ask people in administration specifically about this they say we're not gonna let it happen.
-- yet and that's -- we've heard is that that -- not -- it happen but it would be great if they did because of the -- bullet points are already pointed out I mean we do need this for this economy if we -- receive this fiscal clip really -- In small businesses are hit we got to have growth somewhere in that can be a way of doing.
And whoever wants to take this stuff are -- belong in fiscal cliff.
Yes -- probably up 55 to 60%.
And then early in January they strike some kind of DL it allows the administration is say they're actually to decreasing taxes from -- -- went to in January 1.
And I say 60% there were gone over the -- While boy we are playing with fire if that happens a lot of people say that even if it's temporary might be enough to push -- into recession.
Quickly Michael you think that's possible that we will I have.
It certainly is possible I would just add -- -- interest they -- consensus has gone from fifty to 60% it is a month or two ago that we were not going over the has left to -- -- I agree that it it's it's completely flipped on its head and the only precedent in recent memory have is the debt ceiling back -- summer of 111.
And all through July everybody was confident that we are gonna get a deal and we saw what happened -- so.
Having little attacks on the sidelines two -- -- reload it should we go over the cliff there's not a bad thing.
Investors well it's it's still scary time for just with a possibility that we could go in a recession is as a result of that Charlie but -- school I thank you very much.
A burial investments and Michael most CEO FBB capital -- is --
