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Charles Schwab Chief Investment Strategist Liz Ann Sonders on the recovering housing market and potential fiscal cliff’s impact on the economy’s o...
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I don't compress another rise over the last six months and home builder confidence at its highest level in nearly six -- years.
Many believe there's actually some sort of housing rebound in the works believe it or not.
Our next guest -- says the key driver to boosting our economy next year will be a housing recovery.
Here explain living and founders Charles Schwab's chief investment strategist Liz and I am glad you're here could -- a little.
Breath of fresh air some optimism because man -- man it's been -- -- around here do you think 2013 actually could be okay.
I think it'd be okay I don't think it's going to be terrific when you when you look at housing I think it's undeniably in recovery.
I think the mortgage deduction pieces part of the fiscal -- could throw a little bit of a short term wrinkle in there.
You've got domestic energy obviously is a huge boom in the economy right now you've got post hurricane sandy rebuilding -- -- that's happening more quickly than a lot of people think.
And so there are some bright spots the problem is that you add them all up -- it's still does not come anywhere near what the consumer represents in the economy and I don't think the consumer will be a drag on the economy.
But -- ongoing deleveraging that is still necessary.
Income growth fairly weak and relatively slow job recovery that piece of the economy is still likely to be in slow growth -- But -- you mention the fiscal clip that is a pretty big drag on confidence.
Whether you understand the implications of it or not just hearing it is enough to make you wanna hide and -- pillow right so -- -- what's your thought on it.
At what consumer is I think I don't know that they -- so much -- whistling past the graveyard on this issue I think there.
Only more recently coming to the realization of what this possibly means for them but they've also had some positives to focus on which is housing and also gasoline prices.
Businesses though I think have been bracing for this in dealing with the uncertainty factor for many months now which.
The only potential bad news there is we may have front end loaded a lot of the economic weakness -- -- relate to the fiscal clip at least on the business side.
With capital spending that also could mean that's a -- spring going into twenty Christian.
Share because of our US companies are leaner and meaner than they have ever been probably in my -- time.
But there is this looming fiscal -- do you actually think we're gonna get a deal before the end of the year.
I -- -- black absolutely no idea -- I think there is some low hanging fruit one of which had because the patch to the AMT yeah street strongly both sides cannot wanna see another Thirtysomething some million people ensnared under the AMT.
I think the doc fix maybe some low hanging fruit it looks like we may get some sort of compromise on the bush tax cuts.
I think important that -- -- sort of a two stage process here were really only focus on the first stage the first stage represented the deadline just getting some sort of deal.
Then -- an extent we get one I think there's a breath of relief.
Then I think we start to look at the details of -- -- the deal is.
And the implications for the economy for markets for corporate earnings all those things so I think we're not quite at that Asia.
We have an excellent FOMC meeting on Wednesday and we're gonna start to -- results about.
Q4 more stimulus what do you expect to hear.
-- -- The Fed selling some of the shorter dated securities in order to buy longer dated treasuries to bring long term interest rates down that expires at year end.
And -- thought as they want to bring some more stimulus into the picture not letting that expire which would in essence be a drag.
So what do you call it QE four or just an extension of QE3 that's really not relevant but what our best -- says.
Is that they will likely add.
-- -- treasury purchases to the mortgage backed securities that they are purchasing under QE3 so what will be some sort of extension and will be the provision of additional liquidity.
Will it be necessary -- I mean we'll -- we've got so much out there already and it's a lot diminishing returns isn't it.
We're not and then bang for our buck that we used to get.
Now they've got a clearly not an it depends on how you measure the returns but certainly the stock market as a gauge for the success of the various rounds of quantitative easing -- -- -- Positive return that we -- in the first couple of rounds and I happen to think that the big boost to housing is coming.
Because prices are starting to increase.
Not as much on the mortgage side so you now have record low mortgage rates for now prices are going up and that's sort of the double -- -- for homebuyers.
So you could argue that that's more at play than what the Fed has done so.
-- I think the Fed will do something -- to ultimately whether we look back and say boy that was the elixir for the economy less sure about that.
Yeah because a minute one could argue to increase interest rates a little bit that I get people up there but.
Out on the weekends looking -- homes again.
I'll wall that's been certainly -- -- the chairman of our firm chuck Schwab himself that's been -- -- he has expressed -- Publicly that there are certainly long term and attending -- consequences of keeping interest rates down ranked so low and you're right there are probably fence sitters who think you know what they promise that they're gonna keep rates low until 2015 what's the rush.
I might as well just sort of book the spread -- financial institution.
Why go out of my competitors are doing -- if I know that low rates are going to be there a year from now two years from now.
There isn't that fire under me so I don't think that's the consensus view but I certainly have some sympathy for them.
-- from a bank's point of view to why -- want to -- in money for thirty years at these low rates so I think it's it's got every one.
You know just waiting to see what's gonna happen and so -- were hoping housing is Gannett pull us out of this Malays knew we need a little action on that ends.
Well I mean look let's also remember though housing can only do so much back at the peak in the housing bubble housing represented about six and a half percent of GDP.
It's only about two and a half percentage GDP right now so although I think it will be a nice positive driver and that has been for five or six quarters now.
The math is such that it doesn't have quite the impact that -- -- a few years ago yeah and that mortgage interest deduction that they're playing around with could change everything live and -- there's you're so great thank you.
Thank you thank you for having --
