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Jack Ablin, BMO Harris Private Bank CIO, on what he is expecting out of the final Federal Reserve meeting of 2012.
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I've -- the Fed's last policy meeting of 2012 is armed away.
Was so -- Operation Twist expiring at the end of the year -- and investors expect joining us now Jack Kaplan chief investment officer at.
BMO Harris private Baghdad Jack thanks so much for being here obviously sold about the fiscal cliff but very quick and -- talk about the Fed.
Operation Twist expiring.
The theory among a growing number of people is that they will.
Continue Operation Twist in some formal fashion.
But what good is that going to do is my question to you.
You're right -- I don't expect much time the Fed at least near term -- clearly the -- in the fiscal court right now.
In Washington.
We need to solve you know certainly the expenses and taxes and try to get that.
Our arms around that.
I do think though that out once that is the once -- that at least a major initiatives are behind us or at least it looks like.
They have certain.
Agreements.
Contained.
Then I think that the ball can go back to the Fed where they are likely to replace Operation Twist which is a -- -- program meaning that they can't print money to do their operation they're taking money they've already got and just shifting it around.
To -- sterilized operation where they can just like QE1 two and three.
Print new money and use that to buy securities whether -- US treasuries agencies or perhaps even mortgage securities again.
Right this is basically -- Short term holdings left for -- -- -- of the got to figure out what that to do right and so here we go back to mortgage backed security reinvestment what we're probably going -- something like that in the language.
Called QE for a call it whatever.
No lawyer Robin -- -- -- you -- earlier.
Competing reason for this a little bit of a rally today -- thank.
I think it could be I don't like I said I'm not expecting that much from the that I don't think they want to take anything away.
Necessarily from you know fiscal lawmakers right now I think.
I'm probably wanna wait till after the end of the year to -- come back -- center stage so to speak.
But clearly they're gonna need to provide some extra stimulus because.
Basic caught fiscal -- cliff call it whatever its austerity we are gonna be raising taxes we're going to be cutting spending we're not gonna.
Be able to enjoy that one point three trillion dollar.
Annual budget deficit that was just financed by debt.
But -- you say that.
Even if we go over the fiscal cliff you -- -- think the markets -- gonna quote -- out of bed but it does seem that the markets react to every statement coming out of DC right now so.
Clearly there's some volatility that.
Serious -- -- you know actually I lose sleep at night on a number of things.
I don't lose that much sleep that night in you know having the fiscal cliff going into 2013.
Because.
Quite honestly this isn't -- and I think falling off a cliff is probably the wrong.
Metaphor here what it ultimately does is it takes a -- culture and -- hot water and then turns on the heat and worship in the water.
Yes -- its clock will be ticking we need it resolved and the longer.
It's not resolved the more deleterious effect -- have.
On our economy right if they ultimately come up an agreement sometime mid January I don't think got the others -- no harm no file.
So really click even if we follow everything comes to peace is -- put your money can you -- sector real quick for us.
Sure I would say -- -- you know for next year probably utilities or perhaps Telecom utilities as an example.
For the first really firm for the first time analog times.
Utilities are yielding more than a high quality corporate bonds and we're at near record levels so my guess is I'd rather earning quit.
It income from the equity -- next year and have to rely on bonds yeah.
Alright Jack Kaplan -- BMO Harris private bank -- thank you says so much for joining us appreciate it.
Thank you even Fitch ratings Heyman says -- if they don't fix the fiscal cliff even housing are the only bright spot the could be her yeah definitely -- -- --
