You're watching...
Ariel Investments vice chairman Charles Bobrinskoy gives his outlook for Obama's State Of The Union Speech and the markets.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
President move markets in his speech tonight Charles -- brands -- vice chairman at Errol investments and he joins us now from Chicago.
Tells good just talk with you if the president does not lay out -- kind of ignores the fact.
That deficits are from the bit debt is a problem this country doesn't lay out some path ahead for us to cut back.
How would the market's reacting thing.
I actually don't.
-- be that much of a problem there's not that much optimism built in on this speech obviously people would like eventually spread.
The Washington to get a hold of this issue but frankly that's not driving the market they're not big expectations -- -- speak.
We will -- drive the markets that Charles wind will become problem when it will lawmakers and whoever's in the white -- at the time being forced to do something about.
Because it's not gonna get -- -- rob rapper.
Right and that's the problem and that is the way I describe it is your children and your and my grandchildren are very good credit.
They are.
Have the ability to pay back a lot of money so.
Even though the -- sixteen trillion dollars we can probably handle that but it's gonna hurt our grandchildren.
It's like a kid who's got a very rich father who runs up a big credit card bill his -- is good for it.
So there is no short term indication that the markets are gonna prevent -- From borrowing.
-- -- what about though.
The ship that we're starting to see in a in a big way.
Out of bonds.
And into stocks finally which we've been talking about for some years now will cause interest rates -- gotten so looked or been so long for so long do you think that that is sustainable.
Well I think gets a very important point that you raise that people have been making money on their bond accounts as interest rates drop.
The value of bond goes up and so people have been able to except two and 3% interest on their bonds.
But that's gonna start to change interest rates are gonna start to go up and people are already starting to take their money out of bonds and put -- into stocks is not just individuals it's big institutions like pension funds and endowments and even insurance company so we're starting to see.
The great rotation back into stocks and that's gonna have a big impact.
-- at what point lead to the higher interest rates hurt stocks at what level would you watch the ten year and then -- -- cautious on the stock market.
That's a great point we think in the short term it's gonna go slowly so we're gonna go from 2%.
On the ten year to maybe 3%.
4% over a couple of years and that kind of impact we don't think it's going to be that bad for the stock market we think people will start to move out of bonds and into stocks.
But that companies can handle that particularly because most companies.
Have either fix their debt.
Or have a relatively small amount of short term floating rate debt that's not gonna go up that much so we think it's gonna not be a big problem for the stock market Charles great to see you as always -- speaks and I certainly have talk programs quite.
