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Still Risks to Investors Despite Market’s Rise?

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    Former UBS Chairman Joe Grano on the outlook for the markets and economy.

  • Duration 5:38
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Look at that down and I -- moving closer and closer to a record and -- your house at least it's moving closer and closer the right direction up in price.

I'm -- argue that there's a connection in you can bet the house on stocks keep advancing as long as housing keeps improving and lately both home prices and building starts.

Have been surging.

So my latest crackpot theory and keep in mind -- know what I'm talking about I've read a prompter for a living.

This keeps happening my friends a new Dow record is in the offing.

But what -- it doesn't what -- today's disturbing news of an unexpected drop in home builder confidence is signaling.

We're getting a little ahead of ourselves on housing massive associates at -- builders.

The Wells Fargo housing market index ticking down to a reading of 46 and -- from 47 -- January.

Now but to be sure not a calamity but a concern.

Let's -- market legend Joe Brown who does know.

It's and its connection between -- it didn't.

Well there isn't direct corollary no question I mean housing starts and housing industries about 4% of GDP.

And as it improves people get to work -- -- and get back to 2005 levels should put to three million people back to work.

So -- there is a corollary but I I don't think that that is the reason market's been going up our I didn't say it was -- so.

Reasons -- you don't have to jump ugly with -- just because your market legend.

I -- I don't know who leads whom here or what leads what but in the 87 crash course housing.

-- after that you could argue with a -- that -- real estate led the way and then stocks followed depending on your perspective if who do you think is leading them here people are feeling better about their homes that they go to -- zillow sites and the like and -- And my home isn't worth ten census anymore it's it's moved up and -- Do they feel better about.

Their financial status.

Relative to the house yes and -- that you've seen stabilization start to see prices come up a bit.

And I think it's also an issue -- demand and supply and 2005.

Brand new homes being built where about a million for.

During this crisis struck down a 500 pounds and -- in -- pick up again.

But again we should remember in the case of housing and in the case of these markets -- records again we're simply back to the future -- back to where we work.

Five years ago we're we're not advance -- new territory so so what do you make of both what -- saying about housing.

And where it's going and the markets and whether ago.

Again again I think housing does have a correlation -- I think you're looking at a cyclical bounce in the market not a structural.

-- dissidents and secular bull market in my opinion no matter what -- I think there's a lot more downside risk.

Than upside reelection absolutely Huntsman Johnson it's well we've got a global economy that's very fragile.

England going to a triple dip recession.

Europe still slow even Germany slowing the talking about -- from seventeen million to a million cars this year.

That's going to impact the United States for not -- -- -- slowdown.

Granted in in on the land of the blind the one night persons can that's United States right now friend amongst the democratic nations.

But look who look at your dialogue -- to question the -- issue.

Look at the deficit look at the fact that unemployment is still very unhealthy level.

It is very fragile I see a lot of downside risk and by the way.

For people who were scared about.

My view is you -- -- ask yourself the question in a bad market preservation capitalism good return.

It's not bad -- In this environment.

There's another thought that says markets can't climb a wall -- And cash that used to be just bottled up under folks mattresses is now inching its way into the markets into Atticus -- to corporations alone trillion dollars.

Let's begin to be tapped now and all they need at this point -- -- to sense that things -- at least better than they were you're saying.

That could be short lot.

Yeah I would say.

You may see another 5% with the momentum in the market.

But I think you have a fifteen -- 20% downside risk a lot of this new money coming and coming and -- money market funds.

And I think that the responses -- what do you do with the money in -- return -- -- -- three quarters of the funds are hitting record highs all funds mutual funds.

Inflows in yes -- record inflows right and you're not buying that well I cannot sustaining the people are saying we're you wanna put your money.

You cannot get a get a reasonable return from a banker for a bond.

You're gonna -- has always been the case for years Richard something has changed but you're gonna -- -- rotation has your rotation out of bonds -- as that happens prices of bonds go down interest rates go up we'll have an influence even on the Fed.

Which is really been subsidizing -- economy for three years.

Some good some bad but it is assumption is that really effective -- that's correct but it's not sustainable it's just not sustainable.

Some very concerned by I would opt for preservation of capital -- Real quickly on the sequestration -- we were alluding to earlier joke this on our markets running up despite that.

-- deadline or or because it.

I think the market is saying that it's never gonna happen gonna kick the can down the road a little bit further again -- would really present the cuts that they -- -- test.

The markets would not I don't think can -- -- presence out there's Karen however everybody -- -- him.

If Angeles type approach life.

But we need to to get seriously my views are fired a lot of mr.

we -- third party in my opinion this is an ounce country we have to start over.

Joseph Crowley always could see you my friend I -- well this.

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