This transcript is automatically generated
The wealth manager tae young housing expert data collection and MarketWatch are look nor -- with the lowdown on all new version.
Of trickle down.
-- nor do you first -- going on here this this disconnect between Wall Street -- doing okay.
It would seem.
But Wall Street power houses not.
When you look at just equity trading activity it's down -- over 7% so far this year.
That that's very indicative of the there's going to be a lot mark cuts and if you look from a historical perspective.
Normally he had during the nineteen hundreds the financial services sector as a percent of GB GDP was between one and 2.5 percent.
Philly Pete twice -- pick the ones in the 1930s a big surprise hit 6%.
Shortly after that -- nineteen early 1940s it was down to 2%.
Peaked again in 2006.
It represented eight point 5%.
Not surprised you're gonna have to -- people lot to get back to something that the little bit more in line with historical alarms.
So outside let's step back and look at -- -- It's his ride and then -- -- as it did that would raise an issue that maybe this rally isn't quite what it appears sort of break it down from.
-- I think you're right you know I think -- -- we can find good news out there there are companies with good earnings but.
On this market in my view it is up because of price inflation due to the -- money.
In this environment traitors or trading now more on government news government policy news then they are innovations from individual.
Individual companies and they look -- -- -- -- Ben Bernanke's testimony this morning.
The markets -- based upon that a couple of days ago.
They just announced that QE3 -- they -- the QE -- -- -- -- quantitative easing would stop and the market did -- I think that's a great idea that you -- staying at first I think that's -- yeah.
A great idea so what it comes down to where it comes down to -- as Wall Street's having to do with the same thing.
That main street is is having to deal with -- and here is a real problem with the bank's credit creation is no longer be a function.
Of the free market it's a function of of the government.
And it if you factoring -- -- mortgage settlement said Dodd-Frank in low interest rates.
And the government trading creating credit not the banks it's awfully tough to make money and I'm not surprised we're seeing and we're seeing layoffs I think we see even more.
You know I did idealistic got a lot of every including the market rally and and continue to rally the economy turning around Wall Street doing better hinges on housing.
We debts to pick up -- reports on housing the latest.
Today a little bit more promising -- we've seen but it's been all over the map.
And reinforces the notion it's not a slam dunk.
You know housing is completely turned around and I suspect until it is.
All of this is held in question.
It absolutely is in the fact that these cutbacks are hitting Wall Street right now is a real concern to me if you think it's difficult -- getting a mortgage now.
When we have what we have in place and we continue these cutbacks -- a Wall Street.
And it's only gonna get more difficult the feds are backing off of what they're buying as far as the number of loans that they're buying.
And -- be backing off and they're going to the private market say -- private markets come back and start buying mortgage backed securities.
We you know all the securities are all these loans bundled together into a security and being sold if the government stopped buying those -- And Wall -- not there or is understaffed to be able to -- in the start facilitating.
Liquidity to our housing markets this housing recovery -- you're not going to continue.
Then -- -- all bets are off.
Absolutely you get nailed it you let's get hit -- Federal Reserve.
Their balance sheet is now 85%.
Correlated with the stock market.
It normally is about 20% corporate earnings only have a 70% correlation with the stock market -- -- now -- salads and now what he's like Atlanta markets doing well we like and correlation -- -- partisan well.
We don't when -- non.
But at some point that balance -- going to have to get pulled back yet absolute and if that correlation maintains what are you candidate -- that's time when the balance sheet it's with man.
Shell Oil without a doubt it -- to the real estate market just the second.
What we look at the real estate market most the money coming in real -- -- -- right now is investor money just like it was.
In 2007 and 2008.
And one that we hadn't talked about which is huge in the economy right now is gas prices throughout bacon -- quickly every dollar that goes into a gas tank can't be spared another part of the economy that makes economic growth worse it's it's about a greater -- On main street and Wall Street.
You know did you hear conflicting reports would you know this better than probably -- -- -- as your baby that loans are not as hard again as the use today.
But all all there might get through some element of truth to that.
But all you need is the first sign.
That there's a problem and and that lending tightens up like a drum again doesn't.
It does and I think we look at consumer confidence a lot of -- -- that's not a significant indicator.
But it indicates the psychic what's going on with the average consumer and the back did you apply for loan you wanna go out and get there and he can't get approved.
That's gonna put her reels DO.
A real damper on this market for sure -- Our when you say a damper how much of one another words whatever uptick we've seen just completely reverses itself for -- Well yeah I think -- a potential for that first off what's driven this market was your previous guest said it's investor money is coming in gets -- All ever -- coming out of the homes trading up first time home buyers coming back.
We're not seeing that at the rates -- we have hit historical levels at what we would consider healthy levels -- So what we have had is a lot a billions of dollars of investor hedge funds coming in.
Seeing their huge opportunity invest in real estate residential real state.
Rent it and then flip it at some point when the market is it actually at a higher point and -- real well that strategy.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- That would then what are we do.
Watch for the correction that's gotta be coming hair when you got to something -- -- in -- by the balance sheet you look great now and 90% of all new treasury issues.
Are being bought by the -- Federal Reserve so there's only 10% out there in the market.
That means all that money that would've gone into buying treasuries and buying the mart effect security have to go someplace else so is it any surprise didn't -- see that money pushing up stock prices -- eight years that that can't go on -- reduction.
Real quickly tell you still -- them.
-- well yeah.
I am and I'll tell -- the last quarter we've seen now Maliki inflows of money -- billion -- mutual funds and managed accounts.
And the average investor is usually wrong they buy high and they sell low.
It's awful hard to make money using that strategy were set enough for right now the Smart money is protecting themselves here all right guys which -- tell -- -- -- Smart money laying -- up here guys -- appreciate -- Well --