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Lot of people saying that the housing market has come back there's way more -- lending and hear the numbers mortgage applications.
This came out today are at their highest level.
Since may of 2010.
So clearly applications are up somebody's getting something approved -- that signal risk.
Or reward and should you jump in and find and in festival play on this.
-- Friedlander Angel -- capital portfolio manager says absolutely this is assigned to run toward risk in the housing market.
But -- bought separate management managing director says noun and an in house stay clear so -- we're gonna get a first crack at this solid new home sales data solid mortgage data.
What do you really believe about getting involved in risk in the housing market which of course we all got burned by 2007.
Sure it's great question I think -- especially for looking at fixed income I think that there's a real realization at this point that traditional.
Fixed income core fixed income like treasuries and agency debt.
Are simply not accomplishing the goals that most investors are looking for this point with yields around 1%.
But just that for inflation you and your negative territory.
But I do believe if -- able to take a moderate degree of credit risk.
And to look to certain sectors just as you mentioned like housing.
They're demonstrating clear improvement in the last few years.
You are rewarded.
And then top of that there are many of the bonds associated with in that housing sector and fixed income.
Our are floating rate non agency mortgage backed securities are actually floating rate assets you're preparing yourself well for a any eventual rise in real estate but hopefully compensate in the meantime with higher yields and higher income.
What I hear mortgage backed securities that sometimes break out in -- crash because of what MBS's did to the markets but specifically the FBS's you are OK with getting involved in a way there.
Yeah the key would be going up in quality.
In particular we relied heavily on this sector we've avoided sub prime completely.
So we tend to focus on the higher quality aspects the types of bonds and it.
Actually survive the crisis and are now at a point when they're just beginning to.
The benefit from the improvement they were seeing the true fundamentals delinquencies are down considerably.
Home prices are up considerably.
So these are all great -- him and what's interesting is is that this is a credit market but that's actually not pricing in improvement right now there are few markets are actually doing that.
The home builder sector in in equity spaces.
Very fiction and it will improve quickly so.
Jim I want your gut reaction well I don't disagree with what Brad is saying he's a specialist in that area and I like the fact that he's sticking.
With a high quality segment my caveat would be.
That the Fed through this extraordinary.
Combination of quantitative easing -- and lowering interest rates and asset backed.
Has created a level of speculation in many parts of the credit markets.
That -- remind me of 2007.
And I think generally it's -- time to upgrade your quality after the kind of run that you've had.
He is though he said look -- get quality but here's what you're saying stay away from that there are better opportunities in -- correction well what.
I would say they're not mutually exclusive I would say if you on the fixed income side you could you can do some what Brad is saying but what I like.
Most of all our multinational corporations would dividends.
A growing earnings global exposure good balance -- you getting many cases 4% dividend yield.
Earnings growth to an end and I think equities over time do better than bonds would you stick with quality equities as you stick with quality bonds.
Although -- -- makes a very good point about the -- at some point the Fed may do all kinds of things that would then tighten rates how do you tell your clients to brace for that moment.
Yeah I mean it's this fed has been incredibly accommodative and I do not think that that.
Stance is going to change.
This is not the -- the Fed them my belief that is going to.
Send shocks into the marketplace.
Growth is is somewhat gradual and is not improved significantly.
Also -- -- momentum for them to continue to -- to continue to provide accommodation.
But that being said he still need to prepare because you don't know -- the growth situations going to look like.
And so the upside downside is -- skewed in -- prepare for higher rates that you can do that in certain areas and and net.
Need -- agency mortgage bond sector is an area that I think makes a tremendous nonsense -- You still like equities a little bit better consents and you give us some names that you really like right now sure.
Again emphasizing quality -- like stocks like GE Microsoft.
Intel JPMorgan they all have three and a half 4% dividends.
They're well positioned in there around their industries they have global exposures.
Again excellent balance sheets and over time you always do better and equities -- you do in my opinion and fixed income although there is a place for fixed income.
But within both the fixed income and equity -- I do want to emphasize quality.
After the kind of moves we've had in both credit and equity market where he -- on emerging markets well I interestingly emerging markets have way under perform develop markets in the United States.
For the last several months and the long term growth is an emerging markets somewhere I would also tell.
Investors that if you if you -- nine China had Japan not China Asia.
Mutual funds to cater to the growing middle class.
-- being created over there you'll do you'll be you'll do very well over time.
OK Brett got the first words Jim gets the last word we thank both of you very much to thank my ideas here -- -- want upper management managing director and -- Friedlander.
Angel of capital had portfolio manager we'll see you guys next time we've got about.
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