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Pull back pull back our next guest Susan sure you get to see what I'm doing good now Michael Jones -- -- and ethnic groups CIA out.
Michael thank you for being with us we were jokingly calling it the -- normal market in reference of course -- young Frankenstein.
That could be a good thing couldn't you know we don't need history anymore I mean I've said it time and time again I I had learned fundamental announces it's not -- in.
Maybe -- normal the good thing.
Well with all apologies to Mel Brooks says it is kind of an adding normal environment.
-- but in a normal market environment after you've been running -- a 40% annual pace which is what we've been doing since November.
You would expect a pull back you'd expect at least an eight to 10% correction come back towards the 200 day moving average retrace -- 13 of the advanced.
All the stuff that the technical people who work for me always tell me is gonna happen.
The challenge in this environment is that it's not normal.
We have the Fed printing 85 billion dollars every month we have the Bank of Japan pumping out fifty to sixty billion every month.
And with all that liquidity coming into financial markets it has to go somewhere it tends to go to the equity markets and it makes it much harder to sustain a pull back.
And so while we should have a pull back.
My actual expectation is we may just -- sideways here for awhile and kind of stall out and work out the overbought conditions that way.
Right and I think you know for a lot of traders -- who and investors have been in this market for a long time.
It's very hard to wrap your head around the notion that -- might not be a pull back right.
These go up they come down well -- just need be let's just say the Fed does this right.
Pulls out slowly -- this market.
Earnings get better I mean everything -- in a perfect world right we could really dodged a pullback.
Oh without question.
I think you know for one thing on our models the market is still five to 10% undervalued so there's no reason from a fundamental valuation perspective that we should necessarily have to go down.
You also have something of a goldilocks environment developing in the economy.
The reason why the market shrugged off some of the weaker data that got announced today is because it actually is hoping for a bit of softening in the data.
What the market wants is a delicate balance between an economy growing fast enough.
From recovering housing from recovering auto sectors to offset the big dramatic headwinds that Washington is inflicting on us -- higher taxes.
And lower spending through the sequestration.
And what they want to see is the one and -- half 2% type growth that keeps this far away from a recession.
But is not so robust that the Fed is tempted to take away the punch bowl and stop pushing 85 billion into the market.
Right but like any kid that read those nursery rhymes what you want what you get a two very different things so that being said.
This market's going to keep going for awhile for reasons many people don't get where should you put your money.
Well we're actually starting think that if the market's got -- at least stall out here let's look at the areas that have been somewhat overlooked in the rising market.
So this is a market that's been driven somewhat by -- look lower volatility higher quality dividend oriented names some of the higher volatility lower quality sectors like materials.
I get some of the more cyclical industrials they've sort of been left out of the party.
They're very cheap on our price matters framework which makes sense because to the extent that investors have wanted to any stocks they've -- -- the dividend low volatility.
So the neglected parts of the market we think can do little catch up move here.
We also are looking overseas.
We think the bad news out of Europe is so bad that it might be good because -- force the ECB's hand.
There's there isn't it invests in Europe that might be at Michael Jones thank you very much -- -- -- complaint along with Mel Brooks.
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