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Hi everybody look at a great weekend are often -- on Monday welcomed the foxbusiness.com.
Live in you might have noticed that -- different.
I'm not gonna point it out stocks are up F yeah Syria into one and the -- but Robert Watson for economists -- -- taking a bit of.
Hit a bit of -- -- I'm sure we'll look for him that chime in on line later on hopefully he'll do the same but thinks or have me on the -- -- OK yeah yeah how often I think maybe this might be like act.
Our Robert rally and we -- our -- is a continuation of what I don't know that we can then I'll take the credit for it but it's certainly better to be here on daily you're up 4% down.
I've spoken like a good doctor Ned we have a big show coming up we actually had to -- On the show both bring a lot to the table great Merlino is the president of -- avenue -- financial talk a little bit about the markets with him an awesome great make bride.
I've been great I heat that's that you decide great running of the great McBride is going to be -- a little bit later.
A great is website he could actually -- -- -- about your own bank as well to make sure.
I have or is someone -- ideas that your bank is five stars compared to when -- prefer.
I -- also a lot of mortgage information and -- -- housing data surprisingly.
Bullish today coming out the existing themselves so.
Will be talk about tell him no doubt as well.
And that's it was good to great the great thing to act.
To sell off on a Monday like this that I can tell you feel a little nervous I feel that this market -- I believe how bad you weigh in because -- all these plans that I just over the weekend we see it -- about 317 point.
The financial and he -- do well but still.
And -- -- questions about the bad bank.
And don't forget our good friend Teddy Weisberg joining -- Celeron point -- York stock exchange that talked to Teddy las -- and I asked him again.
I was as I think it's about Thursday may send me we were talking about the rally and he said -- almost like if you bought it the prior week when the rally started.
If you're still sitting on it are you gonna ride it out to mean you feel about like -- the craps table in Vegas or -- right here so when asked him.
His thoughts now -- with even bigger gains coming in right.
What's the next catalyst that we've got this plan out there now we've seen some also whenever we had these announcements from treasury in the past but will that hold -- more will -- -- that's.
Into getting eventually dollar and we apple actually fiesta weigh in on justice -- start things off.
What do you think of the Treasury's plan to rid banks of toxic assets -- you -- -- screen it's good it's about time we address the -- -- this.
I'm skeptical I doubt the private sector.
I mean if you can't see that we'll think I -- thank you -- maybe it's good.
And it's not gonna work -- three different options there IA and out you know explain why tell us a little bit about -- feel that way because.
-- right now looks like you guys are right even between its good.
And I'm skeptical that rich -- through this remember you can contact with on your screen right here.
-- Twitter at the end line and they can email us at the end live at foxbusiness.com.
A great really notice here -- is telling you about this earlier president and founder of the nearly financial services.
What do you think look at these markets at more than three and a -- -- an hour or so couple hours -- -- trading on -- Monday think it's gonna last.
That's hard to say -- clearly the market's been oversold.
And I think now is excellent time to put some money to work -- certainly wouldn't go wall in but a dollar cost averaging strategy.
I think we is would be very pretty what does that with the -- costs well that's where you commit so much in dollars on -- a monthly basis.
When the markets down your picking up more shares at a lower price in the markets are up.
-- shares but that over a long run it is a defensive strategy and it takes the emotion out of investing.
I certainly -- down at 101012 year lows from any stocks and in indices groups as well.
You think people would perhaps be loading up to lower their -- average but we've seen the exact opposite and that's historically been the trend in individual investor running for the hills when in fact they should be loading up and increasing and part of this it could be because we've seen.
You know it dozens maybe even scores of companies cutting down their contribution matches to 401 -- what is been your experience of your clients you know over the past him.
Prior to this started this rally two weeks ago.
What was the sentiment where people bought backing away when in fact they perhaps have been adding to and unfortunately.
People don't view this like they should if this was tuna fish we were talking about everybody would load up their pantry.
Let's call it -- can attest.
I ending at -- at that people don't like to buy stocks on sale.
And that's the long and short of it and in fact given the degree with which we've come down in the markets they become paralyzed.
They thought they were doing everything the right way.
You know setting aside some savings.
Putting money to their 401K.
And it hasn't worked out like they planned and so consequently.
They're having questions with regard to can they afford the retirement that they envision for them in their styles.
Committee afford to put their chip child or grandchild through college.
Can -- lethal amount of legacy that they were hoping for for the grandchildren or perhaps great grandchildren.
These are the questions that I don't care -- -- retiree and fixed income.
Or nor -- -- with a few million dollars in your profit sharing plan these are the things that are most important to you.
It's interesting I asked our viewers they say hey do you agree with -- take some of the emotion out of investing is that possibility.
And Jimmy from Texas waited until it's it's hard to not be emotional when you lose.
And people are -- emotional about this market so.
Your idea takes -- money and put it to work it you know we've heard that before but where specifically what sectors you see it like it into her telling these are the sectors like -- right now.
I think quality is -- We are overweight large cap growth right now.
We are underweight financials even though we've seen a nice move -- that even with -- -- they plan out -- do you think you'll change that as while for it look at the financial they can there's just.
Too much uncertainty out there right now with regard to the specifics -- how these banks are going to recover.
We'd much prefer to.
Stay in the large cap growth area.
Particularly -- And the reason for that is their balance sheets are a lot stronger they don't have some of the issues that other sectors like financials are having right.
Think about it it not even talking -- -- -- -- you recently because I didn't feel like tech is gonna break it kind of out of this recession but isn't.
And there's a lot of tech have to -- with -- the way consumers feel and consumer spending habits not to mention corporates as well corporations.
No question about it and you know again.
You're not going to go all land but we're saying just.
Fabulous companies that are earning money.
Trading at levels that we haven't seen in years so you're gonna want to take advantage of that and like I said not load up in that area but certainly put some capital of the war.
Today -- if you put capital -- with face -- you -- say that the closer you got to work in the market now moving forward for the next settlement how long how long do you keep your.
Your money in the market.
Patty how would you judge that I mean if you're gonna put them being worked -- -- -- can only that there aren't you put at.
You know that price range on eBay's site and get off of that the -- -- certain percentage up or down how Heidi were that.
We can certainly put -- stop stop limits orders and as say that if we do see a correction.
We can protect ourselves and get out at that moment.
But we're talking I'm not a traitor.
So I don't believe in jumping in and out and in trying to capture.
Small movements in the market.
My my clients are looking for.
Long term investing.
For retirement and preparation that way that's correct okay.
And when talk about the psychology a little bit of talking to people to me it sounds like.
With the stock market over the past 69 months it's sort of like the housing market -- you're standing -- looking you're going while the price keeps coming down.
When -- wanting to get -- are you facing a little bit of that as well -- mean.
But people just well you in my 401K keeps diminishing -- everything keeps falling I'm not gonna put more money and I'm scared it's Mormon you know good money after bad if you well.
And we're seeing a lot of that particularly with younger.
And I can't think of the worst move that they could make.
What we're seeing is that people are stopping contributing to their 401K.
-- -- taking money out of equities and putting in into more conservative stable value -- money market accounts.
That is absolutely the most devastating thing that they can do especially if they're young.
When these kids but yeah well I I would say anybody under forty.
Don't -- that -- -- don't do that at all because.
These markets will recover -- Horry always recovered in the past they will recover again from these levels the problem with going into.
Investments right now is you're getting paid nothing there or nothing here practically paying in some cases short term pressures you're paying the government at one point to hold your money.
It exactly so when you get ready to reach higher.
You're going to be looking at -- -- that -- -- near what it needs to be in order to meet your and long term retirement needs.
Of elicit a little bit about the news of the day OK we have that the bad banks and aren't as -- -- put up their -- to digest the markets are -- a little bit on that you have more action as well from the Federal Reserve.
And you have said that you.
Are bullish on Bernanke you you agree with what he's done so far.
And -- -- in huge moves from the Fed as far as what's going on account getting to -- -- -- insuring and have been investment.
Do you believe that there are tapped out now is it over for the -- as far as that the headlines we think they have more room than their -- on to have.
I think the Fed will do everything and anything in its power.
To give enough liquidity to this market.
And and and solve some of the confidence issues that are plaguing us right now.
It's picking up what he has sort of a parting thought if you idea where we're they have been asking you about -- and -- and a lot of people -- actually saying yeah overtime you know one guy Jonathan saying you know what I was -- when people were running for the hills and here.
But they're also about reducing their voice prickly if one company gets too large say you -- you know owned a city your -- today.
You know in the run up to the highs and 07 that -- may have become an outsized position mean.
In just briefly when someone starts moving above that 4050 year old range.
-- -- -- up about how portfolio allocation comes into play because obviously you wanna get out of some of the riskier assets in the more into fixed income and and things along that line.
Absolutely right and we're big believers.
As opposed to say an individual stock position we would prefer a mutual fund may be -- ETF.
That would diversify that investor over.
Maybe a hundred different companies instead it just betting on a city group.
-- -- -- you know Wells Fargo or whatever.
So that's diversification on one level on another level it's what how much do we have committed to stocks.
And when you do get closer to retirement age absolutely you wanna have less in that particular area.
With our clients.
It's not just stocks bonds -- cash anymore we're looking at alternative investments that aren't correlated to the stock market.
And I think that that's helped from a diversification perspective -- well example.
Things like managed futures commodities.
These are areas where I played some of those of NE TF like that -- -- PDA or something that's the ticker I think it's a -- bank.
It holds a lot of soft commodities and there.
With regard to commodities looking at -- ETFs.
There are also some.
Limited partnership issues that how.
Are are traded.
So those would be the types of things that we would -- -- -- portfolio way.
They tend to be able to -- a little skeptic.
Healthy skepticism I mean the market -- see that's and he's up right now.
About it wolf four and a half percent to big move there but he can look at it over the 52 weeks yourself.
That's MPs down more than 40% to -- -- a little perspective on that to what our viewers are asking at this hey hey hey Greg.
Hi how you have confidence the market is actually gonna come back.
We're in historic times -- we keep hearing that this is like nothing we've ever seen on our entire lives but you still believe that no matter what the market will still beat -- But we've just gone through a ten year rolling period of negative returns in the S and pay.
From 1999 through the end of 2008.
Stocks returned negative one point 6% per year that hasn't happened in seventy years.
So if returns revert to their mean.
Then you got to believe that the next ten year period is not only going to be decent for stocks but it's actually going to be a lot.
Better than average -- your money in the market -- and -- yes OK hold that thought because we're gonna -- difference now is that Peter -- is joining us from DC.
I he of course has been at covering everything and since late last night here you and hiring emailing.
About bad about bad banks I had no idea that.
Peter Barnes and I would be emailing about bad things but I was I wasn't a candidate time there was John -- you had to get up at like 2 AM -- Really get up at 5 AM I was obsessed about it -- -- to play and to tell me what kind of a bond from your morning in DC now the actually the details you forgot -- speak and it.
-- under the new news.
Well we we got a briefing this morning from -- secretary Geithner and some of the -- that now actually not -- a whole lot and they -- got a lot of that in the paperwork and we are expecting the president.
To make comments on that this announcement here shortly the apple cameras -- in the Roosevelt room right now we're gonna get a tape play back in just the minutes of stand by for that.
But the bottom line -- administration thinks that this is a critical part.
To unlocking the credit markets they're getting credit going again to to get in the financial markets stabilize then.
And operating correctly again by getting the toxic assets.
Out of the out of the system wherever -- -- -- -- some of those toxic assets.
Are in the forms of loans that are still on the bank on the balance sheets of banks others are.
Securities backed by those loans mortgage backed securities there may be held by a bank but they also be helped by an insurance company -- pension fund or something like that but.
The administration wants to try to.
Get this -- moving by attracting private investors in what looks to be a pretty good deal in which the government.
The treasury would used TARP money.
And match private investment money up to a certain level and then provide.
Government financing either to the Federal Deposit Insurance Corp.
The Treasury Department itself or in some cases through the fact.
And in one of these programs the lending could be as much as from what we can -- eighty to 85% of the purchase price so.
You know 15% down -- split that with the feds and your.
You're into the to a deal at seven for 7%.
Equity at 7% of the total deal.
-- and -- the market the housing market turns around and real estate markets turn around our.
You could make some good money they tank than you could lose.
Or that something didn't have had a lot like.
I know the housing market in the past several years there it is happened we a lot of lay down any that has support and -- -- -- -- -- yourself a little over sentinel.
Well remember that that that that part of the goal here is still obviously by these assets.
Wear whatever they are at a discount.
Now in some cases some of these assets might have already been written down by the bank or the pension fund or the or the insurance company that holds them and then you think that this is part part of the reason for bringing in the private investors the hedge funds the private equity guys.
Who now suddenly Washington watched -- really likes those guys all of a sudden.
-- -- It says that they supposedly have the brains of the talent than the and the computer models to go out there and accurately.
Figure out how what what these things are worth and how to value them in the price to pay what what really is happening here is the federal government does not want to be in the business of trying to price these assets are setting the prices of these assets if that's a lose lose situation on the pay too much history of the taxpayer they pay too little -- -- the bank so.
They're gonna they're gonna hope they're gonna count on the private investors to manage that -- them.
All right Peter I think you very much and are great well.
Peter -- not only I might stick around July 2 is ready to talk activities and more about this great it actually leading the enemy and leaving Greg.
But but we're gonna -- -- -- -- great now just temporary there may need to sit back out here didn't question I had about this is about this done.
How well let me know these athletes -- actually with what the prices actually to do -- -- any kind of -- -- and when we're gonna get that for the market because the markets are right now but you know.
Back to change if we did that the price out violently as the -- says that a month.
How much -- how well you know let's in the Fed just did a dealer wrap up the balance of assets these kind of after that indymac bank remember took that over when it failed a few months back.
And that the FDAC guy sold that stuff for 25 cents on the dollar.
Not that that -- that and is necessarily going to be the plight of price that everybody pays or whatever.
But remember the other piece of this to us as as the banks -- -- sell this stuff to these partnerships these joint ventures between the government and private investors.
They'll get new capital.
Right sure and that's a positive as well so -- the that it is at least you know if you're optimistic about it it it could be a win win win for for everybody.
And that well you know I hope that happens and Peter emailing you later yeah this.
Extra leverage here.
But -- that -- but not on that not at midnight -- You don't need to go honestly couldn't get rested up for your shows are great thanks -- and later -- and -- very much feared the -- -- pouring out they have to see it on foxbusiness.com and graded elite let's go to it because.
We had one more quick thing going to get you on and this is the next kind of bubble.
The treasury bubble that you say is really -- -- out there for investors to sidestep and mean it is that how how much of a concern is that for you right.
Now it's a huge concern because what we saw last year was a lot of investors got out of the market at the worst possible time in the fourth quarter.
And that was when treasuries had already made their move.
The Fed Funds rate is zero to point 25%.
Those gains are long gone down interest rates have nowhere to go but up.
And people who -- -- long term treasuries right now are really gonna get socked.
-- judge Amy treasuries not sending at you you recommend treasuries is something that I do not recommend any tech about what when you see that -- say it's a battle.
And look at how much time IDC -- and -- second in the battle of 09.
I think it could very well be that interest rates have only one way to go and that's -- And when that happens you're not gonna wanna be in long term treasuries what about the Fed coming -- -- buying into that hadn't at least some temporary stability in and price support.
Well what happens is the Fed always over shoots so right now they're putting everything into the system that they can think of at some point it's going to be very inflationary.
Tips might be something.
That you wanna get in now which -- very low prices because deflation is still being priced into this market.
But there's no question in my mind that we're -- -- go through an inflationary.
Do you died advised by directly and tax exempt account are use in the ETF that took -- I prefer attacks exempt account because of the that the tax from a case let's say yes says he warned if you don't you can really faced a lot of penalties even on this so called phantom -- and now I've.
Covered took a little bit and now that's some this pretty scary -- you're realizing paper gains and you start finding yourself marking to market I think that that's that's right so.
The guy you're in and hire ray that's much better a declaration.
Some great tips and you know -- -- right.
I'm hanging offense and so -- great thank you very much for coming -- we appreciate it and then -- banks acts.
That's and that's we haven't heard his ultimately you know we haven't heard about it as a great hope to have you back thank you and I would intuitive -- I think our viewers -- TO OK I Nicole I believe he's is out of the New York Stock Exchange Nicole what what is it feeling like out there today.
All the traders are all heated up -- and Robert -- -- certainly they've had found much material here.
To discuss everything from president -- bombing yesterday on sixty minutes today.
Treasury Secretary Geithner plan that the end failed and -- housing numbers and we have had financials soaring had to turn to talk about the -- -- -- -- something.
But they've been talking about here on Wall Street -- quite some time we've had the tech bubble.
The housing bubble the commodity bubble.
And really there on this bubble -- because certainly.
Treasuries on the next -- but certainly everybody continues to watch but what we're seeing in these -- Is unbelievable.
I mean we've been here on Wall Street watching these numbers over the years.
See you don't need an adult movie in 20% increments and in -- airline that looked like that whereas the -- -- movement.
2% 5% having those big days and yet.
Over the past couple of weeks have been watching Bank of America for example most of the -- the majority of the days 70% of -- days have been.
Big moves 10% or more I mean -- 1%.
Is certainly help us again today I mean really -- we have all thirty Dow components of the upside.
Citi and Bank of America right now bulk up more than 17%.
-- certainly we're -- Some big seed in the market we had two straight weeks of games head hit the -- and also people that are hesitant now what we're seeing with the government.
And also the AIG bonuses in what was interesting is an apologist talked about this but Barney Frank tuchman -- AIG executives.
Are not made ops you know they're really trying to distinguish what's going on here.
And it's very interesting is obviously heard about buses going around Connecticut and looking at that houses on the AIG executives like sit there.
You know may else right so it's interesting to hear him come out -- actually well like that headline.
As interesting revolver inside the -- this -- second they're really quick Jeremy what you're hearing from traders are you hearing bad.
You know that that they actually see it this bad bank scenario is gonna work out that that that private investors are actually gonna -- -- -- into this plan.
That's marriage that is definitely an argument that's happening I mean you have one trader will bring UV the not -- piece talking about you know the stronger system and can't provide -- credit.
And then you have other folks who don't want anything to do -- the government and don't like it at all and don't want to touch it.
So what you know obviously using private investor money so bad that is a debate here analogy -- -- Yeah and we'll -- that the -- the standard that I.
Think you very much technical down there at the New York Stock Exchange Sanders met with -- -- -- -- I -- to guys have you have not heard anybody against this as far as being in the private investor world whether you're a private equity investor or a hedge fund.
I mean it's unbelievable the response has been that this would be -- this is an incredible opportunity.
One sort of example that I heard from one private equity fund manager Jim Clark you said.
I think of it this way say Robert and you and I managed hedge fund up there -- manages hedge funds for several years.
We have a prime brokered to make it easier loans and even bothers me that -- -- -- Deutsche bank for example.
As of last fall we were getting one to fifteen.
Leverage on our hedge -- and leverages these loans that you get that can boost the potential return on investment that -- make it.
So they have money to -- basically exactly that's leverage so Deutsche Bank last fall -- in my prime our prime broker for hedge fund comes and -- our leverage to six to one.
Where -- we -- make up for that lack of leverage.
While the treasury is now offering that -- this is a huge opportunity out there for these guys who were either forced to raise capital.
Or cell which all we did was we saw these hedge funds and private equity funds with -- selling which exacerbated the sell off in the -- So basically what this it is very very cheap leverage so I have not spoken to anyone so far who has been opposed to this and fact of the matter is they need.
And and pretty much.
All right some people out there are are concerned but in the most people out there that spoke with them that professional trading community are not concerned about the FDIC the us government going belly up -- -- I've heard about that.
Credit default swaps -- getting elevated it and I and the like but seriously you -- the FDIC now -- your prime broker -- you some of these loans on top of it as opposed to.
Lehman Brothers you're not worried about your collateral being caught up in -- bankruptcy.
Exactly suit you and those who work for are saying that the big disadvantage here is that all of a sudden the treasury could step in -- right now there's the saying that.
I anyone who participates in this plan won't be exposed to does executive pay restrictions.
But things like that could change retroactively if this goes on so any changes to the plan that come -- but obviously being negative here and also -- Somebody could come back and he's got these hedge fund or private equity funds that get involved with this and evidently didn't -- the start.
Somebody could come back -- that after on thank you need too much money on.
So I mean there's a lot of sort of -- -- that the UD at the end of the day.
Most of these private investors say that the returns the potential returns that they -- make by getting the leverage right -- the treasury on this.
Far outweighs any of the -- cases women here about where -- -- -- US government putting out these different plans and the big question I have Weathers for hedge funds or from banks or for.
Consumers out there because in seeing guys is -- -- and how do you get out -- -- that has finally getting involved in this and if they say they're ready to go and jump and we talk about and did that unraveling in AIG OK so now I have given us what we need and how to get those hedge funds back out of the government out of this involvement with a 3510 -- -- remembering you don't even know which security here -- -- which.
Particular securities you're invested in -- -- -- a great point that.
You necessarily -- can get out.
So the whole idea here that club.
Yeah I mean like land and that could be for Carolina.
As well saddening that with -- that possible returns -- you can make in your teaming up with the government here you're getting -- average additional leverage.
Gains you've taken on a little bit of risk that your your team up with the government so yes there's the drawback is that what the government may do this restrictions being put on your private investment.
Or changes they mean make down the road or whether or not -- let you out those -- the job back.
-- -- hotel California check out and how do you think you can -- I got.
Good enough to -- that out and -- to agree -- exactly I think.
-- -- it's interesting good to have you say that you haven't really heard too much resistance because.
What are your thoughts of playing at the alternative but -- glad that the alternative -- very -- -- otherwise you're gonna sit there hedge fund.
Which is that meant to make bigger returns in the average market especially distressed funds we've had yeah and they've got no.
You -- and I did translate that just really don't have the loan that they need in the forms of -- futures or options or whatever it may be.
They don't have the leverage that they need to that there -- -- right which again that was the root of a lot of the problems we're now.
They don't have the leverage that they were you -- to make those big returns to outperform the markets.
This is an opportunity a lot of them -- labeling it that cheap opportunities and that's.
Hedge funds aside we've heard from Bill Gross of Pimco the world's biggest bond fund.
Chiming in saying you know that but -- plan there are already a player in some of these treasury facilities and and also I just saw no Bloomberg wires out travelers -- -- Saying that they would be interested in buying some and and traders are interpreting that to mean travelers doesn't have any toxic assets on the docket this -- that stock is moving higher today to use.
-- good -- to watch who is saying why the -- language here could.
It's -- in line to see who have these five and we don't know yet which ones are going to be the first to get involved here so.
They're limiting it to five there might be a lot of people turned out here a lot of private investments -- into that no Larry Summers also coming on saying.
There will be the investors in this plan we will not be subject to those executive pay restrictions so again the fears that those things can change on the right.
Q hotel California yeah.
I think that's really fascinating to benefit and that's that's really analyze the -- -- Tennessee who those five.
Private investors the first but first I'm sorry about the tiger sort of but did my Tar Heels all they wanted to -- Saturday and let it go yeah.
Even started I think I think Tennessee Titans and we don't want any part of your football it is.
Yeah and severing -- -- -- -- Michael Greenberger is the professor.
At the University of Maryland school -- former director of the division of trading and markets at the commodities future trading commission.
And that professor Greenberger great to have you on today when again we're just getting another kind of I just had me there's so much news served up for the markets right now from bad banks and other writes this what's your first reaction to this plan we're hearing from the US treasury.
And well -- My first reaction is.
It's been received very positively.
It's probably the most important proposal Obama will make this here.
-- solving this troubled.
And freeing up of the markets to start lending again.
Is the most important issue for him if he can't get this going everything else I fear would collapse.
The market has responded positively to it you have talked about.
A lot of enthusiasm.
From those who may be investors the only thing I would caution here is.
Yes it's a wonderful thing for the private investors.
When you add everything up they're putting in a very.
Small amount of money to get.
Potentially very big gains in hand and that's great for them but you know congress is gonna start looking at this and the -- is true.
The United States some people estimate will be putting up as much as 97%.
Of the funding through guarantees.
Sharing equity at sadder and sadder that's a lot of money for the United States taxpayer to put on the line in case there are losses.
And the second thing I would tell you Larry Summers can promise these guys till the cows come home they'll be no limits on executive compensation.
Identify where a private.
Investor trying to get involved in this hedge fund private equity what -- you I would be very worried about it and so this long and short of it is.
This is not even Geithner himself has recognized this is a high risk.
It's very hard to judge it so quickly in its wake.
Okay yeah -- -- right Beckett they say let's have to wait you ought to say no this is really could be.
The apex of Obama's economic policy if it fails -- definitely could take down a lot more than just this plan I mean with the financial systems depending on it or so it seems right now.
How can you judge.
Six yes I mean how how do you -- success that we've heard the plan what are the next steps to know if it's successful.
Well I think you're -- -- hear almost immediately I think congress is a big actor here.
And what is congress going to say about this if in fact it works out.
That the taxpayers essentially funding this operation to reason to banks may be so they hedge funds.
Private equity and the banks are some enthusiastic about it they've put very little skin in the game they're putting down a small premium for possibly.
Very large benefits conversely the taxpayers putting them.
Most of the money for what could be.
Vary -- large losses so you've got to wait to see what congress'.
Reaction is to this that's going to be the really big deal.
And by the way.
I think a lot of people think if this doesn't work.
The other thing that is on the table.
That has been recommended by everybody from Alan Greenspan.
To James Baker.
To Joseph Stieglitz and Paul Krugman as putting these institutions and conservative ship.
And -- guaranteeing the bad assets but also having the tax Payer.
Take the profits.
From suddenly freed up institutions.
Who don't have to worry about -- bad assets.
The problem here is this program.
We'll -- he had hedge funds private equity banks' huge profits using the tax -- leverage.
You have -- -- I guess in theory the other side I had seen in theory we will make some money back on this hit -- -- that's why they're making the bets here and tell me probably no coincidence the president on sixty minutes last night shying away from -- limits on compensation.
Ahead of the announcement of this today.
Absolutely the worst -- the reason the AIG situation was so dangerous.
To the administration was.
That it washes over on this program so Larry Summers today says don't worry guys know executive women's.
But is that gonna get through the -- the kindness is not in any mood right now.
To see huge rewards to hedge funds private equity and banks and seeing the tax Payer put.
Huge amounts of money at risk here.
Don't forget these private institutions can bid on this they can be -- high.
They've got very little money at stake it's the taxpayer who has -- money at stake.
And that they over bid and these assets are worth.
Like the example they used in the materials they put -- -- 84 cents on the dollar that's very very high.
Estimate it could end up ten cents -- -- dollar it is it is a lots of 74 cents that taxpayers gonna take the great bulk of that loss.
-- -- -- by bringing an end they sort of wanna create price discovery with.
The end of the -- private market of the on the financial markets out here and not have the government setting the price discovery.
Do you think we will get a fair shake in buying these -- I say we because it's our money gets bits -- you know eighty some percent of these purchases.
At that perhaps we write the question here is if you have so little money at stake.
To lose as a private investor.
Does that really give you price discovery.
If you're only gonna lose a small part of your back.
How serious is your price discovery mechanism going to be.
They've tried to inject pride that a valuation.
Of these assets which are very hard to evaluate.
My worry is that when your only exposed 36%.
Lost on this stuff in the taxpayers exposed.
How good is that gas going to be in terms of free market economics about the value of these assets.
And what about their -- on -- day folks are are -- Chiming in here saying you know that.
Maybe taking out some of the profits -- from the hedge funds through tax laws that something else that maybe you'd be a private equities got to consider on the other side of.
I I really think that taxing issue has has run its course I think there's a lot of second thoughts about that.
As a law professor and somebody who teaches constitutional law I'm very worried about the constitutionality.
Tax -- legislation.
If I were a private investor I wouldn't be worried about that at all what I would be worried about if it's something you are worried about is.
That congress is not going to let this happen with people participating.
And only investing such a large small amount of money for such a large game that there won't be limits on executive compensation.
That's the problem here if they could go back the AIG problem would have been fixed by limits not by taxing.
Here you've got a perspective program they could put limits in place and that's what you've got to watch for as to whether this work.
Daniel professor I entered Chiming in here you know saying these bad bank assets.
They couldn't price then -- you know in the market market and as a zero -- less in some cases.
How -- we know there's a very finite number -- that we you know of these assets toxic or otherwise.
That are really worth anything out there given that the number of foreclosures particularly for the mortgage backed securities that are in a lot a number on a lot of these balance sheets.
That there's a finite number of those then after that -- you -- or -- left holding the bag on a lot of them -- perhaps just this sub prime based.
CDOs that could potentially be out there.
While that's certainly a problem and if this system gets up and running in the bidding takes place you're gonna see by virtue of the -- whether it's gonna -- These things are going to be -- out at some price that means something.
-- the other hand let me say this.
We had a very brief moment in time -- Citibank Bank of America last week and the week before started talking about their successes.
And January and February pre write downs the market responded phenomenally to that.
If this program can work.
If the trouble assets are removed.
I believe the market will bounce back -- -- fast.
So I think there's a lot of upside here for a program it can work.
I think that investors are going to be surprised.
Once credit starts flowing again how quickly the market's going to respond and as I said.
We saw a little bit of that evidence when Citi and Bank of America gave out.
What I would call sort of questionable -- good news but good news never -- I was the first good news from the financials in a long time and you had Jamie Dimon JPMorgan Chase also it's -- pretty bullish comments and and -- plays overseas so you sort of had a little ration -- you're right it just took a little bit of good news after.
-- village of bad news now of course resolve earnings to look forward to I won't put you off the spot.
With corporate earnings but that's certainly -- something a lot of investors are are looking to for sort of been the next flag but definitely this is an issue when -- to continue following here and I guess.
The good the number of big question we have to really look forward to now as is housing I mean we had this housing numbers out today.
So in a little bit of an uptick here you know an existing homes but clearly the median home prices are still falling that's starting to show a little bit of demand I don't -- to stray too far but.
I think you have to look at that -- correlated to these assets that people are looking at.
You're absolutely right if we can turn housing around a lot of these quote troubled assets.
May not be so troubled there's a direct correlation.
Viability of those assets in the housing market.
Housing markets go down those assets could -- housing markets go up those assets go up so we can form a bottom -- the housing market.
And and by the way.
Freeing the banks to start extending credit.
Not only has implications for mortgages but for people keeping their jobs.
A lot of the problem with -- hasn't marketed gate you've got so many people losing their jobs they may have had prime mortgages at one point because they had employment.
Now they don't have employment and those mortgages are going down the tubes as well -- so getting credit flowing could be -- key to turning this recession around.
Absolutely and and that's certainly something of that so many people are focusing on we're talking to and just sort of one other thing and I I don't wanna go too far off a base but.
We talked about the market snapping back something I know you've talked about before you've testified about credit default swaps.
In you know a lot of -- talk about how that exacerbated the decline in the -- or or maybe just -- of call things up depending on your perspective.
With stocks but.
Do you think -- the market may be have it a differ policy have ended up differently last year had they been -- more regulated.
I -- -- exchange vs you know the off exchange that we've solved.
There's no question about it let's just look at AIG.
AIG issued four billion dollars in credit default swaps.
-- two billion dollars of net equity 200000000400.
Billion swaps 200 billion of -- equity.
They didn't have to put any capital offense reserves for the guarantees they made.
The guarantees were essentially the people couldn't afford their houses would pay their mortgages it was a crazy back.
If they had been required to set aside capital for each one of this credit default swaps they issued.
-- credit default swap portfolio would have shrunk to almost nothing and they would be alive and well today.
That the government is hindering that by not letting it issue more credit default swaps with with no capital reserves.
Op -- we.
That there are at least 25 trillion dollars of credit default swaps out there which essentially ensured.
That sub prime mortgage fees would pay their mortgages.
If that had been regulated.
There would be at most a trillion dollars it would been reduced substantially.
And that is in the hole and our economy.
No capital was set aside for those commitments and the US taxpayer as evidenced by AIG.
We're paying AIG money.
Out of our taxes.
So they can pay.
There counter parties who got the insurance.
Take for example Goldman Sachs.
To the tune of billions and billions of dollars -- it -- the biggest recipient thirteen billion dollars.
They should have never been in that business it was a crazy guaranteed for them to offer.
If they had a set capital aside it would have been -- control.
And in the future there's no doubt in my mind.
That credit default swaps will have to be traded.
Through an exchange environment were collateral will have to be posted.
To back the commitment.
And that will shrink the market and in my view that will be very healthy going forward.
The problem is we've got this -- in front of us now and we've got to clean that I got.
Clean that up certainly people -- taking out these bets.
With companies and you couldn't pay and it's shorting the stock all the way down with just exacerbated the situation may be that can alleviate that but.
Professor -- or -- have to leave it there we thank you so much for joining us today on Fox Business live.
And I would hope -- -- will -- join us at another time.
All right thanks so much let's take a look at these and does that.
I -- I am from Fox News and really the markets haven't changed now.
To -- -- in these levels so you have the Dow up about three -- fifteen points here that's -- what.
-- people -- do before I came on really want to see.
If the rally can hold these levels because we saw these levels briefly after the Fed's decision last week.
-- their announcement I should say and then.
You know -- we gave it back so they want to see this -- so across the -- -- hundred orbit number on this -- 57500.
No -- people say they're psychological.
But that people it -- become self fulfilling if it doesn't hold that people start selling cell -- -- -- start buying more so what do you think read at like that last hour closed that's what I was watching us and 875 -- what I'm hearing I don't know if you guys.
Have other levels you're watching let us know but that's because a popular numbers around numbers I think -- -- is also a key number has to be 500 to get even more specific but.
Hey what takes a step back and taking B got -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- And we -- want to hear from you because this is a lot of information to digest.
What all working -- either mentioned to you earlier -- -- -- emailing each other out there just trying to make sure that we're sorting the information appropriately so let us know.
Some of the things that you want -- to highlight as well as we worked through the last actually minutes or so of the show and and a great guests we have with this next is Greg McBride is great ready you guys.
He is there -- -- is Greg McBride licking -- seven and instantly pop up at the great magic of television and Bankrate dot com.
And a great act again -- -- about mortgage and talking about the banks were talking about the consumer environment that what's your biggest take away from this day so far.
Well I mean -- This really hits at the heart of of what's been kicked around the last six months and that is how do you get those bad assets off the bank balance sheets.
That that's really seemed to be what's what's caught the cog in the -- that's that's preventing credit from falling to the extent that it should -- -- and credit begins the flow as it should.
You know that's -- get to stabilizing not only the financial sector but ultimately get -- the economy going again.
Now without an existing patent pump sales announced today that was you -- it seems to be surprising greatest stars existing home sales were up from January.
Prices actually held fairly steady.
Of course prices are so down 15% year over year by.
Yeah what do you make it data like that knew you guys are angry Digg.com really look at the mortgage market among other things are we seeing any kind of indication that.
They -- to stabilizing in the decline is it too soon to cost something like that.
Well -- I think that the mortgage rate element of that plays a big part -- what we saw those February existing home sales numbers and here's why.
It was late November when the Fed first announced their plan to buy about 600 billion dollars in mortgage backed securities and as a result mortgage rates -- with.
Plummeted to near record lows.
Through the month of December and ended January well.
Didn't existing home sales that closed in February.
More than likely those were loans that were locked rate and mortgage rates that were locked in December in January when mortgage rates -- came down very sharply -- I think then.
Good move by the Fed to bottom that mortgage backed debt the effect that have a mortgage rates.
Really had a positive impact on existing home sales and now we bring that forward just a little bit more.
He take last week's announcement by the Federal Reserve which again brought mortgage rates down to record lows and I -- more significantly that.
The shores this environment of low mortgage rates persist that the balance of the year I think it's very optimistic what that votes for.
Home sales for the rest of the year even though lousy economy low mortgage rates coupled with a sharp decline in home prices puts a lot of affordability at the back.
Of of -- consumer who's.
A qualified consumer somebody -- borrow somebody's in a position via home.
I -- we could see an improvement in existing sales going on through the balance of the year even though the economy.
Remains an adult.
And what Greg was saying -- cities are being yet that the conventional -- what about the Jumbo -- we haven't seen that coming down as much yet are we seeing any in any movement late.
It for the jumbos if people -- looking you have but to buy the other larger -- sort of half million dollars up.
Well there's good news and bad news on the on the Jumbo front Sunday -- the bad news is that by and large rate still remain much higher than normal there's a much wider than normal spread.
Between John -- and the smaller conforming loans.
The good news is that.
There's that huge variation in rates and what one -- quoting at eight and a quarter eight and half another lender could be quoting it's something well below 65 and a half five and three quarters.
Also the Federal Reserve's announcement last week that they're gonna buy 300 billion dollars in treasury.
The debt long term treasury debt.
That is also going to help keep a -- Jumbo mortgage rates help bring those rates down a little bit so right now on average the Jumbo thirty year fixed.
-- no points would run you about six and three quarters the point is you have to shop around because that if you're not careful he could find yourself paying a rate north of 8% -- sunk the well.
-- -- And they got evidently your website when things -- -- we've we've certainty about before is.
-- wants to know what's going on with their own bank and -- Bankrate dot -- you had this system called safe and sound I believe that's the way that.
That app you can check your bank no matter where you are in the country and and you guys have been great had this -- -- and set up.
Where you give it one star five star is now -- -- -- with the predict the debate's gonna fail it's just kind of a reading that you need used.
-- that's helpful because you have to know what's really going on the baking system and when you have money in your local bank it's.
-- that's really nerve -- Kate talked just a little bit about this statement sound.
I just to -- have set up and and also -- the biggest take away for consumers right now based on what's going on the baking industry.
Well and in this -- some rating system is designed to give consumers an additional comfort level with regard to that bank they're currently dealing with or one that they're considering doing business for a lot of people come to Bankrate dot com.
Looking for the top yielding CDs -- savings accounts.
Which is very often located at a bank in a different part of the country.
Make it never heard up well also the next logical step is to give that consumer send information to help them in the decision making process are they comfortable sending their money out of state.
And so the ratings do range from one -- -- -- to five stars on the on the high end.
Ranking of them on a variety of different financial metrics -- the bottom line for consumers is this.
Did the -- some rating system is a supplement to not a replacement for FDIC insurance and what ever money you have on deposit in a bank.
Make sure that it's fully covered by deposit insurance if you do that the possibility of -- bank failure then becomes the bank's problem not -- -- -- dragon on that note also the cedars program right if you're looking to ensure you have more than a couple 100000 dollars and also if you think about it yeah we've only seen.
What's on the thirty some banks this year and -- in -- not to make light of it but.
Compare that to get -- early ninety's at the S and L crisis we -- many many more.
And -- this just put it in context there are 8300.
Out there and yes we we are seeing more failures we will we went through a period of 33 years we didn't have any failures.
Banking is a very cyclical business when the economy's good.
They make money when the economy's bad and right now the economy's bad and the loan defaults are way up.
You're going to see more defaults but as a result if you have your money fully protected by deposit insurance.
-- your return is still a risk free return.
Really could -- great I just a final thought you know we have a tax rebate stimulus going to be hitting the markets everyone's expecting it to come in around.
April lease on the consumer side.
Do you believe that's gonna give the markets either on Wall Street or otherwise -- type of a -- or do you feel like most consumers and our investors have -- -- Well I think that that's largely expected again with what the consumer is doing right now is they're dialing back their spending.
They're paying down that and Arab and they're increasing their savings reserves and I don't think that's a trend that's that's going to change overnight.
That's something that I think is going to be with us for long term painful economically in the short run the better for us in the long run.
At the -- retail authority in price Waterhouse Cooper just put out a survey today that's it exactly that consumers.
Have changed their habits retail therapy has changed perhaps her.
I don't know I -- -- -- I agree with that -- a personal note Greg McBride.
And a lottery -- can't I thank you.
Bankrate dot com -- great great to have you today -- to join that.
Thanks -- Great look -- -- Weisberg has been.
Can't hear you there kitty lifespan Seaport Securities during this -- the floor of the New York Stock Exchange and belly started on that -- Teddy.
I you would probably be surprised me talking to some of our viewers all across the country -- mind but that's exactly what you're doing right now so.
Let's just talk with a little bit from the floor of the stock exchange -- -- give some perspective here on this move in the market and everything you've heard over the last weekend.
Well I mean it clearly you know up 300 points there are more smiles and -- today which is nice.
As he went into last Thursday and Friday -- it looked like.
The rally that we had that experience you -- last couple weeks to kind of run out of steam.
But the other news over the weekend that that perhaps we were going to get this financial package from that from that.
Department of the Treasury and giving -- The banks in particular with the -- bad assets we started disease -- over the weekend.
And so we saw some strength in Europe and in -- here overnight and and we've been basically on the plus side.
Since the opening bell today and as we speak treaty meant that if not the very highs for the day darn near the highs for the day.
Okay -- -- at this at the beginning of the show and I'm gonna follow up with a question directed to you early spoke in the middle of last week in -- saying you know what if you bought.
Right at the beginning of this rally almost felt like he had to sell probably fell even more so at the end of last week.
But if you're hanging on now and you've been riding you know say Citigroup for just you know this has been a poster child of this rally going from right about a dollar Chara what -- need to see what it's trading at right now -- a little over three quick look -- -- You know maybe what you're telling your customers when you're talking to them on the phone and I mean now they've got I'll be asking you -- -- it's been and because we've been.
Up up up right here.
Well you know and unfortunately nobody has a crystal ball Robert I don't know that come on.
I I do what is covered with moss.
This today it has been the financial sector that has been the lightning rod.
But this stock market for the last eighteen to twenty months it was that sector that created the most damage.
On the way down and clearly in my opinion at least in the early stages have any kind of rally.
It will be this sector that we'll get the market going in the end up in a positive direction again and that.
At least as we speak has turned out to be had turned out to be the case.
It I -- fundamentally mediate do you buy do you buy bags back here in general.
I suspect you know we possibly some some have very few exceptions that.
Like everything with the stock market is not rational and things have gotten way way -- done on the south side.
And I would I would think that there's probably -- pretty good value in the banking sector at the moment but those folks at.
Have the benefit have a little time in terms of a trade if you buy a stock and a dollar.
Headed straight at three dollars I would say that that's a great that's a great trade and I'd probably be embedded seller that a buyer -- -- -- a -- for the long term.
But the long term investor and I want to leave cities like Seattle to be a stock I don't -- -- -- them -- -- America.
But leaving city -- but I think that -- I think gives us a little unique and we can talk about it if you want.
That this sector long term probably offers great value here one of the issues though is number one they -- tendency for people that bought them right.
To sell them too soon.
And the other is that -- stories fact it was trading at a dollar and is now paid -- three dollars to pick on city again.
And you say well you know what I miss the bottom I can't buy it here but the fact is long term if you're right.
About the sector it doesn't matter whether the stock is three dollars five dollars or eight dollars because.
Three years ago this with a fifty dollar stock -- all the start got lined up in the fundamentals come back as people hope they do.
There's nothing is -- that -- can't go back to thirty or forty or fifty dollars over three to five year period.
You're talking the difference between short term -- such as yourself vs.
People putting aside money for retirement or they -- a longer time horizon then looking to trade in and out perhaps every week.
At absolutely and one of that one of the one of the problems that people haven't we all have it is one David straighter.
And the next day you're an investor.
And and usually a trade it becomes an investor when they're wrong.
And and and sell you its its -- taxpayer they expect that it's really it's really all about discipline.
And that's I mean in terms of the stock market no matter where we are in this cycle.
It's when it comes to investing you have to -- it it's critical.
That you have financial discipline you need to know what your goals are what you're trying -- -- -- You can't keep flip flopping around every day because it's a lot of fun but -- the end of the day you're probably not -- make a whole lot of money.
-- caddie went what is the long term for you when you're talking about investors holding short term or holding long term and -- what kind of her right and you happen that.
Well of course for everybody is going to be different but for.
For me end -- for the people that we have at at sea port that that that listen to us.
Basically its one dimensional long term for us is almost forever I mean.
I'd like Citibank initially in 19901991.
During the Latin American loan crisis.
Now clearly I overstayed my welcome.
And I and I had numerous opportunities to sell it but that's a long time I mean I don't have a problem keeping its stock for five.
Like ten years I mean if I think it's a good company and I bought it right.
I see no reason this -- but of course everybody's discipline is going to be different and people are gonna have to do what they're comfortable doing.
But realistically I think long term in terms of where we are today and where the stock market is today.
I think we need to be talking at two to four years.
You know you can pick a number but you need to give.
I think you need to give equities at least a couple years to climb out of that giant hole of the -- and that that's that we are and -- giant hole.
Real quick here we have a poll Teddy at what do you think of the Treasury's plan to rid banks of toxic assets so.
What do you think about the Treasury's new bad bank idea three -- it's good.
It's not going to work and I'm skeptical our viewers -- and we want to know what -- cancerous.
-- Short term I think it's it's it's better than good I think it's terrific.
But in the end you know it's going to be a tiny factor but this is that critical focus for the government needs to be picking -- financial sector and and getting and thinking of banks and this is -- way to fix the banks provided by operating companies debuting gets fine.
The trick is to get this toxic waste off their books.
It's a bit of a shell game I mean I I I think I except that.
But at least short term and I think the market is telling us is that prospect of that happening obviously short term and very positive for the bank.
I take very quickly talked about the financials coming back we know usually that what leads and and you bull market is now what led the last time so with financials and not commodities Sox having let down are you looking elsewhere perhaps technology.
For winning if we do -- move higher on a sustained level well.
You know I've never I've never have been a big a big fan of technology stocks other than than -- -- -- Microsoft.
And I BM clearly.
All by itself seems to be yet carrying the mantle for the technology stocks but.
I I tend to look at the energy sector I think.
I can't quite simply if if the economy in fact is gonna get better and let him and we and we sure -- hoping it's gonna get better program.
Right route and we're rooting for betting on -- that we're betting on it I think I think you have to go right back to the Yankees sector.
It cuts the fact is.
We didn't do anything about any GM and the needs event and he all the -- toward oil and alternate sources of energy.
Went when oil went -- -- 145 dollars a barrel.
And clearly without oil at fifty or forty dollars a barrel all the incentive -- to the dissipated and gone away so.
Basically nothing has changed when it comes to energy at least in the short term so I I definitely think you need to go back to the -- he stocks.
And if inflation is going to be a problem which clearly it's going to be a problem it once again.
They get the economy moving it is going to be in that it's going to be a problem I think sooner rather than later.
-- you want to be in the commodities you know in the in the in in the medals in the soft metals.
And it's an interesting did you -- and I'm just gonna say at this energy stocks are well up performing both utility stocks and of course the oil stocks the Exxon's in the Chevron's are outperforming the market today.
And what you know and we all know this but sometimes people -- to get.
The market and sectors look months and months ahead so sometimes there's a real disconnect between the headlines and what the sectors are doing.
And people just act at every level need to basically think long term.
In an overall sense and long term in terms of where we are today but where we might be in six or nine months or twelve months from now.
-- -- great to have you as always that our viewers appreciate the well great show everybody really appreciate your feedback from ever coming up tonight on Fox Business Network streaming lying about foxbusiness.com.
-- secretary Geithner speaks at the Wall Street Journal nature of my.
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