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-- -- -- -- -- on the exactly an end -- talking a couple of traders right before we came on saying they know -- to be pretty good digestion right now -- still seeing the trend.
Sort of moving higher here even after this explosive rally over the past ten days and we're gonna talk to -- -- about that.
In just a couple of minutes.
You know but again they're saying you know we're digesting the gains that we had you know.
Was the fourth biggest gain on the Dow yesterday in point gain so -- it's about big rally -- also looking for.
You know got -- the markets out there the exchanges anyway -- -- trying to get the uptick rule back and we -- talk -- little more about that in a little while but.
-- we have a lot to get you we have about -- and pick up in just a second we have said Jeff Flock to be talking to about the latest.
A what's going on with the auto sector at Patrick -- you know this guy he's oversaw dot com CEO he talks a lot about.
I short selling in the market short sellers is always an exciting interview so a lot coming up today but in -- first -- is actually in your recommendation rob.
Yeah and -- -- yeah dental Trotsky we've -- nine close contact for a while now -- -- -- the gummery and I Dan is joining us by remote.
-- glad to have you welcome board here.
Robert -- -- -- I can't great patio.
Thanks for having me.
So we've just been talk about yet the market digesting the gains you know really all -- president I think the biggest.
Ten day rally since the 1930s which of course evokes and spirits of the great depression and leaves everyone you know with -- a big question mark you how sustainable.
Are such gains it's a huge move so quickly off of the idea that recently established -- Yeah well so -- march.
Six I believe S&P hit 665.
The Dow was trading around 6600.
Since that time yes and he's been up 23%.
In those number of trading sessions as you mentioned about ten trading sessions.
I was a powerful market last.
And technicians really across the country who -- I've been in contact.
Have been recording what we call a series -- cluster of about 90% up days.
And this is basically good market breath that supports the price action.
So against those nominal price moves that you know that 23% nominal gain something like the S&P.
We've had good participation.
90% of the stock trading on the NYC.
Have been trading higher than 90% of the volume money in NYSE has been out buying volume we like to see those 90% upside days it suggests that.
The bulls have some conviction for their buying at this point so you know -- digestion is okay I think profit taking during this is normal.
And I think you could even go as low on profit taking -- maybe 74750.
And still essentially being bullish.
And until the S&P 500 yet.
Just to just get -- by S&P 500 and now.
But -- -- that's lower than some people I've heard you know looking at 79800.
At 740 would be an even bigger digestion I guess you what you're saying is we've seen so much buying power come again.
People sort of -- would be very understandable if they sort of step back and it may be even shorted it down into that region only to come in and buy again perhaps is that what you're suggesting.
-- -- -- -- At absolutely and you know and our theory you know a market bottom is that it is not really a single day -- -- area event.
Actually if you look at the history of market bottoms they typically takes several months.
The fact that 2002 to 2003 market bottom -- my estimation.
Took about seven or eight months and during that time you had a series and things upside rallies in bear market rallies.
That ultimately went and retested the lows without breaking -- not thing.
You know we're necessarily gonna go from here and retest those lows at 665 on the recipe with 6600.
But in a bottoming process it's really a big Tug of war between Bulls and Bears in and sentiment generally is gonna stay pretty -- so I think.
If you let the wind out of the -- of this market to the tune of no going back below 800 on the S&P.
A lot of bearish sentiment would come back we'll -- -- to the surface again see.
Okay see we're not convinced this was really -- head -- and that's how these bottom sort of form and eventually.
Evolve into a cyclical bull market.
Which is really what everybody -- Sure and that's Paula actually was weighing in saying you know the boring day in the market there's no real direction that we might get a larger sell off after yesterday's big run -- -- may -- we've reached some sort of -- bottom but SharePoint and you're saying.
And then there's not just that one capitulation point I was looking at your -- they put this out there for our viewers is about some of the areas.
In your US sector may -- -- and put that out there are some of the areas that you.
I'd say these might be the stronger areas and I'm looking for some reaction for -- went out there.
It looks like -- guy weighing in it he says you know okay precious -- tech health care commodities energy.
But no banks you don't have any banks -- -- we know that financials have led a little bit of this rally recently so.
Why -- the banks not included in the strongest area this matrix.
-- that matrix actually looks to track the relative strength in the different sectors.
On multiple -- -- actually if you look at the front page that we put the banks actually did show up in sort of par are trading strength column.
And that means that -- recently.
Banks have been shown some signs of life and you're absolutely right in this most recent rally thanks easily outpace the S&P they were up.
I think -- -- over 50%.
Off their lows.
What's interest being used that.
You know in my opinion for a bear market rally you don't necessarily.
Need massive participation.
By the financial sector.
Took to sort of launch any type of bear market back at bear market rally we're talking about you know three to four month uptrend in prices that maybe -- is anywhere from -- Could be as high as 40%.
Don't necessarily need -- thanks for that.
But history has shown is that if we want to launch a larger cyclical upturn in the market.
-- typically need the financials the banks to participate.
And the fact that they rallied 50% it's a good side.
You know it's still early in the game and we're waiting for some confirmation but I like that they're actually shown some signs of life.
You know Larry was -- in a lot of comments about the health care being part and that that middle comments are designated by the chart here but basically we did it easy.
He drew graphic it in the middle were some of the -- with the most -- and so.
And you're -- are not Lander but Larry from Ohio senate health care.
Now when Obama talks about what he wants to deal and also we have causes Stephen weighing in saying right away from health care said -- -- a little bit about.
Health care why you think that should be at the center of this -- is -- you know relative variant strains.
-- -- -- -- I mean taking a step back to some people in -- sort of how we take a top down approach to the markets we take a long time cycle view the markets and according to -- model.
We -- really still in -- deflationary.
Bear market here in the United States these secular trends in the market take anywhere from fifteen to twenty years.
We believe this current deflationary bear market that we're seeing here.
Began sometime around the years 1990 to 2000 well -- work.
Really anywhere from about nine to ten years about halfway through the secular trading range in the market.
During that time when you go into the sort of these smaller cyclical trends like it's cyclical bear market that began in 2007.
One of the market's knee jerk reaction is to find hiding place is safe havens and -- it typically defensive areas so health care has been one of them.
You know utilities are typically one of them.
So they have been showing strong relative strength.
You know throughout most of the cyclical bear market and I would agree.
You know with the viewers saying that you know if we have to launch something more like a bigger bear market rally here and and I think certainly -- -- -- could could rally as high -- 880 maybe even 900.
That would equate to about a 35%.
Rally off those -- from 665.
If we want to see something like that I would agree that health care would probably under perform.
Though my distinction would be that you know in bear market rallies and especially in cyclical bull markets it tends to be a rising tide.
Lifting most if not all -- -- health care would participate.
-- most likely would underperform.
88 your range without another ten years ago I made it and we're halfway through kind of what what -- what you're looking at as far as.
This like this long term for.
-- you're talking about.
I believe so when I added the long term -- ahead of the markets.
And the market moved in about fifteen to twenty years secular cycles there's also a negative correlation with commodities to that equity run.
As well and more importantly.
There's an interest rate cycle that overlaps that equity cycle that's double the length.
So -- have fifteen to twenty -- secular cycles and equities commodities.
We actually have a thirty to forty -- interest rates cycle.
Which makes this current market and deflationary bear market we have range bound equity prices.
Declining or low interest rates and rising commodity prices during -- deflationary bear market.
Commodity prices and interest rates will actually decouple for several years if not a decade or more and that's what we've seen since the year 2000.
And rates have been going lower and commodities -- -- -- -- there.
That's absolutely true it is continuing a long term tremble at that the Fed really pumping the money supply up so much in the past six months or so well what are you looking towards.
As an inflation point to see you know are -- inflection point I should say for inflation here because we've had a number of people you know is talking about you know.
Treasuries safe but they're not gonna pay off in the long run when inflation does indeed start to kick up and you know when you start to look at you people talking about tips and how they and maybe even stocks as -- they're sort of flushing new out of treasuries in.
In some -- -- chuck and you you bring up a perfect point so what we're in this deflationary bear cycle -- Cycle analysis simply is the repetitive nature of not only the financial markets but believe it or not of humankind you know from generations.
So the next phase.
-- the next secular trend that we would anticipate seeing here at least in the US.
If not globally would be an inflationary cycle -- rates however it would not be an inflationary bear market and equities as we're currently in the band the next secular cycle once this exhaust itself.
Will be a bull market and equities so to put -- stuff together the next cycle we see long term cycle this is a long term trend not a trading time.
Would be an inflationary.
Bull market in the US he would have.
Rising interest rates against -- generally rising tide of fifteen to twenty year bull market and equities.
The last time we saw this cycle -- the 40s50s and 1960s in this country and again that was right after our last.
Deflationary bear market which we -- know it's the Great Depression.
Write a cycle simply repeats itself and that's regardless of what the Fed or any government official does at least in my opinion if if -- Psycho analyst.
You would -- you would say that the cycle dictates what we do.
Not the other way around.
That -- that brings us back to today having great historical context number of our you have followers here -- are saying you know what.
You know looking what to do now I mean what's he right now you some of the -- -- research has been very instructed the buying and selling climax is that you -- following right at the lows there.
You're pointing out the stocks or hitting it and fresh was 52 week lows but then were higher by end of the -- so you're seeing sort of the strong hands coming in and scooping up stocks at a bargain or are you seeing the reverse of that.
As we start to reach you know if hi -- -- -- that was up to this huge move over the past ten days.
I would not necessarily seeing that yet and and and of course where we're not saying that can't happen.
What I think it's been constructive about the markets is that since that.
-- march 6 you know print that initial rally that we saw.
The selling that has come in after that has been very selective on that's been on generally lighter so so volume.
You know prior to this coming in from the panic of of late 2008 when you're talking about.
October November and itself and December and even January sell -- the -- was very broad based and it was on high volume.
This time around the selling has been much more selective so.
I realize that we can fade and you know our constituents and let my court cut client -- is this is you know the institution so they are looking to trade things a bit shorter term.
And they will probably look to fade this market as well but again.
If if the market is making higher lows.
And if volume improved and -- Brett stay strong -- -- move that's a sign that the market is facing.
That could suggests that a bear market rally could evolve into something more you know again.
What what I want to do -- in terms of the next big call that we want to try and make and we don't.
We don't want -- anticipated -- jump the gun.
But the next big trend would be cyclical bull market so within the secular bear market structure that fifteen to one -- cycle in the market is range bound side with.
Market goes to smaller cyclical gyrations these are roughly two to five -- market cycles were -- for example.
Our our last cyclical bull market here was about 2003.
To 2007 was a four year bull market.
-- -- that's the next call that we would look to make.
If what we're seeing today evolved into a cyclical bull market.
You could see at twelve to eighteen -- lift in the stock market and that you know that cuts would be behind home because again that's that rising tide theory that all -- most sectors.
Would participate to some extent.
That's not to say that it would be the beginning of the next secular -- thing.
A lot of times we're using here but what we're we're simply trying to.
Identify what is the long term playing field that Iran have been within there what what we're trying to hang on for dear life and and trade in and profit from some of that shorter term volatility.
Sometimes and I don't know that the playing field the game -- that there's so many different questions which Richard as a great window he says.
Is gold safer than investing in health -- what do you think about that question about that commodity question that's now on the market.
Sure so you have around the time about 1990 to 2000.
When equity markets transition from the last secular bull market.
To their current secular bear.
Around the same time because they have that negative secular correlation.
From a secular bear market two with secular bull market so what about -- pointer halfway through what I think is a secular bull market commodities.
If you look in 1998.
The commodity prices mid major -- than anybody remembers the oil is trading around nine or ten dollars a barrel.
Gold was trading around 200 pounds now I'm so since that time of the last 89 years -- -- commodity prices have been moving higher.
Negatively correlated against that equity market -- cycle.
OK so I don't think.
That -- -- to their -- -- take a breather because as well for our viewers out there they're trying to follow along.
Exactly as if we're halfway through -- could be.
A bullish cycle for commodities is that what you're saying is -- again this is time to get in and by then because it's gonna have more apps laying on the back cap.
I I need whether or not today is the time today to -- in bike and I try to trade the shorter term volatility.
But I would say on a longer term basis the next 57 years possibly longer.
I believe gold prices will be higher because they -- secular bull market we would look at targets anywhere from thirteen hundred miles of support.
You know as high as 2500.
A lot of I got out.
That wouldn't -- Latin I think that they come on the low end of the spectrum if -- talked to some of the folks out there they have targets you know north of 6000 on.
-- incredible I'm not at all.
How can you give -- to the extent inning you're 2500 in your very conservative now thirteen hundred dollars -- Round -- conference at something like yeah conveying that happened but it you know with with hearing that in the marketplace that mean that -- -- we haven't heard on the show before and Anthony and our viewers have as well and he -- -- -- hitting 6000 or even higher.
I mean did how do you so how do you say OK I'm gonna top this estimated around 2500 -- not gonna go.
That way of everybody you know some of the people you're hearing which is -- 5006000.
Right black you know I don't know how other technical strategists do it I don't tend to look at consensus view when looking at the tentacles of the market so.
-- -- -- -- -- -- -- You know has spoken of of a target that aggressive you know throughout this commodities cycle she's very well respected.
Yes I I don't look at I don't I don't know how she came.
Up with that target specifically.
But I do -- I try to extrapolate long term trend lines I look at the long term cycle of the markets.
I judge that against what the equity markets are doing and we come up with our with our best fit.
You know what I would say is that I believe.
You know pretty strongly in the cycle theory that you know both equity and commodity markets.
Do tend to move and sort of these multi.
Decades secular trends and if you look at 1998 or even 2000.
As the birth of the current commodity ball.
It would say that you know.
You know worst case scenario about halfway through in a best case scenario where it was still early in the game.
So again I you know I I think thirteen hundred to 14100 -- is reasonable.
And I think when he you know 4500.
Is certainly possible -- the -- -- -- Parting shot here what's your call right now we're taking a little breather here does this rally -- -- -- sort of shorter term right now when you're looking at the charts here.
-- -- -- -- -- Agree absolutely take a breather I mean I think -- -- -- this market is all about reversion to the -- high volatility is a lot of emotion out there.
There's a lot of choppy trading.
Have been tough to gauge even technicals have you have been very tough to follow we're drawing the lines were -- lines.
That's typically what you see you know at a market bottom it's highly volatile.
But I tend to think that.
You know if we would hold that 74750.
Zone on the Chesapeake it would be good buying opportunity here for certainly the continuance of a bear market rally.
And and again you know we're looking at initial resistance initial target of -- running 6880.
But I think outside -- -- get to 900 on this thing from there you know will redraw the lines we'll take a look at how things look.
Hopefully we can go -- make that call that hey we're merging into you know -- -- cyclical bull trend.
We're not ready to make that call yet so you know quite frankly after year we had we'll take what we can get.
You have I'm sure Dan -- or drops -- with Janney Montgomery Scott said by 740 sell 900 seems to be the call.
We'll -- back -- now see how that works out next go -- thanks so much for joining us today.
Thank you guys.
Thanks -- That haven't heard his estimate -- everybody out there what what's the -- ethnic you've heard -- because at that point commando ground investing in jury spent.
You know -- really.
-- -- -- If they hit them this thing that this could be something positive coming from that I have some again I was on the kind of write your name matches I guess they -- for four dollars in the west village that -- I had I have to get educated at the bar -- -- -- We didn't pull free iced tea today you're -- -- on that Abbott C Stephen east at 15100 is how high you heard from -- I 2000 just what you -- I'm curious most curious that when -- get a hand there.
Here's the -- After the treasury unveiled his bank rescue plan the Dow soared five -- -- point how much faith do you have.
In the plane you see it right they're coming and coming up popping up there at you at what is none is doomed to fail.
That's are producers -- that -- -- that are produced with dean except for you guys might sound I as -- -- the private sector is on board.
-- as long -- housing often gets -- that's a great point.
And a lot this will -- clean up its balance sheets so I'm curious to see what you guys seniority moving their way again.
Can we actually want to hear topic that is a bit and it's just a great topic we actually hear what you guys wanna talk about today -- And you know we're watching your comments on on the screen here.
But if you're thinking specific that he got my address with any of our guests even if it seems a little bit off topic -- wanna hear what you got let's talk -- wanna go to the pawnshop.
They're excited are -- And say you know what -- -- they economist they came up with that idea that the bad things like -- shot.
He's sitting right here he says he's watching the whole situation just to kind of get an idea of what's going nuts to get -- come up with some -- comments he's the pawn broker will be.
Have you been subcontract.
Inside -- I have in yeah its.
It's just thing.
I'm sure I never and then I never I that hit on something real I -- -- actually this is ironic I was actually curious about when Julie that I receives.
Yeah I can get.
What kind of -- that was not real.
Don't get that gets people don't get that that was -- -- people.
I and irate is Jeff pretty good chance to me now.
As early as he has -- Lieberman's -- -- before.
Well we did a live from -- to live data that's yeah that's -- -- business is hugely booming.
But it does remind me your your comment does remind me that I did give an engagement ring to a girl wants that was not.
A 100% real meaning that's what cracker Jack.
We know I've got that a perfectly good store okay I you know the ones that I could afford were quite small and I saw the other one -- -- and I said how about that one -- so you can afford that one but at the time I didn't get the concept that it had to be real life.
Oh yeah looked fine and -- that right now right here at foxbusiness.com.
It should get -- -- yeah.
Yes I guess you attack.
Naturally we'd love to have you back for a segment on that obviously.
But -- acknowledge -- what not to do and America.
Meaning advice as well as investing about 08 front to something here -- I know what to do wrong I can tell you what what does not work that's for sure about -- good advice why did you tell us about what's working or not working for.
For the out effective -- -- -- -- this conversation.
Yes thank you.
Happy to dive in with GM's problems here.
Deadline today exactly you think yeah I'm in trouble well GM's got trouble too.
Today's the deadline for this big buyout that they've done they extended a buyout offer to all 62000.
Their hourly workers today is the last -- you can decide to opt in all they get seven days afterwards to opt back out if you change your mind.
They're essentially offering the smallest buyout package they ever have it it consists of a 20000 dollar payment in cash.
Hat and a -- voucher for a new car which they'd like to move some cars anyway 25000 dollars vouchers so.
That's what you get.
They're targeting the 22000 workers at GM right now our hourly workers who are currently eligible for a buyout are -- -- -- eligible to retire.
These are the guys that make a lot of money they've been there a long time their wages are or are fairly high.
The new workers they bring -- and make about half of what the -- workers would make so they really want to replace these guys.
That's why they've done by -- guys what do you think with the reception.
Well I just talked to GM Tom Wilkinson spokesman said that they don't have the numbers yet because of the fact that.
Today is the last day clip it to close of business and a lot of people to tend to take these offers.
At the last minute wait until the last minute until they -- out for some reason they -- you know things could change their situation could change.
You know the thing is now they don't have a lot of job security so a lot of people have been thinking maybe they would take it.
You know when the economy starts turnaround to get a run up in the market people think -- wow you know maybe things are gonna turn around.
Some people -- back off -- but they'd like to take as many have as many people they have targeted they'd like to have about half of those 22000.
Retirement eligible employees to take it so maybe about 101000 -- what they'd like to.
Well -- we're getting closer to that that march 31 deadline to -- Jeff I'm absolutely -- -- encouraged to vote in what have you back I definitely to top -- that they got a sector but obviously -- we discovered that Jeff Flock in shares down 5% clearly I'm not sending.
Lessening -- and he jewelry I -- -- -- she can't take it to the -- break.
I let her that's -- isn't the best source Jeff I mean yeah she really gonna get her name -- -- really gonna get that the dust appraisal there I mean I feel like I gotta -- -- -- want to shop itself.
I feel like and those guys really are good I mean for the gold don't send your gold in by the -- -- -- that -- -- great segment may be one of our sponsors.
But that's really terrible but don't do that the guys in the pawnshops we'll give you a much better deal relates.
Think -- -- -- consumer that is de -- we're Aggies come back -- -- yeah his client shot the auto sector.
Is definitely do it here you know.
There's no limits and speaking no limit to thank you.
Patrick -- CO oversight that -- is joining us now from Salt Lake.
A city and that Patrick -- apologized -- line.
Jokes as well as artillery jokes -- if you like to weigh in on either where we had and happy to have you.
Well if you really want -- you know go to upon popular over stock.
Aviation that -- That's an upcoming.
Well at the Patrick talk just a little bit today you've been so outspoken just it to -- acting as -- had -- the Fox Business Network he talked about short sellers what's going on the market right now.
It's been that -- it's been put to the side at least for the time being with all of volatility.
In the market and otherwise it would -- this -- -- -- -- state of the union as it comes to get a feeling about the short selling activity in the market right now.
Oh well I thought I'm sorry I thought we were -- -- the bank rescue plan.
I you -- -- to stick on the short selling.
I would like -- think -- -- we -- talk about both but if they get to attend the that you have been so adamant about.
I hate to -- to ignore it.
Okay well -- there's there's basically been for loopholes and you know tactically just -- I don't act have anything against short selling short selling is fine and -- information into the marketplace.
There's a form of short selling call -- abuse of short selling.
Or naked short selling that.
People skip paying the price -- short selling basically the information it injects into the marketplace is value less.
In literal sense.
It's there been for loopholes we try to get close one of them incidentally that we spent two years and millions of dollars trying to convince the FCC to close.
Was a a loophole with a very technical sounding name the option marker maker exception to rule.
Bob apply it.
The colloquial term forward with the -- was the -- off exception.
As in 1998 gunning Bernie Madoff went and got them to put this exception so -- give you an idea how.
How good for -- it -- but anyway there's really two more things they have to do.
And there's this fellow senator Kaufman from Delaware.
Who filled Joseph Biden seat when Joseph Biden became vice president.
And the word on -- -- he was just supposed to sort of keep doing the seat warm for Joseph Biden's son but I guess he never got the memo because he's come out with a very aggressive.
Bill cosponsored by another Democrat and another at a Republican.
That's seal up the last two loopholes it basically says it basically says what the US government did last year.
For the nineteen financial firms in the center of our system remember that did this emergency order that said from now on to short have to pre borrow.
And you have to deliver and have mandatory buy -- It it makes up the -- for the entire US capital markets it's very healthy it's very -- -- that only a new senator who hasn't been.
Had gotten a lot of strings attached -- my different powerful interest.
Had the courage to do this but it's cosponsored I think -- tester from Montana.
There's Republican it's -- great -- going to be attached to this that basically the congress is stepping in and telling me SEC you have mismanaged.
We insist you get back the uptick test the uptick rule -- -- that they're saying we're gonna you need to close off these last two new polls.
I had to make it short selling other big loopholes and it's just what the government did for the for the -- and financial firms so I think that there is a good step forward that's going to be taken in the next sixty days.
-- question for you Patrick and also for our viewers and and followers out there is this.
This letter now from the -- heads of the exchanges today to the SEC chairman Mary Schapiro.
You know about to bringing back a modified.
Uptick rule is that what they're calling an -- in this letter and they're saying basically initiating.
Shorts price above the highest prevailing national bid.
By posting it for short sell order it's it's a little bit complicated and some of the traders I've talked to already.
A little bit critical of us certain portions of this proposal here but clearly it's on the SEC is considering that come up putting in a circuit breaker where.
By it would kick in this rule -- its stock dropped by 10% or something.
Trying to curb some of these abusive BOY bear raids if you relative sort of go back in time but.
What you do is that something you think has merit or did you discuss this in detail with any -- exchange heads the head of the NASDAQ offer instant.
All we've had a lot of conversations for three years now where weird fender exchanges SEC other folks.
I actually think I know this is going to be blasphemy to some of my friends.
I don't think that much of the uptick rule I think that we probably should have something like that back -- because the odds are stacked so heavily in favor of the short.
But the truth is I think this big fight about the uptick rule is a red Herring.
What they really don't want to -- done.
Is ending the loop holes -- but let there be naked short selling because there's a tremendous amount of activity there are far more than anyone has let on yet.
I know because I'm in lawsuits how much this activity is because I've gotten discovery there's far more -- that and people have gotten.
Have understood yet.
And they don't wanna close those loopholes so they're trying to sneak the bad guys are trying to make the fight be about this uptick rule.
Really has a look at the birdie you look at the birdie count -- measure.
I think we probably should have it and let's do -- and so forth but it -- the -- of that.
Yet it's it's just it's sort of -- I guess a measure of confidence maybe did to some folks particularly individual investors out there and and one trader told me you know a more appropriate collar here would be the full disclosure of positions automatic by answer these naked shorts after five days.
You know after they failed to locate the stock things along this nature would that sort of be something -- -- -- that would closes loopholes.
That's exactly what we've been -- we called it the gold standard.
There was a grandfather exemption that they had to get rid of -- got rid of it.
Get rid of the option market maker that's the -- but -- edit option market maker exception they got rid of that -- that was the -- exception.
-- DR locate and disclosure have to have a firm locate.
And you have to be after the firm located when -- shorts -- after really a -- the stock to sell you short selling it.
And then you have to disclose how much of -- there is.
But that's exactly what these three senators led by senator Kaufman have come forward and done in the last week and it was last Thursday.
They introduced a rider whatever it's called on to the uptick law that's making its way through.
Of the house and senate.
To demand just what you just said bad boss -- she's gonna go bizarre.
They're already garbage -- the -- especially the managed funds association that the hedge funds lobbyist group.
Gonna go bizarre.
Because what it's gonna do if -- if that passes is it's gonna shut down an activity that they insist hasn't been going on.
Now I know for a fact they're lying through their teeth but it's so funny they're talking to both sides of their mouth for years they've been saying this isn't going on.
Now their position is oh my god if you really stop it.
-- dramatically drive liquidity in the marketplace well which is it -- literally campaigning on the grounds that this wolf's.
That if they stop doing this thing that they're not doing it will have these seismic -- consequences -- -- Again and you know we could continue to talk about this and why they don't -- drive some of their business to dark pools from the exchanges but we do wanna talk about your business.
Right now and now and number of people wanting to -- -- how is your business.
Are you seeing -- -- right now obviously tough economic times out there right now over stock would.
You know you guys are our plays from people can go and and look for bargains now -- off fronts in the like tell us a little bit briefly how.
Over stock is faring right now in this environment.
Well we actually have.
Up -- and -- -- I would say certainly the consumers sitting on his or her wallet.
And that's affecting everybody.
On the other hand on the supply side things have never been better.
Distributors importers they are stopped with a except -- excess inventory -- they were stuck over the holidays right.
Yeah out there and so there's still stuff.
And I thought you know what but we got into in the last six months we're liquidating cars liquidating homes we have we have hundreds of thousands of Freddie Mac and Fannie Mae homes in foreclosure up on our website now so.
You know where we go wherever there's overshot so on the one hand it's great on the supply side on the other hand it's.
Give consumers are staying on -- wall it.
And in addition to our competitors and -- to the brick and mortar save middle income stores serving middle income people.
They're really in a national going out of business sale right now.
And so there's tremendous pricing pressure when you have an upscale store like gay.
In our Saks Fifth Avenue running 7580%.
Off sales on Gucci purses it's -- at a discount.
On the other hand that's not a sustainable business might have them -- and a senior certainly -- that Bob -- Out of their stock prices -- yet they were doing that as early as November here in New York City.
Sacks as a matter of fact and may be -- -- -- can.
Go for that the jury that area I don't know if you heard those comments earlier but that -- Overstock.Com but are you seeing.
Any kind of an uptick here you have heard anecdotally from other and business isn't particularly in retail.
That things have started to pick up a little bit starting sort of the end of January as we got into February and now we're heading into march are people.
Are you seeing -- are picking up.
Actually were doing our toughest comps for last year or January February early -- other words we're we're going very strong growing 27%.
In in that period last year actually continued through the second quarter but.
Anyway we got we've just -- really in the last couple weeks things are.
Coming back for us things seem to be settling out OK what -- really saying it's a big shift what happens is.
In normal times the middle class doesn't discount shop that people would discount shop.
Tend to be at the ends of the -- -- -- economic spectrum the lower income people and wealthy people.
He go to Costco on Saturday morning look in the parking lot you'll see you see the Mercedes in the -- -- it's there's that professor in South Carolina who's written about it.
On the other hand you get into a recession and the mayor and the middle class -- -- pay full retail for whatever reason.
You get into government into a recession and -- in the middle class down shifts.
Which is why you -- Wal-Mart doing well why last I saw McDonald's was so upset and a half percent same source tells us.
The middle class -- to down shift in this period so they they seem to be finding us we're doing we're doing -- Bordered reasonably well actually.
All right William Patrick -- it's great -- have you will definitely have you back talk more about these trends.
Well we can also talk about you know -- -- bail -- the toxic -- program as well -- -- we certainly appreciate your time coming in here.
Today talking to us about this and that the end that the -- on -- to see how the SEC.
Proposal goes along.
My pleasure and honor to be on thank you -- have a nice day are right.
Well jet goes back and Nick Cole is with us as well from the NYSE and Nicole and I -- not sure if anyone down there's talk about these.
Modified uptick rules -- Duncan Niederauer the head of the NYC signing off on -- this.
-- -- that they've wanted and have spoken about for some time.
Duncan last year Duncan Niederauer the head of the NYSE had petitioned for that late last year want something similar.
He wasn't the only idea that they had topped out there he was working with the prior administration the FCC ruling last year continue to do yourself.
It is of course -- -- the -- over time but the question is that the fragmented market the way it is people like Ted White and we'll tell you.
That it's very difficult.
To monitor that sort of -- -- certainly we'll see what happens there but it is part of -- but they certainly.
Watching Bernanke and Geithner and AIG and we're going to be hearing from Obama -- Such a run here for this market is certainly they were expecting a little bit of a pullback actually doing and traders are very surprised -- holding up very night they were only down about fifty.
Lot of traders expecting the season may be some fine.
Later this afternoon it will look back.
The plus category and it wasn't that two consecutive weeks of game.
So anything can happen here but a lot of traders -- of the fact that when you -- -- -- do you start to accumulate a little bit so a positive.
Feeling here on Wall Street at least for now.
We've had so much Bloomington and -- we'll leave it at eleven quarters after -- -- injury so it's tough.
News and talk headed down market new lows this past couple weeks pretty -- and yesterday we saw the -- 500 points pretty impressive right.
Absolutely and our people sort of getting that the feeling now the sense that yes the path of least resistance in the near term is higher not lower at the moment divided -- at least.
For the moment -- we have.
-- data that I've heard by the -- it's.
You know accumulate on the pullbacks -- those -- phrases that we've been hearing all morning -- -- -- -- was on earlier today he actually said.
Buy on the dips and I've heard someone like -- -- you know saying maybe -- -- today you know he didn't watch the -- in the morning in the mornings you know.
So there is big I mean David Henderson losing by some of the quality companies.
Such as Coca-Cola General -- Chevron Exxon the big -- quality companies that do on the ball back.
That seems to be that Kenya.
All right -- probably -- much on the floor of the NYSE so you know sort of -- the halftime point here and lower -- not making new lows on the day -- was.
That's a positive -- -- I had I had put that question up for our viewers back you know we have that question who is the private part of the public private partnership that we just heard about from the US government.
And Chris Aldridge as a co head of US fixed income portfolio management.
At black rock he's joining us now because critics as we understand it you say.
-- we we would be that -- and in -- we would participate.
In this new program coming up from the federal government it is that duet that cracked.
Yes absolutely we we definitely on behalf of our clients would love to raise funds that would participate in public private investment program.
We think this is going to be a great opportunity for investors to get involved and markets that have -- to date been pretty broken.
OK so let me start let me set it -- then because to get involved with markets that have been had a broken.
We we understand again that there's a partnership with the US government.
But what is the incentive what is so now -- about this deal about getting involved in this market.
That wasn't so -- last week.
Well first -- I think that it was to use your word -- last week we actually raised to fund several weeks ago.
That was launched and started investing in February to buy some of these same assets how to have fun -- perform so far.
It's perform -- market's been kind of sideways.
We haven't fully -- for fun yet.
But it's doing fine -- students obviously only been.
About a month or so we're still.
Been in the phase where we're investing capital.
And I can tell you that didn't interest I think in the marketplace to invest in assets that are targeted by these programs.
I think investors generally have been somewhat reluctant to get involved in markets that have had such negative price momentum.
And I think that what the government is doing is trying to establish some buy side capital to offset a lot of the selling that is going on the F sellers who were forced to liquidate.
As it -- this series have been downgraded by the rating agencies they can't hold on investment -- assets or if they do they have to hold.
More capital to to keep those balance sheets on our balance sheet and they may not have that capital so we -- a lot of sellers.
Many of them don't really have a choice.
And when they go to market with these assets which we see -- every day.
There to sign up buying power to it to stabilize the market and I think that what.
Treasury has done and there are a lot of unsung heroes really a treasury and -- fed who have really worked hard to understand the dynamics of the market place.
Talking to investors banks.
Consumer advocacy groups every one.
And it's -- there really quick India -- Robert have been in some of our viewers that and they had it a lot of people are complimentary of the treasury absolutely.
I bite and the question I had the credit in public's.
Sector coming together so closely had been a question also raised.
That bio but I -- just your common investors out there that that year involvement with US government would created rather.
It's strange bedfellows they call it are you worried about jumping into bed with the US government.
Not at all I actually think that we have very mutually aligned interest remember we own.
A lot of assets in the fixed income market that have been under pressure we have and for our clients.
We think that their value in many cases is trading well below their intrinsic value and again I don't think that will pollyannish about the the real value may have the assets we run some pretty harsh stress test we look at securities.
Everything from you know dubbed the economy performing very poorly unemployment rates being very high in what the impact on these series would be.
I think that the government wants to restore stability -- the markets we want that.
I think the government wants to get the economy back on its feet clearly that would be good for the performance of securities that we him.
And I think that we have a -- of a lot of reasons to work with the government -- -- there have been all kinds of issues raised about the public private dynamic.
-- but I think this is that this is a time when it's gonna be.
Very it's a win win for both sides to work together we can help with price discovery.
Doing doing all the credit work and all analysis it will be doing we're excited to have the opportunity if we're selected as one of the investment managers to help generate.
Attractive returns on taxpayer capital and address in law it returns.
So would you be it's the year yet -- that be one of the investment managers and so would you be a buyer and possibly a -- also in there would you be basically.
Buying it off the balance sheets of banks -- black rock throwing their hat in the ring for that and then.
Potentially you know selling it to your selves -- to say a mutual fund that you would create for individual investors who may want to participate.
-- just say here's how that works we manage almost 500 billion dollars of fixed income assets and as a company match a little over one point three trillion dollars.
We obviously have clients coming and going all the time and so we have a pretty significant compliance.
A department that is -- obviously overseeing all of our activities.
Ensuring that we don't reach any conflicts of interest between those accounts.
If we were buying four funds and other clients he would exit from the market in May not be because of what's happened prices and they just need the money to.
Do capex or or or for some other reason.
We obviously have things coming and going we do things through intermediaries would do all of our transactions -- every area writes it's it's very much.
Guided by some -- step.
And I -- I'm not suggesting any improprieties about just trying to get -- analysts -- you could potentially be participating on both sides and another question in that coming from.
One of our viewers you -- does black rock indeed have their own toxic assets that you may be looking to sell it.
Into this process.
Black -- is invested in.
Almost all aspects of the fixed income markets.
You know -- -- there I don't think there is I had actually seen their real definition of toxic assets yet I got a good look at the dictionary I don't see it -- don't you let.
He had held by a toxic assets I think are assets that are clearly having tremendous risk of default.
And as a result of that don't trade well in the marketplace Salma -- sorry go ahead.
-- -- -- I -- I was just curious -- so are you looking.
Sane individual does want to participate -- are you looking to create mutual funds would you create an exchange traded fund and oh god looks like sparkly yet they have the MBG which has mortgage backed bonds and there.
Would you create some kind of you know toxic avenger ETF -- the lack of a better term.
Yeah I don't know that it ATF is gonna work here it's a little bit complicated with the funding component and the side by side investment with taxpayers.
To do so not ruling it out but I but I don't think that's the next best solution.
At the moment we're working on trying to get hired obviously as one of the investment managers.
-- that happens we are also currently at the drawing board around.
What the best way to take.
Product to clients would be so for institutional clients -- might be one mechanism to raise money that suits them best.
But certainly for individuals we are very interested in creating a way for individuals to get invested in these markets through these programs.
And I I think that you know we're going to be able to create some products that that fit them.
We again the fun that we raised that I mentioned about a little over a month ago was targeted individuals -- had a 25000 dollar minimum investment amount.
And was very successful there a lot of individuals that see the opportunity to have less volatility than they might have an equities.
But earn higher yields than they would earn just by being in very -- government bonds.
And so I think there's going to be a lot of interest in the product.
Why he's so confident.
Why -- so confident well.
First of all I I think that the marketplace has been incredibly broken where you've had as I said before it is far too many cell booksellers.
Relative to buyers and it's driven prices to very low levels relative to intrinsic value in many cases.
I I'll tell you that I have a view that the economy is you know clearly got a lot of risk and it.
We're gonna see a rise in defaults we're gonna see recoveries be lower than people may expect.
-- so I'm not necessarily so confident about.
The way in which so this is gonna play out having said that the price dynamics in these markets have priced a lot of that in and more so.
-- -- -- -- -- fundamental to this and the pricing of these assets is still a big question mark -- I'm subsite as -- -- for the pricing of the their pricing gains and the market is one thing but the price of these assets.
It's something -- still big question mark right in this -- if you work as you say selected to be part of this type of management or.
Have an investment have you called that the government setting up with that the private enterprises.
-- you would be a part as saying the price so does that concern you.
Well doesn't it's army it's it's what we do.
And I I think that -- there's two things going on and I and I actually think it's worth spending a second on it sure -- a lot of the a lot of the price discovery dynamics that have been talked about in this program.
There's a loan program and there's a securities program.
A bank's own a lot of loans on their balance sheets they -- on -- par and they may hold reserves against them.
When they go -- to sell loans.
There will be some price discovery a lot of loan packages have not traded.
So investors are gonna put bids on loans.
That that may be new information for the sellers -- the banks that hold those loans and so there will be a period where.
The bid offer spread may be very wide and and -- not -- transactions.
Might happen on the low side.
On the security side I mean every day for the past you know we're very long period of time.
Since the market really became turbulent.
Many of these assets have traded and so the market place for them is reasonably well defined.
Around a wider bid offer spread than usual so we have.
Assets to trade at fifty cents on the dollar maybe they trade at 55 cents last week and -- 45 cents this week the people know generally where that market is.
We're gonna go into the market and try the best that's try to -- the best assets that we can.
At the most attractive prices that we can't -- Turner said he had that the one thing that concerns a lot of people out there -- What's the incentive for the sellers and and -- you know if you're coming in and buying up assets and in theory you're creating a market and that the assets should rise in value.
What's to stop a bank from holding back at least some if not all a lot of their best assets until the prices -- and and try and sell them back out into the market.
At even higher prices four UN and secondly what's the time horizon.
I did you would see you expect to see some kind of return on these assets.
First -- the first point not not only banks but all investors are currently hold these assets would sell them for one of two.
Very basic reasons.
Is there one they think the prices too high relative to their own view of the way in which the economy and and the fundamentals will play out and the impact on that security so they may disagree with the value and think that it should be lower.
Or at more more likely what we've seen dramatically be the case over the last several months is that they don't have a choice.
So they don't have enough capital to hold the security people have absolutely been selling securities.
That they didn't want to sell but that wasn't -- there -- have the luxury that option anymore.
And and we're seeing that in the marketplace day in day out now that I think -- there's a place in the market place then -- -- we've been doing this plan.
I'm I'm sorry if there's always.
Yes Abaxis -- back to my point that there have been far more sellers in the market and buyers and -- -- use the -- from -- We they're a hundred people they'll have to sell something -- only five people who could buy it.
The price would continue to fall because that that there's just not enough the playing field isn't level -- buyers and sellers.
So this program is intended to create more buyers by making it attractive through the financing that's being offered.
And by the treasury actually using their capital.
Taxpayer capital to come -- and be a buyer in this market I -- think taxpayers are gonna buy some assets at some attractive prices.
Bush certainly hope so it's our money at stake how to do my two I have.
So well right what -- and we have to headed back on when you get closer today you know kind of send.
Definitive answers on this it's been really a pleasure to have been really great perspective we've been anxious to hear something from the private sector so thank you for the coming out -- that's.
-- thanks for having -- on project.
Volatility about it earlier.
We talked about the punch out.
Bob Brusca the chief economist at fact and opinion economics and he came up with this idea by the censoring your blog as -- -- traditionally.
Yes because I do appreciate your sense of humor humor -- -- is the fact that you -- -- -- bank it's similar.
To find I don't know Chris would agree that he's upon broker may be a great dad how did you come up with this idea the punch shot -- bad bank.
Well because it has a lot of characteristics what's going on -- -- system right now you know you have a lot of dispute about what assets are worth.
And you've got people who apparently are selling things that they think are worth more.
But -- on them for lower prices and asked why does that happen -- -- -- but the dysfunctional market what does that happen.
And it occurred to me that it happens all the time and a pawnshop and that's what people do and but the thing that's interesting is an upon -- people often do that because.
They expect to come back and get their item you know they think they're borrowing money against that they're gonna come back and they're going to get it and hopefully filled either right hopefully we'll still be there but you have a deal -- -- sunny days to come back and -- -- and the -- can talent right that.
But the pawn -- has rules.
But I'm with what's happened -- it's interesting in the financial markets as it seems that.
A lot of banks actually haven't been selling these things have been hanging on -- them partly because.
Unlike the the pawnshop example the -- to -- getting liquidity because they've got a lot of money from the federal authorities say they haven't even the liquidity so -- actually haven't sold the stuff.
You know put -- -- money in the banks has helped to.
Make these assets sales.
Less frequent because the banks haven't been forced to do about liquidity we just heard a story about him there why would they be any -- -- incentive for them to sell.
-- they don't want to even know what's happening -- with a special deal that's being put together.
What they're doing is they're creating a special class of investor in the flood like the plan that you've got.
I think the original market that we're dealing with now is burden of the way we just heard described partly because of mark to market accounting.
-- the -- to market.
You think that's a long run value the tire but you don't have the choice you have to market the market right so you're stuck doing that and therefore all the values compressed to the -- conditions are now right.
If that's too abstract think about the stock market look how low the stock market then we had a recession of course the stock market is low do you think that everything in the stock market is valued correctly today.
But maybe for today but what if we take a longer view of things you know.
It is a longer -- you think what we're in a recession -- -- recover stock prices are gonna go up right things are going to be valued batter and so warehousing facilities securities.
But you have to.
Doubted -- this -- today for your quarterly balance -- if your bank.
And that's a big problem.
So when you give people a broader -- rise in the price could float up.
So now instead of solving that problem getting rid of mark to market accounting -- creating this special market where we're gonna have special investors I think especially and that's beside Uncle Sam.
And they he get special low interest rate -- and they have a special guarantee against risk.
It doesn't strike me that the -- you fix the market it's like two wrongs don't make a right.
And so that's and that's why I asked that question Curtis which is why why is he so confident and it need to be -- with that but.
The government as well as the private sector have done a lot of things over the last year or so it's you the spark as being skeptical and the least about with their actions and my question is that this plan.
Know why you when you go to punch shot you trust the prime broker because he's got you have to deal with you Jason was just writing -- said he gave the -- -- or anything like it went in my neighborhood.
He probably should trust and those weren't exactly his Williamsburg more than -- -- -- actually have options so that that the question is now for a lot of these financial and otherwise.
Why do you trust them why do we trust them to set the price now why didn't trust them to get involved in the market now what is the incentive now that's a difference.
That it was six weeks ago when we first heard about this plant.
The incentive for home for the -- -- have a regular ball and I think I think this is -- the government wants to have.
-- that's why they want several different kinds of these entities together to bid against one another.
It's why if you're not sure about you -- to -- the one pawnshop.
It's because it's -- that's what the value was but the point is they haven't done anything to affect market value.
Even within this framework people start paying more for the -- that they won't pay more and the regular market -- the -- we have a baseball team.
Jack capita guys with steroids you expect -- -- -- more home runs but don't expect the guys -- -- don't object hit more home runs you right.
-- on the part of the market that they have these special investors for the we'll pay more of these securities because they have less risk they've got a lower borrowing costs.
Did that -- conditions that the rest of the market doesn't happen if they have any impact on the markets and the rest of the security.
They haven't got anything with a -- still real price and there's this kind of created price that you for the death that you -- Take a lot of security top of the market to restore kind of a fundamental supply and -- -- that the mark to market rule no longer -- in the market.
May be -- you have -- sold.
A trillion oratory -- and a half under the new program he would -- provide at least for the price relief for the primary market.
But then you couldn't exactly cut up the primary markets and be the -- marketed to.
-- -- -- -- -- -- -- -- -- Yeah also -- also having you know Jonathan here saying you know.
Concerns about removing mark to market losing fundamentals -- you know where they were really added I guess that you know after the Enron.
Scandals earlier and -- you also concern here that there are two trillion dollars now -- really have no demand and a lot of them are under performing or nonperforming loans.
Sub prime that CDOs as collateralized debt obligations that.
May never see a return on -- what's gonna what's the incident to go and buy that.
That's interesting habit and you know a couple of interesting points here first of -- mark to market is for good people -- we take it we wouldn't transparency well.
Who care about having transparency and you can't -- but it really is that the -- the prices up I tell you have a choice you look at no mirror you can look at the fun house mirror which when you wanna look at.
It -- the -- house -- really help you -- They got.
That -- aside and -- that health.
And as far as the fundamental right is half that you've got Sheila -- saying that she -- -- -- Balentien from the very undervalued.
State let's just overnight saying -- this is a terrible planned -- -- put the burden all these bad assets on the banks.
You've got people talking about these -- behind him under value would Tim Geithner proposed this plan he says you have to get these.
Festering Arafat's top of that Balentien to walk away and he's fast thing assets -- these hundred.
I get asked that is what I was free to play and his -- -- saying when you go to punch happened in normal circumstances you do because you're desperate need instant cash as police say in your block so my question is here.
We haven't seen from the base because they've held onto the value that they say these athletes -- -- they have not gone to the fire sale they had a knock on the open market and and made this point in desperation.
So why it.
Bring the -- -- now when they have -- and even made the choice themselves and you're not gonna go of the content even if it's available to you if you don't like the price is being set so.
That better than it -- It right to a two point one is that the government by providing liquidity to banks keeps them from going to this pawnshop.
The second point is that if you juice up the investors and -- -- -- not provide enough incentives.
They will pay more these securities we can you give them leverage what you get one -- is there -- -- salivating -- at the bit to get and that's and until they afford to -- and still make their games so maybe they'll be able to raise the price enough but.
Great but always a beloved resident that's -- question I'm I'm skeptical about that aspect.
And what about just being skeptical about which assets the bank wanted to do vast and you know -- talking to our last guest about that how -- you know.
They're not gonna hold wanna hold on to some of the more valuable ones -- -- Sherri can have my you know sub prime CDOs -- here and and these nonperforming assets to your credit card.
There's a whole loans the F.
Yes he is going to.
Inspect these things first before they decide even how much leverage and having -- borrow against them even with the other part of the plan the securities plan.
It's not clear how much leverage to get there it's going to be dependent on the securities that you buys so that's going to be something that will be back did.
And very clearly have that.
As a seller potential seller and ask that you recognize -- if you put your least valuable ones out there you're going to get the -- bid for them than anything other people don't know how bad they are.
And that just raises this question of who really knows what these things -- work -- certain.
-- that worked earlier this decade for the guys the engineers who created all these things -- and sold and they they had a pretty good idea that these sub prime mortgages if he is strip away and and you know put them all together and alchemy and suddenly got a AAA rated you know CEO but.
Apparently and that world before we were in reality when we -- that never neverland world where everything was supposed to work out when they tested their worst case scenario that worst case scenario -- that.
House prices didn't rise.
So they never considered that the opportunity to house prices department we -- the Fed Chairman Alan Greenspan and the Fed nationally house prices never fell.
That's true -- they didn't until they did it and -- spectacular.
It was a bad argument -- the time -- real house prices have fallen a lot more than you could expect house prices to follow in the nineties the severe recession with inflation at 13%.
I think that -- completely and totally blew it Eddie Greenspan that is economics wrong.
Now that's the last word you can actually -- in with with -- on his blog -- go ahead you can kind of -- feel those -- spot so I am going into -- remember at President Obama speaking tonight 8 PM eastern time -- -- can be -- hosting on Fox Business Network.
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