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Hi everybody welcome to stress test Thursday -- -- it's just.
Nineteen -- the markets are sort of stressed that a little bit -- A little -- I mean if you look at Bank of America than a feeling it's just that and the other guys are -- right -- -- that the markets are down about sixty points -- -- becomes the Dow.
How are gonna pull up horrible will -- yet to get on any of the other markets off all of the -- trying to lower.
As them as we move through these results 5 PM eastern time -- and we expect Sampras in the major banks but as -- you're mentioning I think America is you know all.
Can connect column rally twelve -- -- yeah and and a rally but it.
I mean it's up to another 12% you know it took off yesterday and said they only well wouldn't it was leaked -- needed 34 billion dollars you -- -- hear from traders are talking about.
The fact that while the government when the biggest shareholders out there whether it's in preferred sun right now on possibly being converted to common shares and some of these.
Financial stocks -- coming out numbers that are below the amount.
Of TARP funds they've already received meaning they would have to add more money so it's not really had a negative surprise to.
The professionals up there you know 34 billion is a lot -- -- gotten 45 billion dollars from the government to keep that.
In mine at Bank of America and hi there also sort of encouraging private equity to come and at least on a one to one basis with the government because I think the government trying at least.
From what you can read between the lines here to not take controlling stakes in some of these financials.
Some out there would say maybe they are trying to do but that's the take I've gotten from now so far today.
It's interesting because them early on and -- concerned Fox Business around 5 AM eastern time for.
Firm for a lot of you guys out there that he -- of sleeping which is a -- and seeking to and is now it finally comes out just just for today -- -- -- -- -- -- He's not -- the games.
I can't just -- it can't commodity now they're not they know they -- denying I had no idea knew we had to have a Twitter war a Twitter warrants I think he got a Lankan native.
He's adhered -- and -- but go back to the financial getting back to the financials -- -- here.
Oh it's interesting because they'll while we've heard that making America -- for billion dollars for that they're gonna need.
-- -- the analysts have come out and dad quit beard and Morgan Stanley.
And -- came out today and actually raise the price target raised their ratings on the stock and say for example very said -- analyst there said.
He's actually comfortable with their capital position even if they need that much more money -- so.
They can also all you know sell some of the assets main Bank of America's been -- a huge acquisition spree over the past decade we can talk a little bit more about helps our guest today that first -- been mentioned you know they bought almost -- Chicago area.
As part of it a huge steeler involved some of the European banks saw a couple of years ago today we have some very you know Bible.
Assets -- could solve that they had to and again.
I think -- also discovered some of the preferred shares -- government and private.
Two common equity in that could get them to the mark.
It's now a little bit like we -- attacking Iraq and the stock down.
And say you're talking about in General Motors took place in their right yeah it is so we have General Motors results as well -- can fill us in because you were covering them this morning.
-- six billion dollar loss.
Nearly double what they lost in the quarter a year ago but.
Not as bad as expected to -- fat it's less bad that seems to be the theme of 2009 right it's not as bad as 2008 at least not for -- so far right but -- -- 966 a share that was less than people are looking for.
Breakthrough ten billion dollars in cash again -- A lot of cash -- not as much as some people thought.
Revenue cut by nearly half the chief financial officer ray young telling us on Fox Business earlier today.
You know -- not surprisingly that customers being scared off by the looming Specter of bankruptcy for GM a lot of concern that even though.
The Obama administration has come out and basically said you know what don't worry about your warranty will back it -- government backing -- people.
Still shying away from GM according to GM officials now I yeah I was a Chevy dealer.
Last month about a month ago and I am at a handful of people who came machete because they wanted to back -- American companies but.
Nonetheless it was a handful -- wasn't like that yes streaming through the -- -- -- mean.
-- did you see in the -- -- today there's an editorial by professor Matthew slaughter -- saying.
You know what is an American car -- being encouraged to buy American cars would look at the companies that are actually supporting American industry.
And it really have some stability in their jobs you're talking that Toyota Hyundai.
As a Mercedes is being rented Mercedes believing what BMW in South Carolina -- -- thank you -- and so that's.
That's where you you have to ask yourself what are you by American you're buying this -- now.
I'm curious to see where viewers think about -- set up.
Honda back when they -- the car and that was built in Marysville Ohio so in it's.
Thank god we're Americans building and patriotic everything is that Italian.
The quickly say -- I was the sergeant at arms is my high school science raise the flag every day in Manila but look we learn a lot about flag etiquette that.
The great jobs yeah yeah what do what it rained -- got out of class to -- -- fun.
And you have to.
Make that thick and thin and insight we get into -- on the -- that -- -- only sort of -- -- -- and -- ourselves -- talk about jobless claims today and yes that was interesting -- losing trend.
Yet because it's I started to move lower I don't know if we were able to reproduce the -- that are controlling Brady center for us but.
It was a great short looking at the -- going back to past recessions and you know.
We don't want -- called.
The top if you will in joblessness down 34000 from the -- fourth we -- five we've -- jobless claims moving lower.
We've seen the four week moving average moving lower any point at this chart and if we -- -- we could take it but I'm not marathon -- it's all about and it it's -- your score.
If you're online at -- you can check it out.
Which you are online so you can see it and nonetheless we can't say they're not -- in front of us but nonetheless it's -- that the chat section.
Did you get CN past recessions where it has -- has peaked -- -- when it moves slower you're all the way out of the recession so by this you know it's possible.
You know and now we've heard from some economist and taken a look at the numbers and saying possibly.
The recession could be over by late may or early June thing.
So I don't know what you guys think about that what you hear from you though.
At that actually getting better that's the whole thing you know it's available played less fat and and there's a great comment on the board at a distance if something is less fat than does that mean -- it.
And that could be applied to Bank of America suicide and -- -- down.
PNC's joining us now PNC wealth management he's chief investment strategist and their bill what do you think about that our viewers say there's less bad -- that mean by it.
I what do you think about this trend of less bad economic news -- less bad news is somebody made a company.
Well I think it does go to the into the -- that you typically see stocks move higher pride actually seeing the actual good news so.
When you look back at history at least it's playing out as you would expect -- of course city gets to the point where it.
It's a little nerve racking that you might be buying things they did.
Really the news as you point out and -- good at this point is just not as.
As what it was.
Yeah you know -- just curious your take you know as of an investor -- -- looking through things and seeing your Bank of America rallying up another 12% today.
Does that stress you wealthy stress tests to -- yellow.
Is it a lot of people are trying to game it but you just look at it the market and it just has a mind of it's -- it's sort of detached from what you might have expected a couple of weeks ago regarding -- test.
It's difficult for for couple reasons one is that I don't think.
-- nothing's official.
You know it's all unnamed sources etc.
we won't know the official told us this chase so far right bill and they need for a AM ET have to wonder some poor part of -- you know trial balloons that that people than putting out there.
Which he won since gives you little better feeling because you know first -- third at six banks needed money than it was ten you know any keeps going and obviously hasn't rattled the market yet so you get -- you know at least a good feeling on that side.
The other side of it is I think what's really helped is that the macroeconomic.
Environment is has really supported the financials.
-- figure out how do you invest in financials right now if you're sitting out there and you're seeing Bank of America another 12% today go -- missed a huge move but.
Look where was a year ago two years ago if they're gonna keep making money and in the government's trying to allay concerns that you know what they're not going insolvent.
How do you decide now looking at base and it looks like in the basic you know models are sort about the wind -- how you may have you know valued.
A bank a year two years ago maybe even six weeks ago.
Him well -- I talked RA analyst who covers financials and I -- -- we're really sticking with his trying to concentrate.
On the highest quality financials so the ones that need you know little to no extra capital.
Even according to what we think -- come out on the stress tests.
It's difficult because as you've probably seen.
The big companies are the finances that were maybe.
In a little seem to be a little rougher shape of bounce so much more than the others but I guess on the other side is we have to have them -- the risk and reward that you're willing to take.
And we just feel it it's probably better to state of the high quality.
I think particular when you think of a long term.
That we still think they'll probably have a good shot it taking more share from some of the weaker competitors.
I think just saying yes we talk about whether it is the automakers the banks it it did seem that the landscape overall.
Is changing about it after this question after our viewers -- what is an American -- everybody what is an American bank -- -- you can't comment specifically bill on your own financial institution but.
It seems like the landscape.
But they really get news like this like for example that reportedly Bank of America needs -- -- -- billion dollars in additional capital.
And the stock is -- writer at least hangs in there for now.
It doesn't really seem like maybe these big guys are going anywhere.
Well I think the one thing that the government's been pretty clear on is that they are gonna let anymore go and I think that that at least has gotten people's 2.0 of you know some sort of feeling of security now that doesn't mean there isn't some dilution -- center and you know perhaps it was partly the market -- Figured in more delusion in this and again I don't know they you can separated from the fact that we've.
Seeing a bit of the -- the winds of change in the sense that as you pointed out we've got initial jobless teams.
Admittedly still at a high level but coming off their peaks so when you think of that in the sense of if more people are keeping their jobs and maybe not too long -- we thought was gonna happen.
Then -- you'll probably be able to pay back these banks the loans and in it then you get this.
Positive feedback loop instead of the negative feedback loop the way to stay out of trouble is they're really earn your way how would end hopefully this helps send this in that direction.
-- did -- -- -- the sectors that you like according to our notes that's technology and consumer discretionary.
You know -- financials -- are wired financials not there.
If if it's true what you're saying.
Yeah we we have we've slowly but surely kind of brought our financials towards equal weight but you know honestly it it is hard to find a lot of what we would consider.
-- the high quality financials that that.
We think passes are stress test internally let's put it that way.
So that that's one of the things that we certainly run into but we've been adding -- -- on some of the high quality ones like JPMorgan and Goldman Sachs from both their names that are not included reportedly.
We need to raise -- Right -- -- technology.
Where specifically giving you look at semiconductors are off but they haven't really participated in the rally.
To the extent that many other groups have.
In -- yet a lot of people been looking -- as a leading sector for technology and what's your take on the -- on the chips specifically or is there another group that you like better I mean you had some.
Fairly bullish comments out of -- Cisco last night -- that stock really not doing a -- today there.
Yet -- we we kind of think of it -- talk on the macro one sense is there a reason for a we've been.
Overweight in technology for quite some time is we think it has they're really good combination of some upside to the economies of the economy gets better but then also because they tend to be not very levers don't have a lot of pension exposure is frankly a lot of morph.
We're founded after there were even you know no pensions anymore.
See you've got some of that limited downside I think in that sense.
So we think it's a good place to be.
As for specifics we -- Intel we -- Cisco's some recent edition.
Has -- Google we -- apple so it's kind of a smattering of of some deferred individual companies that we find attractive.
As we're through we're going through this -- and getting comments about again wedding what does this mean this American business how is it changing and I -- from Cleveland says that revenue from American made products.
Stays in America if it doesn't go back overseas.
Maybe you can kind of back and talk a little bit about that that whole kind of made in America can bill and would.
How that fits in because that continues to be rhetoric that is born out of this anxiety about the marketplace.
And I see that you -- to think that emerging markets are something that we really need to keep an eye on globalization continues no matter what so.
How how can we -- -- sort through this time of wind to be we -- about a little bit protectionist about our own industries.
But also remember this is a global crisis in this still remains a global economy.
I agree and I guess I look at it a little bit differently in -- in the sense of I just like the -- any bigger so everybody shares in a bigger piece of the -- so.
That's the way we kind of think of that you know when you think could best be 500 earnings -- getting exact number but it's between forty and 50% of their revenues are actually.
Sales from overseas so it's tough to separate that you know trying to keep the money in the United States because.
Frankly I think we're past that it's -- very do you know difficult to do when you talk -- -- even autos parts are made overseas -- -- assembled may be overseas.
So I don't know how to do this -- tangle that whole thing.
I think if we get our piece of the pie and frankly hopefully he's emerging markets come along.
I think will profit from that and -- -- through direct investment -- secondly through our large companies based in America selling to them.
-- Ben -- didn't follow that -- do you like a specific geographical region are you more.
Heavily weighted towards Asia do you like South America and is there -- -- that you may have by some of our viewers out there.
Yeah and what it should they get there -- ET you have to buy the whole basketball people by the ADRs that trade here in the states.
It's the that we we don't have a specific recommendation on the on an area buddy -- you hit it we we've still -- day we use the ETF so -- -- -- we used some active managers outside of our firm in order to implement it.
You know I think is it it's.
When you look at the the sector that in the index of the M index -- seven countries make up something like eighty some percent of the index so and it's primarily who you might think China.
This is so you you get some Russia and they're -- but by the time you get done what they need is driven by some of those large.
-- country star and that's the iShares ETF votes -- -- you -- -- the ticker in case you're trying to find out for yourself but discordant note that.
And really really click here because -- kind of finish up talk a little bit about the stress test misses are coming out and and T minus five hours or so is this even be hurdle to cross for the market to -- if this -- -- get this set out a way to get the jobs report and the way.
I tomorrow before the open and let's just get on with -- is that exactly am -- on your side and the investment side.
The guys that are wearing suits and that he had their yeah.
Yeah and I think we like to just -- the final because like I said I everything right now is unnamed sources and you know it seems like it's pretty good information.
But it is we've been nice to just get the official word and get it done with I think the second thing kinda hanging over us for now is that.
Employment number tomorrow morning because we've seen a string of at least.
Better than expected employment numbers and would certainly.
Keep the story going around some sort of healing going on the economy and I think would.
-- -- -- good a mood in the stock market anyway.
All right -- -- the -- chief investment strategist at PNC wealth management thank you so much for joining us here this afternoon and bill from -- we're gonna move on to Joseph Hyder who's on the Mac -- thus thank you the president of Dawson wealth management thanks so much for joining us here.
As you may have noticed Jenna has leftist but chilly back she does double duty are doing them broadcast from the back but an analyst nothing personal health and -- -- -- -- but.
Let's go ahead and continue that conversation stress test the order of the day.
And -- to give us your take me we've obviously had these leaks you've had.
You know yesterday report so -- some banks needed money -- after the bell maybe they'd China didn't -- night and they do need money.
How much weight to our investors able put into this right now do you really -- have to -- -- -- -- Michael White.
I think you have to wait and see but I also believe that these leaks seem to come out.
I would agree.
With bill that you don't -- gallons -- trial balloons and you -- the biggest one out first Bank of America with 3433.
Whatever the billion dollar number ones.
And the market seems to react positively so then you start feeding.
More into the news and see what happens in the market.
My suspicion is that it's it's it's not going to be a big deal once we we get it out there I think the numbers are are probably.
Pretty close to what the -- -- anticipated.
What that's a question.
Why are the financial rallying so much is it relief that it's not a bigger number I mean that's that.
The trillion dollar question everyone's asking -- over the past few weeks well I appreciated your technical terms of last bad but definitely is.
What what we're talking about these and you know you look at that unemployment number.
Which is positive on one hand if you're custom list you can say.
We've just hit record unemployment in US history continuing claims are at a record as well for a fourteenth straight week we should point out so it's taking longer.
For people to fire to find new work.
After they've been like but we look at it that having said that what we really look at it.
He is those are lagging indicators.
In the appeared to be stabilizing.
That's why the financial markets which tend to lead the recovery.
Hi in anticipation of it bomb seem to be reacting very passionately and me in the aggregate to the news obviously we've had a 35%.
Plus run up over the last couple months.
You know just kind of scary -- -- -- -- -- talking to some folks before I came out -- CI you know is this -- sort of selvin is what sort of seems to be the consensus of the handful of traders are -- able to reach before I came -- to to do this show.
-- sort of selling the news you're getting -- the news out today a lot of these stocks have run up in anticipation of it.
You have had 30% plus -- more than that some stocks doubling tripling in in this time period.
The question now we've seen yet that the individual investor usually -- to the party.
Is the party winding down the big boys -- out the back door as long as the individual come through the front door to finally trying to jump on.
I don't believe so I mean I was I happened to be in New York -- an investment conference the last few days where.
They do represent the big boys in the big -- -- In terms of institutional equity managers in the -- -- very positive about the market going forward doesn't mean there is a risk out there course.
Bomb but they're positive.
In their outlook for the market for the remainder of the year and for the next several years going forward.
And that's how we're revising our our clients as well.
-- a big believer in a disciplined diversified strategy among our among our clients so they can weather through these kinds of.
Saying that that is from our our notes that you don't expect us to retest the march ninth was you think we've put in willow put enough distance and it's -- -- -- correction.
The question now bags here we've heard all kinds of comparisons.
For this markets over the past year -- so.
Are we re playing 2003 that seems to be -- -- -- I'm hearing for the past couple weeks now.
Well sent the case then we're gonna have several good years of the market.
Hopefully we're not totally re playing it because when you really look at the last ten years in the equity markets.
The pretty lousy I mean the returns are basically depending on which benchmark slightly negative slightly positive.
-- read -- you know Merrill Lynch saying cash outperformed.
Stocks by the most ever ever a ten year period in the year the year ending last -- but he's certainly one not startling number of.
I don't believe that the American business.
And certainly hopeful and I believe.
That American business will prosper it's going to change because we're changing we were talking about earlier whether it be the auto industry.
The financials but I have fundamental belief that going forward the US equity markets are going to be positive.
And I think we're going to see positive returns over the next decade.
Opposed to what we we've done and in the last ten years since.
Juxtaposed to that chart showing how cash outperformed.
Ballots had the headlined by humiliation and by that they mean stocks they've been humiliated and they're saying here don't mean.
A lot of people still not believing in the rally in in that to the -- out there anyway as an indication that it has further to run because there are so many doubters.
At this time and again obviously individual investors you know our viewers -- -- are going to be skeptical because again you know you have.
-- Wall Street to you know the analysts generally are a little bit relates.
In moving from buy to sell in these types of things so how what are you telling your clients must -- -- little shell shocked disabling -- from the past here.
They like the -- emotionally -- stabilizing as well.
With overall better news over the last couple months.
But it's -- it's very frightening time.
What we've told our clients.
In the past and we're telling them now is that you first of all need to have a strategic.
Disciplined investment approach its diversified.
And just like the banks.
From an analogy standpoint just like we're.
Putting this -- stress test on the banks.
That the average investor out there should be looking at a stress test on their own investment portfolio.
Rather than being reactive.
They should plan ahead and whether the market's booming.
-- -- rushing back -- they need to have enough safe haven investments.
-- it short term high quality buying CDs or money markets so the next time the market goes down whether it's next month or five years from now.
They don't need to begin selling.
Into their equities.
To -- fundamental needs right that's where you really so many investors get burned they react then they'll join the end when the train is about out of the station.
And you bring a lot of terrible anecdotes about early march late February people finally just giving up on their hands up and walking away from stocks of the absolute wrong moment but.
Just a right here with us we're gonna check it right now with our own Nicole had a lady she's on the floor of the big board down to New York Stock Exchange and look generally is back -- Guys.
-- a lot of people buckle down in the New York Stock Exchange would have liked to have you know I saw this this whole recession coming.
And not a lot of -- did them.
William hind sights 20/20 right back.
If I have a -- -- -- hungry snapped out of industrial average down about eighty points but we've been seeing is those financials pulling back concerns about.
What we're going to see it later in the day there is this wait and see note happening as far as the big picture and what we're seeing in the market there's definitely.
This feeling is back in film now and just.
Waiting to -- -- just talking to Jason Weisberg of Seaport Securities he -- -- but the fact.
That he thought that we were going to head north but take a breather coming up -- -- -- -- we'll talk about the reverse head and shoulders.
We're just sort of sitting in this area and this is really.
Building a bassist John -- you know would say so that's what we're seeing here as far as the financial we mentioned the names that are likely have to raise capital including Bank of America -- -- Also Citigroup.
Wells Fargo on the other side of the point of sixteens that Goldman Sachs Morgan Stanley JPMorgan and and Bank of New York -- -- seem like the names that you probably have sufficient capital you follow what we've been hearing from city but I know we're going to be getting that after the bell today at around 5 o'clock I believe will be watching that.
-- -- watching some of the retailers -- that those retail sales and the same store sales over the back and Easter came late stacking up as to names such as Wal-Mart and target.
On the downside you know -- trying to without the crowd you can take a look at some of the Telecom names such as Verizon and AT&T getting downgraded by -- he's been JPMorgan basically saying those -- they're seeing slower subscriber growth.
And also the pricing pressures that we've -- some pressure on some of those Telecom names but yeah.
Yeah a little well very interesting -- the oil.
Closing at the highest level yesterday that we've seen since November and film once again now.
Moving to the outside so -- give up our -- of the day here but certainly there's just -- the united traders -- finally that's in this.
Just give a little bit of everything I mean obviously.
We've seen seven laughing trading week to the upside and even now we're still in positive territory for the week -- we -- be tacked on yet another week.
And -- at -- -- jobless claims number that payment we saw the weekly number dropping off and that's some good news I know they six point three million.
Continuing claims -- the -- -- -- a record number but singles weekly claims coming down that obviously gives some optimism to the market is well on some positive comments from people such as.
Who broke her top ten and Bill Miller and John Chambers -- -- positive comments today and that's enough to bring some optimism to.
The market is well on.
You know clinical you're talking to -- -- we talked to Teddy yesterday.
And Teddy Teddy by the way -- everyone is is Jason's father -- -- -- is a family -- here the foxbusiness.com live -- and it's -- call begins Teddy said.
-- started getting Citigroup there's been times that he's just won the US sticking his head in the standing -- had to ask your approach to the market so -- you know.
It's hard especially with these games is you show correctly point out it's you know it's hard -- -- -- -- you -- your head out are very it would mean to you and I what do you -- hearings.
The -- here adding that being the consent of the people such as Teddy Weisberg who by the way is celebrating its fortieth anniversary and a I come out here on the -- -- stock exchange but he would say I mean he's a stockholder and stuck with these stocks just like everything that a stockholder.
Stockholders -- he's not but -- that consensus is that you're never going to be able to time the market and that the whole idea about dollar cost averaging.
We're just trying to get in little by little I'm not -- This consensus would be here in the US a lot of these guys have been in this market for some time like this market.
And you know buying the -- and selling them out of work during -- the other way around -- at the top.
I mean if you're just trying get in the long -- And periodically and just believe that long from someone like I don't know like Nathan saying anything yet Indy 500 appointing a 30% but in the here and I'm pushing -- financial then have to take a chance I mean I mean you can't.
You know I feel like the train left the station and you're out right and certainly we know everybody's gotten hit hard and maybe -- the time to but from my office and get America.
Pasadena and and by the -- -- in Austin, Texas wants to send his congratulations to Teddy that's.
So anyway here it is just not the more we just.
Real quiet that -- can -- -- -- -- -- -- can graduate yeah I've given my best as well you're gone I apparently well they sneaky thing.
Had Teddy and said he started out trading city and now held onto it a little bit too long and it came -- stuff Koran -- he.
So yeah he's been very brave about coming on an always answering questions bashing either with us in fact that may be am.
You know we pick on him for that we should give more credit for that the correct -- he's made in nine when I was on the floor the exchange he was great wealth of information and lot of good positive -- -- cash on.
I'm sure the entire time I read it he is it -- that's right he's a great Cavendish uninsured for our viewers because he is safe and legends.
He has and they are far.
You know I've never came back over here -- heard Joseph basically say that that there was a bottom in this market.
-- -- -- -- -- -- -- And -- -- equities moved higher clock is single now perhaps sending her -- announced it was racy scenes and you know continuing its little bit of its rally Clinton could this week along with the equities you see oil up as well.
He would make -- that and I DCDs in the stock market kind of take off after seeing gold.
Can come on the -- then that makes me believe that maybe people aren't convinced totally and the stock.
Market rumor that there might be a couple of indications there one.
There's there's what ten trillion dollar still sitting on the sidelines out of the equity markets.
Did this afternoon and I believe -- three trillion Dow iron -- -- and if so where you get that investments because this state like.
That's a big number that is -- that's so that was a large number it's one of the -- I can't find how -- waiting in the.
Generally new services to him from them from the institutional reports -- That are holding money markets you know and that's -- the F Schwab had an Italian overall if you look at all those reports whatever it is it's a lot of money that's been taken out of the equity market -- certainly there's skepticism out there.
The -- -- gold I think one it's about skepticism.
It's also about.
-- all of the government.
Infusion of capital a concern about inflation slightly we have both those issues today when it comes to gold.
Oil would tend to indicate the people are believing the economy can prove it.
And indeed think and you look at I will was that it was up about four and a half percent yesterday it was the biggest -- that was this year.
I mean the biggest have been the level that we -- has level I should say it would be an -- today were picked sixty I don't know I think -- ahead and and I wish I -- Phil -- on me.
On the phone yeah right Hanson Hanson -- Hanson and her mom.
Okay here -- -- -- strain -- I have been there ever had a though I'm did you believe that is that where oil or is there speculation back in this market with a equities and with the -- then -- the speculators are still out there.
They did this go away.
Now will always be out there I mean that's part of a capitalistic free market.
I think it's more of the belief at least what I'm hearing and I don't profess to be an expert at tracking oil prices.
But it's more of of hanging out.
Testament to people are believing the economy's improving and people are gonna start using oil again.
Parents -- conservation although we don't hear quite as much about that today as we did three months ago or six months ago.
Particularly as it relates to on house.
Any -- green energy and I don't mean sector's stocks and that's still powerful slap her don't get me wrong I don't try to think inevitably will be a grown wishing her -- -- on that there as far as being a sector that.
For example like -- that you would -- and -- how long would you how long DC as of right and fat.
Before it becomes a -- -- -- a real player.
And say we're still -- few years away like five years fed take a wild guess I'd say three to five -- an idea.
Have a quick 5850.
I think was yesterday's intraday so right now ballparks that we're not quite where there there there was a high for the year crying -- so we're near the highs for the year.
And I -- yes I think she mentioned and as a money management -- and curious to get your take on we.
Saw a lot of this along with the layoffs in the sort of was the second wave after the -- has sort of seen the benefits being cut and speaking specifically.
401K plans people eliminating the matches on this just how -- dollar cost averaging that's what tripled in my mind.
And you saw a lot of those announcements really coming out February march.
Has that affected a lot of your clients and can we expect -- to be reinstituted or is that something that's going to be -- How much further down the road I think it's a mixed bag we have a substantial number -- Small business clients who are sponsoring 401 -- we've seen some of them.
Eliminate -- match or reduce head in the last twelve months depending on.
Of their companies but I would say of that 70401.
K plans that we work went.
I would say there's probably 15% of those cap maximum that have cut.
-- Can lean years and that went five.
Maybe a 10020.
And if it can -- back to your point that you're making as well that mean you saw -- -- -- movement in the market because people had to take what they had in market out.
Just feel like they can one survive or to you by the stress test could survive things actually got worse it was.
Kind of like you know and I -- emergency preparedness plan they're finding in the marketplace do you think they're gonna go back to get things sorted and behavior where.
We look at the market is being that type of safety net.
And that -- -- fundamentally shifted.
It seems that we talk about this recession they were also afraid but you really Weiner missed a short term memory isn't.
I just in general in the media are otherwise it may be -- in -- -- won't forget all that be right back and learn more.
I think that.
My opinion this in between those -- I agree with you human beings and Americans in particular.
-- -- it off right we have a short time horizons and our memories quickly fade.
Com this bill would social there then that I don't think that memory of -- by year end.
I think it could take you know couple immediately if I appear to have a time -- to get the upturn -- energy -- -- -- -- may I can't it could be it can't take awhile.
And you know when you're talking about those for a one case of people lost their jobs many of them had no choice they pulled the form in my case out.
-- taxes and can spend it to fund their lifestyle things like eating.
And her and to pay rent or the mortgage payments my room and it's better painful.
Did you -- he wants now as far as your clients having me on the sidelines and how do you get them back and argued do you try to get them back in at this point.
Well to what it was well -- the personally and ended -- line saying when you say hey let's look at stocks again yeah.
Well -- and I will tell you that -- Who less than one half of 1% of our clients pulled out of the market so most of them -- they were.
Had its traditional 60% allocation in that equities.
They stayed in and took a beating so -- that can sit here and -- -- saw that coming I don't really know anybody who did it at all.
But what what we're seeing with the new clients -- were picking up and many of them who.
Did panic cashed out and we're now investing them.
We've had a couple of them this week who.
Have been emailing me -- I wanna give -- him how we gonna do this and I'm recommending to them that we put it back again.
In a strategic way.
And if if their final allocation it's going to be 60% inequities maybe we put.
And now can take a look.
And they are getting into cold pool ahead through a very slow pace tension and -- and -- -- and absolutely what you don't want if somebody's already panicked once and taken a moment.
Now they've missed out on the 35% uptick anyway I don't -- puts put him back in the market -- by ten.
-- I can think apologists this is a -- behind it can happen traumatize again.
Pepperdine you know and we didn't feel that we isn't.
Absolutely yeah and this is a frightening time I've had a number of clients call up during this period.
Particularly if -- a few years from retirement -- and think of a physician I am in central Ohio.
Who's turning sixteen -- he called me up that total can I still retire.
Mission we can for these reasons it's not can impact your life stuff okay that's all I need to know and that -- the -- yeah.
Yeah but you know Warren Buffett buying and others hear anything along those lines ninety minutes to do that -- -- quotes about come on investor.
I don't quite -- that -- -- in contention just thinking so much television time my planet just a hard time to navigate fully appreciate that perspective very -- Peter Barnes I think he's standing by at the right to Fox News talk a little bit about -- -- yards.
But the busiest man in Washington.
And the best man in Washington are now over and seriously I -- -- -- every time Peter Bryant hops and just -- screen.
-- -- get like fan mail.
And it just keeps on coming Peterson why did you give it the latest from the great -- that's that's.
But that's my mom spam I can't really sorry and I -- They're talking about the stress test out there.
-- -- Well you know hey we're -- -- minus four and a half hours right from the from the big and an error we have nineteen banks that have been stress -- we understand about half of them.
Are gonna be ordered to our -- improve capital to create a capital buffer in case the awful awful happens in the economy.
-- an insurance policy here.
For these banks essentially is the way that officials are describing it we know for example that Bank of America alone as the big one here with.
About 34 billion and -- capital cushion requirement Wells Fargo around fifteen billion GM AC.
-- former finance a division of GM at eleven and a half Citigroup of about five we should talk explain though with Citigroup.
Citigroup's already doing a lot to improve its capital -- capital so we believe.
That this five billion is just.
In addition to what it's already doing there's something.
-- some report that there that this City Hall is fifty billion.
But there are already on the way to -- a lot of that it looks like five billion incrementally here and the ones that do not have to do -- thing.
American Express Bank of New York Mellon Capital One Financial Goldman Sachs JPMorgan Chase and that -- Which -- -- not is that insurance company that became a bank.
To Peter any.
Surprises here and we've got to you know now these unknowns out there looking at -- -- -- -- you know the likes of State Street fifth third KeyCorp PNC's suntrust.
What kind of -- see -- anything we can anticipate that -- it.
These -- the small regionals then yeah you talked this to some of the analysts who are smaller -- is the big regional staff.
And you talked to some of the analysts are following this and as you know.
-- one of the things we learned our reporting and then have them more and also confirmed -- again with the talks with officials.
Is that the stress tests started out.
You know with the some tough assumptions but then as the regulators and examiners were going through each of these banks.
They got tougher on their assumptions.
You know bigger loan loss reserve -- expectations.
On the portfolios of credit card loans mortgages auto loans and -- like that.
And -- that and in particular potentially bigger losses on construction and commercial real estate loans.
A lot of these regional banks are in commercial real estate loans development loans and things like that so did.
-- that the the toughening up of the stress tests probably swept a few more of these regionals.
Than that as far as having to raise capital buffer and so they haven't leaked out anything because the news for them.
Might not be as good.
As for some of the others.
Yeah and now have Peter before we let you go -- I wanted to ask you about.
Repaying the TARP you know I've had if you have emails back and forth offline and maybe you can just reiterate can affect your -- of the principal can be recycled the interest payments cannot write and also by.
What might we expect to hear about that I think a lot of investors would like to hear more about you know like some of Goldman Sachs got Jamie Dimon JPMorgan Austin repay had.
That's right we we got some guidelines yesterday and the statement there released by the regulators ahead of the big report today.
In which they they vote and let's set some guidelines here on how they would allow the banks that want to start repaying the TARP the banks that.
Don't have to have the capital cushion you know the goal Goldman Sachs and JPMorgan's in such.
And and the process by which regulators would approve them.
And the two things we learned work -- number one they have to be able to issue.
Four or five years for five year period or longer without that special.
Backstop program about the Federal Deposit Insurance Corp.
Put in place during the financial crunch.
And that that's a test of financial help -- and that and the ability to our raise cash and the other thing is they also want to make sure that if a bank.
Pays back the TARP that that doesn't.
Hurt the financial system as a whole doesn't hurt lending -- an institution for example so that some other fact is that they're going to look at.
There and there's another real technical thing that they did as well regarding loan loss reserves for 2011 I won't get the -- -- -- at the bottom line is it's it's going to be hard.
Frankly for our most of the banks that want to pay back to pay it back quickly we might only see.
You know Goldman then maybe JPMorgan actually get the process going here and the next couple of Bob months.
Yeah that is something that there were all waiting to see an end of the wind in -- right to and everything payment schedule I but they're kind of they're counting on -- listen I mean they're counting they've budgeted.
Treasury has budgeted 25 billion dollars that TARP money to be repaid.
Over the next you know I guess you're so -- they're the ones talking to Goldman Sachs and JPMorgan and the other banks that are.
Healthy here and so so they had -- have a pretty good idea.
How much money will be coming up back into the treasury and can be used again as you mentioned.
Robert the money that comes back the principal.
Can be recycled.
But that under the under the law passed by congress I believe in the economic Recovery Act.
The dividends the interest the the profits on buying herself selling but the selling the warrants back at things like that that goes directly to deficit reduction.
-- -- -- -- -- Time list who we are getting us some money back down that deficit hit it Peter.
Thanks so much for your time and obviously we're going to be hearing a lot more from you this afternoon a busy guy takes a much.
Okay thanks all right Peter Barnes in Washington -- Bob Kaiser is now joining us here on -- say is the senior director.
On the market credit risk strategies group that's a mouthful that I had Standard and Poor's and yeah I obviously I think we should start with the stress tested not necessarily your your Forte but obviously -- -- studying credit risk.
To sort of get your thoughts on these numbers we're hearing out there.
What's your take in your shop I mean -- these trial balloon seems to be the word of the day the numbers we heard floated until we get the black and white later today beat.
The stress tests really accomplish two things number one they identify what exactly are the assets on the balance sheets of these financial institutions.
And -- -- stress testing them across more than one scenario.
You come up with what is essentially an intrinsic value of the security.
That may not necessarily reflect the -- valuations coming from.
The secondary market during times of high stress like we have today.
So is this sort of mark to market.
Counting here however -- sort of saying I -- there's no market how are they valuing these securities I mean that's something that.
That would certainly be in your wheel house so I think absolutely you can come up with what -- we referred to as an intrinsic valuation for any given RMBS security.
But plugging in for something residential mortgage backed security yes but it going assumptions about the loss severity of the underlying collateral if in fact before -- it occurs.
And you make other assumptions about what he aggravated default rate his -- be aggregated pool -- want investment just to back up a second took.
-- -- just explain we're talking about basically residential mortgages that were packaged up in some cases sliced and diced and only portions of strips.
Packaged up into these securities.
All residential mortgage backed securities are backed by a pool of mortgages literally thousands of mortgages.
Across reap what we called the war hopeful of that security you have very senior tranches of securities within the armed the F structure.
And you have mezzanine structures and subordinated tranches.
-- the destruction so that's what you referred to -- sliced and diced but the interesting thing is when you make assumptions about the full grade.
A loss severity and prepayment rate you can come up with projected future cash flows that can be this -- -- back today to come up with an intrinsic value for that -- So do you think they were looking at a dire and ups.
I had you know that's that gets us a question right where they look -- a scenario that's dire enough.
Because of the you know what needs.
Securities were packaged in and sold.
On Wall Street to everywhere in the world.
No one expected to -- -- housing collapse or at least not most people didn't see -- housing collapse to the scale that we have seen.
We how can make factor that and we've already seen us the unexpected the Black Swan if you will.
How dire do you think these mercenaries were.
Well that's the question everybody's asking is what are the assumptions that these scenarios are making about loss severity and projected future default rates.
We all hear through the media and anecdotally that.
-- Simulations are based on assumptions about GDP you know extended protection the recession to -- 2010.
And US unemployment rate peaking some around 10% but we don't hear a lot of you know it.
Double in the detail type right.
Descriptions about what are the assumptions for default rates and loss severity assumptions and that's why you went consortia tonight -- -- Lucas picked up the market credit strategies teams -- importance.
We are currently conducting.
A simulated valuations.
Valuations of residential mortgage backed securities based on these assumptions so we're very curious to see how.
Power projected assumptions about future default rates and loss severity assumptions look contrast to what the government is using.
And yeah I'd be remiss if I didn't mention there's been a lot of criticism for S&P Moody's.
That the rating agencies over a lot of these mortgage backed securities.
Sort of from your perspective.
What do you guys do in terms of sort of regaining.
The trust of investors out there well -- -- State for the record that our research group is completely independent and separate from the ratings process so the valuations that we are doing.
Our our take on what the appropriate assumption should be if you wanna take -- value this security.
According to the current performance profile the collateral.
Underlying BR BS securities.
And then we make our own for a proprietary assumptions about what its future default rates and loss severity rates would be.
Then we come up with a valuation under complete separate set of assumptions.
Now if you value one security and it -- trudge across multiple scenarios.
And because it's a very senior tranche and it values anywhere from 90% to 100% of its value.
He can be fairly comfortable about securities worth ninety to a hundred.
If you get more into the mezzanine area of the structure.
Where the valuation can be very different depending on current profile and projected forward dark days scenario type -- -- Then you have to be more concerned -- -- -- your assumptions because frankly nobody knows what the future holds right now.
-- speaking of the future just quickly here as we wrap up what a lot of people -- -- talking most of the people up the public private investment partnership.
Now in valuing these.
Do you think that that -- will use these valuations they call it through the stress tests are they gonna use independent folks such as yourself holiday valued that and just quickly what do you think it's gonna be a successful program and some people seem -- to participate like JPMorgan.
That's a loaded question has lots of parts come first of wall if I'm an investment manager and on it being asked to value security to put.
Money that I represent them and I'm responsible for coming with a bid for security.
I'm gonna come up with my own set of assumptions as to what the proper intrinsic valuation -- security -- Will be intrinsic valuation of the security be different from indications coming from the secondary market.
In some cases we believe they will because finally -- Well frankly the rest you know be secondary RMBS market right now is dysfunctional there are many sellers -- few buyers and very often the price that you get as an indication from the secondary market.
Reflects an imbalance between cells and -- so it's more an indication what the securities were kept to sell today as opposed to if you choose to hold -- to a maturity basis.
Obviously whether or not the housing market stabilizes or not we'll have well but I would imagine would have a great impact on that as well and maybe by.
You know they -- and they're not starting immediately they're giving it time for that to happen.
Absolutely correct because.
You know the -- the outlook for the housing market in October about 2008.
When when prices were falling in the midst of a severe downturn in the credit cycle there's a little different from today -- as early signs that home prices starting to stabilize.
And these can be credit markets are beginning to -- -- -- stabilization.
But I think would have to have you back when we get closer to -- -- time the talk a little bit more about how you value of these toxic or legacy assets whatever euphemism you wanna use for them.
Certainly did to get into a little bit more but.
Anyway thanks so much for your time Bob Bob Kaiser he -- -- with Standard and -- thanks again all right.
All right well guys do we have -- -- joining us here.
We do indeed have Robin nearly all right rob was time to talk a little tech -- -- -- in -- group rob joining us from Mountain View California.
Pardon to know where to begin as a lot to talk about and -- got apple you have Microsoft.
We've got Google.
You know basically I see you're you're last when your time out what to these companies want to be when they grow up.
Let's talk a little bit about it because apple and Microsoft Microsoft clearly a very mature company apple seems to be you know they -- the rejuvenation with the iPod.
Announcers seemed to be maturing I guess in -- second stage here.
-- but I was talking about when I wrote wrote the column was the case wearing in the case of apple.
How Microsoft and -- -- each one early on identified.
When it we're probably should focus.
And each one is has either forgotten or is for getting in the case of Google.
That focus and the end result is -- -- -- be drifting away from what they could be in Apple's case which is where you started.
The case the the issue was this is when Steve Jobs originally went to John Sculley -- was their first major CEO we said.
He would -- do you want you want to make a difference thirty wanna just make colored water and for a while.
In the early years Apple's trying to transform computing could kind of be the center of it.
But when Steve Jobs came back.
He did things like eliminate all Philanthropic activity -- focused on things like the iPod and even what the I've fallen.
The big focus now seems to be towards gaming and all of that seems to be on the colored water side of technology not the fundamentals of actually making the thing.
-- -- -- -- -- -- -- -- -- -- Rob what I floodwaters that.
-- a wire -- it's sweet it's nice I mean -- for our Coca-Cola the leader in colored water is its largest powerful you'll forget them but they don't really make a difference I mean -- they don't make the difference to say.
Like Google is making a difference where -- it in the Smart grid and and they're trying to.
Instrument the entire world that that's making a fundamental difference if Google were to go away tomorrow.
Everything they did.
Would stay wet -- if if if the iPod filled tomorrow much like the walkman we would probably forget about it as big as it is right now.
Rob -- I do I'm back now I just kind of jump back -- this conversation -- got I got this this last part -- -- If you see everybody walking around -- -- the white headphones -- -- this is symbol for apple it seems so pervasive you think that that would just.
Well a walkman work were asked popular and and it's time is that as the iPod is today and back.
At -- at at a run rate of around a hundred -- and it sounds like a really big number but if you look itself on sprints and -- -- three billion market them and so it actually doesn't it that they don't sustained on the market tends to fall for whatever technology as hot a hot at the moment.
And the walkman with the previous one and I'll be something after.
The iPod back Apple's anticipating that with the iPhone.
But you know -- limited here's here's something that it and he's bringing up and this is a good point.
And that Apple's I just about the iPod -- the fact that if you buy one apple device that you become an apple household right you -- The Apple iPhone and you did it that apple I've pie and then hottest -- it where they're ready and you have to -- Apple Computer everything goes together because they -- -- devices so frequently see -- -- keep not so.
They beat -- it's a loyal.
Then to do very loyal part -- this brand -- don't think I don't know I really see that with the walkman and he didn't have a -- and then you know that we necessarily with the stereo.
In your home phone and your computer or your car.
For your car well.
You bet that you did kind of have that and it's -- -- in that best at that time Sony was very strong at home and auto mode it was very strong -- home stereo.
There was the connection in that ecosystem we didn't have the networking capability we have today -- kind of had to -- together.
But at one time Sony was the power to beat him back before them RCA kind of on an entire market now RCA went away but the things they created did not because they got big enough.
The TV that they created the radio they created will always be with us it'll never go -- What apple originally imagined with changing the entire way we compute the way we week.
We take in information very much what Google is doing a very large -- -- If Google were to go away tomorrow.
The thing is they have done probably never -- the issue right now if -- view apple as their focus is so much towards entertainment and fun stuff the colored water side of technology.
It doesn't have a lasting impact of of what they initially anticipated which is kind of taking place of IBM.
That's where Microsoft went.
Apple now is is off that course and the concern right now is with.
With Steve Jobs so critical -- that consumer side that that -- glossy sparkly side if he goes away apple can't hold.
-- he is so much of making that work.
Well it's an iPod busily individual and that's and an interest -- thought that there early control I didn't even know rain and the conversation Rhonda you know we're real Detroit market.
Before my time.
Yeah I'm sorry can they -- I came to light he talked about what's going on the GM right now we have got to -- unemployment -- get there because.
Rabin well I'm gonna give Robert grace and -- -- -- -- and knees on the Fox Business Network yesterday attacking that GM's.
-- -- -- On the -- oh yeah they're.
-- -- -- -- -- -- -- -- -- -- I got talked to judge John -- you know he's one of the two keepers of the Dow thirty and basically if I Jim goes through with their plan.
I would give a government controlling stake they're gonna do some convertible exchanges.
They would be -- I ally AIG last September well the first indicate pops out of most investors Mel's drive but ask them is apple.
Any thoughts on that because that just because they have a huge consumer they've got the retail network.
They are technology that you -- producing a lot of their own stuff in particular they start doing their own chips as we've seen reported.
Certainly could be big enough and and and we're watching the concern is it comes so close -- we think Steve Jobs made a part may be a very short tenure.
I would I would -- IV but more comfortable F.
We could look off in the future for apple and see.
Something after Steve Jobs went with him so critical of the company I worried that they -- dropping and and then drop back out again.
As their valuations drop post post the jobs that the big concern right now -- about valley is whether apple can continue.
Without Steve Jobs well -- but once -- make it if it is so much effort to make it look like he's participating.
If there is no external evidence that he has now been -- what though 130 dollar price tag it's also very.
We had a huge way to be good the biggest component in the Dow because it is price weighted average that's of them to think about -- that's why Google would never be at 400 bucks a share that's just gather now.
Also Cisco be much more interesting -- a much more lasting power it's it's -- and infrastructure.
Changes in that company happened very slowly and over a long period of time a much better choice because he wouldn't have left chance it's gonna drop in and -- -- -- You know this -- back to the idea Cooley takes heed Johnson's place.
Yeah I heard in San Francisco so detect heat geeks were kind all the rage definitely and San Francisco -- that ended -- be the huge attack.
And you've seen major player is eighty seem fresh blood because one of the things when we talk -- innovations in the new company leadership.
I happen -- it doesn't seem like there's a lot of young guys that are jumping in their guys or girls at her.
Jumping in and really making a name for themselves -- they -- were overlooking things -- Wall Street will what do you hearing rob is there is there that.
That energy still in Silicon Valley.
Well in some cases there is for instance -- was that and then at Berkeley.
Went went marvell and that and the and here is accompanied it that the founders came -- Berkeley they're going back in and into an incubator.
-- -- -- -- -- And they're retraining engineers so that they can come out and hit the ground running as opposed what is traditionally the case where somebody comes out of school they have no clue what business they have no clue how to -- their skills.
They've rebuilt this incubator -- people come out -- legal skills business skills and technology skills and the party in the morning watch something like 72.
Startups out of this up out of this incubator so it looks like.
With efforts like yes we can bring it back but I share your concern because for awhile Silicon Valley really lost that that core ability -- took great great company -- And -- -- incubation but you look at and he would give Bill Gates for example you look at at the founders of apple.
They -- they have been warning college they weren't trying to figure out their business plan biggest -- really cool idea.
And it seems that the marketplace right now -- not necessarily totally open to new cool idea -- to just not -- really strong vibrant character.
To bring his ideas -- Well and and the valley lost bet that the IDF fun during the eight during the years when apple came up and companies like -- systems came up and Microsoft came up.
And -- -- try to start that way.
There was this concept a fine -- got to give and we can you have a lot of -- he worked part and you played hard for whatever reason the valley age and they lost that play hard part.
And it became a job and so -- we sort of looking looking like the Rust Belt.
We started looking like other parts of the country just kind of went into decay and never came back at rather quickly -- -- gonna have to wrap it up and a sack coming to the end of the show but.
-- jazz -- there -- war has a question nine is apple working out something to compete with Kendall and just quickly could you also address the apple buys Twitter river move.
Well there's a lot going on with the F -- -- what what it will be completely counter strategic.
But what the FDC looking at a possible collusion between Google and apple there is a possibility that the two got together and -- okay.
Apple you get Twitter because were concerned -- concerned about antitrust stuff.
And will stay out of the iPod market is that you think about it the android phone much like the iPhone became the iPod Touch could easily go into Apple's -- marketing and she went up.
So there's a lot of concern is right now in the valley these two guys are -- for collaborating.
To control a market and we'll see -- the FTC investigation and a -- to comes up with other than that.
There is no possibility that Twitter would do any good at all for apple -- -- -- and what about a Kindle killer.
Few jobs have been public about the -- -- doesn't think people read.
But however most cases when they comeuppance and start talking about something -- not gonna do -- they're -- they're gonna do it again here.
Amazon -- the fighting a market much like apple did with the iPod I don't see how they stay out of this and remember.
One of the Kindle readers is now on the iPhone so Apple's been slapped upside the head about the fact that.
Here here's Amazon doing something on their device that they're not able to do.
And it's not watch this there's a larger -- -- -- iPod Touch coming we knew how far down the road.
I expectation is it they typically do what I -- -- A little -- -- -- okay.
-- -- --
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