MERRY OF NFJ INVESTMENTS WELCOME BACK TO OUR PROGRAM. SATISFIED NEW YEAR JOHN, I'' M GOING TO START WITH YOU. YOU'' RE PROBABLY ONE OF THE MOST BULLISH INDIVIDUAL THAT HAS ACTUALLY APPEARED ON THE PROGRAM THAT I TIN CONSIDER. OUR LAST DISCUSSION IS WHY YOU WERE MUCH MORE BULLED UP THAN THE PRIOR TIME WE HAD SPOKEN, AND ALSO RIGHT HERE YOU OPT FOR THE MINS TODAY WHICH WERE DECIDEDLY HAWKISH, AND ALSO I'' M WONDERING HOW YOU CAN REMAIN SO POSITIVE ON STOCKS WHEN FACED WITH EVERYTHING LIES AHEAD DESCRIBE. >> > > WELL, SCOTT, EXCELLENT TO SEE YOU ONCE AGAIN. A NUMBER OF MATTERS THAT I WOULD SAY. IF YOU GO BACK TRADITIONALLY, GREATER THAN THREE TIMES WE HAVE SEEN THE S&P 500 DOWN BY THIS SIZE AND ALSO THE SUCCEEDING YEARS COMPLYING WITH THOSE STYLES OF 19% OR MORE, THE AVERAGE RETURN WAS 27% IN THE MARKET. SO LOOKING BACK, THOSE WERE TIMES TO BE FAVORABLE ON EQUITIES, IF YOU THINK OF NEAR TERM, SPEAKING ABOUT SEASONALITY A LITTLE YOU HAVE AMONG THE– GO BACK PRIOR TO I GO TO SEASONALITY IF YOU LOOK AT AMONG ONE OF THE MOST PREVAILING FACTORS OUT THERE YOU SEE THE WIDEST SPREAD BETWEEN GREAT ENERGY SUPPLIES AND POOR ENERGY SUPPLIES, GOING BACK HISTORICALLY WHEN YOU CHECK OUT LAST YEAR.WHEN YOU DOVE TAIL THAT WITH A JANUARY RESULT, YOU COULD SEE A SUBSTANTIAL APPEAR EQUITIES. I ASSUME THEY COULD TRIGGER A NEAR TERM CATALYST FOR SUPPLIES. EVEN IF I PUT ON'' T KNOW IF THAT ' S GOING TO PIVOT OR OTHERWISE OR WHEN THEY ' RE GOING TO PIVOT, IT ' S LESS LOVED ONE. THEY ' RE NOT GOING TO INCREASE BY AS MUCH. THE TEN-YEAR HAS ACTUALLY SURRENDERED 7, 8% THIS YEAR,'AND ALSO YOU ' RE NOT GOING TO HAVE'A FED THAT ' S GOING TO BE ABLE TO BE AGGRESSIVE, ALTHOUGH THEY INTEND TO MAINTAIN HAWKISH LANGUAGE IT'' S GOING TO BE HARDER FOR THEM TO CONTINUE TO ELEVATE PRICES, AND ALSO YOU ARE SEEING RISING COST OF LIVING ROLL OVER I ASSUME ALL OF THOSE POINTS ARE FALLING INTO AREA THE DOLLAR HAS ROLLED OVER SINGS HALLOWEEN, THE BUCK HAS ACTUALLY SURRENDERED, 8, 9% I INTEND TO SUGGEST YOU OUGHT TO BE TIPPING INTO EQUITIES, WHEN INFLATION IS PEAKING, THE FED IS ENTERING COMPLETION OF THEIR RATE INCREASES AND ALSO WHEN YOU'' RE SEEING VALUATIONS, DISTRESSED IN CYCLICALS, CUSTOMER DISCRETIONARY, INDUSTRIES AS WELL AS BANKS.BANKS ARE SIGNIFICANT WORTHS BELOW NOBODY INTENDS TO STEP IN BECAUSE THEY ' RE WORRIED ABOUT An ECONOMIC DOWNTURN. > > I ALMOST SEEM LIKE EXPRESSION >>, WELL, THAT CARES WHETHER THEY– THE MAGNITUDE OF HOW THEY HIKE IF THEY TAKE THEIR FOOT OFF THE GAS A LITTLE BIT. BUT THEY STILL PUT THE CAR ON CRUISE CONTROL AS WELL AS THEY REACH A FURTHER DESTINATION THAN YOU THINK THEY ' LL REACH, DOES ANY ONE OF THAT MATTER, WHAT YOU JUST STATED > > I WOULD ARGUE THAT EVALUATIONS ARE THE LARGEST PREDICTOR OF FUTURE RETURNS IF YOU CONSIDER THE CAKE, THAT IS GOING TO BE THE LARGEST FORECASTER OF FUTURE RETURNS.FOR INSTANCE, VALUES TRADING AT 10 TIMES PROFITS. THAT ' S ECONOMICAL
YOU LOOK AT ANY HISTORICAL TEXTBOOK ON VALUATIONS, THAT'IS REALLY LOW-COST WE ARE SEEING EXTREMELY RETRACTED VALUATIONS IN SMALL AND MID CAP SPACE AND I WOULD ARGUE THAT ' S A BETTER MEASURE FOR WORTH THAN TRYING TO IDENTIFY EXACTLY HOW THE FED IS GOING TO PIVOT. THAT ' S AS WELL SHORT-SIGHTED BECAUSE SPECIFIC LOCATION. IF YOU CONSIDER THE EMERGING MARKETS, I ' LL PIVOT THERE FOR A MIN, WE ' RE SEEING TREMENDOUS OPPORTUNITIES THERE, AS WELL AS YOU UNDERSTAND, CHINA, FOR EXAMPLE, SCOTT, THAT ' S UP 40 %BECAUSE HALLOWEEN, AS WELL AS THE S&P 500 IS DOWN 100. NO ONE WANTED TO STEP INTO CHINA. YOU ' RE SEEING THOSE BECOME EYE-CATCHING TO INVESTORS READY TO TAKE THAT RISK. YOU ' RE NOT GOING TO HAVE A LARGE RETURN IF YOU ' RE SEARCHING FOR SAFETY TWO YEARS IS AN INTERESTING PLACE TO SIT AS WELL AS COLLECT SOME INCOME, AND ALSO PERHAPS YOU GET SOME GRATITUDE IF THOSE ACTION LOWER, IF THE PRICES MOVE LOWER. I WOULD ARGUE THAT EQUITIES HAVE A A LOT LONGER TRAJECTORY GIVEN THE DISCOUNTED EVALUATIONS. SCOTT, IF YOU CONSIDER, FOR INSTANCE, A SUPPLY WE LIKE IN PHARMACEUTICALS, THAT ' S LINKED TO MORE DISCRETIONARY COSTS. ARISING MARKET SALES. IT ' S TRADING AT THE STEEPEST DISCOUNT TO BIG PHARMACEUTICAL FIRMS RETURNING TO THE FOURTH QUARTER OF ' 18, AND ALSO WHILE I CONCUR WITH MUCH OF WHAT JOSH STATED, ONE THING I WOULD PERHAPS PUSH BACK A LITTLE BIT ON IS LOOKING AT THE REWARD OFFER FOR VALUE. MERCK, JOHNSON & JOHNSON AND PFIZER, THEY HAVE SUBSTANTIAL YIELD PREMIUMS, BUT THEY ' RE MUCH PRICIER, THEY ' RE PERPETUITY HIGH VALUATIONS YOU NEED TO BE VERY CAREFUL SEARCHING FOR YIELD ON THE MARKET THE DEFENSIVE AREAS ARE PRICEY > > THAT ' S A FAIR COMMENT AT THE VERY LEAST HOW YOU ENDED THERE BRENDA, GIVE ME YOUR VIEW BELOW, AS WELL AS WE ' LL HAVE JOSH ENTER >> THE MIX, AS WELL AS GIVE US HIS VIEWPOINT ON WHAT HE ' S JUST LISTENED TO BRENDA > > I AGREE SOME OF THE DEFENSIVE AREAS ARE COSTLY WHICH SOME APPRAISAL AREAS WITHIN THE EQUITY MARK ARE STILL REALLY >> APPEALING PARTICULARLY THOSE OUTSIDE OF LARGE CAP EQUITY WHEN WE CONSIDER THE RISK BENEFIT FOR LARGE CAP EQUITY VERSUS BONDS, WE THINK THAT BONDS ARE LOOKING EVEN MORE ATTRACTIVE, AS WELL AS WE HAVE BEEN ADJUSTING OUR PORTFOLIOS AS NECESSARY I BELIEVE THAT IS ABSOLUTELY A HUGE GAME CHANGER WHEN YOU CONTAINER EARN 4% IN A MONEY MARKET FUND WHERE THERE IS NO COMMUNITY SIDE.I THINK THAT ' S VARIOUS I ' M NOT RECOMMENDING EVERYONE OUGHT TO PUT EVERY ONE OF THEIR MONEY IN A MONEY MARKET FUND BUT THAT DYNAMIC HAS TRULY CHANGED THE SPENDING OUTLOOK MATERIALLY IN OUR'SIGHT, AND WE THINK IF YOU STICK WITH STILL INVESTMENT QUALITY BONDS, YOU TIN EARN 5 TO 7 %ALSO AS THE FED INCREASES RATES OF INTEREST, IF THEY CONTINUE DOING SO, THERE MAY BE SOME TEMPORARY DISCOMFORT ASSOCIATED WITH BONDS. I BELIEVE IN THE ULTIMATE SITUATION THERE, WE THINK THAT WOULD LIKELY CAUSE An ECONOMIC DOWNTURN, WHICH BONDS WOULD REALLY RETURN TO THEIR HISTORICAL FUNCTION IN PORTFOLIOS AS BEING EVEN MORE OF A GUARD IN AN EQUITY MARKET ADJUSTMENT THATWE THINK WOULD LIKELY UNFOLD BECAUSE CIRCUMSTANCE SO WE REALLY THINK THAT THE DYNAMIC HAS ACTUALLY ALTERED WITH
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