Is the bull market over yet? Kenneth Heebner, Capital Growth Management, and George Gilder, author of “Knowledge and Power” provide perspective. Kenneth Heebner who has a massive short bet on treasuries appeared on CNBC.
Kenneth Heebner video and transcript below
we’re back with the kudlow report. i’m larry kudlow. looking at markets, here’s what you need to know. two consecutive 100 point market days. one point i want to make is long-term interest rates, which have jumped about 50 bases points, i think they have peaked. they’ve already discounted slower fed bond purchases which, by the way, i don’t think is going to happen for many, many months. second point on rates. 1% subdued inflation, we had a low cpi today, and roughly 2% under performing economy, there’s just no reason for interest rates to jump higher. the u.s., by the way, is really the only global stock market game in town. our companies are profitable. so at these levels it may not be roaring bullish. i don’t think the fed is going to taper down tomorrow, and i do believe the bull market is far from over. that’s my take. let’s welcome kenneth hner.and i’m joined by george gilder. he has the book knowledge ispower. ken, what say you? i say that we have a number of years of growth ahead of us in the economy. it’s growing at 2%. it’s going to accelerate as consumer confidence rises with rising housing prices. we’ll see 3, 4, 5% growth rate. 3, 4, 5%, those are big numbers. you had an okay housing number today but housing starts are up 29% on year. here’s my inflation point.the year-to-year cpi, 1.4%. guys like me two years ago worryabout inflation, money printing, i was wrong. i said that before.thet set indicator, 1.0%. without inflation, why should inflation rates have to go higher? they go a little bit higher, but the key is our tremendous productivity in this country. even if you get labor costs up 1 or 2%, there will be no increase in unit labor costs if you get 3% productivity growth which i think is reasonable given our experience. we’ve got years of growth ahead of us. these are the years where the environment, where it can look ahead several years and see continued significant growth. just exactly how fast it grows is going to grow is not the problem, particularly when you’re at 15 times next year’s estimate in earnings which is not a cheap mogul. kep, where are you investing? what do you like the best here? i think this controversy has pulled back the home building stocks at a time when they were about to report increasing margins. so i think the home building stocks really stand out here because people are afraid that higher mortgage rates are going to inhibit demand. i think they’re going to stimulate it. when people talk about a 4% mortgage rate as being high, with the exception of the last nine months, it hasn’t been this low in 50 years. it’s a bargain. a lot of people on wall street, a lot of people we hearon cnbc like financials, do you? i think the big investment banks, which everybody hates and which are being subject toregulation, are really cheap, particularly morgan stanley. here’s a company that’s going in the wealth management businesswhich is a 10 to 20 pe business. the company is selling at a 6 or 7 pe based on current estimates and they’re doing very well.and goldman sachs, citigroup, even citigroup is up a bit but the stock’s very inexpensive and no one likes these. how about energy? how about energy, the great fracking miracle. natural gas prices have bumped back up. there’s going to be some energy infrastructure buildup. what’s your take on that sector,kenny? i think the energy revolution of the united states is reallyreinforcing our position in the world. the — it’s well known though, i think the stocks in a lot of cases reflect the tremendous potential and the tremendous success american companies are having in developing this resource. george gilder, welcome to the program. energy. fracking. horizontal join. you talk about knowledge and information. we learn a lot now and we may wind up being energy independent. let me ask you about that particular issue. well, i think it’s been anenergy miracle that is derived from a growth of knowledge inenergy industry, that this is innovation and all real growthcomes from innovation, not from increasing margins and housing builders. it comes from ingenius new ways of tapping the fossil fuels below our surface of the planet at incredible — at ever cheaper costs and with ever less damage to the environment. if the government keeps its paws off it and just lets the private sector go, can an energy revolution like this carry the economy. is it, for example, in your judgment, we’re technologists, is it as important as the software revolution, hardware revolution, iphone revolution? does it rank up there with those revolutions? yes, it does. it’s vastly important to tap our energy resources. for thi government to suppress our energy production is the most disruptive thing in the economy.all right. ken heebner, did we leave anything out? do you like the autos? do you like ford? do you like the retailers? the retailers are very attractive. ford will make a fortune in pickup trucks. the contribution in a pickup truck is 10 to 20,000 as opposed to 3 to $5,000 for a car. with construction, demand forpickup trucks is going to be surging. you’ll see blowout increases in ford. ford is contracting its operations in europe and they’ll minimize the damage europe does to them. we’ll leave it there. many thanks to the great ken