An outlook on the markets ahead of a “fiscal cliff” solution, with Daniel Stecich, TJM Institutional Services, and Mario Gabelli, GAMCO Investors CEO & CIO.
At this year's SALT New York conference, Jean Hynes, the CEO of Wellington Management, took to the stage to discuss the role of active management in today's investment environment. Hynes succeeded Brendan Swords as the CEO of Wellington at the end of June after nearly 30 years at the firm. Wellington is one of the Read More
right now we have daniel from tjm institute. we’ve been watching what happens with the futures every day. a lot of concerns about the fiscal cliff, is that the biggest issue driving things right now? the fiscal cliff is the driving issue right now. a little fear from europe. the market came off. that is in the background. as long as we’re seeing things move forward, but not negative on the fiscal cliff, i think you’ll see the market bounce against this 87 and 90 level. any hint of a compromise, yo ur you’re going to break the 1,400 level. okay. 20 to 22 area. every time these talks come in, though, we know it’s going to be a lot of turbulence between now and let’s say the middle of december or some time, tht’d be the earliest. are you following every single trade? are you thinking eventually there’ll be a deal that gets done? i think eventually there will be a deal that gets done. and i kind of like the fact it’s been quiet lately because itmeans — it seems to me that means they’re working atsomething. you’re not going to get a grand compromise early on, t you’re going to get something reasonably substantial. and next year when we have the new congress, things will gettogether. you start seeing that, then we start going off pretty good to the upside. of course, dan, everyone has said if there’s this idea that washington can come together and define some sort of solution, that will make the markets buy into this confidence in washington. washington has big problems, andthe solutions are probably going to mean painful medicine around. is there a moment when the markets wake up and realize and say, oh, my gosh, we have to realize we are talking about spending cuts, higher taxes and combination of these two things could lead to some troubling times for the markets too? well, that’s going to be found out once the deal is in. let’s say they had some sort of a deal and you start breaking itdown. you’ll have to look at how is it going to impact the economy? i imagine they’re going to do it to minimize whatever impact there is. it seems to me, there’s growth in this economy and we’re looking for a place to spring board from it. so they’re not going to want to ruin that chance. but until the details are out, we’re really not going to want to know. we have not talked fiscal cliff with you in-depth on these gs. what it means for the markets now, the changes, potential tax law changes could mean. what are you hopeful about? what are you worried about? for the next five years, ten years, a very simple model.you have to raise revenues, lower expenses, and grow theeconomy. but the economy is not isolated. and the global economy is important. how does the u.s. participate? so we have to keep an eye on europe, we can’t ignore it. you have to keep an eye on china. china’s going to step on theacceleratoarch if not earlier. and within the framework of thenext ten years, can we regain our economic prowess? and that’s priority number one. if you have these guys in new york, mayor bloomberg, mayor booker, the yor, the governors, cuomo, christie, malloy, if they went on holiday while we had sandy, what would you do? we have an economic crisis. they’re going to take a short break in december. yeah, we have to have a patch, but we have to have a fix. and a structural fix is sofundamental so that if you’re running a business and you haveclarity and visibility for the next five years, you can live with whatever you have. corporate taxes are coming down accoing to the current administration. you drop them from 35% to 28% or25% if it’s u.s. manufacturing. that is very helpful for profits of certain companies. but you close the loopholes, meaning those who aren’t — you have to. come on, lobbyists have put in too many loopholes at the corporate level, they snuck them in, carried interest, carried interest is a disgrace. three years, it’s not even patched. notwithstanding if you’re a hedge fund, a private equity, i mean, you going to harvest your investments.someone else was selling a piece of charter communications.why? they want to get the carried interest. they don’t want to pay the extra tax. however, there’s no question, 71% of the economy is the consumer. 13% is investment. balance is government spending and exports. the consumer’s a function of jobs, psychology, cash. housing yesterday, bernanke echoed the notion of a positive feedback loop on housing, very fundamental to jobs and net worth. we’re going tok more about that, but dan, thank you for joining us and happy thanksgiving.