Latest / Bloomberg Intelligence / Ken Fisher: Bureaucrat Negotiations Are Big Brexit Risk (Audio)

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Ken Fisher: Bureaucrat Negotiations Are Big Brexit Risk (Audio) · Bloomberg Intelligence

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  Speaker 1: and Kathleen Hayes on Bloomberg Radio, there's one big question
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  Speaker 1: for investors starting around late Thursday night if you're in
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  Speaker 1: the US, and early in the morning if you're going
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  Speaker 1: into Asian trading, certainly since Friday when we learned, when
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  Speaker 1: we realized that yes, the vote to leave the United Kingdom,
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  Speaker 1: the Brexit vote one, and we had two days of
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  Speaker 1: major declines in stock markets around the world, the pound
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  Speaker 1: another huge leg in the bond market, rally joining us
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  Speaker 1: down to put it all together and not just look
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  Speaker 1: at Brexit, but about the presidential election, about at the
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  Speaker 1: Federal Reserve, and and just then what it all means
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  Speaker 1: for where you put your money at a time like
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  Speaker 1: this or you keep it. Ken Fisher, founder, executive chairman
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  Speaker 1: and co chief investment officer at Fisher Investments with nearly
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  Speaker 1: sixty five billion dollars assets center management, usually in sunny,
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  Speaker 1: beautiful Woodside, California. But joining us in our New York
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  Speaker 1: studio today, Well, you know I'm not in Woodside, California.
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  Speaker 1: That's where you're in southern California. No, no, no, no,
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  Speaker 1: we used to be in Woodside, and in fact, we
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  Speaker 1: still have five employees there, but over half of our
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  Speaker 1: employees are in sunny Camus, Washington, tied over the border
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  Speaker 1: from the Portland or you know that I grew up
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  Speaker 1: at Olympia, Washington, I did not. Well, yes, I know
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  Speaker 1: Camas very well. Literally, we have a thousand people. Were
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  Speaker 1: the biggest private sector employer in the town of Camas.
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  Speaker 1: You're a lucky employee. Such a I mean, we can't
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  Speaker 1: we could go on on about this obvious. I'm a
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  Speaker 1: big fan of Washington State at anyway, can Fisher just
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  Speaker 1: showing one more reason why such a Smartphington I am
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  Speaker 1: born and rays Yeah, you just sound southernmost tips proud
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  Speaker 1: of it. It's the water that makes Olympia beer. By
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  Speaker 1: the way, county, well, well it's the state capital. We're
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  Speaker 1: gonna do another segment when these stays on Thursday and
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  Speaker 1: and what it is now and what it was with
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  Speaker 1: Ken Fisher. But today, we've got to get too. Breaks
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  Speaker 1: in another part of the world can because what's your
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  Speaker 1: immediate reaction. What I've been saying all year long, which
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  Speaker 1: the last few days seems to defy, but I don't
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  Speaker 1: think it truly does, is that this is a year
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  Speaker 1: that started with huge uncertainty about so many topics, and
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  Speaker 1: by the time we get to the end of the
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  Speaker 1: year will have become a year of irregularly falling uncertainty.
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  Speaker 1: And I think this fits into that pattern in that
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  Speaker 1: right now there's a lot of polatility about it, and
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  Speaker 1: by the time we get to the end of the year,
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  Speaker 1: it will mostly be old news. I think there are
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  Speaker 1: some things we can say about it that aren't widely said,
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  Speaker 1: although there's been much said about it obviously in the
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  Speaker 1: last few days from a lot of different angles. And
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  Speaker 1: I don't want to be redundant about any of those things.
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  Speaker 1: But one of the points is to think about it
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  Speaker 1: a little bit from the way, which I don't think
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  Speaker 1: people do that either Bernie Sanders or Don Trump might
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  Speaker 1: think about it, and uh, not so much the way
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  Speaker 1: MS Clinton might think about it. Not that I'm saying
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  Speaker 1: good or bad about any of those three people. The
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  Speaker 1: first look, I just top you for a second. Are
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  Speaker 1: regularly falling uncertainty. So it seems you're saying that over
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  Speaker 1: the next six months we're gonna have headline risk. Headlines
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  Speaker 1: are going to hit the stock market, the bond market,
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  Speaker 1: We're going to see that. But basically, if you look
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  Speaker 1: at the trend line June December, we're gonna do that
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  Speaker 1: resolve of itself. We know what happens, including the presidential elections, true,
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  Speaker 1: isn't it, the Spanish elections, including so many things over
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  Speaker 1: the course of the year, we've had some falling uncertainty already.
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  Speaker 1: So you know, if you think of the beginning of
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  Speaker 1: the year, there was all of the concern about China
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  Speaker 1: melting down. China hasn't melted down. There was a concern
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  Speaker 1: that we would have a recession in America. GDP stronger
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  Speaker 1: than people thought. It's not robust, but it's stronger than
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  Speaker 1: people thought. We didn't have the recession, we didn't have
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  Speaker 1: the meltdown. We had a huge number of the biggest
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  Speaker 1: field ever Republican candidates running for president. There's now a
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  Speaker 1: presumptive nominee. There's a little bit of wiggle about what's
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  Speaker 1: going to happen with the convention and a vice presidential pick.
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  Speaker 1: There's the same kind of stuff on the Democratic side
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  Speaker 1: with Mr Sanders wiggling around. That'll all go away. Then
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  Speaker 1: you'll have a campaign, we'll get a winner. Will like
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  Speaker 1: the winner better than we like that candidate now, even
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  Speaker 1: though we may not like that candidate all that much
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  Speaker 1: more than now. We always get a winner. The uncertainty
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  Speaker 1: will fade all your long. Markets should like that. In
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  Speaker 1: the second half of the year and second half of
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  Speaker 1: election years in America usually are strong compared to overseas
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  Speaker 1: markets because the falling uncertainty in America is bigger during
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  Speaker 1: that second half than uncertainty overseas. It should work that way. Okay,
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  Speaker 1: so let me ask you some of these things, specifically,
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  Speaker 1: a little bit of a boom boom boom going down
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  Speaker 1: the list. Okay, at the end of the year, what
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  Speaker 1: will what will be the permanent impact of brexit? If
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  Speaker 1: anyway we're right now, there's a concern about Italian banks.
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  Speaker 1: There's a concern about just what this means that more broadly,
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  Speaker 1: at the end of the year, are we gonna see
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  Speaker 1: there won't be a financial crisis again, that they'll they'll
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  Speaker 1: be the new Prime minister in the UK, they will
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  Speaker 1: be negotiating the exit and markets will have their focus
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  Speaker 1: off of it. And the big force that people don't
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  Speaker 1: talk about now is what I was starting to allude
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  Speaker 1: to before, which is the way Sanders or Trump might
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  Speaker 1: think about this, which is that before you get to
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  Speaker 1: the end of the negotiations on Brexit on both sides
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  Speaker 1: of the Channel, the big fish private sector corporate global
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  Speaker 1: interests that have huge stakes will have lobbied so hard
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  Speaker 1: to the politicians on both sides that most of the
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  Speaker 1: worst of things will have gotten mitigated to their best interests,
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  Speaker 1: and we'll end up seeing something that may have And
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  Speaker 1: this is the biggest risk of Brexit in my opinion.
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  Speaker 1: In terms of economic policy, there's another risk as well,
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  Speaker 1: as Steve Forbes articulates well, but in in in in
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  Speaker 1: economic policy, the biggest risk is unintended consequences in the negotiation.
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  Speaker 1: Some big things well intended architected by bureaucrats, perhaps morphed
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  Speaker 1: a little bit by some private sector interest in lobbying,
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  Speaker 1: and that generates something on toward a little bit like
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  Speaker 1: the negative impacts in two thousand seven to nine of
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  Speaker 1: f AS one seven I se seven quick summation of
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  Speaker 1: what each presidential candidate would mean for the capital markets. Uh,
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  Speaker 1: let me just make this simple, and then we can
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  Speaker 1: get too complicated. As a general rule in American history
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  Speaker 1: that people don't fully appreciate. And this goes back a
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  Speaker 1: long way, as it goes back to the beginning of
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  Speaker 1: the s and P. Five hundred. In a year where
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  Speaker 1: we elect a Republican, the year is much stronger than
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  Speaker 1: a year where we elect the Democrat, and then that
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  Speaker 1: flips for both of them in the inaugural year. Democrat
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  Speaker 1: inaugural initial inaugural years are much stronger than Republican initial
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  Speaker 1: inaugural years. The election years the reverse. So if we
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  Speaker 1: elect Mr Trump, despite all of the things people have
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  Speaker 1: his concerns about him, we should assume that markets are
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  Speaker 1: more or benign this year, and you pay for that
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  Speaker 1: next year. On the other hand, despite all the things
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  Speaker 1: you might say about Ms Clinton, if we elect her,
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  Speaker 1: we should have a less robust year this year, and
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  Speaker 1: then next year we get the benefit of not having
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  Speaker 1: gotten too evulent in the back half of two thousand
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  Speaker 1: and sixteen, having not been evulent for a long time.
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  Speaker 1: People don't get this, but we're actually right for a
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  Speaker 1: little bit of evulence for a while. So for investors, then,
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  Speaker 1: what is the takeaway from this? My view would be
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  Speaker 1: if you look at a lot of the stocks that
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  Speaker 1: you might have thought to own before any of this
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  Speaker 1: happened in America that have gotten whacked the most, that's
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  Speaker 1: a perfect buying opportunity, Big Strong, or whatever else it
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  Speaker 1: is that you particularly liked. Overweight US in my mind,
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  Speaker 1: but many may to degree overweight Big Pharma that has
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  Speaker 1: building proprietary pipeline by gross stable, mature but still growing
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  Speaker 1: tech that is not I'm not talking about exciting tech.
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  Speaker 1: You're talking like a Microsoft tech oracle hasn't hasn't done
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  Speaker 1: well lately. Normally, these kinds of stocks in the latter
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  Speaker 1: stages of bull markets run in spurts, and both of
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  Speaker 1: those had spurts, have backed off, likely in the back
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  Speaker 1: half of the year, and the year where US is
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  Speaker 1: better than form, you get another spurt, and they're the
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  Speaker 1: kind of things somebody would normally buy for the last
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  Speaker 1: third of a bull market. And this is a long,
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  Speaker 1: begrudging bull market. This bull market has been going on
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  Speaker 1: and won't quite die, but it doesn't get to that
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  Speaker 1: rip roaring, ebulent stage and I'm not suggesting necessarily word
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  Speaker 1: about to have that. That's not where I'm going. My
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  Speaker 1: point is that normally in the latter part of bowl markets,
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  Speaker 1: companies just like that end up doing well in the
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  Speaker 1: stock market in spurts. Okay, this is quick. I'm gonna
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  Speaker 1: ask you two questions. You've got thirty seconds to answer,
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  Speaker 1: So fifteen seconds for the first one. By energy stocks,
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  Speaker 1: sell energy stocks. Um, I'd prefer materials non energy to energy. Okay,
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  Speaker 1: they capture the same effect, but they're not perceived to.
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  Speaker 1: All right, how about banks mightily beaten up the last
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  Speaker 1: few days. Again, you have to separate big from small.
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  Speaker 1: But if you're talking about big, which is where most
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  Speaker 1: of the beat ups, then I think the answer is yes.
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  Speaker 1: In particularly US, I guess I can get one more
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  Speaker 1: consumer discretionary retail. Some people like it. Now. Again, i'd
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  Speaker 1: be focused on making sure you're not going to get
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  Speaker 1: caught by the electronic effect. Oh Amazon, Uh, it's the
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  Speaker 1: elephant in the room, the very big elephant in the room. Yes,
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  Speaker 1: and if you can get free shipping and everything, so
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  Speaker 1: that elephant is really very enticing to so many people.
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  Speaker 1: Can Fisher sticking around founder executive Chairman and co chief
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  Speaker 1: Investment Officer at Fisher Investments. Our stock sitder, Dave Wilson's
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  Speaker 1: coming back, Carl Ricka Donna from Bloomberg Intelligence on the
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  Speaker 1: eCos side, and we're all going to mix it up
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  Speaker 1: coming up on Bloomberg Radio