Paul Schatz of Heritage Capital spoke with Surabhi Upadhyay on CNBC-TV18 and gave his perspective on US markets. Below is the transcript of the interview.
Q: Lots of drama coming in from Europe and then of course the data that we are looking out in the US, what is more important for you? What are you tracking?
A: Clearly, the Greece situation is that the media is making a big deal of that in the markets. I think the markets have pretty much digested a partial kicking of the can down the road and we all know Greece is in the fault, it cannot argue that. So for better, for worse the Greece story is going to be headlines for the foreseeable future and any deadline we know is now unofficial, it is just getting pushed back. Today, the big story is the Supreme Court affirming that Obamacare subsidies can be used. That is probably the story of the day here.
Q: Let me talk to you about Greece for a bit, I get your point and that is so evident, market reactions are completely different this time around, markets are moved on, they have shrugged off, whatever is happening in Brussels right now but isn’t that risk because for a second if you were to imagine that there is going to be a default next week on that IMF loan, is that going to create a lot of volatility?
A: I don’t think so. We see volatility. You can have a day or day and a half volatile move and frankly the best resolution long-term is that Greece leaves the euro. It is not working now, it hasn’t worked, it is not going to work. So if I were in the IMF, if I were in the powers of being in Europe, I would make a deal for Greek to leave the Europe. Let them go from a complete depression based on deflation to a hyper inflationary environment and in five years to seven years, they will come out of this but what is going on right now is literally putting tiny little band-aid on a giant gash in your leg, it is not going to work.
Q: What about the US? We have seen a tremendous rally, we have seen the NASDAQ hit fresh all time highs, technology stocks been rallied, data has been mixed and of course all important question about whether September will be the Fed lift off or not. What is your sense?
A: After the horrible gross domestic product (GDP) print from Q1, which I totally dismiss, GDP in Q2 in the US is going to accelerate as well as Q3. We are going to grow somewhere between 2-3 percent, maybe an upside surprise. The high we just saw in the NASDAQ did not accelerate to the upside. Even though we just slightly take all time highs in the NASDAQ, I don’t think it is cause for celebration. We don’t think the Fed is going to raise rates in September and the market will stay in trading range between 8-9 percent is our downside from here and probably 5 percent of upside through the summer months. Ultimately, stocks resolve themselves higher and the DOW is going to atleast 20,000, but not right now.
Q: In that case, where you are putting your money?
A: We are fairly active in our investing process and this has been the quietest trading in a long time. On the equity side, we are overweight on small caps; we have got a significant amount of technology, we have got biotech and healthcare where we have not done a lot of trading. We will probably stay the course there and when we want to hedge, we are going to short the DOW primarily and possibly S&P against that, but we like our positions with the small caps, biotech, healthcare, a little bit of Hong Kong, a little bit of China and not a whole lot else.
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