Ted Simons: Good evening, and welcome to "Arizona Horizon," I'm Ted Simons. The Dow Jones Industrial Average today closed at a record high of nearly,. Here to tell us what's going on is Wayne Stutzer of RBC Wealth Management. Wayne, good to have you here.
Wayne Stutzer: Thank you.
Ted Simons: Is it a surprise that we're seeing the market surge like this?
Wayne Stutzer: For many people it's been a surprise that it's been going out since the demise of and. Many analysts told you we would never see another record high for five,ten fifteen, twenty years or maybe even our lifetime.
Ted Simons: And is it a concern now that it happened right before you-know-what happened?
Wayne Stutzer: It might mean tomorrow we will drop down a little bit again. This is the third time we've been here. We were here in 2000 -- and 2002 and 2007now this time. What makes it different? In 2002 and, everybody was truly overzealous. Stocks would go up forever and the attitude was irrationally exuberant, as they would say. In 2007the same thing, but it was in real estate, irrationally exuberant. Now we know what happened to the banks after that. I don't think the public is irrationally exuberant. There wasn't a hurrah on the close at Wall Street.
Ted Simons: Are there enough people you think still concerned that the market could even go higher?
Wayne Stutzer: It does like to climb a wall of worry. The general mood of the public is still more of a worried nature or a skeptical nature. Not the type of confidence we saw at other highs in the market.
Ted Simons: Now, Chinese markets, or economic conditions, European I think with the retail sales there, that all plays a factor, too, doesn't it?
Wayne Stutzer: Today's numbers did show China has made an effort to try to restimulate their economy. They are coming off a terrible low race, and they are still not positive numbers, they are just less worse.
Ted Simons: Let's talk about whether or not the market right now in the United States, is it overvalued? What kind of investment are we looking at here?
Wayne Stutzer: That's an interesting point, too. The market likes to look at the price to earnings market. When we saw the tech bubble crash, the average to one dollar of earnings was. It's more of a market ran by the banks and sub-prime mortgages and all that, and we still laugh at the home prices as we know it. The history is about where it's been historically on average. It's not overly exuberant in that way, nor what we would call extremely cheap, like it would have been in the depths of October 2008, early 2009.
Ted Simons: Earnings do seem to be up?
Wayne Stutzer: Yeah, just in the last week, Wal-Mart good report, Home Depot, good report. A lot of companies are not only using some of that cash to expand their business but they are using a good amount of that cash to raise dividends and to buy back stocks. In fact, today a company called Qualcomm just made that announcement. Companies are making money. They are still sitting on a lot of money, but they are making money.
Ted Simons: What about the bond market, the treasury yields, is that still fueling what is happening? A lot of people say any low interest rates are doing it. And without Ben Bernanke nothing would be happening with the market.
Wayne Stutzer: That is a part of it, a lot of people refinance their mortgages, they do feel more confident. It's much easier to pay down debt at % than %, for an example, Ted. You don't put money in the market if you think the company is losing money. You put money in when you think the companies are making money. Earnings have doubled in the last five years.
Ted Simons: Why is the stock market going great guns, earnings going great guns and the economy seems to be somewhat stagnant?
Wayne Stutzer: A couple of things We are going through this process of trying to get our balance sheets back in order after getting truly out of whack in the mid part of and. When you can't borrow money to build your business or build your life, then you've got to do it the old-fashioned way, called cash on hand. That's what I call a "back to the s" attitude. We're spending but only what we know we can spend. What happens then, Ted, it takes longer for the economy to recover. But it'll be a much more solid recovery because it's based on real dollars, not the type of synthetic money we use to take it out of a house to live on.
Ted Simons: Last question, is this a healthy rise in the stock market or are we next to a bubble here?
Wayne Stutzer: I think it's a healthy rise but it doesn't mean markets don't take pull-backs from time to time. I don't see the type of crash, let's say that, we experienced in or . That I don't see.
Ted Simons: Wayne Stutzer, thanks for joining us.
Wayne Stutzer: My pleasure.