Audi vs. Mercedes: Luxury Vehicles Go Budget

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July 9 (Bloomberg) -- Kelley Blue Book's Matt Degen and Bloomberg's Mark Clothier discuss Audi closing in on Mercedes-Benz in the small but crucial market for premium cars priced that start below $30,000. They speak with Trish Regan on "Street Smart." (Source: Bloomberg)

Slump, economists are overwhelmingly bullish.

But the s&p i've hundred and the dow hovering -- both the s&p and the dow hovering at highs.

But in the midst of it, the state, i am making a call to the kin -- to begin a pullback and recommending selling nonperforming stocks to raise cash.

How big a correction could be in store?

And could earnings season really do anything to help or hurt that?

Joining us now, michael reagan, stocks editor for bloomberg news.

You heard what he was saying there.

The idea that we could see a pretty big pullback in july or august.

How much merit is there to that?

So many have said we've gone so long without a big pullback in stocks.

It's been more than two years since we've had anything approach that correction that it does not feel right.

It feels like eventually markets need to correct, for whatever reason.

Comparing the market to 2011 when valuations got to about where they are now and the s&p 500 dropped almost 20%, it is really the post we come to a bear market in the last several years.

In the middle of that was the u.s. credit downgrade.

It scared the heck out of everyone.

It did.

And it was a big part of the pullback.

The question is whether or not winning of the catalyst like this to cause that, or whether it will just happen.

Echo hansen is also with us.

-- michael hansen is also with us.

You are looking at the economic data, all of which looks for the positive these days.

Mike, is there anything on the horizon from an economist viewpoint that could cause a pullback in stocks echo there are two things that could do it.

One is, a jump in oil prices that would undermine confidence in the recovery.

The other possibility is something of a spike in interest rates.

That is a hockey stick move that is not currently priced into the market.

If we got that, there could be worries going forward.

Where would we see a hike up in interest-rate?

The fed has done everything against that.

And the market is taking that as good news.

I agree, and that is not my best case, but bringing out the risk scenarios, it did not take much from bernanke.

It did not take much at the beginning of the year to see a bit of of -- a bit of a run up and rates.

They have come back down, but it seems you could get them to move in the other direction.

What about alcoa reporting after the bell yesterday and setting a bit of a tone?

Do you think this earnings season will help justify that?

It looks like it is going to be a decent, not great, earnings period.

Basically, almost every industry group is forecasting a post -- it posted increase in earnings, except bank.

I cannot earn any money because the government keeps taking it.

We have just talking about -- have just been talking about all these fine.

It is a challenging environment for them, in part because of the low interest rates.

That is fair.

We have been doing this because fundamentally, it has going to be -- is going to be a long and drawnout healing process.

This idea that july or august, there could be a pullback, is that something that could be helpful for the market at this point?

There are people still on the sidelines looking for any sign of weakness to come back into the market.

Retail investors, your individual mom-and-pop investors putting money into mutual funds, those have been relatively strong.

Have a, really?

It seems like volume has been so low.

And it seems like you're mom-and-pop investor has been so burned by this market and are saying, forget it, i will make money some other way.

Maybe at the poker table, but not the stock market.

They are putting money into mutual funds.

On the flipside, these are the people last to the party.

Of course.

And there was talk about four stages of bull markets.

This is the exuberant stage.

What kind of numbers are you seeing in terms of the monthly inflows into mutual funds models?

They are strong and consistent, but not really at the level where we get worried that it is irrational like the.com rally -- like the dot com rally.

There is a nice tale of baby boomers that kind of realize retirement is looming out there and i don't have what i always thought i would happen -- i would have.

That is affecting some of these loads as well.

Coming up, ain't no party,

This text has been automatically generated. It may not be 100% accurate.

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