Why Should Investors Buy Now?

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Aug. 29 (Bloomberg) -- In today's "The Open," Patrick Dorsey, vice chairman at Sanibel Captiva Trust, explains why now is a good time for investors to take advantage of global unrest. He speaks on “In The Loop.” (Source: Bloomberg)

No contract.

There goes the opening bell.

I want to bring in the chief investment strategist.

Spoken like a true capitalist, pat says investors should be taking advantage of the unrest in political hot spots.

How dare you, pat?

I know, it it is heartless.

If you go back to world war ii, there has never been a geopolitical event that has caused an extended market decline.

Even the beginning of the gulf war, the decline lasted a few weeks and then fundamentals to go over again.

When you see the market getting freaked out about ukraine, ebola, whatever, if it is not related to how companies make money, that is probably a buying opportunity.

A general buying opportunity?

Where would you be putting money to work?

Obviously, whatever is down the most usually looks the best.

Right now, big picture, most defensive companies, consumer packaged goods, food companies, the karma, -- big pharma, they look stretched because investors have been so nervous the past few years despite this amazing bull market.

They also tended to generate a lot of income in al low yield environment.

I would be poking around industrials, tech companies that are starting to return capital to shareholders.

I think you will find better values there.

Do you want to stay in u.s. equities?

Someone is buying up ukrainian currency and putting money into eastern europe.

Do you still want to buy off dips in u.s. equities?

Had a you take advantage of geopolitical risk?

That is a good question.

Typically you see emerging markets tend to sell off the most, whether russia, brazil, indonesia.

That is an area that is more attractively valued than the u.s. and is certainly going to have better growth prospects over the next decade.

Many of the worries we see over the fragile five are a redux of the 1987 asian currency crisis.

Is highly unlikely because the balance sheets are stronger.

If emerging markets are part of your asset allocation, which we think they should be, that is an area i would be putting money to work if you get a more than usual selloff on one of these.

In the u.s., you're looking to put money to work in companies that return cash to shareholders.

We have a chart that shows how buybacks have been slowing down declining to $126 billion in the second quarter.

Still above the long-time average.

But it is a slowdown.

Does the slowdown mean the equity rally is losing one important market driver?

I think it indicates the valuations may be getting on the higher side.

That would indicate rational behavior on behalf of corporate chieftains.

That would not be in keeping with history.

History is typically buybacks slow when the market is down and rise when the market is up.

It is kind of the opposite of the behavior you would hope for.

One stock you do like is ebay.

I was trying to find a case against ebay which was not easy according to the most recent round.

Some of the biggest names in the business are invested.

They are long ebay.

You are in good company.

I did find a note from pacific press who recently downgraded it to market perform for a few reasons.

They say there are no near-term positive catalysts and the reason these big names are long ebay is because it is a bet on paypal and what happens if ebay does not spin off a pal -- paypal and paypal is not the leader in e-payments?

What if you see a tie between apple and visa?

They become the dominant player in mobile payments.

It would be hard to replicate the paypal level of consumer acceptance.

That tie up is possible, but visa only handles the backend.

You need the front in the acceptance by consumers.

That is something paypal is way ahead of on.

Even if they do not spin off, it still generates value for ebay.

I would not sweat the lack of a near-term catalyst.

If you can predict a catalyst,

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


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