Ken Fisher Interview Part 8
Please note: The original interview took place on Wednesday, October 27, 2010

Stockerblog: What sectors and industries look good to you?

Fisher: I’m still in the exact same place I’ve been in for quite a while. We’re in a period of where, domestically and globally, the economy will do better than people think it will do, when they don’t think it will do well, and therefore in an environment like that, the stock area that will do well are materials, industrials, the more capital intensive parts of technology, consumer durables but not consumer staples, and to a lesser extent, energy.

The parts that do worse tend to be consumer staples, health care, utilities, finance, all the things that aren’t economically sensitive.

Another way of saying it is that things that are rising right now are things that are economically sensitive. Because most people think that the economy is not doing so well. For example, something that’s perfectly observable that nobody wants to write is that nominal GDP in America is already at an all time high. It’s a simple fact, but nobody wants to write that, and if you write it, nobody will believe it. Because the mythology around us in the media is that we’re mired in a slump. ‘It’s a dismal world.’

That’s real GDP that’s at an all-time high, inflation adjusted GDP isn’t quite to its all time highs yet but it will happen in the first quarter. It’s not that far away. It’s been expanding for 14 months now. When the NBER came out and said ‘we’re officially saying the recession is over and it ended in the third quarter of last year’, the media reacted to that with catcalls.

The fact is, the economy on a global basis, with some places better than average and some places worse than average which is normal, the economy’s been expanding globally earlier than that.

Stockerblog: What countries do you think look good right now?

Fisher: Overall, the next step is you want to be overweighted in emerging markets, you want to be lightly overweight to America, and you want to be lightly underweight to the English-speaking world and most of Europe. We continue to have a world where people are skeptical of emerging markets, but emerging markets continue to do better than people think they will, with a couple of exceptions, and one of them is China. China continues to do well economically but there is so much interest in China relative to the rest of the emerging markets that the Chinese markets don’t do well, because there is too much optimism and expectation about them and excitement. Latin America, Brazil, Chile, obviously not Venezuela, the broad spectrum of Hispanic America, the broad spectrum of the rest of Asia, India, and Eastern Europe. America is slightly over-weighted because America is doing better than people think it is.

End of Part 8

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

Part 3 of this interview is available HERE.

Part 4 of this interview is available HERE.

Part 5 of this interview is available HERE.

Part 6 of this interview is available HERE.

Part 7 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the articles were written.

Copyright 2010-2011. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

If our caution proves to be warranted and the market does correct over the coming days and weeks ahead, our work suggests the pullback will be relatively small and contained within the 4-7% range (give or take a percentage or two) on the major averages. The broader indexes such as the Russell 2000 will most likely be hit the hardest, as we have pointed out the recent relative outperformance in many of the bigger cap names.

Over the past two weeks we have sold and paired back many of our portfolio holdings. Over the short-term, we feel most stocks need to correct, or at the very least, consolidate. This does NOT however, mean that we will completely abstain from adding new longs to the portfolio on a select basis.

There is always the possibility that the market turns up and moves right back into new high ground even without broad participation. It is precisely for that reason we stick with our investment theme until proven wrong and let the market itself guide us as opposed to rigidly clinging to personal opinions or theories.

If the overall market is going to get into serious trouble, our stop-loss protection will force us to the sidelines one stock at a time. Currently, our risk model remains on a buy however; it is teetering on an intermediate-term sell. Short-term caution is our stance de jour.

-Mark Minervini

I dont know about you, but applying for a mortgage can be frustrating and time-consuming. From our perspective, we were just another number applying for a bunch of numbers. Insert a great mortgage broker into the equation.

Heres a short (but not inclusive) list of great things a great mortgage broker can do you:

Give you customer focus – Unlike banking representatives, mortgage brokers are not tied to any one bank. Sure, they might have some favourites, but great brokers canvas the full field. Our guy was looking out for the customer (us), our terms, conditions and pre-payment options. He was working to find a product that fit our needs and situation, not his agenda. In brief, our mortgage situation is not ideal, we have a hefty penalty to pay if we break our existing mortgage and go with another lender within the next two years. (This is a reminder to look at the detailed print of your mortgage agreement before you purchase a new home .) In our case, a great opportunity arose and sometimes you simply cant pass those up regardless what the fine print says – life happens, choices need to be made and chances need to be taken. Back to my point, you can certainly make a strong argument that mortgage brokers work for themselves, not you, however without attention to personal detail, they wouldnt be in business. Our broker put our needs and requirements #1. He was always very responsive. He never said he didnt have time for us or needed to take another call.

Give you leverage The way I see it, using a mortgage broker to fund a mortgage, youre going to get more attention because the lender wants that broker to continue sending business their way. As an individual customer, were just a number apply for a bunch of numbers. In talking with our broker, I know if he sensed any run around from a prospective lender hed move on and our mortgage prospects would go with him.

Save you money No doubt mortgage brokers are compensated by the lenders they strike the deal with but a) that means you dont pay them and b) as long as the rate and conditions of the mortgage are better than what you could have obtained youre saving money. Potentially lots. Like I mentioned earlier, our broker worked hard to get us a good deal. He knew his stuff and actively monitored bond yields for us. We more than appreciated that because without our new great rate and its associated terms, we wouldnt be coming out ahead over our hefty mortgage penalty. Weve taken our lumps and learned from them. My advice? Dont take a five-year mortgage term if theres even a chance you might move within that term period. Sure, you can sometimes port your 5-year fixed term to your new home (it doesnt cost anything but the mortgage appraisal and sometimes a small discharge fee) but that wasnt ideal for us. In hindsight, we should have taken a shorter fixed term a few years back or instead, given historical research, a variable rate. Click here to read more about variable mortgage rates and how more often than not, you come out a winner over a fixed rate mortgage.

In closing, mortgage brokers can be a tremendous resource, if you have the right one. Were glad we worked with our guy. Actually, we still are.  He’s still checking in with us to ensure all the rebates we were able to take advantage of are coming our way, including one for the mortgage appraisal.

I know if I have mortgage question going forward, Ill drop him a line. Hell take my call, hell listen, hell provide good customer service and objective feedback. I dont mind sharing who we used because the experience was very positive.

Thanks very much Rob!!

Click here if you want his contact information.

Do you agree or disagree what a great mortgage broker can do for you?
Any positive or “other” experiences youd like to share?

Cheers,
Financial Cents

Many investors look for debt free stocks selling at or near cash per share. These are stocks which have virtually no debt and are trading close to the amount of cash the company has on a per share basis. Without any debt and a lot of cash, it would be hard for a company to go out of business, unless it is a biotech company with a high burn rate. In addition, the cash might make the company a possible takeover candidate.

WallStreetNewsNetwork.com just updated its list of Low Price to Cash per Share Ratio Stocks with No Debt, which shows the recent price, cash per share, forward PE, and price per cash ratio. Almost all the stocks have price to cash ratios less than 4.

On example is Electronic Arts Inc. (ERTS), the video game manufacturer, has $4.99 in cash per share, with the stock selling at less than 15.80, giving it a 3.16 price to cash ratio. The company, with no debt, has a forward PE of 18.8.

FormFactor Inc. (FORM) is another stock with lots of cash. This debt-free manufacturer of semiconductor wafer probe card products, which sells for less than 9.50 per share, has a significant $7.35 per share in cash. Recent earnings were negative, however, revenues for the latest quarter were up 8.2%.

If you want a free downloadable Excel list of ten stocks that have a Low Price to Cash Ratio with No Debt, go to wsnn.com.

Disclosure: Author did not own any of the above stocks at the time the article was written.

By Stockerblog.com

Ken Fisher Interview Part 7
Please note: The complete interview took place on Wednesday, October 27, 2010

Stockerblog: There was an article recently about how some investors got early retirement, they had nothing better to do, did a lot of research on their stocks, and were very successful. The article talked about one guy who built his portfolio from $30,000 to $3,000,000. Do you think that article was about an aberration or just looking at one end of the bell curve?

Fisher: That’s looking at the very few people who are definitely one tip of the bell curve.

And it’s not the average investor that could possibly consider it unless they had an extreme amount of luck to achieve anywhere near that.

The average investor by definition cannot do that. The average investor cannot possibly beat the market. The average investor, at most, can equal the market.

Stockerblog: Speaking of playing the market, the Bunk chapter on swine flu and some of the other things. It seems like someone who trades or does short term investing could actually play the opposite of some of these bunks. The swine flu could be an example or some other major catastrophe where the market has a temporary sell-off, and if you are mentally set to go into the market to do the opposite, a trader could actually do fairly well playing to opposite of the common bunks. Would you agree with that?

Fisher: I think that’s possible but for the average person that thinks its a trade, that he or she is a trader, is exceptionally unlikely. In fact, when we look at the history of traders, most of them don’t do very well.

Said another way, if you say who are the traders we can think of that have become legendary investors, are really, really rich and successful as traders, there aren’t very many of them; although we have a lot of traders in total, which tells you that it’s another one of those things where its a tip of the bell curve where people have a knack to do that but they’re very unusual and they are probably least like our primitive stone age ancestors. They probably have the leave behavioral finance issues embedded into their brains for some reason.

But there aren’t very many of those people and the odds of anyone being one of those people is small.

If the person that can trade these things, which I do believe there are people who can do it but its not me that’s for sure, if there are people good enough to trade these, they are good enough to trade all kinds of other things.

So another one of the bunks that you will remember reading about is my comments about gold, and gold is basically a thing where if you’re a very good trader, gold might be a good thing for you but gold has had an OK return but a huge volatility over time, and 85% of history on a monthly basis has lost money, and made all its total return out of 15% of the months. If you’re a good enough trader, you should be able to trade gold successfully and you should be able to trade all kins of other things too. And you don’t need an trading advice from me, that’s for darn sure.

The fundamental nature of those rare George Soros like traders or Paul Tudor Jones type people, the people at have made money off of trading that have gotten good returns and have had some consistency, because you can trade gold, you can trade oil, you can probably trade swine flu, but most people aren’t very good traders.

End of Part 7

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

Part 3 of this interview is available HERE.

Part 4 of this interview is available HERE.

Part 5 of this interview is available HERE.

Part 6 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the articles were written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.

A few days late with my dividend income update, but better late than never!

It’s been hectic week since we got back from vacation but in a good way. My wife celebrated her birthday this past week, we started packing for our move (coming in two weeks, whoa) and we got some Christmas shopping done. Fun and productive I must say!

Like some of my fellow bloggers already announced (Passive Income Earner, Loonie Bin to name a couple), shareholders of Enbridge were also given a reason to celebrate this week: the Calgary-based pipeline giant said it will increase its dividend by 15% to $0.49 per share. If anyone is counting, that’s the second dividend increase for ENB in the last 12 months.

I guess Enbridge is generating much more cash flow than expected, surviving two high-profile pipeline leaks in the process. Certainly a good news story for the company and its shareholders.

Without this increase included into our dividend income calculations (the increase will not take effect until the March 1, 2011 paydate), we’re on pace to earn just over $4,300 this year – if dividends were paid to us in cash. Instead, we reinvest most dividends into new stock to keep our dividend-compounding machines running. We like it that way – reinvested dividends buy more stock, more stock pays more dividends each quarter, more dividends get reinvested – simple process, extraordinary results over time. With various dividend machines humming with every payment, every quarter (for example, we recently earned 4 free shares of Bank of Montreal stock), we’ve had a slight increase in our dividend income over last month, yet another small reason to celebrate this week.

Now if only my Ottawa Senators can get their act together…

Do you think Pat Daniel, President and CEO of Enbridge has any clout there? You’re right, probably not. Even if he did, I know, I’m definitely pushing my luck

Have a great weekend and happy investing!
Financial Cents

Getting back to work and into the grove (or rut) from vacation this week, I feel compelled to import some of what Im experiencing at work into my blog today.

Ill set the scene

Youre asked to work on a new project, its high-profile and youre the project manager. Youll be given resources, although there are limits. Youll be given time to complete the project, although there is a due-date down the road. Youll be given scope to work within, although youve got some wiggle room to manoeuvre. Youre excited and you want to get going. Thats great because theres a natural tendency to dive right into the work – do this; do that; full steam ahead. From my perspective, that’s the last thing youd want to do. Enthusiasm and keenness are great attributes for a project but youll have fun soon enough. Successful projects require effective management from the very beginning; creating objectives, plans and communication of your approach to name a few.

Is your personal finance journey any different than a long-term project? Not in my opinion…

According to the Project Management Institute (PMI) project management is the application of knowledge, skills, tools and techniques to project activities in order to meet or exceed stakeholder needs and expectations of a project. Technical, I agree, but I live this stuff everyday. In plain language, project management is a toolkit for folks to get work done effectively and efficiently.

At work, you might be responsible for implementing a new product or service. In your personal finance journey, the product is you. Youre the long-term project deliverable, financial independence is your outcome. At a very high-level, I dont see many differences between project management principles and the personal finance journey, I’ll explain:

1.Both need clear objectives - The most successful projects have clearly defined objectives from the outset. Wouldnt this apply to your financial journey?

2.Both need good plans - A carefully thought-out project plan serves two purposes. First, it allows everyone involved to understand and perform their part in the project. Second, it serves as a monitoring tool allowing you or others to take action if something doesnt go the way you thought it would. Written plans are always the best. I would argue your financial plan is simply a long-term project in disguise.

3.Both need lots of communication - Your projects at work are a collaborative effort between all of the individuals involved, even if its just you and your boss. Your personal finance project is probably not so personal, it likely affects your spouse, your kids, maybe even your parents. Everyone needs to be on the proverbial same page at home, just like work, if the journey is to be a successful one and all successful ventures begin and end with effective communication.

4.Both need controlled scope Just like work, numerous issues will arise during your project and not all these changes will help you achieve your objectives. There will be setbacks, there will be changes, its inevitable. At work, its important to stay focused on your objectives. I dont see your personal financial journey being any different. In my opinion, it doesnt matter if your financial objectives are 100% GICs or 100% stocks – managing your scope and staying true to your plan is absolutely necessary.

5.Both need sponsorship and support - Projects typically involve several stakeholders, folks who invest time, resources and have a vested interest in the project. If the project is you, you need to remain invested and vested. That can also mean, getting support when necessary, from your spouse, kids, parents, friends or a financial professional when you need it. Rarely can anyone achieve success (financial or otherwise) without help from others. While it may be a personal finance journey, the journey isn’t taken in isolation.

I could go on. I think theres tons of parallels between the project management world many of us experience everyday and the personal finance journey. In the end, good management is simply that, at work or at home.

What do you think?
Do you see any of the same parallels I see?
Do you think I’m nuts and too immersed into my work?

Cheers,
Financial Cents

Vineyards at Domaine St. Diego Bodega (winery), Mendoza, Argentina.

In my last post, I mentioned our vacation to Argentina has quickly come and gone, but not without many memories and experiences. In this post, I’ll wrap-up what we enjoyed about this fine country…and provide more pictures too!

Our vacation started in Buenos Aires and we stayed in BA for 5 full days. It was an amazing city and as my last post mentioned, full of culture. Beyond visiting and enjoying numerous cafes and restaurants, we also visited the city’s fine arts museum, their beautiful parks, watched some tango in rustic San Telmo neighbourhood, visited the botanical gardens in the heart of the city, the city zoo and also the Recoleta cemetery these latter three attractions certainly left an impression on us. The botanical gardens are filled with stoned paths that wind their way through spacious grounds, most of it filled with flora from around the world with over 8,000 plant species represented. Next door, the city zoo featured a diverse composition of indigenous birds and monkeys, giant turtles, llamas, elephants and bears. The Recoleta cemetery pays tribute to some of Argentinas most notable and important historical people. Created in the early 1800s, it is the citys oldest operating grave site and was really more of a necropolis.

The tomb of Eva “Evita” Peron, Recoleta cemetery, Buenos Aires, Argentina.

The cemetery covers numerous city blocks and you can literally spend hours touring the tombs. Like most tourists, we visited the tomb of Eva Evita Peron, who was largely responsible for women receiving the right to vote in Argentina and used her political power to build hospitals, schools and playgrounds for lower-class Argentine citizens. Overall, an amazing experience – this cemetery is a must-visit in Buenos Aires.

Other Buenos Aires highlights worth mentioning:

-Our Bus Tourista tour, it gave us a great overview of the city.
-Tartas at Ninas (near Juncal and Bustamante) in the Barrio Norte neighbourhood, for $18 pesos ($4.50 CDN) we got one of the best lunches (and deals) in Argentina. (Tartas are best described as a small, baked pies filled with various meats and veggies. When done right, these things are amazing…)
-Shopping in Palermo, my wife got some amazing deals, I like deals!
-Beautiful plazas and districts, including Plaza de Mayo (the political heart of the city), Puerto Madero (the port, waterfront district) and Plaza San Martin (in the nucleus of the city amid flowering and towering jacaranda trees).

Trees nearing bloom in Plaza San Martin, Buenos Aires, Argentina.

After our stay in Buenos Aires, our LAN flight took us northeast for 3 full days to Puerto Iguazu, a small city near Paraguay and Brazilian borders. As my last post mentioned, we went here to visit the spectacular canyon of waterfalls that were shaped some 120 million years ago from geological upheaval. This UNESCO World Heritage Site is in our opinion, another must see if you go to Argentina. Although the national park in Iguazu can be seen in one very full day, we took our time and made two days of it. Our first day was quite adventurous. Not only can you hike and walk various circuits to get some up-close, breathtaking views of over 250 falls, you can also pay 100 pesos (about $25 CDN) per person and take a high-powered motor boat right into the falls! We did this and it was thrilling. We just hope our waterproof camera pictures turn out! The second day we explored the parks tropical jungle on a 10 kilometer trek that took us through huge cupay trees (South American hardwoods) with our hike ending at a small waterfall and pond. We both took some time here to have a small picnic and a swim simply time to soak in our surroundings. We had some other neat experiences in Iguzau, such as a visiting a lookout point where you can see both Paraguay and Brazil (separated by only a river) but the national park in Iguazu was the reason for our visit and rightly so!

Just a few of the huge falls in Iguazu, Argentina.

After a few days in the park, including an afternoon of sun helped by some very big beers at our resort-like bed and breakfast (B&B) we boarded another LAN flight to take us from Iguazu to Mendoza, via Buenos Aires (there are no direct flights, BA is the hub).

Round # 1 of our 1 L Quilmes beer by the pool, Los Troncos, Iguazu, Argentina.

Our travel day behind us, we spent 4 full days in Mendoza. Like Buenos Aires, Mendoza has many things to do for one, visit wineries, LOTS of them. Within a radius of a couple hundred miles, there are well over 1,200 wineries (bodegas) – from very big enterprises who produce tens of millions of bottles per year to small, boutique, family-owned wineries that produce a few thousand. We had the luxury of visiting (and tasting) a bit of everything on our private wine tour, bodegas big and small; Malbec, Cabernet Sauvignon, Cabernet Franc and Merlot just to name a few. Another highlight for us in Mendoza was Parque San Martin. Under the direction of French architect Carlos Thays, the park was completed in the early 1900s which was adorned with many beautiful sculptures and a rose garden. Also within the parks grounds, there is a stadium, a zoo, some university buildings, a monument that commemorates the crossing of the Andes by Jos de San Martn and his army, and a large lake which has The Regatas Club on its shore. Simply put, its a great way to spend a day, and we did.

Parque San Martin, Mendoza, Argentina.

Last but certainly not least, our other major experience in Mendoza was our Alta Montana tour (high Andes mountain tour). As the name suggests, a small tour bus took us up, way up, into the Andes mountains from Mendoza and back again. The entire trip was long, about 400 kilometers in total but well-worth every climb and turn. Starting from the wine region and the foothills, our journey took us into the Andes to over 10,000 feet, right to the Chilean border. On our way up, we visited the Aconcagua park entrance, where skilled mountain climbers (not us) begin their 15 kilometer journey to climb the highest mountain in the Western hemisphere. At almost 23,000 feet, it is a very big mountain indeed, the biggest weve ever seen and one of the Seven Summits.

The top of Aconcagua, from our view down below, at 10,500-feet.

Other Mendoza highlights worth mentioning:

-The five plazas in Mendozas city center, great to stroll through, people-watch and simply relax and enjoy amongst the water fountains.
-Dinner at Azafran amazing food and you can bring your own wine. You can have a five-star, three or four course meal for $80 CDN per couple!

My petit filet at Azafran, Mendoza, Argentina

I could go on, but thats probably more than enough. Besides, this is a personal finance and investing blog, not a travel blog We have tons of stories about the people we met and our B&B owners in particular all great people whom we owe a huge thanks for making each night in each city, comfortable and safe. Thanks to Tesorito, Los Troncos and Plaza Italia B&Bs!!!

Like I mentioned in my last post, while its great to travel its also great to be home. In a future post, Ill discuss what we learned or re-learned about travelling; when youre over 6,000 miles from home, every day is literally an adventure and sometimes you can’t be careful enough. There are always things you can do to protect yourself and beyond that, make your trip most enjoyable. Stay tuned for those tips and learnings, hopefully they can help you in your next adventure.

Anyone have a trip they were especially fond of?
Anyone have a trip planned?

Cheers,
Financial Cents

I am thankful that I live in the technology age, where I can use a small electronic box called a computer to analyze my stocks and trading techniques on something called a spreadsheet.

I am thankful that I live in the information age, where I can get stock quotes instantly without having to call a broker, and I can get all kinds of financial data and up-to-the-second news about stocks I am interested in.

I am thankful that I live in the communication age, where I can connect with my brokerage firm and fellow traders in numerous ways, such as instant messaging, texting, tweeting, and chat-rooming.

I am thankful that I pay less than $10 per trade for commissions, unlike the old days, when I was subject to minimums of $35 to $100, plus add-ons depending on the number of shares.

I am thankful for the bid and asked spreads narrowing to as little as one cent, unlike the old days when it used to be one quarter of a dollar, or occasionally one eighth of a dollar.

I am thankful that I can easily trade internationally, with the ability to buy most major publicly traded companies around the world, and still pay the same low commission.

I am thankful that I can now easily trade a type of mutual fund called an Exchange Traded Fund, which I can buy and sell several times in one day.

I am thankful that I can buy bearish funds through an ETF, which allows me to diversity with a short position without the unlimited risk of shorting a stock.

I am thankful that I can buy funds through an ETF that can give me double and triple leverage, without having the risk of margin calls.

I am thankful that there is so much free instantaneous adjustable charting software available, unlike the old days when we had to wait for our outdated daily and weekly chart books to arrive in the mail.

I am thankful that the commissions on options are so low, allowing me to do spreads that could only have been profitable to market makers back in the old days.

I am thankful for all the option software currently available for free through my brokerage firm that helps me analyze and choose the best collars, iron condors, and other option trading strategies.

I am thankful that I can have money transferred from my brokerage account to my bank account without a fee and quickly, sometimes in as little as 24 hours, unlike the old days, when I had to wait for a check to be sent across country and arrive in my mailbox.

I am thankful that I live in a free enterprise country that allows me to trade stocks freely.

By Fred Fuld III at Stockerblog.com

Ken Fisher Interview Part 6
Please note: Interview took place on Wednesday, October 27, 2010

Stockerblog: In regards to Congress, in your book, you do show the analysis of a change in parties and how it can affect the market, but have you done research on Congressional changes from one party to another?

Fisher: Those don’t matter much. What matters is do they have power to pass or not.

It’s really not whether the Republicans are better or the Democrats are better. When you move from one party has got the power to nobody’s got the power, the market likes it better.

Let me put it this way. Markets really don’t like political change. They don’t like having legislation. It doesn’t matter if it’s legislation that the Democrats would prefer or legislation that the Republicans would prefer.

So if you take the time period like the 1994 midterms with the Republican revolution, that worked really well because the Republicans didn’t have big margins when they won, in 1994. They had a big election to get there but they didn’t have big margins, and then they had a Democratic president who could veto. So not much got done after that.

This time we’ll have the same thing. Almost certainly, the Republicans will take the House of Representatives. (ed. note: interview took place Oct. 27) The Democrats won’t have any margin and won’t be able to pass anything, and the Republicans will pick up steam, and while its very unlikely they will take control of the Senate, with one House in one party and another house in another party, it’s like what Ronald Reagan had in 1983.

Stockerblog: Now Bunk Number 36, I think most investors, obviously incorrectly, fear higher taxes. This is the one about stocks love lower taxes.

Fisher: We kind of talked about this before. Those fears are already priced into the markets.

This can be done one of two ways. The one people are worried about now is the sun-setting of the so-called Bush tax cuts. Everybody knows that’s fair and have had a lot of time to react to it.

Let’s step back for a minute. The United States is part of the world is important, but it’s not the only part of the world, and of the United States, more money than not isn’t taxable than is. Most of the money that’s taxable doesn’t get sold anyway, like Bill Gates owning shares in Microsoft or me owning Fisher Investments. It’s not like a stock that you’re going to turn around and sell right away. And then the people that are taxable investors, if you think about it now after what we’ve been through in the last few years, not that many of them have a lot of capital gains to take. If they wanted to take them and realize the gains, they have had all this time to do it before the tax change occurs. So it’s not like they didn’t have lots of lead time.

So you can say, who in their right mind if they’ve got a thousand shares of stock X at a big capital gain, and they want the lower rate, who in their right mind is holding off until after the change. The selling’s all done in the here and now. The odds are that the market doesn’t have a problem with that moving forward.

There’s this part that I find amazing, which is the arrogance of presuming that an investor sees something that pretty much every other investor ought to be able to see, and from that, you continue to see that its a smart economic decision. That might be true outside of the world’s capital markets but the whole role of capital markets makes that impossible.

End of Part 6

The Debunkery book is available at Amazon.

Ken Fisher obviously doesn’t give individual stock recommendations in his interviews, but some stocks he likes that were mentioned in his recent Forbes columns, including high dividend stocks, are available in the form of a free Excel list at WallStreetNewsNetwork.com.

Part 1 of this interview is available HERE.

Part 2 of this interview is available HERE.

Part 3 of this interview is available HERE.

Part 4 of this interview is available HERE.

Part 5 of this interview is available HERE.

By Fred Fuld at Stockerblog.com

Disclosure: Interviewer doesn’t own any of the stocks mentioned in this interview series at the time the articles were written.

Copyright 2010. All rights reserved. Reproduction of this interview prohibited without permission. All opinions are those of Ken Fisher, and do not represent the opinions of Stockerblog.com or the interviewer. Neither Stockerblog nor the interviewer nor the interviewee are rendering tax, legal, or investment advice in this interview. If you want tax, legal, or investment advice, contact the appropriate professional.