Jason Stipp: It seems like, at least since the beginning of this year ... since it's run up so much, it seems like any sort of little jolt sends stocks down for a few days. What do you see as the risk factors out there, maybe looking a little bit longer term than the market is right now, and since you're seeing a lot of those opportunities close, what are the risks that investors should have on the radar?
Steven Romick: Well, first, I'm not even sure the market's really sending things down for a few days. It seems like a few minutes or hours, maybe.
In terms of what we see out there, I think that we have a tremendous amount of debt, huge debt burden at the federal level. And what the Fed has been doing, by adding so much into the system and guaranteeing so much and buying assets, as the Fed begins to pull back, what's going to happen is anybody's guess. We liken this economy to as if we were to have a child that has the flu and we've given the child Motrin. When the Motrin wears off is the only point in time at which you will really understand if the child is well, if he still has a fever.
So the Motrin that is the federal stimulus is still there. And until it pulls back it's hard to tell. And as it gets pulled back, it's very challenging to try and predict what is going to happen next. Are we going to have the economic growth slow down because we know there's no support, and it kind of falls off at this rate that we've seen most recently? We would argue that at best, we're looking at lumpy growth and then low to moderate growth over the next five years--nothing great. It's too hard with an economy that has grown such as ours has.
And if you look at each decade, and you look at the ... '50s, '60s, and '70s. GDP, real GDP, was 4%-something. And you look at the '80s and '90s, it was low 3%s. And you look at the first part of this century, first decade, we were at 1.9% real GDP. So what's happening next? We just think there's a continued deceleration. ...
So from our position, where we see opportunity, is we're putting more money overseas, more money in companies today that we think larger cap companies are cheaper than smaller cap companies. And we think that a lot of these larger cap companies have more overseas exposure, anyway. A lot of the more mediocre companies have really, really risen rapidly, and you've seen stocks go up three, four times. Those are places where we have to be careful. If I'm an individual investor, direct them, from the last part of your question, for to what to look for, I would just exercise caution and make sure they are looking at margin of safety first.