David Asman Isn't it beyond time at which the Fed should raise rates given its mandates.

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1 Interviewee: Title: Portfolio Manager Company: USAA Interviewee2: Daniel Stecich, Athena Advisor Services Interviewee3:, Fort Pitt Capital Group Vice President Channel: Fox Business Network Date: February 9, 2015 Time: 04:03pm EST Duration: 7 minutes 14 seconds Interviewer1: Interviewer2: Now let's get today's market action for being in the right place. of USAA is cautious on U.S. equities. You just heard Liz Ann Sonders of Charles Schwab say maybe you want to look elsewhere, but his reason is different. He says it's due to valuations. Kim Forrest from Fort Pitt Capital here to tell us why she's moving to a defensive sector and Dan Stecich is in the pits of the CME. Okay, Dan, you get to run with, I don't know whether it's a Greek soccer ball or the issue in Ukraine. What do you think was really pulling the markets down today? Daniel Stecich It's absolutely Greece right now. The Russian thing certainly a worry, but there's a lot of fear of what's going to happen with Greece, whether they force them into a renegotiation or how that's going to work out. And it's not so much, if Greece were just to go away from the Euro zone quietly it would be all right, but there's the fear of the what-ifs after that. If Greece goes, is it going to cause a domino to fall somewhere else down the line, and I think that's what's pressuring the market. And what is interesting, even though we've been under pressure all day, it hasn't been panic selling. We didn't go down that much and it's not very aggressive. So they're just loosening up a bit before the big Wednesday meeting. All right. Kim, as I mentioned Richard Fisher is coming on. Now he is leaving the Dallas Fed, so this was an audition for you to become head of the Dallas Fed by the way. So I'm going to see how you would respond. We've had a couple of good jobs reports, several good jobs reports. Wages were actually up in the last one, that's good news. : Yes. Isn't it beyond time at which the Fed should raise rates given its mandates. : Well, I don't think I'll ever really be up for that job because I think we should have unwound this a lot longer ago than 2015.

2 So you think they should have raised rates before now? Or maybe not have lowered them as much, but that is water under the bridge, isifn't it now? Okay. Turning to your question, you know, I think the Fed has indicated that they are wanting to be seen as data driven. So given these much higher, you know, the wages are going in the right direction, jobs look like they're catching, you know, traction here, I wouldn't be surprised if we see an increase in rates, very nominally though, later in the year, again because of data drivenness. And let's see what he says about this. I'm fascinated. I know I'll be tuning in for those two segments. Good for you. Amen. Yes, it's going to make news and it will really give people a sense of what may then lie ahead. But, Bob, whether it's the Federal Reserve or perhaps it's just simply that the market is overvalued, you believe that maybe valuations are a little rich here in the United States. People are watching, saying, tell me, Bob, do I stay in equities or do I get out or do I just hold the course? Well, overall, yeah, we think that U.S. equities are probably pretty fairly valued here whether you look at any number of measures, whether it's forward earnings, whether it's trailing earnings, whether you're looking at the Shiller base measure of longer term earnings. But that said, I mean we still believe that there are plenty of very attractive stock picking opportunities out there. Well, okay. So I'm hearing that overall if the S&P's price-to-earnings ratio, I believe it is 17 times forward earnings, is a little historically appropriately valued or even rich, then you say look for the cheaper names that are of great value. So you have to become a stock picker? Exactly. I mean, you know, you're not going to see the returns that we've seen in recent years, like last year up about 14 percent. So I think you have to temper your expectations somewhat and expect perhaps U.S. stocks to be up somewhere in the single digits this year. Dan, I understand foreign news weighed heavily on the market today, but we have retail sales numbers, domestic retail sales numbers coming up later this week. Isn't that going to be more important to traders than what's happening overseas? Daniel Stecich You know, ultimately it should be, but because we have all of these other issues it isn't. But retail sales is a big number this week. It's been a bit squishy of late. They're looking for a.5 percent increase [excluding] food and gas. Let's hope that comes, because if you add that up with the other economic numbers we've had they've been pretty decent. But when you put Europe in front of this and the uncertainty as to what's going to come out of that number, you're not going to see a whole lot of advance from it.

3 Interesting. I like what he just said. I mean I think that that makes a lot of sense. It doesn't matter that it should be a good number, it might not be due to the headline risk, Kim. So let's just get to, I know you're the type of person that's been in this race a long time so you tune out a lot of the headline risk. Yes. What are you picking regardless of what could happen overseas? Well, we are moving from a defensive stand that we've had for the last couple of years and we are looking for growth because we see those green shoots in, I know this is crazy, in America. So technology is a focus, industrials are a focus, and, yes, even consumer discretionary is something that we're looking at. So we're hopeful and we think that the economy is going to continue to expand. Well, Bob, one beaten down sector recently that investors are getting into right now, at least today and the day before, is energy. The energy sector is hopping right now, and Occidental Petroleum is one of your picks. There's some very interesting things that are happening with that one particular energy company. Tell us about it. Yeah, they've undergone a restructuring, so they're looking to sell a significant portion of their Middle East assets and we could see an announcement on that at any time. They've got a very good position in the Permian Basin, both conventional and unconventional production. They just recently started up a huge natural gas project over in the United Arab Emirates called Al Hosn Gas Project, and this thing's going to generate significant free cash flow. So that's why we like Occi. We see a company that's generating significant free cash flow even in this environment, and they pay a really solid dividend and they should continue to increase that dividend over time. Okay. You also have Texas Instruments, CVS Health and Bemis Company, and while, Kim, we showed your picks we didn't say them. I'd like to say them because we have people listening on SiriusXM. Sure. CA Technology, SanDisk, Urban Outfitters.

4 Yep. Three very diverse names. I could go with SanDisk which has had a very nice run up over the last several years. Right. But isn't that a commoditized business, and depending on prices you could really get hit here? That is an extremely volatile name and they have gotten hit. They were well above 100 earlier in They've had some challenges, and that's why I'm suggesting that people take a look at this. They do have one thing that troubles us. They have an outstanding patent issue with another company, and this has to do with their making of solid state drives. Those are the things that you would find in laptops and tablets as opposed to spinning disk drives. So this is something, this is a much-longer term holding than most investors are looking for, but I think it is a great opportunity. And you're right, it is at some point a capacity sort of game but take a look at them. Yeah. Good stuff, guys. Kim Forrest, Dan Stecich,, thank you very much. Important Disclosure This video transcript is provided for informational purposes only by USAA Asset Management Company (AMCO) and/or USAA Investment Management Company (IMCO), both registered investment advisers. The information presented in the video transcript should not be relied upon as investment advice. The video transcript does not contain recommendations, offers, or solicitations of an offer, to buy or sell any security, strategy, or investment product. The views and opinions expressed in the video transcript are solely those of the speakers, as of the air date provided, and do not necessarily reflect the views and opinions of AMCO, IMCO or any affiliate. The views and opinions expressed in the video transcript are subject to change at any time, and AMCO and IMCO disclaim any responsibility to update the video transcript or the views and opinions expressed therein. The information presented should not be regarded as a complete analysis of the subject(s) discussed. The views and opinions expressed should not be relied upon as an indication of the trading intent of any USAA mutual fund or any managed account portfolio. Neither AMCO, IMCO nor any speaker are responsible for any loss incurred by applying the information contained in the video transcript. Past performance is no guarantee of future results.

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