abby joseph cohen, are you lowering the boat after 11%? abby: that's a very charged question, mr.n. let me ask a few questions and then answer. do we think this is a recession? the answer is no. you would think there are some idiosyncratic reasons why profits -- do we think there are some idiosyncratic reasons why profits -- yes, we do. some of it having to do with the currency adjustment because of the rise of the dollar. the profit picture will likely be improving in 2006 -- 2016 vs. 2015. we have,nclude, as that it's not an economic recession or a prophet recession, we take a look at the valuations. profitons in many -- a recession, we take a look at the valuations. scarlet: certain sectors have gotten a huge bump up. --this the time to abby: this is the time to look at companies. 's,n you look at 25-year p/e in some cases, high p/e's are warranted. our focus is really on margins. those are companies that are able to continue to generate good returns on capital and so on. a fewile you identified sectors that have performed well as companies -- stocks, the question for 2016 is,

francine: abby joseph cohen, saying that the markets the perspective.ent on to say that investors have really shown emotional response. we are back with our guests for the hour. lamont, when you look at psychology in the market, how much does volatility have to do with psychology and the fear of the deflationary spiral? and how much does it have to do with the fact that we don't know what's going on in china. >> well, i think it is both. i think we are living in unprecedented times, and there is a sharp division of opinion andt qe and unwinding it what is appropriate for the ecb to be doing, whether the bank of england should be unwinding. a lot of people are very critical, and you know the arguments for and against. butink that is part of it, volatility in itself is also deeply, deeply scary. i think it is the unknown in china. we don't really know what is going on in china. i think a lot of the announcements being made by the chinese authorities have not instilled great confidence the way they have discouraged journalists from reporting things, the wa

betty: that was abby joseph cohen. tom donahue will be joining us. talk with him about that 2016 election. what he wants to do about the gridlock in washington. that is coming up at 11:40 a.m. eastern time. ♪ betty: ted cruz and donald trump running neck and neck in iowa in the newest bloomberg politics poll. ted cruz is under fire after the new york times revealed he failed to disclose loans totaling up to $1 million used to finance his winning 2012 senate bid. donald trump sat down with with all due respect and took a friendly tone on the issue. >> the big story in the new york times about ted cruz, his having not reported a loan for his senate campaign from goldman sachs. you concerned about that? donald trump: i know nothing about it. i hear it is a very big thing could i hope you salts it. he is a nice guy. >> you've been in the public spotlight for years and years. he has not. think it is possible there are lots of things about him in the background that now as he becomes a leading candidate should be investigated? well and i canry understand i

am pleased tos, i say i am joined by abby joseph cohen when who the president of the institute at goldmangreat to have you with us here in tel aviv. we were just talking with the selloff we saw yesterday. in correction mode, it is just the tip of the iceberg? on valuation and based the outlook for the u.s. economy, this is not the tip of the iceberg. clearly, investors are nervous. but the underlying performance of the u.s. economy is actually quite good. the unemployment rate has fallen to 5%. new jobs are being created. companies are profitable. ar feeling is that this is reaction to some of the important news around the world, including the sharp decline in energy prices and the world is about china. then thoughts about what will the federal reserve do next. elliott: you'd expect some kind of rebound eminently? bby: when we apply our valuation models, we think fair value for the s&p 500 is about 2100. so several percentage points above where we are right now. elliott: you already answer my next question, the bank of scotland warning of a ferry -- fairly cataclysmic year ahead. that chi