Invest in individual companies; never invest in the stock market: Foster Friess

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Millionaire investor Foster Friess on Tuesday explained why he was expecting the market selloff and what dangers could lurk around the corner for the markets.

“It’s the individual companies fundamentals that eventually will carry the day, and talking with my guys, they say 60% of the companies are showing increased estimates,” he told FOX Business’ Neil Cavuto. “It’s quite bullish and when the market runs up as much as it has, a breather is often expected. We always say, never invest in the stock market; we tell our potential clients, invest in individual companies,” he said.

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However, Friess said the implementation of sanctions against Well Fargo over its consumer abuses – part of which involved its creation of millions of fake customer accounts – could be a cause of concern for the markets, describing the actions as “regulations on steroids.”

Well Fargo’s stock has fallen since the Federal Reserve issued sanctions against the bank, limiting its total assets and requiring them to replace four of its current board members.

“For the first time in history the Federal Reserve has physically attacked Wells Fargo,” he said. “It raises concerns: Is the Trump administration really serious about cutting back on regulations?”

“When that happens, a lot of these investors are now passive investors to electronic traded funds. If 36% of American investors are in these now, when that ETF goes down with the banks, that causes people to create selling.”

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Passive investors typically keep buying and selling to a minimum in hopes of maximize returns in the long term.

Another major concern for Friess comes on the political side of the spectrum, with the Democrats pushing to repeal the tax overhaul, which was signed into law in late December.

Many Republicans believe that the lowering of the corporate tax rate from 35% to 21% will drive more companies to invest in the U.S., which in turn will stimulate the economy.

“Another concern would be if the Democrats look like they are going to make some progress coming into the midterm elections, which could reverse the tax reform bill,” he said.

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