WEBVTT - Surveillance: Trade Wars Are Scaring People, Stringham Says 0:00:00.080 --> 0:00:13.040 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 jay Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.360 Bloomberg dot Com, and of course on the Bloomberg And 0:00:34.440 --> 0:00:37.320 now to give us a little bit of perspective. When 0:00:37.320 --> 0:00:40.440 we see that the SMP five hundred is down twelve 0:00:40.479 --> 0:00:43.440 percent for the year, the nasdack down ten percent, the 0:00:43.560 --> 0:00:46.680 Dow Jones industrial leverage posting a decline of eleven and 0:00:46.720 --> 0:00:50.120 a half percent, we went looking under the tree for 0:00:50.159 --> 0:00:53.080 someone who is optimistic, and luckily we didn't have to 0:00:53.080 --> 0:00:55.960 go very far. Edward Stringham joins us now here in 0:00:56.040 --> 0:00:59.440 our studios. He's the president of the American Institute for 0:00:59.520 --> 0:01:04.520 econom Research. Edward Stringham, Merry post Christmas and Happy Boxing 0:01:04.600 --> 0:01:08.280 Day to you. I'm so glad that you're here because 0:01:08.920 --> 0:01:14.080 you are optimistic about the global economy in twenty nineteen. 0:01:14.440 --> 0:01:17.800 Give us some reasons why we should put the humbug aside. 0:01:18.640 --> 0:01:23.720 So I would say, uh, potentially, potentially we got it 0:01:23.800 --> 0:01:26.160 with a little hope. There's the there's a joke in 0:01:26.240 --> 0:01:30.120 the Soviet Union of the optimists and the pessimists. That 0:01:30.360 --> 0:01:33.760 the pessimist says, oh, things are so bad, they can't 0:01:33.760 --> 0:01:36.840 get any worse. The optimist says, no, don't be so pessimistic. 0:01:36.920 --> 0:01:41.440 Things can get a lot worse. So I hope that's 0:01:41.480 --> 0:01:43.880 in the past. So I I would say that there's 0:01:44.160 --> 0:01:46.840 a lot of things that could go wrong in two 0:01:46.920 --> 0:01:50.040 thousand nineteen, but there's just so much that could go well. 0:01:50.080 --> 0:01:54.440 So we're at right now record low unemployment rates, the 0:01:54.480 --> 0:01:57.960 lowest we've seen in the past fifty years. We've seen 0:01:58.000 --> 0:02:02.160 a lot of increase in UH certain sectors of the economy, 0:02:02.200 --> 0:02:04.680 like the financial sector due to I would say de 0:02:04.880 --> 0:02:08.200 regulation of the economy or the past couple of years, 0:02:08.560 --> 0:02:11.640 we've seen a lot of strength in our business due 0:02:11.639 --> 0:02:17.960 to lowering taxes and increasing corporate opportunity. On the other hand, 0:02:18.560 --> 0:02:23.200 there's a lot that is actually interfering, getting people upset. 0:02:23.320 --> 0:02:26.800 I would say things like the trade wars are scaring people. 0:02:27.240 --> 0:02:30.240 They're hammering markets in China. If you look at the 0:02:30.320 --> 0:02:33.880 stock indexes for for the Chinese stock markets, I feel 0:02:34.000 --> 0:02:37.000 very bad for them. So you know, there's a lot 0:02:37.040 --> 0:02:40.960 more than the Hank Sang is down more than this 0:02:41.040 --> 0:02:45.880 year it's just unbelievable. So that's what we would predict. However, 0:02:45.960 --> 0:02:49.520 when we see that people can gain from trade and 0:02:49.560 --> 0:02:51.920 then we see that that could be taken away from this, 0:02:52.480 --> 0:02:56.200 that's exactly what we would predict, is decreases in our 0:02:56.240 --> 0:02:58.679 major trading partners stock markets. All Right, I'm going to 0:02:58.760 --> 0:03:01.920 play the optimist for you here because I'm wondering whether 0:03:02.320 --> 0:03:08.280 the sort of imagination of investors has run away with 0:03:08.360 --> 0:03:12.680 them when they think about the repercussions from the trade 0:03:12.760 --> 0:03:15.880 confrontation between the United States and China, between the United 0:03:15.880 --> 0:03:19.160 States and the European Union, because it seems to be 0:03:19.200 --> 0:03:21.760 at least let's go down the list, be a little specific. 0:03:22.320 --> 0:03:25.359 The issue of intellectual property is one that no one, 0:03:25.400 --> 0:03:28.400 at least in the United States, Republican or Democrats, seems 0:03:28.440 --> 0:03:32.040 to have an issue with. Everybody sees the perspective that 0:03:32.200 --> 0:03:38.920 China has been stealing or at least misappropriating intellectual property 0:03:39.120 --> 0:03:41.360 not only from the United States but from other countries. 0:03:42.520 --> 0:03:46.640 It's I think a very interesting issue that has come 0:03:46.760 --> 0:03:49.920 up in light of these discussions about tariffs, and a 0:03:49.960 --> 0:03:52.600 lot of people say, oh, it's really not about restrictions 0:03:52.600 --> 0:03:55.840 on trade, it's these other things. But when the president 0:03:55.920 --> 0:03:57.640 came out a few weeks ago, I say, I am 0:03:57.680 --> 0:04:01.280 a tariff man. I think that that really shows deep 0:04:01.360 --> 0:04:05.120 down that he might be actually a tariff man, and 0:04:05.160 --> 0:04:07.640 that to me does worry me. So there's a lot 0:04:07.680 --> 0:04:09.840 of these I would say, I don't think it's just 0:04:10.160 --> 0:04:14.280 a political stand. I wanted to get Chinese to change 0:04:14.320 --> 0:04:16.159 the way they do business. I I don't know. A 0:04:16.160 --> 0:04:19.560 lot of my friends actually argue that that's what he's doing. 0:04:19.640 --> 0:04:22.160 It's part of his art of the deal, and he's 0:04:22.200 --> 0:04:25.240 really just bargaining. And if that ends up being the 0:04:25.279 --> 0:04:27.800 case and we end up with lower tariffs all around, 0:04:28.240 --> 0:04:32.080 then I will be thrilled and say yes two thousand nineteen, 0:04:32.480 --> 0:04:35.239 I think if they were to actually take their foot 0:04:35.360 --> 0:04:39.000 off of the throat of international trade, the government or 0:04:39.040 --> 0:04:41.200 take its foot off the throat of international trade, we 0:04:41.240 --> 0:04:44.320 would have a huge increase in markets, and that also 0:04:44.400 --> 0:04:48.960 could be potentially part of his strategy to actually open 0:04:49.080 --> 0:04:51.640 up unleash markets at a later date. What do you 0:04:51.680 --> 0:04:56.240 make of the argument that the reason we've seen this 0:04:56.480 --> 0:05:00.560 steady sell off in stocks is directly related to the 0:05:00.680 --> 0:05:05.320 US Federal Reserve, the increase in interest rates, and the 0:05:05.360 --> 0:05:08.480 wind down the ongoing wind down of the Federal Reserve's 0:05:08.520 --> 0:05:12.479 balance sheet. That's another very interesting and complicated issue. We've 0:05:12.520 --> 0:05:16.440 got a system where the Federal Reserve controls so much 0:05:16.839 --> 0:05:20.279 of the important parts of our economy, specifically the interest rate. 0:05:20.600 --> 0:05:23.880 We had a series of very loose monetary policy for 0:05:24.360 --> 0:05:27.120 over ten years, and people saying we've got to move 0:05:27.160 --> 0:05:29.240 away from that. We've had what I would say are 0:05:29.480 --> 0:05:33.800 very artificially low UH interest rates for so long, and 0:05:33.880 --> 0:05:37.960 the Federal Reserve said, basically, we can't continue this, and 0:05:38.040 --> 0:05:40.480 they've been easing off of this what I would call 0:05:40.520 --> 0:05:44.320 this overly loose monetary policy. So I think it had 0:05:44.360 --> 0:05:48.600 to happen at one point. We're going into this direction. 0:05:49.240 --> 0:05:52.000 And then the question is is this going to be 0:05:52.839 --> 0:05:57.200 distabling or destabilizing of the economy or not. You believe 0:05:57.240 --> 0:06:00.440 it will be destabilizing. I mean, it's really is this 0:06:00.640 --> 0:06:02.640 level of interest rates. I mean, you take a look 0:06:03.040 --> 0:06:06.200 at you know, three percent for the thirty year and 0:06:06.520 --> 0:06:08.240 all right, to take a look at the two year 0:06:08.320 --> 0:06:13.360 at two point five, that doesn't seem like an outsized 0:06:13.960 --> 0:06:17.040 increase in interest at all. I totally agree with you 0:06:17.120 --> 0:06:20.159 that we're we're talking about, you know, a quarter percent 0:06:20.400 --> 0:06:23.799 increase last week, and it's like, oh, the sky is falling. 0:06:24.279 --> 0:06:28.919 I just don't think that that is that the excuse 0:06:29.000 --> 0:06:31.640 for why people sell, but they don't have any other 0:06:31.680 --> 0:06:35.640 President said just the other day he said he said 0:06:35.640 --> 0:06:38.840 the only bad thing going on in the economy is 0:06:38.880 --> 0:06:41.120 a federal reserve. And I think that's trying to put 0:06:41.640 --> 0:06:44.720 point the finger too much at the federals. I'm not 0:06:45.279 --> 0:06:47.920 saying the federal reserve is great, but to say that 0:06:47.960 --> 0:06:51.640 they're responsible for all woes and the economy, I just 0:06:51.720 --> 0:06:53.919 don't buy it. Well, they can't rack up a trillion 0:06:53.960 --> 0:06:56.760 dollar deficit all by themselves, right, I mean, they need 0:06:56.800 --> 0:07:00.200 help from side, from the government. Do you believe that 0:07:00.279 --> 0:07:03.560 the increase in the debt and the deficits that the 0:07:03.600 --> 0:07:06.080 government is the U S Government is running, you think 0:07:06.120 --> 0:07:10.800 that this is going to really hurt the economy? In so, 0:07:10.880 --> 0:07:13.840 this is I would call a long term problem. We've 0:07:13.880 --> 0:07:18.720 got unsustainable deficits, unsustainably growing debt, and I think the 0:07:18.800 --> 0:07:21.920 longer this last, the more we're gonna have to be 0:07:22.000 --> 0:07:25.840 paying on interest servicing debt. But I do think that 0:07:25.920 --> 0:07:28.600 this is going to come in gradually and it's going 0:07:28.680 --> 0:07:32.160 to be more and more problematic. But I don't I 0:07:32.200 --> 0:07:34.480 can't predict that this is what everybody who is listening 0:07:34.520 --> 0:07:37.800 has already retired, and the children and grandnill do. Right. 0:07:37.880 --> 0:07:40.880 So I don't think tonight there's going to be this 0:07:41.040 --> 0:07:45.000 massive crisis. But but over time, certainly, as we go 0:07:45.560 --> 0:07:47.840 more and more into the realm of higher and higher debt, 0:07:47.880 --> 0:07:50.200 that isn't going to be increasingly a problem. Okay, so 0:07:50.400 --> 0:07:54.320 you've talked about the labor picture, which means more people working. 0:07:54.400 --> 0:07:57.240 You see help wanted signs, it's difficult to hire workers 0:07:57.280 --> 0:08:00.480 for certain jobs. Do you believe that that will help 0:08:00.480 --> 0:08:03.800 the economy in because if you're working, you're paying taxes, 0:08:03.840 --> 0:08:06.040 and that money also goes into the economy because you've 0:08:06.040 --> 0:08:09.080 got to spend it. Sure. Yeah, there's a very good 0:08:09.160 --> 0:08:14.360 labor market right now. There's increases in wages, and by 0:08:14.400 --> 0:08:17.920 all accounts, that's actually very positive. The more people we 0:08:18.000 --> 0:08:21.360 have hired, the more, as you said, the people are working, 0:08:21.360 --> 0:08:24.680 the more they're producing, the more everybody has. So so 0:08:24.840 --> 0:08:28.960 to what do you really ascribe the gloom that seems 0:08:29.000 --> 0:08:37.280 to have settled on financial markets, whether it's the debt market, treasuries, leverage, loans, equities, yeah, 0:08:37.320 --> 0:08:40.640 I I don't. I don't consider things like leverage loans 0:08:40.720 --> 0:08:44.040 to be the problem. I consider the problem to be policy. 0:08:44.280 --> 0:08:50.199 Uncertainty of bad government policy can really throw a wrench 0:08:50.280 --> 0:08:54.440 into things. It can interfere with businesses plans if all 0:08:54.440 --> 0:08:59.360 of a sudden the inputs of their products are more expensive. 0:08:59.400 --> 0:09:05.000 American corporations are now put at a competitive disadvantage worldwide. 0:09:05.360 --> 0:09:09.200 Consumers themselves are going to be buying fewer goods when 0:09:09.240 --> 0:09:13.120 they have to pay higher tariffs. So I certainly hope 0:09:13.400 --> 0:09:18.680 that this trade ward doesn't balloon and explode, But it's 0:09:18.679 --> 0:09:21.920 something that can cause a lot of alarm to to anybody. 0:09:21.920 --> 0:09:24.040 All right, So I'm just gonna before we let you go, 0:09:24.120 --> 0:09:26.079 I just got to assume that you came here either 0:09:26.160 --> 0:09:28.880 in some vehicle or you've taken a plane. In the 0:09:28.960 --> 0:09:32.400 last couple of days. We've got oil right now at 0:09:32.520 --> 0:09:35.960 forty three dollars of barrel trading on the nimax. It's 0:09:36.040 --> 0:09:38.439 up two percent today, but that's the minimus because it's 0:09:38.760 --> 0:09:42.679 six cents higher. If oil stays at forty three, is 0:09:42.760 --> 0:09:44.880 that going to be good for consumers and good for 0:09:44.920 --> 0:09:47.160 the economy, and good for the airlines and so on? 0:09:48.160 --> 0:09:51.640 That's a really difficult question. We've got so many prices 0:09:51.800 --> 0:09:57.120 in the world, and stock markets prices are determined by 0:09:57.240 --> 0:10:02.040 all factors, including current input crisis. So I think that, 0:10:02.280 --> 0:10:07.319 um uh, the oil. Oil is an important factor in 0:10:07.360 --> 0:10:10.840 the economy, but I think there's so many other, bigger, 0:10:10.960 --> 0:10:14.440 more important things that are in our control. The oil 0:10:14.480 --> 0:10:18.080 markets is kind of outside of our control in the 0:10:18.160 --> 0:10:22.320 short run at least. But what isn't our control is policy. 0:10:22.400 --> 0:10:27.240 Economic policy matters. All right, Well done, thanks very much. 0:10:27.600 --> 0:10:30.960 Edward Stringham is the president of the American Institute for 0:10:31.080 --> 0:10:48.240 Economic for Research. I'vean fine set. Tigers Financial Chief investment 0:10:48.360 --> 0:10:52.680 officer and director of Research joins us. Now, Ivan, it 0:10:52.760 --> 0:10:55.480 looks like a good open today, but what about a 0:10:55.640 --> 0:10:58.040 close for the year. Do you think that we're going 0:10:58.080 --> 0:11:03.160 to be able to rebound from these pretty steep sell 0:11:03.200 --> 0:11:07.560 offs and all the indexes? Well, I think now it 0:11:07.679 --> 0:11:10.400 is the time to take advantage of the after Christmas 0:11:10.400 --> 0:11:13.240 sale on Wall Street. I mean, there are some incredible 0:11:13.320 --> 0:11:16.719 values here. There's been, unfortunately, there's been a huge disconnect 0:11:16.760 --> 0:11:19.280 between how well the economy is doing and now how 0:11:19.320 --> 0:11:21.800 badly the stock market is doing. And there's been some 0:11:21.840 --> 0:11:25.240 near term issues I mean, the concern over the trade 0:11:25.240 --> 0:11:32.679 situation with China. Now the um uh government shutdown, and um, 0:11:32.840 --> 0:11:36.840 some concerning tweets from President Trump about the lack of 0:11:36.880 --> 0:11:40.720 confidence in the FED and uh, you know, and wanting 0:11:40.760 --> 0:11:47.160 to potentially remove Jerome Powell as the head of the FED. Yes, 0:11:47.280 --> 0:11:50.320 and his statement of the fact that the FED doesn't 0:11:50.400 --> 0:11:53.760 understand financial markets is is a little odd. That's like 0:11:53.840 --> 0:11:56.280 saying the doctor who's about to operate on you doesn't 0:11:56.320 --> 0:12:00.400 understand medicine. So, um, some of these near term things 0:12:00.400 --> 0:12:03.480 have been disappointing. And uh, two of the things that 0:12:03.559 --> 0:12:05.960 President Trump had going for him was the strength of 0:12:05.960 --> 0:12:08.720 the economy. Everybody liked the Trump economy and the Trump 0:12:08.760 --> 0:12:12.680 stock market, and unfortunately the Trump rally has faded. However, 0:12:12.720 --> 0:12:15.400 I still believe that the underlying economic strength in the 0:12:15.480 --> 0:12:19.400 US is still strong, and you know, just look at 0:12:19.440 --> 0:12:22.880 the strong holiday season that we had. And uh, for 0:12:22.960 --> 0:12:25.240 the most part, stocks are cheaper than they were a 0:12:25.320 --> 0:12:27.960 year ago at this time. Surely, But but I gotta 0:12:27.960 --> 0:12:30.080 pressed you, ivan, I mean, did you see this sell 0:12:30.120 --> 0:12:34.440 off coming? No, not not to this extreme point. Okay, 0:12:34.480 --> 0:12:37.960 So if you didn't see this, okay, So my point is, 0:12:38.000 --> 0:12:41.520 if you didn't see it coming. Many people didn't see 0:12:41.520 --> 0:12:44.120 it come. You've got a lot of company. Is it 0:12:44.200 --> 0:12:48.320 possible that the stock market and investors, like you know, 0:12:48.520 --> 0:12:55.199 the bookmakers, are telling the public something that they didn't 0:12:55.280 --> 0:12:58.800 know before, that they really are concerned about something in 0:12:58.840 --> 0:13:02.840 the future, and that it is a future looking machine 0:13:03.280 --> 0:13:07.839 that sometimes gets it right. Well, there is a lot 0:13:07.880 --> 0:13:11.880 of concern amongst investors about the decline in stocks, but 0:13:12.000 --> 0:13:15.160 they are more upset that the market is down, and 0:13:15.200 --> 0:13:17.600 not more upset that that not upset that they believe 0:13:17.640 --> 0:13:20.520 the economy is slowing. You know, everybody says the economy 0:13:20.559 --> 0:13:24.880 still looks good from various people's advantage point of you know, 0:13:24.960 --> 0:13:27.199 the companies they run, or the jobs they have, or 0:13:27.240 --> 0:13:29.760 the situations that they're in. They still say the economy 0:13:29.840 --> 0:13:32.520 is good. But this sell off in the stock market 0:13:32.600 --> 0:13:36.040 has been somewhat technical. I think we've seen a lot 0:13:36.080 --> 0:13:40.760 of margins selling recently, and a lot of UH forced 0:13:40.760 --> 0:13:44.760 selling by over leveraged hedge funds, and a lot of 0:13:44.800 --> 0:13:47.320 funds are in net redemption now, which has caused a 0:13:47.320 --> 0:13:49.720 lot of forced selling, and there's a lot of panic 0:13:49.760 --> 0:13:52.760 out there. Explain in a second, I've explained how that 0:13:53.040 --> 0:13:57.640 forced redemptions work because if you invest in an alternative 0:13:57.800 --> 0:14:00.880 such as a hedge fund, it's like you can just 0:14:01.000 --> 0:14:03.160 call them up on the phone or send them an 0:14:03.160 --> 0:14:05.400 email whatever it is, and say I want to get out, 0:14:05.480 --> 0:14:09.079 send me my check. It takes a while, doesn't it. Well. 0:14:09.200 --> 0:14:12.319 Usually some have, you know, minimum of thirty day notice 0:14:12.360 --> 0:14:15.720 to redeem. Others have a periodic redemptions that you have 0:14:15.840 --> 0:14:20.120 to get in line for. But I think with the 0:14:20.160 --> 0:14:23.680 poor performance and hedge funds that we've seen, um, they 0:14:23.840 --> 0:14:26.520 in theory underperform on the way up because their heads, 0:14:26.560 --> 0:14:28.400 but they're supposed to protect you on the way down, 0:14:28.400 --> 0:14:31.320 and many haven't and they are getting a lot of 0:14:31.360 --> 0:14:34.480 redemptions uh for the end of the year and have 0:14:34.600 --> 0:14:37.000 been forced to sell. Also, a lot of hedge funds 0:14:37.440 --> 0:14:43.040 use leverage and they have been in a significant deleveraging process. 0:14:44.200 --> 0:14:46.760 What do you make of the argument that the reason 0:14:46.960 --> 0:14:52.000 that stock prices have fallen is directly correlated to the 0:14:52.080 --> 0:14:58.800 Federal Reserve with drawing liquidity and buying power in the marketplace. 0:15:00.520 --> 0:15:04.400 They've raised rates and they have been contracting their balance sheet. 0:15:04.480 --> 0:15:06.760 But I don't really believe it has been a huge 0:15:06.800 --> 0:15:11.360 reduction in liquidity I think the point that Treasury Secretary 0:15:11.440 --> 0:15:14.960 Minution was making on Sunday night with his calls to 0:15:15.080 --> 0:15:18.120 the heads of all the big banks was that there 0:15:18.240 --> 0:15:21.680 is plenty of liquidity out there, so we really there's 0:15:21.680 --> 0:15:23.520 not really a liquidity issue. I think we've seen a 0:15:23.600 --> 0:15:27.000 buyer strike. People have just pulled back from buying, and 0:15:27.040 --> 0:15:28.800 when you have a lot of shares being dumped on 0:15:28.800 --> 0:15:34.160 the market, prices moved downward quickly. But I don't think 0:15:34.240 --> 0:15:37.040 that there's a lack of liquidity in any of the 0:15:37.080 --> 0:15:40.680 financial markets. So where do you believe this on the skyline? Okay? 0:15:40.720 --> 0:15:42.880 So where do you believe the new money will come 0:15:43.000 --> 0:15:46.880 from in order to boost stock prices because the only 0:15:46.920 --> 0:15:49.160 reason they go up is someone else is willing to 0:15:49.200 --> 0:15:53.000 pay more for the same share. Well, that's a good question. 0:15:53.280 --> 0:15:56.840 The first flow of money will begin on the middle 0:15:56.880 --> 0:15:59.840 of January when people start to get paid again and 0:16:00.440 --> 0:16:03.480 uh start to contribute into their four o one case 0:16:04.120 --> 0:16:07.000 because um, you know, during the course of a year 0:16:07.040 --> 0:16:09.760 you may reach the limit, and that for some people 0:16:09.840 --> 0:16:12.600 can be anywhere from the middle of the year toward 0:16:13.080 --> 0:16:15.040 you know, later on in the year. So we still 0:16:15.280 --> 0:16:17.680 maxing out your four oh one contribution you think that 0:16:17.720 --> 0:16:20.760 has an effect. That's number one, yes, yes, So you 0:16:20.800 --> 0:16:24.640 will see UM money flow back into four one case, 0:16:24.680 --> 0:16:26.800 which goes back into the stock market on a periodic 0:16:26.840 --> 0:16:30.520 basis one of the best ways to invest. The second 0:16:30.840 --> 0:16:35.120 catalyst for the upside I believe will be Q four earnings, 0:16:35.120 --> 0:16:38.120 which we start to get in towards the end of January, 0:16:38.520 --> 0:16:41.680 and the and the and two thousand nineteen outlooks, and 0:16:41.720 --> 0:16:44.640 we have not seen a huge reduction in corporate outlooks, 0:16:44.680 --> 0:16:49.280 and in fact, most CEOs are still very optimistic for 0:16:49.360 --> 0:16:53.280 two thousand nineteen. They haven't cut their outlook back. So 0:16:53.320 --> 0:16:55.960 you're looking at earnings being a boost when we receive 0:16:56.080 --> 0:16:59.880 those fourth quarter results. I think there's you know, two 0:17:00.040 --> 0:17:02.680 a catalysts. The flow of money that always begins in 0:17:02.800 --> 0:17:05.320 January into pensions in four O one case is always 0:17:05.320 --> 0:17:09.760 positive for the market. Second is uh, I think that 0:17:09.840 --> 0:17:13.080 earnings will be a positive catalyst. The third is I 0:17:13.119 --> 0:17:17.320 think we will get some type of UM trade deal 0:17:17.400 --> 0:17:20.399 with China. I've said for a long time President Trump 0:17:20.400 --> 0:17:23.040 had the upper hand for a while, as the Chinese 0:17:23.080 --> 0:17:27.280 stock market has declined significantly since the trade battle began 0:17:27.840 --> 0:17:31.920 in February, and now the decline in our market, which 0:17:32.040 --> 0:17:36.840 is partially caused by the uncertainty over trade with China. 0:17:37.240 --> 0:17:40.840 I think President Trump maybe a little bit more flexible 0:17:40.840 --> 0:17:44.360 in his negotiations. Uh, and he's probably as stubborn as 0:17:44.560 --> 0:17:47.160 President sigen Ping is too. So you have two sub 0:17:47.280 --> 0:17:50.240 negotiators that you know are being forced to the table 0:17:50.280 --> 0:17:54.080 because of current economic and market situations in their own countries. 0:17:54.560 --> 0:17:58.200 Speaking with Ivan fine Set, he is Tigris Financial's chief 0:17:58.240 --> 0:18:03.240 investment officer and director of Research, Ivan, are you surprised 0:18:03.560 --> 0:18:07.919 that there are not more bullish calls for equity, particularly 0:18:08.080 --> 0:18:11.679 when you see the price of fossil fuel of crude 0:18:11.680 --> 0:18:16.840 oil at forty two dollars a barrel. The one thing 0:18:16.880 --> 0:18:19.560 I have been right on and recently has been I've 0:18:19.760 --> 0:18:21.520 said oil was going to drop, and I believe the 0:18:21.560 --> 0:18:24.080 oil will go closer to forty dollars than many people 0:18:24.119 --> 0:18:27.679 calling for sixty dollars and lower oil prices is another 0:18:27.800 --> 0:18:31.800 positive thing for consumer discretionary spending, so that also is 0:18:31.800 --> 0:18:34.199 helpful the economy. Why do you think oil prices are 0:18:34.200 --> 0:18:38.679 gonna hit forty because they will not be able to 0:18:39.480 --> 0:18:43.520 support prices meaning OPEC with the recently announced UM production 0:18:43.560 --> 0:18:48.000 cuts and Uh, the US is now a wash and oil, 0:18:48.040 --> 0:18:50.280 and we are the world's biggest producer of oil now 0:18:50.320 --> 0:18:53.280 and the shale oil that keeps coming online is also 0:18:53.760 --> 0:18:57.320 helping keep prices lower. Russia, while they are not an 0:18:57.320 --> 0:19:01.760 OPEC member, they meet with OLPEC and try to have 0:19:01.840 --> 0:19:04.440 a consensus on production because obviously we have an interest 0:19:04.480 --> 0:19:06.439 in the price of oil. But they will pump what 0:19:06.480 --> 0:19:09.960 they want and when they want, and we just have 0:19:10.040 --> 0:19:13.479 a lot of supply. Also, company countries like Venezuela is 0:19:13.600 --> 0:19:17.040 in desperty to cash though they want to pump as 0:19:17.119 --> 0:19:20.080 much as they can. So um, the world is a 0:19:20.080 --> 0:19:22.880 wash and oil. It's supply and demand and right now 0:19:22.880 --> 0:19:25.919 we have an oversupply which should take prices for you 0:19:25.920 --> 0:19:29.320 know lower. Well, it just to give you thirty seconds, 0:19:29.359 --> 0:19:31.480 and I'd like you to spend some more time with us, 0:19:32.040 --> 0:19:35.040 and because I want to get your sort of specific 0:19:35.119 --> 0:19:38.440 views on the market which sectors. But is it possible 0:19:38.480 --> 0:19:41.160 that the decline in oil prices is linked to slowing 0:19:41.240 --> 0:19:46.520 demand and that's weaker economic output outside the United States? Well, 0:19:46.560 --> 0:19:49.760 there has been some concern that the decline in oil 0:19:50.119 --> 0:19:54.600 would be an indication of economic weakness. My guest is 0:19:54.640 --> 0:19:57.199 Ivan Fined set He is the chief investment officer and 0:19:57.240 --> 0:20:01.440 director of Research for Tigress Financial Show Ivan. It has 0:20:01.480 --> 0:20:05.480 been a brutal fourth quarter for stock investors. We know 0:20:05.560 --> 0:20:08.920 that we are approaching a decline in the S and 0:20:09.000 --> 0:20:13.000 P five currently at one. We'll wait to see what 0:20:13.080 --> 0:20:16.320 the open brings us. You have mentioned that you are 0:20:16.359 --> 0:20:20.160 bullish and you believe that there is a buying opportunity. 0:20:20.560 --> 0:20:23.560 So if you are an investor who has money to invest, 0:20:24.040 --> 0:20:27.160 where would you specifically be looking to put it to work? 0:20:28.320 --> 0:20:30.840 The first sector would be the tech sector. It's still 0:20:30.880 --> 0:20:34.600 the engine of growth for our economy and pretty much 0:20:34.760 --> 0:20:37.560 most global economies. And the sell off there has been 0:20:37.600 --> 0:20:42.119 the most dramatic companies like Amazon and Apple and UM, 0:20:42.400 --> 0:20:46.320 Intel and Microsoft and Nvidiah and along with many of 0:20:46.320 --> 0:20:50.919 the other chip stocks like Skyworks, Corbo and Quilcom. I 0:20:50.960 --> 0:20:57.360 think there are huge bargains there. And then retail Costco UH, 0:20:57.560 --> 0:21:03.000 Best Buy, UM, Target, UH, Nordstrooms and Macy's. And then 0:21:03.000 --> 0:21:09.639 in the industrials Caterpillar, Boeing, ALCOA, UM. There's just a 0:21:09.720 --> 0:21:16.480 tremendous number of companies that have good growth, pay good dividends, 0:21:17.040 --> 0:21:19.440 and have a huge amount of opportunity ahead of them. 0:21:19.520 --> 0:21:21.440 All right, let's take each one of these if we 0:21:21.520 --> 0:21:24.560 can just a little bit more detail. You mentioned technology. 0:21:24.640 --> 0:21:29.040 You spoke about Amazon dot Com, of course retail plus technology. 0:21:29.080 --> 0:21:32.720 Also you mentioned chip stocks and Apple. I didn't hear 0:21:32.800 --> 0:21:37.080 Facebook in there. Oh yes, I forgot face Facebook. You'd 0:21:37.080 --> 0:21:41.800 be buying Facebook at these levels. Absolutely. You don't believe 0:21:41.840 --> 0:21:48.680 that there's any concern about government regulation. Um not. I'm 0:21:48.680 --> 0:21:52.160 not overly concerned about it. I think that they are 0:21:52.240 --> 0:21:56.520 doing a lot to The two key issues are fake 0:21:56.560 --> 0:22:01.080 accounts and um pretty much false news, and they have 0:22:01.440 --> 0:22:07.600 hired about twenty people to oversee compliance and are heavily 0:22:07.720 --> 0:22:11.960 using artificial intelligence to ferret out a lot of the issues. 0:22:12.359 --> 0:22:16.119 But the most important driver is they have two point 0:22:16.200 --> 0:22:21.160 six billion monthly active users, and advertisers want to go 0:22:21.400 --> 0:22:27.480 to where the customers are, and the digital advertising continues 0:22:27.520 --> 0:22:31.640 to grow because you can use technology and target and 0:22:31.720 --> 0:22:36.959 measure your return on advertising invested dollar. And Facebook offers 0:22:37.400 --> 0:22:40.439 the best value and opportunity to the advertisers and that 0:22:40.640 --> 0:22:43.199 is the key. Al Right, So at a hundred and 0:22:44.200 --> 0:22:49.200 do a share, you're a buyer of Facebook. Absolutely. In 0:22:49.280 --> 0:22:52.679 Facebook is now at the cheapest level since the history 0:22:52.880 --> 0:22:55.160 of it being a public company. All right, so you're 0:22:55.200 --> 0:22:59.840 positive on Facebook. Make the case for Apple. When we 0:23:00.160 --> 0:23:05.000 heard from many analysts that the transition from hardware sales 0:23:05.240 --> 0:23:10.879 of iPhones to service revenue and software is going to 0:23:10.920 --> 0:23:14.679 be a challenge, Well, I don't know if it's going 0:23:14.720 --> 0:23:19.160 to be a challenge. It continues to happen. iPhone sales 0:23:19.320 --> 0:23:25.960 are slowing slightly, but they sold million phones in the 0:23:26.040 --> 0:23:31.320 last quarter. They have a active iPhone user base of 0:23:31.720 --> 0:23:36.200 seven and fifty million that they can sell additional services to. 0:23:36.400 --> 0:23:39.920 They could go to a subscription model for the sale 0:23:39.960 --> 0:23:43.399 of the phones, where uh, most people do buy their 0:23:43.440 --> 0:23:46.280 phones on a monthly basis as part of the contract 0:23:46.280 --> 0:23:50.479 with their service. They can go to a Amazon Pride 0:23:50.480 --> 0:23:56.760 type of membership for streaming media for iTunes um. They 0:23:56.760 --> 0:24:00.560 can also include the Apple Care warranty on a for 0:24:00.600 --> 0:24:02.879 a monthly fee as part of the purchase of the phone. 0:24:03.200 --> 0:24:05.879 There's a lot they can do to monetize this huge 0:24:07.000 --> 0:24:11.280 Apple customer base, and they continue to sell product. They 0:24:11.320 --> 0:24:14.720 continue to go through the ongoing upgrade cycle of the phones. 0:24:14.800 --> 0:24:19.080 They still sell max, they still sell iPads um. The 0:24:19.080 --> 0:24:22.360 demand for their products is strong, alright, So bullish on Facebook, 0:24:22.400 --> 0:24:25.760 bullish on Apple. Turn your attention to industrial as you 0:24:25.760 --> 0:24:28.280 mentioned them. Just give us one industrial stock to give 0:24:28.280 --> 0:24:31.479 you about the thirty seconds. What industrial company would you 0:24:31.520 --> 0:24:36.840 most like to own? They just raised their dividend. Is 0:24:36.880 --> 0:24:40.159 that part of the story. Yes, they just increased their dividend. 0:24:40.960 --> 0:24:43.440 They just increased their buy back by two billion dollars 0:24:43.480 --> 0:24:47.480 from eighteen billion billion. Plane that they have a backlog 0:24:47.520 --> 0:24:51.480 of plane demand for the next twenty years. Few companies 0:24:51.520 --> 0:24:54.640 have that kind of visibility. Uh. They just got a 0:24:54.720 --> 0:25:00.280 huge A fifty plane order from a subsidiary of Saudi 0:25:00.400 --> 0:25:06.200 Arabia Airlines worth almost six billion dollars. Uh. The UH 0:25:06.200 --> 0:25:10.200 seven thirty seven Max remains their best selling phone. Excuse me, 0:25:10.280 --> 0:25:14.280 past selling plane. They've had no loss of letters since 0:25:14.520 --> 0:25:18.280 the unfortunate Lion Air issue, which is now coming out. 0:25:18.320 --> 0:25:20.639