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Speaker 1: This is Master's in Business with Barry Ridholts on Bloomberg Radio.

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Speaker 1: This week on the podcast what Can I Say? An

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Speaker 1: extra extra special guest toward a force presentation from Professor

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Speaker 1: Jeremy Siegel. You know him from all his books, Stocks

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Speaker 1: from the Long Run, Wisdom Tree, Wharton at the University

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Speaker 1: of Pennsylvania. Siegel holds court and explains to us exactly

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Speaker 1: what's been going on in the stock market, in the

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Speaker 1: bond market, what's going to happen in inflation, why the

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Speaker 1: sixty forty portfolio is dead, and why you should have

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Speaker 1: a little bit of gold in your long term investments.

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Speaker 1: You know we I've spoken to the Professor Siegel numerous

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Speaker 1: times before, he's been on the show previously. He's just

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Speaker 1: a delight. He's so knowledgeable you could understand why he

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Speaker 1: is frequently voted favored professor at University of Pennsylvania, the

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Speaker 1: Wharton School. He I'm just gonna stop gushing and say,

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Speaker 1: with no further ado, my conversation with Jeremy Siegel vis

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Speaker 1: is Master's in Business with Barry Ridholtz on Boomberg Radio.

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Speaker 1: My extra special guest this week is Professor Jeremy Siegel.

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Speaker 1: He is the Russell E. Palmer Professor of Finance at

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Speaker 1: the Wharton School at the University of Pennsylvania. He is

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Speaker 1: the author of numerous books, probably most famously Stocks for

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Speaker 1: the Long Run, which is now in its fifth edition.

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Speaker 1: He is frequently voted favorite professor at Wharton. Jeremy Siegel,

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Speaker 1: Welcome to Masters in Business. Thank you, Barry. Happy to

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Speaker 1: be with you today, right, Glad to have you back.

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Speaker 1: Last time we were here, we were discussing something completely different. Today, obviously,

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Speaker 1: the pandemic, the lockdown has caused all sorts of economic changes.

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Speaker 1: How do you see what's going on today impacting the

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Speaker 1: market and the macro economy. Yeah, and this is important.

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Speaker 1: As you know, Bury, My background is kind a PhD

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Speaker 1: in economics with the specialty and monetary theory and policy.

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Speaker 1: I went into finance afterwards because it was an interest,

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Speaker 1: but actually my training was money debt, Federal Reserve, aavior

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Speaker 1: and all the rest. And very early on in March,

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Speaker 1: when the pandemic was raging and markets were tanking, I

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Speaker 1: looked at what was going on and I said to myself, Wow, um,

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Speaker 1: we've had unprecedented stimulus by the Federal Reserve. But this

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Speaker 1: is what's very very important, um uh, in terms of

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Speaker 1: shaping how I look at what our future is going

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Speaker 1: to be macro economically, then we can take a look

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Speaker 1: at the structures of jew which industries are going to

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Speaker 1: do better. Before the financial crisis, the two thousand seven

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Speaker 1: eight banks held zero excess reserves. They were tied against

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Speaker 1: the limits, and it was very little by the way

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Speaker 1: we're talking, you know about fifty billion dollars research. They

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Speaker 1: basically went the crisis basically said hey, you can't do

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Speaker 1: that anymore. And because of requirements and on all the rest,

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Speaker 1: the FED started expanding its balance sheet hugely, but almost

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Speaker 1: all the expansion of the balance sheet went into excess

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Speaker 1: reserves held by the banks. They didn't lend it out.

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Speaker 1: In other words, there was very little increase in what

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Speaker 1: we would consider the traditional monetary statistics M one, M

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Speaker 1: two um and I'll talk a little bit about that later.

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Speaker 1: The big difference this time is not only has there's

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Speaker 1: been a huge increase in the balance sheet again of

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Speaker 1: the FAT, but to a much greater extent. This money

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Speaker 1: is going right into checking accounts, right into transactions accounts,

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Speaker 1: right into payroll accounts, right into the bank accounts of

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Speaker 1: individuals of businesses in a way that I have never

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Speaker 1: seen before. And I mean, I'm a historian of monetary statistics. Now,

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Speaker 1: I brought up just a moment ago, M one, M two.

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Speaker 1: They're not talked about very much anymore, but when I

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Speaker 1: was going through school, they were like things you looked

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Speaker 1: at and when we're having big inflation. M one is

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Speaker 1: basically all transactions accounts that are held by people, their

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Speaker 1: debit accounts. They're checking accounts there you just be called

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Speaker 1: now accounts, their transactions accounts, and it also includes all

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Speaker 1: the currency outstanding. But that's a pretty stable amount. Those

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Speaker 1: accounts are very very uh important. Those accounts in the

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Speaker 1: eight weeks after the virus hit, from the middle of

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Speaker 1: March the next eight weeks increased by almost I had

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Speaker 1: never seen that before. In the entire year that followed

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Speaker 1: the Lehman crisis, the increase in the M one money

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Speaker 1: supply was that year. That's amazing. So so let me

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Speaker 1: ask you the other side of that question. The Fed

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Speaker 1: obviously cut rates to zero. They injected three trillion dollars

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Speaker 1: in liquidity, but we also saw on the fiscal side

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Speaker 1: three trillion dollars in stimulus passed by Congress how impactful

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Speaker 1: was the combination of fiscal plus monetary students? Absolutely huge.

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Speaker 1: You know, I was privileged. You know, my first teaching

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Speaker 1: job after I got my pH d was at the

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Speaker 1: University of Chicago, and I was I was, as we

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Speaker 1: talked about earlier, a colleague of Milton Friedman, and um,

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Speaker 1: I remember you know him saying to me, he said,

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Speaker 1: you know, excess reserves are good. You know, it's good

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Speaker 1: stimulus for the economy. But if those excess reserves get

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Speaker 1: pushed in either M one or M two, they're going

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Speaker 1: to be far more potent, far more potant. And that

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Speaker 1: is exactly what is happening this time that did not

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Speaker 1: happen last time. And I think that as we get therapeutics, vaccines,

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Speaker 1: as our economy opens up, this liquidity that is in

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Speaker 1: this economy there, the fact is not going to get

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Speaker 1: rid of it. I mean, it basically committed to zero

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Speaker 1: rates of fit and the government is not going to

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Speaker 1: put a taxi increase on to absorb all this. I

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Speaker 1: think we're going to have a huge spending boom next year.

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Speaker 1: And I think, for the first time, and I know

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Speaker 1: this is a sharp minority view here, for the first

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Speaker 1: time in over two decades a word going to see inflation.

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Speaker 1: That has been a bugaboo for a while. We've seen

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Speaker 1: more people start to talk about that. We're recording this Tuesday,

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Speaker 1: May sixteen. What did you make of the May retail

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Speaker 1: sales report? Up right? And liquidity? Hey, you know how

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Speaker 1: many people got you know, all those canceled planes, so

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Speaker 1: they all got credited. They're checking. I've had people tell

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Speaker 1: me for the first time they have credit balances on checking.

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Speaker 1: Savings rate is what double digits now for the first time.

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Speaker 1: You know. About three weeks ago, Brian Moynernion had a

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Speaker 1: b o A. He was there and he said, are

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Speaker 1: small we We've seen a increase in people's checking account

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Speaker 1: These are small people. These are these are people that

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Speaker 1: had less than five thousand hours, he said, compared to

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Speaker 1: last time, We've never seen such an increase. I mean

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Speaker 1: it was extraordinary. Now again, we can't mean most people

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Speaker 1: don't want to travel now, restaurants our very beginning to open.

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Speaker 1: All of this is suppressed purchasing power. My feeling is

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Speaker 1: this is exactly what the stock market sees, and that's

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Speaker 1: why I turned very bullish really late in March and

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Speaker 1: never wavered from that despite what was going on in

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Speaker 1: terms of the shutdowns and and all the rest, and

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Speaker 1: I remain from also, I made the call in in

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Speaker 1: April I said that the low bond rate that we

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Speaker 1: saw in the tenure bond in March is going to

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Speaker 1: be the lowest in our lifetime. It end, it's going

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Speaker 1: to end the forty year bull market in bonds. I

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Speaker 1: made some very bold calls um, and so far, so good.

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Speaker 1: In fact, one's got to, uh, you know, be modest um.

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Speaker 1: You know, things start going your way and you think

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Speaker 1: you're a genius until they don't. Well, Mr, market is

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Speaker 1: very good. I think that that we're going to look back,

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Speaker 1: all of us are going to look back at two

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Speaker 1: thousand and twenty and say, wow, we those that was

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Speaker 1: the low of interest rates, not for a decade, a

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Speaker 1: generation and maybe forever. Wow, that's quite that's quite a

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Speaker 1: forecast right there, generational, if not eternal bonds. Yeah. Well,

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Speaker 1: I don't know any of it's gonna be around eternally.

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Speaker 1: Maybe maybe even human kind won't be around there. But

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Speaker 1: you know, in summary, this huge amount of debt and

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Speaker 1: money and liquidity is Yeah, let me tell you a

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Speaker 1: really interesting story which I've told to non experts. They

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Speaker 1: say that that they say really helps them to understand

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Speaker 1: what's going on. Everyone, you know, I talked about the

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Speaker 1: last pandemic nineteen eighteen, and everyone, of course now knows

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Speaker 1: the story that it was worse than in the city

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Speaker 1: of Philadelphia, where I'm now sitting right here talking to

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Speaker 1: I live right in the city. We all know that

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Speaker 1: the pandemic exploded because there was a bond sale, liberty

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Speaker 1: bond for World War One, because the government had to

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Speaker 1: raise money and they didn't call off again. That's how

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Speaker 1: we raised money back then. We raised money because the

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Speaker 1: government had to have bond sales. We had a federal reserve.

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Speaker 1: But you know why the Fed couldn't buy those bonds

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Speaker 1: because we were on a gold standard that said you

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Speaker 1: can't buy bond unless you've got a gold to back

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Speaker 1: up every dour. So the feed said, no, sorry, I

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Speaker 1: can't buy your bond and love to help. You got

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Speaker 1: to sell them to the public. Now, what's the difference today, Well,

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Speaker 1: we didn't have three trillion dollars. Is the fight the

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Speaker 1: war against COVID? Did you see any bond sales? Did

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Speaker 1: you see any you know, calls to patriotism by COVID

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Speaker 1: bonds so we can fight this epidemic and keep people

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Speaker 1: income and food and all the rest. You didn't see

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Speaker 1: what not only did you not see? You one you

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Speaker 1: saw the government cut taxes by over a trills to

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Speaker 1: get even less revenue. And well that's possible because the

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Speaker 1: Federal Reserve bought all those bonds. As that's quite fascinating. Yeah,

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Speaker 1: but that history is critical because to make the long

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Speaker 1: story trying and people say, which is the man who

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Speaker 1: is paying for this war on the COVID nineteen and

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Speaker 1: I say, you don't see it now, but it's going

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Speaker 1: to be the bondholder. Let's talk a little bit about

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Speaker 1: the stock market today we have. It's hard to avoid

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Speaker 1: noticing the big keep getting bigger. The fang stocks are

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Speaker 1: really beating everything else, Facebook, Apple, Amazon, Google, Microsoft, The

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Speaker 1: giant tech companies seemed to be dominating. What's it going

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Speaker 1: to take for the rest of the market to catch

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Speaker 1: up to the giant tech companies. Well, I don't know

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Speaker 1: if they were going to catch up all the way,

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Speaker 1: but obviously as as the economy opens up, as therapeutics

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Speaker 1: and and or vaccines get developed, that reduced that fear.

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Speaker 1: You will see the so called cyclical economy sensitive stocks

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Speaker 1: do better than clearly. But that all said in the

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Speaker 1: big macro picture, this pandemic just made a huge shift

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Speaker 1: to showing how much as a society we rely on technology,

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Speaker 1: and technology actually uh has made out some outcomes better. Uh.

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Speaker 1: Then if we could make a wave a magic wine

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Speaker 1: and the virus disappears, and we could go back to

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Speaker 1: the old ways. But but hey, why should we you know,

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Speaker 1: why why shouldn't we not have a zoom meeting? Isn't

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Speaker 1: it isn't it better than h It's simpler and easier. Yeah,

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Speaker 1: I could, you know, go down to the office and

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Speaker 1: and and have that meeting. And in some cases I

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Speaker 1: may really have to, but for many meetings I don't

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Speaker 1: have to do I need to take that business travel

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Speaker 1: I mean, uh, I mean all this accelerated this this

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Speaker 1: this shocked us into a new mode that things that

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Speaker 1: some things are just better. It's not just the virus.

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Speaker 1: So in some ways, and the market is recognized that

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Speaker 1: that's why, you know, basically, the the fang did better.

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Speaker 1: Now the thing also did because we had to rely

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Speaker 1: on the technology. It was good thing that will really

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Speaker 1: derail fang um in a way. And you honestly, I

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Speaker 1: think it's it's antitrust, government action, et cetera, one way

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Speaker 1: or another. Again, I think the whole market is going

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Speaker 1: to do well. As I said, you know, the feeding

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Speaker 1: of the liquidity in and I think we're going to

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Speaker 1: snap back. But you know, and I think relatively during

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Speaker 1: this snap back, you know, the fang will tend the leg.

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Speaker 1: But you know, when we look at the relative fang

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Speaker 1: tech and let's say the end of two thousand twenty one,

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Speaker 1: we have there everything else relative and now they're they're

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Speaker 1: they're gonna be they're gonna be um up. Now they're

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Speaker 1: already up, but there's this is a this is a

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Speaker 1: step function that gave them a huge boost, which um

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Speaker 1: in a way. You know, I don't see it easily derailed.

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Speaker 1: So given all that, what did you make of the

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Speaker 1: violent move in March? It was the fastest drop down.

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Speaker 1: March was one of the twenty worst months in market history.

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Speaker 1: Why did we have such a violent overreaction? What was

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Speaker 1: the market seeing? Then? You know, it was a reaction

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Speaker 1: from oh, this is just a virus in China to

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Speaker 1: oh my god, this could be the pandemic of and

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Speaker 1: it went from complacency to panic, and it it went

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Speaker 1: to panic also because we weren't we had resulently running

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Speaker 1: on a sanitizer. We ran out of mask. We got

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Speaker 1: terrible advice from the c d C, in my opinion,

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Speaker 1: terrible advice, terrible preparation, and all of a sudden, it

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Speaker 1: was like you're on your own, and then the government's panicked.

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Speaker 1: And I think the closed downs and and why it

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Speaker 1: was done was dreamily destructive in the way that it

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Speaker 1: was done, done in the pendulum, just one the other way,

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Speaker 1: and the market just absolutely in tainted with it. So

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Speaker 1: I'm gonna guess. I'm gonna guess, given what you said

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Speaker 1: about the combination of fiscal and monetary stimulus and how

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Speaker 1: it all found its way into M one and M two,

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Speaker 1: you probably weren't surprised that the market began to recover.

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Speaker 1: But this has been like a two months forty something

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Speaker 1: percent snap back. Did the speed and strength of this

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Speaker 1: recovery surprise you, Well, it's very interesting, you know. And

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Speaker 1: you asked that when before the March fourteenth, and I

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Speaker 1: called that weekend the crash weekend. I think we all

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Speaker 1: have a story where all of a sudden started developing,

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Speaker 1: everything and things closed down, and but things were getting

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Speaker 1: a little dicey, and the market head to a couple

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Speaker 1: of spills in February, and I was on all the

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Speaker 1: media and I was asked about, oh my god, you

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Speaker 1: know what will affect on the market, And I said

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Speaker 1: the following. I said, stocks are the longest term assets

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Speaker 1: that we have. You know, theoretically they go on forever,

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Speaker 1: or they get absorbed by another firm that keeps on

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Speaker 1: going on. If you would wipe out a hundred percent

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Speaker 1: of their earnings over the next twelve months, and then

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Speaker 1: in any you know, listen, I'm a professor, any valuation

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Speaker 1: model you use, how much would the stocks go down?

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Speaker 1: If it's telling for they should go down by five

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Speaker 1: So if a hundred percent wipe out in the year,

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Speaker 1: if you get that normal in a year, and we

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Speaker 1: could debate that obviously, but at that time, you know,

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Speaker 1: that was not an unreasonable and still is not. But

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Speaker 1: even before the set act at all this, I said,

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Speaker 1: if we have a terrible year that wipes out S

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Speaker 1: ANDP earnings to zero by the way, the current estimate

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Speaker 1: decline in SMP. But let's say I even said, let's

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Speaker 1: go terrible. This is so bad it wipes out a

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Speaker 1: spre But let's assume in one we get back to

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Speaker 1: only twenty nineteen levels. Stock market should go down five.

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Speaker 1: I think that's what the mat shows. That's impressively. Yeah.

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Speaker 1: And and actually I said it's going to go down

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Speaker 1: more because fear always drives it down more. But the

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Speaker 1: theory says, if you have, you know, a V that

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Speaker 1: you can see coming up, and we can talk about

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Speaker 1: V and W and all that, but you know that

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Speaker 1: that that recovery there should not cause a thirty four

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Speaker 1: decline in the S and P, which of course happened

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Speaker 1: between you know, February and March. Let's talk a little

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Speaker 1: bit about inflation. You know, we we've heard right after

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Speaker 1: eight o nine we're gonna see it up tick inflation

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Speaker 1: because of all the actions of the Fed. Very famously,

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Speaker 1: a bunch of conservatives and libertarians sent an open letter

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Speaker 1: to Ben Bernanke. I think that was warning of hyper

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Speaker 1: inflation and the collapse of the dollar. Neither ever showed up.

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Speaker 1: Why do you think we're going to see inflation eventually?

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Speaker 1: And what does that mean for the bond market? Yeah,

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Speaker 1: and that this is really important, and these distinctions are

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Speaker 1: really important. Yeah, you have very famous, people like John

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Speaker 1: Taylor was Under Secretary Treasury, often mentioned to be FED chair.

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Speaker 1: You know, Paul got it. But they came to me

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Speaker 1: and said, Jeremy, you want to sign this letter, and

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Speaker 1: I say, no, I'm not signing that letter. Why are

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Speaker 1: you not signing that letter? The QI we've never seen anything.

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Speaker 1: Because I said, it's going into excess reserves. I see

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Speaker 1: a little bump in the money supply and that, but

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Speaker 1: nothing else. This is all cushion around the bank. They're

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Speaker 1: just not lending it interest rates or zero. So I mean,

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Speaker 1: I don't think this is going to feed into it.

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Speaker 1: So let me stop you. I said, I'm just not

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Speaker 1: signing because I just I don't think this is right now.

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Speaker 1: So let me let me just clarify what you're saying

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Speaker 1: so people understand exactly what you mean. So in O

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Speaker 1: eight oh nine, the FED introduced all of these new

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Speaker 1: policies TAMP and TARP and all these different things to

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Speaker 1: help banks stabilize, deal with bad mortgages, get a lot

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Speaker 1: of the junk off their books. And when they flooded

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Speaker 1: the system with all this cash, the banks basically took

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Speaker 1: this money, put it on their savings account, didn't lend it,

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Speaker 1: didn't spend it. They just kept it there for safety reasons.

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Speaker 1: And that's why you're saying we never saw that uptick

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Speaker 1: in inflation. Exactly. They kept it at what we call

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Speaker 1: access reserves, way above what there are mandatory requirements against accounts.

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Speaker 1: They were trillions above it, and they just want didn't

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Speaker 1: want to go like it happened in two thous They

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Speaker 1: didn't want to be caught short, everyone wanted liquidity, and

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Speaker 1: the banks wanted it, the regulators wanted it. They all

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Speaker 1: wanted it was not lent out. That's the critical difference

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Speaker 1: what I see today is it's lent out in fact

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Speaker 1: that the PPP program is go to the banks and

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Speaker 1: get your loan and put in your account. You know

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Speaker 1: that the government's cotton checks giving people money putting in

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Speaker 1: your account. That's the difference today. And I think that's

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Speaker 1: the difference that that people didn't catch and maybe I

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Speaker 1: caught it because this is something I this was something

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Speaker 1: I had studied so intentionally intensely for years and again

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Speaker 1: had the benefit of the great mentor Milton Friedman to

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Speaker 1: teach me. He said, excess reserves a stimulatory and that's

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Speaker 1: what the FETE should have done in the Great Depression.

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Speaker 1: But more potent is if that gets pushed into M

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Speaker 1: one and M two, you're going to see a much

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Speaker 1: much stronger effect. And that is what I am seeing today.

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Speaker 1: So let me ask you a related question, because I

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Speaker 1: remember having conversations with you in the middle of the

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Speaker 1: financial crisis on television and elsewhere. Did Congress miss the

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Speaker 1: opportunity for a big fiscal stimulus in O eight oh nine.

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Speaker 1: Might that have helped the recovery and perhaps avoided some

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Speaker 1: of this increasing gap in income and wealth. That's a

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Speaker 1: good question. I mean, there are many those that that

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Speaker 1: thought there, you know, that we needed more push on

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Speaker 1: an actual text cuts on more stimulus. I mean there

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Speaker 1: was a cash for cars um cash for clunkers for

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Speaker 1: clunkers that did actually that was funded, and that did

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Speaker 1: cause a little bit of a spirit. One thing is

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Speaker 1: very important, though, very remember what sparked the financial crisis

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Speaker 1: was the first and oversupply of housing. Too many people

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Speaker 1: got into housing and bad you know, that was all

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Speaker 1: that bad lending that enabled people with no money down

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Speaker 1: to get into that. So what we we had to

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Speaker 1: do back in two thousand and nine and ten, which

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Speaker 1: we had to work off a tremendous amount of excess

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Speaker 1: supply of housing that there there were really no excesses

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Speaker 1: in terms of production before this COVID crisis. We don't

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Speaker 1: have to work that out. Remember how starts fell to

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Speaker 1: the lowest point in seventy years following the financial crisis.

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Speaker 1: I don't think we're going to get very much of

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Speaker 1: a fall at all now. Not only that people's home

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Speaker 1: equity was wiped out with the biggest crash in home price.

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Speaker 1: We're not going to have any of that now, none

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Speaker 1: of that. It's actually going the opposite direction with seeing

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Speaker 1: we had impediments working out working off huge excess inventory

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Speaker 1: and housing wipe out of home equity for millions of Americans,

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Speaker 1: ten millions of Americans, you know, soaring bankruptcies of housing.

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Speaker 1: I mean, yes, we're having the business problem now, but

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Speaker 1: then we had the problem of the biggest asset is

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Speaker 1: still home equity and individuals more than stocks, that was

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Speaker 1: wiped out for so many people or diminished dramatically. Not today.

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Speaker 1: So let's stay with the FED for another moment. What

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Speaker 1: do you think of Powell's actions, first working with Black Rock,

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Speaker 1: buying ETFs and now buying specific bonds where does this

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Speaker 1: end well, put out all the stops, you know, just

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Speaker 1: the FED saying I'm going to do something. Does it

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Speaker 1: you know, I know about that. You know, if people

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Speaker 1: think the FACT could do it, then all of a

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Speaker 1: sudden says I want the rate to be there. The

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Speaker 1: market will push the rate there. So the PET says,

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Speaker 1: I want to lower spreads, which did get out aline

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Speaker 1: in February. We do no dysfunctional market. I'm going to

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Speaker 1: make sure that you know, they don't. Well, once they

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Speaker 1: said they're going to do that, actually the spreads are

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Speaker 1: going down, and so did they really need to do

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Speaker 1: you know the announcement we saw yesterday and not really

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Speaker 1: they want to listen, they have to go through incredibility,

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Speaker 1: said they're gonna do it. So to do a little bit,

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Speaker 1: I I assure you that they're going to get rid

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Speaker 1: of it, you know, once things normalise. They just like

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Speaker 1: they're getting rid of the mortgage backs. Their goal was

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Speaker 1: to get back to an all treasury portfolio. They're gonna

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Speaker 1: eventually get rid of all these um as they did

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Speaker 1: during the financial crisis and in terms of lending and

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Speaker 1: all that, you know, they got and they had other

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Speaker 1: positions overmat they had an equity position in a I

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Speaker 1: g um back then. So yeah, so so you know,

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Speaker 1: I I think it's a matter of credibility. I said,

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Speaker 1: I'm gonna do it. I don't really need to do

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Speaker 1: it now. It doesn't really matter now. What really matters

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Speaker 1: is what happened to those checking accounts and not so.

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Speaker 1: The access reserves are plentiful. They even give another trillion

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Speaker 1: access reserves stays. The next reserve is not gonna do much.

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Speaker 1: If it gets into the pockets of individuals, that is

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Speaker 1: a different story. And my final question on bonds and inflation.

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Speaker 1: You recently said the forty year bullmarket in bonds is over.

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Speaker 1: Does that mean we're looking at a bear market in bonds?

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Speaker 1: And where can let's use a ten year treasury yields?

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Speaker 1: Where can that yield go? We ever gonna see five

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Speaker 1: yield on that? What does that mean for inflation? So

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Speaker 1: what do you see happening with bonds for the next

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Speaker 1: decade or so? I see bonds as I say, I

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Speaker 1: think this is low yield, and I see them creeping

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Speaker 1: up continuously. There's still and you know, treasuries are viewed

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Speaker 1: as an excellent short run hedge asset. They become they

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00:27:00,000 --> 00:27:02,679
Speaker 1: a cushion the portfolio and the Dow drops two thousand,

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00:27:02,760 --> 00:27:05,000
Speaker 1: your your treasuries are up, and people like that. So

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00:27:05,080 --> 00:27:07,520
Speaker 1: there's a huge demand for that's called the h demand

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Speaker 1: negative beta for those technicians and that that do portfolio

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Speaker 1: and analysis. Um. But so there's a huge demand. But

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Speaker 1: with this liquidity in the economy, as we say, I

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Speaker 1: expect moderate inflation. I'm not talking about hyper inflation, and

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Speaker 1: so I'm nowhere near that. I expect inflation to move

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Speaker 1: up next year to two three, four five percent and

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Speaker 1: maybe run again in the same way. So cumulatarly, I

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Speaker 1: expect inflation maybe to go up the price level, consumer

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Speaker 1: price level go up ten twelve percent over the next

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Speaker 1: few years, maybe fifteen now you know, back and don't forget,

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Speaker 1: we had almost fifteen percent inflation one year back in

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Speaker 1: the terrible years of the light seventies. So again, and

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Speaker 1: this this is what I call moderate inflation. I expect

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Speaker 1: bond yields to RNs from the current half percent to

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Speaker 1: one one and a half, two, two and a half, three,

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Speaker 1: there's still a great hedge short term hedge three three

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Speaker 1: and a half On treasuries maybe four. You're going to

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Speaker 1: do worse than inflation. So you're not to keep up

429
00:28:15,640 --> 00:28:19,639
Speaker 1: on inflation, but you're not expecting and you're going to

430
00:28:19,760 --> 00:28:23,320
Speaker 1: have capital losses if you rule those long term. Huh,

431
00:28:23,560 --> 00:28:26,000
Speaker 1: but you're I don't get the sense that you're expecting

432
00:28:26,040 --> 00:28:30,000
Speaker 1: the sort of persistent inflation we saw in the nineteen seventies.

433
00:28:30,000 --> 00:28:33,320
Speaker 1: Once all the stimulus, once the pig is through the python,

434
00:28:33,480 --> 00:28:36,639
Speaker 1: so to speak, everything should sort of slide back to

435
00:28:36,720 --> 00:28:39,360
Speaker 1: normal and inflation should ease. Yeah, and then then we

436
00:28:39,400 --> 00:28:41,040
Speaker 1: give you just a couple of figures. You know, we

437
00:28:41,120 --> 00:28:43,680
Speaker 1: talked about the three trillion dollars or whatever you know

438
00:28:43,760 --> 00:28:46,960
Speaker 1: about that war on COVID and everything like that. Well,

439
00:28:47,200 --> 00:28:50,000
Speaker 1: you know, we we have twenty trillion dollars worth of

440
00:28:50,040 --> 00:28:52,960
Speaker 1: government death. If you have fifteen inflation, you wipe out

441
00:28:53,000 --> 00:28:57,760
Speaker 1: three trillion dollars and revalue it. So basically, you that's

442
00:28:57,760 --> 00:29:02,000
Speaker 1: how you paid for it. You know, Inflation is another

443
00:29:02,000 --> 00:29:04,240
Speaker 1: way to tax people. It's it's it's attacked on the

444
00:29:04,280 --> 00:29:07,680
Speaker 1: bond holders. Other ways actually the tax people and maintain

445
00:29:07,720 --> 00:29:11,239
Speaker 1: the bond holders. But you know, my boys, it's going

446
00:29:11,280 --> 00:29:14,120
Speaker 1: to be the former. So basically what what you know,

447
00:29:14,120 --> 00:29:17,480
Speaker 1: what the three trillion dollars etcetera, And so on, basically

448
00:29:17,800 --> 00:29:21,880
Speaker 1: a fifteen kumo percent. Again, this is over several years

449
00:29:22,520 --> 00:29:25,760
Speaker 1: rate of inflation. We'll wipe out the three trillion dollars

450
00:29:26,000 --> 00:29:29,160
Speaker 1: of that excess amount and bring you back down to

451
00:29:29,480 --> 00:29:32,479
Speaker 1: levels that you know, that you that you had before.

452
00:29:33,120 --> 00:29:35,840
Speaker 1: Let's talk a little bit about what's been going on

453
00:29:36,040 --> 00:29:40,440
Speaker 1: in the marketplace lately, because it's been a little crazy,

454
00:29:40,680 --> 00:29:44,920
Speaker 1: especially with the return of the day traders. Robin Hood

455
00:29:45,000 --> 00:29:49,440
Speaker 1: does free stock trades. We've seen this become a new

456
00:29:49,480 --> 00:29:53,040
Speaker 1: pastime for the under forty set, for the millennials and

457
00:29:53,040 --> 00:29:59,720
Speaker 1: and others. Do you see any parallels between today? Uh? Not.

458
00:30:00,080 --> 00:30:01,880
Speaker 1: I mean it's fun, I know the truth. I mean,

459
00:30:02,040 --> 00:30:05,440
Speaker 1: don't don't forget sports. Betting is shut down. Where are

460
00:30:05,440 --> 00:30:08,880
Speaker 1: they going? Oh let's go to the stock market. Casinos

461
00:30:08,880 --> 00:30:12,280
Speaker 1: are just reopening. Oh where can I work in a gamble?

462
00:30:12,600 --> 00:30:15,480
Speaker 1: Let's go to the stock market. I see a lot

463
00:30:15,520 --> 00:30:18,520
Speaker 1: of that. I mean, um, yes, some of them are

464
00:30:18,560 --> 00:30:21,920
Speaker 1: going to stay, but most of them are, you know,

465
00:30:22,040 --> 00:30:24,400
Speaker 1: gonna you know, most of them gonna lose some money

466
00:30:24,440 --> 00:30:26,680
Speaker 1: and they're gonna say, hey, I'm gonna go go better

467
00:30:26,720 --> 00:30:30,640
Speaker 1: on sports. People who are determined to lose money gambling

468
00:30:30,640 --> 00:30:33,200
Speaker 1: are going to find some outlet for it. Or I

469
00:30:33,200 --> 00:30:36,240
Speaker 1: mean people go to casinos not only to you know,

470
00:30:36,320 --> 00:30:38,880
Speaker 1: with the hope of winning, but having fun. I mean

471
00:30:38,880 --> 00:30:42,160
Speaker 1: they're willing to lose a certain amount, you know. You

472
00:30:42,200 --> 00:30:43,840
Speaker 1: know a lot of people go and say, you know,

473
00:30:43,960 --> 00:30:47,360
Speaker 1: I have you know, five dollars. Yeah, I'm gonna have fun.

474
00:30:47,400 --> 00:30:49,280
Speaker 1: I'm gonna have spring that out as much as I can.

475
00:30:49,360 --> 00:30:51,760
Speaker 1: And you hope that you know that, and and and

476
00:30:51,760 --> 00:30:54,239
Speaker 1: and all the rest. I mean maybe some of these

477
00:30:54,320 --> 00:30:57,560
Speaker 1: day traders are also thinking in terms of that. We often,

478
00:30:57,680 --> 00:31:00,920
Speaker 1: even even I and others say, hey, take take ten

479
00:31:00,920 --> 00:31:03,760
Speaker 1: percent of your portfolio, have fun, play with it, see

480
00:31:03,760 --> 00:31:05,520
Speaker 1: how you do. But you know the rest should be

481
00:31:05,520 --> 00:31:08,920
Speaker 1: long term invested. So you know, these these are players

482
00:31:10,080 --> 00:31:13,640
Speaker 1: we are nowhere near. So Barry were really important, but

483
00:31:13,760 --> 00:31:20,000
Speaker 1: nowhere near. I mean, uh, and and we talked about

484
00:31:20,440 --> 00:31:25,200
Speaker 1: you know, I mean, I you know, I mean recently,

485
00:31:25,240 --> 00:31:27,440
Speaker 1: I was recently in CNBC and I was asked, what,

486
00:31:27,640 --> 00:31:29,920
Speaker 1: Dr Siegel, You've been right to big Bush, but aren't

487
00:31:29,920 --> 00:31:32,480
Speaker 1: you always Bush? And I didn't say it at that

488
00:31:32,520 --> 00:31:34,719
Speaker 1: time because they asked to asked a question about and

489
00:31:34,760 --> 00:31:36,640
Speaker 1: I told him when I wrote my book and what

490
00:31:36,800 --> 00:31:39,280
Speaker 1: I learned on stocks for the long run. Back in

491
00:31:39,440 --> 00:31:44,280
Speaker 1: two thousands, I remember this one of those opeds that

492
00:31:44,360 --> 00:31:46,920
Speaker 1: was one of the most red red in Wall Street Journal,

493
00:31:46,920 --> 00:31:49,920
Speaker 1: which is get out of tech stocks. I have a

494
00:31:50,040 --> 00:31:52,880
Speaker 1: very vivid recollection of you writing that up. I want

495
00:31:52,880 --> 00:31:56,040
Speaker 1: to say it was January or Mark it was actually was.

496
00:31:56,360 --> 00:31:59,720
Speaker 1: It was almost to the day that nasdack peaked at

497
00:31:59,720 --> 00:32:02,520
Speaker 1: five thousands, and that was of course dumb luck. But

498
00:32:02,920 --> 00:32:06,840
Speaker 1: I mean it was entitled big cap tech stocks are

499
00:32:06,880 --> 00:32:10,360
Speaker 1: a sucker's bat and I have get hate mail berried

500
00:32:10,560 --> 00:32:13,280
Speaker 1: after that. That's how you know you're right, when you

501
00:32:14,400 --> 00:32:16,400
Speaker 1: get all that hate mail, that's how you know. Yeah,

502
00:32:17,040 --> 00:32:20,240
Speaker 1: so you know I'm not always boys. This is important.

503
00:32:20,520 --> 00:32:22,880
Speaker 1: And the internet stocks, of course we're crazy. But the

504
00:32:23,000 --> 00:32:26,840
Speaker 1: tech So this to give you an idea, the text

505
00:32:26,960 --> 00:32:30,680
Speaker 1: sector of the S and P five, these were not

506
00:32:30,760 --> 00:32:32,800
Speaker 1: Internet companies. They O L was the only one that

507
00:32:32,920 --> 00:32:34,800
Speaker 1: was on there and was making money back then. Then

508
00:32:34,880 --> 00:32:37,720
Speaker 1: this these are the IBM s. These are you know,

509
00:32:38,520 --> 00:32:41,040
Speaker 1: the Intels and and and and the Microsoft and all

510
00:32:41,040 --> 00:32:48,400
Speaker 1: the rest. The tech sector was selling for ninety times earnings. Wow,

511
00:32:48,760 --> 00:32:52,720
Speaker 1: I mean, what is it today? I mean, you know,

512
00:32:54,560 --> 00:32:57,160
Speaker 1: and by the way, interest rates were, you know, mammothly

513
00:32:57,280 --> 00:33:01,840
Speaker 1: higher than they are today. I remember one investors said,

514
00:33:01,880 --> 00:33:04,680
Speaker 1: I'm getting you out of these speculative stocks. I'm putting

515
00:33:04,680 --> 00:33:07,959
Speaker 1: you uh in IBM, which is only selling for fifty

516
00:33:08,000 --> 00:33:11,160
Speaker 1: times earnings, considered a conservative stock at that time. So

517
00:33:11,440 --> 00:33:17,360
Speaker 1: anyone who tries to compare today is not looking at

518
00:33:17,400 --> 00:33:20,680
Speaker 1: what the valuations are. I mean, I was very cognizant that,

519
00:33:21,280 --> 00:33:25,040
Speaker 1: you know, I said, there's no big cap companies and

520
00:33:25,080 --> 00:33:28,520
Speaker 1: they you had these multi today. Of course they're a

521
00:33:28,520 --> 00:33:30,680
Speaker 1: trillion doar companies, but I was looking at anything over

522
00:33:30,720 --> 00:33:33,760
Speaker 1: a hundred billion back then, twenty years ago, and I said,

523
00:33:34,040 --> 00:33:36,320
Speaker 1: these these companies are not worth a hundred and fifty

524
00:33:37,760 --> 00:33:41,840
Speaker 1: times earnings. History tells you they're They're just not worth that.

525
00:33:42,760 --> 00:33:46,720
Speaker 1: I recall something you had said, maybe it was in

526
00:33:46,760 --> 00:33:50,160
Speaker 1: the late nineties or early two thousand's, but given the

527
00:33:50,240 --> 00:33:52,360
Speaker 1: spike we've seen in I p O S, I have

528
00:33:52,440 --> 00:33:56,240
Speaker 1: to ask you the question again. You have written I

529
00:33:56,440 --> 00:33:59,920
Speaker 1: p O s typically disappoint Do you still believe that's

530
00:34:00,480 --> 00:34:04,000
Speaker 1: you know what and and and that included that data there.

531
00:34:04,600 --> 00:34:06,360
Speaker 1: I POS have done a little better in the last

532
00:34:06,400 --> 00:34:08,680
Speaker 1: twenty years, But don't forget the I p O. There's

533
00:34:08,719 --> 00:34:11,480
Speaker 1: there's two things. They're getting it at the I p

534
00:34:11,719 --> 00:34:16,759
Speaker 1: O price, which is almost always good, and then there's

535
00:34:16,800 --> 00:34:20,840
Speaker 1: getting it when it starts trading, and that ain't so good.

536
00:34:21,040 --> 00:34:25,520
Speaker 1: It's good, sometimes not good others Right now, I think,

537
00:34:25,560 --> 00:34:27,440
Speaker 1: and I'm just off the top of my head, but

538
00:34:27,840 --> 00:34:32,040
Speaker 1: probably since the bubble, let's say some two thousand to

539
00:34:32,160 --> 00:34:34,520
Speaker 1: two thousand three, if you got it when their first trading,

540
00:34:34,600 --> 00:34:38,640
Speaker 1: you probably are still probably match the SMP, maybe a

541
00:34:38,719 --> 00:34:42,920
Speaker 1: little bit better. Before then you underperformed if you if

542
00:34:42,960 --> 00:34:45,960
Speaker 1: you if you started buying them when you could, if

543
00:34:46,000 --> 00:34:48,480
Speaker 1: you if you got them at the you know I

544
00:34:48,600 --> 00:34:50,840
Speaker 1: p O, if you knew the broker and he could allocate,

545
00:34:50,920 --> 00:34:55,640
Speaker 1: you did good business with him, then you were winners.

546
00:34:55,719 --> 00:34:58,120
Speaker 1: Quite interesting. I mean, let me ask you this question,

547
00:34:58,480 --> 00:35:01,240
Speaker 1: was was Google remember? No? No? I remember when Google

548
00:35:01,239 --> 00:35:03,960
Speaker 1: went public, no one really wanted because they refused to

549
00:35:04,000 --> 00:35:09,520
Speaker 1: do a road show and get it. I think, what

550
00:35:09,680 --> 00:35:13,319
Speaker 1: was it opened at eight? You know, so there have

551
00:35:13,480 --> 00:35:15,920
Speaker 1: been good ones then, but those were you know, there's

552
00:35:16,719 --> 00:35:18,640
Speaker 1: you know, up to that point, it was it was

553
00:35:18,680 --> 00:35:22,560
Speaker 1: a loser's game. Um. Today, I would say if you

554
00:35:22,600 --> 00:35:25,239
Speaker 1: look back fifteen or twenty years, even if you bought

555
00:35:25,320 --> 00:35:27,680
Speaker 1: them when they first traded because they were concentrated and

556
00:35:27,719 --> 00:35:30,239
Speaker 1: tech intected, will you probably are ahead of the S

557
00:35:30,280 --> 00:35:34,400
Speaker 1: and P. Pretty interesting. Let's let's stick with valuation for

558
00:35:34,440 --> 00:35:38,040
Speaker 1: a minute. You have written a lot about CAPE, which

559
00:35:38,200 --> 00:35:42,240
Speaker 1: was essentially the cyclically adjusted PE price to earnings ratio

560
00:35:42,680 --> 00:35:46,560
Speaker 1: created by your pal Bob Schiller. What do you think

561
00:35:46,760 --> 00:35:50,919
Speaker 1: of where CAPE stands today? It hasn't worked especially well

562
00:35:51,680 --> 00:35:54,480
Speaker 1: as a timing tool. Maybe it gives you some insight

563
00:35:54,560 --> 00:35:58,279
Speaker 1: into future expectations. What are your thoughts? Well, you know,

564
00:35:58,480 --> 00:36:01,319
Speaker 1: and yeah, Bob Showers of my oldest friend, Oh no, no,

565
00:36:01,560 --> 00:36:04,800
Speaker 1: over a half a century great economists, when the Nobel

566
00:36:04,840 --> 00:36:09,560
Speaker 1: Prize completely deserved. His work is great, as I've mentioned before,

567
00:36:09,600 --> 00:36:12,080
Speaker 1: and I think maybe in our previous one I wrote

568
00:36:12,080 --> 00:36:14,880
Speaker 1: an articles in F A J. I said the CAPE

569
00:36:14,920 --> 00:36:18,839
Speaker 1: is giving off wrong signals now, and I said it's

570
00:36:18,840 --> 00:36:21,200
Speaker 1: giving off wrong signals because he uses a ten year

571
00:36:21,280 --> 00:36:27,480
Speaker 1: average of reported earnings and back fast by we change

572
00:36:27,600 --> 00:36:31,000
Speaker 1: how it does reported earnings, and so as a result

573
00:36:31,120 --> 00:36:35,680
Speaker 1: of that, it caused much more fluctuation in earnings and

574
00:36:35,719 --> 00:36:39,640
Speaker 1: particularly crashed earnings during the Great Financial Crisis, and that's

575
00:36:39,640 --> 00:36:47,920
Speaker 1: why it's been bearished almost every year since it is.

576
00:36:48,200 --> 00:36:52,480
Speaker 1: I said, it's way too bearish, and um uh, and

577
00:36:52,520 --> 00:36:55,279
Speaker 1: I gave other reasons. It's also change in dividend the

578
00:36:55,280 --> 00:36:58,320
Speaker 1: behavior that also changes earnings growth, and there's there's a

579
00:36:58,480 --> 00:37:02,080
Speaker 1: there's other problems with it. So I don't think it's

580
00:37:02,120 --> 00:37:06,799
Speaker 1: a great tool. However, valuation matters, and I do look

581
00:37:06,840 --> 00:37:10,160
Speaker 1: at what I think is normal earnings, and and I

582
00:37:10,239 --> 00:37:14,080
Speaker 1: do think that the PE ratio. I think a normal

583
00:37:14,120 --> 00:37:17,120
Speaker 1: PE ratio today on normal earnings is eighteen to twenty.

584
00:37:17,120 --> 00:37:21,120
Speaker 1: That's above the historical average. But I believe, given not

585
00:37:21,239 --> 00:37:25,000
Speaker 1: only low interested not only that, but the ability to

586
00:37:25,280 --> 00:37:28,480
Speaker 1: index and get a you know, zero cost totally diversified

587
00:37:28,520 --> 00:37:36,840
Speaker 1: portfolio spreads risk around such uh, that eighteen is the

588
00:37:36,880 --> 00:37:39,520
Speaker 1: new normal PE ratio. Doesn't mean it can't go down

589
00:37:39,560 --> 00:37:43,200
Speaker 1: to fifteen twelve, and doesn't mean it won't call up.

590
00:37:44,680 --> 00:37:47,799
Speaker 1: Obviously this year we're talking really high because he's gonna

591
00:37:47,800 --> 00:37:50,680
Speaker 1: be down, but then again they're going to be bouncing back.

592
00:37:52,800 --> 00:37:55,560
Speaker 1: Quite fascinating. Let me let me mix it up with

593
00:37:55,600 --> 00:38:00,160
Speaker 1: you a little bit with two other related questions. So

594
00:38:00,360 --> 00:38:03,480
Speaker 1: I know you're not a believer in hyper inflation, but

595
00:38:03,920 --> 00:38:08,040
Speaker 1: one of the things some of the let's call him inflationistas,

596
00:38:08,040 --> 00:38:11,960
Speaker 1: have been worried about. Has been the overall level of

597
00:38:12,160 --> 00:38:16,160
Speaker 1: US debt now annually in the trillions. The cumulative debt

598
00:38:16,880 --> 00:38:21,000
Speaker 1: is about a hundred and six percent of GDP. What

599
00:38:21,080 --> 00:38:23,279
Speaker 1: do you think of all this debt? What does it

600
00:38:23,400 --> 00:38:26,200
Speaker 1: mean for stocks? What does it mean for private capital?

601
00:38:26,680 --> 00:38:29,280
Speaker 1: We used to fear crowding out, but we really haven't

602
00:38:29,280 --> 00:38:33,120
Speaker 1: seen much of that. The big increase in debt has

603
00:38:33,320 --> 00:38:37,439
Speaker 1: coincided with the gremendous increase in demand for the debt

604
00:38:37,560 --> 00:38:41,680
Speaker 1: has a hedge asset. The some of John Campbell and

605
00:38:41,680 --> 00:38:45,960
Speaker 1: others economists and others, and I actually was a believer

606
00:38:46,040 --> 00:38:48,120
Speaker 1: in this many years ago. The biggest reason for the

607
00:38:48,200 --> 00:38:52,799
Speaker 1: decline in long term bonds, he yes, his low inflation

608
00:38:53,040 --> 00:38:57,000
Speaker 1: and liquidity in all sorts of life expectance. I mean,

609
00:38:57,040 --> 00:39:01,280
Speaker 1: I can go into those, but actually that now treasury

610
00:39:01,320 --> 00:39:07,200
Speaker 1: debt is the hedge asset of choice to cushion shocks,

611
00:39:07,880 --> 00:39:10,400
Speaker 1: and that by whole treasury debt, it will go up

612
00:39:10,440 --> 00:39:14,440
Speaker 1: when bad things happen, and that is causes huge demand,

613
00:39:14,480 --> 00:39:17,640
Speaker 1: and that that that's eaten up all that increase and

614
00:39:17,680 --> 00:39:21,440
Speaker 1: has kept the interest rates really down. However, as I

615
00:39:21,760 --> 00:39:25,080
Speaker 1: you know said at the Euroy part of our discussion today,

616
00:39:25,560 --> 00:39:30,360
Speaker 1: this big increase in debt and money is going to

617
00:39:30,440 --> 00:39:36,839
Speaker 1: feed into inflation, moderate inflation. Um, you know very it

618
00:39:36,880 --> 00:39:39,399
Speaker 1: reminds me like what happened world Ward two. We got

619
00:39:39,440 --> 00:39:43,920
Speaker 1: to that the GDP ratio. Um. We also increased the

620
00:39:43,960 --> 00:39:46,600
Speaker 1: money to buy the FED was back then, you know,

621
00:39:46,680 --> 00:39:48,799
Speaker 1: we were off the gold standard roses help us out.

622
00:39:48,960 --> 00:39:51,120
Speaker 1: It was buying a lot of that debt too. There

623
00:39:51,160 --> 00:39:53,839
Speaker 1: was no inflation because we were on rationing and all

624
00:39:53,840 --> 00:39:55,520
Speaker 1: the rest. And then all of a sudden afterwards we

625
00:39:55,600 --> 00:39:59,040
Speaker 1: got inflation, and we got a boom, and people saying,

626
00:39:59,080 --> 00:40:01,880
Speaker 1: why is this happening? And it was debt in money,

627
00:40:02,080 --> 00:40:05,400
Speaker 1: and we got debt in money, and that's going to

628
00:40:05,480 --> 00:40:11,000
Speaker 1: be again not hyper inflation again. I'm I'm not predicting

629
00:40:11,000 --> 00:40:14,200
Speaker 1: any I'm not even predicting double digit I'm not even

630
00:40:14,239 --> 00:40:18,000
Speaker 1: predicting high single digits, although no one can be exact.

631
00:40:19,080 --> 00:40:23,719
Speaker 1: But I'm predicting inflation rates that we haven't seen for

632
00:40:23,760 --> 00:40:27,160
Speaker 1: several decades. And that is one of the again the

633
00:40:27,200 --> 00:40:30,640
Speaker 1: classic reasons of how do you pay for the war

634
00:40:30,719 --> 00:40:33,680
Speaker 1: on COVID, Well, you inflate away some of the debt

635
00:40:33,760 --> 00:40:38,120
Speaker 1: that has been floated to pay for it. So people

636
00:40:38,160 --> 00:40:41,840
Speaker 1: have been fearful of deflation. A three to four percent

637
00:40:41,920 --> 00:40:45,120
Speaker 1: inflation rate. That doesn't sound like it would be the

638
00:40:45,160 --> 00:40:47,719
Speaker 1: worst thing in the world. It isn't. I mean, deflation

639
00:40:47,840 --> 00:40:51,000
Speaker 1: is really harmful, and you know the feed is to

640
00:40:51,040 --> 00:40:53,200
Speaker 1: be committed and everyone else. When we saw what happened

641
00:40:53,239 --> 00:40:56,680
Speaker 1: in the thirties, that was, you know, that terrible failure

642
00:40:56,680 --> 00:40:59,600
Speaker 1: of policy to prevent that. If they if they just

643
00:40:59,760 --> 00:41:02,280
Speaker 1: did the reserves and kept the banks allied, they would

644
00:41:02,440 --> 00:41:05,279
Speaker 1: they would have prevented the defoet we decline in the

645
00:41:05,280 --> 00:41:12,120
Speaker 1: CPI index. Wow, between thirty three, I mean it was terrible.

646
00:41:12,160 --> 00:41:14,880
Speaker 1: Everyone with debts and they're all denominate indowers just and

647
00:41:14,920 --> 00:41:18,120
Speaker 1: they were unemployed. There was bankruptcies everywhere. You've got to

648
00:41:18,160 --> 00:41:22,080
Speaker 1: avoid that deflation. But you know what moderate inflation, Yeah,

649
00:41:22,080 --> 00:41:24,960
Speaker 1: there'll be those little scream hey, fad, you're you're not

650
00:41:25,120 --> 00:41:27,480
Speaker 1: you got to present target. Why don't you do anything? Listen,

651
00:41:27,719 --> 00:41:31,719
Speaker 1: for years we were a little below and now you know,

652
00:41:32,320 --> 00:41:34,680
Speaker 1: we'll go a little above. We need to absorb some

653
00:41:34,719 --> 00:41:36,960
Speaker 1: of these unemployed people and it's still going to be

654
00:41:37,040 --> 00:41:39,680
Speaker 1: high unemployment. By the way, even though the economy is

655
00:41:39,680 --> 00:41:43,200
Speaker 1: going to be strong, firms are permanently going to be

656
00:41:43,280 --> 00:41:45,319
Speaker 1: letting off people because they're going to see that they

657
00:41:45,360 --> 00:41:47,560
Speaker 1: just need less, and they're going to let that inflation

658
00:41:47,640 --> 00:41:50,000
Speaker 1: rate go above target. I think for quite a number

659
00:41:50,000 --> 00:41:55,319
Speaker 1: of years you mentioned employment and firms hiring. What did

660
00:41:55,360 --> 00:41:59,640
Speaker 1: you make of the MAZE Employment Situation report that seems

661
00:41:59,680 --> 00:42:05,040
Speaker 1: to prize a lot of people by else now, I mean,

662
00:42:05,040 --> 00:42:08,720
Speaker 1: it's really hard to classify and and honestly, I didn't

663
00:42:08,719 --> 00:42:11,279
Speaker 1: get that excited about it. I mean, you know, it's

664
00:42:11,280 --> 00:42:17,480
Speaker 1: all all the data we're getting in is rear view mirror. Yeah.

665
00:42:17,520 --> 00:42:20,120
Speaker 1: I mean I when I get up in the morning,

666
00:42:20,120 --> 00:42:22,200
Speaker 1: what I do is I look at all the virus reports.

667
00:42:22,239 --> 00:42:23,920
Speaker 1: I look through every country in the world. I look

668
00:42:23,920 --> 00:42:26,839
Speaker 1: at the states. I see the trends. I read all

669
00:42:26,880 --> 00:42:30,560
Speaker 1: the reports, and and and and and I see what

670
00:42:30,680 --> 00:42:34,200
Speaker 1: kind of reopening is. I look for what's happening there.

671
00:42:34,800 --> 00:42:39,000
Speaker 1: That is the forward looking it makes getting that confidence

672
00:42:39,040 --> 00:42:43,600
Speaker 1: back and getting getting the therapeutics in the vaccines that

673
00:42:43,719 --> 00:42:46,600
Speaker 1: excites me. The rear view mirror, Yeah, it was better

674
00:42:46,600 --> 00:42:49,920
Speaker 1: than expected. Retail sales bounce like we got today did

675
00:42:50,000 --> 00:42:54,960
Speaker 1: surprise me. The main bounce from the april's crater um.

676
00:42:55,080 --> 00:42:58,440
Speaker 1: And and this shows that you know, people want to

677
00:42:58,480 --> 00:43:03,200
Speaker 1: get back out if they you know, social distance and

678
00:43:03,280 --> 00:43:07,080
Speaker 1: we protect the vulnerable groups. We can do this. And

679
00:43:07,160 --> 00:43:10,160
Speaker 1: and with the better treatments to death rate is weigh down.

680
00:43:10,200 --> 00:43:13,120
Speaker 1: The mortality rate is way down, even from people they

681
00:43:13,120 --> 00:43:18,160
Speaker 1: have to go to the hospital. We definitely this report

682
00:43:18,280 --> 00:43:22,719
Speaker 1: that this morning about uh, you know, the steroid that

683
00:43:22,840 --> 00:43:25,600
Speaker 1: actually can reduce deaths by thirty percent of those people

684
00:43:25,600 --> 00:43:27,919
Speaker 1: on ventilators. But this is just the beginning of many,

685
00:43:27,960 --> 00:43:31,879
Speaker 1: many types of therapeutics that's going to reduce this death rate.

686
00:43:32,640 --> 00:43:35,520
Speaker 1: And you know, we get this death rate back down

687
00:43:35,560 --> 00:43:39,759
Speaker 1: to what is what the seasonal flu, which is you know,

688
00:43:39,880 --> 00:43:43,400
Speaker 1: point one percent maybe point three point four point five percent,

689
00:43:43,560 --> 00:43:46,759
Speaker 1: certainly for the more elderly. It's still higher maybe one

690
00:43:46,800 --> 00:43:49,200
Speaker 1: percent for vulnerable. I mean, I don't know if we

691
00:43:49,239 --> 00:43:50,919
Speaker 1: can get it quite that low, but if we get

692
00:43:50,920 --> 00:43:54,920
Speaker 1: it close to that low, then hey, there's no reason

693
00:43:55,040 --> 00:43:59,600
Speaker 1: why we can you know, return to those activities. But

694
00:43:59,680 --> 00:44:05,080
Speaker 1: this shock and what we've experienced is not going to

695
00:44:05,160 --> 00:44:10,920
Speaker 1: fade even withal these medical advances. What what do you

696
00:44:11,000 --> 00:44:14,759
Speaker 1: make of some of the increases we've seen in the

697
00:44:14,800 --> 00:44:17,839
Speaker 1: sun Belt and out west. If you look at the

698
00:44:17,960 --> 00:44:24,000
Speaker 1: areas that were hardest hit first New York, New Jersey, Connecticut, Massachusetts, Pennsylvania,

699
00:44:24,280 --> 00:44:27,200
Speaker 1: back out to the northeast, the rest of the country

700
00:44:27,280 --> 00:44:30,520
Speaker 1: is starting to see not so much on the morbidly

701
00:44:30,680 --> 00:44:35,239
Speaker 1: but on the infection rates really moving up. Florida, Arizona

702
00:44:35,320 --> 00:44:38,040
Speaker 1: has become really and though the very recent debt again

703
00:44:38,160 --> 00:44:41,279
Speaker 1: is down, they never they caught a second way. It's

704
00:44:41,280 --> 00:44:43,160
Speaker 1: not really it's a kind of a first wave going

705
00:44:43,200 --> 00:44:47,440
Speaker 1: through there, and it hits vulnerable and susceptible people really first.

706
00:44:47,760 --> 00:44:51,200
Speaker 1: It's not really second wave, but first started Northeast. They've

707
00:44:51,239 --> 00:44:55,400
Speaker 1: gone down dramatically, and I am not surprised when they

708
00:44:55,440 --> 00:44:57,960
Speaker 1: opened up and and they don't have good social distancing.

709
00:44:58,239 --> 00:45:03,440
Speaker 1: But their wave UM is the first wave, and it

710
00:45:03,480 --> 00:45:08,360
Speaker 1: is not as severe as what are the Pennsylvania actually

711
00:45:08,400 --> 00:45:11,760
Speaker 1: did fairly well, we should take a look and extremely

712
00:45:11,800 --> 00:45:15,800
Speaker 1: well now. But New York, Jersey, Massachusetts where the biggest

713
00:45:16,760 --> 00:45:19,279
Speaker 1: act of the biggest peaks. I don't think we're gonna

714
00:45:19,320 --> 00:45:21,400
Speaker 1: have that wave. Uh. And by the way, some the

715
00:45:21,560 --> 00:45:25,719
Speaker 1: very very recent data is as actually UM again it

716
00:45:25,800 --> 00:45:29,720
Speaker 1: could change, is encouraging that big spike over the weekend

717
00:45:29,760 --> 00:45:33,000
Speaker 1: seems to be again, we're gonna have to look at that. Uh,

718
00:45:33,080 --> 00:45:36,160
Speaker 1: you're gonna have it. This COVID nineteen is gonna be

719
00:45:36,280 --> 00:45:40,400
Speaker 1: in the background. It's a coronavirus. There's millions of them

720
00:45:40,400 --> 00:45:42,080
Speaker 1: out there. It's going to be for years. The question

721
00:45:42,120 --> 00:45:43,920
Speaker 1: is to be able to treat it, to get down

722
00:45:43,960 --> 00:45:48,200
Speaker 1: to levels that hey, this is any any other disease.

723
00:45:48,480 --> 00:45:52,160
Speaker 1: My feeling is there will be no more shutdown. There

724
00:45:52,200 --> 00:45:55,480
Speaker 1: will be emphasis is on on distancing. There should be

725
00:45:55,680 --> 00:46:01,440
Speaker 1: enforcement because many of these states have rules about people

726
00:46:01,600 --> 00:46:04,879
Speaker 1: inside way or masked, whether they choose to enforce them. Well,

727
00:46:05,120 --> 00:46:08,000
Speaker 1: if it spikes, you better enforce it. But you're not

728
00:46:08,040 --> 00:46:11,439
Speaker 1: going to shut down the way you did back in March.

729
00:46:11,719 --> 00:46:15,680
Speaker 1: I that there there's no reason for that. Uh, and

730
00:46:15,760 --> 00:46:18,960
Speaker 1: there's no appetite for them. Well, I hope you're right

731
00:46:19,000 --> 00:46:22,920
Speaker 1: about that. I have to ask you a question about colleges.

732
00:46:23,120 --> 00:46:26,439
Speaker 1: You you've been teaching college students for quite a long

733
00:46:26,520 --> 00:46:31,000
Speaker 1: time now, and some people have come out and saying

734
00:46:31,440 --> 00:46:33,759
Speaker 1: this has been a wake up call for colleges. This

735
00:46:33,800 --> 00:46:37,160
Speaker 1: will be the death knell for many second and third

736
00:46:37,160 --> 00:46:40,000
Speaker 1: tier schools. Obviously, you teach at an Ivy League school.

737
00:46:40,239 --> 00:46:42,880
Speaker 1: People like Professor Scott Galloway at and what you stern

738
00:46:42,920 --> 00:46:47,839
Speaker 1: have said, a huge percentage of schools out there are

739
00:46:47,880 --> 00:46:50,719
Speaker 1: going to see hard times and they're gonna be closures.

740
00:46:51,160 --> 00:46:54,799
Speaker 1: What do you think the future of education looks like

741
00:46:55,520 --> 00:47:01,480
Speaker 1: post pandemic? Well, I agree, second and thirdain fourth tear

742
00:47:01,560 --> 00:47:03,799
Speaker 1: tier schools and maybe in the second tier school gonna

743
00:47:03,800 --> 00:47:05,520
Speaker 1: really have trouble. I think the first tier schools are

744
00:47:05,520 --> 00:47:08,520
Speaker 1: going to do fine. But you know, you know the

745
00:47:08,560 --> 00:47:11,600
Speaker 1: truth that the matter is that a lot of the second, third,

746
00:47:11,600 --> 00:47:16,319
Speaker 1: and fourth year certain fourth tier schools boomed because of

747
00:47:16,320 --> 00:47:20,120
Speaker 1: the student loan program, which I think was not done

748
00:47:20,200 --> 00:47:23,680
Speaker 1: correctly and burden people too much. And we won't go

749
00:47:23,680 --> 00:47:25,919
Speaker 1: into it. But at that time, a lot of schools, hey,

750
00:47:25,960 --> 00:47:29,000
Speaker 1: I can charge tuition like Harvard, guess what they get

751
00:47:29,040 --> 00:47:31,920
Speaker 1: the loans? And and then all of a sudden, these

752
00:47:31,960 --> 00:47:34,080
Speaker 1: people say, yeah, but I'm not getting the type of

753
00:47:34,800 --> 00:47:36,600
Speaker 1: you know when I when I graduate from I'm not

754
00:47:36,600 --> 00:47:38,799
Speaker 1: getting the type of wages I can. You know that

755
00:47:38,920 --> 00:47:41,399
Speaker 1: differential I was promised that would allow me to pay

756
00:47:41,400 --> 00:47:43,400
Speaker 1: it back in three or four years, and that was

757
00:47:43,480 --> 00:47:47,960
Speaker 1: misinformation about that. They extrapolated those from the first and

758
00:47:48,040 --> 00:47:50,960
Speaker 1: second year, and then there were other problems and so yeah,

759
00:47:51,480 --> 00:47:53,799
Speaker 1: they're going to have to reduce dramatically and some of

760
00:47:53,800 --> 00:47:55,200
Speaker 1: those will go out of it. I think the first

761
00:47:55,239 --> 00:47:57,839
Speaker 1: year the first tier schools are going to be as

762
00:47:57,840 --> 00:48:02,200
Speaker 1: strong as ever. And I still think that people want

763
00:48:02,200 --> 00:48:05,000
Speaker 1: to be on campus as students love to be on campus.

764
00:48:05,520 --> 00:48:09,960
Speaker 1: There will be distance learning, and even before COVID nineteen,

765
00:48:10,080 --> 00:48:13,680
Speaker 1: there was a discussion what's called the flip classroom, which

766
00:48:13,760 --> 00:48:16,480
Speaker 1: is that you would get the basic instruction online, you

767
00:48:16,520 --> 00:48:22,600
Speaker 1: would come into lecture hall than ready to discuss rather

768
00:48:22,680 --> 00:48:26,800
Speaker 1: than uh standard uh you know, uh learning module. I

769
00:48:26,840 --> 00:48:30,560
Speaker 1: mean that began before COVID, and it's possible that the

770
00:48:30,840 --> 00:48:34,879
Speaker 1: you know, the the virus will accelerate that trend. Sound

771
00:48:34,920 --> 00:48:38,120
Speaker 1: sounds like a much more efficient use of the professor's time.

772
00:48:38,480 --> 00:48:41,480
Speaker 1: Don't don't have him just tell the students something they

773
00:48:41,520 --> 00:48:43,360
Speaker 1: could have read before. I mean I had to repeat

774
00:48:43,400 --> 00:48:47,520
Speaker 1: myself three times. I mean, you know, I had to

775
00:48:47,600 --> 00:48:49,880
Speaker 1: do three classes and I had a lunch break. But

776
00:48:50,320 --> 00:48:52,480
Speaker 1: you know, man, I was effective on that and I

777
00:48:52,520 --> 00:48:55,479
Speaker 1: had energy to do that. But um, and in many ways,

778
00:48:55,520 --> 00:48:58,040
Speaker 1: I said, gee, if I could record this once and

779
00:48:58,080 --> 00:49:00,239
Speaker 1: they could watch it any time they want, and we

780
00:49:00,280 --> 00:49:03,280
Speaker 1: could just come in here having read it and discussed

781
00:49:03,440 --> 00:49:05,680
Speaker 1: the real meaning it would be. It would be a

782
00:49:05,680 --> 00:49:11,279
Speaker 1: more enriched experience. And again that was that was already

783
00:49:11,640 --> 00:49:15,399
Speaker 1: beginning to be in play before covid um. I think,

784
00:49:15,440 --> 00:49:18,839
Speaker 1: well you might, you know, expect that definitely. To accelerate

785
00:49:19,960 --> 00:49:22,560
Speaker 1: makes a lot of sense. Before we get to our

786
00:49:22,600 --> 00:49:25,399
Speaker 1: speed round with our last five questions, I have one

787
00:49:25,560 --> 00:49:31,399
Speaker 1: last question about stocks. You have said that the average

788
00:49:31,640 --> 00:49:36,400
Speaker 1: real return on stocks real total return is about seven

789
00:49:36,440 --> 00:49:41,359
Speaker 1: percent per year over two centuries, and the long run

790
00:49:41,400 --> 00:49:45,000
Speaker 1: average correct. Alright, so so I know you're not a

791
00:49:45,000 --> 00:49:47,960
Speaker 1: big fan of forecast, but what do you see as

792
00:49:48,000 --> 00:49:52,279
Speaker 1: the average real total return of stocks for the next

793
00:49:52,280 --> 00:50:01,160
Speaker 1: two centuries? Um? Five, five and a half? Maybe real? Wow,

794
00:50:01,680 --> 00:50:05,320
Speaker 1: quite fascinating. I'm glad. I'm glad. I uh. Comparing that

795
00:50:05,480 --> 00:50:11,560
Speaker 1: the bonds right vastly superior to bonds, it's it's it's

796
00:50:11,600 --> 00:50:15,719
Speaker 1: even better than compared to bonds. It's even better than

797
00:50:15,760 --> 00:50:18,160
Speaker 1: when it was between six and a half and seven.

798
00:50:19,360 --> 00:50:22,200
Speaker 1: Does Does that mean that the people who are using

799
00:50:22,320 --> 00:50:26,680
Speaker 1: treasuries and and high grade corporates in their portfolio to

800
00:50:26,840 --> 00:50:30,040
Speaker 1: offset the volatility of stocks should have a little more

801
00:50:30,080 --> 00:50:33,239
Speaker 1: equity and a little less. Absolutely, I mean absolutely, and

802
00:50:33,200 --> 00:50:36,640
Speaker 1: in fact, you know, and um, you know, I wanted

803
00:50:36,640 --> 00:50:39,480
Speaker 1: avoid any I don't want to we uh with some

804
00:50:39,600 --> 00:50:41,879
Speaker 1: tree advertising here because I you don't want to give

805
00:50:41,880 --> 00:50:45,040
Speaker 1: you comics. But I just want to say that we

806
00:50:45,640 --> 00:50:49,960
Speaker 1: the old is not gonna do it. Bonds is way

807
00:50:50,000 --> 00:50:52,080
Speaker 1: too much and the returns are going to be bad.

808
00:50:52,160 --> 00:50:56,080
Speaker 1: And you know, we were now recommending and we think

809
00:50:56,080 --> 00:51:00,200
Speaker 1: that that the profession will evolve as a retiem in

810
00:51:00,280 --> 00:51:07,400
Speaker 1: portfolio towards the proportion. So is the new sixty exactly.

811
00:51:08,120 --> 00:51:10,719
Speaker 1: It's funny because in my shop and I don't want

812
00:51:10,760 --> 00:51:13,360
Speaker 1: to do an advertising, but we're closer to seventy thirty

813
00:51:13,840 --> 00:51:18,239
Speaker 1: for what was sixty. People's lifespans are longer. You have

814
00:51:18,320 --> 00:51:21,359
Speaker 1: to it's not retire at sixty eight and drop dead

815
00:51:21,400 --> 00:51:24,720
Speaker 1: at seventy two. There's an expectation that people are living

816
00:51:24,840 --> 00:51:27,160
Speaker 1: into their nineties and they don't want to run out

817
00:51:27,160 --> 00:51:30,600
Speaker 1: of money. Absolutely, you know, yeah, you know nowadays when

818
00:51:30,640 --> 00:51:33,319
Speaker 1: you reach sixty sixty five, I mean many people are

819
00:51:33,320 --> 00:51:35,959
Speaker 1: going to have that thirty years you know, which stock

820
00:51:36,000 --> 00:51:40,520
Speaker 1: speed bonds and then at a time. So so one

821
00:51:40,600 --> 00:51:42,719
Speaker 1: last question I have to ask you related to that,

822
00:51:43,440 --> 00:51:47,080
Speaker 1: we've seen a pretty substantial rally in gold over the

823
00:51:47,120 --> 00:51:49,960
Speaker 1: past five years. What do you think about gold within

824
00:51:50,000 --> 00:51:53,360
Speaker 1: a portfolio. Well, for the first time, we will with

825
00:51:53,520 --> 00:51:56,040
Speaker 1: some tree and it's part of you know, there's somebody

826
00:51:56,040 --> 00:52:00,000
Speaker 1: calls the sea called portfolio which we're using. My recommend

827
00:52:00,080 --> 00:52:04,239
Speaker 1: dations have have been we've added some gold, um A

828
00:52:04,360 --> 00:52:08,799
Speaker 1: slaw a small flies and long run because of my

829
00:52:09,040 --> 00:52:14,520
Speaker 1: moderate inflationary scenario. Um. I think that that protection, that

830
00:52:14,640 --> 00:52:17,439
Speaker 1: inflation protection. I think stocks are really good as also

831
00:52:17,560 --> 00:52:22,560
Speaker 1: moderate inflation. But we added gold. So yeah, um I

832
00:52:23,080 --> 00:52:25,200
Speaker 1: uh and that's the first time cover that's happened, and

833
00:52:25,280 --> 00:52:31,600
Speaker 1: that's just happened last a few months. Um and um um.

834
00:52:31,640 --> 00:52:34,719
Speaker 1: I think it's a it's a it's a good balance

835
00:52:34,760 --> 00:52:39,600
Speaker 1: and I'll give you good returns. I'm confirming my priors

836
00:52:39,600 --> 00:52:42,480
Speaker 1: we did something very similar because it was pretty clear

837
00:52:42,960 --> 00:52:44,879
Speaker 1: you're not going to see the sort of return from

838
00:52:44,920 --> 00:52:48,280
Speaker 1: tips and treasuries that we've seen for the past forty years.

839
00:52:48,280 --> 00:52:52,640
Speaker 1: And while while we don't think bitcoin is an investable asset,

840
00:52:53,360 --> 00:52:55,840
Speaker 1: there is something to be said for gold, at least

841
00:52:55,880 --> 00:52:59,359
Speaker 1: as a as a trading vehicle. It's more, even more

842
00:52:59,360 --> 00:53:02,239
Speaker 1: than trading vehicle now. But I agree with you. I'm

843
00:53:02,239 --> 00:53:06,920
Speaker 1: not a fan of bitcoin, but um, you know I

844
00:53:06,960 --> 00:53:12,319
Speaker 1: have moved towards modest gold position. Yes, quite fascinating. All right,

845
00:53:12,360 --> 00:53:15,200
Speaker 1: So let me jump to my five favorite questions. I

846
00:53:15,280 --> 00:53:17,799
Speaker 1: ask all our guests. You can feel free to go

847
00:53:17,840 --> 00:53:20,200
Speaker 1: as short along as you like on any of these.

848
00:53:20,800 --> 00:53:24,760
Speaker 1: And let's start with, since you've been sheltering in place

849
00:53:24,800 --> 00:53:27,920
Speaker 1: and lockdown at home, what are you streaming these days?

850
00:53:28,040 --> 00:53:31,560
Speaker 1: Tell us what you're either watching or listening on Netflix

851
00:53:31,680 --> 00:53:35,840
Speaker 1: or podcasts or whatever. Yeah, I mean, well, as I

852
00:53:35,840 --> 00:53:37,520
Speaker 1: said in the morning, get up and I actually check

853
00:53:37,560 --> 00:53:40,840
Speaker 1: all COVID stories, and I look at the websites. I

854
00:53:40,880 --> 00:53:43,000
Speaker 1: look at John Hopkins, I look at the world things.

855
00:53:43,040 --> 00:53:45,320
Speaker 1: I check all debts. I mean, I to me, I

856
00:53:45,320 --> 00:53:50,720
Speaker 1: I devour all that data for trends. Um. I listened

857
00:53:50,719 --> 00:53:53,080
Speaker 1: to Scott got Leave. I think he's great, And I mean,

858
00:53:53,200 --> 00:53:56,640
Speaker 1: and it's one of the best minds better in Fauci

859
00:53:56,719 --> 00:53:59,160
Speaker 1: in my opinion, in terms of really understanding what's going on.

860
00:53:59,280 --> 00:54:04,600
Speaker 1: STAT is a service that that Yeah, that looks at

861
00:54:04,640 --> 00:54:06,719
Speaker 1: a lot of this, Although I don't like some of

862
00:54:06,719 --> 00:54:09,719
Speaker 1: their articles. Seen the little slanted but they keep keep

863
00:54:09,800 --> 00:54:15,000
Speaker 1: you on the forefront there. Um um yeah, we we

864
00:54:15,000 --> 00:54:20,920
Speaker 1: we got Netflix. Uh, we watched Spike we'se um um

865
00:54:21,239 --> 00:54:28,360
Speaker 1: five Blood uh new release yesterday. Um. I love documentaries. Uh,

866
00:54:28,520 --> 00:54:32,040
Speaker 1: so I watched them whenever I can. And for news. Yeah,

867
00:54:32,160 --> 00:54:35,040
Speaker 1: something we've done which is totally unlike us. But we

868
00:54:35,120 --> 00:54:38,920
Speaker 1: never when Friday Night lights remember that, you know that? Yeah,

869
00:54:39,000 --> 00:54:41,880
Speaker 1: we we never saw it when it came out. And

870
00:54:42,400 --> 00:54:45,799
Speaker 1: I'm kind of a football plan my son is um

871
00:54:45,840 --> 00:54:48,239
Speaker 1: and I asked my wife, I said, would you Yeah,

872
00:54:48,280 --> 00:54:49,799
Speaker 1: and she watched a few and she said, you know,

873
00:54:49,920 --> 00:54:51,480
Speaker 1: you know, I don't get the football part of it,

874
00:54:51,560 --> 00:54:54,919
Speaker 1: but I like the series, so you know, after all

875
00:54:54,960 --> 00:55:00,000
Speaker 1: the bad news when you get about viruses forty five minutes. Um,

876
00:55:00,040 --> 00:55:04,279
Speaker 1: we watched an episode in the evening. Nothing what we

877
00:55:04,320 --> 00:55:07,840
Speaker 1: are now. I think we're in season three now. Nothing

878
00:55:07,920 --> 00:55:12,200
Speaker 1: like a little pure escapism to help you forget the craziness. Um.

879
00:55:12,239 --> 00:55:15,879
Speaker 1: You mentioned Milton Friedman, tell us about your mentors who

880
00:55:15,920 --> 00:55:19,640
Speaker 1: influenced your career and lend you to becoming the Jeremy

881
00:55:19,680 --> 00:55:23,040
Speaker 1: Seagull we know and love today. Well, thank you, Milton Friedman.

882
00:55:23,920 --> 00:55:26,759
Speaker 1: I mean I was at Colombia's an undergraduate and I

883
00:55:26,800 --> 00:55:29,520
Speaker 1: read Capitalism and Freedom, which I didn't know him, of course,

884
00:55:30,600 --> 00:55:32,880
Speaker 1: you know, and I said, oh my god. Yeah. And

885
00:55:32,880 --> 00:55:35,480
Speaker 1: and and then when I was at M I t

886
00:55:35,840 --> 00:55:38,319
Speaker 1: and I read Monetary History of the United States, which

887
00:55:38,360 --> 00:55:41,120
Speaker 1: is such an influential book for me. His chapter The

888
00:55:41,120 --> 00:55:45,000
Speaker 1: Great Contraction, which is also you know when you know

889
00:55:45,040 --> 00:55:48,120
Speaker 1: he talked to Ben Bernankey he said that chapter also

890
00:55:49,160 --> 00:55:55,319
Speaker 1: influenced me so much. And of course he used the

891
00:55:55,440 --> 00:55:59,960
Speaker 1: lessons of that chapter to save us from another great depression,

892
00:56:00,000 --> 00:56:03,359
Speaker 1: and in my opinion, in his actions, uh, just ten

893
00:56:03,440 --> 00:56:06,960
Speaker 1: years ago during the financial crisis. So I mean that

894
00:56:07,760 --> 00:56:11,520
Speaker 1: that that was unbelievable in terms of a book, and

895
00:56:11,560 --> 00:56:13,760
Speaker 1: of course one of the things cited by the Nobel

896
00:56:13,800 --> 00:56:16,520
Speaker 1: Prize committee and giving him the Nobel Prize. So Milton Friedman,

897
00:56:16,800 --> 00:56:21,920
Speaker 1: in my intellectual mentor, I mean, I think my going

898
00:56:22,000 --> 00:56:24,239
Speaker 1: going back is my family and my mom. She was

899
00:56:24,280 --> 00:56:28,400
Speaker 1: always very academic, always stressed academics, and introduced me to

900
00:56:28,480 --> 00:56:33,440
Speaker 1: the world um and and traveled with me at the

901
00:56:33,560 --> 00:56:36,920
Speaker 1: very early age, back in the nineteen early sixties around

902
00:56:36,960 --> 00:56:39,480
Speaker 1: the world, which was not done back then, and it

903
00:56:39,560 --> 00:56:41,960
Speaker 1: opened my eyes and I think my interests in the

904
00:56:42,000 --> 00:56:47,919
Speaker 1: world really was was was really you know, increased during

905
00:56:47,960 --> 00:56:50,960
Speaker 1: that period of time. UM. But I've had a lot

906
00:56:51,000 --> 00:56:55,200
Speaker 1: of people who have been Paul Samuels and uh, one

907
00:56:55,200 --> 00:56:57,640
Speaker 1: of my advisors m I T and I just wrote

908
00:56:57,680 --> 00:57:01,799
Speaker 1: a a fast rift the article about his works and

909
00:57:01,920 --> 00:57:06,360
Speaker 1: finance reviewing him. I mean, he's he's always been someone

910
00:57:06,400 --> 00:57:10,200
Speaker 1: I've idowis is probably the best pure economists of the

911
00:57:10,320 --> 00:57:14,120
Speaker 1: of the twentieth century. UM. Yeah, so let's you mentioned

912
00:57:14,160 --> 00:57:16,960
Speaker 1: a few books. Let's talk about what are you reading

913
00:57:17,000 --> 00:57:20,800
Speaker 1: these days and what are your favorite books that you

914
00:57:20,880 --> 00:57:24,880
Speaker 1: might want to recommend to listeners. But yeah, you know,

915
00:57:25,000 --> 00:57:30,680
Speaker 1: I I tend to read more than more than books.

916
00:57:30,720 --> 00:57:33,960
Speaker 1: I do read a treminous amount of newspapers and magazines

917
00:57:34,040 --> 00:57:38,240
Speaker 1: and op heads and all that to get opinion. UM.

918
00:57:38,280 --> 00:57:44,680
Speaker 1: I really enjoyed Churnow's Hamilton's book. UM. I mean I

919
00:57:44,720 --> 00:57:47,040
Speaker 1: happened to live in an I rise in Philly where

920
00:57:47,040 --> 00:57:48,880
Speaker 1: I look on to the first Bank of the United

921
00:57:48,920 --> 00:57:51,760
Speaker 1: States out my window, and I said, wow, he had

922
00:57:51,800 --> 00:57:55,040
Speaker 1: the foresight to know we needed one. And then we

923
00:57:55,080 --> 00:57:56,520
Speaker 1: gave it up, and we had a second bank, and

924
00:57:56,600 --> 00:58:00,440
Speaker 1: we gave that up, and finally we had the Federal Reserve. Um.

925
00:58:00,480 --> 00:58:05,400
Speaker 1: But you know that's my subject matter. And UM, you

926
00:58:05,440 --> 00:58:13,040
Speaker 1: know that book His Genius, I think was was so important.

927
00:58:13,760 --> 00:58:17,320
Speaker 1: UM and of course became the you know, a Broadway

928
00:58:17,400 --> 00:58:22,640
Speaker 1: hit play. UM. But you know, his his his life

929
00:58:22,800 --> 00:58:27,840
Speaker 1: was definitely an inspiration. If if you can recommend one

930
00:58:27,920 --> 00:58:30,960
Speaker 1: Milton Friedman book to somebody who wants to learn more

931
00:58:31,000 --> 00:58:35,720
Speaker 1: about his writing and his philosophy, which one would you recommend?

932
00:58:36,160 --> 00:58:39,320
Speaker 1: There's so many there's there's there's so many anthologies. I

933
00:58:39,320 --> 00:58:42,760
Speaker 1: mean there is, UM. If you want to know what

934
00:58:43,120 --> 00:58:46,960
Speaker 1: really changed history, what what Bernankey acted on and prevented that?

935
00:58:47,040 --> 00:58:50,480
Speaker 1: If you really there, they've taken The Monetary History United

936
00:58:50,480 --> 00:58:53,800
Speaker 1: States is like eight hundred pages. But there's a chapter

937
00:58:53,920 --> 00:58:56,320
Speaker 1: taken out of that called the Great Contraction that went

938
00:58:56,360 --> 00:58:58,440
Speaker 1: into a paperback. I don't know if it's still printed,

939
00:58:58,480 --> 00:59:02,720
Speaker 1: but I probably can get UM which said, this was

940
00:59:02,800 --> 00:59:05,920
Speaker 1: their failures. We could have prevented the Great Depression and

941
00:59:06,240 --> 00:59:09,720
Speaker 1: the world would have changed. Yeah, in my opinion, I

942
00:59:09,720 --> 00:59:13,720
Speaker 1: mean to go pack and we could talk about that. Fascism,

943
00:59:13,800 --> 00:59:19,240
Speaker 1: kinmunism all really rear their ugly head during the Great

944
00:59:19,240 --> 00:59:24,520
Speaker 1: Depression because of the feeling that a free market economy

945
00:59:24,600 --> 00:59:27,840
Speaker 1: was a failure and could never be saved. And I

946
00:59:27,880 --> 00:59:32,080
Speaker 1: think to appreciate that it could have been saved and

947
00:59:32,200 --> 00:59:34,400
Speaker 1: how important that would have been to history. And we

948
00:59:34,440 --> 00:59:38,720
Speaker 1: should never forget it is something you should do. And

949
00:59:38,720 --> 00:59:43,000
Speaker 1: and if I recall, didn't Ben Bernanke specifically say that

950
00:59:43,120 --> 00:59:48,320
Speaker 1: to Milton freedmanthday. He he was the you know, the

951
00:59:49,320 --> 00:59:53,600
Speaker 1: head of ceremonies for his ninetieth birthday party. He stood

952
00:59:53,680 --> 00:59:56,520
Speaker 1: up there. This is well before the financial crisis, because

953
00:59:56,520 --> 00:59:59,040
Speaker 1: mon Freeman died two thousand six, before the financials two

954
00:59:59,040 --> 01:00:03,280
Speaker 1: thousand four. He was ninety, stood up in front of

955
01:00:03,320 --> 01:00:06,240
Speaker 1: a group of people. I couldn't be there because of

956
01:00:06,240 --> 01:00:09,840
Speaker 1: another engagement, and I kicked myself for not being there.

957
01:00:09,880 --> 01:00:14,040
Speaker 1: But he said, Milton, the influence of your book, and

958
01:00:14,120 --> 01:00:18,200
Speaker 1: I'm going to promise you the Great Depression shouldn't have happened,

959
01:00:18,560 --> 01:00:22,800
Speaker 1: and because of what you did and wrote, it's not

960
01:00:22,840 --> 01:00:25,920
Speaker 1: going to happen again. We we will not let it

961
01:00:26,000 --> 01:00:28,880
Speaker 1: happen again. He said that in two thousand six to

962
01:00:28,920 --> 01:00:32,800
Speaker 1: the face of Milton Friedman two thousand four. Two years later,

963
01:00:32,840 --> 01:00:37,400
Speaker 1: Fridden passed away. Two years later, Bernanke had to take

964
01:00:38,040 --> 01:00:44,000
Speaker 1: the playbook from that Mammoth monetary history and put it

965
01:00:44,040 --> 01:00:48,200
Speaker 1: into effect and save us from the great Pale. How

966
01:00:48,240 --> 01:00:52,439
Speaker 1: incredibly precedent in some thousand and four and our final

967
01:00:52,520 --> 01:00:55,760
Speaker 1: two questions, what sort of advice would you give to

968
01:00:55,800 --> 01:00:59,240
Speaker 1: a recent college grad who came to you and said,

969
01:00:59,600 --> 01:01:02,880
Speaker 1: Professor se Siegel, I'm interested in the career in investing

970
01:01:03,040 --> 01:01:08,440
Speaker 1: and equities and finance. Oh great? What? Everyone everything that.

971
01:01:08,960 --> 01:01:12,960
Speaker 1: My My advice is two things. Everyone says, go into

972
01:01:13,000 --> 01:01:16,360
Speaker 1: what you love, okay, But I think there's a deeper

973
01:01:16,440 --> 01:01:20,200
Speaker 1: thing you should go into. Go into what you're good at,

974
01:01:20,840 --> 01:01:23,720
Speaker 1: what you think, what you when when you're talking or

975
01:01:23,760 --> 01:01:26,200
Speaker 1: thinking or reading. Oh yeah, I get that real fast.

976
01:01:26,240 --> 01:01:29,600
Speaker 1: Oh yes, I get that fast. Don't go into what

977
01:01:29,680 --> 01:01:32,960
Speaker 1: you think you should be or someone else thinks you

978
01:01:33,040 --> 01:01:37,240
Speaker 1: should be, or all that. Where do your mind goes

979
01:01:37,800 --> 01:01:40,520
Speaker 1: that you say, you know what, I'm pretty good at this.

980
01:01:42,120 --> 01:01:45,800
Speaker 1: That's what you should pursue. That's the area you should

981
01:01:46,040 --> 01:01:48,000
Speaker 1: go into it. And even in the area of finance.

982
01:01:48,040 --> 01:01:49,880
Speaker 1: I mean, for instance, I'm a macro guy. I look

983
01:01:49,920 --> 01:01:51,880
Speaker 1: at the big picture. I'm not great to pick an

984
01:01:51,880 --> 01:01:54,000
Speaker 1: individual stocks that don't try to I'm not even a

985
01:01:54,040 --> 01:01:58,760
Speaker 1: sector guy. Um, take your specialty, what you're good at

986
01:01:58,800 --> 01:02:03,280
Speaker 1: what you think. Well, um, and you pursue that area.

987
01:02:03,400 --> 01:02:06,960
Speaker 1: That's that's what I tell people. Quite fascinating. And our

988
01:02:06,960 --> 01:02:10,200
Speaker 1: final question, what do you know about the world of

989
01:02:10,400 --> 01:02:14,560
Speaker 1: stocks and investing today that you wish you knew fifty

990
01:02:14,640 --> 01:02:17,480
Speaker 1: years ago when you were a young buck right out

991
01:02:17,480 --> 01:02:21,160
Speaker 1: of school. Well, I wish I knew everything, and I

992
01:02:21,240 --> 01:02:24,120
Speaker 1: knew in stocks for the long run that I wrote

993
01:02:24,600 --> 01:02:29,040
Speaker 1: you know, first came out edition and I guess twenty

994
01:02:29,160 --> 01:02:33,000
Speaker 1: six years ago, Uh, how good stocks were? Uh, they're

995
01:02:33,000 --> 01:02:38,440
Speaker 1: not just speculations and their long term investments. Um um?

996
01:02:38,600 --> 01:02:42,960
Speaker 1: And uh? Also, how do you control your emotions? Um?

997
01:02:43,040 --> 01:02:45,200
Speaker 1: And I listen, I'll tell you another thing. I think.

998
01:02:46,040 --> 01:02:49,720
Speaker 1: Don't try to time the market. Boy, isn't that Look

999
01:02:49,760 --> 01:02:53,600
Speaker 1: at all these guys, I mean, and you know a

1000
01:02:53,600 --> 01:02:56,120
Speaker 1: lot of people this is really important. And I think

1001
01:02:56,120 --> 01:02:57,919
Speaker 1: we've talked about this before. A lot of people who

1002
01:02:57,920 --> 01:02:59,920
Speaker 1: say I'm only going in the index, don't worry, I'm

1003
01:03:00,040 --> 01:03:01,880
Speaker 1: good news. But then when they only go into index

1004
01:03:01,920 --> 01:03:04,480
Speaker 1: and they don't pick stocks, then they go into timing

1005
01:03:05,760 --> 01:03:11,160
Speaker 1: and they actually do worse. You know. So timing is

1006
01:03:11,720 --> 01:03:17,400
Speaker 1: timing the market, and you can see what's happened. Um,

1007
01:03:18,240 --> 01:03:21,080
Speaker 1: I mean, just to end, you know, with one really

1008
01:03:21,120 --> 01:03:27,480
Speaker 1: important story. Someone I had dinner with somebody, um the

1009
01:03:27,520 --> 01:03:31,960
Speaker 1: first week of March or um actually last week February,

1010
01:03:32,200 --> 01:03:36,280
Speaker 1: and he said, I sold all my stocks. I'm out.

1011
01:03:36,560 --> 01:03:38,640
Speaker 1: I think this is going to be a total disaster

1012
01:03:38,760 --> 01:03:42,440
Speaker 1: for the economy, and um, I don't. I don't want

1013
01:03:42,440 --> 01:03:44,760
Speaker 1: any part of it. And I said, well, you know

1014
01:03:45,200 --> 01:03:47,640
Speaker 1: I gave my thing. Well we had zero runnings. It's

1015
01:03:49,320 --> 01:03:52,320
Speaker 1: I wouldn't do that. Well afterwards, I said, oh my god,

1016
01:03:52,360 --> 01:03:55,440
Speaker 1: he was really right. Well he was right for about

1017
01:03:55,600 --> 01:03:59,640
Speaker 1: three weeks. Now, if he got in on mar yeah,

1018
01:03:59,680 --> 01:04:03,160
Speaker 1: that great. But you know what, I haven't checked with him,

1019
01:04:03,200 --> 01:04:04,920
Speaker 1: but I know from what he was saying, I bet

1020
01:04:04,960 --> 01:04:09,120
Speaker 1: he didn't. And you know what he's behind. If he

1021
01:04:09,160 --> 01:04:12,680
Speaker 1: had stayed in stocks, he looked for like a genius

1022
01:04:12,680 --> 01:04:17,560
Speaker 1: for three weeks, and now he's behind the name of

1023
01:04:17,560 --> 01:04:20,000
Speaker 1: the book. The name of the book is not stocks

1024
01:04:20,040 --> 01:04:22,800
Speaker 1: for the next three weeks, it stocks for the long Rueah.

1025
01:04:22,880 --> 01:04:25,760
Speaker 1: I mean, people they praise, Oh my god, I got out,

1026
01:04:25,840 --> 01:04:27,919
Speaker 1: look at how good I was. And then he said, yeah,

1027
01:04:27,920 --> 01:04:34,120
Speaker 1: but did you get back in um um um. You

1028
01:04:34,160 --> 01:04:37,040
Speaker 1: know what I mean? Barry for sure, for sure we've heard,

1029
01:04:37,080 --> 01:04:41,680
Speaker 1: We've heard. Hey, listen, Capitulation takes place when enough people

1030
01:04:41,920 --> 01:04:44,040
Speaker 1: dump stocks. That's how you get a low in March

1031
01:04:44,920 --> 01:04:48,600
Speaker 1: or March two thousand and nine, or or March. Well,

1032
01:04:48,600 --> 01:04:51,600
Speaker 1: that was the peak in March two thousand, But when

1033
01:04:51,640 --> 01:04:55,840
Speaker 1: everybody panics and sells, that's what sets the base for

1034
01:04:55,920 --> 01:05:00,440
Speaker 1: the next move higher. That's exactly right. Thank you, Professor

1035
01:05:00,480 --> 01:05:03,520
Speaker 1: Siegel for being so generous with your time. If you

1036
01:05:03,640 --> 01:05:06,440
Speaker 1: enjoy this conversation, well look up an inch or down

1037
01:05:06,480 --> 01:05:08,960
Speaker 1: an inch on Apple iTunes and you could see any

1038
01:05:09,000 --> 01:05:12,120
Speaker 1: of the previous three D plus conversations we've done over

1039
01:05:12,160 --> 01:05:16,040
Speaker 1: the past six years. Or go to your favorite podcast

1040
01:05:16,720 --> 01:05:23,200
Speaker 1: supplier Spotify, Google, Overcast, Stitcher wherever finer podcasters are sold,

1041
01:05:23,200 --> 01:05:26,880
Speaker 1: and you can find any of our prior conversations. We

1042
01:05:26,960 --> 01:05:31,240
Speaker 1: love your comments, feedback and suggestions right to us at

1043
01:05:31,920 --> 01:05:35,800
Speaker 1: M I B Podcast at Bloomberg dot net. Check out

1044
01:05:35,880 --> 01:05:41,160
Speaker 1: my weekly column on Bloomberg dot com Slash Opinion. Sign

1045
01:05:41,240 --> 01:05:44,200
Speaker 1: up from my daily reads at Rid Halts dot com.

1046
01:05:44,280 --> 01:05:47,280
Speaker 1: You could follow me on Twitter at Rid Halts. I

1047
01:05:47,280 --> 01:05:49,479
Speaker 1: would be remiss if I did not thank the crack

1048
01:05:49,560 --> 01:05:53,680
Speaker 1: team that helps put this conversation together Each and every week.

1049
01:05:54,520 --> 01:05:58,600
Speaker 1: Michael Batnick is my head of research. Mike Boyle is

1050
01:05:58,680 --> 01:06:04,360
Speaker 1: my producer, a teaker. Valbrunn is our project manager. Marufo

1051
01:06:04,680 --> 01:06:09,000
Speaker 1: is our audio engineer. I'm Barry Retults. You've been listening

1052
01:06:09,080 --> 01:06:11,880
Speaker 1: to Master's in Business on Bloomberg Radio