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Speaker 1: Who you put your trust in matters. Investors have put

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Speaker 1: their trust and independent registered investment advisors to the two

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Speaker 1: and four trillion dollars. Why learn more and find your

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Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast.

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Speaker 1: I'm Tom Keene with David Gura. Daily we bring you

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Speaker 1: insight from the best in economics, finance, investment, and international relations.

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Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and

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Speaker 1: of course on the Bloomberg. Joining us now is Ian

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Speaker 1: Shepherdson with Pantheon Macroeconomics. It's great to have you with

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Speaker 1: us here in come on t thanks having me. Let

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Speaker 1: me start with with Janet Yellen's testimony today, the Democrats

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Speaker 1: on the committee billing this as best they could as

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Speaker 1: a as a moment to hear or her on the

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Speaker 1: heels of of the of the election ahead of the

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Speaker 1: f o MC meeting. Let me ask you about that

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Speaker 1: in just a moment. Here, let me get to Walmart's

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Speaker 1: earnings here, which just crossed the wire. Walmart comfortable sales

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Speaker 1: here up one point two percent. Walmart boosts the lower

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Speaker 1: end of the year adjusted earnings per share view at

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Speaker 1: US comes here up one point two percent earnings per

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Speaker 1: share cents that was in line with expectations. And looking

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Speaker 1: at Walmart here in the pre market down just slightly

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Speaker 1: at seventy Back to you here with Janet Yellen's testimony

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Speaker 1: on capital what are you expecting to hear from her today? Well,

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Speaker 1: I'm not expecting it to say anything that would be

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Speaker 1: construed as a policy change or anything that will be

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Speaker 1: construed as a verdict on the election or what's going

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Speaker 1: to happen next. I mean, I'm quite sure she's got

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Speaker 1: a hundred and one different views about what's going to

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Speaker 1: happen next um, particularly on the fiscal front, where I

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Speaker 1: imagine she's been quite nervous because the administration of the

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Speaker 1: new the new administration talking a lot about fiscal stimulus

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Speaker 1: at the time when the economy really doesn't need it.

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Speaker 1: But she can't say any of that. The fiscal stimulus

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Speaker 1: isn't written yet, it isn't in legislation, we don't know,

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Speaker 1: and she's not in the guessing game, at least not

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Speaker 1: in public anyway. And I don't think she'll say anything

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Speaker 1: much about interest rates either, beyond what was said at

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Speaker 1: the last firm C meeting, which is that the case

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Speaker 1: for hiking has has strengthened the data or better the

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Speaker 1: labor markets tighter. But she's not going to go out

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Speaker 1: on a limb. She's in front of a failure, unfriendly

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Speaker 1: Congress anyway, they're not very keen on it. They're not

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Speaker 1: friendly towards the said And I think she'll want to

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Speaker 1: say as little as she can. And she certainly won't

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Speaker 1: want to say anything that could be considered as kind

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Speaker 1: of prejudicial about the incoming administration. I since it will

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Speaker 1: be a strange kind of dialogue on Capitol Hill today,

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Speaker 1: she may not want to talk about the potential for

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Speaker 1: stimulus or what an infrastructure spending package might look like

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Speaker 1: in the effect that might have on the economy. But

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Speaker 1: I imagined, at least among the Republicans on that joint committee,

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Speaker 1: we're going to hear a lot about it. Yeah, it's

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Speaker 1: bound to be talked about. But but she's pretty good

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Speaker 1: at saying lots of words without actually saying anything very

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Speaker 1: much of substance. I mean, this, this is part of

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Speaker 1: the game. I mean, this is this is an art form,

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Speaker 1: you know, It's it's like it's like a chess, it's

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Speaker 1: like jousting. Hopefully, nobody gets hurt, but she's not going

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Speaker 1: to give anything away. And remember that this is a

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Speaker 1: kind of collegiate consensus driven FED. It's not like the

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Speaker 1: olden days were all Greenspan decided what was going to

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Speaker 1: happen and whatever he said was policy. It's not really

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Speaker 1: like that. Yellen doesn't go in there and make things

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Speaker 1: up on on the hoof, and she knows she speaks

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Speaker 1: about what the FED has decided, rather than trying to

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Speaker 1: tell us what the FED is going to decide because

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Speaker 1: that's what she thinks it should decide. That's not how

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Speaker 1: it works under Yellen. So she's kind of constrained by

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Speaker 1: the fed's internal divisions as well as by her own

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Speaker 1: sort of inclination, and by the politics, because here's the

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Speaker 1: FED that's come under a great deal of attack during

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Speaker 1: the campaign, mostly from the Republicans idem they're now in charge,

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Speaker 1: and I think Yellen will will want to perhaps re

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Speaker 1: emphasize the independence of the FED. That would be something

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Speaker 1: that she could say that that wouldn't be controversial if

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Speaker 1: you like. But she's not going to go out on

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Speaker 1: a limb and say anything about about the potential sophistical stimulus.

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Speaker 1: I mean, she might make some remarks among the lines

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Speaker 1: of well, you know, the economy's approaching full employment. That's

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Speaker 1: not really controversial, uh, and sort of leave that dangling

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Speaker 1: in the air as as a kind of an idea

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Speaker 1: that well, maybe you know, a huge form at this

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Speaker 1: point is not such a great man. Maybe evidence will

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Speaker 1: come up as well, folks, as we get evidence to

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Speaker 1: the December jobs report. Onto a middle December FED meeting.

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Speaker 1: Good morning everyone, David Gurray in New York. I'm Tom

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Speaker 1: keenan London. Just spirited conversations today. I love the conversation

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Speaker 1: we had earlier with Mr Shepherdson and Steve Major of

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Speaker 1: HSBC on lower for longer. We'll redo that here. Right

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Speaker 1: now We'rethyan Shepherdson discussing the FED and of course interest

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Speaker 1: rate structures. Where is the terminal value ian? And if

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Speaker 1: there are these new lower terminal values of g d P,

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Speaker 1: of yields, etcetera, do they adjust higher because of Trump economics?

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Speaker 1: Well that is the sixties squillion dollar question, isn't it.

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Speaker 1: Because we so we don't at the moment know what

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Speaker 1: size and what structure the similar package is going to be.

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Speaker 1: I mean, if everything that Trump promised in the campaign

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Speaker 1: is done, and my to say would surprise me. But

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Speaker 1: if it were to be done, we'd be looking at

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Speaker 1: a stimulus of the order of four or five percent

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Speaker 1: of GDP in an economy which is running a full

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Speaker 1: employment and the only way that can end is in

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Speaker 1: an awful lot of tears and an awful lot of

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Speaker 1: inflation and much higher interest rates. Having said that, I

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Speaker 1: still don't think rates would go to where they were

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Speaker 1: at the last cycle, and they peaked at that five

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Speaker 1: and a quarter, because the private sector, especially the corporate sector,

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Speaker 1: is carrying a lot more debt than it was back then,

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Speaker 1: and it will take a lot smaller increase in rates

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Speaker 1: to tip it into recession. But the problem is, of course,

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Speaker 1: that the market is pricing in very little. So the

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Speaker 1: danger is not that rates have to go back to

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Speaker 1: the sort of numbers it's scared us, you know, a

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Speaker 1: few years ago, but just that they have to go

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Speaker 1: substantially higher than markets expect, and that requires a substantial,

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Speaker 1: possibly a very substantial repricing of risk across the whole

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Speaker 1: yield curve and ultimately in the stock market as well,

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Speaker 1: because right now we've got a kind of a split

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Speaker 1: situation where the bond market is saying clearly that if

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Speaker 1: the evation risk has gone up, and the start market

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Speaker 1: is saying party, party because of the fiscal stimulus to brilliant,

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Speaker 1: why is there that dichotomy between two that are supposed

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Speaker 1: to be linked. Well, I think in the medium term

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Speaker 1: they will prove to be linked. But the bond market

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Speaker 1: tends to get more nervous about inflation quicker than the

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Speaker 1: stock market. Stock market wants to party when the government's

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Speaker 1: spending lots of money, or when the government's talking about

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Speaker 1: spending lots of money and also cutting taxes, consumer facing stocks,

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Speaker 1: manufacturing stocks, construction stocks, defense stocks. This is great party,

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Speaker 1: party time, um, and think about the hangover a bit later,

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Speaker 1: whereas but the bond market tends to think about the

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Speaker 1: hangover first. The bond market tends to be less exuberant

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Speaker 1: and more concerned about the aftermath. So it's sees the

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Speaker 1: inflation risk coming, and the stock market is at the

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Speaker 1: moment focusing much more on the spending side. But eventually,

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Speaker 1: you know, these two separate markets live in the same universe,

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Speaker 1: and they will come together. And the danger is that

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Speaker 1: they come together with a substantially bigger rise in yields

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Speaker 1: across the whole curve and the stock market having some

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Speaker 1: sort of event, you know, later next year when when

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Speaker 1: the inflation pressure and the rate pressure kicks in. Ian

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Speaker 1: rate Daio at Bridgewater said he thinks that the thirty

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Speaker 1: year has topped out. Do you do you agree with

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Speaker 1: that forecast? How much is your forecast changed here in

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Speaker 1: light of what we saw last Tuesday. Well, I've raised

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Speaker 1: my forecast fields. I think I was already towards the

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Speaker 1: top end of expectations because I was looking at the

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Speaker 1: tight labor market and the acceleration in wage growth. Bear

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Speaker 1: in mind, by the way, that the Atlanta Fed of Wages,

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Speaker 1: which is a pretty sophisticated measures up at three point

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Speaker 1: nine year of a year. Now that's a really big acceleration.

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Speaker 1: So that's before we get any stimulus from the new administration.

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Speaker 1: So I had some pretty high yield thembers, but I've

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Speaker 1: moved them higher. And honestly, right now, if you had

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Speaker 1: to tell me that the tenure note is going to

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Speaker 1: pick at three and a half or maybe even fo,

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Speaker 1: I probably wouldn't push back that hard. And that's going

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Speaker 1: to put the thirty you know, well above those sort

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Speaker 1: of levels, which is which is a scary thing ian

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Speaker 1: if we get Trump g d P, which he boldly stated,

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Speaker 1: and I believe two of the three debates. If we

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Speaker 1: get Trump g d P given demographics, can we sustain

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Speaker 1: it or is it a one off condition? Oh, it's

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Speaker 1: I think it's a one off. You know, if you

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Speaker 1: if you talk to to Trump people, what they'll say

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Speaker 1: is that this acceleration in demand through the fiscal stimulus

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Speaker 1: is going to pull millions of people back into the

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Speaker 1: labor force and productivity growth is going to pick up.

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Speaker 1: And honestly, I would love that to happen. Nothing would

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Speaker 1: make me happy than seeing two or three million million

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Speaker 1: people who left the labor force given up looking for

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Speaker 1: work coming back in and finding jobs. That would just

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Speaker 1: be fantastic. But I just don't see it, because already

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Speaker 1: before any stimulus, we've got small businesses all around the

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Speaker 1: country through the NFIB surveys screaming at us that they

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Speaker 1: can't find the people they want to hire. Now, if

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Speaker 1: those two or three million people outside the labor force

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Speaker 1: really were substitutes for the existing workforce or good enough

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Speaker 1: to hire, they would have hired them by now. So

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Speaker 1: simply pumping in a huge amount of demand into the secret.

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Speaker 1: I don't think it's going to magically create its own labor. Ian.

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Speaker 1: Have you been to arbor Lore on Spain in Scotland?

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Speaker 1: Not recently? I have been, Yes, you should have been, David.

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Speaker 1: I have learned that that is where Walker's pure butter shortbread.

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Speaker 1: Oh you've taken a deep dives come from. And I

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Speaker 1: I think I may not be at work on Monday, David.

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Speaker 1: I think that I may have to digress north to

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Speaker 1: the Scottish hotland Heartland Highlands. Rather, I gotta work Kilt.

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Speaker 1: I'm going to our Able Lore on Spay. I'm hearing

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Speaker 1: reports of a butter shortage in the UK, shortage exactly,

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Speaker 1: and I believe it's within shouting distance of McCallan, Scotch.

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Speaker 1: So I can kill two luxuries with one stone. David

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Speaker 1: Gurray here in New York, Tom Keene in London, we

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Speaker 1: were with Ian Shepherd's in chief Economists Pantheon back Economics

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Speaker 1: in time. I'm struck reading the papers this morning, how

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Speaker 1: the conversation about this stimulus package has changed. You're hearing

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Speaker 1: a lot of lawmakers urging caution, urging people to be

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Speaker 1: more patient, that it's going to take a while to

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Speaker 1: put this thing together and a while longer still for

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Speaker 1: the economic effects of of that to play out. Let

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Speaker 1: me put that question to to ian. If we get

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Speaker 1: one of these things to the tune of five billion

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Speaker 1: to a trillion dollars, when do we begin to see

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Speaker 1: the economic impact. Well, I remember of the Bush administration

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Speaker 1: there was a tax cut that was implemented by sending

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Speaker 1: everyone to check in the mail. So you can actually

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Speaker 1: do these things very quickly on the tax side. Um,

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Speaker 1: the infrastructure side is much more difficult and takes a

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Speaker 1: great deal longer. So the ideal stimulus package, not considering

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Speaker 1: that we don't actually need one right now. But if

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Speaker 1: you work under implement the stimulus package and you wanted

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Speaker 1: it to have an immediate effect and the longer lasting effect,

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Speaker 1: you would have some sort of immediate tax cut at

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Speaker 1: the very beginning to come through straight away to make

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Speaker 1: people more confident and into me actually doing this thing,

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Speaker 1: and then later that that fills the gap so that

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Speaker 1: later the infrastructure stuff comes through. If all you do

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Speaker 1: is infrastructure, then it's going to take a long time

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Speaker 1: for people to feel it. But I would be amazed,

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Speaker 1: absolutely amazed, if that turned out to be the package

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Speaker 1: that we get next year, it will have tax cuts.

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Speaker 1: The guy that owns a high ground on this Ian Shepherdson,

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Speaker 1: and you may know him as Matthew Shapiro at the

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Speaker 1: University of Michigan, he's client Professor of Economics or Lawrence

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Speaker 1: Klient Professor of Economics, and matt has done fabulous work.

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Speaker 1: And the those of these gifts from the government. Don't

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Speaker 1: we just say that, don't we do a rabbit barrow

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Speaker 1: and just save because we know it's a fiction. Well,

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Speaker 1: some of us will. Undoubtedly not everyone is going to

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Speaker 1: spend the money straight away. But if you send a

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Speaker 1: check for the same amount to everybody, then people at

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Speaker 1: the lower end of the income spectrum are going to

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Speaker 1: spend it more or less immediately. Remember as well that

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Speaker 1: the people, you know, our median incomes haven't had a

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Speaker 1: real pay raise for a very long time, and so

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Speaker 1: something that looks and smells like free money, I think

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Speaker 1: is going to be spent immediately on almost immediately by

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Speaker 1: by most of the population. You know, if we've had

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Speaker 1: twenty years of strong income gains and people had strong

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Speaker 1: balance shee'ds, then yeah, they wouldn't spend the money. Um,

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Speaker 1: they'd be more inclined to save it. But but right now,

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Speaker 1: after a very long period of real pressure on people

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Speaker 1: on medium or below, incomes a much bigger chance of

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Speaker 1: it being spent. That doesn't mean, by the way, I

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Speaker 1: think it's a good idea, you know. I think with

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Speaker 1: an unemployment rate of four point nine in wages accelerating,

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Speaker 1: the last thing the US needs is a big fiscal

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Speaker 1: stimulus of any sort. The time to do it was

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Speaker 1: three or four years ago. It's it's the wrong thing

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Speaker 1: at the wrong time now. But they're going to do it.

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Speaker 1: We have to think about the consequences, and my guess

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Speaker 1: is at a fair bit of it will be spent

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Speaker 1: pretty quickly. We're getting some reads on inflation. This week's

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Speaker 1: CPI data coming out at eight thirty Wall Street Time.

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Speaker 1: Give us the the Ian Shepherdson preview there. What are

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Speaker 1: you expecting to see today? Yeah, all the headline number

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Speaker 1: is going to be popped up a little bit by

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Speaker 1: our gas prices rebounding. Um The core I think will

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Speaker 1: be will be pretty unexciting, but the core rates already

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Speaker 1: a tune a quarter and rising. The headline is where

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Speaker 1: the excitement is, because that, I think is what most

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Speaker 1: people think of as inflation. You know, we in this

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Speaker 1: business talk a lot about the core, but for most people,

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Speaker 1: it's about the headline inflation. Right. That's what's going to

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Speaker 1: be on the front page of the of the papers

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Speaker 1: tomorrow morning, and it's going to move a little bit

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Speaker 1: higher in the report today at one point six one

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Speaker 1: point seven. But the really interesting thing is what happens

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Speaker 1: over the next few months, because by February March time,

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Speaker 1: we're looking at a year of the headline inflation rate

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Speaker 1: of about two and a half. There in mind of

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Speaker 1: a year ago it was exactly zero. So to go

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Speaker 1: from zero to two points even the course of eighteen

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Speaker 1: months is going to look and feel and sound for

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Speaker 1: most people like a real acceleration. Now that the fact

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Speaker 1: that most of it is an unwinding based effectum energy

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Speaker 1: prices is irrelevant. The way that it's going to appear

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Speaker 1: to most people is going to be as a clear

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Speaker 1: acceleration inflation. Even if I get if if I get wait,

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Speaker 1: if I get inflation, do I guarantee positive real wages?

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Speaker 1: Isn't the arch risk here wage disinflation? I mean, isn't

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Speaker 1: that the key risk for Mr? Trump? Well, my guess

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Speaker 1: is that the loand market is so tight that what

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Speaker 1: will actually happen is that people will will for the

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Speaker 1: first time in many years, will be in a position

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Speaker 1: to go and go to their bosses and say, hey,

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Speaker 1: I need a raise to to cover me for this

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Speaker 1: rising inflation. Now, you couldn't do that at any point

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Speaker 1: since the crash, because there were too many people out

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Speaker 1: there who could replace you if you knocked on the

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Speaker 1: boss's door and said, give me a raise. But I

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Speaker 1: think that era has come to an end, and that's

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Speaker 1: why wage increases have already picked up quite smartly after

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Speaker 1: five years of going nowhere. So they're rising and that's

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Speaker 1: telling you the labor markets tight. And we also know

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Speaker 1: from history that when you get moved to the upside

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Speaker 1: and inflation to the downside as well, those implementations becoming

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Speaker 1: embedded in the wage data. And I'm really nervous that

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Speaker 1: was seeing this rising inflation at a time when people

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Speaker 1: are feeling a bit bolder about asking for raises, and

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Speaker 1: at the time when just down the line we're going

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Speaker 1: to see substantial fiscal stimulus. But if I was sitting

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Speaker 1: in the feed shoes now, I think I'd be getting

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Speaker 1: pretty nervous about the labor market. Ian Shepherdson. Thank you

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Speaker 1: so much with thrilled to have you with us today.

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Speaker 1: David Gurry, I just made up a chart. I'll use

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Speaker 1: it on Bloomberg Television tomorrow. I'm gonna send it out

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Speaker 1: right now. If you assume three percent inflation, the e

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Speaker 1: c I wages and benefits hasn't been positive since the

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Speaker 1: summer of two thousand eight with just a three percent inflation.

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Speaker 1: So you've got to have rising wages to get to

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Speaker 1: a legitimate positive real wage. Given Trump, inflation will continue.

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Speaker 1: From London in New York, this is Bloomberg. Good morning everyone,

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Speaker 1: David grew in New York. I'm talking in London. A J.

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Speaker 1: Rogerdocks with us now with Barclay's and they've trotted out

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Speaker 1: their new global outlook. A J. I believe a week

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Speaker 1: ago on Thursday, did you have to rewrite your global

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Speaker 1: outlook like letting pm PM Tuesday night. Yes, we did,

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Speaker 1: and the single biggest driver was, obviously I'm not just

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Speaker 1: the down victory, but more importantly that we are now

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Speaker 1: looking at the world with significant fiscal expansion in the

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Speaker 1: United States next year. We think within that fiscal expansion

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Speaker 1: is the amplitude of expansion Obviously we're discounting a level

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Speaker 1: of expansion. Now are we discounting the correct level? So

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Speaker 1: that's a good question and it's not easy to answer.

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Speaker 1: We are really assuming that that he will get most

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Speaker 1: of what he's asking for, but not to the same maningute.

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Speaker 1: So for example, it's not just tax cuts. Friend, he's

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Speaker 1: asked for as much as five percent of g D.

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Speaker 1: People don't think he'll get that, but we think he'll

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Speaker 1: get two percent. In the past, he was called for

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Speaker 1: forty five percent Paris fan China. We don't think he

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Speaker 1: will actually do that, but we think Paris will be

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Speaker 1: high enough to be punitive, but low enough to be prohibitive.

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Speaker 1: And we assume proportional responses. So you're right, a lot

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Speaker 1: of assumptions going to our somewhat more optimistic outlook for

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Speaker 1: the next few quarters. Tom was talking with with Steve

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Speaker 1: Major at HSBC a few minutes ago on on surveillance

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Speaker 1: on television. One of the things that Steve Major said was,

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Speaker 1: you know, there's a lot that's uncertain right now, but

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Speaker 1: he I think, in his words, couldn't afford to wait

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Speaker 1: for more detail before changing his bond yield forecasts. Do

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Speaker 1: you feel similarly here that that there's the pressure to

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Speaker 1: to change something now in light of what we've seen. Well,

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Speaker 1: I wouldn't call it pressure in terms of simply marking

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Speaker 1: yourself to market. It's more that some of the facts

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Speaker 1: from the ground have changed. There will be physical expansion

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Speaker 1: in the United States. We can dispute the magnitude of it, right,

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Speaker 1: and the fact of the marketers that term premier in

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Speaker 1: bond deals has unwound. So our four now. Having said that,

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Speaker 1: I will tell you, David, we think that markets have

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Speaker 1: actually done a pretty good job repricing bond deals to

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Speaker 1: levels that we think are now close to fair. In

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Speaker 1: this new political configuration. Tends that to a quarter in

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Speaker 1: the first quarter of next year. Seemed about right to us.

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Speaker 1: I look at the dynamics of the bond market and

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Speaker 1: I guess some of it comes down to the point

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Speaker 1: where we've had free money for years. Is your call

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Speaker 1: of a new rate regime enough to upset the m

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Speaker 1: and a apple cart. No, because it might slow it

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Speaker 1: down some, but we do not expect a further new

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Speaker 1: violent repricing in in global bond deals. And as importantly, Tom,

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Speaker 1: remember that this is a late cycle expansion. You know,

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Speaker 1: the United States has had seven to eight years right

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Speaker 1: so logically you're looking at two thousand and eighteen being

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Speaker 1: the point at which the economy goes into a slowdown,

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Speaker 1: and next year's fiscal expansion should hack on another year

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Speaker 1: to eighteen months. But it doesn't change the endgame that much.

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Speaker 1: It probably changes the FED hiking cycle by by you know,

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Speaker 1: a few more hikes, but that's about it. I don't

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Speaker 1: think there is enough to in the apoca. David d

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Speaker 1: right here in New York, with Tom Keen in London,

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Speaker 1: joined by A J. Roger Yaksha of head of back

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Speaker 1: of Research at Barclays and a J. Let me let

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Speaker 1: me ask you about what you're seeing when you look

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Speaker 1: at dollar strength. Tom mentioned above a hundred here at

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Speaker 1: a hundred thirteen right now. How long do you expect

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Speaker 1: that continue? How much higher does the dollar have to go?

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Speaker 1: So it's had a nice move upwards. It will probably

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Speaker 1: stabilize around here for a few weeks. But as we

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Speaker 1: go into the first quarter, everything seems to be still

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Speaker 1: lining up, you know, in favor of the dollar, whether

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Speaker 1: it be fiscal stimulus, higher bond deals in the United States,

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Speaker 1: the prospect of somewhat more aggressive that hikes the US

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Speaker 1: growing better than most of the countries, So against countries

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Speaker 1: like you know, our currencies like the euro for example,

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Speaker 1: or against most emerging market currencies, at least until the

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Speaker 1: Trump trade agenda becomes clearer, we think that dollar still

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Speaker 1: has room to go upwards. What's the business cycle look

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Speaker 1: like to you right now? Under under a president Donald Trump?

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Speaker 1: How much longer do you think it will be when

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Speaker 1: he comes to the others. So, before the elections, with

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Speaker 1: the prospect of no fiscal stimulus, because we were assuming

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Speaker 1: that a Clinton presidency would not be able to pass

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Speaker 1: something through the House, right, we were looking at a

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Speaker 1: business cycle probably turning down at some point in two

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Speaker 1: thousand eighteen, and one can argue that that has been

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Speaker 1: pushed out by at least twelve to eighteen months if

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Speaker 1: he gets the fiscal expansion that we think he will.

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Speaker 1: I just you know, edgy, I look at at the

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Speaker 1: dynamics here and the if or the a fiscal expansion

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Speaker 1: come on. It's a legislative process. Does a pro like

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Speaker 1: you have a clue what that vector will be of

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Speaker 1: quote unquote fiscal expansion? So so usually it is more difficult,

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Speaker 1: no question, But there's two unusual things about President elector

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Speaker 1: Trump right. The first is that his party does have

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Speaker 1: all of the levels of power now right, including in Congress,

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Speaker 1: and there has been a willingness on both sides to

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Speaker 1: use the constitutional option, the nuclear option, if you will,

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Speaker 1: to push things through senators if they need to write.

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Speaker 1: So the legislative process I think is likely to be

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Speaker 1: less of Ahotle from that standpoint. And the other thing

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Speaker 1: is one can argue Tom and this is a judgment call.

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Speaker 1: Admittedly he has a lot more political capital given us

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Speaker 1: come from behind victory, and given how much he's focused

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Speaker 1: on things that like tax cuts, we think that will

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Speaker 1: probably get done, not at the level he's asking for,

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Speaker 1: but I would be very very surprised if still expansion

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Speaker 1: is not reality. Like, okay, so within your global report

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Speaker 1: in twenty five people fighting like cats and dogs in

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Speaker 1: a room. I mean, we know how these things get made.

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Speaker 1: Can Barklay's establish a three percent plus GDP vector right now? No? No,

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Speaker 1: we we we think because remember we are also assuming

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Speaker 1: that there will be tariffs and economic drag at least

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Speaker 1: near term from Paris, and for that he doesn't need

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Speaker 1: legislative approval. So the vector that we are establishing is

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Speaker 1: somewhat stronger growth, maybe another fifty business points over what

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Speaker 1: you would have had, uh, you know, prior to the

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Speaker 1: elections for two seventeen, but more importantly that that continues

431
00:21:39,920 --> 00:21:42,159
Speaker 1: in two thousand eighteen. The real story here is the

432
00:21:42,320 --> 00:21:45,200
Speaker 1: lengthening of the business cycle as opposed to a three

433
00:21:45,280 --> 00:21:47,239
Speaker 1: three and a half percent growth number next to year

434
00:21:47,400 --> 00:21:48,879
Speaker 1: A j I imagine that we're going to hear from

435
00:21:48,880 --> 00:21:52,000
Speaker 1: the FED chairman today, FED chairwoman today that that she's

436
00:21:52,160 --> 00:21:54,000
Speaker 1: adopting a wait and see approach when it comes to

437
00:21:54,080 --> 00:21:56,439
Speaker 1: this this fiscal stimulus package, that she's going to say

438
00:21:56,480 --> 00:21:59,719
Speaker 1: precious little and probably not going to comment too much

439
00:21:59,760 --> 00:22:02,920
Speaker 1: on speculation that will get an infrastructure package. So our

440
00:22:03,000 --> 00:22:05,840
Speaker 1: central banker is watching what's happening here. How about overseas

441
00:22:05,920 --> 00:22:09,280
Speaker 1: other economies paying attention here to how this process goes,

442
00:22:09,359 --> 00:22:13,200
Speaker 1: thinking perhaps of adopting something similar themselves. Well, it's actually

443
00:22:13,280 --> 00:22:17,159
Speaker 1: the political consensus around fiscal stimulus had arguably started to

444
00:22:17,280 --> 00:22:21,479
Speaker 1: turn even before a Trump presidency, whether you look at Japan, China,

445
00:22:21,680 --> 00:22:24,439
Speaker 1: the United Kingdom which has walked away from fiscal consolidation

446
00:22:24,480 --> 00:22:27,800
Speaker 1: after Brexit, and even parts of Europe which might not

447
00:22:27,920 --> 00:22:30,520
Speaker 1: be expanding fiscally, but none of them are adhering to

448
00:22:30,640 --> 00:22:34,880
Speaker 1: that agreed upon targets when it comes to ciscal deficits. Right,

449
00:22:34,960 --> 00:22:37,960
Speaker 1: So I think you're right. I think the chair will

450
00:22:38,000 --> 00:22:40,359
Speaker 1: be cautious to make sure she is not part of

451
00:22:40,400 --> 00:22:43,840
Speaker 1: the news story. She will probably use boilerplate language like

452
00:22:43,920 --> 00:22:46,040
Speaker 1: ciscal expansion is a good thing if it happens when

453
00:22:46,720 --> 00:22:51,040
Speaker 1: that We're mayp three free on Thursday's j But let's

454
00:22:51,040 --> 00:22:56,280
Speaker 1: at least go ex anti ex post with this revolutionary election.

455
00:22:56,440 --> 00:22:59,440
Speaker 1: And I say that with respect for the President elect

456
00:23:00,000 --> 00:23:03,640
Speaker 1: a j. Does our central bank become ever more expost,

457
00:23:04,119 --> 00:23:10,159
Speaker 1: ever more waiting for evidence? Yes, and not just in

458
00:23:10,320 --> 00:23:13,439
Speaker 1: terms of what happens with the economy, but also they

459
00:23:13,480 --> 00:23:17,880
Speaker 1: will also be watching movements in Congress that they think

460
00:23:17,960 --> 00:23:20,560
Speaker 1: we might have bet against central bank independence. So yes,

461
00:23:20,680 --> 00:23:22,480
Speaker 1: they are very much in a wait and see more

462
00:23:23,000 --> 00:23:25,320
Speaker 1: on both sides. They will also be looking at who

463
00:23:25,400 --> 00:23:28,480
Speaker 1: the President elect nominates for the two seats on the

464
00:23:28,520 --> 00:23:31,440
Speaker 1: Federals aboard. That will be a signal of his approach

465
00:23:31,520 --> 00:23:34,160
Speaker 1: to the central bank. Let's talk strategy here, A little

466
00:23:34,160 --> 00:23:37,639
Speaker 1: bit talk allocation. How have you adjusted to recommend? Adjusting

467
00:23:37,680 --> 00:23:40,280
Speaker 1: portfolio is here? In light of the changes we've seen

468
00:23:40,320 --> 00:23:43,399
Speaker 1: here since Tuesday. So if you remember Tom, probably remember

469
00:23:43,440 --> 00:23:46,320
Speaker 1: this last quarter, which was only about eight weeks ago.

470
00:23:46,359 --> 00:23:48,680
Speaker 1: When we put out the previous quarterly, we had gone

471
00:23:48,720 --> 00:23:51,320
Speaker 1: away from fixed income into equities, you know, for the

472
00:23:51,359 --> 00:23:53,920
Speaker 1: first time in a while. And you know, it's better

473
00:23:53,960 --> 00:23:55,960
Speaker 1: to be lucky than smart. We never thought that you

474
00:23:56,440 --> 00:23:59,880
Speaker 1: have this magnitude of a move higher in in bond deals.

475
00:24:00,320 --> 00:24:03,120
Speaker 1: We are still underweight fixed income. All we are saying

476
00:24:03,240 --> 00:24:04,840
Speaker 1: is you're not going to see this. You know, this

477
00:24:05,720 --> 00:24:08,800
Speaker 1: new a new violenty pricing of the magnitude that you've seen.

478
00:24:09,200 --> 00:24:13,080
Speaker 1: And we like US dollar assets, both equities and credit.

479
00:24:13,560 --> 00:24:16,920
Speaker 1: So both of these assets right, there are two conflicting factors.

480
00:24:17,000 --> 00:24:20,879
Speaker 1: On one you have the prospect of somewhat better fundamentals,

481
00:24:21,040 --> 00:24:23,640
Speaker 1: but on the other hand, you do have higher interest rates,

482
00:24:24,119 --> 00:24:26,800
Speaker 1: which are in low interest rates have been one of

483
00:24:26,840 --> 00:24:29,280
Speaker 1: the reasons why evaluations have been so elevated, So that's

484
00:24:29,320 --> 00:24:33,199
Speaker 1: the offsetting factor. We think the first wins out at

485
00:24:33,320 --> 00:24:36,800
Speaker 1: least in two thousands seventeen, especially with the prospect of

486
00:24:37,000 --> 00:24:42,240
Speaker 1: regulatory relief for equity sector and corporate text A J

487
00:24:42,400 --> 00:24:44,600
Speaker 1: helped me here with the linkage of your global report.

488
00:24:44,640 --> 00:24:48,280
Speaker 1: In the dollar, do we see level dollars, stronger dollar

489
00:24:48,480 --> 00:24:53,480
Speaker 1: or brutal move dollar stronger dollar at least for Q one,

490
00:24:53,680 --> 00:24:58,280
Speaker 1: and then it probably stabilizes virtually versus virtually every other currency.

491
00:24:58,359 --> 00:25:00,920
Speaker 1: The one currency that makes me a little ashes is

492
00:25:01,000 --> 00:25:05,840
Speaker 1: the Japanese yen, but they've had trouble generating inflation. But

493
00:25:05,960 --> 00:25:08,800
Speaker 1: everywhere else the type seems to be turning, and that

494
00:25:09,000 --> 00:25:12,560
Speaker 1: is positive. We focused on political risk here and the

495
00:25:12,600 --> 00:25:15,800
Speaker 1: effect on policy in the US. Let's talk a little

496
00:25:15,840 --> 00:25:17,760
Speaker 1: bit about Europe and all the elections we have on

497
00:25:17,840 --> 00:25:21,439
Speaker 1: the the agenda here over the next eighteen months. How

498
00:25:21,520 --> 00:25:23,800
Speaker 1: big is that risk and when you weigh that versus

499
00:25:23,840 --> 00:25:26,679
Speaker 1: the potential for, say, problems with down Trump's trade policy,

500
00:25:26,720 --> 00:25:30,320
Speaker 1: which is the bigger risk. So we think the probability

501
00:25:30,520 --> 00:25:33,040
Speaker 1: of something bad happening is low. If it moves in

502
00:25:33,119 --> 00:25:36,720
Speaker 1: that direction, the consequences are very high. And you know,

503
00:25:36,800 --> 00:25:40,439
Speaker 1: it's a very good point investors who are looking at

504
00:25:40,480 --> 00:25:43,000
Speaker 1: European politics and saying I'm going to ignore it because

505
00:25:43,040 --> 00:25:45,840
Speaker 1: look what happened with Brexit, Look what happened with President Trump,

506
00:25:46,320 --> 00:25:48,920
Speaker 1: right it was there were surprises and financial markets have

507
00:25:49,040 --> 00:25:51,359
Speaker 1: been more than fine. So I'm not just paying attention.

508
00:25:51,440 --> 00:25:53,920
Speaker 1: We think that's actually a big mistake because it is

509
00:25:53,960 --> 00:25:56,880
Speaker 1: a significant deal. We still believe for the United Kingdom

510
00:25:57,280 --> 00:25:59,240
Speaker 1: to leave the European Union, but it would be a

511
00:25:59,480 --> 00:26:03,480
Speaker 1: huge if a Eurozone country started to move in that direction.

512
00:26:03,600 --> 00:26:07,200
Speaker 1: And that is the prism through which elections in Europe

513
00:26:07,240 --> 00:26:09,520
Speaker 1: should be looked at next year. Both in the Netherlands

514
00:26:09,600 --> 00:26:13,000
Speaker 1: and in France, you have prominent political parties who are

515
00:26:13,240 --> 00:26:17,760
Speaker 1: very visibly anti you, and the market probabities of one

516
00:26:17,840 --> 00:26:21,320
Speaker 1: of them leaving increases. That's a bad thing. A J. Rogers,

517
00:26:21,359 --> 00:26:23,800
Speaker 1: thank you so much with Barclay's congratulations on your new

518
00:26:23,880 --> 00:26:27,040
Speaker 1: report and great to go over that, David. I think

519
00:26:27,080 --> 00:26:29,440
Speaker 1: it's time that we really bring all of our listeners

520
00:26:29,520 --> 00:26:33,359
Speaker 1: worldwide into the making of the sausage. Can we do that?

521
00:26:34,080 --> 00:26:36,200
Speaker 1: Here's the way. Here's the way it works, folks. And

522
00:26:36,280 --> 00:26:38,880
Speaker 1: you wonder how we don't cut each other off. Our

523
00:26:39,040 --> 00:26:42,639
Speaker 1: wonderful producer, why you end is in our ears telling

524
00:26:42,720 --> 00:26:44,919
Speaker 1: us who's next, and we sometimes step on each other,

525
00:26:45,359 --> 00:26:49,560
Speaker 1: and it's all about keeping the conversation going. It's different

526
00:26:49,720 --> 00:26:53,000
Speaker 1: when I'm in London because what is critical here is

527
00:26:53,119 --> 00:26:56,119
Speaker 1: why you an allows me to eat a walker shortbread

528
00:26:56,400 --> 00:26:59,880
Speaker 1: while you're asking questions. I mean, we gotta be honest. Here,

529
00:27:00,320 --> 00:27:03,880
Speaker 1: he goes David next, and I'm David. I'm like, yes,

530
00:27:05,280 --> 00:27:07,800
Speaker 1: Ken potting you down just slightly as you're crunching on

531
00:27:07,880 --> 00:27:14,400
Speaker 1: that crunching walker short broad. I mean that's the reality here,

532
00:27:16,520 --> 00:27:19,320
Speaker 1: excuse me, the grind between New York and London. Why

533
00:27:19,440 --> 00:27:22,600
Speaker 1: you again, is the most important person on the planet

534
00:27:30,200 --> 00:27:33,560
Speaker 1: who you put your trust in? Matters? Investors have put

535
00:27:33,640 --> 00:27:37,520
Speaker 1: their trust in independent registered investment advisors to the two

536
00:27:37,560 --> 00:27:40,600
Speaker 1: and of four trillion dollars. Why they see their roles

537
00:27:40,680 --> 00:27:44,280
Speaker 1: to serve, not sell. That's why Charles Schwab is committed

538
00:27:44,560 --> 00:27:49,400
Speaker 1: to the success over seven thousand independent financial advisors who

539
00:27:49,560 --> 00:27:54,960
Speaker 1: passionately dedicate themselves to helping people achieve their financial goals.

540
00:27:55,400 --> 00:28:07,399
Speaker 1: Learn more and find your independent advisor dot com. David

541
00:28:07,440 --> 00:28:09,880
Speaker 1: Gurr in New York, I'm Tom keenan London. In this hour,

542
00:28:10,119 --> 00:28:14,840
Speaker 1: the most controversial FED President, Mr cash Curry of Minneapolis

543
00:28:14,920 --> 00:28:17,600
Speaker 1: is darkened the door, David, to save every second. Why

544
00:28:17,600 --> 00:28:19,879
Speaker 1: don't you go right now to President cash Car? Yes,

545
00:28:20,000 --> 00:28:21,639
Speaker 1: he joins us here in studio. Nel cash Car, the

546
00:28:21,720 --> 00:28:24,320
Speaker 1: president and CEO of the Fedier Bank of Minneapolis had

547
00:28:24,359 --> 00:28:26,720
Speaker 1: with a new report The Minneapolis Planet's being called here

548
00:28:26,760 --> 00:28:28,200
Speaker 1: about how to end it too Big to Fail. We

549
00:28:28,240 --> 00:28:30,359
Speaker 1: will get to that in just a moment. Let me

550
00:28:30,400 --> 00:28:32,960
Speaker 1: dispense with the politics quiz quickly, because I have to hear.

551
00:28:33,000 --> 00:28:35,720
Speaker 1: We are very close to fifty and fifth where Trump

552
00:28:35,800 --> 00:28:40,000
Speaker 1: Tower is located. Have you been are you going any

553
00:28:40,080 --> 00:28:42,520
Speaker 1: contact with the Trump Trump transition team? Oh? First of all,

554
00:28:42,560 --> 00:28:43,880
Speaker 1: thanks for having me. It's great to be here. No,

555
00:28:44,000 --> 00:28:46,240
Speaker 1: I've had no contact with the Trump transition team or

556
00:28:46,320 --> 00:28:49,440
Speaker 1: the any of the campaigns beforehand as well. All right,

557
00:28:49,600 --> 00:28:51,440
Speaker 1: very good. Um. I want to ask you about the

558
00:28:51,560 --> 00:28:53,760
Speaker 1: political rhetorics surrounding the FED. What we heard on the

559
00:28:53,840 --> 00:28:56,760
Speaker 1: campaign trail, the degree to which that echoes through the

560
00:28:56,800 --> 00:28:58,600
Speaker 1: halls of the Equals building. Where if the marble is

561
00:28:58,640 --> 00:29:01,160
Speaker 1: thick enough that it that it doesn't how does how

562
00:29:01,200 --> 00:29:04,360
Speaker 1: does the FED interpret what's being said about the Fed? Well,

563
00:29:04,440 --> 00:29:07,040
Speaker 1: we hear the concerns, and I understand the concerns. The

564
00:29:07,120 --> 00:29:10,040
Speaker 1: FED is a monetary policy is a complex thing. The

565
00:29:10,160 --> 00:29:13,640
Speaker 1: FED historically has been somewhat mysterious. So we're doing everything

566
00:29:13,720 --> 00:29:16,040
Speaker 1: we can to be more transparent to explain to people,

567
00:29:16,120 --> 00:29:18,720
Speaker 1: what data we're looking at, why we're making the decisions

568
00:29:18,800 --> 00:29:22,320
Speaker 1: that we're making. But I can tell you with certainty

569
00:29:22,440 --> 00:29:24,320
Speaker 1: i'm in the room, I'm participating in the f o

570
00:29:24,440 --> 00:29:28,000
Speaker 1: MC meetings. Politics simply never comes up. And as I

571
00:29:28,080 --> 00:29:31,400
Speaker 1: look at the data, I find myself agreeing with people

572
00:29:31,520 --> 00:29:33,840
Speaker 1: on the other side of the political spectrum in that

573
00:29:34,080 --> 00:29:36,800
Speaker 1: room who are also objectively looking at the data. And

574
00:29:36,840 --> 00:29:38,920
Speaker 1: so I'm very proud of the Federal Reserve, and I

575
00:29:39,000 --> 00:29:41,480
Speaker 1: think people could look behind the curtain, they too would

576
00:29:41,480 --> 00:29:43,680
Speaker 1: be very proud of our institution. Of course, they can't

577
00:29:43,720 --> 00:29:45,360
Speaker 1: look behind the curtains. So what do you say to

578
00:29:45,400 --> 00:29:48,000
Speaker 1: those when you're walking around the Minneapolis or St. Paul

579
00:29:48,000 --> 00:29:50,800
Speaker 1: elsewhere in Minnesota talking to to folks in your district

580
00:29:50,920 --> 00:29:52,680
Speaker 1: about the FED. How do you make that point to them?

581
00:29:52,720 --> 00:29:54,960
Speaker 1: How do you make them understand the a political nous

582
00:29:55,040 --> 00:29:57,160
Speaker 1: of the Federal Reserve? Well, I just described the fact

583
00:29:57,200 --> 00:29:59,560
Speaker 1: that a hundred and three years ago, Congress created this

584
00:29:59,600 --> 00:30:02,840
Speaker 1: institut tuition. They created twelve different reserve banks because they

585
00:30:02,880 --> 00:30:06,160
Speaker 1: wanted a diversity of opinion, not all the power concentrated

586
00:30:06,200 --> 00:30:08,720
Speaker 1: in Washington, d C. And then Congress has given us

587
00:30:08,720 --> 00:30:12,480
Speaker 1: a dual mandate stable prices and maximum employment, and then

588
00:30:12,520 --> 00:30:15,200
Speaker 1: I walked through here's how we define that, here's the

589
00:30:15,280 --> 00:30:18,160
Speaker 1: data we look at. We're all committed to achieving our

590
00:30:18,240 --> 00:30:23,920
Speaker 1: dual mandate, and that's what's driving our decisions. Neil, you

591
00:30:24,040 --> 00:30:28,560
Speaker 1: are not the typical Fed president. You are the mechanical

592
00:30:28,680 --> 00:30:32,160
Speaker 1: engineer from Illinois and you darkened the door at Wharton

593
00:30:32,840 --> 00:30:36,600
Speaker 1: for a time. Help me here with your interpretation of

594
00:30:36,760 --> 00:30:41,720
Speaker 1: rules versus discretion. Where is the institution going long after

595
00:30:41,840 --> 00:30:45,160
Speaker 1: kesh Carry exits, Well, I think that we have to

596
00:30:45,240 --> 00:30:47,880
Speaker 1: be pragmatic about these rules. So just take the tailor

597
00:30:48,000 --> 00:30:50,560
Speaker 1: rule as an example. The last four years, if we've

598
00:30:50,600 --> 00:30:53,720
Speaker 1: been following the tailor rule, millions of Americans would be

599
00:30:53,720 --> 00:30:56,880
Speaker 1: out of work today. Meanwhile, we're undershooting our inflation targets.

600
00:30:56,920 --> 00:30:59,160
Speaker 1: So the last four years, the tailor rule has been

601
00:30:59,240 --> 00:31:02,000
Speaker 1: dead wrong. And so if we were forced mechanically to

602
00:31:02,120 --> 00:31:06,040
Speaker 1: follow this old rule, Main Street would have been suffering

603
00:31:06,080 --> 00:31:07,880
Speaker 1: because of it. And so I'm proud of the fact

604
00:31:07,960 --> 00:31:11,520
Speaker 1: that the Federal Reserve looks at these rules doesn't completely

605
00:31:11,560 --> 00:31:14,000
Speaker 1: ignore them. But then we also apply judgment and common

606
00:31:14,080 --> 00:31:16,000
Speaker 1: sense to say, is this the right thing to do

607
00:31:16,080 --> 00:31:17,400
Speaker 1: for the country, And and you know, I want to

608
00:31:17,440 --> 00:31:21,200
Speaker 1: make clear President Chris Curry Folks is much like Jean

609
00:31:21,280 --> 00:31:25,840
Speaker 1: cautriche there is an advantage of many suggest to leavening

610
00:31:26,640 --> 00:31:30,960
Speaker 1: the fungibility of economics with the plug and chuck of engineering.

611
00:31:31,440 --> 00:31:33,760
Speaker 1: What's it like being an engineer at the desk at

612
00:31:33,800 --> 00:31:36,160
Speaker 1: the Echos building. I mean, you don't think the same

613
00:31:36,240 --> 00:31:38,920
Speaker 1: as they do, do you. Well, it's interesting. So we

614
00:31:39,000 --> 00:31:41,440
Speaker 1: have a wonderful team of economists at the Minneapolis Fed

615
00:31:41,480 --> 00:31:43,600
Speaker 1: that I talked to, you know, all of these issues,

616
00:31:43,640 --> 00:31:45,760
Speaker 1: and we debate back and forth. I feel like the

617
00:31:45,800 --> 00:31:47,760
Speaker 1: fact that I'm not an economist means I get to

618
00:31:47,840 --> 00:31:51,080
Speaker 1: come in and ask some very basic questions and push

619
00:31:51,160 --> 00:31:54,440
Speaker 1: back on some of their assumptions that most economoussts accept.

620
00:31:54,480 --> 00:31:56,440
Speaker 1: I give you an example. You know, when we look

621
00:31:56,520 --> 00:31:59,719
Speaker 1: at economic growth, most economists say, well, all that matters

622
00:31:59,880 --> 00:32:02,240
Speaker 1: is growth per capita. And if you look at Japan,

623
00:32:02,680 --> 00:32:05,880
Speaker 1: Japan's economic growth per capita or per worker looks pretty good.

624
00:32:06,320 --> 00:32:08,280
Speaker 1: So I pushed back to the economist, I say, okay,

625
00:32:08,480 --> 00:32:10,480
Speaker 1: then why does it seem like the Japanese people in

626
00:32:10,480 --> 00:32:13,880
Speaker 1: the Japanese policymakers are so frustrated if on a per

627
00:32:14,000 --> 00:32:17,040
Speaker 1: worker basis they're doing really well because I the engineer

628
00:32:17,080 --> 00:32:20,520
Speaker 1: would argue, it's not just per worker that matters. Aggregate

629
00:32:20,640 --> 00:32:24,680
Speaker 1: growth matters too. How do we get aggregate growth going again? David,

630
00:32:24,720 --> 00:32:27,960
Speaker 1: It's just amazing to think of the partial derivatives that

631
00:32:28,120 --> 00:32:32,560
Speaker 1: launch out of cash Gary's office in Menneapolis. Also interesting

632
00:32:32,600 --> 00:32:34,600
Speaker 1: to think of the tweets. I I wonder what you

633
00:32:34,680 --> 00:32:36,920
Speaker 1: think the future of FED communication is you. You are

634
00:32:37,120 --> 00:32:39,080
Speaker 1: very active on Twitter. I follow you on Twitter. You

635
00:32:39,160 --> 00:32:43,280
Speaker 1: respond to to folks who ask you questions about FED policy. Uh,

636
00:32:43,440 --> 00:32:45,360
Speaker 1: we don't yet see FED share yelling on on on

637
00:32:45,440 --> 00:32:48,120
Speaker 1: the social media platforms. But is that where we're headed.

638
00:32:48,120 --> 00:32:50,760
Speaker 1: How does communication change in the future. Well, I'm trying

639
00:32:50,840 --> 00:32:53,800
Speaker 1: to lead by example. I'm trying to experiment new ways

640
00:32:53,840 --> 00:32:56,280
Speaker 1: of engaging the public to enhance transparency and if they

641
00:32:56,360 --> 00:32:59,120
Speaker 1: work and I don't get myself in trouble and hoping

642
00:32:59,200 --> 00:33:01,120
Speaker 1: that other people follow and say, hey, you know, we

643
00:33:01,200 --> 00:33:03,560
Speaker 1: can do this too, and it's not too scary. So far,

644
00:33:03,640 --> 00:33:06,120
Speaker 1: Twitter has been working. You know. I did a Q

645
00:33:06,280 --> 00:33:07,840
Speaker 1: and a session on Twitter a couple of months ago

646
00:33:07,920 --> 00:33:10,880
Speaker 1: with the hashtag asked Neil, and I expected to just

647
00:33:11,000 --> 00:33:14,280
Speaker 1: get Twitter snark and you know what I'm talking about. Instead,

648
00:33:14,320 --> 00:33:17,760
Speaker 1: I got the questions were really serious substance of questions

649
00:33:17,760 --> 00:33:20,240
Speaker 1: and a lot of genuine back and forth. That was great,

650
00:33:20,320 --> 00:33:21,840
Speaker 1: and I'm going to do it again. And so I

651
00:33:21,920 --> 00:33:24,080
Speaker 1: think we're all looking for better ways to engage with

652
00:33:24,160 --> 00:33:26,840
Speaker 1: the public, and I'm hoping I can be a leading

653
00:33:26,920 --> 00:33:29,440
Speaker 1: voice in that way. You released a plan yesterday on

654
00:33:29,560 --> 00:33:31,000
Speaker 1: on how to end too Big to Fail, did it

655
00:33:31,040 --> 00:33:32,800
Speaker 1: with a speech at the Economic Club of New York

656
00:33:32,920 --> 00:33:35,240
Speaker 1: And and let's start by talking about the environment into

657
00:33:35,240 --> 00:33:37,760
Speaker 1: which you've You've released that plan. There is talk from

658
00:33:37,800 --> 00:33:40,280
Speaker 1: the President elect to hear about doing away with with

659
00:33:40,600 --> 00:33:43,920
Speaker 1: Donald with with Dodd Frank completely. Do do you expect

660
00:33:44,000 --> 00:33:47,000
Speaker 1: that there will be a serious conversation about the future

661
00:33:47,080 --> 00:33:49,719
Speaker 1: of financial regulation and and what's your hope for how

662
00:33:49,800 --> 00:33:51,920
Speaker 1: this plan is gonna be received? I think there is

663
00:33:51,960 --> 00:33:54,080
Speaker 1: gonna I think now, actually, I think we got lucky.

664
00:33:54,120 --> 00:33:56,680
Speaker 1: Now is the right time to have this conversation. You've

665
00:33:56,720 --> 00:33:59,720
Speaker 1: got people on the right and left who agree the

666
00:33:59,760 --> 00:34:01,520
Speaker 1: big US banks are still too big to fail and

667
00:34:01,560 --> 00:34:03,920
Speaker 1: they're not happy about that, and neither am I. You've

668
00:34:03,960 --> 00:34:06,360
Speaker 1: also got Chairman henchel Ing in the in the House

669
00:34:06,680 --> 00:34:10,520
Speaker 1: who's put forward his plan, which does increase capital requirements

670
00:34:10,600 --> 00:34:13,120
Speaker 1: for banks. I think Chairman Hencheling is headed in the

671
00:34:13,239 --> 00:34:15,719
Speaker 1: right direction. Our plan says we need to go further,

672
00:34:16,160 --> 00:34:17,840
Speaker 1: we need to be tougher on the banks than he is.

673
00:34:18,160 --> 00:34:20,520
Speaker 1: But at least he's headed in the right direction, and

674
00:34:20,600 --> 00:34:22,560
Speaker 1: so it feels like now might be a sweet spot

675
00:34:22,600 --> 00:34:24,440
Speaker 1: to take a fresh look at what's been a complation

676
00:34:24,520 --> 00:34:28,320
Speaker 1: and what's where we should go. Will your policy force

677
00:34:28,719 --> 00:34:33,640
Speaker 1: bank combination in the United States? Is Keshkari of Minneapolis

678
00:34:34,120 --> 00:34:37,839
Speaker 1: much like Jackson of Nashville from another time and place. Well,

679
00:34:37,920 --> 00:34:39,719
Speaker 1: I don't know if it will be bank combination or

680
00:34:39,760 --> 00:34:42,759
Speaker 1: it'll be bank separation. I think it will force most

681
00:34:42,800 --> 00:34:45,840
Speaker 1: big banks to restructure themselves, or many will choose to.

682
00:34:46,280 --> 00:34:48,640
Speaker 1: But if they really do have the economies of scale

683
00:34:48,680 --> 00:34:51,279
Speaker 1: and scope that they claim to have, they'll be able

684
00:34:51,320 --> 00:34:54,440
Speaker 1: to afford to hold more capital. If they can't afford

685
00:34:54,440 --> 00:34:57,040
Speaker 1: to hold more capital, their economies of scale and scope

686
00:34:57,120 --> 00:35:01,200
Speaker 1: is just smoking mirrors. This is a interesting folks, and David,

687
00:35:01,280 --> 00:35:04,239
Speaker 1: the key issue for me what the President just said

688
00:35:04,280 --> 00:35:08,240
Speaker 1: their scale scale is the strangest thing in this debate.

689
00:35:08,760 --> 00:35:11,200
Speaker 1: Part of what you've proposed to your present cash carry

690
00:35:11,320 --> 00:35:15,520
Speaker 1: is raising capital requirements at what would the effect of

691
00:35:15,640 --> 00:35:19,880
Speaker 1: that be on our star? Well, that's a good question,

692
00:35:20,239 --> 00:35:23,440
Speaker 1: and may modestly bring up our star in terms of

693
00:35:23,480 --> 00:35:26,120
Speaker 1: the natural rate of interest. Where things clear, we think

694
00:35:26,239 --> 00:35:29,080
Speaker 1: overall cost of borrowing, and we'll go up somewhat in

695
00:35:29,120 --> 00:35:31,719
Speaker 1: the economy. But we we measure this on a cost

696
00:35:31,800 --> 00:35:34,720
Speaker 1: benefit analysis. If you look, the cost of a financial

697
00:35:34,800 --> 00:35:38,720
Speaker 1: crisis is massive, around twenty eight trillion dollars of GDP,

698
00:35:39,440 --> 00:35:43,400
Speaker 1: trillion dollars for the U S economy of GDP. So

699
00:35:44,000 --> 00:35:46,600
Speaker 1: what we've analyzed is if we had a modest increase

700
00:35:46,600 --> 00:35:50,000
Speaker 1: in lending rates, actually society is better off if we

701
00:35:51,120 --> 00:35:54,400
Speaker 1: then avoid that terrible financial crisis. And these are the

702
00:35:54,480 --> 00:35:56,759
Speaker 1: trade offs that ultimately the American people need to make.

703
00:35:57,200 --> 00:35:59,560
Speaker 1: How healthy is the financial system now when you look

704
00:35:59,560 --> 00:36:01,560
Speaker 1: at it, not to say that safe enough is good

705
00:36:01,680 --> 00:36:04,920
Speaker 1: enough here, but is it measurably safer than it was?

706
00:36:05,080 --> 00:36:07,080
Speaker 1: And and why aren't you satisfied with where things stand?

707
00:36:07,239 --> 00:36:09,520
Speaker 1: It is measurably safer. So we've analyzed the I m

708
00:36:09,600 --> 00:36:11,920
Speaker 1: F has a database of the history of financial crises.

709
00:36:12,360 --> 00:36:15,399
Speaker 1: We've used that database to analyze where we were before

710
00:36:15,440 --> 00:36:18,080
Speaker 1: the crisis and where we are now. Ten years ago,

711
00:36:18,160 --> 00:36:20,520
Speaker 1: there was an eight four percent chance of a financial

712
00:36:20,600 --> 00:36:24,040
Speaker 1: crisis in the next century. We've now reduced that risk

713
00:36:24,200 --> 00:36:27,799
Speaker 1: to six but there's still a sixty seven percent chance

714
00:36:27,840 --> 00:36:30,040
Speaker 1: of a financial crisis in the next century. Our plan

715
00:36:30,160 --> 00:36:32,600
Speaker 1: gets that down to a round ten percent. Neil, you're

716
00:36:32,719 --> 00:36:37,000
Speaker 1: without question the most competent dynamics analyst within the FED.

717
00:36:37,080 --> 00:36:40,359
Speaker 1: Your aerospace where at TRW from years ago? In your

718
00:36:40,400 --> 00:36:43,720
Speaker 1: fiscal work of treasury? Do you believe in dynamics scoring?

719
00:36:43,760 --> 00:36:46,719
Speaker 1: Are Brendan Greeley with a great article this week on

720
00:36:46,880 --> 00:36:50,480
Speaker 1: dynamic versus static budget scoring? Words Cash, carry on this.

721
00:36:50,880 --> 00:36:52,680
Speaker 1: You know, I'm You're not gonna like my answer. I'm

722
00:36:52,719 --> 00:36:55,279
Speaker 1: probably somewhere in the middle because I've seen to killing me.

723
00:36:55,360 --> 00:36:58,640
Speaker 1: Come on, what do you affect? President seen? Dynamics scoring

724
00:36:58,840 --> 00:37:01,919
Speaker 1: used to sell you know, I'll sell you a bridge

725
00:37:01,920 --> 00:37:05,080
Speaker 1: in Florida with dynamic scoring. But then sometimes it can

726
00:37:05,120 --> 00:37:07,160
Speaker 1: just be too consucted if you ignore all of the

727
00:37:07,239 --> 00:37:12,360
Speaker 1: dynamic effects. Congratulations on your effect on our economy, President Cash, Gary,

728
00:37:12,800 --> 00:37:15,839
Speaker 1: would you do something about the Minnesota twins? I mean,

729
00:37:16,280 --> 00:37:20,560
Speaker 1: which is just listen to my Unfortunately I was born

730
00:37:20,600 --> 00:37:23,880
Speaker 1: and raised Ohio and unfortunately lifelong Browns fan, and so

731
00:37:24,080 --> 00:37:26,000
Speaker 1: first and foremost, I gotta get the Browns a win.

732
00:37:26,239 --> 00:37:29,280
Speaker 1: They can't go oh and sixteen this year, I've watched

733
00:37:29,280 --> 00:37:31,520
Speaker 1: a little bit of that. David, take it. Take us

734
00:37:31,560 --> 00:37:34,000
Speaker 1: out here with Neil Kush. Yeah, Neil Cascari, thanks very

735
00:37:34,080 --> 00:37:49,320
Speaker 1: much for joining us here today. Our next guest is

736
00:37:49,400 --> 00:37:54,320
Speaker 1: criticized because he deals in the minutia, and that's what

737
00:37:54,440 --> 00:37:56,680
Speaker 1: you get when you're with SMP Global c f R

738
00:37:56,760 --> 00:38:00,520
Speaker 1: A except Sam Stovell has been so it on and

739
00:38:00,640 --> 00:38:04,040
Speaker 1: so sick right that everybody loves the bathe in the

740
00:38:04,160 --> 00:38:08,719
Speaker 1: stove all minutia. So, Sam, I believe you observed the

741
00:38:08,800 --> 00:38:14,160
Speaker 1: election night, we observed within your minutia. What changed with

742
00:38:14,280 --> 00:38:17,560
Speaker 1: the Trump victory? Hey, Tom, good to talk to you,

743
00:38:17,680 --> 00:38:22,240
Speaker 1: and thanks for I guess the intro. No, it's great.

744
00:38:22,320 --> 00:38:25,200
Speaker 1: I mean you do you do, Sam? You do minutia

745
00:38:25,360 --> 00:38:29,759
Speaker 1: like no one. Sam. What's changed? I'll take it. I'll

746
00:38:29,800 --> 00:38:32,120
Speaker 1: take it. What what what changed was? I think we

747
00:38:32,239 --> 00:38:35,400
Speaker 1: had a lifting, uh if you will, not just because

748
00:38:35,480 --> 00:38:38,600
Speaker 1: the uncertainty is now over, but a lifting of all

749
00:38:38,680 --> 00:38:43,640
Speaker 1: of the the dampening worry about increased regulation, whether it

750
00:38:44,160 --> 00:38:48,760
Speaker 1: had to do with UM more financial regulation in general

751
00:38:48,960 --> 00:38:52,000
Speaker 1: on the things in particular, whether you had it to

752
00:38:52,120 --> 00:38:56,680
Speaker 1: do with price controls on pharmaceuticals and biotechs UH, combined

753
00:38:56,760 --> 00:38:59,839
Speaker 1: with tax increases pretty much across the board, and then

754
00:39:00,000 --> 00:39:03,320
Speaker 1: finally a push up and expenses in terms of likelihood

755
00:39:03,360 --> 00:39:08,080
Speaker 1: of UH mandated increase in minimum wage. So I think

756
00:39:08,120 --> 00:39:11,360
Speaker 1: a lot of that just got relieved, and UH investors

757
00:39:11,400 --> 00:39:13,240
Speaker 1: are I'm saying, wait a minute, the clouds have parted

758
00:39:13,280 --> 00:39:16,160
Speaker 1: in their blue skies ahead page two. I sounded like

759
00:39:16,200 --> 00:39:19,439
Speaker 1: Paul Harvey, Sam. Let's go back to page two where

760
00:39:19,480 --> 00:39:23,279
Speaker 1: you absolutely kill it on history in a time where

761
00:39:23,320 --> 00:39:25,839
Speaker 1: nobody knows history, I mean, nobody can even get back

762
00:39:25,880 --> 00:39:30,480
Speaker 1: to Kennedy nine six. You go back to Wilson Taft Roosevelt,

763
00:39:30,719 --> 00:39:34,879
Speaker 1: and classically, like your father, you nail the political analysis

764
00:39:35,239 --> 00:39:38,640
Speaker 1: into the equity markets. What did you learn about Republican

765
00:39:38,719 --> 00:39:43,520
Speaker 1: this Republican that Republican Trump? Well, what I learned first

766
00:39:43,560 --> 00:39:46,279
Speaker 1: off was that because the market was down two point

767
00:39:47,360 --> 00:39:50,560
Speaker 1: from July thirty one through October thirty one, as I

768
00:39:50,640 --> 00:39:53,800
Speaker 1: reported in my Sector Watch and Investment Policy Notes, it

769
00:39:53,960 --> 00:39:58,360
Speaker 1: implied a Republican victory. Second part is that once the

770
00:39:58,480 --> 00:40:01,920
Speaker 1: uncertainty of the election is over, the market tends to

771
00:40:02,080 --> 00:40:05,480
Speaker 1: gain about two point three percent on average after the

772
00:40:05,600 --> 00:40:08,719
Speaker 1: incomment person or party has been replaced, which is what

773
00:40:08,840 --> 00:40:12,719
Speaker 1: we're seeing right now. So yes, probably get that end

774
00:40:12,760 --> 00:40:15,960
Speaker 1: of year rally that will continue. But once we head

775
00:40:16,080 --> 00:40:19,840
Speaker 1: into two thousand and seventeen, there is a bit of

776
00:40:19,880 --> 00:40:23,480
Speaker 1: a worry because the five times that we had first

777
00:40:23,640 --> 00:40:27,839
Speaker 1: term Republican presidents, the market was actually down two point

778
00:40:27,920 --> 00:40:31,480
Speaker 1: seven percent on average and rose in price only one

779
00:40:31,719 --> 00:40:35,720
Speaker 1: of five times. And going back to your college roommate

780
00:40:35,800 --> 00:40:43,080
Speaker 1: Woodrow Wilson, what I did find was that every Republican

781
00:40:43,200 --> 00:40:47,839
Speaker 1: president that's Teddy Roosevelt experienced a recession um in their

782
00:40:47,880 --> 00:40:50,480
Speaker 1: first term in office, and everyone but one in their

783
00:40:50,520 --> 00:40:53,239
Speaker 1: first two years in office. So we have to be

784
00:40:53,760 --> 00:40:57,080
Speaker 1: very vigilant that we don't slip into a similar situation.

785
00:40:57,239 --> 00:41:01,040
Speaker 1: Our executive producer Rachel Worst, just in Rachel's Overall Never Again,

786
00:41:04,120 --> 00:41:07,440
Speaker 1: Sam introduced into your your historical brew here having a

787
00:41:07,560 --> 00:41:10,600
Speaker 1: Republican president and a Republican House and Republican Senate, what

788
00:41:10,680 --> 00:41:14,280
Speaker 1: difference does that make? Um? Actually, that ends up pointing

789
00:41:14,400 --> 00:41:18,600
Speaker 1: to the best overall performance that we have seen. Looking

790
00:41:18,719 --> 00:41:24,640
Speaker 1: at all different kinds of mixtures of UM republican democratic

791
00:41:24,719 --> 00:41:30,279
Speaker 1: control congresses as well as republican or democratic controlled presidencies.

792
00:41:30,320 --> 00:41:34,160
Speaker 1: Whenever you have a totally unified government, the SMP has

793
00:41:34,239 --> 00:41:39,120
Speaker 1: gained an average of fifteen point one percent under those scenarios.

794
00:41:39,160 --> 00:41:44,959
Speaker 1: So the annual average annual return was essentially UM still

795
00:41:45,040 --> 00:41:48,200
Speaker 1: pretty good. Was when you had a totally democratic controlled

796
00:41:48,520 --> 00:41:52,520
Speaker 1: about ten percent. It's when we start having UM a

797
00:41:52,680 --> 00:41:56,240
Speaker 1: unified congress but a different president or even a split congress,

798
00:41:56,680 --> 00:41:59,759
Speaker 1: that things look a lot less enticing. But right now

799
00:42:00,000 --> 00:42:02,759
Speaker 1: it's sort of the best of all worlds. But the

800
00:42:03,360 --> 00:42:06,680
Speaker 1: number of observations has been pretty low at only six

801
00:42:06,840 --> 00:42:09,680
Speaker 1: times going back to World War Two. Great time to

802
00:42:09,719 --> 00:42:11,480
Speaker 1: talk to Sam stove All. We're gonna rip up the

803
00:42:11,560 --> 00:42:17,720
Speaker 1: strict script. Dollar reverses, dollar surges right out to renewed

804
00:42:17,800 --> 00:42:21,200
Speaker 1: strength on that blended index d x Y. We're not there,

805
00:42:21,239 --> 00:42:24,440
Speaker 1: but there any moment one point four seven up a

806
00:42:24,600 --> 00:42:27,080
Speaker 1: nice half a percent, just in a matter of minute,

807
00:42:27,120 --> 00:42:30,480
Speaker 1: Sam stove All, when you structure your sector bets, when

808
00:42:30,480 --> 00:42:33,760
Speaker 1: you structure your equity ownership, do you wrap it around

809
00:42:33,840 --> 00:42:38,720
Speaker 1: multinationals and dollar dynamics. I think you have to consider

810
00:42:38,800 --> 00:42:42,800
Speaker 1: that because UM s and p. Dow Jones Indussees estimates

811
00:42:42,880 --> 00:42:46,279
Speaker 1: that at least of the revenues for the companies in

812
00:42:46,360 --> 00:42:49,480
Speaker 1: the five hundred come from overseas operations. And I think

813
00:42:49,560 --> 00:42:53,160
Speaker 1: that's also one reason why Tech did not participate early

814
00:42:53,320 --> 00:42:56,680
Speaker 1: on in this Trump rally, is because it has the

815
00:42:56,880 --> 00:43:00,759
Speaker 1: highest overseas exposure. And the worry was that with the

816
00:43:00,880 --> 00:43:04,520
Speaker 1: emphasis on growth, the likelihood that the Fed would then

817
00:43:04,680 --> 00:43:07,200
Speaker 1: continue to raise rates and maybe even become a bit

818
00:43:07,280 --> 00:43:10,880
Speaker 1: more aggressive that would result in a stronger dollar and

819
00:43:11,719 --> 00:43:16,600
Speaker 1: slow the growth in earnings for technology. Are we anywhere

820
00:43:16,719 --> 00:43:22,719
Speaker 1: near nifty fifty valuations? Yes? Uh. If the bullmarket ended

821
00:43:22,760 --> 00:43:26,000
Speaker 1: on August fifteen, it would have been the second most

822
00:43:26,080 --> 00:43:30,240
Speaker 1: expensive bullmarket top since World War Two, with a trailing

823
00:43:30,360 --> 00:43:34,239
Speaker 1: gape of more than twenty five times versus the near

824
00:43:34,400 --> 00:43:37,840
Speaker 1: thirty two that we saw when they tech bubble finally burst.

825
00:43:39,360 --> 00:43:41,080
Speaker 1: Say when I when I look at these data from

826
00:43:41,120 --> 00:43:43,920
Speaker 1: today's CPI Housing store OS initial jobless claims, I wonder

827
00:43:45,000 --> 00:43:47,480
Speaker 1: how important they are to a guy like you when

828
00:43:47,520 --> 00:43:50,040
Speaker 1: you were waiting for Congress to do something. When Congress

829
00:43:50,160 --> 00:43:52,600
Speaker 1: is is purportedly going to do something as soon as president,

830
00:43:53,040 --> 00:43:55,279
Speaker 1: when as soon as Donald Trump becomes President Trump and

831
00:43:55,320 --> 00:43:56,879
Speaker 1: other wors. How important is the data right now, given

832
00:43:56,920 --> 00:43:59,640
Speaker 1: how much it could change. Well, I think it's very

833
00:43:59,719 --> 00:44:03,440
Speaker 1: important because you're constantly taking the pulse of the economy.

834
00:44:04,040 --> 00:44:06,600
Speaker 1: We all have heard that bull markets don't die of

835
00:44:06,680 --> 00:44:09,600
Speaker 1: old age. UM and right now, this bull market is

836
00:44:09,640 --> 00:44:12,960
Speaker 1: in its UH seven and a half years, and we've

837
00:44:13,000 --> 00:44:16,760
Speaker 1: got almost four months ago before we celebrate our eighth birthday,

838
00:44:16,840 --> 00:44:20,080
Speaker 1: so we're way beyond the average of about five years

839
00:44:20,200 --> 00:44:23,359
Speaker 1: in duration. But bull markets don't die of old age.

840
00:44:23,440 --> 00:44:25,840
Speaker 1: They die of fright, and what they are most afraid

841
00:44:25,920 --> 00:44:29,160
Speaker 1: of is recessions. I look to three indicators that I

842
00:44:29,280 --> 00:44:33,279
Speaker 1: find very helpful. First off, housing starts. UH. Typically we

843
00:44:33,360 --> 00:44:35,960
Speaker 1: have needed to see a thirty percent year on your

844
00:44:36,040 --> 00:44:40,160
Speaker 1: decline in housing starts before we are either in or

845
00:44:40,960 --> 00:44:45,680
Speaker 1: headed for recession. Add to that, consumer confidence. It's not

846
00:44:45,800 --> 00:44:49,520
Speaker 1: because construction is so important, but consumer confidence is. We

847
00:44:49,640 --> 00:44:52,560
Speaker 1: have traditionally needed at least a twenty percent year on

848
00:44:52,680 --> 00:44:56,880
Speaker 1: your decline in the University of Michigan's Consumer survey to

849
00:44:57,040 --> 00:45:01,640
Speaker 1: point to recession. And then finally a rolling six month basis.

850
00:45:01,960 --> 00:45:05,839
Speaker 1: We've traditionally needed to see a negative reading for leading

851
00:45:05,880 --> 00:45:11,200
Speaker 1: economic indicators. So housing starts, consumer confidence, leading economic indicators

852
00:45:11,280 --> 00:45:15,040
Speaker 1: I find are very helpful indicators as to whether we

853
00:45:15,200 --> 00:45:18,400
Speaker 1: have something to fear, and right now it says, now,

854
00:45:18,560 --> 00:45:21,400
Speaker 1: if you process what we've seen in equity since Tuesday

855
00:45:21,480 --> 00:45:24,440
Speaker 1: of last week, I've probably talked to a dozen twenty

856
00:45:24,520 --> 00:45:28,279
Speaker 1: equity strategises since then, and each to a t has said,

857
00:45:28,960 --> 00:45:31,000
Speaker 1: you know, it's it's too early to speculate on what

858
00:45:31,120 --> 00:45:32,600
Speaker 1: policy may or may not be. We're not going to

859
00:45:32,760 --> 00:45:34,640
Speaker 1: go all in on utilities, say, or go all in

860
00:45:34,760 --> 00:45:39,239
Speaker 1: on on healthcare. Yet we we've seen those sectors really rising,

861
00:45:39,280 --> 00:45:42,680
Speaker 1: we've seen technology falling. How how is that happening? Who's

862
00:45:42,719 --> 00:45:45,440
Speaker 1: the culpable party there? Well? I think it was certainly

863
00:45:45,440 --> 00:45:48,799
Speaker 1: a knee jerk reaction. Remember that investors are no better

864
00:45:48,880 --> 00:45:51,960
Speaker 1: than hyperactive first graders playing musical chairs, always trying to

865
00:45:52,000 --> 00:45:54,920
Speaker 1: out anticipate the other. So that's what I think they

866
00:45:55,000 --> 00:45:57,319
Speaker 1: were trying to do was snap back into what could

867
00:45:57,360 --> 00:46:01,120
Speaker 1: be the potential beneficiaries. But we all know that even

868
00:46:01,160 --> 00:46:05,600
Speaker 1: though Congress is Republican, it's still pretty conservative, and I

869
00:46:05,760 --> 00:46:08,319
Speaker 1: think for every dollar that will be spent in terms

870
00:46:08,360 --> 00:46:11,200
Speaker 1: of stimulus, they're gonna want to find a dollar to

871
00:46:11,320 --> 00:46:14,840
Speaker 1: take away in terms of subsidies. So we already have

872
00:46:15,239 --> 00:46:19,120
Speaker 1: a GDP ratio that's near. We don't want to make

873
00:46:19,200 --> 00:46:24,040
Speaker 1: that worse. Sam the cliche which always a radar goes up?

874
00:46:24,719 --> 00:46:27,800
Speaker 1: Is it the most unloved bull market since time began?

875
00:46:28,560 --> 00:46:31,239
Speaker 1: And you I think of Anthony dwyered Can according to

876
00:46:31,360 --> 00:46:35,759
Speaker 1: select others Brian Belski, Abby Josephone for that matter, have

877
00:46:35,960 --> 00:46:39,640
Speaker 1: just been resilient bulls. Is it still the most unloved

878
00:46:39,680 --> 00:46:44,279
Speaker 1: bull market since time began? I wouldn't be able to

879
00:46:44,360 --> 00:46:46,880
Speaker 1: say since time began, but I certainly feel that it

880
00:46:47,120 --> 00:46:49,960
Speaker 1: is unloved. You know, it's it's like the eighth grader

881
00:46:50,000 --> 00:46:53,879
Speaker 1: who keeps going across the Gymnasium Florida, ask someone to dance,

882
00:46:53,920 --> 00:46:57,280
Speaker 1: and they keep getting turned down. Right, in this seventh

883
00:46:57,440 --> 00:47:00,319
Speaker 1: year of this bull market, we declined four point three

884
00:47:01,360 --> 00:47:04,640
Speaker 1: Every bullmarket since World War Two that lasted three years

885
00:47:04,719 --> 00:47:07,120
Speaker 1: or longer went out with a bang, not a whimper.

886
00:47:07,640 --> 00:47:11,839
Speaker 1: So if we did end up slipping into a bear

887
00:47:11,960 --> 00:47:15,840
Speaker 1: market without registering a gain of anywhere from sixteen to

888
00:47:16,000 --> 00:47:20,000
Speaker 1: thirty six percent, as the other bullmarkets did, um, it

889
00:47:20,080 --> 00:47:22,640
Speaker 1: would be the first time since World War Two that

890
00:47:22,719 --> 00:47:25,920
Speaker 1: that had happened. So I think usually the market tends

891
00:47:25,960 --> 00:47:28,920
Speaker 1: to surprise the greatest number of people, and right now,

892
00:47:29,040 --> 00:47:31,239
Speaker 1: the greatest number of people would be surprised if the

893
00:47:31,320 --> 00:47:36,480
Speaker 1: market did well rather than finally succumb. Which sector just

894
00:47:36,680 --> 00:47:44,359
Speaker 1: seems most attractive, most reasonable, most common sensical. Um, Well,

895
00:47:44,480 --> 00:47:49,960
Speaker 1: I think looking at UM some areas like, uh, what

896
00:47:50,200 --> 00:47:54,640
Speaker 1: is it? Looking at industrials, UM, technology is trading at

897
00:47:54,680 --> 00:47:59,560
Speaker 1: a relative premium, relative discount to the S and P

898
00:48:00,280 --> 00:48:03,040
Speaker 1: over the past twenty five years, and this is based

899
00:48:03,080 --> 00:48:05,279
Speaker 1: on a median where we're removing a lot of the

900
00:48:05,719 --> 00:48:10,919
Speaker 1: excesses of the late nine nineties. UM. So looking at tech,

901
00:48:11,239 --> 00:48:15,320
Speaker 1: looking at industrials, but also take a look at healthcare

902
00:48:16,000 --> 00:48:20,920
Speaker 1: trading at a relative discount. Uh. This is a group

903
00:48:21,080 --> 00:48:24,960
Speaker 1: that just was absolutely hated because of the expectation that

904
00:48:25,080 --> 00:48:30,000
Speaker 1: we would have price controls, etcetera. On pharmaceutical and biotech. Uh,

905
00:48:30,520 --> 00:48:34,560
Speaker 1: last year we had more entities approved by the FDA

906
00:48:34,880 --> 00:48:38,120
Speaker 1: than in the prior twenty years. So I think there's

907
00:48:38,160 --> 00:48:41,640
Speaker 1: good longer term potential. Uh. It just needs to have

908
00:48:41,800 --> 00:48:44,200
Speaker 1: some time to get out of its own way. Very valuable,

909
00:48:44,239 --> 00:48:46,279
Speaker 1: Sam Stove All, thank you so much. A c f R.

910
00:48:46,360 --> 00:48:58,320
Speaker 1: A SMP Global. Thanks for listening to the Bloomberg Surveillance Podcast.

911
00:48:58,719 --> 00:49:03,800
Speaker 1: Subscribe and listen to interviews on iTunes, SoundCloud, or whichever

912
00:49:03,960 --> 00:49:08,359
Speaker 1: podcast platform you prefer. I'm out on Twitter at Tom Keene.

913
00:49:08,480 --> 00:49:12,239
Speaker 1: David Gura is at David Gura. Before the podcast, you

914
00:49:12,320 --> 00:49:28,400
Speaker 1: can always catch us worldwide. I'm Bloomberg Radio. Who you

915
00:49:28,520 --> 00:49:31,240
Speaker 1: put your trust in matters? Investors have put their trust

916
00:49:31,640 --> 00:49:35,520
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917
00:49:35,600 --> 00:49:40,040
Speaker 1: trillion dollars. Why Learn more at find your Independent Advisor

918
00:49:40,640 --> 00:49:41,120
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