1
00:00:02,240 --> 00:00:06,800
Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.

2
00:00:07,280 --> 00:00:09,760
Speaker 1: This week on the podcast, I have a special guest.

3
00:00:09,840 --> 00:00:13,160
Speaker 1: Her name is Danielle Di Martino Booth, and full disclosure,

4
00:00:13,560 --> 00:00:16,720
Speaker 1: we know each other for way too long. We've spent

5
00:00:16,760 --> 00:00:21,640
Speaker 1: way too much time fishing, debating economics, markets, the Fed,

6
00:00:22,280 --> 00:00:26,079
Speaker 1: which Cabernet is better, making fun of some some mutual

7
00:00:26,520 --> 00:00:29,920
Speaker 1: acquaintances who shall go nameless. And I brought her on

8
00:00:29,960 --> 00:00:32,120
Speaker 1: the show this week to talk about her book fed Up,

9
00:00:32,520 --> 00:00:36,360
Speaker 1: as well as to discuss and debate economic policy, the Fed,

10
00:00:36,440 --> 00:00:39,960
Speaker 1: the markets, and honestly, I had way too much fun.

11
00:00:40,159 --> 00:00:42,519
Speaker 1: If it sounds like we're arguing, it's because we just

12
00:00:42,560 --> 00:00:45,440
Speaker 1: know each other too well and it's practically shorthand. So

13
00:00:45,560 --> 00:00:48,839
Speaker 1: if you're at all interested in everything from the Federal

14
00:00:48,840 --> 00:00:53,120
Speaker 1: Reserve to REPO markets to Alan Greenspan, you're gonna find

15
00:00:53,120 --> 00:00:56,600
Speaker 1: this to be an absolutely fascinating conversation. So, with no

16
00:00:56,680 --> 00:01:00,600
Speaker 1: further ado, my discussion with Danielle de Mark, you know both.

17
00:01:03,120 --> 00:01:07,680
Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg Radio.

18
00:01:08,280 --> 00:01:11,520
Speaker 1: My special guest this week is Danielle Di Martino Booth.

19
00:01:11,880 --> 00:01:15,800
Speaker 1: She is the CEO and chief strategist of Quill Intelligence,

20
00:01:16,200 --> 00:01:20,960
Speaker 1: a research and analytics firms, where she authors commentary with

21
00:01:21,240 --> 00:01:26,440
Speaker 1: actually fairly rabid following. Previously, she served nine years at

22
00:01:26,440 --> 00:01:30,319
Speaker 1: the Federal Reserve Bank of Dallas, where she was chief

23
00:01:30,400 --> 00:01:35,520
Speaker 1: advisor and Wall Street liaison to President Richard Fisher. She

24
00:01:35,760 --> 00:01:38,800
Speaker 1: is the author of fed Up, an insider's taken on

25
00:01:38,840 --> 00:01:41,959
Speaker 1: why the Federal Reserve is bad for America. As well

26
00:01:41,959 --> 00:01:45,480
Speaker 1: as somebody I've known for ten years in a decade,

27
00:01:46,040 --> 00:01:49,520
Speaker 1: Danielle di Martino. Welcome to Bloomberg. It's awesome to be here.

28
00:01:49,760 --> 00:01:51,800
Speaker 1: So you and I have known each other for a

29
00:01:51,800 --> 00:01:55,960
Speaker 1: long time, and it's weird asking you questions that I

30
00:01:56,000 --> 00:01:59,120
Speaker 1: asked you a decade ago. But for the sake of

31
00:01:59,160 --> 00:02:03,120
Speaker 1: the audience, I'm gonna pretend we hardly know each other

32
00:02:03,160 --> 00:02:06,480
Speaker 1: and start with so, Danielle, how did you begin your

33
00:02:06,520 --> 00:02:09,640
Speaker 1: career on Woolf Street. Well, it was something of a

34
00:02:09,680 --> 00:02:13,040
Speaker 1: secuitous route. I was born to be a writer. I

35
00:02:13,120 --> 00:02:16,040
Speaker 1: was accepted at the n y U scholars Program. I

36
00:02:16,080 --> 00:02:18,520
Speaker 1: was going to travel, I was going to be an

37
00:02:18,680 --> 00:02:22,440
Speaker 1: esteemed very poor journalist. And my covering what what sort

38
00:02:22,480 --> 00:02:25,520
Speaker 1: of things interested you? In your my forte when I

39
00:02:25,560 --> 00:02:29,400
Speaker 1: was younger with sportswriting real things. People would never guess

40
00:02:29,440 --> 00:02:31,119
Speaker 1: about me. Put that right up there at the top,

41
00:02:32,120 --> 00:02:35,760
Speaker 1: the huge fan of sports and cars. But anyways, my

42
00:02:35,800 --> 00:02:39,440
Speaker 1: parents ended up splitting up around then. My father told

43
00:02:39,440 --> 00:02:41,679
Speaker 1: me that he hadn't paid his taxes for the better

44
00:02:41,680 --> 00:02:43,760
Speaker 1: part of the last decade, and good luck with the

45
00:02:43,760 --> 00:02:47,440
Speaker 1: financial scholarship financial aid that I needed for the other

46
00:02:47,480 --> 00:02:49,920
Speaker 1: half that wasn't covered by this great big scholarship to

47
00:02:49,919 --> 00:02:52,160
Speaker 1: go to n Y You. So I found myself at

48
00:02:52,160 --> 00:02:55,800
Speaker 1: San Antonio College. So I am the product of a

49
00:02:55,919 --> 00:02:59,560
Speaker 1: community college where I started. I went off to the

50
00:02:59,600 --> 00:03:02,840
Speaker 1: local University of Texas, moved my way up after a

51
00:03:02,840 --> 00:03:06,200
Speaker 1: few years, became the collar business scholar. Just study, study, study.

52
00:03:06,360 --> 00:03:08,120
Speaker 1: That was all that I could do to to figure

53
00:03:08,120 --> 00:03:09,600
Speaker 1: out how to get back to where I thought I

54
00:03:09,639 --> 00:03:11,280
Speaker 1: was starting when I was getting out of high school

55
00:03:11,280 --> 00:03:13,480
Speaker 1: and my misremembering, didn't you get an NBA from the

56
00:03:13,560 --> 00:03:17,160
Speaker 1: University of Boston, got very very respected school. I've got

57
00:03:17,160 --> 00:03:19,359
Speaker 1: my NBA and finance there the year that E. D.

58
00:03:19,600 --> 00:03:22,920
Speaker 1: S actually opened up a trading floor. One of my

59
00:03:23,120 --> 00:03:27,880
Speaker 1: great mentors, Dr Keith, He's the person I literally earmark

60
00:03:28,000 --> 00:03:30,839
Speaker 1: money to the finance department, even though he made me.

61
00:03:31,280 --> 00:03:33,160
Speaker 1: He made me pull apart the black shoals and then

62
00:03:33,160 --> 00:03:35,560
Speaker 1: showed me how to put it on my calculator. It

63
00:03:35,600 --> 00:03:38,920
Speaker 1: took me a few years really to forgive him for that.

64
00:03:38,960 --> 00:03:40,839
Speaker 1: But in any event, so so wait, when you say

65
00:03:40,880 --> 00:03:43,600
Speaker 1: e d S, you're talking Russ Perro's electronic data system.

66
00:03:43,640 --> 00:03:46,760
Speaker 1: That there was way back inside the business school. We

67
00:03:46,760 --> 00:03:48,600
Speaker 1: had our own trading floor, and we had our own

68
00:03:48,800 --> 00:03:50,640
Speaker 1: fund and it was fun, and I mean it was

69
00:03:50,680 --> 00:03:53,160
Speaker 1: actual money. Oh god, what's more fun than being a

70
00:03:53,200 --> 00:03:55,240
Speaker 1: trader in the eighties? Come on, well, when you're in

71
00:03:55,280 --> 00:03:58,120
Speaker 1: your early twenties and coming sure, so how do you

72
00:03:58,240 --> 00:04:01,000
Speaker 1: end up going from there to Credit Swiss and d LJ.

73
00:04:01,600 --> 00:04:04,160
Speaker 1: Some guy at Solomon Brothers came to one of these

74
00:04:04,240 --> 00:04:07,440
Speaker 1: informational interview type things on campus, and what do you

75
00:04:07,480 --> 00:04:09,280
Speaker 1: had to say was stand up? Pretty interesting to me,

76
00:04:09,400 --> 00:04:11,240
Speaker 1: said come on up any time you like. I said,

77
00:04:11,280 --> 00:04:14,280
Speaker 1: how's next week worked for you? So that's I looked

78
00:04:14,280 --> 00:04:16,560
Speaker 1: out on the Solomon Brothers trading floor, which was two

79
00:04:16,600 --> 00:04:19,400
Speaker 1: stories tall, started at Sally No. No, that was the

80
00:04:19,400 --> 00:04:21,839
Speaker 1: first time I've ever seen anything on Wall Street anything,

81
00:04:22,160 --> 00:04:24,200
Speaker 1: And I looked out and there were probably like four

82
00:04:24,640 --> 00:04:27,520
Speaker 1: guys and like three girls, and that was it, and

83
00:04:27,560 --> 00:04:29,960
Speaker 1: I went to look at the ratio. That's really interesting

84
00:04:30,040 --> 00:04:33,600
Speaker 1: for two reasons. One is I had a similar experience

85
00:04:33,920 --> 00:04:36,279
Speaker 1: very very early in my career. You wanted to become

86
00:04:37,240 --> 00:04:40,919
Speaker 1: interviewing at the Merrill Lynch trading floor, which was a

87
00:04:40,960 --> 00:04:46,360
Speaker 1: football field, but it was the same ratio. All white dudes. Yeah,

88
00:04:46,360 --> 00:04:48,440
Speaker 1: oh yeah, absolutely. You know what, it's the first and

89
00:04:48,520 --> 00:04:51,000
Speaker 1: last time in my entire life, I've had credit card debt,

90
00:04:51,160 --> 00:04:53,200
Speaker 1: first and last time when you moved to the city,

91
00:04:53,440 --> 00:04:58,240
Speaker 1: banging on doors on wall streets, Lehman Brothers, Goldman, Sachs, Morgan, Stanley,

92
00:04:58,279 --> 00:05:00,919
Speaker 1: bear Sterns, you name it, dodge a few bullets in

93
00:05:00,960 --> 00:05:04,120
Speaker 1: that list. Hey, look, Arthur Anderson wanted to keep me

94
00:05:04,160 --> 00:05:07,640
Speaker 1: after business school and fast tracked me to becoming, you know,

95
00:05:07,960 --> 00:05:11,320
Speaker 1: an auditor and and then become a strategist of some kind.

96
00:05:11,400 --> 00:05:13,200
Speaker 1: And they were working with this big company in Houston

97
00:05:13,240 --> 00:05:16,799
Speaker 1: called I'm like, and my mom's like, you'd be staying

98
00:05:16,800 --> 00:05:18,560
Speaker 1: in Texas, honey, And I'm like, i am so out

99
00:05:18,560 --> 00:05:20,640
Speaker 1: of here. She's like, d l J d l J.

100
00:05:21,560 --> 00:05:24,120
Speaker 1: What is that? Like? A transportation company? I'm like, no, mother,

101
00:05:24,200 --> 00:05:28,440
Speaker 1: it's not DHL, it's d l J. And when that

102
00:05:28,560 --> 00:05:30,360
Speaker 1: was your first gig out of business school, that was

103
00:05:30,400 --> 00:05:32,200
Speaker 1: my first kid got out of business school. It was

104
00:05:32,560 --> 00:05:35,320
Speaker 1: the best place to work. I mean, the entire firm

105
00:05:35,360 --> 00:05:39,919
Speaker 1: at first Christmas year fit in the rainbow room. Crazy

106
00:05:39,960 --> 00:05:42,599
Speaker 1: stuff went on back, so that before all divisions, that

107
00:05:42,680 --> 00:05:46,000
Speaker 1: was pre purchase right, oh way, prepurchase way way way.

108
00:05:46,040 --> 00:05:48,599
Speaker 1: And when did they get bought? Tony James and his

109
00:05:48,640 --> 00:05:51,680
Speaker 1: infinite wisdom saw the peak and sold the firm at

110
00:05:51,680 --> 00:05:54,200
Speaker 1: the very top of the bubble. This was like, oh,

111
00:05:54,839 --> 00:05:58,159
Speaker 1: I mean credit see just finished writing off a few

112
00:05:58,200 --> 00:06:01,839
Speaker 1: billion extra dollars from the deal J purchase recently. Oh yeah,

113
00:06:01,839 --> 00:06:03,839
Speaker 1: you know, No, No, I mean, I mean they wrote

114
00:06:03,880 --> 00:06:06,000
Speaker 1: off billions of dollars for years. So what did you

115
00:06:06,000 --> 00:06:09,039
Speaker 1: do at d l J. I sold all kinds of

116
00:06:09,080 --> 00:06:12,320
Speaker 1: things to all kinds of people, bonds, equities, contact, what

117
00:06:12,360 --> 00:06:14,760
Speaker 1: I did. I did share buy backs. I did a

118
00:06:14,839 --> 00:06:18,719
Speaker 1: lot of debt retirement, working with the former Drexel boys

119
00:06:19,320 --> 00:06:23,640
Speaker 1: who dlj's junk bond desk had absorbed. They were so mischievous,

120
00:06:23,680 --> 00:06:25,479
Speaker 1: that's the nicest word I can come up with. But

121
00:06:25,520 --> 00:06:27,840
Speaker 1: I had mutual fund companies, I had some high net

122
00:06:27,880 --> 00:06:31,320
Speaker 1: worth investors, but it was really the debt retirement, the

123
00:06:31,400 --> 00:06:34,360
Speaker 1: junk bond, the private equity. I mean, like I said,

124
00:06:34,360 --> 00:06:36,320
Speaker 1: Tony James sold the firm and then obviously he went

125
00:06:36,360 --> 00:06:38,320
Speaker 1: on too Blackstone in a great career. But Leon black

126
00:06:38,360 --> 00:06:41,640
Speaker 1: walk the halls. I mean, DLJ had a beautiful merchant

127
00:06:41,680 --> 00:06:45,080
Speaker 1: bank before private equity was a thing. So how do

128
00:06:45,120 --> 00:06:49,400
Speaker 1: you do the transition from the bleeding edge of capitalism

129
00:06:49,440 --> 00:06:51,840
Speaker 1: to I know, I'll go in the house of the

130
00:06:51,880 --> 00:06:54,640
Speaker 1: government and work for the Fed. Well, okay, so the

131
00:06:54,680 --> 00:06:57,560
Speaker 1: Swiss were not near as much fun as d l J.

132
00:06:57,880 --> 00:07:00,839
Speaker 1: By the way, overseas investors always to top tick the

133
00:07:00,920 --> 00:07:04,640
Speaker 1: market or bottom ticket if they're sellers, so not a surprise.

134
00:07:05,240 --> 00:07:07,640
Speaker 1: How long did you stay with Credit Swiss? For eighteen

135
00:07:07,720 --> 00:07:11,400
Speaker 1: whole long months? And so that gets us to around

136
00:07:11,480 --> 00:07:13,520
Speaker 1: And by the way, I was getting my second masters

137
00:07:13,520 --> 00:07:15,600
Speaker 1: at the time, because I you know, I'm Italian, I

138
00:07:15,640 --> 00:07:17,680
Speaker 1: hold a grudge, so I but instead of n y U,

139
00:07:17,760 --> 00:07:20,760
Speaker 1: I went to Columbia, the best journalism school at night

140
00:07:20,880 --> 00:07:23,920
Speaker 1: and got my second degree in journalism. Finally finally got

141
00:07:23,920 --> 00:07:27,040
Speaker 1: my lifetime dream. I never knew that about you, who

142
00:07:27,120 --> 00:07:29,360
Speaker 1: was the dean while you were there. Gosh, now you

143
00:07:29,400 --> 00:07:31,720
Speaker 1: got me because it was only there. He was only

144
00:07:31,720 --> 00:07:33,600
Speaker 1: there for one year and then he left, but it

145
00:07:33,640 --> 00:07:36,960
Speaker 1: was now He's one of the most transformative moments of

146
00:07:37,000 --> 00:07:39,640
Speaker 1: my life. Was I graduated in December of oh one.

147
00:07:40,200 --> 00:07:41,840
Speaker 1: Was not being able to go to work on Wall

148
00:07:41,880 --> 00:07:45,000
Speaker 1: Street after nine eleven, but having to report to campus

149
00:07:45,040 --> 00:07:47,640
Speaker 1: the next day Wednesday. Well it's the other direction. So

150
00:07:49,120 --> 00:07:52,920
Speaker 1: but being in journalism school on nine eleven, and I

151
00:07:52,920 --> 00:07:55,000
Speaker 1: mean I was the oldest, you know, part time student

152
00:07:55,000 --> 00:07:58,560
Speaker 1: they'd ever seen. You were also on an institutional trading

153
00:07:58,600 --> 00:08:01,280
Speaker 1: desk when the dot com moms were imploding. What was

154
00:08:01,280 --> 00:08:05,720
Speaker 1: that experience? Like? Well, so you know it was really

155
00:08:06,480 --> 00:08:10,400
Speaker 1: it was the Enron experience and the dyna gy and

156
00:08:11,000 --> 00:08:13,679
Speaker 1: all of the You could tell that these were shady deals.

157
00:08:13,760 --> 00:08:15,560
Speaker 1: It's like, why do you keep your end on price

158
00:08:15,600 --> 00:08:19,480
Speaker 1: target at forty Stock hadn't done anything in forever. I mean,

159
00:08:19,640 --> 00:08:22,040
Speaker 1: you know, one analyst is raking away. You know, a

160
00:08:22,040 --> 00:08:26,520
Speaker 1: couple of million dollars per debt deals to be done,

161
00:08:26,680 --> 00:08:29,160
Speaker 1: So we're going to keep our price target high. Look

162
00:08:29,200 --> 00:08:31,680
Speaker 1: that's where we are. Oh wait today, So but but

163
00:08:32,360 --> 00:08:35,000
Speaker 1: the Enron and the dynages of the world kind of

164
00:08:35,040 --> 00:08:38,320
Speaker 1: set us up for recognizing the Internet bubble when it

165
00:08:38,400 --> 00:08:42,040
Speaker 1: was staring you in the face. So what led you

166
00:08:42,200 --> 00:08:46,400
Speaker 1: to the move from the bleeding edge of capitalism to

167
00:08:46,520 --> 00:08:50,319
Speaker 1: going in house at the Dallas Federal Reserve? So that

168
00:08:50,559 --> 00:08:53,640
Speaker 1: was eleven. Nine eleven was a big turning point for

169
00:08:53,679 --> 00:08:58,200
Speaker 1: me personally. Uh, shortly thereafter a few weeks after nine eleven,

170
00:08:58,240 --> 00:09:01,800
Speaker 1: I met my current husband and we started long distance

171
00:09:01,920 --> 00:09:05,040
Speaker 1: dating between Dallas, Texas, and New York. And when the

172
00:09:05,040 --> 00:09:07,320
Speaker 1: time came, I said, well, just move on up here

173
00:09:07,360 --> 00:09:09,199
Speaker 1: to Manhattan. And he said, you go out six nights

174
00:09:09,200 --> 00:09:11,880
Speaker 1: a week and think it's normal. So that was that.

175
00:09:11,920 --> 00:09:14,160
Speaker 1: I ended up moving to Dallas. I signed a non

176
00:09:14,240 --> 00:09:18,040
Speaker 1: compete and agreed to leave the industry. I called the

177
00:09:18,040 --> 00:09:20,640
Speaker 1: publisher of the Dallas Morning News and I said, I'll

178
00:09:20,640 --> 00:09:24,600
Speaker 1: work for free. I'm retired. They just credit see wrote

179
00:09:24,600 --> 00:09:27,080
Speaker 1: me a big check to leave, and basically the book

180
00:09:27,120 --> 00:09:31,320
Speaker 1: went to the junk bond test um. So I, you know,

181
00:09:31,320 --> 00:09:37,200
Speaker 1: I tootled away with a you know that's right. You

182
00:09:34,360 --> 00:09:39,360
Speaker 1: were you know, did you have me Bill Diner over there?

183
00:09:39,400 --> 00:09:45,600
Speaker 1: And I did, Yes. I was rarely in the newsroom

184
00:09:45,640 --> 00:09:48,040
Speaker 1: per se because I kind of walked in and wrote

185
00:09:48,080 --> 00:09:51,680
Speaker 1: my own rules because I could. You don't need a salary,

186
00:09:51,679 --> 00:09:53,400
Speaker 1: you don't want to like, I'm working for free. Here

187
00:09:53,480 --> 00:09:55,920
Speaker 1: here's what I'm doing. But within within a few months,

188
00:09:55,920 --> 00:09:59,240
Speaker 1: I actually was the first daily columnist that they've ever

189
00:09:59,280 --> 00:10:01,160
Speaker 1: had in the history of the paper. So I was

190
00:10:01,160 --> 00:10:03,760
Speaker 1: writing a daily about the markets. And I was just

191
00:10:03,800 --> 00:10:07,320
Speaker 1: as happy as happy to impassibly be quite fascinating. So

192
00:10:07,520 --> 00:10:11,319
Speaker 1: you finally have your dream job in journalism, working at

193
00:10:11,400 --> 00:10:14,160
Speaker 1: what's the paper in Dallas? Dallas Morning News, Dallas Morning News?

194
00:10:14,360 --> 00:10:17,920
Speaker 1: And what has you leave? A job you had always

195
00:10:18,000 --> 00:10:23,640
Speaker 1: wanted to go into? This crazy semi government told the FED.

196
00:10:23,800 --> 00:10:26,520
Speaker 1: So I start writing about things that had bothered me

197
00:10:26,679 --> 00:10:30,520
Speaker 1: on Wall Street, like the first c d O, for example,

198
00:10:30,600 --> 00:10:33,080
Speaker 1: that was sold at Credit Sweets. I'm like, would buy

199
00:10:33,080 --> 00:10:35,719
Speaker 1: that equity tronch? But this is a one oh two. Oh,

200
00:10:35,800 --> 00:10:37,720
Speaker 1: that's a good equity tronch. Did you see the vig

201
00:10:37,720 --> 00:10:42,400
Speaker 1: attached to that had some fat commissions? Yeah, exactly. But

202
00:10:42,440 --> 00:10:45,400
Speaker 1: I started wondering about these things. I started writing about

203
00:10:45,440 --> 00:10:48,720
Speaker 1: the national debt, got the attention of Warren Buffett, so

204
00:10:48,720 --> 00:10:51,320
Speaker 1: he invited me out to oh Maha. Actually spent a

205
00:10:51,360 --> 00:10:57,040
Speaker 1: lot more time with Charlie Munger at azing. He basically

206
00:10:57,040 --> 00:10:58,720
Speaker 1: said that the efficient Frontier is going to go the

207
00:10:58,720 --> 00:11:03,320
Speaker 1: way the Dodo bird, the pension advisory industry doesn't change

208
00:11:03,320 --> 00:11:06,360
Speaker 1: its ways, and the Federal Reserve continues to be overly intrusive.

209
00:11:06,400 --> 00:11:09,079
Speaker 1: I just condensed the thirty minute conversation that I had

210
00:11:09,080 --> 00:11:11,199
Speaker 1: with him. But he's right, and he's getting right er

211
00:11:11,280 --> 00:11:13,600
Speaker 1: every day, and he might not live to see the change,

212
00:11:13,600 --> 00:11:16,400
Speaker 1: but he is right. I would push back and say,

213
00:11:16,920 --> 00:11:19,600
Speaker 1: so far he's been completely wrong because all the bad

214
00:11:19,640 --> 00:11:22,880
Speaker 1: things that people have predicted about that have yet to

215
00:11:22,920 --> 00:11:24,960
Speaker 1: come true, well, they've definitely yet to come true. But

216
00:11:25,000 --> 00:11:27,840
Speaker 1: what he said was it might not happen in my lifetime.

217
00:11:29,160 --> 00:11:32,160
Speaker 1: So that's not saying exactly he's he's but but I

218
00:11:32,160 --> 00:11:35,000
Speaker 1: don't think that he saw passive coming in the way

219
00:11:35,040 --> 00:11:38,959
Speaker 1: that it's come. When Passive Investing and J Powell walk

220
00:11:39,040 --> 00:11:41,559
Speaker 1: into a bar, it's a beautiful thing. You don't fight him,

221
00:11:41,920 --> 00:11:44,120
Speaker 1: You let them run hand in hand. I don't want

222
00:11:44,160 --> 00:11:45,880
Speaker 1: to get off on something. We'll talk about that more

223
00:11:45,880 --> 00:11:48,679
Speaker 1: because it's a fascinating topic. It is how did you

224
00:11:48,800 --> 00:11:52,240
Speaker 1: end up at the Dallas fit? So I started working

225
00:11:52,240 --> 00:11:55,840
Speaker 1: some with Jonas, and he was working on Goldman's Economist,

226
00:11:55,840 --> 00:11:58,240
Speaker 1: but he was just a rookie back then, and he

227
00:11:58,320 --> 00:11:59,960
Speaker 1: was doing a lot of great work on what Alan

228
00:12:00,000 --> 00:12:03,080
Speaker 1: Greenspan had been working on mortgage actively withdrawal. So I

229
00:12:03,080 --> 00:12:07,640
Speaker 1: started writing intensely about the housing crisis, and at one

230
00:12:07,679 --> 00:12:11,000
Speaker 1: point the publisher was like, do you know what systemic

231
00:12:11,080 --> 00:12:12,840
Speaker 1: risk is? And I'm like, actually I do. He's like,

232
00:12:12,840 --> 00:12:15,000
Speaker 1: you're saying that this is going to be global and

233
00:12:15,120 --> 00:12:18,960
Speaker 1: systemic in nature. This is oh five, and he's like,

234
00:12:19,000 --> 00:12:21,400
Speaker 1: you're nuts. And if you looked in the right place,

235
00:12:21,640 --> 00:12:24,040
Speaker 1: there was an overwhelming amount of data, but if you

236
00:12:24,200 --> 00:12:28,040
Speaker 1: looked in the usual place, everything was absent. Who knew

237
00:12:28,040 --> 00:12:30,760
Speaker 1: what a German lands bank was? I didn't know until

238
00:12:30,920 --> 00:12:33,680
Speaker 1: Lateman blew up. In any event, I did get a

239
00:12:33,679 --> 00:12:36,520
Speaker 1: call one day from Richard Fisher, and he took me

240
00:12:36,559 --> 00:12:40,079
Speaker 1: to lunch and said, look, you're you're you're wasting your talent.

241
00:12:40,120 --> 00:12:41,920
Speaker 1: You should beat the Wall Street Journal, the economists. What

242
00:12:41,920 --> 00:12:43,440
Speaker 1: are you doing here in Dallas, Texas? And I'm like,

243
00:12:43,440 --> 00:12:45,640
Speaker 1: if you couldn't tell him, I do have my shoes on,

244
00:12:45,679 --> 00:12:48,560
Speaker 1: but I'm very pregnant. In any event, within a few

245
00:12:48,559 --> 00:12:51,600
Speaker 1: months he asked me to come join and the FED

246
00:12:51,920 --> 00:12:54,160
Speaker 1: and what was your title? Oh gosh. I started off

247
00:12:54,200 --> 00:12:57,520
Speaker 1: as like, you know, a dishwashers as a writer in

248
00:12:57,720 --> 00:13:01,920
Speaker 1: the research not a research assistant. I came in as

249
00:13:01,960 --> 00:13:04,880
Speaker 1: somebody to help with his speech writing. Okay, so you

250
00:13:04,920 --> 00:13:07,360
Speaker 1: were an aide to the president of the Dallas FED.

251
00:13:07,559 --> 00:13:10,880
Speaker 1: And it evolved into the more he got his sea

252
00:13:10,920 --> 00:13:14,559
Speaker 1: legs and realized that the New York Fed markets intelligence,

253
00:13:14,600 --> 00:13:17,680
Speaker 1: which you're kind of obligated to take if you're running

254
00:13:17,760 --> 00:13:21,920
Speaker 1: a district. The New York Fed Markets Desk conducts intelligence

255
00:13:21,920 --> 00:13:25,040
Speaker 1: with the broker dealer community. It's actually an inc on

256
00:13:25,080 --> 00:13:28,760
Speaker 1: their website. So, as jo Q president, whether it be

257
00:13:29,280 --> 00:13:32,520
Speaker 1: Minneapolis or Cleveland or Dallas, Texas, you're sister, take all

258
00:13:32,520 --> 00:13:35,080
Speaker 1: of your market intelligence from the New York Markets Desk,

259
00:13:35,280 --> 00:13:38,200
Speaker 1: which kind of reads like cell side research, which Richard

260
00:13:38,240 --> 00:13:41,800
Speaker 1: figured out really quickly because economics neither of mine. We're

261
00:13:41,800 --> 00:13:44,000
Speaker 1: both nbas and financial. So let's talk about something you

262
00:13:44,120 --> 00:13:46,120
Speaker 1: sort of snuck in there, which is until he got

263
00:13:46,120 --> 00:13:49,000
Speaker 1: his sea legs, because I was one of several people

264
00:13:49,080 --> 00:13:51,480
Speaker 1: pretty critical of him in the early days, and I

265
00:13:51,520 --> 00:13:53,720
Speaker 1: want to throw some stuff at you and have you

266
00:13:53,760 --> 00:13:57,720
Speaker 1: either defend him or we're not. June two thousand and five,

267
00:13:58,280 --> 00:14:01,800
Speaker 1: Richard Fisher told CNBC, we are clearly in the eighth

268
00:14:01,840 --> 00:14:04,440
Speaker 1: inning of a tightening cycle, and we have the ninth

269
00:14:04,480 --> 00:14:07,200
Speaker 1: inning coming up at the end of June. Lots of

270
00:14:07,200 --> 00:14:10,400
Speaker 1: people began calling him a thanning Fisher. I'll take a

271
00:14:10,400 --> 00:14:14,160
Speaker 1: little uh blame for that as as well. Why did

272
00:14:14,200 --> 00:14:16,960
Speaker 1: he think that we were so far along in the

273
00:14:17,000 --> 00:14:20,120
Speaker 1: tightening cycle when it was clear green Span had a

274
00:14:20,160 --> 00:14:23,920
Speaker 1: different agenda. Green Span did have a different agenda, There

275
00:14:24,040 --> 00:14:26,880
Speaker 1: was nothing macro prudential going on. Green Span at the

276
00:14:26,880 --> 00:14:31,920
Speaker 1: time said that because the FED only technically regulated of

277
00:14:32,000 --> 00:14:34,200
Speaker 1: mortgage lending in America, that's the only thing that the

278
00:14:34,200 --> 00:14:36,840
Speaker 1: FED was responsible for policing. There were a few other

279
00:14:36,840 --> 00:14:39,160
Speaker 1: people inside the institution who were of a different opinion,

280
00:14:39,240 --> 00:14:41,440
Speaker 1: because in the event that there was a falling knife

281
00:14:41,440 --> 00:14:44,360
Speaker 1: and something went wrong with this supreme explosion, the FED

282
00:14:44,440 --> 00:14:47,480
Speaker 1: might be catching the entire falling knife before we even

283
00:14:47,520 --> 00:14:50,080
Speaker 1: get to the subprime issue, which I think you and

284
00:14:50,120 --> 00:14:53,120
Speaker 1: I are very much an agreement of oh five. We

285
00:14:53,200 --> 00:14:56,920
Speaker 1: had already seen gold takeoff, we had seen inflation take off.

286
00:14:57,360 --> 00:15:03,280
Speaker 1: Oil was probably halfway on its way to one fifty milk, beef,

287
00:15:03,320 --> 00:15:06,920
Speaker 1: food stuffs, everything was moving up. It was pretty clear

288
00:15:07,040 --> 00:15:10,880
Speaker 1: that there was a lot of inflation in the system

289
00:15:10,920 --> 00:15:13,520
Speaker 1: even as the dollar got weaker and weaker and weaker.

290
00:15:14,160 --> 00:15:17,240
Speaker 1: So that's the question is was he just a little

291
00:15:17,680 --> 00:15:22,000
Speaker 1: green and naive or did he simply not see what

292
00:15:22,160 --> 00:15:26,240
Speaker 1: I described as rampant inflation everywhere except the statistics. I

293
00:15:26,280 --> 00:15:29,880
Speaker 1: think he saw the inflation, but I think more importantly

294
00:15:30,000 --> 00:15:32,480
Speaker 1: what he saw too early on. And this is a

295
00:15:32,600 --> 00:15:34,800
Speaker 1: lesson I think a lot of people who have been

296
00:15:34,920 --> 00:15:38,320
Speaker 1: inside the FED and lived to tell learn it's that

297
00:15:39,360 --> 00:15:45,320
Speaker 1: easy monetary policy can elongate any cycle, for sure, any cycle.

298
00:15:45,680 --> 00:15:49,480
Speaker 1: And right now we're in the longest elongation. So even

299
00:15:49,520 --> 00:15:53,440
Speaker 1: when the longest elongation and the longest elongation, it's been

300
00:15:53,480 --> 00:15:55,280
Speaker 1: lower for longer than it ever has. That's going to

301
00:15:55,360 --> 00:15:59,840
Speaker 1: be my first tattoo. That's pretty That's pretty interesting. So

302
00:16:00,560 --> 00:16:04,560
Speaker 1: was he just unaware of how they thought that because

303
00:16:04,560 --> 00:16:06,720
Speaker 1: he had Wall Street contacts, and because he was speaking

304
00:16:06,720 --> 00:16:08,720
Speaker 1: to hedge funds, and because he knew that there was

305
00:16:08,720 --> 00:16:13,360
Speaker 1: a d LTV toxic garbage that was trading hands, that

306
00:16:13,440 --> 00:16:16,720
Speaker 1: surely this had to give. Well, it had some more

307
00:16:16,800 --> 00:16:19,240
Speaker 1: gas in the tank, before it a whole lot more.

308
00:16:19,280 --> 00:16:22,400
Speaker 1: So let me give you another question, another quote. We're

309
00:16:22,440 --> 00:16:24,880
Speaker 1: going to fast forward to two thousand and eight, and

310
00:16:24,920 --> 00:16:26,800
Speaker 1: bear in mind we didn't always agree with each other.

311
00:16:27,160 --> 00:16:31,560
Speaker 1: I know that about you generally, but knowing your economic

312
00:16:31,600 --> 00:16:35,000
Speaker 1: world forew and your politics, I could see you respectfully

313
00:16:35,000 --> 00:16:38,160
Speaker 1: disagreeing with them and then getting to say I told

314
00:16:38,160 --> 00:16:42,640
Speaker 1: you so afterwards in a very polite different verbiage. If

315
00:16:42,640 --> 00:16:46,440
Speaker 1: you're listening, I'm still waiting for the opportunity. So two

316
00:16:46,480 --> 00:16:49,880
Speaker 1: thousand and eight, the crisis is expanding. There's an FOMC

317
00:16:50,040 --> 00:16:52,760
Speaker 1: meeting in June and then another one in August. The

318
00:16:52,840 --> 00:16:56,520
Speaker 1: Fed had left rates at two percent. At both meetings

319
00:16:56,920 --> 00:17:00,680
Speaker 1: there was one dissenter one Richard Fish, president of the

320
00:17:00,760 --> 00:17:04,440
Speaker 1: Dallas Fed. The sole dissentier was Richard Fisher, who had

321
00:17:04,520 --> 00:17:08,520
Speaker 1: both meanings quote preferred an increase in the target for

322
00:17:08,560 --> 00:17:11,920
Speaker 1: the federal funds rate unquote. This is in the middle

323
00:17:11,960 --> 00:17:17,280
Speaker 1: of two What was he smoking again? He is much

324
00:17:17,359 --> 00:17:22,719
Speaker 1: more of an inflation boogeyman Wymar Republic, speaks fluent German,

325
00:17:22,800 --> 00:17:26,919
Speaker 1: gives speeches in Germany and German. He's much more of

326
00:17:26,960 --> 00:17:29,720
Speaker 1: that generation than I am. I've learned from Lacey Hunt

327
00:17:30,560 --> 00:17:33,480
Speaker 1: that the more debt you create, as long as that

328
00:17:33,560 --> 00:17:36,520
Speaker 1: debt is going to be absorbed by whatever the system is,

329
00:17:36,600 --> 00:17:39,520
Speaker 1: because you've got reserve currency status. The only thing that

330
00:17:39,520 --> 00:17:42,560
Speaker 1: that incremental dollar of debt is going to potentially create

331
00:17:42,600 --> 00:17:45,720
Speaker 1: a deflation because you're taking away money that you would

332
00:17:45,760 --> 00:17:48,160
Speaker 1: otherwise spend on something else in order to service the debt.

333
00:17:49,400 --> 00:17:52,640
Speaker 1: So there's always going to be a deflationary impetus if

334
00:17:52,680 --> 00:17:55,960
Speaker 1: you're allowed to grow your debt two levels that Richard

335
00:17:56,000 --> 00:17:58,880
Speaker 1: would have thought would have created hyper inflation. That makes sense.

336
00:17:58,960 --> 00:18:02,760
Speaker 1: You have a giant mon terry activity should be somewhat

337
00:18:02,760 --> 00:18:07,480
Speaker 1: deflationary versus a giant fiscal activity which should be more inflationary.

338
00:18:07,560 --> 00:18:09,920
Speaker 1: And I was also of the opinion at the time. Again,

339
00:18:10,000 --> 00:18:12,199
Speaker 1: he and I were not, and you know we're an

340
00:18:12,240 --> 00:18:18,320
Speaker 1: agreement on a two percent floor. I'll say that out right, yes, period,

341
00:18:19,119 --> 00:18:21,720
Speaker 1: forever and ever. I think that we had we stopped

342
00:18:21,720 --> 00:18:24,000
Speaker 1: at two percent, we would have a much different world

343
00:18:24,080 --> 00:18:26,560
Speaker 1: today than we do. I wouldn't disagree with you at all.

344
00:18:26,840 --> 00:18:29,120
Speaker 1: It was it was liquidity. It was the alphabet soup

345
00:18:29,160 --> 00:18:31,439
Speaker 1: of god knows what acronyms that I was involved in

346
00:18:31,480 --> 00:18:33,960
Speaker 1: helped the New York Markets desk set up for the

347
00:18:33,960 --> 00:18:37,720
Speaker 1: asset back securities market, and you name the market. It

348
00:18:37,760 --> 00:18:41,119
Speaker 1: was liquidity that was frozen. The price of credit was

349
00:18:41,440 --> 00:18:45,000
Speaker 1: meaningless at the time to any investment. That nobody was

350
00:18:45,040 --> 00:18:48,560
Speaker 1: extending credit at any price it was. It was a

351
00:18:48,560 --> 00:18:53,000
Speaker 1: function of everything being frozen and unavailable, not expensive. We

352
00:18:53,040 --> 00:18:55,240
Speaker 1: did not have to go to the zero bound. So

353
00:18:55,240 --> 00:18:58,679
Speaker 1: so here's the here's the big question. Right, You've been

354
00:18:58,680 --> 00:19:01,280
Speaker 1: a pretty big FED critic for a long time. I

355
00:19:01,320 --> 00:19:06,160
Speaker 1: think you and I both agree the there's some overlap.

356
00:19:06,240 --> 00:19:09,680
Speaker 1: I think the FEDS ultra low rates and I wrote

357
00:19:09,680 --> 00:19:13,240
Speaker 1: this embail nation is one of many causes of the

358
00:19:13,280 --> 00:19:16,600
Speaker 1: financial crisis. I think you put more weight on that.

359
00:19:17,440 --> 00:19:20,040
Speaker 1: Uh and fed up you really say that is where

360
00:19:20,040 --> 00:19:23,080
Speaker 1: it all begins and ends. Here's what we disagree, and

361
00:19:23,119 --> 00:19:25,960
Speaker 1: this is what I'm fascinated about. As much as I

362
00:19:26,000 --> 00:19:29,439
Speaker 1: give them an F for all their actions leading up

363
00:19:29,440 --> 00:19:32,800
Speaker 1: to the crisis, I give them a B plus following

364
00:19:32,840 --> 00:19:36,280
Speaker 1: the crisis. What sort of ranking would you give them?

365
00:19:36,560 --> 00:19:40,000
Speaker 1: By the way, that's just during an immediately after normalizing

366
00:19:40,119 --> 00:19:43,080
Speaker 1: rates over the past decade. I think they're way behind

367
00:19:43,080 --> 00:19:45,600
Speaker 1: the curve. But we'll come back to that, how would

368
00:19:45,640 --> 00:19:50,719
Speaker 1: you grade the FED for their response immediately to the

369
00:19:50,760 --> 00:19:54,159
Speaker 1: crisis in let's call it oh eight oh nine, and

370
00:19:54,240 --> 00:19:58,600
Speaker 1: even I would probably give them not an F but

371
00:19:58,640 --> 00:20:01,480
Speaker 1: I would probably give them a C minus for adhering

372
00:20:01,520 --> 00:20:04,960
Speaker 1: to the Bernanke doctrine which was agreed upon at Jackson

373
00:20:05,000 --> 00:20:08,840
Speaker 1: Hole in two thousand seven with a very small group

374
00:20:08,920 --> 00:20:10,879
Speaker 1: of f o MC members, by the way, which was

375
00:20:11,119 --> 00:20:14,479
Speaker 1: kind of against the rules um but in that meeting

376
00:20:15,320 --> 00:20:19,000
Speaker 1: it was decided that a precondition to growing the balance sheet,

377
00:20:19,080 --> 00:20:22,359
Speaker 1: if the time came right, this is August of oh seven,

378
00:20:22,760 --> 00:20:25,160
Speaker 1: if the time markets still haven't even made their high,

379
00:20:25,320 --> 00:20:29,080
Speaker 1: which doesn't show up till October seven exactly, so, if

380
00:20:29,160 --> 00:20:32,080
Speaker 1: it came to pass that they needed to start growing

381
00:20:32,080 --> 00:20:35,439
Speaker 1: the balance sheet, quantitative easing, heading to Japan, whatever you

382
00:20:35,480 --> 00:20:38,520
Speaker 1: want to call it, the Bernanke doctrine dictated the interest

383
00:20:38,600 --> 00:20:42,600
Speaker 1: rates must go to the zero bound first. That's that's

384
00:20:42,600 --> 00:20:45,240
Speaker 1: why I given the C minus as opposed to be

385
00:20:45,400 --> 00:20:48,200
Speaker 1: as opposed to stopping at had they stopped at two,

386
00:20:48,320 --> 00:20:50,960
Speaker 1: I would have given them a B plus because of all,

387
00:20:51,359 --> 00:20:54,560
Speaker 1: because of the Pandora's box that was opened by going

388
00:20:54,600 --> 00:20:57,520
Speaker 1: to the zero bound. In later years, So here's where

389
00:20:57,720 --> 00:21:01,720
Speaker 1: I think you and I will find more common ounds post.

390
00:21:02,240 --> 00:21:07,520
Speaker 1: Let's just call it eleven through. I've been waiting for

391
00:21:07,560 --> 00:21:10,960
Speaker 1: them to normalize rates. And I know some people think

392
00:21:11,000 --> 00:21:15,160
Speaker 1: this is the quote greatest economy ever, But why if

393
00:21:15,160 --> 00:21:17,800
Speaker 1: this is such a good economy, haven't rates returned to

394
00:21:17,920 --> 00:21:24,240
Speaker 1: a more normal level instead of what's still incredibly accommodative.

395
00:21:24,280 --> 00:21:27,440
Speaker 1: And I know we could blame where's the thirty year?

396
00:21:27,600 --> 00:21:30,439
Speaker 1: The ten years? Like one five the day before we

397
00:21:30,480 --> 00:21:34,800
Speaker 1: recorded this, So you could blame the bond market, but really,

398
00:21:34,840 --> 00:21:39,359
Speaker 1: shouldn't the Fed have been further along the normalization process

399
00:21:39,440 --> 00:21:43,000
Speaker 1: and off emergency footing? Or am I just crazy? Look?

400
00:21:43,160 --> 00:21:46,360
Speaker 1: Kiri two and Que three were outright mistakes in my opinion.

401
00:21:46,960 --> 00:21:51,000
Speaker 1: Would we have suffered a mild and shallow recession? It's

402
00:21:51,040 --> 00:21:54,960
Speaker 1: impossible to look in any rear view mirror, But we

403
00:21:55,119 --> 00:21:58,760
Speaker 1: knew at the time that we were creating zombies. I

404
00:21:58,800 --> 00:22:02,720
Speaker 1: wrote zombie banks to zombie people. No, No, well we

405
00:22:02,800 --> 00:22:05,919
Speaker 1: and I mean I mean like politicians and others, the

406
00:22:06,040 --> 00:22:10,960
Speaker 1: saving of zombie banks, that's different. I'm talking about giving

407
00:22:11,000 --> 00:22:14,320
Speaker 1: birth to zombie corporations. I did an entire briefing on

408
00:22:14,359 --> 00:22:16,919
Speaker 1: what the potential ramifications would be in the future of

409
00:22:16,960 --> 00:22:19,520
Speaker 1: cutting a default rate cycle in the high yield market

410
00:22:19,560 --> 00:22:22,640
Speaker 1: in half. So I have to stop you here and

411
00:22:22,680 --> 00:22:26,240
Speaker 1: go over each of those zombie banks and zombie corporations

412
00:22:26,640 --> 00:22:28,760
Speaker 1: zombie banks. So let's do first, because I think that's

413
00:22:28,760 --> 00:22:32,840
Speaker 1: the easy one. Zombie banks are banks that and again,

414
00:22:32,880 --> 00:22:35,239
Speaker 1: tell me where we disagree. I think there's a lot

415
00:22:35,280 --> 00:22:37,840
Speaker 1: of daylight between us. Hey, if you're a city bank

416
00:22:37,960 --> 00:22:40,760
Speaker 1: or a Bank of America or whoever, and you have

417
00:22:40,840 --> 00:22:42,680
Speaker 1: all these really good assets and you have all these

418
00:22:42,680 --> 00:22:46,160
Speaker 1: really bad debts, Well there's this lovely building downtown of Manhattan.

419
00:22:46,160 --> 00:22:49,000
Speaker 1: It's got these beautiful columns, and it's called the Federal

420
00:22:49,000 --> 00:22:53,199
Speaker 1: Bankruptcy Cord. And if you are bankrupt, for lack of

421
00:22:53,200 --> 00:22:55,040
Speaker 1: a better term, you go down there and you do

422
00:22:55,080 --> 00:22:58,719
Speaker 1: a Chapter eleven reorg and you take the good parts

423
00:22:58,720 --> 00:23:01,200
Speaker 1: of the bank and you spin it out, and you

424
00:23:01,280 --> 00:23:04,160
Speaker 1: take the debt. There's no such thing as toxic debt.

425
00:23:04,240 --> 00:23:07,399
Speaker 1: There's just toxic prices. This junk at at a dollar

426
00:23:07,480 --> 00:23:12,760
Speaker 1: or nine eighty is fabulous at fifteen or twenty or dollar.

427
00:23:12,840 --> 00:23:15,680
Speaker 1: John Thane, there you go. So you turn around, and

428
00:23:15,760 --> 00:23:18,919
Speaker 1: now you're ripping the band aid off, and maybe we

429
00:23:19,040 --> 00:23:21,399
Speaker 1: end up at Dow five thousand. But now you have

430
00:23:21,440 --> 00:23:25,000
Speaker 1: a clean, healthy Bank America's my favorite example. Here's Bank

431
00:23:25,040 --> 00:23:27,119
Speaker 1: of him. Here's Mary Lynch spinning out. Here's Bank of

432
00:23:27,160 --> 00:23:29,920
Speaker 1: America's spinning out. Here's who else did they acquire in

433
00:23:29,960 --> 00:23:33,399
Speaker 1: the last couple of years before the year's countryroid mortgage?

434
00:23:33,440 --> 00:23:36,640
Speaker 1: So you end up with all these good So am

435
00:23:36,680 --> 00:23:39,360
Speaker 1: I and I'm talking way too much, but um, I'm

436
00:23:39,400 --> 00:23:43,399
Speaker 1: literally talking my book. But is that how you avoid

437
00:23:43,480 --> 00:23:47,600
Speaker 1: zombie banks? The how you would have avoided zombie banks

438
00:23:47,680 --> 00:23:50,679
Speaker 1: and you wouldn't have institutionalized too big to be failed

439
00:23:50,680 --> 00:23:54,680
Speaker 1: with stupid legislation. I was trying to find a polite word.

440
00:23:55,359 --> 00:23:58,800
Speaker 1: And you wouldn't have let them go downtown to the

441
00:23:58,880 --> 00:24:01,679
Speaker 1: other place downtown, the other fed on Liberty Street, and

442
00:24:01,760 --> 00:24:04,919
Speaker 1: instead just go knock, knock, knock. I need to see somebody.

443
00:24:04,960 --> 00:24:10,080
Speaker 1: I've got a problem. So the second question is zombie corporations.

444
00:24:10,240 --> 00:24:13,480
Speaker 1: What is a zombie corporation? So a zombie corporation is

445
00:24:13,520 --> 00:24:16,920
Speaker 1: a corporation. Our mutual friend Jim Bianco, who started fishing

446
00:24:16,920 --> 00:24:19,359
Speaker 1: the same year we did, He's written a lot of

447
00:24:19,359 --> 00:24:21,600
Speaker 1: great things. I think about fourteen percent of the US

448
00:24:21,640 --> 00:24:25,119
Speaker 1: stock markets are considered to be zombie corporations. They couldn't

449
00:24:25,200 --> 00:24:28,480
Speaker 1: last like one or two if the coronavirus doesn't go away,

450
00:24:28,560 --> 00:24:31,439
Speaker 1: we're going to have a handful of companies that go

451
00:24:31,560 --> 00:24:33,919
Speaker 1: poof into the night because they can't handle one or

452
00:24:33,960 --> 00:24:38,600
Speaker 1: even two quarters of operating themselves because they're so in debt.

453
00:24:38,640 --> 00:24:45,320
Speaker 1: It meaning, so, now, what is the normal zombie corporation

454
00:24:45,680 --> 00:24:50,560
Speaker 1: overly leveraged, too much debt ratio? Typically if it's fourteen percent, Now,

455
00:24:51,080 --> 00:24:53,159
Speaker 1: what was it in the eighties, what wasn't in the nineties?

456
00:24:53,680 --> 00:24:59,879
Speaker 1: It's of of of stocks in America are zombies. So

457
00:25:00,080 --> 00:25:02,159
Speaker 1: four is it? When you say fourteen cent stocks? Is

458
00:25:02,200 --> 00:25:06,800
Speaker 1: it of the companies in America the publicly traded? Okay,

459
00:25:06,920 --> 00:25:10,560
Speaker 1: so so what has that been historically? Well, if you

460
00:25:10,600 --> 00:25:12,560
Speaker 1: look at it over time, it's it's been in the

461
00:25:12,680 --> 00:25:16,359
Speaker 1: single digits. We've always wounded. So it's double what it

462
00:25:16,480 --> 00:25:19,760
Speaker 1: usually is. And and ultra low rates goes to the

463
00:25:19,840 --> 00:25:23,479
Speaker 1: argument allows them to refinance cheaply. And so companies that

464
00:25:23,680 --> 00:25:27,360
Speaker 1: should again, other companies that should find that pretty building

465
00:25:27,760 --> 00:25:32,240
Speaker 1: with the dead rock, take out the yucky capacity, make

466
00:25:32,320 --> 00:25:35,600
Speaker 1: room for new entrance to put in efficient capacity, you

467
00:25:35,640 --> 00:25:39,399
Speaker 1: get innovation, and uh so this is about double what

468
00:25:39,480 --> 00:25:42,240
Speaker 1: it historically has been. If if I'm reading you correctly,

469
00:25:42,440 --> 00:25:45,240
Speaker 1: if I'm if I'm quoting Jim correctly, Yes, all right, Jim,

470
00:25:45,240 --> 00:25:47,840
Speaker 1: we'll get you on the show to follow up and

471
00:25:47,920 --> 00:25:52,400
Speaker 1: do another version and continue this conversation. My special guest

472
00:25:52,480 --> 00:25:55,639
Speaker 1: is Danielle di Martino Booth. She is the author of

473
00:25:55,760 --> 00:25:59,120
Speaker 1: fed Up, an insider's take on why the Federal Reserve

474
00:25:59,720 --> 00:26:02,560
Speaker 1: is Bad for America. So I gotta call you out

475
00:26:02,600 --> 00:26:05,880
Speaker 1: on the title right away, The Federal Reserve is bad

476
00:26:05,920 --> 00:26:09,280
Speaker 1: for America. I mean, they've made some mistakes. Are they

477
00:26:09,359 --> 00:26:12,720
Speaker 1: really all that bad for America? Well, when when J.

478
00:26:12,880 --> 00:26:17,240
Speaker 1: Powell first gave his first congressional testimony when he said

479
00:26:17,280 --> 00:26:19,879
Speaker 1: it's not the Fed's job to backstop the stock market,

480
00:26:19,920 --> 00:26:21,480
Speaker 1: I went, you know what, we might have to go

481
00:26:21,480 --> 00:26:24,000
Speaker 1: back and fix that subtitle because it looks like we

482
00:26:24,040 --> 00:26:27,080
Speaker 1: have an adult in the room right now. A lot

483
00:26:27,119 --> 00:26:32,360
Speaker 1: of this could be described as Alan Greenspan, an acolyte

484
00:26:32,400 --> 00:26:38,280
Speaker 1: of Iron Rand who believed in as little government intervention

485
00:26:38,320 --> 00:26:42,280
Speaker 1: into the economy in the marketplace as possible, was constantly

486
00:26:42,720 --> 00:26:46,200
Speaker 1: changing rates and doing what Wall Street wanted him to do.

487
00:26:47,240 --> 00:26:50,760
Speaker 1: Aren't you really complaining that Greenspan was not a great

488
00:26:51,280 --> 00:26:54,680
Speaker 1: FED chief? It for me at least, and you can

489
00:26:54,680 --> 00:26:59,640
Speaker 1: talk to people about the era in between. Way, McChesney

490
00:26:59,720 --> 00:27:02,560
Speaker 1: Martin my absolute favorite FED chair of all time, and

491
00:27:02,600 --> 00:27:06,520
Speaker 1: the only other one I liked er my second to

492
00:27:06,600 --> 00:27:09,760
Speaker 1: favorite one. They're they're my two favorites because they were

493
00:27:09,840 --> 00:27:12,240
Speaker 1: really the only two who they had to go to

494
00:27:12,280 --> 00:27:14,320
Speaker 1: hell button. They just hit it. Go to hell, go

495
00:27:14,400 --> 00:27:16,560
Speaker 1: to hell, go to hell, and they did what they

496
00:27:16,560 --> 00:27:20,400
Speaker 1: needed to do for the country. In his biography, I mean,

497
00:27:20,440 --> 00:27:23,360
Speaker 1: there was somebody like living with him for two years

498
00:27:23,400 --> 00:27:27,640
Speaker 1: practically to write this big Alan Greenspan biography, the guy

499
00:27:27,680 --> 00:27:30,520
Speaker 1: admits that he enjoyed being popular for the first time

500
00:27:31,080 --> 00:27:33,920
Speaker 1: did He was like, Wow, I'm like really really popular

501
00:27:33,960 --> 00:27:37,200
Speaker 1: with these politicians. They're paying attention to everything I say.

502
00:27:37,320 --> 00:27:39,479
Speaker 1: All they want for the stock market to keep going up.

503
00:27:40,000 --> 00:27:41,800
Speaker 1: Surely I can figure that out. And so he had

504
00:27:41,840 --> 00:27:45,439
Speaker 1: a briefing on his desk every single morning. Some shmow

505
00:27:45,520 --> 00:27:47,280
Speaker 1: had to wake up and write it at five thirty

506
00:27:47,280 --> 00:27:49,439
Speaker 1: in the morning, and he had his stock market briefing

507
00:27:49,880 --> 00:27:52,560
Speaker 1: every single day. I think he is the first FED

508
00:27:52,640 --> 00:27:55,399
Speaker 1: chief with a Bloomberg terminal on his desk would not

509
00:27:55,440 --> 00:27:58,359
Speaker 1: surprise me. It would not surprise me. Look, I always

510
00:27:58,359 --> 00:28:00,879
Speaker 1: tell people they're like, when did your anger starting. I'm like, October,

511
00:28:02,720 --> 00:28:05,120
Speaker 1: So go back to that, because that's kind of fascinating.

512
00:28:05,760 --> 00:28:11,639
Speaker 1: He came in in the summer, and following the crash,

513
00:28:12,040 --> 00:28:16,080
Speaker 1: which was really as much plumbing and other issues. Following

514
00:28:16,080 --> 00:28:19,640
Speaker 1: a huge recovery from AD two to eighty seven, he

515
00:28:19,840 --> 00:28:23,760
Speaker 1: cuts rates and basically my pet theory has been the

516
00:28:23,960 --> 00:28:28,080
Speaker 1: audience applause just washed over him and it felt so good.

517
00:28:28,119 --> 00:28:33,080
Speaker 1: He wanted another hit of that. Absolutely. On October, instead

518
00:28:33,119 --> 00:28:35,840
Speaker 1: of presenting in Dallas, Texas, he got on an airplane

519
00:28:36,320 --> 00:28:39,600
Speaker 1: flew back to Washington. D C released a statement that said,

520
00:28:39,600 --> 00:28:43,320
Speaker 1: the Federal Reserve and my new popular life is now

521
00:28:43,400 --> 00:28:46,920
Speaker 1: going to backstop the banking and financial systems. Okay, the

522
00:28:46,960 --> 00:28:49,440
Speaker 1: middle part I put in there, but the banking and

523
00:28:49,480 --> 00:28:52,760
Speaker 1: financial systems were part of a very short statement that

524
00:28:52,800 --> 00:28:55,760
Speaker 1: the Fed released the day after the stock market crash,

525
00:28:55,840 --> 00:28:58,640
Speaker 1: which is quite shocking. This was the hardest thing to

526
00:28:58,640 --> 00:29:01,479
Speaker 1: get past the lawyers for the books in the days

527
00:29:01,520 --> 00:29:04,160
Speaker 1: and the weeks and the months that followed. He's got

528
00:29:04,200 --> 00:29:07,440
Speaker 1: the guys on the New York Markets desk, calling bond

529
00:29:07,480 --> 00:29:11,560
Speaker 1: desks all across the street and saying, we're about to

530
00:29:11,600 --> 00:29:14,920
Speaker 1: inject liquidity just so you know, wink wink, get out

531
00:29:14,920 --> 00:29:17,840
Speaker 1: of the way. So their front running the Fed. They've

532
00:29:17,840 --> 00:29:20,240
Speaker 1: been taught since the weeks and the months that followed

533
00:29:21,320 --> 00:29:25,040
Speaker 1: that they can front run the fetist. So here's the pushback. Hey,

534
00:29:25,200 --> 00:29:29,080
Speaker 1: isn't it easier if the Fed gets Wall Street traders

535
00:29:29,120 --> 00:29:30,680
Speaker 1: to do their business and now they could be a

536
00:29:30,760 --> 00:29:33,800
Speaker 1: little less interventionists. They don't have to make the injection

537
00:29:33,880 --> 00:29:36,280
Speaker 1: is big because the bond traders are doing their work

538
00:29:36,360 --> 00:29:39,000
Speaker 1: for them. Yeah, good luck with that. People have said

539
00:29:39,040 --> 00:29:40,920
Speaker 1: that many many times. I hear all the best on

540
00:29:41,240 --> 00:29:43,400
Speaker 1: what basis. I mean, look what happened with this repo

541
00:29:43,560 --> 00:29:49,120
Speaker 1: thing recently. Yeah, that's a few huge banks basically throwing

542
00:29:49,120 --> 00:29:52,080
Speaker 1: their weight around the financial system. And by the way,

543
00:29:52,120 --> 00:29:54,080
Speaker 1: when I was researching my book, I was shocked to

544
00:29:54,200 --> 00:29:57,520
Speaker 1: learn that the FED chief had the power to raise

545
00:29:57,560 --> 00:30:00,760
Speaker 1: your lower rates on his own the phone see clipped

546
00:30:00,760 --> 00:30:04,000
Speaker 1: his wings because he was doing it way too much.

547
00:30:04,560 --> 00:30:09,040
Speaker 1: So how much of nothing corrupts like power. That's exactly

548
00:30:09,080 --> 00:30:11,280
Speaker 1: where it's going to go. How much of the current

549
00:30:12,240 --> 00:30:16,840
Speaker 1: criticism of the FED traces back to Alan Greenspan as

550
00:30:16,880 --> 00:30:20,840
Speaker 1: a deeply flawed chairman. Well, it wasn't so much Alan

551
00:30:20,880 --> 00:30:24,400
Speaker 1: Greenspan the deeply flawed chairman, had he not had two

552
00:30:24,480 --> 00:30:30,520
Speaker 1: successors in his wake who adopted identical philosophies. It's just

553
00:30:30,880 --> 00:30:34,880
Speaker 1: each iteration of successor was even more afraid of their

554
00:30:34,920 --> 00:30:39,200
Speaker 1: shadow than the prior. How do you describe what should

555
00:30:39,240 --> 00:30:42,920
Speaker 1: be the proper role of a central bank in a

556
00:30:42,960 --> 00:30:46,320
Speaker 1: country like the United States? I would think that the

557
00:30:46,400 --> 00:30:49,880
Speaker 1: best role for the FED to play is making sure

558
00:30:49,960 --> 00:30:52,280
Speaker 1: that the dollar you pull out of your wallet, Ay,

559
00:30:52,400 --> 00:30:54,640
Speaker 1: you can still pull out of your wallet, Sorry, Ken Rogolf,

560
00:30:54,920 --> 00:30:58,600
Speaker 1: but b is worth the same amount of money tomorrow

561
00:30:58,640 --> 00:31:02,080
Speaker 1: that it is today. The dollar is very strong lately.

562
00:31:02,200 --> 00:31:06,320
Speaker 1: We're the cleanest shirt in the hamper relative to the end,

563
00:31:06,720 --> 00:31:09,959
Speaker 1: the Euro, the pound, sterling. Wherever you look in the world,

564
00:31:10,400 --> 00:31:12,800
Speaker 1: the dollar is. But even the one isn't really doing

565
00:31:12,840 --> 00:31:17,000
Speaker 1: a whole lot of much. So after a decade of

566
00:31:17,240 --> 00:31:20,400
Speaker 1: quei one to three plus twist and all this other stuff,

567
00:31:20,800 --> 00:31:24,080
Speaker 1: you still have a very robust US currency. Doesn't that

568
00:31:24,120 --> 00:31:29,080
Speaker 1: suggest the FED hasn't damaged that purchasing power? Well, there

569
00:31:29,200 --> 00:31:31,680
Speaker 1: is that second mandate that has caused the FED to

570
00:31:31,840 --> 00:31:35,960
Speaker 1: completely go off the rails, and that is minimizing the

571
00:31:36,000 --> 00:31:40,080
Speaker 1: unemployment rate or maximizing employment that was given to them

572
00:31:40,160 --> 00:31:49,680
Speaker 1: in by Congress in the middle of a huge yemment. Yes, yes, yes,

573
00:31:49,760 --> 00:31:53,520
Speaker 1: misery index was through the roof, I get it. But nevertheless,

574
00:31:53,680 --> 00:31:57,960
Speaker 1: that was a crucial error made on the part of Congress.

575
00:31:58,480 --> 00:32:01,400
Speaker 1: And people are like, you know, you'll never be able

576
00:32:01,400 --> 00:32:03,200
Speaker 1: to get Congress to say that the FED can do

577
00:32:03,240 --> 00:32:05,959
Speaker 1: negative interest rates or by corporate bonds or by stocks.

578
00:32:05,960 --> 00:32:08,080
Speaker 1: And I'm like, when push comes to show, have Congress

579
00:32:08,080 --> 00:32:10,560
Speaker 1: a vote for anything, especially in a panic, there are

580
00:32:10,560 --> 00:32:13,560
Speaker 1: no actually in a panic, there are no atheists and foxholes,

581
00:32:13,600 --> 00:32:18,600
Speaker 1: and there are no hard dollar monitus at the FED

582
00:32:18,640 --> 00:32:22,160
Speaker 1: in the middle of a panic. But that second employment

583
00:32:22,160 --> 00:32:27,120
Speaker 1: mandate is what has caused the fed's mission creep and

584
00:32:27,440 --> 00:32:30,320
Speaker 1: the lower for longer. They're trying to pull that one

585
00:32:30,680 --> 00:32:34,400
Speaker 1: last employee in off the sidelines. Really at the expense

586
00:32:34,560 --> 00:32:38,080
Speaker 1: of going, Oh, that financial stability thing, we don't know

587
00:32:38,120 --> 00:32:40,160
Speaker 1: that until it hits us in the head. So so

588
00:32:40,880 --> 00:32:42,680
Speaker 1: let me push back a little bit of it. I

589
00:32:43,280 --> 00:32:45,200
Speaker 1: find it hard to believe that the FED is really

590
00:32:45,200 --> 00:32:51,520
Speaker 1: concerns very concerned about unemployment, with unemployment levels at sixty

591
00:32:51,600 --> 00:32:56,560
Speaker 1: year lows. At the same time, this third mandate of

592
00:32:56,680 --> 00:33:01,080
Speaker 1: back stopping the markets seems to be their biggest priorities.

593
00:33:01,880 --> 00:33:03,880
Speaker 1: Or so some people say, what what are your thoughts

594
00:33:03,880 --> 00:33:06,840
Speaker 1: on that? So, look, I think that there's there's a

595
00:33:07,000 --> 00:33:13,680
Speaker 1: little bit of confusion here. Look when you are when

596
00:33:13,680 --> 00:33:18,560
Speaker 1: you are, when you're facilitating Uncle Sam to quietly blow

597
00:33:18,640 --> 00:33:24,000
Speaker 1: up debt and and debt throughout the Obama administration grew quickly.

598
00:33:24,680 --> 00:33:27,680
Speaker 1: A lot of this was in order to fund fiscal spending.

599
00:33:28,160 --> 00:33:32,160
Speaker 1: But if you're if you're teaching the lesson to your

600
00:33:32,960 --> 00:33:36,720
Speaker 1: to the to the powerful politicians that run the country

601
00:33:36,720 --> 00:33:39,840
Speaker 1: that there are absolutely no ramifications for you can run

602
00:33:39,960 --> 00:33:41,880
Speaker 1: up as much debt as you please because it's going

603
00:33:41,920 --> 00:33:45,640
Speaker 1: to be just about free. Okay, then you're going to

604
00:33:46,040 --> 00:33:52,120
Speaker 1: cause a sclerosis an atrophying in the labor force. So

605
00:33:52,160 --> 00:33:55,440
Speaker 1: it doesn't matter how hard the Fed tries to pull

606
00:33:55,600 --> 00:33:58,560
Speaker 1: somebody off the sidelines, if they're not qualified to fill

607
00:33:58,600 --> 00:34:01,000
Speaker 1: the position, it's not going to be field. So what

608
00:34:01,040 --> 00:34:02,760
Speaker 1: does one thing have to do with the other. Why

609
00:34:02,960 --> 00:34:07,760
Speaker 1: does debt cause Well, you have this massive expansion of

610
00:34:07,760 --> 00:34:11,520
Speaker 1: the social safety net such that in this country or

611
00:34:11,600 --> 00:34:14,160
Speaker 1: you talking about Obamacare. No, I'm talking about in this

612
00:34:14,200 --> 00:34:17,560
Speaker 1: country in a more in a more general sense, there's

613
00:34:17,600 --> 00:34:19,760
Speaker 1: been some good I don't know if I call that massive.

614
00:34:19,920 --> 00:34:22,120
Speaker 1: I mean, you've seen you've seen creep. There's been a

615
00:34:22,160 --> 00:34:28,600
Speaker 1: big uptick in people claiming disability on Medicaid and social Security.

616
00:34:29,520 --> 00:34:32,440
Speaker 1: You asked the average one of these people who are

617
00:34:32,480 --> 00:34:35,319
Speaker 1: basically living off the government, how much would you have

618
00:34:35,400 --> 00:34:38,959
Speaker 1: to have an entry position job pay you in order

619
00:34:39,000 --> 00:34:41,239
Speaker 1: for you to come off the sidelines and work. And

620
00:34:41,239 --> 00:34:42,839
Speaker 1: it's a heck of a lot more money than they

621
00:34:42,840 --> 00:34:45,400
Speaker 1: would be getting as a starting salary. Well, it's entry

622
00:34:45,520 --> 00:34:50,920
Speaker 1: because that pays very little. It's but again, so if

623
00:34:50,920 --> 00:34:53,200
Speaker 1: you get thirty thousand dollars without working with thirty thousand

624
00:34:53,200 --> 00:34:58,839
Speaker 1: dollars worth working economic incentives, say why would you work? Exactly?

625
00:34:59,440 --> 00:35:02,480
Speaker 1: But how does as long as you keep government debt

626
00:35:02,719 --> 00:35:05,960
Speaker 1: super super super cheap, then you can keep these programs

627
00:35:05,960 --> 00:35:10,920
Speaker 1: alive and well. As opposed to removing you and making

628
00:35:10,960 --> 00:35:13,279
Speaker 1: it a job of the private sector. I mean, it

629
00:35:13,400 --> 00:35:17,160
Speaker 1: is time to make vocational training great again in this country.

630
00:35:17,440 --> 00:35:20,160
Speaker 1: I don't think anybody's going to disagree with you about that.

631
00:35:20,360 --> 00:35:23,200
Speaker 1: But where they will disagree with you about is that

632
00:35:23,280 --> 00:35:28,360
Speaker 1: the FED has enabled federal debt because you've seen federal

633
00:35:28,400 --> 00:35:32,120
Speaker 1: debt go in one direction for World War two forward.

634
00:35:32,440 --> 00:35:34,520
Speaker 1: You have, but you've also seen the duration of the

635
00:35:34,560 --> 00:35:37,640
Speaker 1: treasury holdings of the United States until this twenty year

636
00:35:38,040 --> 00:35:40,680
Speaker 1: bond issuance that was recently announced. You've seen the duration

637
00:35:40,719 --> 00:35:43,440
Speaker 1: of treasuries come way in while the United Kingdom has

638
00:35:43,440 --> 00:35:46,680
Speaker 1: gone the absolute opposite way. Because if we were to

639
00:35:46,800 --> 00:35:50,640
Speaker 1: be borrowing money at the maturities where we should be borrowing,

640
00:35:52,480 --> 00:35:56,520
Speaker 1: you name it, if we'd been borrowing way out there,

641
00:35:56,520 --> 00:35:58,120
Speaker 1: then our interest expense would be a hell of a

642
00:35:58,160 --> 00:36:02,480
Speaker 1: lot higher um. And nobody wants that anything. I don't

643
00:36:02,480 --> 00:36:05,120
Speaker 1: know if it would be them, of course it would

644
00:36:05,160 --> 00:36:07,160
Speaker 1: be higher. Listen, the thirty year and the ten year

645
00:36:07,200 --> 00:36:09,480
Speaker 1: of spitting distance apart. I think you do the fifty

646
00:36:09,520 --> 00:36:15,520
Speaker 1: year and and and this is this is it. This

647
00:36:15,560 --> 00:36:19,000
Speaker 1: has been a fifteen year trend of reducing the maturity

648
00:36:19,040 --> 00:36:23,800
Speaker 1: profile of treasuries. So this is this changing the shape

649
00:36:23,840 --> 00:36:29,560
Speaker 1: of the duration and borrowing much shorter, shorter to fund. Yes,

650
00:36:29,920 --> 00:36:33,000
Speaker 1: but it's a good way to kind of hide the

651
00:36:33,440 --> 00:36:37,759
Speaker 1: evils of having tri whatever the debt clock says, downtown

652
00:36:38,000 --> 00:36:40,839
Speaker 1: trillion accounting of national debt. All right, so now let

653
00:36:40,840 --> 00:36:43,839
Speaker 1: me push back to you on that. So let's what's

654
00:36:43,920 --> 00:36:47,439
Speaker 1: rounded up to trillion. Okay, we can forgive all student debt.

655
00:36:47,840 --> 00:36:51,200
Speaker 1: Well before we even do that, here's what a lot

656
00:36:51,239 --> 00:36:56,680
Speaker 1: of people, here's what some analysts and economists and strategists

657
00:36:56,680 --> 00:37:01,040
Speaker 1: have brought forth as a counter argument. Hey, we have

658
00:37:01,080 --> 00:37:03,640
Speaker 1: our own printing press, and we have a standing army,

659
00:37:03,960 --> 00:37:06,920
Speaker 1: and we have the reserve currency. We can print all

660
00:37:07,000 --> 00:37:09,680
Speaker 1: the debt we want, and we aren't going to have

661
00:37:09,719 --> 00:37:14,440
Speaker 1: the same problem that Japan had. Oh and ps, Japan's

662
00:37:14,640 --> 00:37:18,560
Speaker 1: credit rating is fine and the their tenure bond is

663
00:37:19,160 --> 00:37:22,719
Speaker 1: you know when it's not negative, it's you know, fraction.

664
00:37:23,520 --> 00:37:26,400
Speaker 1: Why does should we think that our debt isn't going

665
00:37:26,440 --> 00:37:29,680
Speaker 1: to be any different than Japan's debt? Well, we are

666
00:37:29,800 --> 00:37:34,360
Speaker 1: beholden to foreign ownership of our treasuries. Why why do

667
00:37:34,400 --> 00:37:37,080
Speaker 1: we care about that? We care about it because we don't.

668
00:37:37,360 --> 00:37:40,479
Speaker 1: We don't have the same latitude that Japan has because

669
00:37:40,560 --> 00:37:45,680
Speaker 1: Japan's um sovereigns are mostly owned by the Japanese internally

670
00:37:45,760 --> 00:37:48,480
Speaker 1: inside the country. Right, So what Japan did is printed

671
00:37:48,560 --> 00:37:50,520
Speaker 1: up a whole bunch of bonds and put it in

672
00:37:50,600 --> 00:37:53,279
Speaker 1: their right pocket and then have their left pocket by it.

673
00:37:53,600 --> 00:37:57,080
Speaker 1: They completely created money out of thin air. Why can't

674
00:37:57,080 --> 00:37:59,799
Speaker 1: we do that? There's a theory that we can do that,

675
00:37:59,840 --> 00:38:03,040
Speaker 1: but again we all we are. Don't make me say

676
00:38:03,040 --> 00:38:07,360
Speaker 1: them M I prefer modern meritocracy theory. I call it

677
00:38:07,400 --> 00:38:11,880
Speaker 1: Bernie's theory MMT. But the thing about mm T is

678
00:38:11,960 --> 00:38:14,040
Speaker 1: he again go back to the fact that we do

679
00:38:14,080 --> 00:38:16,359
Speaker 1: have reserve currency status, but we can't piss all over

680
00:38:16,400 --> 00:38:19,080
Speaker 1: it because we are have been. We have been, but

681
00:38:19,280 --> 00:38:21,479
Speaker 1: that does not mean that foreign buyers of our debt

682
00:38:21,520 --> 00:38:24,840
Speaker 1: have completely stepped back. Now, now I will say that

683
00:38:24,920 --> 00:38:29,000
Speaker 1: China has methodically and for years been reducing the maturity

684
00:38:29,040 --> 00:38:32,480
Speaker 1: of US treasuries with no negative impact on rates or anything,

685
00:38:32,640 --> 00:38:35,239
Speaker 1: no negative impact. Despite the warnings of a lot of

686
00:38:35,239 --> 00:38:38,200
Speaker 1: crazy it doesn't matter. If China is in a preparation

687
00:38:38,320 --> 00:38:43,520
Speaker 1: mode to do anything they've they're they're doing it actively, right,

688
00:38:43,560 --> 00:38:45,360
Speaker 1: And they play a much longer game than us, and

689
00:38:45,360 --> 00:38:47,359
Speaker 1: they think in terms of decades. They do, and they

690
00:38:47,400 --> 00:38:50,200
Speaker 1: have ten year plans. And I wish we were as

691
00:38:50,280 --> 00:38:55,920
Speaker 1: savvy when it came to industrial power, industrial um policy

692
00:38:56,040 --> 00:38:58,080
Speaker 1: and long term planning is them. We just kind of

693
00:38:58,080 --> 00:39:01,719
Speaker 1: wing it, we do. And trillion you're throwing out there

694
00:39:01,760 --> 00:39:04,279
Speaker 1: has nothing to do with modern monetary theory at all.

695
00:39:04,640 --> 00:39:06,640
Speaker 1: That's what we're going to have, like an eighteen months

696
00:39:06,640 --> 00:39:09,000
Speaker 1: for God's sake, as quickly as the deficit is growing.

697
00:39:09,480 --> 00:39:12,160
Speaker 1: But what they're talking about is something more that's that's upwards,

698
00:39:12,200 --> 00:39:16,400
Speaker 1: up closer to fifty. Is Trump a modern monetary trillion?

699
00:39:16,719 --> 00:39:19,520
Speaker 1: Oh gosh, I think he doesn't seem to care about

700
00:39:19,520 --> 00:39:22,400
Speaker 1: the debt at all. He doesn't, and Mitch McConnell doesn't

701
00:39:22,400 --> 00:39:25,560
Speaker 1: care about it, and Paul Ryan tended to care about it.

702
00:39:25,800 --> 00:39:29,320
Speaker 1: So we're the responsible adults when it comes to managing

703
00:39:29,360 --> 00:39:34,719
Speaker 1: debt outside the belt Way anywhere anywhere there. I I

704
00:39:34,840 --> 00:39:36,640
Speaker 1: still care about the debt. I think there are some

705
00:39:36,760 --> 00:39:39,279
Speaker 1: Americans who still care about the debt. Oh no, there

706
00:39:39,280 --> 00:39:42,440
Speaker 1: are a lot of people do, but none within who

707
00:39:42,520 --> 00:39:44,800
Speaker 1: can actually do something about it within the powers of

708
00:39:45,880 --> 00:39:49,520
Speaker 1: But again, to look out at a crowd, as President

709
00:39:49,560 --> 00:39:52,200
Speaker 1: Trump did recently, and to say to Kevin worsh you know,

710
00:39:52,239 --> 00:39:54,360
Speaker 1: if you were there right now, at least I'd have

711
00:39:54,440 --> 00:39:57,200
Speaker 1: negative interest rates just like Germany, and I'd be getting

712
00:39:57,239 --> 00:39:59,319
Speaker 1: paid for my debt. I mean, these are the things.

713
00:39:59,440 --> 00:40:02,359
Speaker 1: These a billion economic theorist. You've got to give him that. Okay,

714
00:40:02,400 --> 00:40:05,120
Speaker 1: my hair was on fire when he said that. But

715
00:40:05,160 --> 00:40:07,000
Speaker 1: other than that, it was great. I mean that the

716
00:40:07,000 --> 00:40:10,760
Speaker 1: whole rest of the play, it was fine. Negative interest

717
00:40:10,840 --> 00:40:15,880
Speaker 1: rates come, negative interest rates come to America. And aside

718
00:40:15,920 --> 00:40:19,520
Speaker 1: from that, what did you think of the plays? But again,

719
00:40:19,560 --> 00:40:21,919
Speaker 1: if you're talking about universal basic income, if you're talking

720
00:40:21,960 --> 00:40:24,880
Speaker 1: about health care for all, if you're talking about student

721
00:40:25,120 --> 00:40:29,040
Speaker 1: loan forgiveness, forget the pony part. You're still talking about

722
00:40:29,080 --> 00:40:32,719
Speaker 1: doubling the debt quickly. Alright, So so let's be so

723
00:40:32,800 --> 00:40:36,920
Speaker 1: here's because, by the way, social Security and Medicare are

724
00:40:36,960 --> 00:40:41,640
Speaker 1: no longer actuarial theories. Their cash flow issues over the

725
00:40:41,640 --> 00:40:44,319
Speaker 1: next few years. So let's discuss that because I find

726
00:40:44,320 --> 00:40:48,840
Speaker 1: that fascinating. So social Security we could we it's capped

727
00:40:48,840 --> 00:40:51,799
Speaker 1: at about a hundred and ten thousand dollars salaries where

728
00:40:51,840 --> 00:40:55,120
Speaker 1: your FICA tops out. I think if you raise it

729
00:40:55,160 --> 00:40:59,320
Speaker 1: to something like two three four thousand, you buy another

730
00:41:00,000 --> 00:41:03,120
Speaker 1: in your forty years. So I'm not worried about Social Security,

731
00:41:03,320 --> 00:41:07,480
Speaker 1: Medicare and Medicaid. You have runaway prices of prescriptions. You

732
00:41:07,560 --> 00:41:10,759
Speaker 1: have medical tourism because you go to Tiajuana and for

733
00:41:10,840 --> 00:41:14,520
Speaker 1: two thousand dollars get three thousand dollars worth of surgery.

734
00:41:14,760 --> 00:41:19,960
Speaker 1: The United States is quite literally the only industrialized developed

735
00:41:20,080 --> 00:41:24,439
Speaker 1: nation without some form of a universal health care which

736
00:41:24,480 --> 00:41:32,239
Speaker 1: allows a cap on many prescription and procedure costs. And

737
00:41:32,280 --> 00:41:35,000
Speaker 1: if we do that, you'll have this very lovely too

738
00:41:35,040 --> 00:41:39,319
Speaker 1: tier system where here's basic coverage for everybody, here's high

739
00:41:39,400 --> 00:41:42,719
Speaker 1: end coverage for anyone who can afford to buy insurance,

740
00:41:43,200 --> 00:41:46,279
Speaker 1: and the entire cost structure comes way way down, or

741
00:41:46,320 --> 00:41:50,040
Speaker 1: so goes the theory. What's what's wrong with that before?

742
00:41:50,160 --> 00:41:53,959
Speaker 1: And forget forgiving school dad, and forget basic income for now,

743
00:41:54,440 --> 00:41:59,320
Speaker 1: let's just get of the US economy wrestled into submission

744
00:41:59,760 --> 00:42:04,279
Speaker 1: by fixing the healthcare system. I'm not opposed to what

745
00:42:04,360 --> 00:42:09,040
Speaker 1: you just described, and there's certain rationale as long as

746
00:42:09,080 --> 00:42:13,040
Speaker 1: we can keep the quality up. But you did at

747
00:42:13,080 --> 00:42:16,200
Speaker 1: some point asked me why I wrote this book. Yes, well,

748
00:42:16,200 --> 00:42:19,280
Speaker 1: that actually takes us right back to Medicare and Medicaid.

749
00:42:20,840 --> 00:42:26,160
Speaker 1: The Federal Reserve uses the PC as its inflate consumer

750
00:42:26,200 --> 00:42:29,279
Speaker 1: price equivalent for lack of a better yes, it's it's

751
00:42:29,320 --> 00:42:32,040
Speaker 1: a substitute for the for the CPI, for the consumer

752
00:42:32,080 --> 00:42:35,759
Speaker 1: Price Index, and which has it's. Both of them have them.

753
00:42:35,960 --> 00:42:38,359
Speaker 1: Both of them have their problems, but one has a

754
00:42:38,400 --> 00:42:42,080
Speaker 1: lot bigger worth than the other because they both understate housing.

755
00:42:42,440 --> 00:42:45,640
Speaker 1: Both of them, well, the owner's equivalent rent is very

756
00:42:45,680 --> 00:42:51,640
Speaker 1: problematic because when home prices are going up, paradoxically, the

757
00:42:51,640 --> 00:42:56,959
Speaker 1: the residency, the shelter portion of inflation paradoxically goes down.

758
00:42:57,400 --> 00:43:00,279
Speaker 1: It's totally backwards. And right now rents are going at

759
00:43:00,320 --> 00:43:02,520
Speaker 1: such a fast pace and we haven't captured that in

760
00:43:02,560 --> 00:43:04,440
Speaker 1: the CPI, and we could talk about that all day now.

761
00:43:04,440 --> 00:43:06,440
Speaker 1: The pushback to that is, well, that's because we have

762
00:43:06,520 --> 00:43:11,760
Speaker 1: this nimby restriction on building UM denser multi family units

763
00:43:11,760 --> 00:43:15,080
Speaker 1: and apartment buildings and areas that open that up see

764
00:43:15,440 --> 00:43:20,200
Speaker 1: much more competitive prices for renters UM. And as long

765
00:43:20,239 --> 00:43:22,480
Speaker 1: as we have this NIMBYism, places like New York and

766
00:43:22,480 --> 00:43:25,440
Speaker 1: San Francisco are going to be really problematic when it

767
00:43:25,440 --> 00:43:28,319
Speaker 1: comes to renters. Hashtag acinine, But why did I write

768
00:43:28,320 --> 00:43:31,719
Speaker 1: the book? Is that a real hashtag? Can I? Can

769
00:43:31,760 --> 00:43:34,839
Speaker 1: I go to Twitter and function that in UM? So

770
00:43:34,920 --> 00:43:37,760
Speaker 1: why did you write the book. Well, so Stanley Fisher

771
00:43:37,840 --> 00:43:42,239
Speaker 1: was vice chairman of the FED for a while, UM

772
00:43:42,320 --> 00:43:45,880
Speaker 1: Jim Bianco one afternoon we spent an entire afternoon fishing

773
00:43:45,920 --> 00:43:49,320
Speaker 1: trying to debate why on earth the godfather or Central Banking,

774
00:43:49,360 --> 00:43:51,440
Speaker 1: who Ben BERNANKEI had on speed dial in case he

775
00:43:51,520 --> 00:43:54,520
Speaker 1: had an existential crisis, why this legend of central banking

776
00:43:54,520 --> 00:43:59,520
Speaker 1: would come out of retirement to be vice chairman. So

777
00:44:00,239 --> 00:44:04,719
Speaker 1: very first f MC meeting, Fisher says, I only have

778
00:44:04,880 --> 00:44:08,200
Speaker 1: one question, why on earth do you use this convoluted

779
00:44:08,600 --> 00:44:13,800
Speaker 1: PC in my life? At least it's a minimum headline

780
00:44:13,840 --> 00:44:17,200
Speaker 1: CP I. Why don't we have something more realistic and

781
00:44:17,320 --> 00:44:21,920
Speaker 1: reasonable that we're following. So some trepidacious FED staffer in

782
00:44:21,920 --> 00:44:24,320
Speaker 1: the back of the room in the Echoes Building raised

783
00:44:24,360 --> 00:44:26,840
Speaker 1: his hand and said, well, if we don't use it,

784
00:44:26,840 --> 00:44:29,920
Speaker 1: our models are going to break. So you gotta fix

785
00:44:30,000 --> 00:44:32,279
Speaker 1: your models. So at which point Jim Bollard, who knew

786
00:44:32,280 --> 00:44:34,600
Speaker 1: he had a sense of humor, raises his hand and says,

787
00:44:34,640 --> 00:44:36,000
Speaker 1: let me get this straight. This is how we make

788
00:44:36,040 --> 00:44:40,360
Speaker 1: monetary policy in America. Crap in, crap out. That's the

789
00:44:40,400 --> 00:44:44,040
Speaker 1: gist of it. Because the PC uses as an input

790
00:44:44,040 --> 00:44:47,200
Speaker 1: in Medicare and Medicaid reimbursement rates, which is an absolute

791
00:44:47,280 --> 00:44:50,640
Speaker 1: insult to every American who's actually paying for real over

792
00:44:50,719 --> 00:44:54,360
Speaker 1: priced healthcare. So it's it's it's it's the shield that

793
00:44:54,440 --> 00:44:57,680
Speaker 1: the FED hides behind. I'm almost finished. So in two

794
00:44:57,680 --> 00:45:03,200
Speaker 1: thousand nine, internal debate occurs. Everybody inside the FED is like,

795
00:45:03,360 --> 00:45:05,840
Speaker 1: we might not have you know, we might not have

796
00:45:05,920 --> 00:45:08,600
Speaker 1: the right inflation metric. We might have seen this crisis

797
00:45:08,680 --> 00:45:11,400
Speaker 1: coming had we incorporated something like, oh, I don't know,

798
00:45:11,520 --> 00:45:14,760
Speaker 1: real estate and financial asset prices into some inflation metric.

799
00:45:15,200 --> 00:45:17,239
Speaker 1: So it was decided that something had to be done

800
00:45:17,280 --> 00:45:20,560
Speaker 1: because it was broken. And then they did nothing, And

801
00:45:20,600 --> 00:45:22,560
Speaker 1: then I got really piste off and wrote fed up.

802
00:45:23,000 --> 00:45:25,880
Speaker 1: So here's the pushback. I've heard the PC and the

803
00:45:25,960 --> 00:45:30,719
Speaker 1: CPI arguments, and and let let me just disclose my

804
00:45:31,120 --> 00:45:34,400
Speaker 1: bonefit ese um. In the two thousand's, I was screaming

805
00:45:34,400 --> 00:45:37,400
Speaker 1: about inflation. I used to mock what I called inflation

806
00:45:37,560 --> 00:45:40,200
Speaker 1: X inflation. We're going to report inflation, but we're gonna

807
00:45:40,200 --> 00:45:42,480
Speaker 1: take out food and energy. Oh so you're only going

808
00:45:42,520 --> 00:45:46,160
Speaker 1: to report the things that aren't going up in price. Fantastic. However,

809
00:45:47,120 --> 00:45:51,239
Speaker 1: the pushback that I find persuasive is uh M I

810
00:45:51,360 --> 00:45:55,160
Speaker 1: T has this project called the Billion Price Projects where

811
00:45:55,360 --> 00:45:58,600
Speaker 1: they use the Internet to track literally millions and millions

812
00:45:58,640 --> 00:46:03,120
Speaker 1: of product prices. And when you overlay the Billion Price

813
00:46:03,239 --> 00:46:07,320
Speaker 1: Project on top of cp I, they're not perfect, but

814
00:46:07,520 --> 00:46:11,200
Speaker 1: they're pretty close. I mean, when the Billion Price Project

815
00:46:11,320 --> 00:46:15,279
Speaker 1: says inflation is ticking higher, you see it in cp I,

816
00:46:15,400 --> 00:46:17,040
Speaker 1: and when it flattens out, you see it in c

817
00:46:17,160 --> 00:46:20,400
Speaker 1: p I. It's not perfect, but what it says is

818
00:46:21,280 --> 00:46:25,200
Speaker 1: there is modest inflation out there. You have a lot

819
00:46:25,280 --> 00:46:29,439
Speaker 1: of inflation and things like healthcare and education UM, both

820
00:46:29,520 --> 00:46:32,719
Speaker 1: of which one is a free market disaster, the other

821
00:46:32,880 --> 00:46:36,239
Speaker 1: is a government disaster. Uh and you don't have a

822
00:46:36,320 --> 00:46:41,520
Speaker 1: lot of inflation and things like UM technology and software

823
00:46:41,800 --> 00:46:45,440
Speaker 1: and uh and and we're as real estate and rents

824
00:46:45,480 --> 00:46:48,040
Speaker 1: have gone up a lot. A big chunk of that

825
00:46:48,400 --> 00:46:51,080
Speaker 1: is driven by ultralow mortgage rates because you can buy

826
00:46:51,160 --> 00:46:53,360
Speaker 1: that much more. So you could lay that at the

827
00:46:53,400 --> 00:46:57,320
Speaker 1: feet of the Fed. But overall, we've had modest inflation

828
00:46:57,440 --> 00:47:01,000
Speaker 1: for the past ten years, nothing like what we saw

829
00:47:01,040 --> 00:47:05,120
Speaker 1: in the two thousands or the nineteen seventies. I would

830
00:47:05,200 --> 00:47:09,920
Speaker 1: agree with that, but what we've we've had twenty three months.

831
00:47:09,960 --> 00:47:12,720
Speaker 1: Of course, cp I north of the two percent target.

832
00:47:13,920 --> 00:47:15,960
Speaker 1: If you were to make one tweak to the PC,

833
00:47:16,320 --> 00:47:19,600
Speaker 1: the FED would have long since started to normalize rates.

834
00:47:20,239 --> 00:47:23,160
Speaker 1: They're literally hiding behind a metric that they know and

835
00:47:23,280 --> 00:47:28,719
Speaker 1: recognize is broken. I'm fine. I'm fine with it because

836
00:47:28,760 --> 00:47:32,200
Speaker 1: we would have been normalizing a long time ago. I

837
00:47:32,280 --> 00:47:34,400
Speaker 1: don't think they would have even if, even if they

838
00:47:34,440 --> 00:47:37,120
Speaker 1: would have shown more inflation. Well, I think they're too

839
00:47:37,160 --> 00:47:38,920
Speaker 1: afraid to. But that's a whole another That is a

840
00:47:38,960 --> 00:47:41,040
Speaker 1: whole another story. And that's what happened with KI two,

841
00:47:41,080 --> 00:47:43,200
Speaker 1: and that's what happened with QUI three, is that it

842
00:47:43,360 --> 00:47:46,440
Speaker 1: was time to begin normalizing and the fear factor kicked in.

843
00:47:46,760 --> 00:47:49,320
Speaker 1: Quite fascinating. I want to throw a quote at you

844
00:47:49,480 --> 00:47:53,240
Speaker 1: and have you discuss it. Quote. The FED is injecting

845
00:47:53,320 --> 00:47:56,440
Speaker 1: billions of dollars into this market and that's why everything

846
00:47:56,600 --> 00:47:59,800
Speaker 1: is going up. Discuss the FED is about a hundred

847
00:47:59,840 --> 00:48:02,799
Speaker 1: billion dollars a month run rate as things stand right now.

848
00:48:03,280 --> 00:48:06,920
Speaker 1: Commercial industrial lending is at the largest banks is negative

849
00:48:06,960 --> 00:48:09,480
Speaker 1: on a year over year basis, which is shocking. Well,

850
00:48:09,560 --> 00:48:12,200
Speaker 1: it is kind of shocking because so is global trade.

851
00:48:12,320 --> 00:48:15,680
Speaker 1: There are several other metrics that have never coexisted without

852
00:48:15,760 --> 00:48:20,360
Speaker 1: being in recession. So something is intervening to make everything

853
00:48:20,480 --> 00:48:23,680
Speaker 1: better right now. If the money that's being pumped into

854
00:48:23,719 --> 00:48:26,960
Speaker 1: the system is not going into any kind of lending

855
00:48:27,040 --> 00:48:30,239
Speaker 1: of any sort, because it's not, then it's it's has

856
00:48:30,320 --> 00:48:33,760
Speaker 1: to find a home. So let me stop there first.

857
00:48:34,200 --> 00:48:37,400
Speaker 1: Say what you will about the economy. It's fairly robust.

858
00:48:37,520 --> 00:48:40,480
Speaker 1: We have lots of economic activity. It's not three or

859
00:48:40,520 --> 00:48:43,960
Speaker 1: four percent, it's two percent. You have unemployments at three

860
00:48:44,040 --> 00:48:47,880
Speaker 1: and change. Well told, this is not a terrible economy.

861
00:48:48,239 --> 00:48:49,680
Speaker 1: We don't see a whole lot of R and D.

862
00:48:49,920 --> 00:48:52,120
Speaker 1: We don't see a whole lot of capex spening to

863
00:48:52,719 --> 00:48:56,000
Speaker 1: We're not seeing that. And industrial is already in a recession.

864
00:48:56,040 --> 00:49:00,160
Speaker 1: Manufacturing is already in recession. But still it's not a

865
00:49:00,320 --> 00:49:04,560
Speaker 1: terrible economy. It's not a terrible economy yet. So given that,

866
00:49:04,760 --> 00:49:08,520
Speaker 1: why aren't we seeing more lending? Because I think banks,

867
00:49:09,160 --> 00:49:11,600
Speaker 1: especially the large banks, can see the writing on the wall.

868
00:49:12,239 --> 00:49:15,000
Speaker 1: So you think this is a conscious decision. We're not

869
00:49:15,040 --> 00:49:17,960
Speaker 1: going to do more loans because we think looker of

870
00:49:18,040 --> 00:49:21,560
Speaker 1: CFOs in America came into saying we're in a cost

871
00:49:21,600 --> 00:49:25,080
Speaker 1: cutting mode. We saw that also late in ten, they

872
00:49:25,160 --> 00:49:28,360
Speaker 1: had were thraveling. We don't expect to increase capex mending,

873
00:49:29,000 --> 00:49:33,960
Speaker 1: and and that was right into a market correction. The

874
00:49:34,080 --> 00:49:37,320
Speaker 1: surprising thing is that CFO survey, I think that's the

875
00:49:37,400 --> 00:49:41,560
Speaker 1: Duke survey, continued straight through twenty nine. There was even

876
00:49:41,600 --> 00:49:44,560
Speaker 1: as the market started moving higher and recovering that loss,

877
00:49:45,000 --> 00:49:47,600
Speaker 1: there was no change in sentiments. So you think these

878
00:49:48,080 --> 00:49:51,600
Speaker 1: CFOs are genuinely concerned about an impending recession, Well, I

879
00:49:51,760 --> 00:49:54,760
Speaker 1: think that you have seen some very strange things happen.

880
00:49:55,239 --> 00:50:00,040
Speaker 1: So we we follow at quill not seasonally adjust it,

881
00:50:00,840 --> 00:50:05,040
Speaker 1: continuing unemployment claims, because just because you apply for unemployment

882
00:50:05,080 --> 00:50:07,719
Speaker 1: insurance doesn't mean you're going to get it right. So

883
00:50:07,840 --> 00:50:10,120
Speaker 1: we follow a not seasonally adjusted number because it's just

884
00:50:10,239 --> 00:50:12,920
Speaker 1: raw data. Are you looking at year over year numbers?

885
00:50:13,000 --> 00:50:14,960
Speaker 1: Is that what you know bother the seasonal adjustments, So

886
00:50:15,040 --> 00:50:18,520
Speaker 1: we're looking at a year over year so beginning in Octo.

887
00:50:18,600 --> 00:50:20,359
Speaker 1: By the way, I love that, and that I found

888
00:50:20,400 --> 00:50:23,719
Speaker 1: that enormously helpful in the financial crisis to look at

889
00:50:23,800 --> 00:50:27,000
Speaker 1: you over year existing home sales and it told the

890
00:50:27,040 --> 00:50:30,840
Speaker 1: whole story. So I love that methodology as opposed to

891
00:50:31,440 --> 00:50:34,640
Speaker 1: all the seasonal adjustments and everything else. But hold that aside.

892
00:50:35,000 --> 00:50:37,760
Speaker 1: We look at that number, we follow it very closely,

893
00:50:37,880 --> 00:50:40,080
Speaker 1: and it is off of the lowest base you can

894
00:50:40,160 --> 00:50:46,480
Speaker 1: imagine because plus percent of people who qualify for unemployment insurance.

895
00:50:46,560 --> 00:50:48,840
Speaker 1: Now some states have made it a lot harder and

896
00:50:48,960 --> 00:50:51,239
Speaker 1: more expensive, and they've up the premiums on these. So

897
00:50:51,320 --> 00:50:53,680
Speaker 1: Moody's has done some good work showing that you don't

898
00:50:53,719 --> 00:50:57,040
Speaker 1: even have the same percentage of Americans on unemployment insurance

899
00:50:57,120 --> 00:50:59,719
Speaker 1: right now, which is why you know they came to

900
00:50:59,760 --> 00:51:03,600
Speaker 1: the lusion that jobless claims are inherently understated because in

901
00:51:03,640 --> 00:51:06,560
Speaker 1: the aftermath of the crisis, a lot of states made

902
00:51:06,600 --> 00:51:10,160
Speaker 1: it harder and or shortened the time that you could

903
00:51:10,200 --> 00:51:13,760
Speaker 1: be on unemployment insurance as part of the I forgot

904
00:51:13,840 --> 00:51:19,160
Speaker 1: the acronym. The modest fiscal response to the crisis was

905
00:51:19,200 --> 00:51:21,479
Speaker 1: really broken into three parts. I think it was about

906
00:51:21,480 --> 00:51:24,560
Speaker 1: seven billion dollars. A third of it went to infrastructure,

907
00:51:24,600 --> 00:51:26,800
Speaker 1: which is really nothing. A third of it went to

908
00:51:26,880 --> 00:51:28,719
Speaker 1: a temporary tax break, and a third of it went

909
00:51:28,800 --> 00:51:34,200
Speaker 1: to temporarily extending unemployment. And that ended a long time ago.

910
00:51:34,960 --> 00:51:39,520
Speaker 1: So your your position is, but some states, like North Carolina,

911
00:51:39,880 --> 00:51:43,480
Speaker 1: they're they're they're a handful of states that permanently shortened

912
00:51:43,520 --> 00:51:46,360
Speaker 1: the length of time that you can collect unemployment insurance.

913
00:51:46,400 --> 00:51:50,000
Speaker 1: Some states made up for the extra expense by raising

914
00:51:50,040 --> 00:51:53,000
Speaker 1: the premiums that employers had to pay for unemployment insurance

915
00:51:53,040 --> 00:51:56,839
Speaker 1: within their states. So so you're saying the looking at

916
00:51:56,960 --> 00:52:00,880
Speaker 1: the unemployment roles today is a little leading, It is

917
00:52:00,920 --> 00:52:04,919
Speaker 1: a little misleading. Set that aside. Set that aside, We've

918
00:52:05,000 --> 00:52:09,120
Speaker 1: still seen starting in October, four consecutive months of year

919
00:52:09,239 --> 00:52:14,200
Speaker 1: over year increases in non seasonally adjusted continuing claims. That is,

920
00:52:14,280 --> 00:52:17,279
Speaker 1: the number of Americans collecting unemployment insurance on a year

921
00:52:17,360 --> 00:52:21,040
Speaker 1: over year clean basis has been increasing since October. What

922
00:52:21,120 --> 00:52:23,560
Speaker 1: does that mean historically if you see that increase in

923
00:52:23,800 --> 00:52:26,760
Speaker 1: the first time that we've seen this since O nine. Alright,

924
00:52:26,840 --> 00:52:29,759
Speaker 1: well O nine, clearly a different situation go previous to that.

925
00:52:30,000 --> 00:52:33,320
Speaker 1: Is this a recession indicator or is this a softening

926
00:52:33,360 --> 00:52:36,680
Speaker 1: of GDP indicators should be a recession indicator. But you're

927
00:52:36,719 --> 00:52:39,840
Speaker 1: saying the Fed is preventing that from spiraling out of control.

928
00:52:39,960 --> 00:52:43,719
Speaker 1: You've never seen global debt right now, We've seen year

929
00:52:43,880 --> 00:52:47,120
Speaker 1: over year. There's a Netherlands global debt monitor. The next

930
00:52:47,160 --> 00:52:49,359
Speaker 1: one for its very lag The next one's coming out

931
00:52:49,400 --> 00:52:53,560
Speaker 1: in December. But you've seen that going down on a

932
00:52:53,680 --> 00:52:57,080
Speaker 1: year over year basis since I believe May of twenty nine,

933
00:52:57,320 --> 00:53:01,439
Speaker 1: meaning less dead or low equality of debt, when world trade,

934
00:53:01,520 --> 00:53:05,239
Speaker 1: world trade, world trade volumes have been declining on a

935
00:53:05,360 --> 00:53:08,600
Speaker 1: year over year basis. And my friend, now, how much

936
00:53:08,600 --> 00:53:10,400
Speaker 1: of that is coronavirus and how much of that is

937
00:53:10,680 --> 00:53:15,040
Speaker 1: all corona? Really this is made through November. We only

938
00:53:15,200 --> 00:53:19,440
Speaker 1: have a small snapshot because it's extremely lag data. Forget coronavirus.

939
00:53:19,480 --> 00:53:21,400
Speaker 1: This thing is going to fall off a cliff. But

940
00:53:22,040 --> 00:53:25,080
Speaker 1: my buddy Lacy Hunt taught me that you had go

941
00:53:25,200 --> 00:53:28,080
Speaker 1: back to your recession starting in eight. If a US

942
00:53:28,120 --> 00:53:32,760
Speaker 1: recession is accompanied by contracting world trade, it's a nasty recession.

943
00:53:32,800 --> 00:53:38,600
Speaker 1: It's a global recession. No contrasts in world trade. Was

944
00:53:38,680 --> 00:53:41,600
Speaker 1: that even a real recession or was that just a

945
00:53:41,719 --> 00:53:45,440
Speaker 1: mild real estate something going on there? And then two

946
00:53:46,160 --> 00:53:49,120
Speaker 1: well you had f y I, we had seven. You

947
00:53:49,320 --> 00:53:51,960
Speaker 1: had the crash, the Fed responded to it, You had

948
00:53:51,960 --> 00:53:55,799
Speaker 1: a temporary blip in housing, and and then it fell

949
00:53:55,960 --> 00:53:58,800
Speaker 1: pretty much off a cliff. If you bought a co

950
00:53:59,040 --> 00:54:03,280
Speaker 1: opera condo in New York following the eighties seven crash

951
00:54:03,440 --> 00:54:06,320
Speaker 1: and a drop in rates. You ended up not getting

952
00:54:06,320 --> 00:54:08,200
Speaker 1: back to break even for like six or eight years,

953
00:54:08,239 --> 00:54:11,759
Speaker 1: which is New York on the East. In New York specifically,

954
00:54:11,800 --> 00:54:15,560
Speaker 1: that was a terrible real estate recession because driven in

955
00:54:15,680 --> 00:54:19,640
Speaker 1: some part by Green Spans panic. So that's a good

956
00:54:19,680 --> 00:54:21,600
Speaker 1: title for a book. There you go. I want to

957
00:54:21,640 --> 00:54:25,280
Speaker 1: bring this back to the market. Two one, No global

958
00:54:25,320 --> 00:54:29,399
Speaker 1: trade contraction, not a bad recession, right, that was too

959
00:54:29,440 --> 00:54:31,880
Speaker 1: O one was a short what was that March to

960
00:54:32,000 --> 00:54:34,480
Speaker 1: November with September eleven right in the middle of it.

961
00:54:35,200 --> 00:54:38,360
Speaker 1: By the time eleven hit, we were much closer to

962
00:54:38,440 --> 00:54:40,560
Speaker 1: the end than the beginning of the two thousand nine

963
00:54:40,880 --> 00:54:45,800
Speaker 1: ugly contraction in world trade, ugly recession. And here we

964
00:54:45,920 --> 00:54:50,359
Speaker 1: are with this phenomena we're staring at so have rising

965
00:54:50,800 --> 00:54:54,080
Speaker 1: continuing jobless claims and contracting world trade and buck kiss

966
00:54:54,120 --> 00:54:56,880
Speaker 1: going on in the economy. So I would argue the

967
00:54:57,000 --> 00:54:59,560
Speaker 1: O nine to ten, or really the oh seven to

968
00:54:59,640 --> 00:55:03,200
Speaker 1: oh nine in recession was driven by the market, not

969
00:55:03,400 --> 00:55:07,480
Speaker 1: the economy itself. Contracting the market caused a disaster and

970
00:55:07,600 --> 00:55:11,600
Speaker 1: then that led into a whole bunch of systematic problems.

971
00:55:11,960 --> 00:55:16,840
Speaker 1: But let's talk about today you've discussed and I'm paraphrasing,

972
00:55:17,360 --> 00:55:19,959
Speaker 1: the FED has gone into the market. They've exchanged short

973
00:55:20,040 --> 00:55:23,600
Speaker 1: dated government bonds for reserves already held at the FED.

974
00:55:24,120 --> 00:55:26,840
Speaker 1: Government bonds are the most liquid asset in the world.

975
00:55:27,440 --> 00:55:30,799
Speaker 1: How does that end up impacting equities? Because I think

976
00:55:30,920 --> 00:55:35,000
Speaker 1: that's where the debate about the FED sort of schisms

977
00:55:35,000 --> 00:55:38,439
Speaker 1: into two camps. So I'll tell a really quick story

978
00:55:38,960 --> 00:55:40,920
Speaker 1: because it's not the stock market you have to be

979
00:55:41,000 --> 00:55:44,080
Speaker 1: directly concerned with. It's keeping the bond market open. That's

980
00:55:44,080 --> 00:55:46,319
Speaker 1: what's most important. And Jardine has done some good work.

981
00:55:47,320 --> 00:55:50,359
Speaker 1: Over half of share by backs are financed with debt,

982
00:55:51,560 --> 00:55:54,600
Speaker 1: even more than that. Okay, so um, I'm going based

983
00:55:54,640 --> 00:55:57,840
Speaker 1: off that. What happened on Halloween two thousand and eighteen

984
00:55:57,960 --> 00:56:01,800
Speaker 1: when Moody's downgrade at General Electrics debt was what was

985
00:56:01,840 --> 00:56:04,319
Speaker 1: the game changer for j Pal. J Pal still doesn't

986
00:56:04,360 --> 00:56:07,400
Speaker 1: give a damn about the stock market, but he cannot

987
00:56:07,560 --> 00:56:09,680
Speaker 1: not care about the bond market, which is whatever. It

988
00:56:09,719 --> 00:56:13,879
Speaker 1: is almost ten trillion dollars GDP non financial debt, all

989
00:56:13,960 --> 00:56:17,000
Speaker 1: time record high in this country. So Halloween g E

990
00:56:17,120 --> 00:56:20,080
Speaker 1: debt gets downgraded. And remember the fourteenth, two thousand eighteen,

991
00:56:20,320 --> 00:56:23,640
Speaker 1: the highyeld bond market shuts down. Goodbye, goodnight, Irene for

992
00:56:23,760 --> 00:56:28,239
Speaker 1: forty one record days. You've got redemptions on high yield

993
00:56:28,320 --> 00:56:29,880
Speaker 1: E t F. You have the I m F, the

994
00:56:29,960 --> 00:56:34,120
Speaker 1: B I S, all these global entities are like J. J. Pale,

995
00:56:34,160 --> 00:56:37,120
Speaker 1: You've got a problem on your hands. The collateral backing

996
00:56:37,200 --> 00:56:40,120
Speaker 1: these fixed income uh E t F s was trading

997
00:56:40,160 --> 00:56:43,719
Speaker 1: by appointment only. Spreads were gapping out, yields were going

998
00:56:43,760 --> 00:56:47,000
Speaker 1: through the roof. And you have this quiet at first,

999
00:56:47,080 --> 00:56:50,399
Speaker 1: and it got really loud chorus of CFOs on Wall

1000
00:56:50,480 --> 00:56:53,799
Speaker 1: Street saying we're gonna behave and stop buying back our

1001
00:56:53,920 --> 00:56:56,400
Speaker 1: stock because we're gonna have to pay attention to our

1002
00:56:56,520 --> 00:57:00,799
Speaker 1: balance sheets. They were lying, they were lying, but they

1003
00:57:00,880 --> 00:57:04,279
Speaker 1: didn't have to lie for long because the meltdown in

1004
00:57:04,360 --> 00:57:08,600
Speaker 1: the market, catalyzed by the shutdown in the credit markets,

1005
00:57:09,320 --> 00:57:13,080
Speaker 1: shut down shared by backs, people got afraid enough. In

1006
00:57:13,280 --> 00:57:18,280
Speaker 1: Q four of Scared J. Powell, J. Powell knows one thing,

1007
00:57:18,560 --> 00:57:23,160
Speaker 1: October two thou twelve, f O m C transcript, q

1008
00:57:23,440 --> 00:57:26,960
Speaker 1: E is blowing a fixed income duration bubble across the

1009
00:57:27,160 --> 00:57:32,640
Speaker 1: entire credit spectrum. That's a quote, so so here's the

1010
00:57:32,680 --> 00:57:36,960
Speaker 1: pushback I've read and heard, and some of which resonates,

1011
00:57:37,000 --> 00:57:40,480
Speaker 1: some of which doesn't. It goes something like this, First,

1012
00:57:41,400 --> 00:57:44,120
Speaker 1: junk bonds are supposed to default. That's what junk bonds

1013
00:57:44,160 --> 00:57:46,760
Speaker 1: do not in America, they're called junk for a reason.

1014
00:57:47,160 --> 00:57:50,680
Speaker 1: And when the spread between quality corporates and junk gets

1015
00:57:50,720 --> 00:57:53,920
Speaker 1: too small, that's how you know you're in a frothy

1016
00:57:54,240 --> 00:57:59,760
Speaker 1: at best, bubble at worst situation. Seconds. Yeah, there's been

1017
00:57:59,800 --> 00:58:02,240
Speaker 1: some problems in the repo market, and there's been some

1018
00:58:02,320 --> 00:58:05,240
Speaker 1: problems in the credit market, but it's mostly plumbing, just

1019
00:58:05,400 --> 00:58:09,800
Speaker 1: like seven was a plumbing problem, and the equity market

1020
00:58:09,880 --> 00:58:13,360
Speaker 1: hadn't caught up technologically, they was still doing paper. Hey,

1021
00:58:13,520 --> 00:58:17,520
Speaker 1: these are relatively young markets, these repo markets, and they're

1022
00:58:17,560 --> 00:58:21,320
Speaker 1: certainly not you know, like Japanese rice markets and around

1023
00:58:21,360 --> 00:58:25,240
Speaker 1: for centuries, and so this is just a plumbing problem

1024
00:58:25,320 --> 00:58:28,720
Speaker 1: and we'll figure it out. What's your what's your response

1025
00:58:28,760 --> 00:58:31,520
Speaker 1: to that pushback? I would like to see the markets

1026
00:58:31,560 --> 00:58:36,800
Speaker 1: figure it out without having the pacifier than being being

1027
00:58:37,680 --> 00:58:40,880
Speaker 1: the federal We only had a two percent portfolio insurance

1028
00:58:40,920 --> 00:58:45,840
Speaker 1: position against the stock market capitalization. That was just two

1029
00:58:46,920 --> 00:58:49,240
Speaker 1: The risk parity trades only about ten percent. So let's

1030
00:58:49,280 --> 00:58:51,080
Speaker 1: just let's just throw it up against the wall. Let's

1031
00:58:51,080 --> 00:58:54,320
Speaker 1: see what happens. Let's let credit credit volatility come unhinged

1032
00:58:54,520 --> 00:58:57,800
Speaker 1: and see what happens. So I'm one of these crazy

1033
00:58:57,960 --> 00:59:02,040
Speaker 1: free market people who think if something goes belly up

1034
00:59:02,120 --> 00:59:05,080
Speaker 1: like long term capital um, well maybe that's a bad

1035
00:59:05,120 --> 00:59:08,240
Speaker 1: example because the FED actually greenspan road to the rescue. No,

1036
00:59:08,600 --> 00:59:11,720
Speaker 1: because that's the one where gold Green Smid didn't wass

1037
00:59:11,760 --> 00:59:14,000
Speaker 1: bang a bunch of heads together and said, hey, you

1038
00:59:14,200 --> 00:59:18,040
Speaker 1: private banks, you go work this out yourself without the

1039
00:59:18,160 --> 00:59:21,880
Speaker 1: FED being very involved, because if we get involved where

1040
00:59:22,080 --> 00:59:25,480
Speaker 1: you're not gonna be happy. So so the question one

1041
00:59:25,520 --> 00:59:27,800
Speaker 1: gentleman from bear Stearns told him where to fly. So

1042
00:59:28,320 --> 00:59:31,320
Speaker 1: here's the that's right. Who was who was? By the way,

1043
00:59:31,440 --> 00:59:35,560
Speaker 1: one of the biggest counterparties to LTCM. But hold that

1044
00:59:35,800 --> 00:59:38,360
Speaker 1: and by the way, the whole rescue was a dry

1045
00:59:38,480 --> 00:59:41,120
Speaker 1: run for a decade later for what we ended up doing.

1046
00:59:41,520 --> 00:59:44,600
Speaker 1: But hold that aside. What would happen if the FED

1047
00:59:45,080 --> 00:59:49,600
Speaker 1: wasn't intervening in the repo market or wasn't providing liquidity

1048
00:59:50,360 --> 00:59:54,360
Speaker 1: when there were frictions and and some freezes in some

1049
00:59:54,560 --> 01:00:00,480
Speaker 1: of these smaller backwater credit markets with short from interest

1050
01:00:00,560 --> 01:00:03,040
Speaker 1: rates pushing double digits? What would have happened? No, No,

1051
01:00:03,120 --> 01:00:06,120
Speaker 1: what would happen today? If the FED says, all right,

1052
01:00:06,200 --> 01:00:08,560
Speaker 1: you know, we're done intervening here. You guys figure it out.

1053
01:00:08,680 --> 01:00:11,000
Speaker 1: The free market can work this out. What's the net

1054
01:00:11,040 --> 01:00:14,200
Speaker 1: result of that? I don't think we know, Verry. I

1055
01:00:14,320 --> 01:00:16,360
Speaker 1: think that we would see rates be a lot higher

1056
01:00:16,440 --> 01:00:18,600
Speaker 1: than they are. It's a little problematic when you're running

1057
01:00:18,640 --> 01:00:21,200
Speaker 1: trillion dollar deficits. So when you say a lot higher

1058
01:00:21,320 --> 01:00:24,720
Speaker 1: four or five, six or n I don't I do.

1059
01:00:24,880 --> 01:00:27,120
Speaker 1: I don't know that the market would end up at

1060
01:00:27,320 --> 01:00:29,400
Speaker 1: nine or ten percent, But I know that if the

1061
01:00:29,480 --> 01:00:31,440
Speaker 1: market was to end up at four or five percent,

1062
01:00:31,920 --> 01:00:35,400
Speaker 1: given that the FED wants to put a new replacement

1063
01:00:35,440 --> 01:00:39,720
Speaker 1: for libor out there, it would be the worst possible development. Alright, So,

1064
01:00:40,760 --> 01:00:43,440
Speaker 1: given all that, and the fed's about to cut rates

1065
01:00:43,440 --> 01:00:46,160
Speaker 1: again because of the coronavirus, that was my next question.

1066
01:00:46,320 --> 01:00:49,080
Speaker 1: You you beat me to the question. Given that, what

1067
01:00:49,240 --> 01:00:51,720
Speaker 1: do you think the FED is going to do over

1068
01:00:51,800 --> 01:00:54,640
Speaker 1: the next four meetings? Real? And by the way, does

1069
01:00:54,680 --> 01:00:57,600
Speaker 1: the castors don't fight the FED? But there's one cohort

1070
01:00:57,680 --> 01:00:59,720
Speaker 1: out there that doesn't fight the FED harder than the

1071
01:01:00,000 --> 01:01:01,840
Speaker 1: who don't fight the FED. And that's the FED itself.

1072
01:01:02,360 --> 01:01:04,880
Speaker 1: The FED never fights itself. It never fights the market,

1073
01:01:04,960 --> 01:01:08,320
Speaker 1: It never fights w I R P. New type it

1074
01:01:08,360 --> 01:01:12,280
Speaker 1: into your Bloomberg. It never fights expectations of rate cuts,

1075
01:01:12,640 --> 01:01:16,320
Speaker 1: and it never even fights expectations of FED moves. When

1076
01:01:16,400 --> 01:01:19,800
Speaker 1: it came to Ben Bernanky was completely guided in terms

1077
01:01:19,840 --> 01:01:22,400
Speaker 1: of the size of the tapering of quantitative easing way

1078
01:01:22,440 --> 01:01:24,800
Speaker 1: back when by what the survey from the New York

1079
01:01:24,840 --> 01:01:28,760
Speaker 1: Fed was saying. The FED is guided by the financial markets,

1080
01:01:28,800 --> 01:01:30,840
Speaker 1: and it will do what they tell it to do.

1081
01:01:31,320 --> 01:01:32,800
Speaker 1: Can you stick around a bit? I got a bunch

1082
01:01:32,880 --> 01:01:36,160
Speaker 1: more questions for you. Of course, we have been speaking

1083
01:01:36,280 --> 01:01:39,560
Speaker 1: with Danielle di Martino Booth. She is the founder and

1084
01:01:39,680 --> 01:01:44,320
Speaker 1: chief strategist of Quill Intelligence and author of fed Up,

1085
01:01:44,480 --> 01:01:47,400
Speaker 1: an insider's take on why the Federal Reserve is bad

1086
01:01:47,480 --> 01:01:50,680
Speaker 1: for America. If you enjoy this conversation, well, be sure

1087
01:01:50,720 --> 01:01:53,360
Speaker 1: and check out the podcast extras, where we keep the

1088
01:01:53,440 --> 01:01:56,960
Speaker 1: tape rolling and continue discussing all things FED related. You

1089
01:01:57,080 --> 01:02:02,360
Speaker 1: can find that at iTunes, Spotify, Google podcast, overcast, stitchers,

1090
01:02:02,600 --> 01:02:06,280
Speaker 1: wherever your final podcasts are sold. We love your comments,

1091
01:02:06,360 --> 01:02:10,560
Speaker 1: feedback in suggestions right to us at m IB podcast

1092
01:02:10,600 --> 01:02:14,040
Speaker 1: at bloomberg dot net. Check out my weekly column on

1093
01:02:14,160 --> 01:02:17,880
Speaker 1: Bloomberg dot com. Follow me on Twitter at rit Halts.

1094
01:02:18,280 --> 01:02:21,280
Speaker 1: I'm Barry Ri Halts. You're listening to Masters in Business

1095
01:02:21,760 --> 01:02:28,720
Speaker 1: on Bloomberg Radio. Welcome to the podcast, Danielle. Thank you

1096
01:02:28,840 --> 01:02:31,440
Speaker 1: so much for doing this. I'm afraid that people are

1097
01:02:31,480 --> 01:02:34,520
Speaker 1: gonna hear us on the radio and not here this

1098
01:02:34,680 --> 01:02:36,920
Speaker 1: part of the discussion, and the gonna say, hey, man,

1099
01:02:37,000 --> 01:02:38,520
Speaker 1: what are you giving her such a hard time for

1100
01:02:39,640 --> 01:02:41,880
Speaker 1: I'm like, no, no, you understand. We kind of know

1101
01:02:42,080 --> 01:02:45,440
Speaker 1: each other. For we've been doing this for a decade, right,

1102
01:02:45,640 --> 01:02:47,760
Speaker 1: is it that long? It is? The day I'm at

1103
01:02:47,840 --> 01:02:49,920
Speaker 1: you is the day I met Jim Bianco, walked into

1104
01:02:49,960 --> 01:02:53,000
Speaker 1: the fishing lodge. There you were. This is up in Maine,

1105
01:02:53,160 --> 01:02:55,600
Speaker 1: up in Maine. Always the first person there at the

1106
01:02:55,680 --> 01:02:57,640
Speaker 1: lodge so you can suck up all the band with

1107
01:02:57,840 --> 01:02:59,919
Speaker 1: and turn your Bloomberg on. That's early in the morning.

1108
01:03:00,200 --> 01:03:03,560
Speaker 1: I do my morning reads and I found well, now

1109
01:03:04,560 --> 01:03:10,240
Speaker 1: you actually right, actually now there is some bandwidth in

1110
01:03:10,360 --> 01:03:13,120
Speaker 1: each of the room, each of the cabins, but the

1111
01:03:13,200 --> 01:03:16,000
Speaker 1: best band with is in the dining hall and I

1112
01:03:16,120 --> 01:03:19,640
Speaker 1: get listen, I'm an early riser. Uh, the early bird

1113
01:03:19,680 --> 01:03:23,080
Speaker 1: gets the worm and the early blogger gets the band

1114
01:03:23,120 --> 01:03:26,800
Speaker 1: with that's the that's the thesis up there. Um, and

1115
01:03:26,920 --> 01:03:31,919
Speaker 1: we've we've had a number of fascinating debates and discussions

1116
01:03:32,000 --> 01:03:35,600
Speaker 1: and experiences and Maine is really a blast. Camp Ko

1117
01:03:35,720 --> 01:03:40,520
Speaker 1: talk is always delightful. I can't wait. It wasn't last year,

1118
01:03:40,520 --> 01:03:43,160
Speaker 1: it was the previous year. Someone said how long you've

1119
01:03:43,160 --> 01:03:45,120
Speaker 1: been coming here? And I've been saying, I know, five

1120
01:03:45,160 --> 01:03:47,840
Speaker 1: six years for a few years. And someone said, well,

1121
01:03:47,880 --> 01:03:49,960
Speaker 1: when was your first year? And I had to figure

1122
01:03:49,960 --> 01:03:52,520
Speaker 1: it out and I'm like, oh, it's been a decade.

1123
01:03:52,560 --> 01:03:54,640
Speaker 1: Oh my god, it's crazy. I think this. I don't

1124
01:03:54,640 --> 01:03:56,800
Speaker 1: know if this year is eleven or twelve years ten

1125
01:03:56,920 --> 01:04:00,240
Speaker 1: for me. So you skipped a year. I've have a sreek.

1126
01:04:00,280 --> 01:04:02,320
Speaker 1: I haven't missed one. I skipped here. I was in

1127
01:04:02,360 --> 01:04:06,120
Speaker 1: the middle of writing a book. But yes, um, yeah,

1128
01:04:06,200 --> 01:04:08,800
Speaker 1: but it's a weekend. Come on, you could you could

1129
01:04:08,800 --> 01:04:11,400
Speaker 1: take a weekend off from book. It's okay. It's Dallas,

1130
01:04:11,560 --> 01:04:15,040
Speaker 1: Texas to to nowhere in Maine versus New York to

1131
01:04:15,200 --> 01:04:17,320
Speaker 1: nowhere in Maine. It's a little bit different calculus. So

1132
01:04:17,400 --> 01:04:20,920
Speaker 1: it's like an hour flight up to Bangor and then

1133
01:04:21,000 --> 01:04:23,600
Speaker 1: you drive about two and a half hours. Like the

1134
01:04:23,920 --> 01:04:26,040
Speaker 1: from the time I leave my house till the time

1135
01:04:26,080 --> 01:04:29,000
Speaker 1: I get in the car, and Bangor is more time

1136
01:04:29,120 --> 01:04:32,760
Speaker 1: than the time I leave Bangor and get to get

1137
01:04:33,480 --> 01:04:36,880
Speaker 1: Lean's Lodge, unless I stopped for a lobster roll at

1138
01:04:36,920 --> 01:04:40,760
Speaker 1: the Eagles Nest. I must stack on a four hour

1139
01:04:41,760 --> 01:04:47,720
Speaker 1: flight in from Dallas usually am and change changing terminals

1140
01:04:47,760 --> 01:04:49,800
Speaker 1: and getting to that damn bang Or flight, but I

1141
01:04:49,880 --> 01:04:52,760
Speaker 1: get there. There are lots of places I would consider

1142
01:04:52,880 --> 01:04:57,000
Speaker 1: living outside of New York. Dallas happens to be pretty nice.

1143
01:04:57,120 --> 01:05:00,360
Speaker 1: And Austin is just such a party town when you

1144
01:05:00,440 --> 01:05:03,440
Speaker 1: went to school there. When you're to grad school like today,

1145
01:05:03,520 --> 01:05:07,480
Speaker 1: Austin is a full blown hipster. Someone described it as

1146
01:05:07,600 --> 01:05:11,720
Speaker 1: the blueberry in the middle of the raspberry pie that

1147
01:05:11,960 --> 01:05:16,200
Speaker 1: is Texas, which I find hilarious. But what was Austin

1148
01:05:16,280 --> 01:05:17,720
Speaker 1: like when you went to school? There was it a

1149
01:05:17,760 --> 01:05:20,280
Speaker 1: big party town? It was. It's always been a big

1150
01:05:20,320 --> 01:05:22,880
Speaker 1: party town. It's always been huge for live music, I

1151
01:05:22,960 --> 01:05:28,440
Speaker 1: mean institutional level of music. Uh, you know, Sixth Street

1152
01:05:28,520 --> 01:05:32,520
Speaker 1: was around then. But the age, the aging of of Austin.

1153
01:05:32,600 --> 01:05:34,600
Speaker 1: And now you have Fifth Street, which is where people

1154
01:05:34,720 --> 01:05:36,360
Speaker 1: my age go because they don't want to go on

1155
01:05:36,480 --> 01:05:38,640
Speaker 1: Sixth Street because germs are no longer for sharing at

1156
01:05:38,680 --> 01:05:44,560
Speaker 1: our age. So you know, there are more roof bars

1157
01:05:44,960 --> 01:05:47,640
Speaker 1: in Austin today than I think any city I've ever

1158
01:05:47,760 --> 01:05:50,640
Speaker 1: been in. And they've they've really just opened some very

1159
01:05:50,760 --> 01:05:54,080
Speaker 1: nice hotels. There's plenty of room for the tourists. But

1160
01:05:54,280 --> 01:05:57,000
Speaker 1: go downtown. Stay downtown for heaven's sake. Don't get stuck

1161
01:05:57,040 --> 01:06:00,080
Speaker 1: in that traffic, to say the least. So there's a

1162
01:06:00,200 --> 01:06:03,560
Speaker 1: ton of questions I didn't get to that. I want

1163
01:06:03,600 --> 01:06:06,480
Speaker 1: to circle back, and I don't have you here all day.

1164
01:06:06,640 --> 01:06:12,080
Speaker 1: But we've been talking long enough. Um, So here's here's

1165
01:06:12,160 --> 01:06:17,760
Speaker 1: the the really interesting discussion, which all this comes right

1166
01:06:17,800 --> 01:06:20,880
Speaker 1: from your book. What do you mean by the FED

1167
01:06:21,040 --> 01:06:23,680
Speaker 1: is bad for America? That seems like a pretty harsh

1168
01:06:23,760 --> 01:06:28,160
Speaker 1: statement there. They've made mistakes, they're certainly an important entity.

1169
01:06:28,760 --> 01:06:30,560
Speaker 1: I don't think either of us are in the ron

1170
01:06:30,680 --> 01:06:33,600
Speaker 1: pole in the FED. No, you know, like that's like

1171
01:06:33,760 --> 01:06:37,720
Speaker 1: unilateral nuclear disarmament. But plus, I mean, look at what

1172
01:06:37,800 --> 01:06:40,680
Speaker 1: the Chinese have done for everybody who always says, God,

1173
01:06:40,720 --> 01:06:42,200
Speaker 1: you've got to end the FED. Just get rid of

1174
01:06:42,320 --> 01:06:44,520
Speaker 1: I'm like, look at what the Chinese can do with

1175
01:06:44,600 --> 01:06:47,840
Speaker 1: our intellectual property, right, okay, now put it on steroids

1176
01:06:47,920 --> 01:06:49,640
Speaker 1: and see what they can do to our financial system.

1177
01:06:49,960 --> 01:06:55,000
Speaker 1: Just leave the thing, please, it's it's it's ridiculous. Pole

1178
01:06:55,080 --> 01:06:56,920
Speaker 1: was out of his mind with that nonsense. It is

1179
01:06:57,120 --> 01:06:59,840
Speaker 1: and some of that's hyperbolic just for him to make

1180
01:06:59,880 --> 01:07:02,400
Speaker 1: a point, But I think he truly believe that, and

1181
01:07:02,760 --> 01:07:06,560
Speaker 1: his son believes it also. Look, it's just it's not practical,

1182
01:07:06,720 --> 01:07:08,640
Speaker 1: not in the world we live in. It. We can

1183
01:07:08,720 --> 01:07:12,720
Speaker 1: deglobalize all we want, but we're never going to un globalize.

1184
01:07:13,200 --> 01:07:15,840
Speaker 1: There's there's a difference between the two. So so that

1185
01:07:16,120 --> 01:07:19,880
Speaker 1: raises the question, how should the FED set interest rates?

1186
01:07:21,080 --> 01:07:24,640
Speaker 1: The FED should set interest rates more a the FED

1187
01:07:24,760 --> 01:07:28,640
Speaker 1: needs to let these markets somehow, some way normalize. If

1188
01:07:28,680 --> 01:07:30,360
Speaker 1: you talk to people who say that the FED is

1189
01:07:30,400 --> 01:07:33,080
Speaker 1: going to blow up the balance sheet to ten trillion dollars,

1190
01:07:33,480 --> 01:07:36,919
Speaker 1: it's going to ease into the next recession, ease even

1191
01:07:37,000 --> 01:07:39,800
Speaker 1: more through the next re session, and eventually we'll have

1192
01:07:39,920 --> 01:07:43,200
Speaker 1: a debt jubilee and sing Kumbaya and walk off into

1193
01:07:43,240 --> 01:07:45,280
Speaker 1: the side. I have a lot of cars I want

1194
01:07:45,320 --> 01:07:48,560
Speaker 1: to buy that are beyond my budget, I'll just borrow

1195
01:07:48,600 --> 01:07:51,920
Speaker 1: against it. And if we do student loan forgiveness, maybe

1196
01:07:51,960 --> 01:07:56,240
Speaker 1: we could do Biblical times before you had a banking

1197
01:07:56,320 --> 01:07:58,200
Speaker 1: system to just say, oh, it's gonna be really easy.

1198
01:07:58,240 --> 01:08:02,120
Speaker 1: Let's just debt jubilee. Somebody say private debt markets, Oh god,

1199
01:08:02,160 --> 01:08:04,000
Speaker 1: what are we going to do with those? It's more

1200
01:08:04,160 --> 01:08:07,680
Speaker 1: complicated than than what it's made out to be. And

1201
01:08:07,840 --> 01:08:11,320
Speaker 1: I think somebody at the Fed, somebody has got to

1202
01:08:11,400 --> 01:08:14,760
Speaker 1: deal with having the beginning and the end of a recession. Right.

1203
01:08:14,880 --> 01:08:16,800
Speaker 1: So in other words, if we want to stick with

1204
01:08:16,840 --> 01:08:20,679
Speaker 1: the biblical theme, seven fat years, seven lean years, things

1205
01:08:20,760 --> 01:08:24,880
Speaker 1: are cyclical. Not just you mentioned this is ten year expansion,

1206
01:08:24,960 --> 01:08:29,760
Speaker 1: the elongated expansion um Australia went what twenty seven years

1207
01:08:29,840 --> 01:08:31,800
Speaker 1: and they still haven't had a recession twenty seven years?

1208
01:08:31,840 --> 01:08:34,839
Speaker 1: And how far can this has been twenty years incounting,

1209
01:08:34,880 --> 01:08:38,360
Speaker 1: but we have not had a benefactor named China. I

1210
01:08:38,840 --> 01:08:41,439
Speaker 1: had a speech in Australia. I was there for twelve days.

1211
01:08:42,040 --> 01:08:45,000
Speaker 1: Just about everything is not made in China but owned

1212
01:08:45,040 --> 01:08:48,840
Speaker 1: by China were exported to China, to China or imported

1213
01:08:48,920 --> 01:08:51,360
Speaker 1: from China. I would argue we have had a benefactor

1214
01:08:51,439 --> 01:08:54,000
Speaker 1: named China because they make all our crap cheap and

1215
01:08:54,320 --> 01:08:56,760
Speaker 1: there where we make every manufacture everything. But they don't

1216
01:08:56,800 --> 01:09:00,040
Speaker 1: own our biggest port. They don't have a tick a

1217
01:09:00,080 --> 01:09:02,360
Speaker 1: year lease on our biggest port in Melbourne. They don't

1218
01:09:02,400 --> 01:09:04,840
Speaker 1: own an island. I went on on the own the

1219
01:09:04,920 --> 01:09:07,800
Speaker 1: island on the Great Barrier Reef. They haven't put up

1220
01:09:07,800 --> 01:09:10,839
Speaker 1: all of these skyscrapers that, by the way, are wrapped

1221
01:09:10,920 --> 01:09:15,120
Speaker 1: with something that is extremely flammable. Um so it's oh

1222
01:09:15,479 --> 01:09:18,519
Speaker 1: something something that is literally extremely flammable. So now there's

1223
01:09:18,520 --> 01:09:21,600
Speaker 1: certain high rise buildings in Melbourne and in Sydney that

1224
01:09:21,680 --> 01:09:24,479
Speaker 1: you kind of know not to buy at some guy

1225
01:09:24,920 --> 01:09:27,559
Speaker 1: dropped a cigarette and the whole three floors going up

1226
01:09:27,600 --> 01:09:31,439
Speaker 1: before Anyways, anyways, all I'm saying is that that that

1227
01:09:32,200 --> 01:09:35,880
Speaker 1: Australia is an aberration, but in a good sense of

1228
01:09:35,920 --> 01:09:39,080
Speaker 1: the word. They never went to the zero bound, and

1229
01:09:39,200 --> 01:09:42,360
Speaker 1: that was our fatal flaw. The Bernankee doctrine was the

1230
01:09:42,479 --> 01:09:45,720
Speaker 1: fatal flaw, the idea that we absolutely had to go

1231
01:09:45,840 --> 01:09:49,680
Speaker 1: to the zero bound. I think that J. Powell is

1232
01:09:50,240 --> 01:09:54,040
Speaker 1: so correct in pushing back against negative interest rates. I

1233
01:09:54,240 --> 01:09:56,920
Speaker 1: even hope he stops at one. So now let me

1234
01:09:57,920 --> 01:10:02,560
Speaker 1: throw out an alternative um scenario, a counter factual, but

1235
01:10:02,680 --> 01:10:05,120
Speaker 1: it's really based on reality. It's not a counter factual.

1236
01:10:05,880 --> 01:10:08,720
Speaker 1: Normally we have a regular playbook, and whenever there is

1237
01:10:08,760 --> 01:10:12,120
Speaker 1: a financial crisis. You learn this from long Keen Lord

1238
01:10:12,400 --> 01:10:15,960
Speaker 1: Kanes way long ago. What you end up doing is

1239
01:10:16,080 --> 01:10:21,400
Speaker 1: you cut taxes, you increase fiscal spending. You temporarily replace

1240
01:10:21,560 --> 01:10:25,960
Speaker 1: the collapse and demands from businesses and households with government.

1241
01:10:26,400 --> 01:10:29,080
Speaker 1: Then the economy begins to recover. You start to take

1242
01:10:29,200 --> 01:10:31,880
Speaker 1: that back and you normalize things. And if there's a

1243
01:10:31,960 --> 01:10:37,679
Speaker 1: little bit of monetary policy assistance, great, But in twenty

1244
01:10:38,000 --> 01:10:41,040
Speaker 1: eight and two thousand eight and two thousand nine, there

1245
01:10:41,160 --> 01:10:44,240
Speaker 1: was almost no real I mean, I mean it seems

1246
01:10:44,240 --> 01:10:47,920
Speaker 1: weird to say, yes, seven eight five billion dollars is nothing,

1247
01:10:48,320 --> 01:10:52,559
Speaker 1: but given the size of the financial crisis, that should

1248
01:10:52,600 --> 01:10:56,680
Speaker 1: have been a three four five trillion dollar multi year stimulus.

1249
01:10:57,240 --> 01:11:00,439
Speaker 1: Bernanke looked out at Congress and he had of meetings

1250
01:11:00,520 --> 01:11:03,080
Speaker 1: and he said, you guys have to do fiscal stimulus

1251
01:11:03,200 --> 01:11:06,439
Speaker 1: or we're going to hell. And they said, look, we'll

1252
01:11:06,560 --> 01:11:09,280
Speaker 1: give you carte blanche to do whatever you want, but sorry,

1253
01:11:09,640 --> 01:11:13,439
Speaker 1: it's not coming from us, right. What should the FED

1254
01:11:13,520 --> 01:11:15,679
Speaker 1: have done in response to that? Should Their response should

1255
01:11:15,680 --> 01:11:17,519
Speaker 1: have been, Hey, you guys are on your own. I'm

1256
01:11:17,560 --> 01:11:19,680
Speaker 1: gonna let the whole thing go to hell. You'll all

1257
01:11:19,720 --> 01:11:22,360
Speaker 1: get voted out of office because you will have screwed up,

1258
01:11:22,800 --> 01:11:24,760
Speaker 1: and then when the next crop comes in, I'll work

1259
01:11:24,840 --> 01:11:27,200
Speaker 1: with them, but this is on you, guys. M Jesse

1260
01:11:27,360 --> 01:11:29,519
Speaker 1: Martin or Paul Vulker would have told them to do

1261
01:11:29,720 --> 01:11:32,920
Speaker 1: just that jump jump in act. That would have been that, right,

1262
01:11:33,360 --> 01:11:36,280
Speaker 1: either you save the economy or it's the world's greatest

1263
01:11:36,320 --> 01:11:39,000
Speaker 1: recession and every one of you is unemployed and living

1264
01:11:39,040 --> 01:11:41,559
Speaker 1: in For me, first, first, I've written a weekly every

1265
01:11:41,600 --> 01:11:43,640
Speaker 1: single week since I left the FED in June of

1266
01:11:43,680 --> 01:11:46,080
Speaker 1: two thou fifteen. The very first thing that I wrote

1267
01:11:46,200 --> 01:11:51,120
Speaker 1: was how Congress abdicated to its authority to the Federal reserve,

1268
01:11:52,080 --> 01:11:55,080
Speaker 1: time for fiscal authorities to do their damn job. So

1269
01:11:55,720 --> 01:11:59,720
Speaker 1: what should the now Here we are in the elongated

1270
01:12:00,080 --> 01:12:05,719
Speaker 1: pansion and nine ten years following the eight or nine debacle,

1271
01:12:06,160 --> 01:12:08,040
Speaker 1: we get a giant tax cut, we get a giant

1272
01:12:08,120 --> 01:12:13,240
Speaker 1: fiscal stimulus. Is that just pro cyclical instead of countercyclical?

1273
01:12:13,320 --> 01:12:15,880
Speaker 1: Should that is that what we trillion dollars, what we

1274
01:12:15,920 --> 01:12:18,680
Speaker 1: should have done in oh nine or oh ten. Well,

1275
01:12:18,720 --> 01:12:23,760
Speaker 1: it was a little after the fact. What so what

1276
01:12:24,000 --> 01:12:27,000
Speaker 1: should be taking place on a basis that was that

1277
01:12:27,120 --> 01:12:29,439
Speaker 1: was blatantly political, and of course, of course it was

1278
01:12:29,560 --> 01:12:33,280
Speaker 1: as is the one that was just right just floated. Um,

1279
01:12:33,439 --> 01:12:35,200
Speaker 1: I have no idea what the hell that was? As

1280
01:12:35,320 --> 01:12:37,880
Speaker 1: is the one that was just floated for the summer. Oh,

1281
01:12:37,960 --> 01:12:39,360
Speaker 1: let's find a way to get more money into the

1282
01:12:39,400 --> 01:12:42,559
Speaker 1: stock market, and let's do a middle class tax cut.

1283
01:12:43,000 --> 01:12:47,959
Speaker 1: Obviously August July of a of an election year, that's political,

1284
01:12:48,120 --> 01:12:50,720
Speaker 1: and obviously politics is that's never gonna get. I don't

1285
01:12:50,720 --> 01:12:53,280
Speaker 1: even know hows get on the island because there are

1286
01:12:53,400 --> 01:12:55,920
Speaker 1: some potholes here in New York that are big enough

1287
01:12:56,000 --> 01:12:58,200
Speaker 1: that they could swallow a small car. I mean, you

1288
01:12:58,280 --> 01:13:02,519
Speaker 1: want to spend money infrastruction, sake, spend it on infrastructure. Everybody,

1289
01:13:03,120 --> 01:13:05,400
Speaker 1: everybody agrees. Why can't we do that? And by the way,

1290
01:13:05,479 --> 01:13:08,160
Speaker 1: it puts a lot of blue collar workers to our

1291
01:13:08,880 --> 01:13:11,840
Speaker 1: years stastic for years at a time. This is great.

1292
01:13:12,400 --> 01:13:16,240
Speaker 1: This is what we've been seeing. What we saw in

1293
01:13:16,320 --> 01:13:21,479
Speaker 1: the automobile sector worldwide as China urbanized, which was just

1294
01:13:21,640 --> 01:13:24,400
Speaker 1: a huge boom to the current recovery. That's what we

1295
01:13:24,439 --> 01:13:28,519
Speaker 1: saw with fracking, is it put blue collar people to work.

1296
01:13:29,080 --> 01:13:31,360
Speaker 1: Let me push back at you on that, well, at

1297
01:13:31,400 --> 01:13:33,080
Speaker 1: least in the state of Texas. I mean, you're making

1298
01:13:33,080 --> 01:13:37,400
Speaker 1: a hundred thousand dollars a year and fast. Read Saudi

1299
01:13:37,560 --> 01:13:42,639
Speaker 1: America by Bethany McClain, who basically says the entire low

1300
01:13:42,800 --> 01:13:45,720
Speaker 1: rate regime of the Federal Reserve is the only thing

1301
01:13:45,800 --> 01:13:49,840
Speaker 1: that's made fracking competitive with everything else because it's so

1302
01:13:49,960 --> 01:13:52,559
Speaker 1: capital intensive and it's all borrowed money. Oh gosh, it's

1303
01:13:52,560 --> 01:13:54,400
Speaker 1: all borrowed money. No, no, no no. I just wrote

1304
01:13:54,439 --> 01:13:56,680
Speaker 1: a recent paper on this, the the the growth of

1305
01:13:56,720 --> 01:13:59,639
Speaker 1: the Fed's balance. She literally moves in blockstep in block

1306
01:13:59,720 --> 01:14:02,040
Speaker 1: step with the growth of the energy industry. I didn't

1307
01:14:02,080 --> 01:14:04,520
Speaker 1: say it was free to build. I said it employed.

1308
01:14:05,280 --> 01:14:09,680
Speaker 1: It employed people who don't have college degrees. So it infrastructure,

1309
01:14:09,760 --> 01:14:13,680
Speaker 1: so does automobile. So here's a debate that I know

1310
01:14:14,200 --> 01:14:17,040
Speaker 1: you love to engage in on Twitter, and I just

1311
01:14:17,160 --> 01:14:21,080
Speaker 1: kinda watch from Afar. I engage in much dumber debates

1312
01:14:21,120 --> 01:14:26,439
Speaker 1: on Twitter. The repo market is what's driving the FED

1313
01:14:26,840 --> 01:14:30,640
Speaker 1: activity to inject more liquidly and that's spilling over to

1314
01:14:30,720 --> 01:14:33,240
Speaker 1: the equity markets, and that's why stocks are going higher.

1315
01:14:33,479 --> 01:14:38,519
Speaker 1: We look, we've discussed this again. You can try and

1316
01:14:38,720 --> 01:14:41,599
Speaker 1: see what happens if rates rise, if you step back,

1317
01:14:41,920 --> 01:14:44,680
Speaker 1: don't go to ten percent on overnight, go to four

1318
01:14:44,760 --> 01:14:50,080
Speaker 1: or five and see what happens. See how I don't

1319
01:14:50,080 --> 01:14:53,679
Speaker 1: even think that that would fly given the sensitivity, given

1320
01:14:53,760 --> 01:14:57,160
Speaker 1: the wall. Look, every time there's been a wall of refinancing,

1321
01:14:57,400 --> 01:14:59,479
Speaker 1: you would blow up what's left of the shale patch

1322
01:14:59,600 --> 01:15:02,280
Speaker 1: right now because there's so much paper that has to

1323
01:15:02,320 --> 01:15:04,720
Speaker 1: be refinanced this year and God help us next year.

1324
01:15:04,920 --> 01:15:07,400
Speaker 1: For the next five years, it's like seventy one billion

1325
01:15:07,720 --> 01:15:10,000
Speaker 1: sixties or four percent of shail debt has to be

1326
01:15:10,080 --> 01:15:12,800
Speaker 1: refinanced in the next five years. I was gonna say,

1327
01:15:12,960 --> 01:15:16,360
Speaker 1: isn't there like a wildly disproportionate amount of corporate debts

1328
01:15:16,520 --> 01:15:20,720
Speaker 1: associated with fracking? Like just so far it was invaded

1329
01:15:20,800 --> 01:15:24,120
Speaker 1: by you know, living in Texas, I'm like, what is

1330
01:15:24,200 --> 01:15:27,519
Speaker 1: this Greenwich private equity firm doing down here? Well, they

1331
01:15:27,600 --> 01:15:31,040
Speaker 1: got in the rain, had some money. I mean, they

1332
01:15:31,120 --> 01:15:34,080
Speaker 1: were going to build the tallest skyscraper in Midland, O

1333
01:15:34,160 --> 01:15:36,240
Speaker 1: Desk that was gonna be the tallest thing between Dallas

1334
01:15:36,280 --> 01:15:39,679
Speaker 1: and Los Angeles. But I mean thank that that funding

1335
01:15:39,800 --> 01:15:41,880
Speaker 1: was pulled. We would have ended up just about as

1336
01:15:41,960 --> 01:15:45,280
Speaker 1: good as the late nineteen eighties Rolls Royce Dealership in

1337
01:15:45,360 --> 01:15:48,360
Speaker 1: Midland O Desk. Do you remember in the eighties the

1338
01:15:48,560 --> 01:15:51,400
Speaker 1: sea through buildings in Dallas? They put up all these

1339
01:15:51,560 --> 01:15:55,600
Speaker 1: in Houston, they put up all these office buildings and

1340
01:15:55,960 --> 01:15:58,479
Speaker 1: they were unoccupied. You literally could see straight through from

1341
01:15:58,479 --> 01:16:00,519
Speaker 1: one of them. Today, every time I here a central

1342
01:16:00,560 --> 01:16:03,479
Speaker 1: banker talk about how much that the sanctity of the

1343
01:16:03,520 --> 01:16:06,200
Speaker 1: financial system and how much stronger our banks are, I'm like,

1344
01:16:06,920 --> 01:16:10,200
Speaker 1: you might want to reference your own data Federal Reserve

1345
01:16:10,400 --> 01:16:14,479
Speaker 1: on commercial real estate loans, on bank balance sheets, see

1346
01:16:14,600 --> 01:16:17,519
Speaker 1: and see that they've gone through the roof because of

1347
01:16:17,600 --> 01:16:21,920
Speaker 1: regulatory costs that we were associated with. Dodd Frank. Small

1348
01:16:21,960 --> 01:16:23,880
Speaker 1: and mid sized banks in this country are not in

1349
01:16:24,000 --> 01:16:26,960
Speaker 1: good shape. Small and mid sized banks are not in

1350
01:16:27,040 --> 01:16:29,800
Speaker 1: good shape. And why is there are there still small

1351
01:16:29,840 --> 01:16:32,479
Speaker 1: and midsized banks? Biball not know. Well, there's been a

1352
01:16:32,520 --> 01:16:35,880
Speaker 1: hell of a lot of consolidation. Asking the question, non bank,

1353
01:16:36,040 --> 01:16:39,400
Speaker 1: if you look at the holdings of both assets and

1354
01:16:39,720 --> 01:16:43,880
Speaker 1: loans of the top let's call it ten banks. It's

1355
01:16:43,960 --> 01:16:46,200
Speaker 1: like one and two and a half times what it

1356
01:16:46,400 --> 01:16:51,280
Speaker 1: was twenty years ago. It's it's really become wildly top heavy.

1357
01:16:52,240 --> 01:16:56,240
Speaker 1: So now we've had is impossibly big defense. So so

1358
01:16:56,360 --> 01:16:58,439
Speaker 1: now that we've had all this consolidation, what does that

1359
01:16:58,520 --> 01:17:01,639
Speaker 1: mean for the small and midsize It means it's not good.

1360
01:17:01,760 --> 01:17:04,280
Speaker 1: It means that. And this was something that was again

1361
01:17:04,400 --> 01:17:07,640
Speaker 1: internally debated at the FED. If you want to impose

1362
01:17:07,880 --> 01:17:12,560
Speaker 1: these capital requirements, if you want to impose these compliance requirements,

1363
01:17:12,960 --> 01:17:15,040
Speaker 1: do it for the big banks. But for god's sake,

1364
01:17:15,120 --> 01:17:17,320
Speaker 1: don't do it for small and midsized lenders. If you do,

1365
01:17:17,720 --> 01:17:19,600
Speaker 1: they're gonna go away out on the risk spectrum and

1366
01:17:19,720 --> 01:17:23,040
Speaker 1: make the crazy commercial real estate loans that they've got

1367
01:17:23,120 --> 01:17:25,160
Speaker 1: that they've got right now. And to be fair, they

1368
01:17:25,400 --> 01:17:29,479
Speaker 1: have set up different tiers of requirements for but this,

1369
01:17:31,120 --> 01:17:33,720
Speaker 1: I mean this, this happened long after the loans were made.

1370
01:17:33,800 --> 01:17:35,560
Speaker 1: All right, am I left? Before I get to my

1371
01:17:35,640 --> 01:17:38,120
Speaker 1: favorite questions, I have one question I have to ask you,

1372
01:17:39,000 --> 01:17:41,759
Speaker 1: what would it take to make you bullish on stocks?

1373
01:17:44,600 --> 01:17:48,720
Speaker 1: I'm not embarrished on stocks, alright, So your clients are

1374
01:17:49,000 --> 01:17:51,920
Speaker 1: very often investors and not just corporate entities and others.

1375
01:17:52,120 --> 01:17:53,800
Speaker 1: I say, as long as the as long as the

1376
01:17:53,840 --> 01:17:57,080
Speaker 1: FED is printing, they cannot be fought. So that's my

1377
01:17:57,240 --> 01:18:01,559
Speaker 1: biggest mistake in my entire career was that I knew

1378
01:18:01,960 --> 01:18:05,800
Speaker 1: when I left the FED with PTSD in a bad way.

1379
01:18:06,520 --> 01:18:09,240
Speaker 1: I knew in my guts that as long as they

1380
01:18:09,360 --> 01:18:12,120
Speaker 1: printed enough that they were going to hold up risky

1381
01:18:12,120 --> 01:18:16,280
Speaker 1: asset prices, it didn't matter what valuations were. That hasn't changed.

1382
01:18:16,400 --> 01:18:18,080
Speaker 1: I had to learn it the hard way. So as

1383
01:18:18,160 --> 01:18:21,120
Speaker 1: long as the FED is accommodative, and as long as

1384
01:18:21,200 --> 01:18:25,800
Speaker 1: they are not either reversing quee doing, unless there's a

1385
01:18:25,800 --> 01:18:29,599
Speaker 1: glaive tightening, unless there's a global calamity that is big

1386
01:18:29,720 --> 01:18:32,360
Speaker 1: enough to put the world in recession, I'm not. I'm not.

1387
01:18:32,760 --> 01:18:35,400
Speaker 1: I'm not somebody who thinks that we can completely decouple

1388
01:18:35,760 --> 01:18:38,680
Speaker 1: the entire Canadian yield curve is inverted, all of it,

1389
01:18:38,920 --> 01:18:41,439
Speaker 1: all the way at to thirty years. Mexico, where I'm

1390
01:18:41,479 --> 01:18:44,280
Speaker 1: presenting at the Bank of Mexico Bonxico next week. They're

1391
01:18:44,320 --> 01:18:47,280
Speaker 1: in recession. They're not getting out of recession anytime soon.

1392
01:18:47,560 --> 01:18:50,839
Speaker 1: We've never not been in recession. If Canada goes Germany

1393
01:18:51,040 --> 01:18:54,800
Speaker 1: for sure is in recession, has been for a good year,

1394
01:18:54,800 --> 01:18:58,200
Speaker 1: and they have flat whatever. Germany's in recession, and you

1395
01:18:58,360 --> 01:19:03,720
Speaker 1: just saw some really ugly employment data post pre coronavirus

1396
01:19:03,840 --> 01:19:07,160
Speaker 1: come out of Germany, so that industrial slowdowns and China

1397
01:19:07,240 --> 01:19:11,680
Speaker 1: is for sure whatever on a paper basis, at the

1398
01:19:11,800 --> 01:19:15,240
Speaker 1: very least, that's showing a giant drop in GDP, right,

1399
01:19:15,360 --> 01:19:17,360
Speaker 1: even if it's temporary, and even if they make up

1400
01:19:17,439 --> 01:19:18,840
Speaker 1: some of it. I mean, it's like all of a

1401
01:19:18,880 --> 01:19:22,400
Speaker 1: sudden and yelling because the favorite buzzword on Wall Street

1402
01:19:22,439 --> 01:19:25,120
Speaker 1: now is transitory. It's all transitory. It's all transitory. Hey,

1403
01:19:25,280 --> 01:19:28,200
Speaker 1: everything on this planet is transitory, including the planet. Well,

1404
01:19:28,200 --> 01:19:29,800
Speaker 1: and I get asked by people all the time, well,

1405
01:19:30,400 --> 01:19:32,160
Speaker 1: even if we go into recession, the FED can just

1406
01:19:32,320 --> 01:19:34,439
Speaker 1: keep printing. And even if we're going to recession, the

1407
01:19:34,479 --> 01:19:37,280
Speaker 1: stock market's going to stay up. And that's happened on

1408
01:19:37,439 --> 01:19:41,000
Speaker 1: rare occasions in the past. I'm not of the opinion,

1409
01:19:41,040 --> 01:19:42,920
Speaker 1: given where we are in the cycle, that that happens.

1410
01:19:43,479 --> 01:19:46,519
Speaker 1: I wouldn't disagree with you, So I'm curious if when

1411
01:19:46,560 --> 01:19:49,400
Speaker 1: people listen to this, how much they think you and

1412
01:19:49,479 --> 01:19:51,280
Speaker 1: I actually agree on and how much they think you

1413
01:19:51,320 --> 01:19:54,479
Speaker 1: and I disagree on because I'm asking questions very often

1414
01:19:54,680 --> 01:19:58,479
Speaker 1: playing a role and not necessarily. My job isn't to

1415
01:19:58,560 --> 01:20:01,080
Speaker 1: debate you. My job is to bring some of the

1416
01:20:01,160 --> 01:20:03,799
Speaker 1: questions other people have raised about some of the subjects

1417
01:20:03,800 --> 01:20:06,519
Speaker 1: you've talked about all people on planet Earth. You know,

1418
01:20:06,640 --> 01:20:09,479
Speaker 1: the person who wrote the expose A I had to

1419
01:20:09,560 --> 01:20:12,120
Speaker 1: learn after the fact, don't fight the Fed. Don't fight

1420
01:20:12,160 --> 01:20:14,760
Speaker 1: the Fed. So you're pretty constructive, and uh, what do

1421
01:20:14,840 --> 01:20:19,519
Speaker 1: you like leveraged on a long long how you're invested?

1422
01:20:19,560 --> 01:20:21,960
Speaker 1: I own a ton of municipal bonds on I own

1423
01:20:22,040 --> 01:20:24,840
Speaker 1: a ton of gold, and I'm not unhappy. Well, gold

1424
01:20:24,960 --> 01:20:28,000
Speaker 1: is approaching s I did well with gold in the

1425
01:20:28,080 --> 01:20:31,519
Speaker 1: two thousand's and once it, you know, peaked and reversed,

1426
01:20:31,600 --> 01:20:33,120
Speaker 1: I tapped out and said, I think you have to

1427
01:20:33,200 --> 01:20:36,080
Speaker 1: be bold, bold, bold in your asset allocations. I really

1428
01:20:36,160 --> 01:20:39,800
Speaker 1: really do. When there's as much global uncertainty as there is,

1429
01:20:41,000 --> 01:20:42,960
Speaker 1: central banks are the only game in town. Hell. I

1430
01:20:43,040 --> 01:20:46,160
Speaker 1: did well in Puerto Rico, but you have to be

1431
01:20:46,280 --> 01:20:49,600
Speaker 1: bold in your alleys. Gold should be no no no, no,

1432
01:20:49,720 --> 01:20:51,559
Speaker 1: no no no. Also, how much gold do you own

1433
01:20:51,720 --> 01:20:53,840
Speaker 1: relative to your portfolio? You should have, you should have

1434
01:20:55,720 --> 01:20:59,240
Speaker 1: in precious metals at a real time like this. Again,

1435
01:20:59,280 --> 01:21:01,880
Speaker 1: at a time like this, I tiptoed in about nine

1436
01:21:02,000 --> 01:21:06,679
Speaker 1: months ago. Wow, that is a bold And my Muni

1437
01:21:06,720 --> 01:21:09,879
Speaker 1: bonds have never I mean, throughout ups downs in betweens.

1438
01:21:09,960 --> 01:21:13,800
Speaker 1: Right now they're they're fat and there we've been, haven't

1439
01:21:13,840 --> 01:21:15,960
Speaker 1: we been in a forty year bond bull market. So

1440
01:21:16,160 --> 01:21:19,599
Speaker 1: whatever you own that's not junk has done pretty well.

1441
01:21:20,000 --> 01:21:22,479
Speaker 1: I wouldn't own a lot of corporate bonds in America

1442
01:21:22,560 --> 01:21:25,479
Speaker 1: to day. Huh, that's interesting. See, I break corporates into

1443
01:21:25,600 --> 01:21:28,960
Speaker 1: the you know, the B B plus and up, and

1444
01:21:29,040 --> 01:21:32,240
Speaker 1: then everything under that, even not the junk, even like

1445
01:21:32,479 --> 01:21:34,920
Speaker 1: the near junk, like I want. I don't want to

1446
01:21:34,920 --> 01:21:37,320
Speaker 1: own anything below B minus. I don't want to know.

1447
01:21:37,680 --> 01:21:39,400
Speaker 1: And a buddy of mine who used to work one

1448
01:21:39,439 --> 01:21:43,200
Speaker 1: of the big three credit rating agencies, the stories that

1449
01:21:43,320 --> 01:21:46,320
Speaker 1: I've heard right out of her mouth, the management is

1450
01:21:46,439 --> 01:21:50,120
Speaker 1: twisting arms to maintain investment grade ratings. I'm like, no, no,

1451
01:21:50,320 --> 01:21:53,080
Speaker 1: thank you, not in my portfolio. Does does anyone still

1452
01:21:53,320 --> 01:21:57,200
Speaker 1: really pay attention to the credit ratings after the debacle

1453
01:21:57,880 --> 01:22:01,360
Speaker 1: of A I G. And Lehman and I think, I think,

1454
01:22:01,560 --> 01:22:04,920
Speaker 1: and the whole financial crisis was the one lesson. There

1455
01:22:04,960 --> 01:22:08,360
Speaker 1: are many lessons, but the one lesson is, hey, credit agencies.

1456
01:22:09,240 --> 01:22:11,880
Speaker 1: They are like stock analysts whose job is to generate

1457
01:22:11,960 --> 01:22:15,200
Speaker 1: more syndicate business. They're not here for you, the bond buyer.

1458
01:22:15,640 --> 01:22:19,240
Speaker 1: There there for the bonds underwriter. We know that, but

1459
01:22:20,280 --> 01:22:23,680
Speaker 1: but shouldn't bond buyers know that Ianco has some insane

1460
01:22:23,840 --> 01:22:27,719
Speaker 1: numbers that he can trail out about the thousand firms

1461
01:22:27,760 --> 01:22:31,920
Speaker 1: and the fo thousand different registered investment advisors, and then

1462
01:22:32,280 --> 01:22:35,439
Speaker 1: millions of accounts that exist. They're all basically look like

1463
01:22:35,560 --> 01:22:38,160
Speaker 1: the same damn pie. One of the slices of that

1464
01:22:38,280 --> 01:22:42,559
Speaker 1: pie is an investment grade bondy TF that investment grade

1465
01:22:42,720 --> 01:22:44,880
Speaker 1: that makes mom and Dad sleep at night because they

1466
01:22:44,960 --> 01:22:47,639
Speaker 1: know it's money. Good. Well, guess what I would known

1467
01:22:47,800 --> 01:22:50,320
Speaker 1: half of whatever is in there? All right? So now

1468
01:22:50,560 --> 01:22:52,360
Speaker 1: I only have you here for another ten minutes. I

1469
01:22:52,439 --> 01:22:55,559
Speaker 1: have to get to my favorite questions because I know, um,

1470
01:22:55,920 --> 01:22:59,120
Speaker 1: there's some of your favorite questions. So let's uh on

1471
01:22:59,240 --> 01:23:01,320
Speaker 1: that happy note, let's jump right into these what what

1472
01:23:01,479 --> 01:23:04,639
Speaker 1: some people call our speed round. Um, and I'm gonna

1473
01:23:04,800 --> 01:23:07,679
Speaker 1: add a question. I'm gonna mix it up a little

1474
01:23:07,720 --> 01:23:11,240
Speaker 1: bit because I have to ask what was your first car.

1475
01:23:14,320 --> 01:23:18,080
Speaker 1: My first car was an Accura. It was a hatchback,

1476
01:23:18,120 --> 01:23:21,720
Speaker 1: but I can't remember the name of it. What year

1477
01:23:21,880 --> 01:23:25,479
Speaker 1: was it? Integra. Yeah, they had the little Integral car

1478
01:23:26,360 --> 01:23:27,880
Speaker 1: that you could get that with a five speed and

1479
01:23:27,960 --> 01:23:32,479
Speaker 1: toss it around. It was really based on a with

1480
01:23:33,280 --> 01:23:36,679
Speaker 1: with a transmission and tips. You just it's been tried

1481
01:23:36,720 --> 01:23:38,760
Speaker 1: a few times. Yeah, yeah, I mean, And don't get

1482
01:23:38,760 --> 01:23:40,720
Speaker 1: me wrong, like like I said recently, a bit of

1483
01:23:40,800 --> 01:23:42,679
Speaker 1: a car guy. Right to my first F one race,

1484
01:23:42,840 --> 01:23:44,800
Speaker 1: didn't want to leave. I'm like, no, no, you surely

1485
01:23:44,800 --> 01:23:46,680
Speaker 1: you can go a few more laps. I've been to

1486
01:23:46,760 --> 01:23:49,479
Speaker 1: the Daytona twenty four hours of Daytona. I left for

1487
01:23:49,520 --> 01:23:53,120
Speaker 1: two hours, came back. That's a tough race, you know what.

1488
01:23:53,280 --> 01:23:55,920
Speaker 1: But watching Italians cry in the rain when their engine

1489
01:23:55,960 --> 01:24:00,280
Speaker 1: blocks crack, there's something magical about That's if you you'll

1490
01:24:00,280 --> 01:24:04,160
Speaker 1: see more of that. Um what are you streaming? Listening to? Downloading?

1491
01:24:04,200 --> 01:24:08,080
Speaker 1: These days? So I'm not a big podcaster that? Um

1492
01:24:08,320 --> 01:24:12,400
Speaker 1: what about video? Amazon? Prime? Netflix? What are you watching? Um? So,

1493
01:24:12,520 --> 01:24:15,200
Speaker 1: I did just watch The Kaminsky Method, which I found

1494
01:24:15,240 --> 01:24:22,120
Speaker 1: so good, larious and perfectly It's like a two minute slice, right,

1495
01:24:22,280 --> 01:24:25,519
Speaker 1: It's great it's amazingly quick. Look serious radio. For me,

1496
01:24:25,840 --> 01:24:29,240
Speaker 1: I'm dating myself. It's just so awesome. If I'm in

1497
01:24:29,320 --> 01:24:31,320
Speaker 1: a particular mood, Hell, I can tell you eight on

1498
01:24:31,439 --> 01:24:33,559
Speaker 1: eighties or seventy on seventies or what are you listening?

1499
01:24:33,640 --> 01:24:38,280
Speaker 1: Sometimes I'm listening to Bruce for hours the Street Channel. Yeah,

1500
01:24:38,560 --> 01:24:43,160
Speaker 1: occasionally I'll even turn on Elvis. But I'm an alternative

1501
01:24:43,200 --> 01:24:45,080
Speaker 1: rock kind of a person. I'm I'm Channel thirty three.

1502
01:24:45,960 --> 01:24:48,360
Speaker 1: Uh So do you listen to Deep Cuts? Is that

1503
01:24:48,479 --> 01:24:51,360
Speaker 1: what that is? Or Vinyl Rewind? I don't know. Sometimes

1504
01:24:51,400 --> 01:24:55,040
Speaker 1: I do Vinyl Dot Classic rewind? And do you ever

1505
01:24:55,080 --> 01:24:58,439
Speaker 1: listened to comedy grades? No that I don't like nine

1506
01:24:58,880 --> 01:25:02,479
Speaker 1: and ninety seven? Check the note it's actually but I could,

1507
01:25:02,520 --> 01:25:04,080
Speaker 1: you know, but laughter is good for the soul, and

1508
01:25:04,120 --> 01:25:06,680
Speaker 1: I laugh very much being this huge FED critics. So

1509
01:25:07,040 --> 01:25:11,360
Speaker 1: I'm I'm going to find who are some of your

1510
01:25:11,479 --> 01:25:17,120
Speaker 1: early mentors who guided your career? So I would say that, um,

1511
01:25:17,800 --> 01:25:22,360
Speaker 1: the most important mentor was was Charlie excuse me, was

1512
01:25:22,400 --> 01:25:26,360
Speaker 1: Harvey Rosenblum. And Harvey took me under his wing. He

1513
01:25:27,200 --> 01:25:29,920
Speaker 1: was the director of research at the Dallas Fed. He

1514
01:25:30,000 --> 01:25:35,880
Speaker 1: was the right hand to Richard Fisher and um. He

1515
01:25:36,120 --> 01:25:40,720
Speaker 1: taught me how to be more accepting of of the

1516
01:25:40,880 --> 01:25:44,040
Speaker 1: school of economics and be less resentful. Even though my

1517
01:25:44,160 --> 01:25:47,160
Speaker 1: father may rest in peace. He taught economics and finance,

1518
01:25:47,200 --> 01:25:49,519
Speaker 1: and I said, never will I ever go there, But

1519
01:25:49,960 --> 01:25:53,040
Speaker 1: he here I am. He gave me a great respect

1520
01:25:53,160 --> 01:25:55,439
Speaker 1: for the school of economics, and I gave him a

1521
01:25:55,479 --> 01:25:57,840
Speaker 1: great respect for the financial markets. And it's been one

1522
01:25:57,840 --> 01:26:01,599
Speaker 1: of the loveliest collab collaborations of my career. Tell us

1523
01:26:01,600 --> 01:26:03,439
Speaker 1: about some of your favorite books. What are you reading?

1524
01:26:03,520 --> 01:26:05,439
Speaker 1: What sort of books do you like to read? So

1525
01:26:05,760 --> 01:26:09,840
Speaker 1: I like to read books that are almost off in

1526
01:26:10,000 --> 01:26:13,640
Speaker 1: their brilliance. The book that's had the greatest impact on

1527
01:26:13,720 --> 01:26:16,800
Speaker 1: my career is The Lords of Finance, hands down, lie

1528
01:26:16,880 --> 01:26:21,840
Speaker 1: Quad and I believe that one the Politzer Prize. I'm

1529
01:26:21,840 --> 01:26:24,639
Speaker 1: pretty sure it did. Yeah, it's wonderful, wonderful books about

1530
01:26:24,680 --> 01:26:29,080
Speaker 1: the four fed chiefs from the US, Germany, and France,

1531
01:26:29,120 --> 01:26:33,040
Speaker 1: and the parallels between pre crisis and pre World War

1532
01:26:33,120 --> 01:26:37,960
Speaker 1: One are just They're stunning, and it's well written, really

1533
01:26:38,000 --> 01:26:41,000
Speaker 1: well written, really really and I had no idea who

1534
01:26:41,040 --> 01:26:43,080
Speaker 1: he was until that book came out. You know, if

1535
01:26:43,080 --> 01:26:46,799
Speaker 1: it's for pleasure, you know, the last year's a quirky

1536
01:26:46,880 --> 01:26:49,000
Speaker 1: book that had history and it off of a Greek

1537
01:26:49,040 --> 01:26:52,439
Speaker 1: island called The Destroyers. That was fun. The Destroyers who

1538
01:26:52,479 --> 01:26:55,080
Speaker 1: wrote that, Oh gosh, I have no idea, The Destroyers,

1539
01:26:55,160 --> 01:26:58,639
Speaker 1: that's really interesting. And then and then Goldfinch. Thank god

1540
01:26:58,720 --> 01:27:01,800
Speaker 1: I didn't watch the movie. That's all I have to say, Goldfinch.

1541
01:27:02,040 --> 01:27:06,559
Speaker 1: Goldfinch is probably one of the best written books out

1542
01:27:06,600 --> 01:27:11,040
Speaker 1: there period endow. So if you've not read either of

1543
01:27:11,120 --> 01:27:13,840
Speaker 1: those who wrote Goldfinch, and I have no idea, I

1544
01:27:13,880 --> 01:27:18,559
Speaker 1: don't do authors. The Destroyers a novel by Christopher Boland, yep,

1545
01:27:18,720 --> 01:27:21,840
Speaker 1: that's it. Wow. And then let's see what Goldfinch has.

1546
01:27:22,240 --> 01:27:24,280
Speaker 1: Who wrote that? I think it's Goldfinch that when the

1547
01:27:24,320 --> 01:27:29,920
Speaker 1: pullets are actually uh The Goldfinch by Donna Tart and

1548
01:27:30,120 --> 01:27:34,320
Speaker 1: David Donna Tart. Wow. Alright, so that's three books. That's great.

1549
01:27:35,840 --> 01:27:40,160
Speaker 1: Lords of Finance, Gold Finch, and The Destroyers tell us

1550
01:27:40,200 --> 01:27:42,720
Speaker 1: about a time you failed and what you learned from

1551
01:27:42,760 --> 01:27:47,280
Speaker 1: the experience. Well, I learned not to fight the FED,

1552
01:27:47,800 --> 01:27:51,000
Speaker 1: even though I did it internally for nine years. But

1553
01:27:51,400 --> 01:27:55,560
Speaker 1: after I left the FED, I have learned how important

1554
01:27:55,840 --> 01:27:59,000
Speaker 1: liquidity is to the financial markets. I'm going to quote

1555
01:27:59,439 --> 01:28:04,599
Speaker 1: current Dallas uh FED president Robert Kaplan and say, let's

1556
01:28:04,640 --> 01:28:08,720
Speaker 1: see what happens if you take the liquidity away. So

1557
01:28:08,800 --> 01:28:11,439
Speaker 1: I've learned to not fight the FED. Quite interesting. What

1558
01:28:11,520 --> 01:28:12,920
Speaker 1: do you do for fun? What do you do when

1559
01:28:12,960 --> 01:28:17,639
Speaker 1: you're not UH in the office writing? I travel? I travel.

1560
01:28:18,640 --> 01:28:21,040
Speaker 1: I travel. I travel for fun almost as much as

1561
01:28:21,080 --> 01:28:25,080
Speaker 1: I travel for UM for work. And I'd always try

1562
01:28:25,160 --> 01:28:27,200
Speaker 1: when I'm traveling for work to have a little bit

1563
01:28:27,240 --> 01:28:29,759
Speaker 1: of fun in there, whether it's one of my favorite

1564
01:28:29,760 --> 01:28:32,639
Speaker 1: restaurants in New York or if I'm in London seeing

1565
01:28:32,720 --> 01:28:34,600
Speaker 1: something that I would never see when I when I

1566
01:28:34,680 --> 01:28:37,320
Speaker 1: had this big speech in Australia, Wow, it was life

1567
01:28:37,439 --> 01:28:40,439
Speaker 1: changing to see that beautiful country. Unfortunately, you know, before

1568
01:28:40,479 --> 01:28:45,479
Speaker 1: the big wildfires and um. Alright, so I don't know

1569
01:28:45,520 --> 01:28:48,160
Speaker 1: whether SS about the FED or general. I'll give you

1570
01:28:48,280 --> 01:28:51,479
Speaker 1: the option, what are you most optimistic about today and

1571
01:28:51,600 --> 01:28:57,639
Speaker 1: what are you most pessimistic about? So I'm clearly most

1572
01:28:57,680 --> 01:29:01,719
Speaker 1: pessimistic about the printing press running twin four seven, making

1573
01:29:01,840 --> 01:29:08,600
Speaker 1: us even more reliant on the largesse of the FED. Optimistic.

1574
01:29:09,000 --> 01:29:12,559
Speaker 1: I am optimistic because I'm close enough to my children

1575
01:29:12,640 --> 01:29:15,719
Speaker 1: and watching them get an education and learning about charter

1576
01:29:15,840 --> 01:29:20,480
Speaker 1: schools to begin thinking that there's some kind of grassroots

1577
01:29:21,479 --> 01:29:24,800
Speaker 1: desire to begin education reform, which I think is so

1578
01:29:25,040 --> 01:29:28,240
Speaker 1: much more important than anything else in this country. Is

1579
01:29:28,560 --> 01:29:33,479
Speaker 1: reforming education interesting? Uh? Speaking of education, a recent college

1580
01:29:33,560 --> 01:29:35,600
Speaker 1: grad came to you and said, I'm interested in a

1581
01:29:35,720 --> 01:29:41,240
Speaker 1: career in either filling the blank, journalism, economics, Wall Street.

1582
01:29:41,320 --> 01:29:43,360
Speaker 1: What sort of advice would you give them? So I'm

1583
01:29:43,439 --> 01:29:46,559
Speaker 1: going to switch it to being a recent high school graduate.

1584
01:29:47,520 --> 01:29:49,880
Speaker 1: I would tell them to go to college, fight the

1585
01:29:49,920 --> 01:29:52,959
Speaker 1: bullet and get an engineering degree. And after the engineering

1586
01:29:53,040 --> 01:29:56,719
Speaker 1: degree they can get a higher advanced degree in whatever

1587
01:29:56,880 --> 01:30:00,160
Speaker 1: they want. But to get an engine engineering to agree,

1588
01:30:00,160 --> 01:30:02,360
Speaker 1: there's many different forms of engineering in this world, many

1589
01:30:02,400 --> 01:30:06,800
Speaker 1: different stripes, but get that as your base. When I

1590
01:30:06,960 --> 01:30:09,080
Speaker 1: was in business school, when I got my NBA and finance,

1591
01:30:09,120 --> 01:30:11,400
Speaker 1: it was always those damn engineers who threw the curve,

1592
01:30:12,439 --> 01:30:16,519
Speaker 1: but they were there their raging successes later on in life. Huh.

1593
01:30:17,240 --> 01:30:19,439
Speaker 1: I don't care if it's law school or to become

1594
01:30:19,439 --> 01:30:23,200
Speaker 1: a doctor. After start with an engineering degree. I gotta say, Uh,

1595
01:30:23,800 --> 01:30:27,000
Speaker 1: I think that's pretty good advice. And our final question,

1596
01:30:27,200 --> 01:30:31,240
Speaker 1: what do you know about the world of monetary policy,

1597
01:30:31,439 --> 01:30:35,880
Speaker 1: Federal Reserve crisis management today that you wish you knew

1598
01:30:36,120 --> 01:30:40,639
Speaker 1: twenty years ago. I wish I would have known about

1599
01:30:41,000 --> 01:30:45,080
Speaker 1: the Group of thirty prior to joining the FED, meaning

1600
01:30:45,280 --> 01:30:48,600
Speaker 1: the nation Group of thirty. It is a group of

1601
01:30:48,680 --> 01:30:53,320
Speaker 1: thirty of the world's most powerful central bankers and financiers.

1602
01:30:54,280 --> 01:30:56,360
Speaker 1: I wish I would have known that that that existed,

1603
01:30:56,439 --> 01:30:59,800
Speaker 1: because it took me too long to figure out that

1604
01:31:00,320 --> 01:31:03,120
Speaker 1: all central bankers appear to be cut from the same stripe.

1605
01:31:03,760 --> 01:31:07,280
Speaker 1: And the reason that it is so difficult to extricate ourselves,

1606
01:31:07,360 --> 01:31:12,080
Speaker 1: it's because everybody around the world is using the same

1607
01:31:12,600 --> 01:31:16,560
Speaker 1: guide book. It's the same playbook. Quite fascinating. We have

1608
01:31:16,800 --> 01:31:19,880
Speaker 1: been speaking to Danielle de Martino Booth. She is the

1609
01:31:19,920 --> 01:31:22,240
Speaker 1: author of fed Up, an insider's take on why the

1610
01:31:22,280 --> 01:31:26,480
Speaker 1: Federal Reserve is bad for America. If you enjoy this conversation,

1611
01:31:27,240 --> 01:31:28,680
Speaker 1: be sure and look up an Inch or down an

1612
01:31:28,720 --> 01:31:31,120
Speaker 1: Inch on Apple iTunes and you could see any of

1613
01:31:31,200 --> 01:31:35,160
Speaker 1: the previous three or so such conversations we've had over

1614
01:31:35,200 --> 01:31:38,240
Speaker 1: the past five years. We love your comments, feedback in

1615
01:31:38,400 --> 01:31:43,120
Speaker 1: suggestions right to us at m IB podcast at Bloomberg

1616
01:31:43,160 --> 01:31:45,960
Speaker 1: dot net. Go to Apple iTunes and please give us

1617
01:31:46,000 --> 01:31:49,040
Speaker 1: a review. Be sure and check out my weekly column

1618
01:31:49,160 --> 01:31:52,479
Speaker 1: on Bloomberg dot com. Follow me on Twitter at rit Holtz.

1619
01:31:52,840 --> 01:31:55,760
Speaker 1: Sign up for the Daily Reads at rid Holtz dot com.

1620
01:31:56,560 --> 01:31:58,439
Speaker 1: I would be remiss if I did not thank the

1621
01:31:58,560 --> 01:32:04,400
Speaker 1: Crack staff helps me put this little conversation together each week.

1622
01:32:05,080 --> 01:32:11,200
Speaker 1: Mark Siniscalchi is my audio engineer. Sam Chivraj is my producer.

1623
01:32:11,760 --> 01:32:15,919
Speaker 1: Michael Batnick is my head of research. I'm Barry Ritolts.

1624
01:32:16,280 --> 01:32:19,880
Speaker 1: You've been listening to Master's in Business on Bloomberg Radio