1 00:00:00,040 --> 00:00:02,640 Speaker 1: Who you put your trust in matters. Investors have put 2 00:00:02,680 --> 00:00:07,000 Speaker 1: their trust and independent registered investment advisors to the two 3 00:00:07,040 --> 00:00:10,680 Speaker 1: and four trillion dollars. Why learn more and find your 4 00:00:10,760 --> 00:00:26,360 Speaker 1: independent advisor dot com. Welcome to the Bloomberg Surveillance Podcast. 5 00:00:26,760 --> 00:00:30,480 Speaker 1: I'm Tom Keene with David Gura. Daily we bring you 6 00:00:30,520 --> 00:00:35,560 Speaker 1: insight from the best in economics, finance, investment, and international relations. 7 00:00:35,960 --> 00:00:40,559 Speaker 1: Find Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot com, and 8 00:00:40,640 --> 00:00:48,000 Speaker 1: of course, on the Bloomberg. In keeping with the central 9 00:00:48,000 --> 00:00:49,920 Speaker 1: banking theme of the show theme of the day, Jean 10 00:00:49,960 --> 00:00:52,920 Speaker 1: Claude Triche, former president d CP, former Governor of the 11 00:00:52,920 --> 00:00:55,480 Speaker 1: Bank of France and now Chairman of the Group of Thirty, 12 00:00:55,840 --> 00:00:59,160 Speaker 1: joins us from Paris. Good morning, Good morning. We'll talk 13 00:00:59,200 --> 00:01:00,960 Speaker 1: about a central banking in a bit, I'm sure, but 14 00:01:01,040 --> 00:01:03,320 Speaker 1: let's start with a new report out from the G 15 00:01:03,560 --> 00:01:06,920 Speaker 1: thirty looking at shadow banking and capital markets risks and 16 00:01:06,959 --> 00:01:09,360 Speaker 1: opportunities there in. And I should start with the basic 17 00:01:09,440 --> 00:01:11,680 Speaker 1: question here we heard about the role that shadow banking 18 00:01:11,680 --> 00:01:15,040 Speaker 1: played in the financial crisis. Of course, how have things 19 00:01:15,120 --> 00:01:18,760 Speaker 1: changed here in the intervening seven or eight years. Well, 20 00:01:19,000 --> 00:01:22,479 Speaker 1: I would say that we have made progress because, as 21 00:01:22,480 --> 00:01:26,319 Speaker 1: you remember, the crisis itself was very much associated with 22 00:01:27,520 --> 00:01:31,479 Speaker 1: abnormal shadow banking behavior, with the c dos that were 23 00:01:32,160 --> 00:01:36,679 Speaker 1: dramatically dangerous, the A B, C, p DA, setback, securities, 24 00:01:37,200 --> 00:01:40,479 Speaker 1: the structure, investment vehicles, and so forth, all this has 25 00:01:40,480 --> 00:01:44,080 Speaker 1: diminished considerably. So if I look at the advanced economy, 26 00:01:44,120 --> 00:01:47,200 Speaker 1: I would say we have made progress in this respect, 27 00:01:47,760 --> 00:01:50,840 Speaker 1: and we have to be vigilant. Of course, we have 28 00:01:50,920 --> 00:01:54,040 Speaker 1: to remain very prudent and cautious, but progress we are made. 29 00:01:54,320 --> 00:01:57,560 Speaker 1: Where I am and we are in the G thirty 30 00:01:57,880 --> 00:02:02,559 Speaker 1: less I would say optimistic is that at the level 31 00:02:02,800 --> 00:02:06,080 Speaker 1: of the world, at the level of the global economy, 32 00:02:06,200 --> 00:02:11,040 Speaker 1: we see that leverage has augmented since the crisis. The 33 00:02:11,120 --> 00:02:15,200 Speaker 1: global debt as a proportion of GDP came at the 34 00:02:15,200 --> 00:02:20,000 Speaker 1: global level from two hundred and seventy four up to 35 00:02:20,240 --> 00:02:25,840 Speaker 1: two hundred and so an increase of seventy trillion dollars. 36 00:02:25,880 --> 00:02:29,400 Speaker 1: So it's big, and it means that the overall leverage 37 00:02:29,639 --> 00:02:34,000 Speaker 1: is even higher today that it was just big at 38 00:02:34,040 --> 00:02:37,720 Speaker 1: the eve of the crisis. So again, no no room 39 00:02:37,800 --> 00:02:42,400 Speaker 1: for complacency in any respect. You invoke some of those abbreviations. 40 00:02:42,400 --> 00:02:45,399 Speaker 1: There is an opacity to shadow banking that has made 41 00:02:45,400 --> 00:02:47,880 Speaker 1: it hard to regulate in the past. How satisfied are 42 00:02:47,919 --> 00:02:52,440 Speaker 1: you with the regulatory apparatus looking at shadow banking right now? Well, 43 00:02:52,480 --> 00:02:55,440 Speaker 1: I think that we have to continue to work because 44 00:02:55,639 --> 00:02:59,120 Speaker 1: a lot has been done on the banks themselves, and 45 00:02:59,720 --> 00:03:03,160 Speaker 1: that is uh in my opinion, good and has been 46 00:03:03,160 --> 00:03:06,200 Speaker 1: done well. It's a working progress, but a lot has 47 00:03:06,240 --> 00:03:10,840 Speaker 1: been done in shadow banking. We are in a universe 48 00:03:10,880 --> 00:03:16,040 Speaker 1: which is more complex, which is objectively less regulated, and 49 00:03:16,080 --> 00:03:19,320 Speaker 1: we have to be prudent again as I said, and cautious, 50 00:03:19,360 --> 00:03:22,760 Speaker 1: and we have a number of recommendations that we are 51 00:03:22,840 --> 00:03:26,679 Speaker 1: sending to regulators and policy makers and that are part 52 00:03:26,840 --> 00:03:29,240 Speaker 1: if I may of the message of the G thirty 53 00:03:29,360 --> 00:03:33,320 Speaker 1: in this domain, it's a good work, I have to say, 54 00:03:33,320 --> 00:03:38,640 Speaker 1: if I may make the propaganda myself, and particularly add 55 00:03:38,680 --> 00:03:42,200 Speaker 1: their Turner, Jacques de la Rosier and Maza Kiawa have 56 00:03:42,320 --> 00:03:48,200 Speaker 1: been working very hard to produce this analysis, which again 57 00:03:48,440 --> 00:03:51,600 Speaker 1: is important. The fact that the global leverage has augmented 58 00:03:52,040 --> 00:03:56,640 Speaker 1: was not perceived in my opinion, sufficiently clearly at a 59 00:03:56,640 --> 00:04:00,880 Speaker 1: global level. Again, I saw the report and as you mentioned, 60 00:04:01,440 --> 00:04:04,680 Speaker 1: Lord Turner involved, I really was quite taken with a 61 00:04:04,720 --> 00:04:09,960 Speaker 1: balance sheet analysis. Within the report, Jean Clautriche arguably defined 62 00:04:10,040 --> 00:04:13,800 Speaker 1: the European Central Bank Mr Dusenberg preceding him, but Jean 63 00:04:13,840 --> 00:04:17,360 Speaker 1: Clautriche giving an identity to the bank that, of course 64 00:04:17,440 --> 00:04:22,520 Speaker 1: Mr drog has carried forward President Triche instead of a 65 00:04:22,600 --> 00:04:25,719 Speaker 1: look back, and of course the courageous look forward of 66 00:04:25,800 --> 00:04:29,880 Speaker 1: your G thirty report help me here with the task 67 00:04:30,080 --> 00:04:34,279 Speaker 1: in front for chair yelling. Clearly there's a massive administration 68 00:04:34,839 --> 00:04:38,560 Speaker 1: government change, if you will, in Washington. What should a 69 00:04:38,640 --> 00:04:43,800 Speaker 1: central bank had do when they see such political change? 70 00:04:44,720 --> 00:04:49,000 Speaker 1: First of all, I would say the banks have been 71 00:04:49,040 --> 00:04:53,120 Speaker 1: made the central banks have been made independent the world over, 72 00:04:54,200 --> 00:05:00,160 Speaker 1: because the anchoring of expectations is extremely important. And I 73 00:05:00,240 --> 00:05:03,640 Speaker 1: have to say that the experience of the crisis demonstrated 74 00:05:03,680 --> 00:05:07,200 Speaker 1: even more how important it was to rely upon a 75 00:05:07,360 --> 00:05:12,680 Speaker 1: solid institution that would anchor expectations. So I expect, of 76 00:05:12,720 --> 00:05:19,320 Speaker 1: course the said in any circumstance to remain this independent anchor, 77 00:05:20,160 --> 00:05:26,279 Speaker 1: which reassure if I may, all investors, savers, market participants. Now, 78 00:05:26,360 --> 00:05:30,120 Speaker 1: of course we will see exactly what are the new 79 00:05:30,160 --> 00:05:35,960 Speaker 1: policies that that envisage and will be implemented, and the 80 00:05:36,000 --> 00:05:40,240 Speaker 1: federal Reserve will take into account all this to produce 81 00:05:40,400 --> 00:05:43,200 Speaker 1: what it is called to produce, namely, as you know 82 00:05:43,279 --> 00:05:49,480 Speaker 1: better than anybody, goth jobs and price stability in line 83 00:05:49,720 --> 00:05:54,240 Speaker 1: with the definition which has been decided upon in two 84 00:05:54,279 --> 00:05:58,760 Speaker 1: thousand and twelve and is the same in all central 85 00:05:58,760 --> 00:06:01,440 Speaker 1: banks of the advanced economy. You know, we have the 86 00:06:01,560 --> 00:06:05,760 Speaker 1: same definition of pressibility in the US, in Japan, in 87 00:06:05,800 --> 00:06:08,320 Speaker 1: the r in Europe. But this is critical and I 88 00:06:08,400 --> 00:06:10,560 Speaker 1: spoke of this to Madame Legard the other day her 89 00:06:10,640 --> 00:06:14,120 Speaker 1: conversation with our John Michael Twaite, and I interrupted John 90 00:06:14,200 --> 00:06:17,120 Speaker 1: Rude Lee President Richie, not that I would ever do that, 91 00:06:17,680 --> 00:06:20,039 Speaker 1: but I interrupted Mr Michael Twaite, and I talked to 92 00:06:20,120 --> 00:06:25,279 Speaker 1: Madame Legarde about the tendency in our politics towards zero 93 00:06:25,400 --> 00:06:30,320 Speaker 1: sum analysis and even a new mercantile is m across 94 00:06:30,400 --> 00:06:34,159 Speaker 1: some of our societies. Do you detect the Europe and 95 00:06:34,200 --> 00:06:39,320 Speaker 1: the United States is moving towards more mercantile list relationship. 96 00:06:40,880 --> 00:06:46,960 Speaker 1: I clearly see danger there. I don't hesitate to say 97 00:06:46,960 --> 00:06:53,159 Speaker 1: that it is the open markets. It is the international 98 00:06:53,360 --> 00:06:56,880 Speaker 1: trade which has been playing a very important role in 99 00:06:57,040 --> 00:07:02,240 Speaker 1: elevating the standard of leaving of the entire world. Of course, 100 00:07:02,560 --> 00:07:07,160 Speaker 1: mainly the emerging economies India, China, Brasil in Mexico and 101 00:07:07,839 --> 00:07:14,280 Speaker 1: also permitted to augment the facility that the advanced economy 102 00:07:14,800 --> 00:07:19,720 Speaker 1: citizens have in purchasing goods and services. So we are 103 00:07:19,800 --> 00:07:22,680 Speaker 1: living in the universe where we have to recognize that 104 00:07:23,600 --> 00:07:28,840 Speaker 1: the world has been helped by international trade. That being said, 105 00:07:29,000 --> 00:07:32,360 Speaker 1: it is clear that in all advanced economy we have 106 00:07:32,480 --> 00:07:39,560 Speaker 1: to cope with anxiety coming from a part of our citizens. 107 00:07:39,600 --> 00:07:43,480 Speaker 1: And this anxiety I interpreted as you know, they are 108 00:07:43,560 --> 00:07:47,080 Speaker 1: telling us things are going very rapidly, maybe too rapidly. 109 00:07:47,520 --> 00:07:50,800 Speaker 1: Science and technology is going extronly rapidly, and we cannot 110 00:07:51,000 --> 00:07:55,760 Speaker 1: we cannot slow down science and technology. The growth of 111 00:07:55,840 --> 00:07:59,080 Speaker 1: India and China is going extremely rapidly and we have 112 00:07:59,280 --> 00:08:03,240 Speaker 1: no way to to tell them you should, you know, 113 00:08:03,480 --> 00:08:07,720 Speaker 1: moderate your growth when we know that they are still 114 00:08:07,760 --> 00:08:10,080 Speaker 1: at a level of standard of living which is very 115 00:08:10,080 --> 00:08:13,040 Speaker 1: low in comparison with us. So we have to take 116 00:08:13,080 --> 00:08:16,600 Speaker 1: that into account. It's a complex world. It's a complex 117 00:08:16,600 --> 00:08:22,440 Speaker 1: world with anxiety coming from some of our citizens, part 118 00:08:22,520 --> 00:08:26,000 Speaker 1: of our citizens which are very very loud and clear 119 00:08:26,680 --> 00:08:29,400 Speaker 1: in the present period, both I would say, in the US, 120 00:08:29,480 --> 00:08:32,600 Speaker 1: in the UK, and in a continental Europe, not to 121 00:08:32,640 --> 00:08:37,720 Speaker 1: speak of Japan, and that calls for you know, very 122 00:08:37,840 --> 00:08:42,199 Speaker 1: very tough in my opinion, policies in terms of education 123 00:08:42,559 --> 00:08:49,240 Speaker 1: or training, permanent education, retraining and taking care of the 124 00:08:49,320 --> 00:08:52,600 Speaker 1: people that are you know, in a situation which is 125 00:08:52,720 --> 00:08:58,280 Speaker 1: obviously difficult because of the rapidity of the changes. Thank 126 00:08:58,280 --> 00:09:01,360 Speaker 1: you so much, greatly appreciated and congratulations on your G 127 00:09:01,559 --> 00:09:06,160 Speaker 1: thirty report on central on shadow banking and central banking 128 00:09:06,720 --> 00:09:22,360 Speaker 1: as well. Here on FED Day, I want to bring 129 00:09:22,360 --> 00:09:25,240 Speaker 1: in Peter who per, chief economist at Deutsche Bank as 130 00:09:25,280 --> 00:09:27,640 Speaker 1: we begin our coverage here ahead of that FED meeting 131 00:09:27,920 --> 00:09:30,360 Speaker 1: it's conclusion at two pm Eastern time. Peter, what are 132 00:09:30,360 --> 00:09:32,200 Speaker 1: you gonna be listening for today? As we've been been 133 00:09:32,240 --> 00:09:34,199 Speaker 1: saying all morning here, the odds of a FED hike 134 00:09:34,520 --> 00:09:38,000 Speaker 1: seem all priced in and probability through FED funds futures. 135 00:09:38,000 --> 00:09:39,640 Speaker 1: What are you gonna be listening for when FED? You're 136 00:09:39,679 --> 00:09:42,720 Speaker 1: Jenny Ellen speaks that shortly after the release of that statement. Well, 137 00:09:43,360 --> 00:09:46,720 Speaker 1: there's an awful lot that can be asked of the chair. 138 00:09:46,840 --> 00:09:50,439 Speaker 1: First of all, she will be asked, uh, what how 139 00:09:50,440 --> 00:09:53,359 Speaker 1: do how does she see policy in the new administration 140 00:09:53,360 --> 00:09:55,440 Speaker 1: going forward? And how does that affect the FED? And um, 141 00:09:55,600 --> 00:10:01,040 Speaker 1: we got a very thorough we got a very thorough answer. Indeed, Uh, no, 142 00:10:01,240 --> 00:10:04,960 Speaker 1: she can't, she can't really tell us much. The question is, Um, 143 00:10:05,360 --> 00:10:07,920 Speaker 1: it should be pushed a bit and should be asked. 144 00:10:08,000 --> 00:10:12,720 Speaker 1: I think hypothetically, what if we get a significant fiscal expansion, 145 00:10:12,760 --> 00:10:14,800 Speaker 1: what what will the FED do? And there I think 146 00:10:14,840 --> 00:10:18,000 Speaker 1: she has to follow the line that Bill Dudley gave 147 00:10:18,280 --> 00:10:20,320 Speaker 1: earlier this week that yes, of course, if we get 148 00:10:20,520 --> 00:10:23,760 Speaker 1: significant further stimulus to aggregate demand, the FED will be 149 00:10:23,840 --> 00:10:26,440 Speaker 1: raising race faster. So that I think that sort of 150 00:10:26,559 --> 00:10:32,640 Speaker 1: indication that the risks are shifting in that direction will 151 00:10:32,640 --> 00:10:36,559 Speaker 1: be probably the most important thing we get out of it. Um, 152 00:10:36,600 --> 00:10:38,720 Speaker 1: there are a lot of different other things that can 153 00:10:38,760 --> 00:10:44,359 Speaker 1: be addressed, of course, having to do with the potential 154 00:10:44,760 --> 00:10:47,960 Speaker 1: appointments of the FED the coming up. Um, I mean 155 00:10:48,000 --> 00:10:50,280 Speaker 1: they're too empty seats to fill. How will these be filled? 156 00:10:51,600 --> 00:10:53,760 Speaker 1: What does she think about the potential for a new 157 00:10:53,880 --> 00:10:59,319 Speaker 1: vice share of regulator regulatory side of things? Uh? And uh, 158 00:10:59,679 --> 00:11:04,240 Speaker 1: she her her own thoughts on further reappointment herself down 159 00:11:04,240 --> 00:11:08,360 Speaker 1: the road. There you go, she'll she'll skillfully avoid addressing 160 00:11:08,360 --> 00:11:11,000 Speaker 1: a lot of the questions dodged like a pro you know, 161 00:11:11,160 --> 00:11:14,319 Speaker 1: on the point of prisonnel. Uh, Donald Trump has the 162 00:11:14,760 --> 00:11:17,439 Speaker 1: potential here to to put six people, I think, in 163 00:11:17,600 --> 00:11:20,200 Speaker 1: positions at the FED here in the next eighteen months. 164 00:11:20,280 --> 00:11:22,920 Speaker 1: How soon could we see the shape of where the 165 00:11:23,080 --> 00:11:28,480 Speaker 1: sensibility of the FED change. Well, I don't expect this 166 00:11:28,520 --> 00:11:31,520 Speaker 1: will be a topic of much discussion as certainly as 167 00:11:31,679 --> 00:11:38,479 Speaker 1: Asen wears on. UM, I'm not expecting any immediate departures. 168 00:11:38,800 --> 00:11:43,880 Speaker 1: There are two seats to fill now. But if Cherry 169 00:11:43,880 --> 00:11:49,280 Speaker 1: Ellen is not reappointed, UM, I would expect to see um, 170 00:11:49,360 --> 00:11:53,120 Speaker 1: as you say, as many as six people people, as 171 00:11:53,120 --> 00:11:56,040 Speaker 1: many as four additional departing. But I don't expect to 172 00:11:56,040 --> 00:11:58,800 Speaker 1: see a big change until we get into what struck 173 00:11:58,840 --> 00:12:01,320 Speaker 1: me about the last press car for Dr Hooper was 174 00:12:01,400 --> 00:12:05,040 Speaker 1: the conflation of ex post and x anti analysis. And 175 00:12:05,200 --> 00:12:08,400 Speaker 1: through no fault of Cherry yellings, she's been grilled about 176 00:12:08,400 --> 00:12:11,560 Speaker 1: a FED getting out front of the debate versus a 177 00:12:11,640 --> 00:12:14,880 Speaker 1: FREED that is reactive to the discussion. Are we going 178 00:12:14,920 --> 00:12:19,920 Speaker 1: to have that same conversation this afternoon? Uh? I think 179 00:12:19,920 --> 00:12:25,120 Speaker 1: the discussions has changed pretty well. Yeah, that's where I'm head. 180 00:12:25,320 --> 00:12:28,800 Speaker 1: I mean, so so we we were, we were wondering 181 00:12:29,000 --> 00:12:31,800 Speaker 1: if if the market was ever going to catch up 182 00:12:31,840 --> 00:12:35,640 Speaker 1: to the Fed in in terms of expectations H and 183 00:12:35,640 --> 00:12:38,760 Speaker 1: now the market seems to be almost surging ahead in 184 00:12:38,800 --> 00:12:42,440 Speaker 1: their term um UH. The Fed does not have the 185 00:12:42,520 --> 00:12:47,120 Speaker 1: luxury of assuming a major change in policy and and 186 00:12:47,360 --> 00:12:51,680 Speaker 1: UH in terms of making its own forecast going for well, 187 00:12:51,920 --> 00:12:54,240 Speaker 1: it needs to see a little bit more evidence about 188 00:12:54,280 --> 00:12:56,440 Speaker 1: what's gonna be happening. I do think there will be 189 00:12:56,480 --> 00:12:58,880 Speaker 1: some catch up. I think the markets move quite a bit. 190 00:12:59,000 --> 00:13:00,800 Speaker 1: I expect the Fed the move more over the next 191 00:13:00,920 --> 00:13:03,280 Speaker 1: year as well. Really giving us great respect to this 192 00:13:03,320 --> 00:13:06,959 Speaker 1: morning Peter Hooper to frame the Deutsche Bank view, maybe 193 00:13:07,000 --> 00:13:10,040 Speaker 1: it's three percent g DP. It's a reflation that sustains 194 00:13:10,720 --> 00:13:15,840 Speaker 1: UM as well, Dr Hooper. Part of the enthusiasm the 195 00:13:15,920 --> 00:13:19,840 Speaker 1: chairman chair Yelling has to deal with is a consumption 196 00:13:19,920 --> 00:13:25,079 Speaker 1: driven recovery. Everybody's buoyant, the animal spirits which you mentioned earlier. 197 00:13:25,160 --> 00:13:28,240 Speaker 1: Click in and consumption is there. Do you see any 198 00:13:28,280 --> 00:13:33,360 Speaker 1: indication investment picks up? Well? The investment numbers recently have 199 00:13:33,440 --> 00:13:37,480 Speaker 1: continued to be sluggish. I think the the indication is 200 00:13:37,720 --> 00:13:40,800 Speaker 1: what we see in in various surveys of business sentiment, 201 00:13:41,640 --> 00:13:44,960 Speaker 1: the n f I B Small Business, I think corporate 202 00:13:44,960 --> 00:13:48,320 Speaker 1: America beginning to look up just the stock market as 203 00:13:48,320 --> 00:13:52,080 Speaker 1: an indication that things are on a on a on 204 00:13:52,120 --> 00:13:55,760 Speaker 1: an upward tilt here. But but much of this is 205 00:13:55,800 --> 00:13:58,360 Speaker 1: still forward looking. Much of it is based on the 206 00:13:58,400 --> 00:14:01,520 Speaker 1: fact that business investment has been in the doldrums for 207 00:14:01,600 --> 00:14:06,400 Speaker 1: the last five years. Business capital stock relative labor is 208 00:14:06,640 --> 00:14:12,160 Speaker 1: uh at all growth at all time, lows, productivity extremely low. 209 00:14:12,559 --> 00:14:14,439 Speaker 1: We have a long way to go. There's a lot 210 00:14:14,480 --> 00:14:17,600 Speaker 1: of potential, I think, and uh, it's it's ah, there's 211 00:14:17,640 --> 00:14:20,880 Speaker 1: there's reason to be hopeful. The early signs seemed to 212 00:14:20,920 --> 00:14:24,760 Speaker 1: be pointing in that direction. What's the biggest deficits in 213 00:14:24,520 --> 00:14:26,560 Speaker 1: the US economy right now as you see it is? It? 214 00:14:26,720 --> 00:14:30,760 Speaker 1: Is it productivity? I think. I think the rate of 215 00:14:30,880 --> 00:14:34,840 Speaker 1: productivity expansion over the last five five and a half 216 00:14:35,000 --> 00:14:39,360 Speaker 1: years for overall g d P has been essentially zero. 217 00:14:40,040 --> 00:14:42,680 Speaker 1: Nonfarm business has been half a percent. But that tends 218 00:14:42,720 --> 00:14:45,920 Speaker 1: to grow faster than the overall economy. So yes, that 219 00:14:46,160 --> 00:14:49,560 Speaker 1: that is certainly the big negative. How does this this 220 00:14:49,640 --> 00:14:51,880 Speaker 1: central bank? How does the FED deal with inflation being 221 00:14:52,480 --> 00:14:54,240 Speaker 1: where it is? We were listening to Mario drag you 222 00:14:54,360 --> 00:14:56,920 Speaker 1: last week, and he tried to address how those policy 223 00:14:56,960 --> 00:14:59,760 Speaker 1: makers seen his colleagues went through to make their decision, 224 00:15:00,480 --> 00:15:02,320 Speaker 1: paying some attention to the fact inflation is that where 225 00:15:02,320 --> 00:15:03,680 Speaker 1: they wanted to be. How does the FED do the 226 00:15:03,760 --> 00:15:07,440 Speaker 1: same thing today? Well, I mean they say, it's uh, 227 00:15:08,800 --> 00:15:11,640 Speaker 1: it's still lower than they'd like to see it. I 228 00:15:11,760 --> 00:15:13,720 Speaker 1: think there are signs that's beginning to move in the 229 00:15:13,840 --> 00:15:17,400 Speaker 1: right direction. Certainly, inflation expectations have picked up pretty impressively, 230 00:15:17,520 --> 00:15:21,920 Speaker 1: the market, the inflation compensation numbers bouncing back pretty sharply, 231 00:15:22,960 --> 00:15:25,560 Speaker 1: the Michigan survey beginning to take up just a little bit. 232 00:15:25,720 --> 00:15:28,320 Speaker 1: So there are early signs there. But I think the 233 00:15:29,880 --> 00:15:32,160 Speaker 1: the way the Fed will hint at it today will 234 00:15:32,320 --> 00:15:34,480 Speaker 1: be a recognition of the fact that the unemployment rate 235 00:15:34,520 --> 00:15:37,800 Speaker 1: has fallen quite a bit. Further, we're down to four six, 236 00:15:38,320 --> 00:15:42,000 Speaker 1: We're below what they were saying nehru is and and 237 00:15:42,520 --> 00:15:45,640 Speaker 1: we're starting to see some pressure on wages. Plus the 238 00:15:45,680 --> 00:15:48,400 Speaker 1: former presidency here the Philadelphia Fed set where you're sitting 239 00:15:48,440 --> 00:15:52,880 Speaker 1: today yesterday and I asked him about unanimity and all 240 00:15:52,960 --> 00:15:57,080 Speaker 1: that we've heard from FED presidents, some from FED governors 241 00:15:57,120 --> 00:15:58,560 Speaker 1: as well, and he says it's a good thing that 242 00:15:58,640 --> 00:16:00,480 Speaker 1: we get such a diversity view, that we hear from 243 00:16:00,520 --> 00:16:02,240 Speaker 1: so many people that they're available for interviews and they 244 00:16:02,280 --> 00:16:05,200 Speaker 1: give that speeches. Is it a good thing in your view? 245 00:16:05,320 --> 00:16:07,720 Speaker 1: Or is it adding to the confusion the lack of transparency, 246 00:16:07,760 --> 00:16:10,360 Speaker 1: the lack of clarity from from this FED reserve. Well, 247 00:16:10,440 --> 00:16:12,960 Speaker 1: you know, this was a topic of quite a bit 248 00:16:13,000 --> 00:16:17,320 Speaker 1: of analysis and discussion at a conference in Washington Brookings 249 00:16:17,400 --> 00:16:19,960 Speaker 1: had a couple of weeks ago I happened to participate in, 250 00:16:20,160 --> 00:16:23,760 Speaker 1: and this was a One of the key themes was 251 00:16:23,880 --> 00:16:29,160 Speaker 1: the cacophony that is raised bye bye by the cloud 252 00:16:29,280 --> 00:16:34,800 Speaker 1: of FED speeches. UH. FED presidents have a duty to 253 00:16:35,040 --> 00:16:37,840 Speaker 1: inform their constituents about how they're thinking about things. But 254 00:16:37,960 --> 00:16:41,760 Speaker 1: I think things could be done a little bit more clearly. Um. 255 00:16:42,440 --> 00:16:46,320 Speaker 1: Two suggestions were made. One is that at the if 256 00:16:46,400 --> 00:16:48,520 Speaker 1: it's a meeting without a press conference, at which the 257 00:16:49,120 --> 00:16:51,480 Speaker 1: the chair can explain things a little more fully the 258 00:16:52,040 --> 00:16:57,080 Speaker 1: varying range of views, the statement might might spell this 259 00:16:57,160 --> 00:16:59,200 Speaker 1: out a little more clearly, some more minutes like yeah, 260 00:16:59,320 --> 00:17:03,960 Speaker 1: allowing allowing UH speakers when they go out and say 261 00:17:04,200 --> 00:17:08,200 Speaker 1: here's here's here's here's what the consensus says, here's what 262 00:17:08,359 --> 00:17:11,280 Speaker 1: my view is and why it differs. So just to 263 00:17:11,720 --> 00:17:14,680 Speaker 1: just to reduce some of the uncertain the arch debate 264 00:17:14,800 --> 00:17:19,440 Speaker 1: here is we have a president elect, whatever anybody's politics, 265 00:17:19,480 --> 00:17:23,080 Speaker 1: who was elected by an angry people from coast becaust 266 00:17:23,119 --> 00:17:26,919 Speaker 1: Richard Cohen's outed in the Washington Post capture this beautifully 267 00:17:27,440 --> 00:17:32,080 Speaker 1: about those people versus them people. The FED represents the 268 00:17:32,240 --> 00:17:34,879 Speaker 1: East Coast and clearly represents, in the mind of a 269 00:17:34,960 --> 00:17:38,720 Speaker 1: lot of Americans the elites. Is there going to be 270 00:17:39,000 --> 00:17:43,640 Speaker 1: a pressure to be devish when it is a hawkish time? 271 00:17:43,800 --> 00:17:48,600 Speaker 1: Is that the arch question for Cherry Yelling. Well, Cherry 272 00:17:48,640 --> 00:17:52,920 Speaker 1: Yellen is not a reconstructed dove by any stretch. She's 273 00:17:52,960 --> 00:17:54,959 Speaker 1: been hawkish in the past, and she will be hawkish 274 00:17:55,000 --> 00:17:57,040 Speaker 1: in the future when when the time. This is an 275 00:17:57,040 --> 00:18:00,680 Speaker 1: important statement. You you believe within the research of the 276 00:18:00,760 --> 00:18:03,840 Speaker 1: former president of San Francisco FED, that there's been times 277 00:18:03,880 --> 00:18:07,880 Speaker 1: where Cherry Yelling has been hawkish. Oh, absolutely, I would 278 00:18:07,880 --> 00:18:11,440 Speaker 1: say Mr Henseling probably would disagree with you. Well, he 279 00:18:11,920 --> 00:18:13,359 Speaker 1: needs to go back and take a look at the 280 00:18:13,400 --> 00:18:16,840 Speaker 1: record of Cherry Yellen as a governor in the nineteen 281 00:18:16,960 --> 00:18:20,440 Speaker 1: nineties when she was pushing Alan Green's Band to raise 282 00:18:20,520 --> 00:18:24,400 Speaker 1: rates faster because the unemployment rate had fallen below NEHRU 283 00:18:24,560 --> 00:18:28,200 Speaker 1: and inflation was a risk. Now, the chairman at the 284 00:18:28,280 --> 00:18:34,600 Speaker 1: time saw productivity boom uh coming along and keeping inflation 285 00:18:34,880 --> 00:18:37,800 Speaker 1: in check, and that was an unexpected development and he'd 286 00:18:37,800 --> 00:18:41,960 Speaker 1: proved right. But at the time Yelling was was arguing, 287 00:18:42,080 --> 00:18:47,399 Speaker 1: based on what was reasonably sound economic analysis, that that 288 00:18:47,520 --> 00:18:51,359 Speaker 1: should be more aggressive. You know. So it's been appropriate 289 00:18:51,400 --> 00:18:53,439 Speaker 1: to be dlish up to this point because inflation has 290 00:18:53,440 --> 00:18:56,720 Speaker 1: been too low. Once inflation moves to being too high, 291 00:18:56,880 --> 00:18:59,719 Speaker 1: I think you'll see uh, different stripes coming out here. 292 00:19:00,119 --> 00:19:02,440 Speaker 1: Tom brings up that the gentleman from from Texas, Mr 293 00:19:02,480 --> 00:19:04,600 Speaker 1: henser Ling, and there is this move on Capitol Hill 294 00:19:04,680 --> 00:19:07,480 Speaker 1: to reform the way the FED works, or form the 295 00:19:07,520 --> 00:19:10,280 Speaker 1: way that relationship is structure between Congress and the Fed Reserve. 296 00:19:10,359 --> 00:19:12,639 Speaker 1: How do you begin to to forecast what that might 297 00:19:12,720 --> 00:19:14,600 Speaker 1: mean for for the economy if we do have a 298 00:19:14,680 --> 00:19:17,680 Speaker 1: Congress that wields more control, it takes some more active 299 00:19:17,760 --> 00:19:20,280 Speaker 1: role with control of the Fed. This is a very 300 00:19:20,320 --> 00:19:23,159 Speaker 1: good question, one that I hope comes up this afternoon, uh, 301 00:19:23,280 --> 00:19:25,080 Speaker 1: and to be interesting to see how it's answered. But 302 00:19:25,280 --> 00:19:30,240 Speaker 1: but so I think there's been reluctance to a couple 303 00:19:30,240 --> 00:19:32,440 Speaker 1: of pushes are probably the major one is we'd like 304 00:19:32,520 --> 00:19:35,360 Speaker 1: to FED too be more rules based, so we can 305 00:19:35,800 --> 00:19:39,760 Speaker 1: understand the basis for their decisions more clearly. The problem 306 00:19:39,920 --> 00:19:43,680 Speaker 1: is that there are many rules uh and uh. The 307 00:19:44,000 --> 00:19:46,159 Speaker 1: key parameters on any one of these rules is a 308 00:19:46,760 --> 00:19:49,960 Speaker 1: is a very uncertain concept where what is neighru what 309 00:19:50,119 --> 00:19:54,920 Speaker 1: is a full employment? What is the natural rate of interest? Etcetera, etcetera. 310 00:19:55,960 --> 00:19:59,280 Speaker 1: But I think perhaps more can be done by the 311 00:19:59,359 --> 00:20:04,680 Speaker 1: FED to try I to come to a closer agreement 312 00:20:04,720 --> 00:20:07,480 Speaker 1: about what their reaction function is, how they're going to 313 00:20:07,560 --> 00:20:11,120 Speaker 1: be responding to various to to you know, various under 314 00:20:11,160 --> 00:20:14,159 Speaker 1: various scenarios. And that does movie a little bit closer 315 00:20:14,240 --> 00:20:17,680 Speaker 1: to a rule. I think the senses that the the 316 00:20:17,800 --> 00:20:21,040 Speaker 1: view and the in Congress on the Republican side is 317 00:20:21,119 --> 00:20:23,440 Speaker 1: softening a little bit on on the on the demands here. 318 00:20:24,040 --> 00:20:26,199 Speaker 1: They don't want to put the FED in a straight jacket. 319 00:20:26,240 --> 00:20:30,200 Speaker 1: They and now that you have a Republican administration coming 320 00:20:30,200 --> 00:20:32,240 Speaker 1: into office, that's not going to be another interest to 321 00:20:32,320 --> 00:20:37,119 Speaker 1: see rates marching upward aggressively. Well, that's right, that's right. 322 00:20:37,119 --> 00:20:39,159 Speaker 1: We're want to go marching the second derivative of what 323 00:20:39,240 --> 00:20:41,560 Speaker 1: we're talking about here, are we falling back into a 324 00:20:41,640 --> 00:20:45,480 Speaker 1: green span measured quarter point quarter point quarter point or 325 00:20:45,520 --> 00:20:48,920 Speaker 1: do we need a little more Arthur Burns aggressiveness. I 326 00:20:49,040 --> 00:20:50,560 Speaker 1: think we're going to be seeing a little bit more 327 00:20:50,600 --> 00:20:53,240 Speaker 1: of the ladder going forward if if things pan out 328 00:20:54,160 --> 00:20:57,280 Speaker 1: we expect. That's a that's a huge statement by Dr 329 00:20:57,359 --> 00:21:01,680 Speaker 1: Hooper there, folks. That is clearly outside the consensus thinking 330 00:21:02,400 --> 00:21:05,399 Speaker 1: right now. Peter Hooper with Deutsche Bank, thank you so much, 331 00:21:05,520 --> 00:21:08,320 Speaker 1: most generous of you on this busy morning, uh, this 332 00:21:08,520 --> 00:21:21,280 Speaker 1: fed day is well. Who you put your trust in matters. 333 00:21:21,480 --> 00:21:26,080 Speaker 1: Investors have put their trust in independent registered investment advisors 334 00:21:26,440 --> 00:21:29,159 Speaker 1: to the two and of four trillion dollars. Why they 335 00:21:29,240 --> 00:21:32,520 Speaker 1: see their roles to serve, not sell. That's why Charles 336 00:21:32,560 --> 00:21:36,960 Speaker 1: Schwab is committed to the success over seven thousand independent 337 00:21:37,080 --> 00:21:42,840 Speaker 1: financial advisors who passionately dedicate themselves to helping people achieve 338 00:21:43,200 --> 00:21:48,040 Speaker 1: their financial goals. Learn more and find your independent advisor 339 00:21:48,480 --> 00:21:56,040 Speaker 1: dot com. Let's get right to it with Michael Mayo. 340 00:21:56,359 --> 00:21:58,800 Speaker 1: What a run for these stocks? What a moon shot 341 00:21:59,320 --> 00:22:02,920 Speaker 1: on a monthly chart? JP Morgan is our three standard deviations? 342 00:22:03,720 --> 00:22:07,280 Speaker 1: Does even Michael Mayo go to holds across the board. 343 00:22:07,840 --> 00:22:09,520 Speaker 1: But while Tom, we were with you at back in 344 00:22:09,600 --> 00:22:11,240 Speaker 1: the spring and we said we were more bullish on 345 00:22:11,320 --> 00:22:15,000 Speaker 1: banks been in twenty years. Um. Bank stocks, even with 346 00:22:15,160 --> 00:22:17,560 Speaker 1: the rally, are still at the same level where they 347 00:22:17,600 --> 00:22:20,360 Speaker 1: were sixteen years ago. So a lot of the move 348 00:22:20,440 --> 00:22:23,680 Speaker 1: in the banks docks is catch up better recognition for 349 00:22:23,760 --> 00:22:28,080 Speaker 1: the strong foundation. And yes, some hope that the new 350 00:22:28,119 --> 00:22:32,040 Speaker 1: administration will facilitate faster growth which would help banks in 351 00:22:32,160 --> 00:22:36,520 Speaker 1: Goldman Sachs with your published enthusiasm of October now enjoying 352 00:22:37,840 --> 00:22:41,240 Speaker 1: per share. Let me focus particularly for Global Wall Street, 353 00:22:41,320 --> 00:22:44,800 Speaker 1: our audience in New York and London that listens religiously 354 00:22:45,480 --> 00:22:49,520 Speaker 1: on the religious change at Goldman Sachs. Is it a 355 00:22:49,720 --> 00:22:53,200 Speaker 1: general I mean Mr blank Find has been ill, wonderful 356 00:22:53,280 --> 00:22:58,159 Speaker 1: recovery from cancer. Mr Khne moves on to the Trump administration. 357 00:22:58,960 --> 00:23:02,879 Speaker 1: Is it organized change? Is it a seat change? Is 358 00:23:02,960 --> 00:23:07,560 Speaker 1: it a generational change? This is a natural change. At first, 359 00:23:07,960 --> 00:23:11,320 Speaker 1: the CEO, Lloyd blank Find is healthy and the moves 360 00:23:11,359 --> 00:23:14,560 Speaker 1: at Goldman show that Lloyd blank Find CEO it's not 361 00:23:14,720 --> 00:23:18,760 Speaker 1: going anywhere anytime soon. So the number two, Gary Cohne 362 00:23:19,600 --> 00:23:22,720 Speaker 1: moving to government and that a lot of Goldman people 363 00:23:22,840 --> 00:23:24,600 Speaker 1: do that from time to time. And then you have 364 00:23:24,800 --> 00:23:29,160 Speaker 1: the two new chief operating officers. Since eighteen sixty nine, 365 00:23:29,200 --> 00:23:32,240 Speaker 1: Goldman Sachs has all been has been about serving clients. 366 00:23:32,720 --> 00:23:36,760 Speaker 1: So the head of investment banking uh David Solomon, he's 367 00:23:36,800 --> 00:23:40,160 Speaker 1: about clients on the investment banking side. Harvey Schwartz, he's 368 00:23:40,200 --> 00:23:43,000 Speaker 1: been better with clients on the trading and capital market 369 00:23:43,080 --> 00:23:45,240 Speaker 1: side as well as the CFO the last few years. 370 00:23:45,320 --> 00:23:48,879 Speaker 1: So and in fact, Goldman hasn't had much change the 371 00:23:49,000 --> 00:23:51,080 Speaker 1: last few years. So the recent changes there, it's a 372 00:23:51,160 --> 00:23:54,280 Speaker 1: degree of catchup for the flow of management upward. How 373 00:23:54,320 --> 00:23:56,520 Speaker 1: does this co president role tend to work out? You 374 00:23:56,600 --> 00:23:59,120 Speaker 1: have two people sharing a job like that. I hate 375 00:23:59,160 --> 00:24:02,760 Speaker 1: co roles at all the banks that I cover, but 376 00:24:02,880 --> 00:24:05,560 Speaker 1: I will say somehow Goldman has made it work better 377 00:24:05,600 --> 00:24:08,320 Speaker 1: than others. In fact, you know, Tom will remember when 378 00:24:08,320 --> 00:24:11,119 Speaker 1: we talked about City Group. When that merger happened, we 379 00:24:11,640 --> 00:24:14,360 Speaker 1: caught it Noah's Ark because they brought two of every 380 00:24:14,440 --> 00:24:17,359 Speaker 1: manager along that was with Travelers and the City Groups. 381 00:24:17,400 --> 00:24:20,920 Speaker 1: So we hate cocy co rolled, but Goldman's made it work. 382 00:24:21,000 --> 00:24:23,920 Speaker 1: Sometimes they have dual rolls sometimes they have three people 383 00:24:24,000 --> 00:24:26,159 Speaker 1: in the same role and it's just part of their 384 00:24:26,160 --> 00:24:28,960 Speaker 1: corporate culture. Does this bank have any trouble retaining talent? 385 00:24:29,040 --> 00:24:30,920 Speaker 1: We were talking to Lena lauron, one of our gad 386 00:24:30,960 --> 00:24:33,359 Speaker 1: Flight columnists Space in London, about Michael Sherwood leaving the 387 00:24:33,600 --> 00:24:36,920 Speaker 1: European Operation at a fairly young age. Still here we 388 00:24:36,960 --> 00:24:39,479 Speaker 1: have some jostling at the top ranks, but is there 389 00:24:39,520 --> 00:24:41,679 Speaker 1: growing frustration among those who realize that there isn't much 390 00:24:41,720 --> 00:24:44,600 Speaker 1: movement within the bank. Well. As an analyst, we always 391 00:24:44,680 --> 00:24:47,240 Speaker 1: have to look at potential red flags. When you have 392 00:24:47,359 --> 00:24:50,240 Speaker 1: different people leaving, you know, it gets your attention. But 393 00:24:50,320 --> 00:24:51,959 Speaker 1: we try to connect the dots and we haven't been 394 00:24:51,960 --> 00:24:54,960 Speaker 1: able to do so. Again, Goldman's had less than typical 395 00:24:55,600 --> 00:24:58,040 Speaker 1: uh you know, change in their managements. There's some of 396 00:24:58,080 --> 00:25:00,320 Speaker 1: this is just natural, Mike Man, this is a great 397 00:25:00,640 --> 00:25:06,080 Speaker 1: time to pause on this. The media particularly it's blank 398 00:25:06,119 --> 00:25:10,000 Speaker 1: find blank, find Gorman, Gorman tm TM whatever you know. 399 00:25:10,160 --> 00:25:13,200 Speaker 1: Stump stump stump for aw long is your well's far ago. 400 00:25:13,840 --> 00:25:15,960 Speaker 1: And yet you look at the management kid immunity of 401 00:25:16,000 --> 00:25:20,320 Speaker 1: Goldman Sachs and it's an eclectic group of deeply experienced 402 00:25:20,520 --> 00:25:24,640 Speaker 1: people like it every other firm. What's the number one 403 00:25:24,840 --> 00:25:28,320 Speaker 1: thing the media gets wrong and its coverage of any 404 00:25:28,480 --> 00:25:32,120 Speaker 1: firm in this case, Goldman Sacks. What what drives Mike 405 00:25:32,359 --> 00:25:37,280 Speaker 1: Mayo nuts about the coverage of your Wall Street I'm 406 00:25:37,280 --> 00:25:39,000 Speaker 1: gonna not give you the answer you want right away. 407 00:25:39,040 --> 00:25:42,240 Speaker 1: I mean the coverage was definitely right around the time 408 00:25:42,280 --> 00:25:46,160 Speaker 1: it financial crisis. I mean banks took too much risk. 409 00:25:46,200 --> 00:25:48,440 Speaker 1: There are many chefs in the crisis kitchen, and the 410 00:25:48,520 --> 00:25:51,879 Speaker 1: banking industry deserved a lot of the body blow that 411 00:25:51,960 --> 00:25:54,800 Speaker 1: they had to take. What's frustrating to me is that 412 00:25:55,240 --> 00:25:59,320 Speaker 1: the foundation of Goldman and the banking industry, the balance 413 00:25:59,359 --> 00:26:02,080 Speaker 1: sheets are the strongest that they've been in a generation. 414 00:26:02,480 --> 00:26:07,040 Speaker 1: That's still underappreciated by investors, the government, and i'd say 415 00:26:07,080 --> 00:26:10,119 Speaker 1: the public at large. Thank you regulators for making banks 416 00:26:10,320 --> 00:26:13,119 Speaker 1: as strong as they are today with record capital and 417 00:26:13,240 --> 00:26:16,120 Speaker 1: record liquidity. You're not You're not having any banks fail 418 00:26:16,320 --> 00:26:18,159 Speaker 1: anytime soon. Now. We have to be vigilant to make 419 00:26:18,200 --> 00:26:20,239 Speaker 1: sure you don't take the excess it's like you had 420 00:26:20,280 --> 00:26:23,480 Speaker 1: before the financial crisis. But US banks are very strong. 421 00:26:23,760 --> 00:26:25,680 Speaker 1: Help us. Then, with the latest bump on the road 422 00:26:25,760 --> 00:26:28,280 Speaker 1: for Wells Fargo yesterday, the failure to pass this living 423 00:26:28,320 --> 00:26:30,960 Speaker 1: will test. How worrisome is that to you when you 424 00:26:31,040 --> 00:26:33,399 Speaker 1: look at how that bank has sort of existed in 425 00:26:33,440 --> 00:26:36,720 Speaker 1: this new regulatory space. So Wells Fargo failed what's called 426 00:26:36,800 --> 00:26:41,560 Speaker 1: the living will UH analysis, and that's part of the 427 00:26:41,680 --> 00:26:44,320 Speaker 1: extra regulation. That's one of the things that makes banks 428 00:26:44,359 --> 00:26:47,200 Speaker 1: a lot stronger today. The guard rails are firm leverages 429 00:26:47,280 --> 00:26:49,560 Speaker 1: down the de risk, and in this case, what the 430 00:26:49,640 --> 00:26:52,680 Speaker 1: regulators require is that if you're going to fail, you 431 00:26:52,760 --> 00:26:55,720 Speaker 1: need to have a process that shows how you would 432 00:26:55,720 --> 00:26:58,720 Speaker 1: wind down. Wells Fargo didn't get it done. They've clearly 433 00:26:58,800 --> 00:27:02,200 Speaker 1: been distracted with all their other cross selling issues, and 434 00:27:02,680 --> 00:27:04,600 Speaker 1: they're going to have to get this right or face 435 00:27:04,880 --> 00:27:07,159 Speaker 1: some curbs or in their growth. But the point is 436 00:27:07,280 --> 00:27:09,800 Speaker 1: regulators are a lot more vigilant than they were, say 437 00:27:09,880 --> 00:27:12,560 Speaker 1: before the financial crisis. Help us with the X factor 438 00:27:12,640 --> 00:27:15,560 Speaker 1: of regulation going forward here into a Donald Trump administration. 439 00:27:15,640 --> 00:27:17,920 Speaker 1: What does that mean for the value of these banks, 440 00:27:17,960 --> 00:27:19,679 Speaker 1: the way these banks are going to conduct business, if 441 00:27:19,720 --> 00:27:24,119 Speaker 1: we could see regulation relaxed or regulation changed. So first 442 00:27:24,240 --> 00:27:27,879 Speaker 1: we'd say the biggest impact for US banks from a 443 00:27:27,880 --> 00:27:31,080 Speaker 1: Trump administration is with higher interest rates. So we'll see 444 00:27:31,080 --> 00:27:33,040 Speaker 1: if rates go higher today that's a little bit of 445 00:27:33,119 --> 00:27:36,840 Speaker 1: oxygen for bank profits. Another positive would be a lower 446 00:27:36,920 --> 00:27:39,040 Speaker 1: tax rate, if you lower the corporate tax rate from 447 00:27:39,080 --> 00:27:43,119 Speaker 1: thirty five percent to A third factor would be loan growth. 448 00:27:43,320 --> 00:27:46,280 Speaker 1: To the extent that GDP growth accelerates, that would be 449 00:27:46,359 --> 00:27:49,879 Speaker 1: a positive. Oh and by the way, regulation, even if 450 00:27:49,880 --> 00:27:53,320 Speaker 1: it doesn't get easier, you stopped layering on new rules. 451 00:27:53,480 --> 00:27:58,359 Speaker 1: Does the oxygen of a yield curve steepening? Is it 452 00:27:58,480 --> 00:28:02,159 Speaker 1: the same as it was pre cry I'd say that 453 00:28:02,320 --> 00:28:05,440 Speaker 1: the benefits to banks from a yield curve steepening is 454 00:28:05,560 --> 00:28:10,160 Speaker 1: even better. Right, That's brilliant because you're going from such 455 00:28:10,400 --> 00:28:14,600 Speaker 1: abnormally low interest rates that the first hundred basis point 456 00:28:15,000 --> 00:28:18,159 Speaker 1: of increase it helps the bank that interest margins, it 457 00:28:18,240 --> 00:28:21,320 Speaker 1: helps the revenues, and still doesn't pressure borrowers. I mean 458 00:28:21,400 --> 00:28:24,120 Speaker 1: with low rates exactly, you still can service your debts 459 00:28:24,240 --> 00:28:27,280 Speaker 1: much more easily. This is a a golden moment for banks, 460 00:28:27,400 --> 00:28:30,400 Speaker 1: these first several rate hikes, and then within that are 461 00:28:30,480 --> 00:28:34,040 Speaker 1: the is the discipline in the rigor there not to 462 00:28:34,119 --> 00:28:37,119 Speaker 1: do stupid things when we mean revert to a higher 463 00:28:37,240 --> 00:28:42,480 Speaker 1: yield through that golden window where everyone benefits. We hope 464 00:28:42,520 --> 00:28:44,800 Speaker 1: that US banks don't do stupid things, and that that 465 00:28:45,040 --> 00:28:48,440 Speaker 1: that that that's no that I mean, that's decades of 466 00:28:48,520 --> 00:28:51,160 Speaker 1: experience now it's it's it's a lot of pain here too. 467 00:28:51,280 --> 00:28:53,440 Speaker 1: And we we've we've seen the problems with the banks 468 00:28:53,480 --> 00:28:56,120 Speaker 1: the early nineties commercial real estate crisis. Then you had 469 00:28:56,160 --> 00:28:58,880 Speaker 1: the tech bubble, and you had the housing bubble, and 470 00:28:59,240 --> 00:29:00,840 Speaker 1: are we going to have an another bubble? So we're 471 00:29:00,840 --> 00:29:03,600 Speaker 1: certainly you know, watching that, and we don't want banks 472 00:29:03,640 --> 00:29:05,800 Speaker 1: to do stupid things. And that's one reason why we 473 00:29:05,840 --> 00:29:08,240 Speaker 1: go to annual meetings time. Remember you know we're here, 474 00:29:08,280 --> 00:29:10,600 Speaker 1: we go, but we go to annual meetings to try 475 00:29:10,680 --> 00:29:13,960 Speaker 1: to hold these bank managements accountable. We've had a change 476 00:29:14,000 --> 00:29:17,200 Speaker 1: in management teams, sometimes the same border directors, So let's 477 00:29:17,200 --> 00:29:19,640 Speaker 1: hold the border directors accountable so they don't repeat the 478 00:29:19,720 --> 00:29:22,320 Speaker 1: same mistakes as in the past. When banks are as 479 00:29:22,320 --> 00:29:24,200 Speaker 1: strong as they are today with the tailwind. How are 480 00:29:24,240 --> 00:29:27,520 Speaker 1: you watching what's what's unfolding in Europe? Not your your 481 00:29:27,560 --> 00:29:29,640 Speaker 1: base of coverage, But are there lessons to be learned 482 00:29:29,640 --> 00:29:32,040 Speaker 1: about from what we're seeing there that can be applied 483 00:29:32,040 --> 00:29:34,600 Speaker 1: to us banks? Well, I think it's the other way around. 484 00:29:34,720 --> 00:29:37,200 Speaker 1: What lessons should the European banks take in the US banks, 485 00:29:37,240 --> 00:29:41,200 Speaker 1: and the lesson is raise capital, reinforce the balance sheets, 486 00:29:41,520 --> 00:29:46,400 Speaker 1: raise liquidity when you can. It's it's really surprising that 487 00:29:46,480 --> 00:29:49,520 Speaker 1: the European banks haven't shored up their balance sheets more, 488 00:29:49,880 --> 00:29:53,560 Speaker 1: and here we are almost in it's it's really amazing MCMAEO, 489 00:29:53,680 --> 00:29:55,800 Speaker 1: thank you so much, greatly appreciate it. With cls A 490 00:29:55,920 --> 00:30:00,120 Speaker 1: particularly Wisdom and Goldman Sex again. Mr Cohn attends the 491 00:30:00,160 --> 00:30:03,640 Speaker 1: Trump transition. Gary you think see Gary Corn will be? 492 00:30:04,040 --> 00:30:05,840 Speaker 1: I wonder if it will be a Davos. I doubt it. 493 00:30:05,880 --> 00:30:09,600 Speaker 1: He'll probably be inaugural ball. Keep on alert. I don't 494 00:30:09,640 --> 00:30:12,080 Speaker 1: know it's right. He'll be at the inaugural ball. I 495 00:30:12,160 --> 00:30:15,000 Speaker 1: forgot that they conflict this year. They conflict. Your allegiance 496 00:30:15,080 --> 00:30:17,320 Speaker 1: is known, though you will be. Do you know it's 497 00:30:17,360 --> 00:30:20,960 Speaker 1: my year? I did not know that. I thought it 498 00:30:21,000 --> 00:30:25,000 Speaker 1: would have been ninth or John Tuckert's my thirteen year 499 00:30:25,840 --> 00:30:30,120 Speaker 1: of attending. It's a special Any idea what his expense 500 00:30:30,160 --> 00:30:32,640 Speaker 1: account over thirteen years is. I think it's a special 501 00:30:32,720 --> 00:30:36,400 Speaker 1: black box where it's like the g d P of 502 00:30:36,440 --> 00:30:40,040 Speaker 1: an island nation. Right, it is not read O. Keeper 503 00:30:40,080 --> 00:30:54,840 Speaker 1: of the amex is truck of that day. David, I'll 504 00:30:54,920 --> 00:30:56,560 Speaker 1: let you use this as a quick sum what's your 505 00:30:57,160 --> 00:30:59,120 Speaker 1: what's your take right now and what you're going to 506 00:30:59,200 --> 00:31:01,640 Speaker 1: try to observe Sifton. Yeah, as you've been saying, I 507 00:31:01,640 --> 00:31:03,520 Speaker 1: think the news conference is the most interesting part for me, 508 00:31:03,600 --> 00:31:05,520 Speaker 1: not to say that your analysis with Joe and Scarlett 509 00:31:05,560 --> 00:31:09,120 Speaker 1: will not be important as well, but with the press conference, 510 00:31:09,600 --> 00:31:11,520 Speaker 1: I'm eager to hear what what Janet Yellen has to 511 00:31:11,560 --> 00:31:14,880 Speaker 1: say about UH future personnel to feed, if she'll say 512 00:31:14,880 --> 00:31:17,680 Speaker 1: anything on that, and sort of the pace of increases 513 00:31:17,720 --> 00:31:19,040 Speaker 1: here in the new in the new year, how about 514 00:31:19,040 --> 00:31:23,000 Speaker 1: you the press conference, and I really want to know 515 00:31:23,720 --> 00:31:29,160 Speaker 1: about how she moves forward on reflation and if she 516 00:31:29,400 --> 00:31:34,240 Speaker 1: brings up nominal GDP. I doubt she'd bring up animal spirits. 517 00:31:34,280 --> 00:31:37,640 Speaker 1: That's too politically low. Yeah, yeah, I don't. I just 518 00:31:37,800 --> 00:31:40,920 Speaker 1: don't hear that from Cherry yelling. But I really want 519 00:31:40,960 --> 00:31:44,200 Speaker 1: to look. Let's see what she says about nominal dynamics, 520 00:31:45,120 --> 00:31:47,600 Speaker 1: and I just don't know where she's going with that. 521 00:31:47,760 --> 00:31:50,640 Speaker 1: I do agree with what we've heard from everyone that 522 00:31:50,720 --> 00:31:53,640 Speaker 1: it will be radically different than the previous press conference 523 00:31:54,400 --> 00:31:58,400 Speaker 1: as is where we are. Douglas Cass has been following 524 00:31:59,280 --> 00:32:04,320 Speaker 1: equity Mark. It's in the periphery for generations. He has 525 00:32:04,360 --> 00:32:08,120 Speaker 1: been short and we're gonna ask him if he's been pounded. 526 00:32:08,400 --> 00:32:12,120 Speaker 1: Shorting is a hazardous sport. Douglas cast, good morning. Have 527 00:32:12,240 --> 00:32:16,480 Speaker 1: you covered your shorts? Um? I actually covered most of 528 00:32:16,560 --> 00:32:19,880 Speaker 1: my shorts on in that big Futures decline the Wednesday 529 00:32:20,040 --> 00:32:26,440 Speaker 1: morning or early morning hours following the Trump victory. In 530 00:32:26,520 --> 00:32:29,960 Speaker 1: the interimental, All Life had several um journeys back to 531 00:32:30,040 --> 00:32:33,720 Speaker 1: the short side, most of them unsuccessful. And I actually, 532 00:32:35,120 --> 00:32:38,560 Speaker 1: I think the way you survive as a short biased 533 00:32:38,800 --> 00:32:42,920 Speaker 1: investor is to uh pretty good risk discipline. So I 534 00:32:43,080 --> 00:32:45,360 Speaker 1: tend to stop my losses rather quickly. But I did 535 00:32:45,480 --> 00:32:49,400 Speaker 1: re enter the short side the day before yesterday again, 536 00:32:49,640 --> 00:32:52,960 Speaker 1: and I've been pressing. I pressed all day yesterday. Let's 537 00:32:53,000 --> 00:32:55,080 Speaker 1: assume you're right. I mean, you got the Cubs wrong. 538 00:32:56,480 --> 00:32:58,960 Speaker 1: I got the Cubs wrong. But the sixty two days 539 00:32:59,120 --> 00:33:01,560 Speaker 1: till pictures Actress, Well, there was sixty two days for 540 00:33:01,640 --> 00:33:03,440 Speaker 1: the Red Sox. But they need to buy some more 541 00:33:03,520 --> 00:33:07,520 Speaker 1: starting pitching to keep up with the latest acquisitions, Doug. 542 00:33:07,560 --> 00:33:10,000 Speaker 1: The amount of money they're spending on these starting pitchers 543 00:33:10,720 --> 00:33:15,239 Speaker 1: is extraordinary. It's a reflation Oh my gosh. I mean 544 00:33:15,360 --> 00:33:19,720 Speaker 1: I think if you UM present value UM co fax 545 00:33:19,840 --> 00:33:24,080 Speaker 1: is earnings, it would be like a million about two 546 00:33:24,120 --> 00:33:28,240 Speaker 1: million dollars here, only Doug help me here with the 547 00:33:28,520 --> 00:33:32,880 Speaker 1: reflation trade. At some point you believe it will ebb 548 00:33:33,080 --> 00:33:37,640 Speaker 1: and move the other way. What are you trying to observe? Well, 549 00:33:37,720 --> 00:33:43,440 Speaker 1: first of all, I UM observe disappointing November industrial production, 550 00:33:43,640 --> 00:33:48,480 Speaker 1: a disappointing retail sales figure. UM. I spent spent last 551 00:33:48,600 --> 00:33:52,920 Speaker 1: weekend a week ago with retail consultants, which suggested to 552 00:33:53,000 --> 00:33:55,800 Speaker 1: me that December is off to a very bad retail start, 553 00:33:56,160 --> 00:34:00,920 Speaker 1: and I think it'll be exacerbated by the shattering and 554 00:34:01,280 --> 00:34:04,320 Speaker 1: the refinancing market, which is part and parcel of the 555 00:34:04,400 --> 00:34:07,160 Speaker 1: rate rise, and also the increase in the price of 556 00:34:07,240 --> 00:34:10,680 Speaker 1: crude oil is hurting consumers. I think that too many 557 00:34:10,760 --> 00:34:15,040 Speaker 1: investors are putting on UM sun tanning lotion in the 558 00:34:15,160 --> 00:34:18,120 Speaker 1: expectation of sunny days that lie ahead, but they're only 559 00:34:18,239 --> 00:34:21,040 Speaker 1: likely in the eye of the hurricane, and they're going 560 00:34:21,080 --> 00:34:24,359 Speaker 1: to be filled with disappointment. UM. If if we think 561 00:34:25,400 --> 00:34:28,719 Speaker 1: today the general consensus, and I love to play the contrary, 562 00:34:29,760 --> 00:34:33,680 Speaker 1: is bullish on bonds, A bullish on stocks and barrish 563 00:34:33,760 --> 00:34:35,960 Speaker 1: on bonds. In fact, the Bank of America did a 564 00:34:36,040 --> 00:34:40,520 Speaker 1: survey which concluded that only six percent of the economists 565 00:34:40,600 --> 00:34:44,399 Speaker 1: expect lower interest rates in two thousand seventeen over two 566 00:34:44,440 --> 00:34:46,680 Speaker 1: thousands sixteen. This is the same group that has been 567 00:34:46,719 --> 00:34:49,319 Speaker 1: wrong and raised for four years. I think we all 568 00:34:49,360 --> 00:34:53,279 Speaker 1: have to remember Bob Farrell's rule number nine quote. When 569 00:34:53,360 --> 00:34:57,800 Speaker 1: all forecasters and experts agree, something else is going to happen. 570 00:34:59,040 --> 00:35:06,279 Speaker 1: Final this Trump administration, well, living uncertainty great again, Um, 571 00:35:06,760 --> 00:35:09,440 Speaker 1: not not the opposite. Does I know that you've been 572 00:35:09,520 --> 00:35:11,680 Speaker 1: been adding life insurance to your portfolio as well? What 573 00:35:11,719 --> 00:35:12,840 Speaker 1: do you see there? What do you see in that 574 00:35:13,000 --> 00:35:17,120 Speaker 1: slice of the sector. Well, I did very well well, 575 00:35:17,200 --> 00:35:21,240 Speaker 1: as as you know, prior to July of two thousand sixteen, 576 00:35:21,280 --> 00:35:24,200 Speaker 1: one I called the generational bottom in bond yales. I 577 00:35:24,239 --> 00:35:26,319 Speaker 1: had a contrary view on interest rates that they were 578 00:35:26,360 --> 00:35:30,759 Speaker 1: going lower, not higher, And I was short MetLife and 579 00:35:31,120 --> 00:35:36,160 Speaker 1: Lincoln National and the stocks were went down and I've 580 00:35:36,239 --> 00:35:40,480 Speaker 1: just re entered them yesterday. Um, they're terribly leveraged to 581 00:35:41,200 --> 00:35:44,239 Speaker 1: interest rates, which I believe will be down in two 582 00:35:44,320 --> 00:35:47,520 Speaker 1: thousand and seventeen, not up. And their leverage to the 583 00:35:47,600 --> 00:35:51,680 Speaker 1: equity market. I think the whole the broad question that 584 00:35:51,800 --> 00:35:56,640 Speaker 1: we face is to me whether secular stagnation is a 585 00:35:56,719 --> 00:36:01,720 Speaker 1: thing of the past, and if the currently lifted animal 586 00:36:01,880 --> 00:36:04,960 Speaker 1: spirits and highest stock prices brought on by the election 587 00:36:05,040 --> 00:36:08,400 Speaker 1: victory by Donald Trump is going to lead to secular 588 00:36:08,480 --> 00:36:13,360 Speaker 1: economic optimism and the realization of much faster economic growth 589 00:36:14,080 --> 00:36:18,160 Speaker 1: with its proposed market based solutions versus government based solutions 590 00:36:18,239 --> 00:36:22,040 Speaker 1: of the previous administration. And I'm skeptical as the conditions 591 00:36:22,120 --> 00:36:26,760 Speaker 1: that exist today, say, versus the Reagan administration, are totally different. 592 00:36:27,320 --> 00:36:32,360 Speaker 1: The economic, political, social market conditions represent a huge hurdle, 593 00:36:32,520 --> 00:36:35,600 Speaker 1: particularly in the face of policy and certainties both absolutely 594 00:36:36,040 --> 00:36:38,919 Speaker 1: and relative to Trump himself. Remind us what happened after 595 00:36:39,160 --> 00:36:41,239 Speaker 1: Ronald Reagan was was elected. We saw a bit of 596 00:36:41,320 --> 00:36:43,319 Speaker 1: a bull market, and that that did not last long 597 00:36:43,400 --> 00:36:45,759 Speaker 1: after inauguration day. I think, I think, as a matter 598 00:36:45,760 --> 00:36:47,839 Speaker 1: of fact, it came with him to a close there. Sure, 599 00:36:47,880 --> 00:36:51,520 Speaker 1: there was a honeymoon from early November to the January 600 00:36:51,719 --> 00:36:55,000 Speaker 1: third week of January his inauguration, in which equities rose 601 00:36:55,080 --> 00:36:57,919 Speaker 1: by eight and a half percent. In the next year 602 00:36:58,120 --> 00:37:02,600 Speaker 1: of fifteen months, they declined by how valuable is it 603 00:37:02,680 --> 00:37:04,960 Speaker 1: to look at that analog right now, to to use 604 00:37:05,000 --> 00:37:08,759 Speaker 1: that as a point of comparison. I think I think 605 00:37:08,800 --> 00:37:14,920 Speaker 1: it's very valid um um and and because there I 606 00:37:15,000 --> 00:37:19,640 Speaker 1: would say that there's this giant leap across the abyss, 607 00:37:19,920 --> 00:37:22,480 Speaker 1: this giant leap of faith on the part of investors 608 00:37:22,560 --> 00:37:26,600 Speaker 1: and traders. My view is, just as monetary policy failed 609 00:37:26,640 --> 00:37:31,600 Speaker 1: to energize domestic economics didn't remedy the gap of income 610 00:37:31,680 --> 00:37:35,400 Speaker 1: and wealth inequality, I think this maton past. This physical 611 00:37:35,520 --> 00:37:38,920 Speaker 1: solution is going to be less successful than the consensus expectations. 612 00:37:39,000 --> 00:37:41,560 Speaker 1: We're joined by Doug Cass, founder and president of Sea 613 00:37:41,600 --> 00:37:44,040 Speaker 1: Breeze Partners, and Doug, I have to ask how you 614 00:37:44,120 --> 00:37:47,920 Speaker 1: plan to ring in down twenty thou infact we get there, 615 00:37:47,960 --> 00:37:51,480 Speaker 1: What kind of celebration do you have planned to grow 616 00:37:51,560 --> 00:37:57,319 Speaker 1: increasingly short of stock prices rise. That is not to say, 617 00:37:57,719 --> 00:37:59,719 Speaker 1: by the way, Tom, that I don't have loans, I 618 00:37:59,800 --> 00:38:03,280 Speaker 1: have any of lungs. Some of them have been great investments. 619 00:38:03,360 --> 00:38:07,839 Speaker 1: This year. DuPonts up radiance up seventy five percent since 620 00:38:07,920 --> 00:38:10,319 Speaker 1: we bought it in the summer. If you ever seen 621 00:38:10,719 --> 00:38:15,800 Speaker 1: have you ever seen a presumed reflation? Have presumed that 622 00:38:16,280 --> 00:38:21,040 Speaker 1: genomenal GDP like we're in right now. No, I've never 623 00:38:21,160 --> 00:38:23,400 Speaker 1: seen it. I've never seen it. I've never seen it. 624 00:38:23,520 --> 00:38:27,000 Speaker 1: But you know, we ended the last segment and I 625 00:38:27,120 --> 00:38:30,800 Speaker 1: basically said a statement that that UM that fed that 626 00:38:30,920 --> 00:38:33,840 Speaker 1: fed policy since oh nine has trickled up to the wealthy, 627 00:38:33,880 --> 00:38:36,839 Speaker 1: not to the middle class, and that physical policy may 628 00:38:36,960 --> 00:38:39,239 Speaker 1: also trickle up and not trickle down, so that that 629 00:38:39,440 --> 00:38:43,600 Speaker 1: this is really important. Let's look at corporate tax rates 630 00:38:43,640 --> 00:38:48,040 Speaker 1: as an example, which is a reduction of that fuels 631 00:38:48,120 --> 00:38:52,799 Speaker 1: that reflation trade. Correct, Trump plans to cut them. When 632 00:38:52,880 --> 00:38:56,880 Speaker 1: Reagan was president, he took them from seventy percent to percent. 633 00:38:57,040 --> 00:39:02,000 Speaker 1: That's impactful. Today the statutory rate is only thirty, but 634 00:39:02,120 --> 00:39:06,640 Speaker 1: the effective rate, the rate that the S and P 635 00:39:06,880 --> 00:39:12,000 Speaker 1: five components are paying, is close to only so reduction, 636 00:39:12,040 --> 00:39:15,440 Speaker 1: to say, won't have a comparable impact that it did 637 00:39:15,719 --> 00:39:19,319 Speaker 1: years ago. And the other thing, let's look at repatriation 638 00:39:19,480 --> 00:39:22,800 Speaker 1: very quickly. The money brought back may not be growth inducing, 639 00:39:22,880 --> 00:39:27,359 Speaker 1: it may not be UM contributed to that reflation trade. 640 00:39:27,840 --> 00:39:32,960 Speaker 1: Cisco CEO talked about repatriation in a blue Berg interview 641 00:39:33,080 --> 00:39:37,640 Speaker 1: last week. UM He said a repatriation of overseas cash 642 00:39:38,000 --> 00:39:40,840 Speaker 1: would result in the larger commitment to buy backs and 643 00:39:40,920 --> 00:39:43,239 Speaker 1: a more aggressive M and A act. There was no 644 00:39:43,400 --> 00:39:46,319 Speaker 1: mention to capex or job growth. And if you think 645 00:39:46,360 --> 00:39:50,919 Speaker 1: of it, Tom, we're at a capitalization rate. Why would 646 00:39:50,960 --> 00:39:54,240 Speaker 1: industry start building plant and equipment with with such slack. 647 00:39:54,360 --> 00:39:57,279 Speaker 1: They won't. They'll go back even more stock and more 648 00:39:57,320 --> 00:40:00,960 Speaker 1: inflated prices, raise their dividends, fathering the individual beds and 649 00:40:01,400 --> 00:40:04,040 Speaker 1: not benefit the average. I mean, Doug, you know, if 650 00:40:04,080 --> 00:40:05,960 Speaker 1: I get out the Bloomberg here, folks, I'm gonna do this. 651 00:40:06,040 --> 00:40:08,600 Speaker 1: I'm gonna throw this out on Twitter as well. This 652 00:40:08,760 --> 00:40:11,920 Speaker 1: is as boring as it gets. Dow Jones Industrial Average 653 00:40:12,440 --> 00:40:16,080 Speaker 1: two hund day moving average in pros like Doug Cass 654 00:40:16,960 --> 00:40:21,440 Speaker 1: keep abreast of how extended we are above the two 655 00:40:21,520 --> 00:40:26,000 Speaker 1: hund day moving average at eighteen thousand one seven, I mean, 656 00:40:26,080 --> 00:40:28,680 Speaker 1: we're out over our skis. Everybody can agree on that. 657 00:40:29,000 --> 00:40:32,560 Speaker 1: Right towards that statement, the seven day relative strength index 658 00:40:32,640 --> 00:40:36,040 Speaker 1: of the Dow Jones Industrial Average is ninety five point five. 659 00:40:36,600 --> 00:40:38,920 Speaker 1: I asked Peter Bookvar to go back and tell me 660 00:40:39,040 --> 00:40:41,680 Speaker 1: the last time, yesterday, the last time it was at 661 00:40:41,760 --> 00:40:44,760 Speaker 1: that level. He went back to seventy and he couldn't 662 00:40:44,800 --> 00:40:48,520 Speaker 1: find a higher reading. Yesterday's inter day put coal was 663 00:40:48,600 --> 00:40:51,280 Speaker 1: at the lowest level since April of two thousand twelve. 664 00:40:51,680 --> 00:40:53,920 Speaker 1: And if you look at CNN sphere in green index, 665 00:40:54,320 --> 00:40:57,480 Speaker 1: what emotion is driving the market? Now? It's almost at 666 00:40:57,640 --> 00:41:02,080 Speaker 1: ninety is extreme. I can't remember this high. Now you 667 00:41:02,160 --> 00:41:04,839 Speaker 1: want to buy stocks with a relative strength index at 668 00:41:04,880 --> 00:41:09,360 Speaker 1: this price? With typemism about policy? So hi, how do 669 00:41:09,480 --> 00:41:12,359 Speaker 1: you is a grizzled pro who's enjoyed losing a lot 670 00:41:12,440 --> 00:41:17,480 Speaker 1: of money? How do you make your trade given that momentum? 671 00:41:17,560 --> 00:41:20,360 Speaker 1: Do you dollar cost in or some would laugh and 672 00:41:20,440 --> 00:41:24,239 Speaker 1: say dollar lost in? How do you affect? How do 673 00:41:24,320 --> 00:41:27,360 Speaker 1: you pull the trigger to go the other way against 674 00:41:27,400 --> 00:41:33,040 Speaker 1: the Trump reflation? I typically um um intwo trades very 675 00:41:33,120 --> 00:41:38,719 Speaker 1: small um um because um, I don't know what will 676 00:41:38,800 --> 00:41:41,000 Speaker 1: happen to the market. So I tend to average into 677 00:41:41,080 --> 00:41:45,759 Speaker 1: positions and it's a good risk controlled discipline, and um 678 00:41:45,960 --> 00:41:49,080 Speaker 1: I have a sense of stops in a certain a 679 00:41:49,280 --> 00:41:53,520 Speaker 1: very small percentage than that on trading shorts, especially as 680 00:41:53,600 --> 00:41:57,080 Speaker 1: it relates to the short side of in disease that 681 00:41:57,200 --> 00:41:59,440 Speaker 1: I'm willing to lose and I take back the position, 682 00:42:00,320 --> 00:42:03,480 Speaker 1: wash rents and repeat do you add to your small 683 00:42:03,719 --> 00:42:07,040 Speaker 1: initial positions as the you're going along here is the 684 00:42:07,160 --> 00:42:10,880 Speaker 1: stock goes up in price? Yeah, okay, what you just 685 00:42:10,960 --> 00:42:15,760 Speaker 1: heard their folks, is the number one most important theory 686 00:42:16,400 --> 00:42:20,160 Speaker 1: out there. The math boys would call that anti Martingale 687 00:42:20,320 --> 00:42:23,480 Speaker 1: theory led by ed Thorpe at M I T a 688 00:42:23,560 --> 00:42:26,640 Speaker 1: few years ago. And David, what you just heard there 689 00:42:26,680 --> 00:42:32,400 Speaker 1: from Mr cass is the quickest way not to lose money. Continue. 690 00:42:32,640 --> 00:42:36,160 Speaker 1: You know, I always say that that the only certainty 691 00:42:36,440 --> 00:42:39,320 Speaker 1: is the lack of certainty in this world. Uh. And 692 00:42:40,120 --> 00:42:42,480 Speaker 1: if you need an example of that, look at the 693 00:42:42,520 --> 00:42:45,800 Speaker 1: stock market over the last six weeks. You know. Bertram 694 00:42:45,960 --> 00:42:48,680 Speaker 1: Russell once wrote that the whole problem with the world 695 00:42:48,840 --> 00:42:51,800 Speaker 1: is that fools and fanatics are always so sure of themselves. 696 00:42:52,160 --> 00:42:55,120 Speaker 1: And why so people are full of doubts. How just 697 00:42:55,320 --> 00:42:58,160 Speaker 1: wrapping up here, I wonder how when you look at 698 00:42:58,200 --> 00:43:02,040 Speaker 1: the mark Bertram Russell was a red sox upon the 699 00:43:02,120 --> 00:43:07,520 Speaker 1: Russell my loges short is the Russell index? There you go. 700 00:43:07,800 --> 00:43:09,960 Speaker 1: By the way, just when you look at the mark 701 00:43:10,080 --> 00:43:13,279 Speaker 1: environment here, how how different is it coming to the 702 00:43:13,400 --> 00:43:15,040 Speaker 1: end of the year and then it has been in 703 00:43:15,120 --> 00:43:16,919 Speaker 1: years past? In light of what we've seen since since 704 00:43:17,000 --> 00:43:18,960 Speaker 1: the election, what does the landscape look like compared to 705 00:43:19,040 --> 00:43:24,000 Speaker 1: in years past? This is you know this, we faced 706 00:43:24,040 --> 00:43:27,160 Speaker 1: the Orange swan. We've never faced this orange swan before. 707 00:43:28,160 --> 00:43:31,640 Speaker 1: UM and the associated animal spirits that have emerged from it, 708 00:43:31,960 --> 00:43:35,400 Speaker 1: which have surprised most of the same people that are 709 00:43:35,400 --> 00:43:38,120 Speaker 1: bullish on the market because the price action. We're barish 710 00:43:38,239 --> 00:43:42,680 Speaker 1: on a Trump election victory. So UM. You know. I 711 00:43:42,800 --> 00:43:45,800 Speaker 1: recognize also that Burton Russell who said all movements go 712 00:43:45,960 --> 00:43:50,840 Speaker 1: too far. UM, so I'm looking for extremes to short 713 00:43:51,040 --> 00:43:54,800 Speaker 1: I see it as you mentioned in investor sentiment. I 714 00:43:54,920 --> 00:44:00,759 Speaker 1: see it in valuations after all, against gap earnings. We're 715 00:44:00,800 --> 00:44:08,640 Speaker 1: at the percentile against Schiller's UM. Uh, keep in the 716 00:44:09,480 --> 00:44:14,160 Speaker 1: multiples were all front percentile. We gotta we gotta leave 717 00:44:14,200 --> 00:44:16,319 Speaker 1: it there, dug Cast. Never enough time if we don't 718 00:44:16,360 --> 00:44:18,799 Speaker 1: speak to you before the end of the year. Uh, 719 00:44:19,200 --> 00:44:24,680 Speaker 1: have a good holiday season. Sixty two days to Pictures 720 00:44:24,719 --> 00:44:35,960 Speaker 1: and Catchers, dug Cast with Sea Breeze Parties. Thanks for 721 00:44:36,080 --> 00:44:40,480 Speaker 1: listening to the Bloomberg Surveillance podcast. Subscribe and listen to 722 00:44:40,680 --> 00:44:45,720 Speaker 1: interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. 723 00:44:46,520 --> 00:44:49,360 Speaker 1: I'm out on Twitter at Tom Keene. David Gura is 724 00:44:49,520 --> 00:44:53,279 Speaker 1: at David Gura. Before the podcast, you can always catch 725 00:44:53,360 --> 00:45:08,880 Speaker 1: us worldwide. I'm Bloomberg Radio M Who you put your 726 00:45:08,880 --> 00:45:12,480 Speaker 1: trust in matters. Investors have put their trust and independent 727 00:45:12,600 --> 00:45:16,480 Speaker 1: registered investment advisors to the two and four trillion dollars. 728 00:45:16,640 --> 00:45:21,120 Speaker 1: Why Learn more at find your Independent Advisor dot com