UPBEAT NUMBERS OUCHT CHINA AS
WELL AS U.S. EASED FEARS OF
RECESSION SHORT TERM AFTER
THAT INVERTED YIELD CURVE LAST
WEEK I SAT DOWN WITH
MINNEAPOLIS FEDERAL RESERVE
PRESIDENT CEO NEEL KASHKARI
HERE IS WHAT HE SAID.
>> THERE IS ALSO A A
POSSIBILITY WOULD BE A
RECESSION A YEAR FROM NOW 18
MONTHS FROM NOW THE ECONOMISTS
CALL IT UNCONDITIONAL
PROBABILITY ON ANY GIVEN YEAR
ABOUT A 5% CHANCE NEXT YEAR
THERE WOULD BE A RECESSION I
THINK THOSE ODDSS ARE ELEVATED
BASED ON SIGNALS FROM THE
YIELDE
YIELD CURVE.
>> GOOD TO SEE YOU.
>> PLEASURE TO BE AN HERE
RECESSION IN '19?
OR 20.
>> DEPENDS WHAT STOCK MARKET
DOES.
MARIA: REALLY?
>> YEAH I THINK THE MARKETS
RIGHT NOW ARE CLEARLY ACTING
ON ASSUMPTION THAT THE FEDS
ABOUT-FACE IS SUFFICIENT TO
SUPPORT GROWTH AND PROFITS,
GROWTH IN THE ECONOMY AND IN
PROFITS, FOR 2019, EVEN AS
EARNINGS ESTIMATES FOR 2019
HAVE BEEN SLASHED WITH -- AT A
PACE THAT HAS BEEN RARELY SEEN
BEFORE.
SO I THINK THERE IS THIS
FEELING THAT THIS IS ALL FIRST
QUARTER PHENOMENA GOING TO
KITCHEN SINK INTO FIRST
QUARTER THINGS SLEL
QUARTER THINGS ACEL
QUARTER THINGS ACCELERATE ARE
THE INTO END OF 2019, 2020
BACK TO DOUBLE-DIGIT EARNINGS
GROWTH, SO WE ARE OUT OF THE
WOODS THANKS TO CHAIRMAN
POWELL'S ABOUT-FACE.
>> AS YOU MIGHT SUSPECT, I AM
NOT TOTALLILY ON ABOARD WITH
THAT.
>> CHINA DATSUN MORNING SHOWED
MANUFACTURING DOWN FROM CHINA,
THAT LED TO A 300 PLUS-POINT
RALLY IN THE U.S. BECAUSE
THERE HAS BEEN NEWS BASICALLY
SUGGESTING MAYBE THINGS ARE
TURNING IN CHINA.
>> RIGHT, I START OUT BY CON
HE CONFESSING I HAVE BEEN
SKEPTICAL ABOUT THIS CONCERN
ABOUT CHINA GOING OFF THE DEEP
END FOR A WHILE.
MY FEELING IS THAT WE ANALYZE
CHINA THROUGH A WESTERN LENS
THE REALITY IS THEY HAVE A
MUCH HE LONGER TIME FRAME
OBVIOUSLY --S IS NOT ONLY
WORRYING REELECTION THE LUXURY
OF TIME OUR POLITICIANS DON'T
TRYING TO ENGINEER FROM EXPORT
RELIANCE.
ABOUT DOMESTIC CONSUMING GOING
TO ENTAIL SLOWDOWN IN GROWTH
IN THE INTERIM I THINK THE
HYSTERIA EVERY TIME WE SEE
THEM WEAKENING, THAT THAT IS
IT YOU KNOW CHINA IS GOING TO
SUDDENLY DISAPPEAR FROM FACE
OF THE EARTH WAS OVERBLOWN, I
THINK CLEARLY THE ECONOMY IS
DECELERATING I DON'T THINK
THEY ARE GOING TO BE IN SUCH
DIRE STRAITS THEY HAVE THE --
THE DESIRE, AND THE
WHEREWITHAL TO KEEP THEIR
ECONOMY MOVING, UNLIKE OTHER
ECONOMIES AROUND THE GLOBALLY
DON'T HAVE AMMUNITION TO
SUPPORT GROWTH OR CENTRALLY
PLANNED COMPLY THAT ALLOWS
THEM TO DO THAT.
>> SUPPLY MANAGEMENT READING
ON MANUFACTURING HERE WAS UP,
FROM THE PREVIOUS MONTH, IT
CAME PARTICULARLY NEW ORDERS
CAME IN VERY STRONG BODES WELL
FOR THE COMING MONTHS THAT
GAVE CERTAINLY A LOT OF
OPTIMISM TO INVESTORS.
MARIA: FOR SURE I GUESS.
>> I GUESS MY POINT THE FEAR
CHINA WAS GOING TO PRECIPITATE
MASSIVE GLOBAL RECESSION WAS
OVERBLOWN, YOU KNOW I AM NOT
TOTALLY SURPRISED NUMBERS ARE
BETTER THAT SAID HERE IN U.S.,
GLOBALLY -- THE INCREASE IN
PRODUCTION IS ONLY GOING TO BE
AS GOOD AS ABILITY TO SELL
ITEMS AT THE END OF THE DAY,
WHEN YOU LOOK AT THE CONSUMER
DATA, THAT HAS BEEN EXTREMELY
WEAK, DISAPPOINTINGLY SO WITH
UPWARD REO
UPWARD REVISION TO JANUARY,
FEBRUARY DISAPPOINTING BUT
THEY DID BOOST UP JANUARY
NUMBER IF YOU LOOK AT THREE
MONTH CHANGE SINCE THAT GLITCH
WE HAD IN DECEMBER, WITH THE
-- INCREDIBLY WEAK NUMBER
THREE MONTHS DOWN 1.1% YOU ARE
LOOKING AT RETAIL SALES DOWN
4.4% STUNNINGLY WEAK AT A TIME
YOU WOULD HAVE EXPECTED AFTER
THE GOVERNMENT SHUTDOWN THAT
CONSUMERS WOULD HAVE INCREASED
CONSUMPTION SO THAT HASN'T
HAPPENED.
YOU'VE SEEN A LOT OF OTHER
DATA LIKE RESTAURANT TRAFFIC
HAS BEEN GOING STRAIGHT DOWN
SINCE BEGINNING OF THE YEAR,
AGAIN, YOU KNOW DIFFERENT FROM
WHAT YOU WOULD HAVE EXPECTED,
GIVEN THAT WE HAD SO MUCH
WEAKNESS FOURTH QUARTERLY
RELATED TO MARKDOWN DEPRESSED
CONSUMER BUSINESS SPENDING
OPTIMISM SEEMED LIKE GOING TO
REVERSE, CERTAINLY THE MARKETS
REVERSED FIRST QUARTER BUT HE
CONSUMER SPENDING FAILED TO
FOLLOW SUIT.
>> CONSUMER CONFIDENCE
STARTING TO PICK UP GREEN IN
IFM AND HOUSING GOING TO SAY,
IS THAT A BLIP OR IS THAT A
CHANGE IN DIRECTION SOME --
>> I THINK IT IS PROBABLY TOO
EARLY TO TELL I DO THINK MY --
MY HUNCH IS PROBABLY A BLIP,
BECAUSE YOU KNOW WE'RE KIND OF
YOU'VE GOT TO LOOK AT A HE
LONGER TERM AVERAGE THAN
ONE-MONTH TREND, AND, YOU
KNOW, CLEARLY THINGS HAVE BEEN
SLOWING THE HOUSING DAY OF THE
SINCE END OF 2016.
>> MORTGAGE RATES HAVE COME
DOWN MUCH THAT WAS A BOOST.
>> THAT IS TRUE, HOWEVER THERE
IS STILL ABOVE WHERE THEY WERE
IN 2016 I AM THINKING YOU KNOW
MAYBE THE BEST LENS FOR THIS
ECONOMY IS 2016 BECAUSE WE ARE
BASICALLY THROUGH THE TAX CUT
STIMULUS WINDOW AND IN 2016
WAS BEFORE THE FED STARTED QT
IF TAKING THAT OFF THE TABLE
GOING BOOK TO THE TIME BEFORE
TAX CUTS BEFORE FED
ERRONEOUSLY TIGHTENED LOOK AT
206 THE ECONOMY WAS A SLOWING
FROM 3.8 TO ONE AND ONE HALF
UNTIL U-TURN ON ELECTION GOT
PEOPLE EXCITED ABOUT --
>> YOU SELL STOCKS INTO
EARNINGS PERIOD TWO WEEKS AWAY
FROM FIRST-QUARTER EARNINGS
SEASON BEGINNING.
>> I THINK I WOULD, I THINK
GUIDANCE WE HAVE SEEN FROM
COMPANIES HAS BEEN HE
OVERWHELMINGLY NEGATIVE PEOPLE
AGAIN ARE ANTICIPATING THAT
THIS FIRST QUARTER WEAKNESS IS
JUST FIRST QUARTER PHENOMENA
THINGS THAT LIKE BETTER AS WE
MOVE FORWARD THROUGH THE YEAR.
>> YOU SAY NO?
>> I SAY NO, AND I WOULD ALSO
HIGHLIGHT WE STILL HAVE A HUGE
INVENTORY OVERHANGING HAS TO
ABOUT UNWOUND THAT SELDOM
HAPPENS TO BENEFIT OF PROFITS
NORMALLY LIQUIDATION MAJOR
DEPRESSION.
>> FROM INTEREST . TO 2.1
INVENTORIES HAVE BEENTAIL
WAGGING THAT DOG FROM MINUS 3
TO PLUS .6 CONTRIBUTION NOT A
POF IN TERMS OF WHAT IS