TRISH: WE'VE BEEN ALL OVER THE
PLACE TODAY.
WE WERE DOWN, WE WERE UP, DOWN,
UP.
POINTS T WAS RIGHT AROUND THIS
TIME THINGS GOT REALLY CRAZY
YESTERDAY.
IT HAS BEEN REALLY CRAZY TODAY.
WE'VE HAD SINGS OF AROUND 900
POINTS TODAY.
I CAN TELL YOU TELECOM, HEALTH
LOWER RIGHT NOW?
WHAT HAS CHANGED, RIGHT, IN THE
CONCERNED?
I'LL TELL YOU WHAT IT IS.
INFLATION.
SINCE THE GREAT RECESSION, AND
THE IDEA THAT THAT COULD COME
BACK, THAT'S AN ADJUSTMENT FOR
PEOPLE.
IT MEANS WE WOULD HAVE HIGHER
INTEREST RATES.
THE FED WOULD BE RAISING RATES.
INVESTORS DON'T LIKE THAT, IN
PART BECAUSE SUDDENLY THERE IS
COMPETITION.
PEOPLE SAY, HEY, MAYBE YOUI
SHOULD PUT MY MONEY IN FIXED
INCOME BOND INSTRUMENT THAT
THE END OF THE COUPON.
AND, OR, I COULD PUT MY MONEY IN
THE STOCK MARKET AND TAKE A BIT
OF A WILD RIDE.
I LOVE THIS IDEA OF RETURNING TO
NORMAL HERE BECAUSE IT SCARES ME
WHEN THE 30-YEAR IS TRADING
WHERE IT HAS BEEN TRADING.
INFLATION 30 YEARS FROM NOW,
THAT IS RATHER PESSIMISTIC
ATTITUDE IF YOU ASK ME, DOUG?
>> I THINK YOU HAVE GOT THIS
RIGHT.
WORLDWIDE THEY SWITCHED FROM
EXTRAORDINARY MONETARY POLICIES,
WITH WHAT THEY DO.
WORLD NO LONGER AWASH WITH CASH,
BUYING UP ALL SECURITIES YOU
HAVE COMPETITION BETWEEN FIXED
INCOME AND STOCKS AGAIN.
THAT IS BUSINESS AS USUAL IN THE
BIG PICTURE AND PEOPLE GET USED
TO THAT I THINK THERE IS PART OF
THIS INFLATION STORY PEOPLE GOT
WRONG, HOWEVER.
THE NOTION ON FRIDAY WE SAW
EMPLOYMENT REPORT THAT SHOWED
2.9% AVERAGE HOURLY EARNINGS
GROWTH, SCARED EVERYONE TO
DEATH, DOESN'T FIT THE MATH.
WAGE GROWTH OF 2.9%.
PRODUCTIVITY OF 2.1.
THAT IS BELOW THE FED'S TARGET
NOTHING TO BE AFRAID OF.
PEOPLE ARE NOT FIGURING OUT WHAT
TO REACT TO.
THEY CERTAINLY SHOULDN'T BE
CONCERNED ABOUT THAT.
TRISH: THAT IS INTERESTING
POINT.
EVERYBODY IS ASKING ME, THE FED
WILL RAISE FAR MORE
AGGRESSIVELY, DO YOU THINK THERE
IS A CHANCE THAT, THEY DON'T?
>> I THINK, IT IS REALLY KIND OF
INTERESTING.
I'M, WE'VE SEEN TWO THINGS
HAPPEN IN THE PAST THREE OR FOUR
DAYS.
ONE IS, A WHOLE BUNCH OF FOLKS
WHO SAID THE TAX CUTS WOULD
NEVER WORK ARE SAYING MY GOD,
THEY WORKED TOO WELL.
WE'LL GET ALL THIS INFLATION.
THE FED WILL HAVE TO MOVE.
TOUGH BE ONE OR THE OTHER.
YOU HAVE TO HAVE A LITTLE
CONSISTENCY THERE.
IF THE TAX CUTS WORK THE WAY I
EXPECT THEM TO WITH ALL THE
BUSINESS TAX REFORMS, THAT IS
PRO-INVESTMENT, PRO-INNOVATION,
PRO-PRODUCTIVITY.
AS WE SAID PRODUCTIVITY TAKES
INFLATION PRESSURES OUT.
I DON'T THINK THERE IS ANYTHING
TO BE CONCERNED ABOUT ON THAT
FRONT.
IT MAY BE THE CASE THAT THE FED
RAISES MORE AGGRESSIVELY.
WHY WOULD THEY DO THAT?
THE NEW NEUTRAL FUND RATE IS
HIGHER THAN THEY THOUGHT.
THAT IS GOOD NEWS.
THROW ME IN THAT BRIER PATCH.
WHY THE FED IS RAISING RATES IS
AVERAGE.
TRISH: A SECOND AGO, WHY DO YOU
THINK FED WOULD RAISE?
NOT BECAUSE OF INFLATION BUT
BECAUSE OF?
>> BECAUSE, NEUTRAL IS HIGHER.
THEY HAVE GOT TO GET TO NEUTRAL.
AND THAT'S A GOOD THING.
IF NEUTRAL IS HIGHER BECAUSE --
TRISH: IN OTHER WORDS THEY NEED
TO SET A NEW NORMAL.
>> IF IT GROWS THE ECONOMY THAT
WOULD BE GREAT.
TRISH: BECAUSE YOU CAN'T HAVE
INTEREST RATES AT ZERO FOREVER.
WE'RE NOT AT ZERO NOW BUT WE
WERE AT ZERO FOREVER.
WHAT IF YOU HAVE A CRISIS YOU
NEED TO FIGHT, DOUG?
>> YOU HAVE LOTS OF ROOM, THE
FED HAS EXTRAORDINARY POWER
STILL ON THE DOWNSIDE.
DOWNSIDE RISK THEY CAN TAKE CARE
OF.
I THINK THE REAL QUESTION HAS
LOOKS LIKE THERE IS LOT MORE