LIZ: YOU’RE WELCOME DENNIS LOCKH
ART, FORMER ATLANTA FED
PRESIDENT.
AS WE LOOK AT THE MARKETS CHECK
THE DOW WE PAIRED 200 POINTS OFF
THE LOWS WE’RE DOWN 717, LOW OF
THE SESSION MARKET HERE DOWN 928
LET’S GET RIGHT TO THE FLOOR
SHOW WE HAVE THE GREAT SCOTT BAU
ER SCOTT SHELLADY.
YOU JUST HEARD DENNIS LOCKHART
SAY WE’RE GETTING
AWFULLY CLOSE AND HE TALKED
ABOUT THE FED RESUMING
CREDIBILITY OR GRABBING SOME OF
IT BACK BECAUSE THEY AREN’T SO
EMBARRASSED THAT THEY STICK TO
THE WRONG NUMBERS HERE, BUT LOOK
AT THE 30 YEAR FIXED RATE FOR A
MORTGAGE.
RIGHT NOW, AND IT IS CERTAINLY
SKY ROCKETED, FORGET, YOU KNOW,
SINCE DECEMBER WHERE IT WAS MORE
LIKE 3%, RIGHT NOW, THAT’S THE
YIELD.
THAT’S THE 30 YEAR TREASURY
YIELD, BUT IF WE COULD SHOW THE
ACTUAL 30-YEAR FIXED RATE
NOW YOU START TO SEE THE HOUSING
MARKET SLOWDOWN.
WHAT SECTORS ARE YOU WATCHING
MOST CLOSELY?
>> SO LIZ, I THINK RIGHT NOW
THE WAY THE MARKET IS TRADING,
PERCEPTION IS REALITY,
ESPECIALLY WHEN YOU’RE REFERRING
TO THE FED, SO WHATEVER THEY DID
YESTERDAY, 50, 75 THE PERCEPTION
IS IT WAS NOT GOING TO BE A GOOD
THING SO I DON’T THINK THEY ARE
IN A VERY GOOD LIGHT RIGHT NOW
AND THAT’S HOW THE MARKET IS
TRADING BUT IN TERMS OF HOW DO
YOU POSITION YOURSELF MOVING
FORWARD HERE.
THE BANKS DURING RISING INTEREST
RATE PERIODS TYPICALLY DO WELL,
BUT, IF WE GET TO AN ECONOMIC
SLOWDOWN THAT OBVIOUSLY CAN AMP
ER THOSE BANKS BUT THERE IS
ONE THAT STANDS OUT AND THAT’S C
ITI CORP.
THEY HAVE A 5.5 FORWARD PE.
IT’S REALLY CHEAP, I LOVE THAT
BANK, AMONG THE REST OF THE
BANKS THAT ARE OUT THERE.
IN ADDITION, IN THIS ENVIRONMENT
, YOU ALWAYS
HAVE TO LOOK AT CASH-RICH
COMPANIES.
SO THERE’S SOME IN THE TECH
SECTOR THAT HAVE BEEN BEATEN UP,
AND THEY’RE NOT FANCY NAMES,
THEY ARE APPLE, MICROSOFT, EVEN
A CISCO, IF YOU WILL, THAT ARE
CASH-RICH THAT I BELIEVE CAN
WITHSTAND IN A REALLY, YOU KNOW,
POSITIVE WAY HERE, WHAT’S GOING
ON, AND YOU WANT TO OWN THEM
DOWN THE ROAD.
LIZ: APPLE IS 4% CHEAPER TODAY
THAN IT WAS YESTERDAY, AND WE’VE
GOT MICROSOFT MORE THAN 2%
CHEAPER THAN IT WAS YESTERDAY.
FOLKS, YOU COULD ARGUE THINGS
ARE ON SALE BUT SCOTT SHELLADY
IS THAT HOW YOU SEE IT OR IS
THIS A FALLING KNIFE AND YOU
DON’T WANT TO TRY AND EVEN CATCH
IT?
>> 100% THE SECOND ONE, RIGHT?
IT’S A FALLING KNIFE.
WHAT’S KING RIGHT NOW TO ME IS
MATTRESS KING, RIGHT?
PUT YOUR MONEY INTO MATTRESSES
FOR THE SHORT-TERM HERE BECAUSE
I THINK IT’S STILL A VERY DODGEY
SCENARIO.
I WAS LISTENING TO LOCKHART.
HERE IS THE DEAL.
SHAME ON ALL OF US TO THINK THAT
THE PEOPLE THAT US INTO THIS
MESS ARE THE ONES THAT GET
US OUT OF THIS MESS.
SHAME ON US.
NUMBER ONE.
NUMBER TWO IS THAT HE WANTS TO
EXPLAIN AWAY THE GDP NOW, THE
FED TRACKER 0%.
GIRL, IF THAT GOES INTO A
NEGATIVE I’VE BEEN DOING THIS 35
YEARS, LIZ.
THAT’S THE FIRST TIME IN MY LIFE
THAT WE’VE RAISED RATES 75 BPS
INTO A RECESSION AND ARE
THINKING ABOUT DOING IT AGAIN.
THE SAND BENEATH THEIR FEET ARE
CHANGING SO FAST THEY’VE MISSED
IT.
I THINK THE ECONOMY IS MUCH
WEAKER THAN THEY BELIEVE, LOOK,
HE SAID THE CONSUMER IS STILL
SPENDING.
DID HE SEE THE RETAIL SALES
NUMBER?
IT CRATERED.
LOOK AT CONSUMER SENTIMENT
SURVEY.
IT’S HORRIBLE.
ALL-TIME RECORD LOWS.
WHERE ARE THESE, WHAT ARE THESE
PEOPLE THINKING?
SO I WAS SURPRISED, OBVIOUSLY
YOU CAN TELL BY MY VOICE, I
UNDERSTOOD THE 75 RATE, BECAUSE
I FELT FOR ONCE THE FED MIGHT
TRY TO ACT AGGRESSIVE AND HAWK
ISH, NOT JUST TALK HAWKISH
BUT ACT HAWKISH AND THE MARKET
GAVE THEM THE DOOR OPEN FOR 75 B
PS RAISE WITHOUT REALLY
PUNISHING THEM BECAUSE
EXPECTATIONS MOVED UP BUT I’M
TELLING YOU RIGHT NOW WHEN THIS
ECONOMY, WHEN THESE
ECONOMIC INDICATORS START COMING
THROUGH WEAKER AND WEAKER
BECAUSE WE’VE STILL GOT HIGH GAS
PRICES AND HIGH FOOD PRICES
THERE’S BEEN NO RELIEF ANYWHERE
AND WE HAVE HISTORIC SYNTHETIC
TIGHTENING.
WHAT DO I MEAN BY THAT?
YOU HAVE THE FED RAISING RATES
NOW, BUT EVERY OTHER PART OF THE
AMERICAL SOCIETY IS MORE
EXPENSIVE.
SO WHERE’S THE RELIEF FOR THE
CONSUMER?
LIZ: YEAH, YOU’VE GOT SCOTT BAUE
R HERE NODDING HIS
HEAD.
REALLY QUICK ON HIGH ENERGY
PRICES WE DO HAVE CRUDE AND
BRENT HIGHER IN THE AFTERMARKET,
SCOTT, WHAT’S YOUR COMMENT ABOUT
THAT BECAUSE THAT SEEMS TO BE
THE DRIVER OF ALL THINGS
INFLATION.
>> IT ABSOLUTELY IS, LIZ, AND
THE FED IS BEHIND THE CURVE,
BECAUSE THEY’RE LOOKING AT DATA
WHICH IS OLD.
IT’S NOT LEADING DATA, AND WE
KNOW WHAT’S HAPPENING TO MAIN
STREET USA.
MAIN STREET USA HAS STARTED
CUTTING BACK ALREADY, EVEN
THOUGH CONSUMER SPENDING IS
STILL UP THERE, SO TO ME, WE ARE
IN A RECESSION RIGHT NOW, AND
I’M GOING TO GO OUT AND SAY BY
THE END OF THIS YEAR, LIZ, IF
THE PATH CONTINUES THIS WAY, WE
MAY GET THE FED TO ACTUALLY CUT
RATES.
LIZ: OH, IN ONE YEAR.
IN THE SAME YEAR, INTERESTING.
WE’VE GOT TO RUN, GENTLEMEN,