DAGEN: FUTURES ARE MIXED THIS
MORNING ON THE FIRST TRADING DAY
OF THE FINAL QUARTER OF 2022.
WE’RE LOOKING AHEAD TO THE
SEPTEMBER JOBS REPORT OUT ON
FRIDAY.
THERE’S SO MUCH MORE THAT’S
GOING TO HAPPEN BETWEEN NOW AND
THEN.
HOWEVER, JOINING ME NOW, ER
SHARES CEO, JOEL SHULMAN.
JOEL, THERE’S MUCH TO DISCUSS,
DISSECT THIS MORNING.
WHAT ARE YOU WATCHING TO START
THIS NEW WEEK, THIS NEW MONTH,
THIS NEW QUARTER?
>> WELL, CERTAINLY HE WE HAVE TH
INVERSION IN INTEREST RATES
WHICH IS ABOUT 40 BASIS POINTS.
YOU ALLUDED TO IT EARLIER MANY
THIS IS A CONCERN.
I MEAN, WE’RE CLEARLY LOOKING AT
TWO, NOW POSSIBLY THREE NEGATIVE
QUARTERS IN A ROW.
SO SENTIMENT’S CERTAINLY VERY
NEGATIVE.
WE HAVE A JOBS REPORT COMING OUT
THIS FRIDAY.
WE ALSO HAVE OCTOBER 13th, THE
NEW CPI NUMBERS WHICH A LOT OF
PEOPLE ARE GOING TO BE WATCHING
VERY CLOSELY TO SEE HOW THE FED
RESPONDS.
DAGEN: WELL, YOU MENTIONED THE
THREE NEGATIVE QUARTERS OF
GROWTH, THE FIRST QUARTER, THE
SECOND QUARTER.
CONTRACTION.
BUT I WILL POINT OUT THAT THE
GDP NOW ESTIMATE FROM THE
ATLANTA FED IS NOW AT 2.4%
GROWTH.
SO THAT KIND OF IGNORES WHAT
WILL BE HAPPENING IN THE
QUARTERS TO COME BECAUSE WHAT
THE FEDERAL RESERVE IS DOING AND
PLANS TO CONTINUE TO DO IN TERMS
OF RAISING INTEREST RATES, JOEL,
THAT’S GOING TO TAKE A YEAR TO
18 MONTHS TO TRICKLE OUT INTO
THE ECONOMY.
SO WE’RE LOOKING AT A 2024
NEGATIVE GROWTH OR WEAKNESS IN
THE ECONOMY, POTENTIALLY.
>> RIGHT.
WELL, I MEAN, AGAIN, AS YOU
POINT OUT, THESE THINGS TAKE A
WHILE TO TAKE EFFECT.
I MEAN, WE DIDN’T GET INTO THIS
MESS OVERNIGHT.
WE’RE CERTAINLY NOT GOING TO GET
OUT OF IT OVERNIGHT EITHER.
AND WITH CPI, WE’VE GOT TO
REMEMBER, IT’S A LAG.
SO PARTICULARLY THE HOUSING
WHICH IS 30 TO 40% OF THE TOTAL
AND WE’VE GOT TO RECOGNIZE THAT
THE MARKET’S ALREADY DOWN HERE.
WE’RE SEEING ENERGY DOWN.
WE’RE SEEING CONSUMPTION AND
COMMODITIESES DOWN.
WE’RE SEEING GDP DOWN.
WE’RE SEEING HOUSING PRICES COME
TO A COMPLETE HALT.
IT WAS THE WORST CASE-SHILLER
SINCE INCEPTION.
THE INDICATORS ON THE GROUND IS
SUGGESTING THAT INFLATION IS
STARTING TO COME DOWN AND WITH
THE FED CONTINUING TO TIGHT
OPEN, THEY HAVE A REAL CHANCE OF
-- TIGHTEN, THEY HAVE A REAL
CHANCE OF OVER-CORRECTING.
DAGEN: MITCH, JUMP IN HERE.
THERE’S SO MUCH GOING ON, WITH
THE FREAKOUT IN BRITAIN THAT
HAPPENED LAST WEEK BECAUSE OF
THE INSURANCE STRATEGIES THAT
CAUSED A DISRUPTION IN THE BOND
MARKET.
ED CREDIT SUISSE TRIED TO CALM
MARKET FEARS ABOUT ITS OWN
FINANCIAL STABILITY.
IF YOU WANT TO TAKE A LOOK AT
CREDIT SUISSE’S STOCK, IT SENT
OUT A MEMO TO EMPLOYEES, CALLING
INVESTORS AND CLIENTS OVER THE
WEEKEND, THAT VERY OFTEN CAUSES
MORE PROBLEMS THAN IT SOLVES.
>> ALL OF THIS, DAGEN, IS
REMINISCENT OF THE FINANCIAL
CRISIS.
I’M NOT SORT OF YELLING FIRE IN
A CROWDED MOVIE HOUSE BUT THE
FACT OF THE MATTER IS WHEN YOU
SEE FINANCIAL INSTITUTIONS AT
RISK BECAUSE THEIR BALANCE
SHEETS AND THEIR ASSETS AND
LIABILITIES ARE SORT OF OUT OF
WHACK FROM A TIMING PERSPECTIVE
AND YOU SEE A CENTRAL BANK
SCRAMBLING LIKE THEY’RE DOING IN
THE U.K., THIS REMINDS ME OF THE
2008 PERIOD AND IT COULD BE A
SIGN THAT ON TOP OF THE REGULAR
HE SLOWING OF THE ECONOMY AND
INFLATION THAT’S OUT OF CONTROL
AROUND THE WORLD, WE HAVE SOME
FORM OF FINANCIAL CRIES HE CRISI
REALLY GOING TO START IF IN THE
U.K.
DAGEN: WHAT ABOUT IN THE U.S.?
YOU E-MAILED ME YESTERDAY, ON
SUNDAY, MITCH.
>> I DID E-MAIL.
DAGEN: WHILE WATCHING FOOTBALL.
>> THE GIANTS HAD WON.
I HEARD TODD SCREAMING.
THE FACT OF THE MATTER IS, THE
FED IS HAVING AN EMERGENCY
MEETING TODAY.
WE DON’T KNOW WHAT IT’S ABOUT.
THERE’S NOT MUCH IN THE PRESS.
I HAVE A FEELING IT’S GOT A LOT
TO DO TO TRY TO PROP UP THE U.K.
ECONOMY.
THE ONE THING THEY’RE DOING, THE
CENTRAL BANK IN THE U.K. IS
BUYING SECURITIES LIKE WAS HE
DID WHEN WE’RE TRYING TO GET OUT
OF OWNING SECURITIES AND THEY’RE
DOING IT, THAT’S INFLATIONARY
AND ONE OF THE THINGS THEY HAVE
OUT OF CONTROL IN THE U.K. IS
INFLATION SO I THINK THEIR
ECONOMY MAY NEED SOME HELP
AROUND THE WORLD.
DAGEN: THEY WERE TIGHTENING AND
THEN THEY TURNED AROUND BECAUSE
OF THE FREAK-OUT IN THE BOND
MARKET THERE AND STARTED BUYING
BONDS AND, JOEL, THAT IS
UNNERVING TO THE POINT THAT IT
SENDS THE MESS P THE MESSAGE THA
BANKER AS IF WE DIDN’T ALREADY
KNOW THIS, THEY HAVE NO CLUE
WHAT THEY’RE DOING.
>> WELL, U.K. CERTAINLY IS BEING
CRITICIZED FROM ALL ANGLES IN
TERMS OF THE WAY THEY HAND A HAN
THINGS WITH BREXIT AND THE
LATEST CRISIS.
EUROPE IS IF IN TROUBLE.
THEY’LL HAVE A DEEPER RECESSION
WE’LL HAVE IN THE U.S.
THERE’S A HANDFUL OF POCKETS
THAT SEEM TO BE CALM.
INDIA IS ONE OF THOSE EXAMPLES
WHERE THEY’VE ACTUALLY RECEIVED
BENEFIT THROUGH THE WAR IN
EUROPE WHERE THEY’RE NOW
RECEIVING THE OIL FROM RUSSIA
AND THEY’RE TURNING AROUND AND
SELLING IT TO EUROPE AT A
PROFIT.
SO THEIR MARKETS ARE FAIRLY
CALM.
BUT THE REST OF THE WORLD
INCLUDING CHINA, EUROPE, U.S.,
LATIN AMERICA, WE’RE ALL IN
TROUBLE.
DAGEN: BEFORE WE GO, SOMETHING
THAT WE WERE TALKING ABOUT HERE
LAST WEEK.
SO BONDS, THE NEW YORK TIMES
ARTICLE, ARE HAVING THEIR WORST
YEAR SINCE 1926 AND YOU LOOK AT
THE YIELDS ARE FALLING THIS
MORNING.
THAT MEANS THAT THE ACTUAL PRICE
IS GOING UP.
THAT’S GOOD NEWS.
BUT IN THIS ENVIRONMENT WHERE
PEOPLE JUST WANT SAFETY, A YIELD
OF 4.2% ON A TWO YEAR, IF YOU
LOCK IT IN FOR TWO YEARS, THAT
LOOKS PRETTY GOOD.
IF YOU THINK THE FEDERAL RESERVE
IS GOING TO BE ABLE TO BRING
INFLATION DOWN TO POTENTIALLY
BELOW THAT LEVEL.
>> MAYBE.
I’M NOT SURE I’D GO THEY THAT
FAR OUT ON A TREASURY AT TWO
YEAR.
MAYBE YOU GO WITH ONE YEAR OR
SIX MONTH.
I DO THINK, HOWEVER, THE LAST
COUPLE MONTHS THIS YEAR WE’RE
GOING TO SEE THE -- I THINK THE
MARKETS ARE GOING TO BE IN
EQUITIES WILL BE RELATIVELY FLAT
FOR THE NEXT FEW WEEKS, MAYBE
DOWN A LITTLE BIT.
I THINK IF WE SEE CPI NUMBERS
THAT ARE IMPROVING AND I THINK
AS PEOPLE HAVE CONFIDENCE THAT
THE MARKET IS GOING TO BE
FORWARD-LOOKING TO FOLLOWING
YEARS WHEN INFLATION IS COMING
DOWN, I DO BELIEVE THAT WE MAY
SEE A LITTLE POP IN THE MARKETS
FROM NOVEMBER AND DECEMBER.
SO I THINK THERE’S A CHANCE
THERE.
BUT I WOULDN’T GO TWO YEARS OUT
ON THE TREASURY.
I MIGHT GO SIX MONTHS P AT THIS
POINT.
DAGEN: THERE’S ONE HEADLINE,
THOUGH, IN THE JOURNAL TODAY,
SAYS AFTER A PUNISHING YEAR FOR
STOCKS INVESTORS AREN’T BETTING
ON A POST MIDTERM RALLY.
BUT YOU SAY OTHERWISE, RIGHT,
JOEL?
>> IT MAY BE.
WE MAY BE.
AND I THINK THE CATALYST, IF WE
HAVE SUCH A THING AS A CATALYST,
IT WOULD BE CPI NUMBERS THAT ARE
SHOWING STARTING TO COME DOWN
BUT AGAIN, THOSE ARE LAGGING
INDICATORS AND AGAIN, WE’RE
GOING TO CONTINUE TO SEE
CORPORATIONS COMING OUT WITH
REVISIONS AND EARNINGS GOING
DOWN AND SO FORTH.
IRONICALLY, WHEN COMPANIES
ANNOUNCE THEY’RE LAYING OFF,
STOCKS DO RALLY.
SO THERE’S GOING TO BE GOOD
NEWS, BAD NEWS THROUGHOUT THE
LAST QUARTER.
DAGEN: JOEL, GREAT TO SEE YOU