BUT WE DON'T.
ERIN, TODD, APPRECIATE IT.
>> THANK YOU.
CONNELL: WITH ALL THE
UNCERTAINTY WE TALK ABOUT IN
MARKETS WHAT ABOUT IDEA OF A
RECESSION IN 2019?
A DIFFERENT VIEW FROM WHAT YOU
HEARD FROM KEVIN HASSETT, CAME
FROM LIZ ANN SONDERS FROM
CHARLES SCHWAB, SHE WAS
INTERVIEWED BY OUR OWN GERRY
BAKER HERE ON FRIDAY.
LISTEN.
>> THERE IS 100% CHANCE WE'LL
GET ANOTHER RECESSION.
IN THE NEXT YEAR I THINK TRADE
HOLDS THE KEY.
RIGHT, I THINK THE KEY TO THE
LENGTH OF RUNWAY BETWEEN NOW AND
THE NEXT RECESSION TO A LARGE
DEGREE DOES RELATE TO TRADE.
HOPEFULLY WE'LL HAVE SOME ANSWER
TO THAT IN THE NEXT FEW MONTHS.
CONNELL: WE'RE JOINED BY THE
PRESIDENT OF THE AMERICAN ACTION
FORUM, DOUGLAS HOLTZ-EAKIN.
JUST TO BE CLEAR, LIZ ANN IS NOT
SAYING 100% CHANCE OF RECESSION
TO KEVIN HASSETT'S ZERO, SHE
SAID, AS YOU KNOW, DOUG WE'LL
GET ANOTHER RECESSION AT ONE
POINT.
THERE IS 100% CHANCE OF THAT.
BUT THE TIMING IS BASED ON
TRADE.
WHAT IS YOUR TAKE?
>> I THINK THERE IS A LOT OF
TRUTH TO THE FACT THAT TRADE IS
CRUCIAL TO THE NEAR TERM PATH OF
THE ECONOMY.
WE'VE SEEN THE TOLL THAT THE
TRADE TACTICS HAVE TAKEN OVER
THE PAST YEAR.
WE'VE SEEN CEO CONFIDENCE CAME
OUT THIS MORNING.
IT IS DOWN TO LEVELS NOT SEEN
SINCE BEFORE THE LAST
PRESIDENTIAL ELECTION.
A BIG PART OF THAT RATCHETING
BACK CAPITAL EXPANSION PLANS.
ALL THAT IS BAD NEWS FOR THE
GROWTH RATE OF THE ECONOMY.
I DON'T THINK OF THAT AS
RECESSION RISK.
THAT IS TAKING THE UPSIDE AWAY.
TO GET A RECESSION YOU HAVE TO
HAVE THE HOUSEHOLD SECTOR GO
SOUTH.
WITH THE GUEST YOU JUST HAD ON,
WE WOULD HAVE TO SEE HOUSEHOLD
SPENDING DROP TO NEGATIVE 1% TO
GET RECESSION.
IT IS GROWING AT 3%.
THAT IS A BIG SWING.
THERE IS NOTHING THAT WILL DRIVE
THE SECTOR THAT WAY.
CONNELL: AS YOU LOOK AT EQUITY
MARKET REACTION.
>> YOU'RE RIGHT ABOUT THAT.
>> IF YOU'RE LOOKING AT EQUITY
MARKET, ALSO OTHER MARKETS.
LOOK AT THE BOND MARKET.
ESPECIALLY LOOK AT HIGH YIELD
FOR THE LAST FEW -- IS THERE
OVERREACTION IN YOUR JUDGMENT IN
FINANCIAL MARKETS TO WHAT IS
HAPPENING IN THE ECONOMY WHAT
THE ECONOMIC OUTLOOK IS?
>> I THINK TWO THINGS ARE GOING
ON.
ONE, IT IS TRADITIONAL FOR
FINANCIAL MARKETS TO OVERREACT.
THEY SWING MORE WIDELY THAN THE
REAL ECONOMY.
YOU DON'T SEE THE ECONOMY
BOUNCING AROUND THE WAY YOU DO
WITH EQUITY MARKETS.
EQUITY MARKETS ARE FILTERING
GOOD AND BAD NEWS, THAT IS ITS
FUNCTION.
THE SECOND THING I THINK THERE
IS A LOT TO BE SAID FOR THE FED
BEING BEHIND THE CURVE AND THAT
BY KEEPING RATES LOW FOR A LONG
TIME WE GOT SOME INFLATION BUT
IT WASN'T TRADITIONAL CONSUMER
PRICE INFLATION.
IT WAS ASSET INFLATION.
SO A LOT OF WHAT YOU'RE SEEING
NOW IS THE FED GETTING BACK TO
NORMAL.
ASSET PRICING GETTING BACK TO
NORMAL AHEAD OF IT SEVEN.
THAT IS GOOD NEWS IN THE BIGGER
PICTURE.
LIVING THROUGH IT IS NOT FUN.
OVER THE LONG TERM THAT WILL
SERVE THE U.S. WELL.
CONNELL: PUTTING THEMSELVES IN A
TOUGH SPOT BEING BEHIND THE
CURVE FOR THAT LONG?
WHAT DO THEY DO WEDNESDAY OR
MORE IMPORTANTLY WHAT DO THEY
SAY?
>> I THINK THEY MOVE WEDNESDAY
REGARDLESS.
WHAT THEY SAY I THINK IS
SOMETHING THAT WILL NOT MAKE
ANYONE VERY HAPPY.
THEY WILL SAY THIS IS ALL DATA
DEPENDENT.
WE'LL DO THE RIGHT THING, I
PROMISE YOU.
WE'RE CLOSE TO NORMAL, THAT
MEANS 100 BASIS-POINT RANGE.
PEOPLE WILL SCRATCH THEIR HEADS.
I THINK IT WILL BE A TOUGH WEEK.
CONNELL: WHERE IS NEUTRAL.
THE WHOLE THING.
>> RIGHT.
WE'LL GET THE WHOLE THING.
CONNELL: WE LOOK FORWARD TO
THAT.
MAKE YOUR OWN INTERPRETATIONS
LIKE CHOOSE YOUR OWN ADVENTURE
NOVEL.
GO AHEAD, DOUG.
>> GO TO CHARLIE GASPARINO, HAVE
A DRINKING GAME.
CONNELL: GAS PARRINO IS ANOTHER
STORY.
ALWAYS HALF FULL WITH HIM.
LET ME ASK YOU ABOUT ANOTHER
QUESTION IF I MIGHT WHICH IS THE
HEALTHCARE RULING.
WHAT DO YOU MAKE OF THAT?
A NOTE CAME OUT FROM S&P, S&P
GLOBAL RATINGS AFTER THE JUDGE
RULED IN TEXAS ON OBAMACARE,
RULED IT UNCONSTITUTIONAL, NOW
IT WILL GO THROUGH THE APPEALS
PROCESS, SAYS THAT THE DECISION
POSES A THREAT TO THE CREDIT
QUALITY OF SOME STATES AS WELL
AS HOSPITALS AND INSURANCE
COMPANIES BECAUSE IT IS, LOGIC
FROM S&P GOES THE STATE HAS
EXPANDED MEDICAID COULD LOSE
BILLIONS IN FEDERAL MONEY.
TRYING TO KEEP PEOPLE INSURED
AND THEY'RE ON THE HOOK FOR A
LOT OF MONEY THEMSELVES.
WHAT DO YOU MAKE OF THIS FROM A
FINANCIAL PERSPECTIVE?
>> THERE IS CERTAINLY A GRAIN OF
TRUTH IN THAT.
IT HAS ALWAYS BEEN A RISK TO DO
THE MEDICAID EXPANSION.
ONE FEAR WAS THAT FEDERAL
GOVERNMENT WOULD ULTIMATELY
RENEGE.
BUDGET DEFICIT IS REALLY BAD.
THEY MIGHT TRY TO FIX IT AT
EXPENSE OF THE STATES.
THEY WOULD BE LEFT COMING UP
WITH THAT MONEY.
THIS IS AN EXTREME VERSION OF
THAT WHERE IT GOES AWAY ENTIRELY
BECAUSE OF A JUDICIAL RULING.
THE GOOD NEWS THERE IS A RUNWAY.
THEY'RE NOT PUTTING IN A STAY OR
INJUNCTION.
THE LAW WILL CONTINUE TO
OPERATE.
AS APPEALS MOVE THROUGH THE
COURTS IT IS SOMETHING TO KEEP