.
>> WELCOME BACK FUTURES A
MIXED OPENING THIS MORNING
TAKE A LOOK DOW INDUSTRIALS UP
A FRACTION NASDAQ DOWN A
FRACTION S&P DOWN 2 POINTS AS
WE LOOK TO FEDERAL RESERVE
RATE DECISION THIS AFTERNOON
MARKETS SO FAR FULLY PRICING
IN A QUARTER POINT RATE HIKE
15% CHANCE OF NO RATE HIKE AT
ALL, WE WILL HEAR FROM FED
CHAIR JAY POWELL AT 2:30
EASTERN SEE IF A MOVER I ASKED
JOE LAVORGNA IF HE EXPECTS FED
TO RAISE RATES HERE IS WHAT HE
SAID.
>> NO MOVE, OH, END QT
HIGHLIGHT THE FACT THAT IF
THINGS CHANGE OR EVOLVE THE
WAY WE EXPECT WE COULD GO BACK
TO RATE HIKES IN MAY BECAUSE
DON’T FORGET THE FORECAST,
THEY CAN GIVE US, THE WORST
THING IS HEIGHTEN RATES FED
HELPED CAUSE THE PROBLEM WE
HAVE.
>> JOINING ME MACROMAVENS
PRESIDENT STEPHANIE POMBOY
FORMER REAGAN ECONOMIC ADVISOR
ART LAFFER THANK YOU SO MUCH
FOR BEING HERE STEPHANIE WHAT
ARE YOU EXPECTING FROM THE
FED, ALSO, I MENTIONED
EARLIER, WHEN THE FED OPENED
THAT WINDOW WE SAW NEW
BORROWING ONTO THAT A FORM OF
EASING ALREADY GIVEN THE FACT
THAT THERE NEED TO GO XAN
BALANCE SHEET THEY ARE
SUPPOSED TO DO THE UNWIND;
RIGHT?
>> RIGHT.
>>, ABSOLUTELY.
SO, I GUESS MY EXPECTATION FOR
TODAY IS THAT THEY WILL RATIFY
MARKET EXPECTATIONS BECAUSE IT
IS ALREADY BUILT INTO THE
MARKET, SO THIS IDEA IN A
TIGHTENING 25 BASIS POINTS
POINTS IS GOING TO CAUSE OTHER
BANKS TO BE TO -- RAIL STRIKES
ME AS INCORRECT, AND THEY ALSO
DON’T WANT TO CREATE THE SENSE
OF PANIC, YOU KNOW IF THEY
STOP RIGHT NOW, PEOPLE MIGHT
SAY WHAT DOES FED SEE THAT
WE’RE NOT AWARE OF I DO EXPECT
WE WILL GET 25.
, HOWEVER, I THINK THAT WE’RE
GOING TO BE LOOKING AT MUCH
MORE RAPID RATE CUTS THAN
MARKET IS PRESENTLY EXPECTING
THEY BUILT IN ABOUT 350 BASIS
POINTS OF KRULTHS BETWEEN NOW
AND YEAR-END I THINK HONESTLY
WHAT WE’RE SEEING MARIA IS NOT
JUST THE BANKING SECTOR ISSUE,
THE EVERYTHING BUBBLE THAT IS
BURST GOING TO HIT, YOU KNOW
QUOTE THE MOVIE EVERYTHING,
EVERYWHERE ALL AT ONCE GOING
TO NOT JUST HAVE THIS
CONTAINED TO BANKING WE’RE
GOING TO HAVE CREDIT MARKETS
DISFUNCTIONAL MUNICIPAL
MARKETS HIT BY IMPACT OF RATE
HIKES DO I EXPECT FED WILL
HAVE A DRAM U-TURN IN POLICY
OVER THE NEXT FEW MONTHS AS
THAT HAPPENS.
MARIA: CONTINUING TO MOVE
THROUGH MARKETS THAT NOTION
LARRY MCDONALD SAID A CUT
BEFORE JULY 4 ART HOW DO YOU
SEE IT?
>> I DON’T KNOW IF A CUT
BEFORE JULY 4, I DO THINK
STEPHANIE IS CORRECT ABOUT THE
FED FOLLOWING A SMALL INCREASE
TODAY I DON’T THINK MAKES MUCH
DIFFERENCE TO BE HONEST FED
SHOULD NOT BE DETERMINING
INTEREST RATES THEY SHOULD
FOLLOW MARKETS NOT LEAD THE
MARKETS THIS GOT US INTO ALL
IF PROBLEMS WE ARE IN TODAY.
AND THE USE OF CREDIT
FACILITIES, BANKS, SILICON
VALLEY ALL OF THAT IS A
CORRECT CONSEQUENCE OF FED’S
BEING AGGRESSIVE TRYING TO
CONTROL MARKETS, RATHER THAN
FOLLOWING MARKETS, A MAJOR
MISTAKE I HOPE THEY CHANGE IT.
>> YEAH THEY MADE A LOT OF
MISTAKES, STEPHANIE YOU JUST
SAID YOU KNOW THE EVERYTHING
BUBBLE HAS BURST.
ONE THING I AM WORRIED ABOUT
IS COMMERCIAL REAL ESTATE,
THERE IS A PIECE OF JOURNAL
TODAY A RECORD AMOUNT OF
COMMERCIAL MORTGAGES ARE
EXPIRING IN 2023, SET TO TEST
FINANCIAL HEALTH OF SMALL
REGIONAL BANKS UNDER PRESSURE
FOLLOWING FAILURES OF SILICON
VALLEY BANK FOWLER BANKS
2. TRILLION COMMERCIAL REAL
ESTATE INCLUDING RENTAL
APARTMENT MORTALITIES ANALYSIS
FROM DATA FIRM ALL FROM "THE
WALL STREET JOURNAL" I AM
READING THIS MORNING,
STEPHANIE, WHAT KIND OF RISKS
THERE ARE LOOK AT FIRST
REPUBLIC STOCK UP 30%
YESTERDAY NOW REVERSED NOW UP
AGAIN, THE BANK, McKENZIE FOR
HEALTH STRATEGIC OPTIONS BANK
RESCUE MAY RELY ON U.S.
BACKING TO REACH A BALE STOCK
DOWN BECAUSE OF STRESS YOU
REFERRED TO STRESS AFTERNOON
BANKS HOW MUCH OF A COMMERCIAL
REAL ESTATE ISSUE COULD BE A
FACTOR HERE DO YOU WORRY ABOUT
THERE A?
>> YEAH ABSOLUTELY, MARIA.
I MEAN SORT OF THE OBJECTS
WEAKEST LINK IN THE CHAIN,
BECAUSE, OBVIOUSLY, REMARKET
IS FIRST THING TO GET HIT WHEN
FED STARTS RAISING RATES, TO
ART’S POINT, WE’VE BEEN
WATCHING THIS FOR DECADES NOW
THE FED BASICALLY HAS
PING-PONG FROM ASSET BUBBLE TO
BUST SEEM TO ATTEMPT TO SOLVE
EVERY ASSET BUBBLE BUST PUSHED
MORE MONEY IN ECONOMY THEY
INFLATE A BUBBLE SEEMS
INVINCIBLE TO THEM ONLY WE ARE
BACK, TO REPEAT NOT SURPRISING
THAT WE ARE SEEING REAL ISSUES
WITH COMMERCIAL REAL ESTATE I
THINK GOING TO CONTINUE
INTENSIFY WAVE GOING TO LOOK
AT REAL ISSUES IN THE
CORPORATE CREDIT MARKET AS
ZOMBIE COMPANIES AT THE END OF
THE DAY SORT OF CLIENTS OF SVB
THE CUSTOMERS COMPANIES THAT
HAVE BEEN COMPLETELY LEVERED
UP AS THEY GO BYE-BYE, LIKE I
SAID GOING TO HIT EVERYWHERE,
ALL AT ONCE SO NOT GOING TO BE
CONFINED TO REAL ESTATE NOT
CONFINED TO THE BANKS NOT CON
FINED TO CORPORATE CREDIT,
THIS IS REALLY LIKE 2007,
2008, ALL OVER AGAIN EXCEPT I
THINK GOING TO DEVOLVE FASTER
THAN IT DID THEN BECAUSE OF
THE SPEED AND MAGNITUDE OF THE
FED’S RATE HIKES.
SOUNDS YOU ARE EXPECTING A
COME DON FOR ECONOMY AND
MARKET COMPARING TO 2007, 2008
FINANCIAL CRISIS.
>> YEAH, ABSOLUTELY.
I MEAN, JUST MATH, YOU KNOW IF
YOU TAKE AN ECONOMY, THAT IS
TOTING MUCH MORE LEVERAGE THAN
2008, AND THEN YOU RATCHET UP
RATES RECORD FASHION, YOU ARE
GOING TO CREATE REAL
DISLOCATIONS WITH PEOPLE WILL
WHO CAPTAIN SERVICE DEBT AT
HIGHER INTEREST RATES, THAT
APPLIES TO ENORMOUS SWATH OF
THE ECONOMY FROM COMMERCIAL
REAL ESTATE SECTOR, TO CERTAIN
LOW END CONSUMER, DISTRESS
SEEING IN AUTOS CREDIT
CARDS, THE CORPORATE MARKET I
THINK IS THE ONE THING NO ONE
IS FOCUSED ON CREDIT SPREADS
BARELY BUDGED IN FACE OF IN I
THINK A LOT OF STUFF COMING
DOWN THE PIKE UFRMENT.
MARIA: ART DO YOU AGREE WITH
THAT.
>> I DO I DO A ASSESSOR
PROBLEM BECAUSE OF FED POLICY
ALSO BECAUSE OF FISCAL POLICY,
BIDEN BUDGE DOES NOT MAKE
ANYTHING BETTER I THINK A LOT
OF CRACKS IN THE SYSTEM I
THINK WE ARE BEGINNING THE
FINANCIAL PROBLEMS BECAUSE YOU
ARE GOING TO SEE THIS POP UP
IN ALL SORTS OF OTHER AREAS
BECAUSE OF LEVERAGE, BECAUSE
OF A VERY SHARP RISE IN
INTEREST RATES, MEANS, THAT
INSTITUTIONS PORTFOLIO
HOLDINGS OF ASSETS AT LOW
RATES BECAUSE THEY BROUGHT
THEM UP THE LIABILITIES ARE
VERY HIGH RATES BECAUSE
CURRENT LIABILITIES PUTS
FINANCIAL INSTITUTIONS ON
THEIR BACK WE WILL SEE MORE
PROBLEMS I WILL GIVING NEXT
THREE, FOUR, FIVE MONTHS I
THINK THAT, BY THE WAY, WILL
DETERMINE HOW FED RESPONDS TO
THE REST, I THINK CURRENT
ESTIMATES OF HOW FED IS GOING
TO LOWER RATES OR RAISE RATES
IS WAY OFF MARK THEY ARE GOING
TO RESPOND TO CRISES AS THEY
COME ALONG NEXT NINE MONTHS
AGO.
>> ISN’T IT INCREDIBLE FEELS
LIKE THE FED ONLY ONE ROWING
THIS BOAT?
IF THE FEDERAL IF BIDEN
ADMINISTRATION UNDERSTOOD WHAT
WAS TAKING PLACE HERE, WOULD
THEY BE PUSHING ALL THIS
TRILLIONS AND TRILLION DOLLARS
NEW SPENDING ALL THE TIME?
>> NO, THEY WOULDN’T, YOU
KNOW.
YOU SAY THE FED PUSHING THE
BOAT WHEN YOU LOOK AT MEMBERS
OF THE BORED YOU DON’T HAVE A
APPALL VOK CONSIDER YOU DON’T
HAVE ALAN GREENSPAN YOU DON’T
HAVE MARTIN YOU DON’T HAVE ANY
PEOPLE OF THIS SORT OF
GRAVITAS IN THERE THEY DON’T
KNOW WHICH WAY THE BOAT IS
GOING HOW TO MAKE IT ROW THEY
ARE RESPONDING TO CURRENT
CRISES THAT IS NOT THE WAY TO
RUN MONETARY POLICY WHAT YOU
WANT TO DO ON MONETARY POLICY
DO THE BEST YOU CAN, TO
ASCERTAIN A STABLE VALUED YOU
CURRENCY OVER LONG PERIODS OF
TIME YOU SHOULD NOT INTE
RESPONDING TO CRISES THIS DAY
NEXT DAY THE NEXT.
THAT IS NOT THE WAY SHOULD YOU
DO IT STABLE PRICES OVER LONG
PERIOD OF TIME LET MARKETS
CLEAREM THAT THAT IS NOT THIS
FED THEY ARE VERY HE,
INTERVENTIONIST, TAKING CARE
OF EVERY WEEK’S PROBLEM
ANOTHER NEW POLICY.
YOU CAN SEE WHAT IS HAPPENING.
IT IS NOT WORK.
>> HOW BIG A SELL-OFF IN
STOCKS ARE YOU EXPECTING,
BECAUSE POTENTIAL TO SORT OF
LAYER ON ANOTHER MASSIVE FEAR
WHEN PEOPLE SEE EQUITIES
VALUATIONS DROPPING CHANGES
BEHAVIOR HOW SIGNIFICANT
SELL-OFF WOULD YOU EXPECT THIS
YEAR.
>> ABSOLUTELY, I EXPECT A
MEANINGFUL SELL-OFF I THINK
LAST YEAR WAS SORT OF A TASTE
OF THINGS TO COME, I THINK WE
CAN EASILY SEE 30% DECLINE IN
MARKET, OR A ESTIMATES
CONTINUE TO BE PIE-IN-THE-SKY,
YOU KNOW FORECAST FOR THIS
YEAR I THINK DOWN 2%, THAT
WOULD BE FIRST TIME IN
HISTORY, WE’VE EVER ESCAPED
WITH THAT MINOR DECREASE IN
EARNINGS.
THE AMAZING THING, MARIA, I
HAD TO CHECK THIS FIVE TIMES,
BUT LAST FRIDAY WHEN THEY DID
THE UPDATE OF ANALYSTS
EARNINGS FORECAST, IT HE WILL
HAVE REFLECTED AN INCREASE IN
THE ESTIMATE FOR THE FINANCIAL
SECTOR, WHICH THEY TOOK UP
FROM SOMEWHERE AROUND 8% TO 9
1/2 FOR THIS YEAR, I DON’T
KNOW WHAT IS GOING ON THERE,
BUT, CLEARLY, AREAS WHERE
EXPECTATIONS FOR EARNINGS
GROWTH ARE SO FAR OUT OF TOUCH
WITH LIKELY REALITY SO THIS
MARKET HAS A LOT OF WORK TO
DO, THE IDEA THAT THE FED
PIVOT IS GOING TO, YOU KNOW,
BE ENOUGH TO PUT FLOOR UNDER
ASSET PRICES IS LAUGHABLE TO
ME WE ARE SO DEEP IN IT, WE’RE
GOING TO NEED NOT JUST A PIVOT
WE NEED TO TAKE RATES BACK
WHERE THEY WERE BEFORE FED
STARTED TO ART’S POINT ONE
SOLUTION CUT REGULATION CUT
TAXES HAVE PRO-GROWTH FISCAL
STIMULUS RATHER THAN ALL THIS
ESG NONSENSE THAT GOT US IN
THIS SITUATION.
>> UNFORTUNATELY, THEY ARE
GOING THE OTHER WAY BIDEN
WANTS TO RAISE TAXES IN LATEST