DAVID: THERE'S A NEW SURVEY OUT
SHOWING NEARLY HALF OF ALL CHIEF
FINANCIAL OFFICERS IN THE U.S.
EXPECT A RECESSION TO HIT
OUR ECONOMY BY THE END OF NEXT
YEAR AND A WHOPPING 82% BELIEVE
THAT A RECESSION WILL ALREADY
HAVE BEGUN BY THE END OF 2020.
OUR NEXT GUEST SAYS IT'S
ACTUALLY NOT ALL DOOM AND
DIPLOMA HEAD AND HE JUST PENNED
AN OP-ED LETTER TO PRESIDENT
TRUMP ON FOXBUSINESS.COM OUTLIN
ING WHY, JOINING US NOW,
MICHAEL BLOCK.
HE'S MANAGING DIRECTOR OF MARKET
STRATEGIST AT THIRD SEVEN
ADVISORS MICHAEL WHAT DO YOU
THINK?
IS A RECESSION BY 2020 LIKELY AS
SO MANY OF THESE CFO'S THINK?
>> WELL A LOT OF THE CFO'S SEE
WHAT'S GOING ON IN THE MARKET
AND IT COLORS THEIR VIEWS AND
GRANTED WHEN THE MARKET GOES
DOWN LIKE THIS DAVID IT MEANS
THERE'S A BETTER CHANCE THEY
BELIEVE IN A WEALTH EFFECT AND
IT'S HURTING CONFIDENCE AND
ASSET PRICES AND HURTING
BUSINESS OWNERS, WILLINGNESS TO
INVEST, BUT THERE IS A WAY OUT
AND THEN THIS OP-ED LETTER THAT
YOU CITED I TALKED ABOUT HOW
PUBLIC POLICY CAN HELP STEER IT
AWAY.
FACT IS GROWTH IS SLOWING BUT IF
WE GET THE RIGHT KIND OF TAX
REFORM --
DAVID: I DON'T KNOW IF I'VE GOT
AN ANSWER IS THERE GOING TO BE A
RECESSION BY 2020?
>> I STILL DON'T THINK SO.
THE QUESTION IS IT LIKELY NO,
POSSIBLE?
DAVID: LIKELY NO.
>> I THINK THERE'S A LOT OF
DIFFERENT WAYS THE POWERS THAT
BE CAN HELP PREVENT THAT ONE IS
HELPING INCREASE WAGES AND
PRODUCTIVITY AND ONE IS BY
PUTTING MONEY BACK INTO THE
ECONOMY, VIA INFRASTRUCTURE
SPENDING, AND THEN THREE IS
GETTING THIS TRADE DEAL DONE
WITH CHINA.
THAT HAPPENS, FREE MARKETS FLOW,
I THINK WE HAVE A GOOD CHANCE OF
WORKING OUR WAY OUT OF THIS.
PEOPLE SAY WE'RE AT THE END OF
THE BUSINESS CYCLE AND THERE'S
NO BUSINESS CYCLE ANY MORE ITS
BEEN MANIPULATED AND STRETCHED
LIKE SALTWATER TAFFY, AS I SAID
IN MY LETTER TO PRESIDENT TRUMP.
>> MICHAEL IT'S KEVIN.
THE INTERESTING ASPECT HERE IS I
DON'T NECESSARILY DISAGREE WITH
THE CFO'S BY THE END OF 2020
BECAUSE A RECESSION IS
REALLY JUST A SLOWING OF
ECONOMIC ACTIVITY, SO IF WE GO
FROM 4.5% GROWTH ON GDP DOWN TO
4% IF WE GO, IF THE UNEMPLOYMENT
RATE GOES FROM 3.7% TO 4% AND
YOU START TO HAVE SLOWING IN
REDUCTION IN THAT GROWTH YOU
COULD CONSIDER THAT A RECESSION
AND THE PROBLEM WITH THE CFO'S
ARE THAT THEY ARE THE ONES
HAVING TO DEAL WITH THE TWO
LAUREST INPUT COSTS AND THAT'S
LABOR GOING UP AND THE COST OF
CAPITAL SO I'M OKAY WITH THOSE
AND SURE MAYBE WE GET A
RECESSION BUT IT'S NOT LIKE THE
GREAT FINANCIAL CRISIS.
MY BIGGEST CONCERN IS WHAT'S
HAPPENING WITH THE FEDS BALANCE
SHEET IN THAT IN PHYSICS FOR
EVERY ACTION THERE'S AN
EQUAL AND OPPOSITE REACTION AND
WHAT THEY DID IS THEY WENT OUT
AND LOADED UP THEIR BALANCE
SHEET AND SUPPRESSED FINANCIAL
VOLATILITY.
I THINK FINANCIAL VOLATILITY IS
GOING TO COME BACK.
YOU THINK THAT'S THE BIGGEST
RISK TO THESE MARKETS?
>> WHAT I'LL SAY IS THIS THE
BIGGEST PROBLEM THE MARKETS HAVE
IS THEMSELVES WE'VE SEEN THAT
VOLATILITY KEVIN YOU AND I LIVE
IT EVERY DAY AND AGAIN THAT'S
HURTING THOSE CFO'S CONFIDENCE
AND A LOT OF THINGS CAN HAPPEN
BY THE END OF 2020.
YOU AND I COULD BE RUNNING A
SEAFOOD RESTAURANT BY THEN.
>> I HOPE SO.
>> [LAUGHTER]
>> A LOT OF DIFFERENT THINGS
CAN HAPPEN BUT A LOT OF RISKS
AND I DO THINK THERE'S A WAY OUT
OF THIS AND AGAIN I DON'T THINK
THERE IS A CYCLE ANY MORE.
I THINK THAT ITS BEEN STRETCHED
OUT.
LET'S SEE WHAT HAPPENS.
>> I WAS GOING TO SAY ONE FED
OR TWO FEDS HAVE GOTTEN A SOFT
LANDING RIGHT, SINCE LIKE 1960,
SO EVEN THOUGH PRESIDENT TRUMP
HAS BEEN MORE VOCAL THAN ANY
OTHER PRESIDENT ABOUT TARGETING
JR. ONLY POWELL AND SAYING
ESSENTIALLY PLEASE DON'T RAISE
RATES HE DOES HAVE A POINT THAT
USUALLY IN A RISING RATE
ENVIRONMENT YOU HAVE A 12-18
MONTH LAG AND YOU DO HAVE
SLOWING.
>> HERE IS THE PROBLEM.
WE HAVE ALL OF THESE ECONOMISTS
TALKING TO THE CFO'S AND GIVING
THEM ADVICE AND THEY HAVE TUNNEL
VISION ALL THEY THINK ABOUT IS
THE DATA AND SPECIFIC DATA AND
THEY SAY OH, THE ECONOMY MUST BE
GREAT, JOB GROWTH, WAGES ARE UP
3.1%.
WELL THERE'S A LOT MORE TO IT
AND ONE THING THAT WE'RE SEEING
NEW, DEIRDRE IT'S THAT WITH JAY
POWELL, PART OF THAT IS THE
MARKETS AND I'VE BEEN SAYING
THIS OVER AND OVER AGAIN.
IT'S NOT JUST DATA DEPENDENCE,
BUT MARKET DEPENDENCE AND SAY
THAT HOWEVER YOU WANT TO SAY
THAT BUT THE MARKETS WHICH FEEDS
THE MARKETS AND ALL FEEDS --
>> HE'S ALSO TALKED ABOUT THE
RISK OF THE U.S. CHINA TRADE
RELATIONSHIP AND CLEARLY, I HEAR
WHAT YOU'RE SAYING.
>> IT'S LIKE I'M SORRY, CAROL.
>> YEAH, NO, I WAS JUST GOING
TO SAY AS A RECOVERING
INVESTMENT BANKER, I SPENT A LOT
OF TIME WITH THE CFO'S IN MY
DAYS AND CERTAINLY AS THEY SEE
THE MARKET IS NOT GIVING THEM
ANY CREDIT FOR GROWTH NEXT YEAR,
THEY ARE IN A POSITION THEY WANT
TO UNDER-PROMISE AND OVER-
DELIVER, HOWEVER THIS DOES
SOMETIMES BECOME A SELF-
FULFILLING PROPHECY AND I
WOULD SAY THE BIGGEST ISSUE THAT
WE'RE FACING IS SHORT-TERMISM,
THE FACT THAT ALL OF THE CFO'S &
COMPANIES ARE SO FOCUSED ON
DELIVERING THE NEXT QUARTER THAT
THEY'RE NOT MAKING THE
INVESTMENTS AND THE PLAYS FOR
THE LONG TERM.
>> YOU KNOW, CAROL WHAT YOU
SAID FIRST OF ALL SOME DAY I
HOPE TO BE A RECOVERING
INVESTMENT BANKER.
SECOND, YOU KNOW WHAT I COULD
SAY IS THIS.
LOOK AT A COMPANY LIKE APPLIED
MATERIALS IN THE MIDDLE OF THIS
TRADE WAR IN THE MIDDLE OF
EVERYTHING GOING ON IN TECH
RIGHT NOW.
THEIR GUIDANCE WAS SO GLOOMY AND
YET, THE MARKET DIGESTED IT AND
THE STOCK DID A LOT BETTER I
THINK THERE IS A LOT OF SAND
BAGGING CAROL BUT YOU'RE RIGHT
IF CONFIDENCE ISN'T UP AND
EVERYONE STARTS DRINKING THEIR
OWN KOOLAID PRETTY SOON YOU'LL
HAVE A STOMACH ACHE AND SUGAR
BUZZ AND PASS OUT.
>> MICHAEL I REALLY LIKE YOUR
RECIPE FOR THE RECESSION, I LIKE
HIGHER WAGES, I LIKE
INFRASTRUCTURE SPENDING, I JUST
HAVE ONE PROBLEM.
>> WHAT IS IT?
>> DO YOU KNOW WHAT IT IS?
THAT 3.1 REFERENCE YOU MADE TO
WAGE INCREASES WHICH IS CORRECT
AS A NOMINAL INCREASE WHEN YOU
LOOK AT THE ACTUAL INCREASE, WE
ARE WAY BEHIND WHERE WE SHOULD
BE IN THE ECONOMY LIKE THIS.
>> IT TOOK US 10 YEARS TO GET
THAT.
WE'RE NOT GOING TO GET THE
INFRASTRUCTURE INVESTMENT SO IN
OTHER WORDS YOUR RECIPE IS GREAT
BUT WE'RE NOT GOING TO DO IT AND
THAT MEANS RECESSION.
>> IT'S LIKE ANYTHING ELSE.
YOU NEED TO DO YOUR PREP WORK
AND THE PREP WORK MIGHT BE
INSTEAD OF JUST GIVING TAX CUTS
TO COMPANIES AND LETTING THEM
BUYBACK STOCK OR MAKE STUPID
ACQUISITIONS AND THINGS LIKE
THAT, TIE THOSE TAX CUTS, TIE
TAX REFORM TO COMPANIES PUTTING
MONEY BACK INTO TRAINING.
>> TOO LATE.
>> IT'S NEVER TOO LATE.
THAT'S WHY WE'RE SEEING SLOWING
GROWTH.
OKAY HIT THE RESET BUTTON LET'S
TRY THIS OVER.
DAVID: VERY QUICK WE HAVEN'T
MENTIONED POLITICS AND WE'VE GOT
A CONGRESS WITH THE PRESIDENT
FOR THE NEXT TWO YEARS, IS THAT
A PROBLEM OR MAYBE THAT'S NOT A
PROBLEM MAYBE IT'S THE OPPOSITE?
>> I DON'T KNOW WHICH
BIPARTISAN GROUP DO YOU WANT
DAVID?
DO YOU WANT THE NANCY PELOSI
WHOSE MAKING FRIENDS WITH
PRESIDENT TRUMP ON TWITTER AND
MAKING GESTURES ABOUT REACHING
ACROSS THE AISLE OR DO YOU WANT
PRESIDENT TRUMP THAT'S TELLING
CHUCK SCHUMER THAT HE WILL BE
PROUD TO OWN A GOVERNMENT
SHUTDOWN OR DO YOU WANT NANCY
PELOSI TALKING ABOUT SKUNK TINKL
E AGAIN WHICH ONE WILL YOU
GET?