10:00 P.M. EASTERN.
LIVE FROM WORLD ECONOMIC FORUM
IN DAVOS, SWITZERLAND.
WE ARE WAITING ON CENTRAL BANK
TO GET DECISION ON INTEREST
RATES, STRONG OPEN FOR BROADER
AVERAGES IN THE U.S.
JOINING ME TO TALK ABOUT MARKET
AND ECONOMY, SCOTT, SCOTT, GOOD
MARIA: ATMOSPHERE IS PRETTY
BULLISH.
HAS YOU A LITTLE WORRIED?
>> YEAH, CLEARLY THE TAX CUTS
ARE HELPING THE ECONOMY A LOT,
YOU KNOW, PEOPLE ARE RERATING
STOCKS, BELIEVING THAT EARN
LCIO
LCIÓN GO UP DRAMATICALLY,
THERE'S EVERY REASON IN THE
WORLD TO BE OPTIMISTIC AND THAT
HAS ME NERVOUS.
MARIA: WHY ARE YOU NERVOUS ABOUT
THAT?
>> I'VE BEEN TO DAVOS BEFORE A
NUMBER OF TIMES AND I REMEMBER
BEING HERE TWO YEARS AGO AND OIL
PRICE WERE ALMOST $25 A BARREL
AT THAT POINT, CREDIT HAD
EXPLODED AND EVERYBODY WAS
SAYING WE WERE GOING INTO A
KNOW, GETTING THE MOMENTUM OF
THE MARKET AHEAD OF WHERE IT
SHOULD BE AT THIS POINT.
IT'S HARD TO ARGUE THAT THE
MARKET SHOULDN'T BE HIGHER BUT
AT THE SAME TIME MARKETS DON'T
MOVE IN STRAIGHT LINES, MAYBE A
RISK.
ONE OF THE THINGS WE HAVE BEEN
DOING IS MOVING TO PURCHASING
OPTIONS WITH VOLATILITY BEING SO
FOR 5%.
IF YOU BELIEVE THAT THE TRUMP
TAX CUT WILL LEAD TO INCREASES
AND EARNINGS THAT WE EXPECT YOU
PROBABLY HAVE ANOTHER 15 TO 20%
OF UPSIDE IN THE MARKET, SO,
IT'S A PRETTY LOW-COST WAY TO
CAPTURE THE UPSIDE WHILE NOT
LEAVING YOURSELF VULNERABLE TO
SOMETHING THAT COULD BE A SHOCK.
MARIA: 15 TO 20% THAT IS GOOD.
>> ALL YOU HAVE TO DO IS LOOK AT
EFFECT OF TAX CUT AND SEE HOW IT
IMPACTS AFTER-TAX EARNINGS AND
WE SEE EARNINGS PROBABLY 1.60.
IF YOU GO BACCALAUREATE TO
MULTIPLE ON THE MARKET BACK IN
EARLY NOVEMBER WHEN WE REALLY
DIDN'T WE WERE GOING TO GET TAX
REFORM AND YOU APPLIED THAT SAME
MULTIPLE TO A 1.60, YOU'RE 10 TO
BE BUT WHEN YOU ADD TAX BENEFITS
ANOTHER 12%.
>> HONESTLY, I THINK PEOPLE ARE
NOT FACT ORING -- FACTORING WHAT
THE COMMERCE SECRETARY WAS
TALKING ABOUT WHICH IS THE
BONUSES AND THE WAGE INCREASES
THAT ARE COMING THROUGH THE
PIPELINE, I THINK IT'S GOING TO
ADD EVEN MORE MOMENTUM.
MARIA: HOW WORRIED ARE YOU ABOUT
MOVING THE DOLLAR, STEVEN
TREASURY BELIEVES ANYWAY, IT'S
NOT LIKE HE TOLD US ANYTHING IT
WAS A SURPRISE, THEY NEVER DID
ANYTHING TO ACTUALLY SHOW A
STRONG DOLLAR.
>> I THINK THE DOLLAR WILL GO
WHERE THE DOLLAR GOES, BUT I
THINK THE KEY IS TO KEEP THE
CONFIDENCE IN THE DOLLAR AS A
STORE OF VALUE, IT'S VERY
IMPORTANT IN TERMS OF HAVING OUR
CAPITAL FLOWS.
WE NEED FORWARD CAPITAL.
MARIA: EXACTLY.
IF YOU'RE TALKING ABOUT 4%
ECONOMIC GROWTH AND YOU'RE
TALKING ABOUT ALL THE MONEY
COMING TO THE U.S., YOU WOULD
THINK THE DOLLAR GOES UP.
>> IT'S FUNNY YOU TALK ABOUT
THAT, IN 2004-2006 WHILE THE
FEDERAL RESERVE WAS RAISING
RATES AN THE STOCK MARKET WAS
GOING ONTO NEW HIGHS, THE DOLLAR
DECLINED AND SO IT COULD BE THAT
PART OF THE MAGIC HERE TO THE
ECONOMIC EXPANSION AND EARNINGS
GROWTH IS THE CONTINUED
DEPRECIATION OF THE DOLLAR, THE
KEY IS NOT TO LET IT TURN INTO A
SLIDE, THAT'S WHAT OCCURRED BACK
IN 1987.
WHEN THE FEDERAL RESERVE WAS
RAISING RATES AS THE STOCK
MARKET WENT ONTO NEW HIGHS, WE
STARTED COLLAPSING ABAS THE
DOLLAR COLLAPSED, PEOPLE LOST
MARKET CRASH ON OUR HANDS AND I
THINK THAT'S THE RISK.
MARIA: WHEN DO YOU SHOW WORRY
ABOUT HIGHER WAGES, MAYBE FED
BLOWING IT WITH TOO MANY
INCREASES?
YOU SAID THAT'S POTENTIAL OR
POSSIBLE IN '18, WHEN DUH YOU
START WORRYING ABOUT WHAT THROWS
US OFF OF THE TRACK?
>> LOOK, I'M ALREADY WORRIED.
I LIKE THE OPTION STRATEGY.
YOU KNOW, I WOULD LIKE TO SEE
SOME MORE INDICATION LIKE
DETERIORATION OF BREATH IN THE
MARKET, YOU KNOW, SOME SIGNS
THAT WAGE INFLATION IS ACTUALLY
PICKING UP.
IT'S BEEN REALLY STAGNANT BUT,
YOU KNOW, WE NEED TO GET WAGE
INFLATION UP TO AROUND 4% YEAR
OVER YEAR BEFORE I WOULD GET
REALLY CONCERNED, WE ARE
CURRENTLY 2 AND A HALF PERCENT.
I TELL YOU 4% IS COMING.
>> PROBABLY THIS YEAR.
MARIA: WHAT ABOUT EUROPE,
INTERESTING TO SEE EUROPE IS
DOING WELL.
ARE YOU INVESTING IN EUROPE?
PROBABLY MORE INTERESTING
EMERGING MARKETS, PLACES LIKE
BRAZIL, CHILE, THESE PLACES ARE
CATCHING A STRONG BID AND, OF
COURSE, IF THINGS ARE AS GOOD
HERE AS WE EXPECT THEM TO BE AND
THE DOLLAR IS WEAK, HISTORICALLY
THAT'S BEEN THE FORMULA FOR
EMERGING MARKETS TO DO VERY
WELL.
MARIA: YOU HAVE $300 BILLION --
>> ALMOST.
MARIA: TO ALLOCATE.
ARE THERE INDUSTRIES THAT ARE
POISED TO DO BETTER OR ARE YOU
INVESTING IN OTHERS --
>> WE REALLY LIKE INSURANCE
COMPANIES.
ONE OF THE ISSUES YOU FACE HERE
HOW QUICKLY CAN YOUR PROFITS GET
COMPETED AWAY.
WHEN YOU GET A TAX CUT LIKE
THAT, YOU KNOW, IF YOU'RE
MCDONALDS, FOR INSTANCE, YOU
MIGHT CONSIDER LOWERING THE
PRICE OF SANDWICHES TO BE
COMPETITOR TO ARBY'S, EARNINGS
HAVE PRETTY INSULATED FOR THE
NEXT FIVE TO TEN YEARS, THEY'LL
AMERICA LOOKS VERY INTERESTING.
THAT'S THE PLACE WHERE YOU SEE
REAL VALUE.
MARIA: GREAT POINT THAT YOU
MAKE.
SIGNIFICANT.
>> THINGS THAT MAKE NO SENSE AT
ALL LIKE THE RESTRICTION ON
REPO, THIS IS ALLOW-RISK
BUSINESS AND THEY ARE AT
CAPACITY BECAUSE THE -- THE SOUP
OF REGULATION RESTRICTED THEM
FROM INVESTING IN BUSINESSES
THAT ARE PRETTY SAFE.
MARIA: DONALD TRUMP ROLLED BACK