DAGEN: WE ARE WATCHING MARKET
THIS IS MORNING, THE DOW AND S&P
UP ACROSS THE BOARD, 24-POINT
THERE'S BEEN A SELLOFF IN
MARK, 4-MONTH HIGH, JOINING US
MERRILL LYNCH AND U.S. TRUST
FIXED INCOME STRATEGISTS MATT,
WHAT DO YO MAKE OF THIS, WE ARE
GETTING DIP IN THE YIELD CURVE,
IS THAT A POSITIVE SIGN?
PEOPLE ARE TALK ABOUT INVERSION
OF IT, IS IT SIGN OF ECONOMIC
WEAKNESS AHEAD.
>> WHAT THAT TELLS YOU IS THE
MARKET IS BASICALLY ON BOARD
WITH WHAT THE FED'S POLICIES ARE
GOING TO BE IN THE NEXT COUPLE
BIT OPTIMISTIC, THE MARKET
AGREES WITH THE NEXT HIKES, IT
WAS UNCLEAR NEXT YEAR, NOW AS
THE RATES MOVE UP THE MARKET IS
SAYING IT'S MORE COMFORTABLE
WITH FED POLICY, WE THINK WE ARE
IN A GOOD PLACE RIGHT NOW.
MIKE: I WAS SURPRISED THE MARKET
OVERREACTED WHEN WE CAME UP 3%
ARE RISING FOR THE THE RIGHT
REASONS IT'S OKAY, IF WE GET 3
RATE HIKES AS LONG AS IT'S
SUPPORTED BY IMPROVING ECONOMY
THE YIELD CURVE, CONCERNED A LOT
OF INVESTORS, WE DON'T THINK IT
SHOULD BE A CONCERN FOR
INVESTORS, THE IMPORTANT THING
TO LOOK AT 2 YEAR, RIGHT NOW 90
BASIS POINTS IN 2-YEAR RATE, THE
MARKET THINKS 2 OR 3 HIKES FROM
WHAT YOU WOULD BE CONCERNED
ABOUT IS INVERSION.
10-YEAR SUBSTANTIALLY LOW BELOW
OR 2-YEAR RATE BELOW THE FED
WHACK THE ECONOMY EVEN SEND THE
LONGER-TERM BONDS AS PROTECTION
IF THERE'S AN ECONOMIC DOWNTURN.
I HOPE I GOT THAT RIGHT.
>> ABSOLUTELY.
DAGEN: 6:30 IN THE MORNING.
>> WE DON'T THINK THE ECONOMY --
THE GROWTH DOESN'T DIE BECAUSE
OF OLD AGE, DIES BECAUSE OF
GOBBLED UP, HUGE APPETITE?
>> SO THERE'S STILL A LOT OF
APPETITE GIVEN HOW STRONG THE
ECONOMY IS BOTH INVESTMENT GREAT
AND CORPORATE BOND MARKETS ARE
SEPTIC TO NEW ISSUERS.
THEY'LL BE COMBINATION OF BONDS
INTO THE LOAN SPACE, WE THINK
FOR THE FORESEEABLE FUTURE THE
MARKET WILL BE FINE BUT AS WE
LOOK FURTHER OUT, 2020 AND
FURTHER ON, IF YOU THINK ABOUT
[LAUGHTER]
DAGEN: THAT'S A WAY OF SAYING IT
COULD END BADLY IN TERMS OF THE
RISKIER FIXED AREAS OF FIXED
INCOME.
>> WHAT I WOULD SAY IF YOU THINK
OF LEVERAGE LOANS, THAT'S ONE OF
THE QUESTIONS YOU'RE GETTING AT,
HISTORICALLY YOU HAVE 80 CENTS
TERMS OF HOW WE ARE LEND TO GO
COMPANIES, GIVEN THE QUANTITY
YOU TALKED ABOUT AND THE MONEY
BIT.
WE PARTICULARLY UNDERWEIGHT HIGH
YIELD NOT AS WE COULD BE BECAUSE
THE ECONOMY IS STRONG AND SHOULD
INVESTORS NEED TO THINK ABOUT
THAT.
>> DO YOU FEAR THAT THE FED IS
GOING TO TRY TO STOP THIS
ECONOMIC EXPANSION ON THE IDEA
THAT WE ARE ALL OVERHEATING
BECAUSE WE ARE DOING SO WELL?
>> THAT'S A VERY IMPORTANT
>> THAT'S NOT GOING TO STOP
THEM.
>> IF YOU LISTEN TO MR. POWELL
ALAN GREENSPAN BEING PATIENT.
HE WILL TAKE MEETING TO MEETING,
HE WILL NOT DO TOO MUCH SO I
DON'T GET ANY SENSE TO WORRY,
EVEN IF IT'S BELOW 4%, DOES NOT
SEE OVERHEATING BECAUSE
INFLATION HAS NOT COME UP YET.
AS LONG AS INFLATION IS IN CHECK