CHARLES: GOLDMAN SACHS JUST
ANNOUNCED IT IS CUTTING ITS
GROWTH FORECAST FOR THE FIRST
HALF OF NEXT YEAR, DOWN 2% FROM
EARLIER PREDICTION OF 2.4% F
THAT IS NOT BAD ENOUGH, THEY SAY
IT IS ONLY GOING TO GET WORSE IN
THE SECOND HALF OF THE YEAR.
BUT AT THE SAME TIME, THEY SAY
THEY ARE NOT PARTICULARLY
WORRIED ABOUT A RECESSION.
WHAT ARE BIGGEST RISKS TO THE
ECONOMY NEXT YEAR WHEN IT COMES
TO YOUR MONEY?
WHERE SHOULD YOU CONSIDER
INVESTING AND WHAT SHOULD YOU
TRY TO AVOID?
GREAT PANEL TO WEIGH IN.
DIRECTOR OF INTELLIGENCE
DANIELLE DIMARTINO BOOTH, JIM
BIANCO, AND UNIVERSITY OF
MARYLAND PROFESSOR EMERITUS,
PETER MORICI.
DANIELLE, I WANT TO START WITH
YOU.
YOU'RE VOCAL IN DAILY WRITINGS,
SOCIAL MEDIA POSTS ABOUT THE
CONCERN OVER CREDIT DEBT HERE
AND SORT OF IDEA MAYBE THIS IS
THE SOURCE, BIGGEST SOURCE OF
RICK RIGHT NOW.
>> WE'VE BEEN WATCHING
INVESTMENT GREAT BOND EARLIER
THIS YEAR.
WE'VE BEEN WATCHING THAT AS
POTENTIAL CATALYST.
WHAT WE SAW WITH THE
GENERAL ELECTRIC EVENT.
IT INDEED CAN BE SOMETHING THAT
CAUSES COMPANIES
PREEMTELEPHONELY BEGIN TO
SHRINK.
MORE RECENTLY WE'VE SEEN THE END
OF PANIC BUYING.
WE'VE SEEN FIVE OF REGIONAL FED
MANUFACTURING SURVEYS SHOW
SLOWING.
THIS MORNING'S DATA WAS RELEASED
IN A VERY QUIET RELEASE DAY OUT
OF DALLAS, WAS A BLOODBATH,
CHARLES.
WE EVEN SAW EMPLOYMENT TICK
BACK, WHICH IS RESULT OF OIL
PRICES BEING DOWN 45% FROM THEIR
HIGH.
WE'RE SEEING CONSUMERS
PROTECTION OF JOB AVAILABILITY
CONTINUE TO COME BACK IN THE
LATEST CONSUMER CONFIDENCE
REPORT, PEOPLE'S PERCEPTIONS OF
JOB AVAILABILITY FELL OFF THE
FASTEST PACE SINCE 1977 WHEN WE
WERE BOTH VERY MUCH YOUNGER.
THERE IS HOUSING.
I THINK GOLDMAN HAS GOT GOOD
REASON TO SAY THEY SEE THE
ECONOMY SLOWING GOING FORWARD.
CHARLES: JIM, IF THAT IS INDEED
THE CASE, THE TEA LEAVES ARE
BECOMING MORE OBVIOUS TO READ,
THIS ADDS MORE CONFUSION TO THE
FEDERAL RESERVE, THIS LAST
MEETING, THE DOT BLOT SUGGESTING
AT LEAST TWO MORE RATE HIKES,
ALL WHILE TAKING SO MUCH
ACCOMMODATION EVERY MONTH OUT OF
THE ECONOMY.
SEEMS SOMETHING IS NOT RIGHT.
SOMEONE ISN'T RIGHT HERE?
>> YEAH.
THAT IS WHY THE MARKET HAD THE
BAD REACTION OVER THE LAST TWO
WEEKS FOLLOWING THE FED MEETING.
THE NATURAL STATE OF AN ECONOMY,
THE U.S. ECONOMY IS TO EXPAND T
EXPANDS FASTER AND SLOWER.
THE REASON WE HAVE RECESSIONS
BECAUSE SOMETHING BREAKS IT AND
THE LEADING CAUSE OF BREAKING
THE ECONOMY IS FEDERAL RESERVE
POLICY IS TOO TIGHT.
THEY RAISE RATES TOO MUCH, THEY
INVERT THE YIELD CURVE, WE HAVE
A RECESSION.
THAT IS WHAT THE MARKETS HAD
THEIR HICCUP LAST COUPLE WEEKS.
FEDERAL RESERVE SAYS THEY WILL
REDUCE THE BALANCE SHEET.
THAT IS FORM OF TIGHTENING.
THEY WILL RAISE RATES TWO MORE
TIMES.
THAT IS A FORM OF TIGHTENING.
THE MARKET IS WORRIED THAT IS
TOO MUCH AND FED IS SLOW TO
RESPOND TO THAT.
THAT IS THE BIGGEST FEAR THE
MARKET HAS.
THEY REBOUNDED THE FED GETS IT,
THERE WILL BE NO RATE HIKES IN
2019, BUT FRIDAY WHEN CHAIRMAN
POWELL SPEAKS IF HE HINTS AROUND
THERE COULD BE MORE RATE HIKES I
DON'T THINK THE MARKET WILL TAKE
IT WELL.
CHARLES: PETER MORICI.
>> I THINK CHAIRMAN POWELL HAS
TO BACK OFF.
HE DOESN'T HAVE TO SAY NO MORE
RATE HIKES BUT INDICATE EASING
BACK.
HE SAID ON DECEMBER 19th, HE
THOUGHT THE INTEREST RATE WAS
NEUTRAL LEVEL.
THEY ISSUED A STATEMENT IN THE
DOT CHART HAS IT GOING UP TO 3%
SOMETIME IN 2020.
HE CAN'T LET THAT KIND OF MIXED
COMMUNICATIONS COME OUT.
HE HAS TO TALK TO HIS PERIOD
ABOUT DOING SOMETHING LIKE THAT.
MORE IMPORTANTLY IT SEEMS TO ME
THE BIGGEST PROBLEM WE HAVE IS
DONALD TRUMP.
NOT MR. TRUMP, NOT DEREGULATION
AND TAX CUT BUT ALL OF THE
NEGATIVE TALK IN NEW YORK.
NO ACCIDENT, TAKE A POLL OF
PEOPLE THAT SIT AT
GOLDMAN SACHS, FOUR OUT OF FIVE
ARE DEMOCRATS AND WOULD LIKE
THIS GUY TO FAIL.
NEXT YEAR THERE WILL BE A LOT OF
STIMULUS IN THE SYSTEM.
NOW, FOR ONE THING THE TAX CUT
IMPACT THAT IS PASSED ON TO
CONSUMERS.
GASOLINE IS A LOT CHEAPER, AWFUL
LOT CHEAPER THAT INCREASES
HOUSEHOLD INCOME.
THAT IS IN REAL TERMS.
THE SECOND THING YOU NEED TO SAY
WHAT IS GOING ON WITH THE DALLAS
FED WITH THE INDICATORS.
WITH THE LEVEL OF ACTIVITY, NOT
PRICE OF OIL, BUT HOW MUCH
DRILLING IS GOING ON.
LOOK AT THE BAKER HUGHES REPORT
AND HOW MUCH DRILLING ACTIVITY
IS GOING ON.
SEEMS TO ME SOMEBODY IS MAKING
THE PIPE GOING INTO GROUND FOR
ALL THESE WELLS.
CHARLES: YOUR GOLDMAN COMMENT I
WOULD GIVE UP AND GIVE YOU
STANDING OVATION.
BUT I'M TETHEREDDED TO THE
CHAIR.
>> READ ALL THE TRADERS.
CHARLES: I READ THEM ALL, MY
FRIEND.
>> WE READ THE SAME STUFF.
CHARLES: YOU KNOW, IT'S TOUGH,
IT IS TOUGHER NOW TO PARSE OUT
FACTS FROM OPINION AND OPINION
THAT IS BASED ON IDEOLOGY, NOT
FUNDAMENTALS.
DANIELLE IN THIS ENVIRONMENT,
PEOPLE ARE NOT SURE WHERE TO PUT
THEIR MONEY.
EQUITIES CERTAINLY LOOK
ATTRACTIVE FROM HISTORIC LEVEL.
4 P-E RATIOS, UNDER THE
FIVE-YEAR AVERAGE, NOT
THREATENING ANYWHERE NEAR WHERE
BUBBLES ARE.
BOND YIELDS ARE YO-YOING.
ONE DAY WE'RE BREAKING NEAR
3 1/2.
NOW WE'RE NEAR 2 1/2.
WE CAN'T MAKE SENSE.
HOW DO YOU HELP INVESTORS HERE
WHO ARE SAYING HEY, WE'RE, WHERE
DO I FIND SOME SAFETY IN THIS
ENVIRONMENT?
>> WELL, THERE ARE MANY WAYS TO
GET DEFENSIVE WITH YOUR
PORTFOLIO AND, BECAUSE STOCKS
HAVE COME DOWN TO THE EXTENT
THEY HAVE, THERE ARE GREAT
DIVIDEND-PAYING STOCKS OUT THERE
THAT WOULD WEATHER EVEN A
RECESSION, CHARLES AND PEOPLE
SHOULD BEAR THAT IN MIND AND THE
ONE FAVOR THAT THE FEDERAL
RESERVE HAS DONE, THE AVERAGE
SAVING AMERICAN THERE IS NO
LONGER SHAME IN HOLDING SOME OF
YOUR MONEY IN CASH BECAUSE FOR
THE FIRST TIME IN A GENERATION,
HOLDING CASH ACTUALLY PAYS A
DECENT RETURN.
IF YOU DECIDE THAT YOU WANT TO
GO WITH THE NOTION THAT THE
ECONOMY WILL SLOW IN 2019 THERE
ARE PLENTY OF OPTIONS.
YOU HAVE TO GET OUT AND TALK TO
PEOPLE THOUGH BEYOND JUST SELL
SIDE.
CHARLES: SURE.
>> AS YOU NOTED WHEN YOU FIRST
OPENED THE SEGMENT, GOLDMAN SAYS
THE ECONOMY IS GOING TO SLOW BUT
NEVER GOING INTO RECESSION.
BE CAREFUL OF THESE PEOPLE ARE
BEHOLDEN TO MAKING SURE
INVESTORS STAY LONG ONLY EQUITY
MARKET.
THAT IS FALLACY, CHARLES.
CHARLES: REAL QUICK, JIM,
DEFENSIVE AREA OR AREAS THAT YOU
MAY WANT TO SHARE WITH OUR
VIEWERS?
>> YEAH.
THE ONE OF THE BEST-PERFORMING
AREAS THIS YEAR, ALTHOUGH IT
LOST MONEY, BECAUSE EVERYTHING
LOST MONEY THIS YEAR, ONE OF THE
MORE UNUSUAL YEARS WE'VE SEEN
HAS BEEN BONDS.
THE BOND MARKET RALLIED, 2.68,
LOWEST YIELD SINCE FEBRUARY.
THAT MEANS PRICE GOES UP.
AS WE MOVE INTO 2019, THE BOND
MARKET WILL SHOW, MAYBE THE
ECONOMY MODERATES.
WE DON'T HAVE TO TALK ABOUT
RECESSION, INFLATION
EXPECTATIONS GO DOWN.
THAT IS A GOOD COCKTAIL TO BE
LONG THE BOND MARKET.
IT SHOULD PROVIDE BETTER
RETURNS.
CHARLES: THREE GREAT MIND THAT
WAS A GREAT COCKTAIL FOR THE