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Ezrati Interprets Fed and Markets

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    Lord Abbett senior economist Milton Ezrati weighs in on the Fed and the markets.

  • Duration 6:06
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Going to happen -- our first guest says that the economy's doing worsen the numbers are telling us.

But an even their -- bigger concern is a price of -- and that's keeping him up at night joining us now is a sleepless Milton is -- learn about it senior economist and market strategist there's a lot to keep us -- restless at night Milton but I wanna talk first about some headlines coming.

Across Ben Bernanke the Fed Chairman saying that the lesson at history is that central banks should not move too quickly to her reverse.

Monetary accommodation after a deep recession.

Is that the scenario that we're living in right now we're gonna have low interest rates until 2014.

Is pulling back dangerous.

To the economy given all the positive signals we've seen so far coming -- Well we have seen positive signals on the economy they probably overstate the strength but the economy is growing.

And Ben Bernanke has reason to soft pedal anymore ease but.

He's trying to the -- he's worried he doesn't know exactly where the situation is he's made that clear and -- He's quite right if the Fed -- to move -- to suddenly it could disrupt the economy.

Give it to -- -- where -- we do we've been given a window of two to three years here I mean there's an argument here that so at some point we understand what -- repercussions.

A tightening of monetary policy is going to be an and then actually instituting fiscal.

At its fiscal -- discipline is not going to be easy on this economy but some -- -- got to do and we are starting to show some signs that we're capable of doing that.

This year.

Well actually I think if the Fed will allow short rates to rise to 1% it would probably not hurt the economy it'll.

And I'm a little skeptical of what the Fed is doing with these long term interest -- for -- not forecasting long term rates.

But forecasting short rates long term they really can't do that.

The Fed does everything on a contingent basis how the economy -- -- if this economy would have -- coming back stronger than the Fed anticipates.

And we anticipate.

They would have to move.

And they run the risk of misleading people by making a two year interest rate for prince.

Well although you can also interpret this thing is that the Fed knows something we don't know in.

Maybe they put on the bravado of the brave face in public but they're scared to death than in private well.

That may be the case I don't know what they see I.

They get a lot of information and -- mafia to say that high and I know more than Ben Bernanke.

That's possible and of course the Fed's main goal is to keep everyone calm regardless aren't there -- -- until I see some evidence I can't.

-- a lot of people saying the conditions -- -- right now was a result of leaving interest rates too low for too long but I wanna ship Dutch of course are a little bit.

You're overall impression that the markets should people will be looking at this market and opportunistic way or should we be sort of saying OK it's been a heck of -- -- let's -- a pull back a little bit.

-- we go with the value and if you look at the value in the market even though we've had a great run since last October if you look at value in this marketplace still looks good equities credit sensitive fixed income.

The risk on trade looks like the place to be there -- risks that trouble in the Middle East we always have trouble in the Middle East.

I'm they're planning your risk but that seems to be the place to be that's what we -- at -- -- on -- we did.

-- some that housing numbers today may not housing starts fell one point 1% -- permits rose 5% we're seeing home builder sentiment on the -- consumer sentiment that that also on the rise.

What do you make of the housing numbers and where we're -- in the -- recovery period.

Well it's a great question and we we think housing is stabilized and stabilizes a lot better it's a vast improvement from the free -- we were and what the numbers we're getting now.

Heavily affected by this mild winter weather -- and having specially construction.

Is very weather sensitive marked the season -- Usually put a lot of back in because of the cold months and with the warm months as more construction activity these numbers probably -- The pull back we've had on these latest set of numbers is probably that as you move.

Into the spring months that deviation that seasonal deviation is less intense.

So I think that what -- we we should we we didn't we can be hopeful that housing is no longer in free -- we have a lot of evidence to suggest that any kind of a rebound is an overstatement.

So that kind of gets his back to the Fed them because people who weren't taking the beta have not really necessarily taken -- what these low rates may be they start to go up that might be that's parkinson's emergency -- three things.

Can the market even these value ideas that you like really move higher without China the Fed in apple.

Because nobody at three that's it really be the -- locomotive of the market everyone else hang up for the -- -- true.

I can't comment on apple I think that the Fed could ease back throttle back that doesn't mean put on the brakes just take -- -- -- little lighter on the X.

The -- the Wall Street has to be though that we're going to be accommodated by still thought do you agree that that has to be the sort of wink and a nod to Wal-Mart yeah we are going to be -- company.

And that and they are I mean even if they -- to let rates rise from here and I'm not suggesting it's not that Ben Bernanke doesn't care what I think.

But even if they -- to let writes it would rates rise to 11 and a half percent on a real basis after inflation.

You'd still be getting they'd still be low they'd be negative in real terms itself so -- plenty of room.

I think the Fed's problem.

Is that it's it's that the banks are reluctant to advance the credits -- even lower rates even though -- -- all right somebody else would gladly take these low rates tomorrow by house.

Going to business it's tough to get the credit and that's why this is moves so slowly.

Some preliminary signs that this is breaking up this logjam is breaking up and we've got a ways to.

Not so funny so -- I was saying that the last week give -- your banking -- buying back you know fifteen billion dollars for the sake -- assortment of some -- Stuart that's going to be a public relations nightmare.

-- and tools and that's how they make money right.

You know that's -- -- did little it that point -- whole system got a -- recent rain out there isn't it there's a hold back in the system.

Milton as -- it's great to CEO hasn't it doubled in the last yeah strain we like seeing in impressing come join by the way I -- the -- that you were computer generated.

I thought I don't accidentally micro seconds on that and yet.

All right thanks -- -- --

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