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TrimTabs Investment Research CEO Charles Biderman and Palisade Capital’s Dan Veru debate the state of the economy.
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I appreciate it so all Wall Street analysts the only want to think we could well and -- in a recession Charles Biederman trim tabs investment research CEO.
Joining us now in the Fox Business an exclusive from beautiful San Francisco.
Charles what do you think -- a recession.
Does it matter at this point.
Well given that you know of the US government is borrowing a trillion to a year in the Fed's printing 800 billion that's -- annualized so what.
-- big creating two trillion a year and guess what take home pay is up 300 billion this year annualized from and so we think about that for a second.
If we -- if we don't if we didn't borrow the two trillion or create two trillion we wouldn't get a 300 billion boost so we have to keep.
Creating two trillion to get 300 -- imagine going to get a loan shark and say give me two trillion I want to make 300 billion out of it.
Well I so -- Societe extent word.
Not in a recession it's because we're printing creating huge amounts of money force feeding it to the economy we're getting a minimal amount of growth.
We're getting an artificial balance -- it makes sense it's off official and is not that great anyway basically.
Charles -- Andrew for our future away yeah -- paid sorry.
-- through -- policy capital management easily a CIO.
Dab believes that this is going to be the month with stocks peak you say.
That the stock's really peaked in well mid September do you still -- that world.
Well yeah I think the stocks peaked the day after the Fed announcement remember when the up PR guy who works for the Fed what's his -- John Colson -- I think he's also part of the Wall Street Journal.
What he early June said there is going to be a -- -- new -- the market was up 15%.
From then.
Until the day after the fact -- we still haven't topped.
The day after the Fed -- closing price.
-- -- you look look today is October why the first day of a quarter what happens the first day of a quarter lot of new money comes into the market.
If the market can't hope I don't know what it's doing now but if it Dan hold up if the SMP in the debt and the NASDAQ can't hold up on the first day of a quarter.
I think we're heading lower.
What do you say -- you disagree well as one word that I wanna focus on that in fed statement and that word was indefinitely.
When you think about what the new quantitative easing and how it's dissimilar from prior one loses.
I think there very open minded I think they are very fearful.
About the fragility of the recovery.
While.
-- of GDP is obviously an average of a lot of different things.
But you know corporate profits remain.
Somewhat solid though I think yeah they could be fading just fading a little bit up but but there's there's also the amount of money that's been invested by corporations.
In productivity enhancements to mean if we go by old guys of productivity.
Remember Alan Greenspan saying in early 2000 that productivity it peaked back then -- here we are more than a decade later and we keep making new highs in productivity.
Just let me bring you back here I'd like to know world what you like in this environment what do you picks.
Well lab before I -- I just want to respond to the current has guest you know all there is in the stock market shares of stock and money.
And the company's.
The only reason the market has gone up -- companies decided they didn't want zero return on their cash balance sheet cash so they were buying a huge amount of shares back.
Unfortunately.
That's stopped in September.
September was the first month in quite this twenty billion more new share sales that and by.
Insiders are now for the last two months there's sold eleven times the amount of shares they've bought the sell by a ratio was 1101 for the last two months.
The only -- engine that broaden the market up is money coming from companies shrinking the float.
If companies are now growing the -- -- insiders are now selling.
It had you know this yes the Fed is easing -- definitely you know what that means there is no more fed easing to anticipate.
Without any anticipation.
Why is -- you know I don't see how the market's gonna rally here that I could be wrong but that's what I think.
Then the universe -- in two ways share repurchases -- companies buying other companies 3M today announced the purchase of Ceradyne.
Those several billions of dollars when that deal is completed because it's a cash deal is gonna be recycled -- -- -- in the marketplace that there we are at the precipice.
And it was one in alias over -- a billion.
Twenty billion of share sales more than -- buybacks and cash takeovers.
In the month of September right that's a huge number.
Which is why in a slow growth economy the way big corporations are gonna make up for a lack of organic top line growth.
They're gonna gotten by if with the very inexpensive money courtesy of the Fed the high yield bond market.
The corporate bond market the convertible bond market all those markets are open and they're deep they're extremely liquid.
And there's an insatiable demand for credit instruments that we chatted about earlier when you saw the inflows the weekly inflows into.
Credit type of funds bond funds phones.
Child yes but -- that emanate types the yemenite types of spent that -- that on the doors of all the potential buyers giving them.
Zero cost cash to buy other companies and we're not seeing we're seeing a -- we're -- an address you know occasional here -- there -- strategic.
You know this is there's not a take over way based on cheap money.
Not at these prices no -- be at 12100 on the S&P there would be but not at -- by approaching 15100.
Respectfully disagree because in palisades portfolios -- the last two years and nine months.
We've had 35 companies get acquired and an average premium of 40% from the previous day's close.
All right we'll have to leave it there we could focal -- know that tells -- -- the trim tabs investment recent CE -- tells thank you so much has always.
