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Fears the Fed will pull back soon on bond purchases that prop up the economy but our next guest says enough it's overblown -- balance -- of GFI group joins me now.
And John that GDP number for first quarter the last definite.
It actually was just taken down hugely but about comparatively from 2.4 to one point 8% I can't remember another time -- the revision the last meeting finally went down as much.
But does it mean if the Fed is entirely wrong to talk about pulling back on -- money.
I think that there are a little bit premature you know usually fed follows the market and the market really wasn't set up that much for taper.
So soon I think that you know the print this morning business fixed investment was big revision down.
Which was not the best I think that you know this'll if one thing -- deal to sell the bond market down I think intends we're now one and three quarters of two and a quarter range.
Now probably unit to a record to its record sink into the thirties.
They awarded to a seven to five to three to -- probably in a three and a quarter to treat some but not now all week in the past two -- people been really just struck by the fact that the yield on ten years -- is -- 2.4 percent -- willow was about who's 026 and now you see that going -- even for I don't know no lights I see -- settling into a range of two and a quarter of two and three -- a -- so -- 75 yeah exactly so right now we'll probably see -- -- -- to come down quite a -- the inflation opponent in the GDP was.
Basically in line so that that but I expect them I'm sorry to stupid question but why is -- the bond market which is the bomb places been plunging because -- so nervous that the Fed's gonna stop using.
Why would this worst number on GDP for for Q1 -- -- coming down the bond market instead of making it further OPEC -- well obviously the president of -- right -- that the other thing is growth is slow so bonds don't wanna see either group bonds -- is -- too high growth but to higher inflation so the one point 8% print.
Is basically putting them at ease in terms of the growth aspect and also the fact that then we'll probably not taper as soon as he is a bond market thought right now we can't we can't taper.
With GDP running one point 8% because that's not enough to get you unemployment rate down to six and a -- 6% of that the Fed -- if today's revision downward yet that they're missing on both sides of the -- right I don't -- on inflation coach -- came out this morning does that happen and it's not happening so we need when you mean we need to get inflation up to 2% inflation now falling yet.
So the Fed looks like that -- how wrong lately to start talking about pulling back on -- easy but it question John as.
Stock futures for the Dow would like to wander right 65 points or so but after that revised down number on -- Q1 GDP came out sadly we have futures are down only -- -- up 54 now do we think that -- they'll fall on this news be hurt by it or will they be helped by because traders will -- now the Fed can't pull back.
On the loose money that I like well.
The fact of the matter is that the Fed -- the and the Bank of Japan is still putting in a 150 billion dollars a month in terms of the liquidity right -- defense that they're -- -- but they're not -- yesterday and they're not taping tomorrow and -- had zero they start to do what they haven't done anything we're still about 85 billion dollars a month still have to go somewhere until they start to -- which could be September -- October December now at the moment last night people afraid of China China came -- said you know what.
That the Chinese and -- give as much when he -- that the there's.
Our money markets as possible rights the PB OC is gonna support to -- came out last night.
Also said that the ECB stands ready to pick up any slack if the Fed tried to taper and also the Bank of England -- the same thing so right now the money markets have come down quite a bit that led to increase the Philippines is up 6% last night.
-- did a little bit better obviously Euro.
The ibex and and the also the the -- was up to -- -- OK so you know we're getting back to where we should be this is.
Good liken this now that a bit about more fundamental underlying question.
Some people argue that the only reason stocks the Dow was up 15% year to date before the tumble began a couple weeks -- that the only reason they're up is because of the Fed's loose money policies.
Stock usually always are reflection of future earnings expectations and -- can't be up just because easy money earnings are this business is better.
Do you think stocks were up only because of the Fed or -- -- because the economy is on the meant.
Well I think I think.
-- -- of the question right now actually stocks are not overvalued there's no bubble and Sox with a -- look at emerging markets trading about nine times earnings Europe trading about twelve times earnings.
We're -- about fifteen times earnings.
The US market was up because of multiple expansion right now because earnings are really blockbuster because they're not we can have good earnings when we have -- point 8%.
I GDP we don't have jobs right I don't hear the president talking about jobs he has not said anything how're we gonna get people back to work I hear a lot about green energy I hear a lot about obamacare I hear a lot about a lot of things.
Not about jobs so we need jobs -- grow the economy people -- John's people spent.
People don't have jobs and -- -- people I'm not gonna have enough money to spend at the just getting disability payments and -- and unemployment claims -- the other thing is.
In terms of earnings -- to trial.
Earnings double every ten years is the way it works so basically the the bottom in earnings was 97 dollars on the S&P 500 in 2007000.
-- In ten years -- -- expected to double right now we haven't had earnings grow at all we're about a 10500 attends the street estimates I think.
That earnings will grow to probably let's let let's say don't -- a little better than Wall Street exactly -- Over the next two or three years so yeah if they don't double to a 180 let's say earnings S&P go up to a 150 dollars -- 150 dollars an innocent people right.
Let's just put -- -- multiple on that we're at 3000 on the S and -- The S&P.
Is back down to it to 2000 levels at 1555.
Just the other year 2000 level exactly just basically -- -- -- some -- we've been -- at thirteen -- earnings haven't growth we're gonna have a big catch up in terms their earnings growth if this president can give us some tax cuts something on regulation.
And get this economy -- people back how big if but it Tom -- volatility -- fearful fed -- -- it's great to hear you sell some some hope for us this morning thank you so much for being with us.
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