Bloomberg Surveillance Transcript
This is the transcript from Friday’s Bloomberg Radio appearance.
~~~
Source: Analyst Wire
This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)
BARRY RITHOLTZ, CEO, FUSIONIQ, TALKS ABOUT THE ECONOMY AT BLOOMBERG SURVEILLANCE JUNE 24, 2011
SPEAKERS: TOM KEENE, BLOOMBERG SURVEILLANCE HOST
KEN PREWITT, BLOOMBERG SURVEILLANCE CO-HOST
BARRY RITHOLTZ, CEO, FUSIONIQ
9:30
TOM KEENE, BLOOMBERG SURVEILLANCE HOST: It is The Big Picture. It is must read by everyone in the Street on the web. Barry Ritholtz with us. We just had on Tobias, really pushing against stocks are cheap. Are stocks cheap right now?
BARRY RITHOLTZ, CEO, FUSIONIQ: They are – it depends on what sort of metric you want to look at and how long a time line you take. If you look at the very big picture – pardon the pun – the long term, the Q ratio, the Shiller trailing ten year earnings ratio, stocks are by no means cheap. They are actually rather expensive.
When you look out on a very short term basis, either trailing four or a forward four, and you look at how earnings have come snapping back from the recession lows, stocks are reasonably priced.
The problem is most people’s time line is not really adjusted to those two differences. If you are a buy and hold investor, this is not really the ideal time to jump in. If you are a trader, there are more opportunities. But given the long term price, the opportunities are fewer and further between.
KEN PREWITT, BLOOMBERG SURVEILLANCE CO-HOST: Well, we had six down weeks. Did it turn up any bargains?
RITHOLTZ: It just took a little bit of that slight overvaluation off stocks and created an environment for a bounce – we came into this week short and covered on Monday. I thought was great until yesterday and the joke in the office was I picked a bad week to stop sniffing glue. And then, you know, by the end of that day that reversal, if you are long or at least not short, that reversal is pretty encouraging to see the market climb.
So just – I know you guys were talking earlier about tech and IPOs, if you look what the Nasdaq did yesterday on a chart, that is a very significant reversal from pretty red to pretty green.
KEENE: It is the Sass power breakfast, folks. We’re here at the Lowe’s Regency Hotel, Park Avenue, mid-town Manhattan. And we thank Sass for their support. Sass, the power to know.
Barry, was your breakfast okay here?
RITHOLTZ: Delightful.
KEENE: They do a -
RITHOLTZ: Worth every penny of the – whatever it turned out to be.
KEENE: Tom Keene, don’t drop the -
RITHOLTZ: Right, I actually have to take a mortgage out for that, right.
KEENE: Barry, -
RITHOLTZ: But the rates are low.
KEENE: – you wrote an essay the other day on The Big Picture. The Fed: Puleeze! And you could have wrote – written it yesterday, the IEA or Strategic Petroleum Reserve, Puleeze! These are exogenous (inaudible) that really come out of nowhere, aren’t they?
RITHOLTZ: Yes, and no. I mean there has been a lot of chatter about the Strategic Petroleum Reserve. We have certainly heard about that. I know that is a question that has been asked of the Obama administration several times.
And, you know, really, when you look at the bag of tricks that the Fed and the Treasury Department have, they are running out of tricks. So this is like, well, you know, all right, they’ve seen me juggle and they’ve seen me ride the unicycle, what can I do now? Well, the Strategic Petroleum Reserve, with energy prices falling, and a little bit of a softness on the consumer side, this really very much a tactical decision to goose the economy.
You know, the weird thing about it is I think most people look at oil prices backwards. They say, you know, if oil prices come down, the economy will do much better. No, no, if oil prices come down, it is because demand isn’t there and the economy is already sliding.
So you have to be – sometimes you have to be a little careful for what you wish for.
PREWITT: Well, going to probably get a conspiracy theory, but do they see something else happening?
RITHOLTZ: No, you see -
PREWITT: If they are going to give us a break on gasoline prices, but it is going to offset something that we don’t know about yet?
RITHOLTZ: No, you know what? Whenever people talk to me about a conspiracy theory, the last president was unable to fire a handful of attorney generals for political reasons. It all came out. If you couldn’t fire six lawyers and not have the world figure it out, I doubt that there is any grand conspiracy theory going on.
If you just look at the recent data, job creation has been punk. GDP has been soft, which, by the way, is what we should expect in a post-credit crisis era. They are looking to do whatever they can to prime the pump and get the economy moving a little faster than it is.
I think 1.5 to 2.5 percent GDP is what you should get following a massive credit crisis and an ongoing deleverage, with big unemployment and a huge headwind from housing. This is exactly the sort of economy, if you read Reinhart and Rogoff, you should expect.
KEENE: I just went to your site. It looks like you are on your blog like 26 hours a day. There are like eight ways to go here. But you have at June 23rd, 2:30 pm, nation building starts at home.
RITHOLTZ: Yes.
KEENE: And you don’t mean shovels. What – how do we nation build? What is a policy that we can have to begin to alleviate so much of the fear and the risk that Tobias was just talking about?
RITHOLTZ: You have to look at who our global competitors are and what they are doing. You know, I deal with a lot of people who are – they are big into their isms, and they are idealists and they – it is amazing how many people working on Wall Street who should really be academics. And so they have these abstract theories, which sound great on college, but in the real world, it doesn’t work.
So if you look at what China is doing in their infrastructure, it is not very different than what the United States did in the 1950s. We built an interstate highway system. We put up a whole lot of airports and naval ports. And we set – left behind an infrastructure that the private sector can build on.
To me, the debate about what government should be doing in terms of taxing and spending is so far off from what the actual debate should be, and it is what can only the government do that private sector can, that then leaves behind an infrastructure that the private sector can build on.
And it is not just interstate highways. Look at the internet as a perfect example of comes out of Darpa, comes out the Department of Defense, and it is now an enormous slice of the economy. That is the sort of thing that the government can be doing where they are not interfering with the private sector, creating something for the private sector.
PREWITT: So what might that be?
RITHOLTZ: There are a thousand different – first of all, if we did nothing but repave the roads and fix the bridges and tunnels, that would be enormous. If you travel overseas at all and go through airports in Europe or Asia, our airports are third world in comparison.
KEENE: It’s amazing. And the trend widens -
RITHOLTZ: Right, -
KEENE: – (inaudible).
RITHOLTZ: – now granted, a lot of the stuff we did, we were 30 and 40 years ahead. And so they are aging, but if we can -
KEENE: Oh, no.
RITHOLTZ: – dig up a trillion dollars for the banks, we certainly could dig up some money for our infrastructure.
By the way, our ports are still very vulnerable to attack. Post- 911, it is a decade later, they are no better than they were a decade ago.
And then look at our electrical grid from a national security basis, the war with China isn’t going to involve guns. It is going to involve botnets -
KEENE: Right.
RITHOLTZ: – that can take down our power grid pretty much any time they want.
KEENE: You know the voice, Barry Ritholtz with us. George Evans will join us here later on.
Of course, Ritholtz, the book is “Bailout Nation.” Jennifer Aniston will be in that next summer.
RITHOLTZ: That’s right. She’s going to be in the movie version.
KEENE: She’ll be in the movie version. Bert Ely really writes it up here on the fed, calling it a fixed income hedge fund, “Toto, I Have a Feeling We’re Not in Kansas Anymore.” Why did you put Bert’s always astute work in The Big Picture this week?
RITHOLTZ: I thought it was – because it was so astute and because I don’t think people realize what the balance sheet of the fed actually is and the ramifications of it. And, again, I have to reiterate this, I am not a policy wonk in my day job. My goal is to look at that and figure out what does this mean for stocks, for bonds, for what have you. And, you know, what we have is a fed that have had – a year ago told you that risk assets are attractive and now they are telling you they are little less attractive.
KEENE: There are seven – this is something I think most people don’t know, Ken. I want you to jump in here. There are $700 billion wire on that balance sheet than they were June of not so long ago.
RITHOLTZ: Right.
KEENE: I showed that chart on Surveillance Midday. A lot of people don’t realize it has continued to expand -
RITHOLTZ: Right.
KEENE: – through this year.
RITHOLTZ: And even more significant is that it is not going to unwind any time soon, so I’ve been calling it QE 2.5. As that ladder comes off, it is just getting reinvested. So the stimulus factor from QE doesn’t go away June 30th. A lot of people have been wondering why hasn’t the equity market fallen 20, 30 percent so close to June 30th? It is because it is almost like a ship in space, and when they hit the after burners, after they go off, they still have that forward momentum. That book is going to continue to come up and be reinvested until the fed says they are moving away from that.
KEENE: Interesting. One final question, where is the Dow a year from now? Are you in or out?
RITHOLTZ: I have not the slightest idea. There are times when I can give you – you know, we think the upward momentum is going to continue, or we think there is an overvaluation and there is some soft spot – up, down, back, forth.
KEENE: Right.
RITHOLTZ: And no confidence as to where it will be.
KEENE: NBA draft, how did the Knicks do?
RITHOLTZ: Eh, not good. Not good.
KEENE: We’ll leave it there. Barry Ritholtz, thank you so much. He’ll be writing on the Knicks. Look for it at The Big Picture out on the web, just a fab – I can’t say enough about the eclectic and smart nature of what Mr. Ritholtz generates. And particularly what he aggregates into the web. He is the Pandora of financial – the Pandora of the financial web.
9:40
***END OF TRANSCRIPT***
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June 26th, 2011 at 1:46 pm
I know there’s a lot of gloom and doom but if America looks at it’s competitors, it seems the time is right for her to step in the breach and lead. Europe has big fiscal, banking and currency problems, Japan has a devastating natural disaster and China has a slowing economy that isn’t always the low cost producer anymore despite a manipulated currency. America still has the biggest economy in the world and with a few wise decisions can become the world economy’s locomotive again.
June 26th, 2011 at 2:35 pm
Nice interview. I disagree with much of it but there’s actual cognitive thought behind Barry’s sentiments which is refreshing when one is constantly bombarded with the usual groupthink.
I disagree with infrastructure spending insofar as it is risky. Considering our debt load, we really have to have a GOOD idea we’re going to get some bang for our buck. Even so, due to gvmt inefficiencies, waste and fraud, there’s every chance we’re going to lose out on the deal.
But an internet build out (high speed) could help us maintain an edge. Nevertheless it would be hugely expensive due to the vast expanse that is America.
June 26th, 2011 at 5:31 pm
“gvmt inefficiencies” … hum .. any charts where the gov reinvests?
ok -ya – where gvmt employees reinvest – thats a hard to track
for disc’d .. export or internal refloat
June 26th, 2011 at 5:56 pm
MayorQ: Infrastructure spending “risky”? You’ve got to be kidding. First of all, we would do well to hire folks to dig holes and fill them back up again. Stimulus works, it hasn’t been tried yet. If you have them build something useful, that’s just bonus. If you’re serious about deficit reduction, then work on repealing the Bush tax cuts and putting a truly progressive income tax in place, including taxing capital gains at least as heavily as regular income. Voodoo economics has been routed, give it a friggin’ rest.
By the way, wtf is “actual cognitive thinking”? As opposed to what? “Virtual intuitive thinking”? Don’t try to set yourself up as the wise adjudicator of other people’s ideas, you don’t have the firepower.
June 26th, 2011 at 7:30 pm
Barry,
If you are going to speak about infrastructure, what don’t you talk about alternative energy? Creating a new energy infrastructure will create the jobs of the 21st century, slow climate change, increase our national security, and reduce government expenditures on costly foreign wars and “natural” disasters. THOSE are multiplier effects. The concern about pristine airports when unemployment is sky-high and most credible scientists agree we are likely at peak oil and one generation away from disastrous effects of climate change seems pretty small to me.
June 26th, 2011 at 9:40 pm
Transcript is a great idea..
June 26th, 2011 at 10:31 pm
Same as Mark E Hoffer, tout pareil.
Transcript is a great idea ’cause you (and I) can read faster than than listen.
June 26th, 2011 at 11:28 pm
@zen-
1. Re: Cognitive thought:
“cog·ni·tive [kog-ni-tiv] Show IPA
adjective
1.
of or pertaining to cognition.
2.
of or pertaining to the mental processes of perception, memory, judgment, and reasoning, as contrasted with emotional and volitional processes.”
2. Digging holes and filling them with BORROWED MONEY means you’ve incurred debts for having smooth roads. If the benefits to the private sector are such that the difference between the newly paved road and the old one facilitates NOT ONLY offsets the interest on the debts incurred to finance the project BUT also results in a real benefit to the economy (as measured in profits), then good. You and I and anyone with an IQ over 67 realize this is not the case.
Short version: You are completely wrong.
I eagerly await your emotional, non-sensical, utterly unfounded response…
June 26th, 2011 at 11:28 pm
China deserve the credit but Americans give China too much credit than China actually deserves. China has it’s today is because China was inspired exactly by the great American success story. After Deng Xiao Ping first laid his eyes on America soil during his first visit to the U.S in 1979, he was completely dazzled by the American infrastructures, the city and country landscapes. At that time China was nothing but a deeply improvised rundown very underdeveloped big dirt poor country. Deng said excitedly: “We will have all these too one day and soon.” So China was motivated by the U.S. Lots of what they had done since the open-door-reform movement are just copy the American story. I don’t understand now certain Americans are saying it cost too much to renew the Americans outdated infrastructures. When China started they were penniless. Not only had no money, but also had no technology nor machineries nor enough food to eat. etc etc. The only thing they had were the willing starving hard working slave labors. (lol) May be that’s one of the main reason of China’s success story.
So what are the America problem(s)? Too much frauds corruptions, the enormous poor-rich gap, the lack of willing starving hard working labors, and on too much debt?
Well China’s frauds corruptions are much much worse and way out numbered the Americans. China’s poor-rich gap is much wider deeper. Thing will surly change when too many Americans become starving with their meal tickets get cut off so they have to work in order to eat. Or else Americans will turn their neighbor the Mexicans into starving slave labors (but many of them already are and now are slaves inside the U.S illegally.). As for the debt, the Fed has the printing press, hello? Other than that Americans have the leading technology and the equipments to do any kind of jobs.
As for healthcare, many in China can’t afford to see doctors or buy meds. Nothing new there. When more Americans have less to eat and have to do physical hard labors, they will be lot healthier and in better physical shapes too. More than half of the time, unhealthy Americans have themselves to blame because they eat way too much and move only their fingers not their bodies.
OK, just joking.
June 26th, 2011 at 11:32 pm
What people REALLY fail ton understand (Barry does btw) – is this:
MONEY DOESN’T JUST APPEAR when gvmt “spends”.
Gvmt can ONLY spend money it gets through taxation OR by borrowing it.
That’s it. They can print money of course but that just dilutes everyone’s purchasing power (shhhh, don’t tell Ben).
So – if USA borrows $50K to pay a guy to build a bridge, we now owe $50K PLUS INTEREST. If that bridge facilitates economic activity such that credit creation can occur and the economy can grow than it COULD theoretically work (and has in the past).
***BUT*** if the old adage “build it and they shall come” does NOT occur, we are now $50K close to bankruptcy.
Considering we are as poorly managed as Greece with regards to our fiscal trajectory, we CANNOT afford to take as many risks as we have in the past.
June 26th, 2011 at 11:46 pm
In China most of roads bridges are toll fee. You have to pay whereever you drive. That’s why China state own makes money. But they over do. It’s on reality TV that the villagers grouping to collect toll fees from cars drive through their village roads because they have to invest and build those roads.
June 27th, 2011 at 12:55 am
Mayor Q – “Cognitive thinking” is redundant and a construction that only an idiot would use. I guess I have to spell it out for you. Interesting thought though, that “benefits to the economy” = “profits”. I guess I and other working people would think that benefits to the economy would more properly be measured in reduced unemployment, growth in median income, and growth in GDP.
Your understanding of economics, as demonstrated in your rambling posts above, is so bad one doesn’t know where to start. However, since the comments of others are generally cogent and reflect a good grasp of reality, there is really no point in starting, as you have no fellow crackpots gumming up the discussion (i.e. nobody cares what you think). Alas, I am guilty of getting sucked in by the troll (you), while others know better and can simply skim over your posturings without feeling the need to quash erroneous memes.
If I thought there was any chance that you had an open mind, I’d respond point by point. However, you have pretty much established that you are a voodoo economics ideologue, as evidenced by a post in a prior comments section that anyone who accepts the proven efficacy of Keynsian analysis and policy prescriptions is “certifiably insane”.
In replying, please provide further demonstrations of your ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge.
June 27th, 2011 at 1:08 am
1. ““Cognitive thinking” is redundant and a construction that only an idiot would use.”
No, it means rational thought, which is the opposite of IRrational thought.
“Your understanding of economics, as demonstrated in your rambling posts above, is so bad one doesn’t know where to start”
And you then go on to fully ignore everything I wrote.
You have no thesis and it is you who have no fundamental understanding of credit creation, fractional lending, nothing.
“that you are a voodoo economics ideologue, as evidenced by a post in a prior comments section that anyone who accepts the proven efficacy of Keynsian analysis and policy prescriptions is “certifiably insane”.”
Not true. Only sheeple assume everyone is as enamored with group think as they. I’m one of those strange people that doesn’t give a damn what others think and generally come to my own conclusions.
No – the Repubs are as wrong as wrong can be. And so are the Dems.
Which is precisely why we’re in this MESS. And it IS a mess, make no mistake (unless you believe in faery unicorns that crap wealth out of thin air so long as Obama says “the secret word” and it sounds as if you do).
June 27th, 2011 at 1:09 am
So…getting back to my analogy – explain to me how $50K of DEFICIT spending, which incurs $50K of new debts PLUS compounding interest, can generate a NET POSITIVE for GDP over time.
That’s your homework.
June 27th, 2011 at 1:53 am
No, “cognitive thinking” does not mean “rational thought”, it means “thinking thought” and is redundant.
To get your economics question answered, please enroll in an economics course in your local community college.
Over and out.
June 27th, 2011 at 1:54 am
http://www.ritholtz.com/blog/2011/06/jump-starting-the-u-s-economy/#comments
• MayorQuimby Says:
June 22nd, 2011 at 7:22 pm
I think anyone that thinks Keynsians are right is certifiably insane.
June 27th, 2011 at 6:47 am
Here’s another venture that’s turning out to be not quite as advertised:
http://www.philly.com/philly/blogs/attytood/Is-Pa-gas-boom-not-all-its-fracked-up-to-be.html
June 27th, 2011 at 8:40 am
@ricecake;
America’s problem is the lack of willingness to reduce self-indulgence and postpone rewards. That is also why we have all this resistance to government. If the money is taxed and used to the benefit of the nation or the collective “we” it is not in the pocket of the individual to be wasted on another 5 inch bigger plasma screen TV. The short term economic stimulus effects of 5 people each adding another room to their house is no different from what happens if those 5 people were taxed that same amount of money and it was used to build a bridge that allowed them a shorter route to their place of work. However the long term effect of the additional rooms are a waste of energy, whereas the shorter commuting distance is a long term investment that saves energy. The Chinese are smart enough to take the long term view and invest in the future of their society, we are spoiled little brads who take the self-indulgence and use a hope and prayer as “plan” for the future.
June 27th, 2011 at 10:38 am
Come on, zenospinoza and MayorQuimby. One thing kind of nice about Barry’s site is the usual lack of vitriol and personal attacks. Debate is great but this definetly started to look personal.
To MayorQ, as to disagreeing with Barry, I think you do that at your own peril. Barry is the one I listen to most closely and have ignored him at my own peril. If I find myself disagreeing with him, I typically go back to question my assumptions.
@ Dedude. Can’t argue with much of what you say. You present the gov’t vs. private investment case pretty well. Maybe “we” are spoiled little brats but industries have sprung up and made fortunes convincing us to be that way. It’s hard to change that momentum to look at investing for the future – just look at U.S. personal savings rates.
June 27th, 2011 at 9:34 pm
Zen-
I’m STILL waiting for you to address my analogy re: deficit spending.