NEIL: ALL RIGHT.
EARNINGS EXPECTATIONS ON THE S&P
500, LOOK AT THE S&P AGAIN,
DECLINE OF ABOUT 2.2%.
IF YOU'RE LOOKING AT OTHERS, ALL
SORTS OF ESTIMATES, THEY ARE
GOING TO BE DOWN.
THAT'S THE GUESSTIMATE, AS MUCH
AS 5%, AS LITTLE AS 2%.
BUT THEY ARE GOING TO BE DOWN.
THAT'S THE EXPECTATION.
STANFORD SCHOOL OF BUSINESS
LECTURER DAVID DODSON ON WHY HE
THINKS THAT MIGHT BE THE CASE.
WHAT DO YOU THINK?
>> I THINK THERE'S A LOT OF
EVIDENCE THE ECONOMY IS
SOFTENING.
WE TEND TO LOOK AT THE JOBS
REPORT AND THEN WE LOOK AT THE
GDP GROWTH RATE.
BUT THAT'S ALL THINGS THAT
HAPPENED IN THE PAST.
THERE'S A LOT OF CLUES IN THESE
REPORTS THAT TELL YOU ABOUT
WHAT'S GOING TO HAPPEN IN THE
FUTURE SO FOR EXAMPLE, WHEN I
GET THE JOBS REPORT, ONE OF THE
THINGS I LOOK AT IS OVERTIME.
CORPORATE OVERTIME HOURS THAT
ARE BEING OFFERED TO EMPLOYEES
IS DOWN BY ALMOST 10% THIS YEAR.
THAT'S REALLY AN INDICATION OF
SOME SOFTENING IN DME.
THE GDP GROWTH RATE, THAT'S
JUST KIND OF A FANCY WAY OF
SAYING HOW MUCH STUFF WE'RE
BUYING, IF YOU WANT TO KNOW HOW
MUCH STUFF WE ARE GOING TO BE
BUYING NEXT MONTH, LOOK AT HOW
CONSUMERS ARE PAYING FOR THE
THINGS THEY BOUGHT THIS MONTH.
IF YOU LOOK AT DEFAULT RATES ON
AUTO LOANS, IF YOU LOOK AT
CREDIT CARD BALANCES, IF YOU
LOOK AT THE PERCENT OF PEOPLE
WHO ARE PAYING OFF THEIR CREDIT
CARDS, ALL OF THAT'S INDICATING
PEOPLE ARE STARTING TO STRUGGLE
WITH PAYING FOR THE THINGS THEY
BOUGHT THIS YEAR.
NEIL: BEFORE I EXTEND THIS TO MY
PANELISTS WHO ARE EAGER TO TALK
TO YOU, ONE OF THE THINGS THAT'S
COME UP IS UNCERTAINTY OF TRADE
THAT A LOT OF COMPANIES DON'T
KNOW HOW TO HANDICAP THAT, SO
THEY JUST PUT IT ON IT THERE AS
POTENTIAL HEADWINDS THEY'RE
FACING AND THEY HAVE BEEN SORT
OF BATTENING DOWN THE FINANCIAL
HATCHES.
WHAT DO YOU THINK OF THAT?
>> I MEAN, IT'S REALLY DREADFUL
FOR THESE COMPANIES THAT HAVE
COMPLEX MANUFACTURING SUPPLY
CHAINS.
THESE ARE SUPPLY CHAINS THAT GOT
CREATED OVER DECADES, AND THEY
ARE VERY INTRICATE AND NOW THEY
ARE BEING SORT OF DISMANTLED IN
WAYS THAT ARE VERY DISRUPTIVE.
NOW, IN THE SHORT TERM THEY ARE
DISRUPTIVE ECONOMICALLY BECAUSE
EVERYTHING BECOMES MORE
EXPENSIVE AND THEN YOU ADD
TARIFFS ON TOP OF IT, THAT'S
GOING TO HAVE A LOT OF NEGATIVE
PRESSURE ON EARNINGS.
BUT LONG-TERM, WHAT BUSINESS
LIKES AND EVERYBODY KNOWS THIS,
WHAT BUSINESS LIKES IS THEY LIKE
CERTAINTY, THEY LIKE TO KNOW
WHAT'S GOING TO HAPPEN.
THERE IS SO MUCH UNCERTAINTY
HAPPENING IN WASHINGTON, D.C.
IT'S MADDENING FOR COMPANIES.
>> DAVE, THIS IS PAUL DIETRICH.
IN LOOKING AT THAT JOBS REPORT,
IT SEEMED LIKE A LOT OF THE
OVERTIME GOING DOWN CAME OUT OF
MANUFACTURING.
AND MANUFACTURING IS ONLY 10% OF
THE U.S. ECONOMY, 70% OF THE
U.S. ECONOMY IS CONSUMER
SPENDING AND YOU KNOW, JOBS ARE
STILL GROWING, WAGES ARE STILL
GROWING.
I THINK NEXT QUARTER IS GOING TO
BE REALLY GOOD.
THAT'S USUALLY THE CONSUMER
QUARTER.
AND SO I WAS WONDERING WHETHER
WE PUT TOO MUCH EMPHASIS,
THERE'S NO QUESTION
MANUFACTURING IS IN DECLINE, BUT
THAT OVERTIME, I AGREE WITH YOU,
THE OVERTIME SHOWS WHERE WE'RE
GOING BUT I THINK IT SHOWS MORE
WHERE WE'RE GOING IN
MANUFACTURING THAN IN THE
OVERALL ECONOMY.
WHAT DO YOU THINK?
>> WELL, I AGREE WITH YOU THAT
YOU CAN'T JUST LOOK AT
MANUFACTURING.
THE NUMBER THAT I LOOKED AT
IS -- LINES UP WITH WHAT YOU
WERE THINKING, WHICH IS IT'S THE
TOTAL OVERTIME, BOTH SERVICE,
MINING, MANUFACTURING, I WAS
LOOKING AT THE TOTAL NUMBER
WHICH CAME DOWN BY 9.5%.
BUT THE INCOME IS ALSO AN
INTERESTING NUMBER BECAUSE YOU
KNOW, WE TEND TO LOOK AT THE
INCOME AS THE CHANGE IN THE WAGE
RATE, BUT WHAT'S REALLY
IMPORTANT FOR A WAGE EARNER IS
WHAT THEIR PAYCHECK LOOKS LIKE,
RIGHT?
IF THEY ARE GETTING LESS
OVERTIME, AND BY THE WAY, NUMBER
OF HOURS HAS COME DOWN SO FAR
THIS YEAR, THEIR PAYCHECK IS
SMALLER.
THAT'S LOST IN THOSE NUMBERS OF
WHAT THE WAGE RATES ARE.
SO IF I'M A SHIFT WORKER AT BEST
BUY, OR I WORK IN A MINE, AND MY
WAGES WENT UP BY 6% THIS YEAR,
BUT THE NUMBER OF OVERTIME HOURS
I GOT WERE DROPPED BY 10%,
THAT'S A REDUCTION IN MY INCOME.
>> I THOUGHT IN THAT REPORT,
THAT THEY ACTUALLY SAID THAT
MOST, NOT ALL, CERTAINLY, BUT
THE DECLINE IN OVERTIME WAS
PRIMARILY IN THE MANUFACTURING
SECTOR.
CERTAINLY OVERWEIGHTED.
>> YEAH.
I MEAN, YOU KNOW, IT'S A
MADDENINGLY DIFFICULT REPORT
BECAUSE THERE'S, WHAT, THERE'S
30 DIFFERENT LINE ITEMS THERE,
AND WHEN I WAS LOOKING AT THE
LINE ITEMS, IT LOOKED TO ME LIKE
THERE WERE TWO PLACES THAT WERE
GETTING HIT HARD.
ONE WAS MANUFACTURING, AS YOU
SAID, BUT THE OTHER WAS IN THE
SERVICE SECTOR.
>> I WANTED TO ASK, IS THE NEWS
WE'RE HEARING TODAY ABOUT SAY WE
DO GET A SHORT-TERM DEAL OUT OF
THE ADMINISTRATION VIS A VIS
CHINA, HOW MUCH WOULD THAT
CHANGE SORT OF YOUR FORECAST IN
TERMS OF WHAT YOU EXPECT TO SEE
IN THE NEXT QUARTER OR NEXT
YEAR?
>> WELL, JEANNE, IT'S
INTERESTING YOU ASK IT THAT WAY,
BECAUSE MY FEELING IN THE NEXT
QUARTER OR NEXT YEAR WOULD BE,
YOU KNOW, OPTIMISTIC.
I THINK EVERYBODY WOULD BREATHE
A MASSIVE SIGH OF RELIEF AND WE
COULD GET BACK TO BUSINESS AS
USUAL AND I THINK THERE WOULD BE
MORE POLITICAL STABILITY.
HOWEVER, MY WORRY IS, WHAT IS
THAT LONG TERM BECAUSE I CAN'T
SEE A WORLD RIGHT NOW WHERE
CHINA IS GOING TO BE MAKING
PAINFUL CONCESSIONS TO THE
UNITED STATES RIGHT NOW, BECAUSE
GIVEN OUR POLITICAL SITUATION
AND GIVEN THAT WE'VE GOT AN
ELECTION COMING UP, I CAN'T
IMAGINE WHY CHINA WOULD MAKE,
YOU KNOW, THOSE KIND OF
CONCESSIONS.
WHAT I WORRY ABOUT IS NOT THE
NEXT QUARTER OR NEXT YEAR BUT I
WORRY ABOUT MAYBE WHAT'S GOING
TO HAPPEN IN THE NEXT DECADE
WITH THAT TRADE RELATIONSHIP.
OF COURSE, THAT'S WHAT THE
PRESIDENT HAS BEEN FOCUSED SO
HARD ON IS TRYING TO FIX THE
LONG-TERM RELATIONSHIP BETWEEN
THE UNITED STATES ECONOMY AND
THE CHINESE ECONOMY.
>> IT'S DAVID DIETZE.
YOU KNOW, AS WE SAY ON WALL
STREET, IT'S NOT JUST THE
MARKET, IT'S A MARKET OF
SECTORS.
ARE THERE SOME SECTORS YOU ARE
MORE OPTIMISTIC ON AND OTHERS
YOU ARE MORE CAUTIOUS ON?
>> WELL, I DON'T REALLY HAVE --
THAT'S A FAIR QUESTION.
I REALLY DON'T HAVE A POINT OF
VIEW ON WHICH SECTORS MIGHT GO
UP OR DOWN OVER THE NEXT QUARTER
OR SO BUT HERE'S AN ISSUE THAT I
AM SPEAKING OF SECTORS, HERE'S
AN ISSUE I AM SORT OF INTERESTED
IN, WHICH IS IF THERE'S A
RECESSION OR IF THERE'S A
DOWNTURN, WE KNOW THAT ALL
DOWNTURNS AREN'T THE SAME.
IN 2008, IT HIT HOMEOWNERS WHO
HAD MORTGAGES, HIT THEM
DISPROPORTIONATELY HARD BECAUSE
THEY HAD BIG MORTGAGES.
THIS DOWNTURN IS LIKELY TO HIT
18 TO 30-YEAR-OLDS
DISPROPORTIONATELY HARD BECAUSE
THE STUDENT LOAN RATE IS 183% OF
WHAT IT WAS BEFORE.
SO HERE'S THE INTERESTING SORT
OF POLITICAL ECONOMIC COCKTAIL
WE MAY BE STARING DOWN.
IF THERE'S A DOWNTURN OR
RECESSION, IT'S GOING TO HIT
THEM WAY HARDER.
THEIR UNEMPLOYMENT RATE IS FOUR
TIMES THE NATIONAL AVERAGE.
IT'S GOING TO HIT THEM HARDER.
THAT'S PIECE NUMBER ONE.
PIECE NUMBER TWO IS OVER THE
LAST TEN YEARS, THAT SECTOR HAS
BECOME VERY DISENCHANTED WITH
THE SYSTEM.
IN FACT, THE FAVORABILITY OF
CAPITALISM AMONG THAT GROUP HAS
GONE FROM 64% IN TEN YEARS DOWN
TO 45%.
SO THEY DON'T BELIEVE IN THE
SYSTEM.
HERE'S THE LAST PIECE.
TUFTS UNIVERSITY RECENTLY
RELEASED SOME INTERESTING DATA
ABOUT STUDENT VOTING.
STUDENT VOTING IN THE MIDTERM
ELECTIONS IN 2018 DOUBLED FROM
19% TO 40%, IT DOUBLED.
SO NOW YOU'VE GOT A COHORT GOING
INTO THE 2020 ELECTION WHO HAVE
A VERY DIFFERENT VIEWPOINT ON
ECONOMIC POLICY AND IT'S MORE
FAR LEFT ECONOMIC POLICY.
I ACTUALLY THINK THAT COULD
TRANSLATE INTO U.S. POLICY OVER
THE NEXT FOUR TO EIGHT YEARS.
NEIL: I DON'T KNOW WHAT'S MORE
REMARKABLE THERE, DAVE, THAT A
GUY FROM STANFORD IS QUOTING A
TUFTS SURVEY, OR THAT WE HAVE TO
