LIZ: I'M GOING TO ASK YOU
INVESTORS A QUESTION.
YOU GET TO DECIDE.
DO YOU WANT TO START YOUR
DOOMSDAY CLOCK JUST A BIT
EARLIER, AT LEAST ACCORDING TO
THE NOBEL PRIZE WINNING
ECONOMIST PAUL KRUGMAN, YOU
SHOULD.
WHEN ASKED OVER THE WEEKEND
WHETHER INVESTORS SHOULD EXPECT
TO SEE A RECESSION IN THE COMING
MONTHS, NOT THE COMING YEAR, HE
REPLIED QUOTE, I THINK THAT
THERE IS A QUITE GOOD CHANCE
THAT WE WILL HAVE A RECESSION
LATE THIS YEAR OR NEXT YEAR.
I SAID LET'S DISCUSS THIS HERE.
WE BRING IN FORMER UBS OF
AMERICA CEO AND FOX BUSINESS
CONTRIBUTOR, ROBERT WOLF ALONG
WITH DEION ROBOWEN.
GOOD TO SEE BOTH OF YOU.
>> GREAT TO BE HERE.
LIZ: ROBERT, PAUL KRUGMAN HAS
BEEN WRONG, HE'S BEEN RIGHT,
HE'S BEEN WRONG, HE'S BEEN
RIGHT.
IS HE RIGHT OR WRONG ON THIS
RECESSION CALL?
>> HE'S WRONG, BUT IT'S NOT
SURPRISING THAT AN ECONOMIST
WOULD GO BOLD ONE WAY OR THE
OTHER.
IN THE '80s, HENRY KAUFMANN MADE
ONE GREAT CALL AND IT SAVED HIM
FOR THE 30 YEARS AS AN
ECONOMIST.
THIS IS WHAT ECONOMISTS DO, GO
BOLD.
THERE IS NO RECESSION.
HIS COMPARISON TO 2008, I WAS
THERE AT THE LEHMAN WEEKEND IN
2008.
THIS IS NOTHING LIKE IT.
THE LEVERAGE IN THE SYSTEM IS
WAY DOWN.
IT'S JUST TOTALLY DIFFERENT
TIME.
LIZ: DEION, WHAT DO YOU SAY?
PAUL KRUGMAN WHO WRITES FOR THE
"NEW YORK TIMES" IS A PULITZER
PRIZE WINNING ECONOMIST, SAYS
RECESSION POSSIBLY AS LATE AS
THIS YEAR.
>> IT'S NOT AN OUT THERE
COMPLETELY IDEA, RIGHT?
I WAS AT A CONFERENCE A COUPLE
YEARS AGO, ACTUALLY THREE YEARS
AGO IN 2016, WHERE FOLKS WERE
CALLING FOR A RECESSION IN 2020
ALL THE WAY BACK THEN.
THIS 2020 RECESSION CONSENSUS
CALL HAS REALLY BEEN BUILDING
FOR AWHILE.
HE'S JUST KIND OF MOVING IT UP A
LITTLE BIT.
LIZ: WHAT IS THE EVIDENCE,
THOUGH?
>> WELL, YOU HAVE A BUNCH OF BAD
STUFF BAKED INTO THE SYSTEM.
YOU HAVE A BUNCH OF BAD LOANS,
THE CREDIT QUALITY IS DECLINING,
YOU HAVE A BUNCH OF THESE TRIPLE
B CREDITS THAT ARE BEING
EXTENDED TO A LOT MORE FOLKS.
THERE'S A LOT OF BAD DEBT ON THE
BOOKS.
YOU ARE ALSO SEEING THE GLOBAL
ECONOMY TURN LOWER.
YOU ARE SEEING AS POINTED OUT IN
THE ARTICLE, CENTRAL BANKS KIND
OF OUT OF BULLETS.
THEY HAVE BEEN SPENDING ALL THIS
MONEY STIMULATING THE ECONOMY
AND THE ECONOMY'S NOT GETTING
STIMULATED.
SO AS GLOBAL GROWTH TURNS DOWN,
YOU COULD SEE THE U.S. TURN WITH
IT.
>> I MEAN, THERE'S A BIG
DIFFERENCE BETWEEN SLOWDOWN IN
GLOBAL GROWTH AND RECESSION.
WE ARE RUNNING RIGHT NOW AT
ABOUT 2.5%, 3%.
I DON'T SEE THAT TURNING THE
OTHER WAY IN THE SECOND HALF OF
THE YEAR.
WHAT I THINK REALLY IS OUR
BIGGEST CONCERN SHOULD BE ONE IS
THE FED GOING TO STAY SOMEWHERE
BETWEEN ZERO AND TWO RAISES RO
BETWEEN ZERO AND TWO RAISES OR
WILL THEY DO ANOTHER HEAD FAKE
AND TWO, WHERE WE WILL BE WITH
RESPECT TO THE CHINA FRAYE
RESPECT TO THE CHINA TRAYE
RESPECT TO THE CHINA TRADE DEAL.
LIZ: DO YOU SEE THE FED GETTING
US INTO SOME TYPE OF QUAGMIRE BY
NOT RAISING RATES?
>> NO.
I THINK THEY MADE A MISTAKE ON
QE3 THAT WE USED TO SPEAK ABOUT,
AND I THINK THEY MADE A MISTAKE
ON THEIR NINTH HIKE IN DECEMBER.
NOW I THINK THEY NEED TO STAY
THE COURSE AND SEE WHAT HAPPENS.
THEY SHOULD DO NOTHING IN MARCH.
I WOULD NOT BE SURPRISED IF THEY
AT LEAST DO, YOU KNOW, SOMETHING
THIS YEAR BUT I ACTUALLY THINK,
I USED TO THINK THERE WERE GOING
TO BE FOUR HIKES.
NOW I THINK IT'S BETWEEN ZERO
AND TWO.
LIZ: THE U.S. SEEMS TO BE
HURTLING TOWARD ANOTHER
GOVERNMENT SHUTDOWN.
HOW WOULD THAT PLAY INTO THIS AT
ALL?
BECAUSE THE FIRST ONE CERTAINLY,
WE ARE WAITING UNTIL FEBRUARY
28th, I BELIEVE, TO GET THE GDP
NUMBER WE DIDN'T GET THE FIRST
FOR Q1, BUT THERE ISN'T A LOT OF
CONCERN THAT IT DINGED IT TOO
BADLY.
>> WE ARE ALSO STILL WAITING ON
A NUMBER OF OTHER DATA RELEASES.
WE AREN'T EVEN GETTING THE
RETAIL SALES REPORT WE WERE
SUPPOSED TO GET BACK IN JANUARY.
WE ARE ALSO NOT GETTING A NUMBER
OF OTHER DATA AND OTHER DATA HAS
BEEN PUSHED BACK TO LATER THIS
MONTH THAT WE WERE SUPPOSED TO
GET IN DECEMBER.
SO WE ARE MISSING A LOT OF DATA
ON HOW THE ECONOMY RECOVERED OR
HOW THE ECONOMY PERFORMED DURING
THE SHUTDOWN.
WE REALLY DON'T KNOW THE EXTENT
OF THE IMPACT THAT IT HAD.
IT COULD CERTAINLY DO A LOT MORE
DAMAGE IN TERMS OF HURTING
FOLKS' FAITH AND IN TERMS OF
BUSINESS EXECUTIVES SAYING YOU
KNOW WHAT, THIS MARKET IS CRAZY,
I CAN'T MAKE ANY LONG-TERM PLAN,
LET'S PUT EVERYTHING ON PAUSE
UNTIL SOMETHING WORKS ITSELF
OUT.
LIZ: NOW YOU TOUCHED A NERVE
WITH ME AND HERE'S WHY.
AS FAR BACK AS THESE SURVEYS GO,
DECADES AGO, YOU WOULD ASK
BUSINESS LEADERS AND THEY WOULD
SAY WITH ALL THIS UNCERTAINTY, I
CAN'T SPEND.
THERE'S ALWAYS UNCERTAINTY,
ROBERT.
SO WHAT ARE THEY TALKING ABOUT?
THEN YOU HAVE THE AMAZONS OF THE
WORLD, YOU HAVE ALL THESE
COMPANIES THAT STARTED
BUSINESSES DURING RECESSIONS AND
SAID WHATEVER, LET'S JUST GO FOR
IT.
>> I MEAN, I WOULD AGREE WITH
YOU.
IT'S CRAZY TO SAY THAT WE NEED
TO HAVE COMPLETE UNCERTAINTY --
LIZ: IT WILL NEVER HAPPEN.
>> NEVER GOING TO HAVE THAT.
I DO THINK, THOUGH, WHAT GOES ON
IN WASHINGTON DEFINITELY IMPACTS
SPENDING.
BUT WE'RE NOT GOING TO SEE
ANYTHING WITH TAXES THIS YEAR.
IF ANYTHING, MAYBE WE WILL SEE
SOME INFRASTRUCTURE.
LIZ: YOU WORRIED ABOUT A HOUSING
MARKET THAT'S SLOWING DOWN?
>> WELL, I THINK THAT'S THE
REASON PAUL KRUGMAN CANNOT BE
TOTALLY IGNORED.
HOUSING FEELS LIKE IT'S GETTING
WORSE.
AUTO SECTOR FEELS LIKE IT'S
GETTING WORSE.
THERE'S LEVERAGE IN THE SYSTEM.
THAT'S THE BIG DIFFERENCE.
YOU'RE NOT GOING TO SEE BANKS
GET DISRUPTED LIKE THEY DID IN
2008.
LIZ: AS WE FINISH UP, ROBERT
SAID THESE ECONOMISTS HAVE TO GO
BIG OR GO HOME.
ONE GREAT CALL AND THEY ARE
KNOWN FOREVER FOR THAT.
WHAT IF IT'S A BAD CALL?
HE HAD A BAD CALL SAYING THE
MARKETS WOULD IMPLODE IF DONALD
TRUMP WERE ELECTED AND THAT HAS
NOT HAPPENED.
>> YEAH, THAT REALLY WORKED
AGAINST HIM.
I WOULD HAVE TO PUSH BACK ON
WHAT ROBERT'S SAYING A LITTLE
WHEN HE SAYS THERE'S NO LEVERAGE
BUILT INTO THE SYSTEM.
THERE'S A LOT OF LEVERAGE, JUST
NOT ON BANK BALANCE SHEETS THIS
TIME.
SO THE BANKS ARE IN A LOT BETTER
PLACE BUT A LOT OF THOSE FUND
MANAGERS, A LOT OF FOLKS WHO
JUST HAVE MONEY IN THESE FUND
MANAGERS, THEY'VE GOT A LOT OF
DEBT BUILT IN THERE AND A LOT OF
LEVERAGE.
SO THAT'S STILL IN THE SYSTEM.
THERE STILL IS SOME DANGER
THERE.
I DON'T THINK WE ARE COMPLETELY
OUT OF THE WOODS.
I DO AGREE WITH YOU, PAUL
KRUGMAN MAYBE GOING A BIT
FURTHER OUT THERE ON THE LEDGE
TRYING TO GET HEADLINES AND IT
SEEMS LIKE IT WORKED.
>> FUND MANAGERS BEING IN
TROUBLE AND HAVING A LACK OF
PERFORMANCE DMOT
PERFORM ACE DMOT
PERFORM ANC DMOT
PERFORM ANC
PERFORMANNC
PERFORMANCE DOES NOT CAUSE
RECESSION.
WHAT CAUSES RECESSION IS THE
AMOUNT OF MONEY IN THE SYSTEM
GETS STRAPPED.
WHEN BANKS GET STRAPPED, THAT
CAUSES RECESSION.
WHEN THE FED GETS STRAPPED, THAT
CAUSES RECESSION.
WE DON'T HAVE RECESSION WHEN
THERE'S MARKET MOVES ONE WAY OR
THE OEFRMEN
THE OTHRMEN
THE OTHEREN
THE OTHER.N
LIZ: THERE IS ONE AREA WHERE
BANKS AND PARTICIPANTS ARE
