- 2023-10-16
- Posted by: kimsite
- Categories: Commentary, Insights, News
Click here to listen to the full interview.
DAVID ASMAN: Well. Meanwhile, Treasury Secretary Janet Yellen was pressed on the United States ability to afford two wars on two fronts. Take a listen.
JANET YELLEN: America can certainly afford to stand with Israel and to support Israel’s military needs, and we also can and must support Ukraine in its struggle against Russia. And look, the American economy is doing extremely well.
ASMAN: Let’s get a reaction now from King’s View Asset Management CEO Scott Martin and Capitalist Pig Pig hedge fund manager Jonathan Hoenig. Gentlemen, great to see our Chicago boys are here. I want to go to Jonathan first and just ask, you know, Biden came into office declaring himself to be an enemy of this concept of endless wars. Now he’s in two on two completely separate fronts, one in Europe and one in the Middle East. How can that not increase inflation with all the extra spending the United States is going to be doing?
JONATHAN HOENIG: Yeah. I mean, David, whether or not you believe we should be involved in these wars, we’re certainly going to spend a hell of a lot of money. And keep in mind, we’re already spending a lot on particularly on debt service, and we’re spending more on servicing the debt now than we are on national defense, as it is $2 billion a day. And with all due respect to Janet Yellen, keep in mind, Janet Yellen said that inflation would be transitory. Meanwhile, you’ve got 60% of Americans living paycheck to paycheck and 401 withdrawals at an all time high. So the more we spend, David, the slower economic growth, the more innovation and the slower the economy grows.
ASMAN: All right. Well, Scott, you’re not old enough. I am. I remember the guns and butter policy of LBJ back in the late 1960s. That led to a huge increase in the late 60s, early 70s, throughout the 1970s of inflation. We didn’t kill it for a full decade until Ronald Reagan came in. And Paul Volcker, of course, at the fed. Guns and butter seems to be exactly the policy that this administration is following.
SCOTT MARTIN: True. And that might be what Joe Biden suggests we use in war as butter, after the mistaken policies that he’s had over the years. And I’ll tell you what, I’m more of an old enough ilk here, David and Jonathan, to remember Milton Friedman, my monetary phenomenon, boy, which is inflation, which talks about how money supply and things that that are basically expanded into the economy, if that’s even a word, do create higher prices. And so this is money that doesn’t necessarily go there. It doesn’t necessarily increase the velocity of money, but still can be inflationary and can affect the price of the dollar. David, I’m not sure if Janet Yellen is still feeling the effects of, say, the Chinese psychedelics that she took a few weeks ago, because talking about how strong the economy is and talking about, like Jonathan said, about the folks living paycheck to paycheck, the massive amount of debts over there on the personal side, not let alone the public side, show that the economy is not that greatly strong. And it’s certainly not an economy that we should just start throwing money around the world to try to fix all these problems that other countries have. So we need to focus on a lot of policies here at home, fix the immigration crisis that we have going on here, the border crisis, of course, the crime rates that are accelerating here in Chicago and around and around the country and make businesses able to start to produce and redo what they’ve done in the past, which is fulfill and propensity or propensity to have the economic growth go forward because of the fact we have a focus on the private sector, not the public ones.
ASMAN: Jonathan, meanwhile, you look at the bottom right of your screen, you see a market increase on the Dow of about 350 points. Right now, Nasdaq is up as well, even though interest rates continue to rise. I assume that that what investors are focusing on right now is one, the fact that perhaps we did skip a recession, and two, the fact that consumers, despite the fact that they’re up to their neck, up to their eyeballs, really in debt, they’re still spending.
HOENIG: Yeah. David, credit card debt at an all time high. Credit card debt, interest rates in an all time high. And look, I’m happy to see the market bouncing today. But keep in mind a majority of stocks are still below both their short term and their long term average moving averages. So the trend for most stocks is down. And David you’re right. The inflation that we experienced in the 1970s, it started really with that spending in the late 1960s. And you know we thought under under Gerald Ford in the mid 1970s that inflation was under control was going to be a soft landing. Meanwhile it was seven more years and needed austerity, not just under Carter but under Reagan as well, to ultimately get inflation and interest rates under control. So Yellen and Biden might kind of paint a happy picture. The market’s up, but everyday Americans are struggling and inflation simply isn’t going away yet.
ASMAN: Well Scott it’s a big week for the Fed’s big week for earnings as well we should mention. But the fed is going to come to some kind of decision. What do you think’s going to happen there.
MARTIN: Nothing to summarize a word but I’m yelling and screaming for the fed to get with the program here, which is that as Jonathan said, I mean, and you said two David, rates are already behaving in respect and maybe in advance of what the fed has talked about and what they’re projected to do. So one of some of the fed governors have talked over the last, say, a couple of weeks, and one of the recent weeks was talking about how. Well the open market interest rate. So looking at, say, the ten year note is already doing the work of the fed and maybe the future work of the fed. So my big thing is Fed’s going to take a chill pill and sit back and let rates determine it. And they need to kind of be quiet and step back here.
ASMAN: Well it’s good to see the market do the work rather than the fed. A lot of people think the market is has more wisdom than a few few folks at the Federal Reserve Board. We’ve got to leave it at that. Gentlemen. We want to go to the region itself.
