Friday, October 26, 2012

Larry Fink on Market Sell-Off: "Market Is Now Responding to the Pending Fiscal Cliff"



Larry Fink, chairman and CEO of BlackRock, on CNBC's Squawk Box, October 26, 2012.

Excerpts:

Steve Liesman: Let's talk about the recent marekt sell-off. It's been sharp and it's causing a lot of concern. What's the cause in your opinion? Is the market telling us something about the economy that we don't already know?

Larry Fink: I think the market is now responding to the pending fiscal cliff. We're starting to approach the election. There's uncertainty about who will be President and how the fiscal cliff will be resolved. CEO's today are pensive about what to do next. They're just sitting back. They're not hiring as much. They're probably not spending as much. So, there's a deceleration in the economy and we all are starting to feel it. Additionally we were expecting a little more resolution in Europe. We're waiting for Spain to act and accept conditionality and that' s probably been delayed by a couple of weeks.

Sunday, October 14, 2012

Edward Griffin: 'The Fed's sole purpose: keeping the banks afloat'



G. Edward Griffith, in an address October 10, 2012, from the Casey/Sprott fall summit and posted by Casey Research:

Is the Federal Reserve really doing such a bad job… or does it actually do exactly what it's supposed to do, but the average American is in the dark about what that is?

In this explosive video, Casey Summit speaker G. Edward Griffin, author of The Creature from Jekyll Island, talks about the Fed's real role in the US economy and why – contrary to common belief – it is not this banking cartel's mission to act in the best interest of the American public.

Read the full text here.

Tuesday, October 2, 2012

Sam Zell: America Needs Presidential Leadership, Not Class-Warfare, and a Consensus in Congress, Not One-Party Imposed Laws Like Obamacare


Sam Zell, chairman of Equity Group Investments, on CNBC's Squawk Box
October 2, 2012
First Segment



Sam Zell,
October 2, 2012
Second Segment



Sam Zell
October 2, 2012
Third Segment

Transcript:

First Segment:

for the next two hours we are joined by one of the top real estate investors in the world. we are lucky enough to have sam zell, the chairman and co-founder of equity group investments here on set. thank you for coming in today.

my pleasure, it's fun.

nobody knows real estate like you do. we've been watching a lot of different things play out in this space. you were talking with joe off camera about qe3 and what you think about the fed's latest move. how does that shake things up in the real estate world? what does it mean for investing on the commercial and residential side?

the best answer i'd give you is that we were beginning to see the excess flow of capital, we're seeing too much capital chasing too few opportunities and consequently i think number one the effect of qe3 is nothing more than pushing up the stock market and yet the stock market is being pushed up at record levels of limited trading. we have low volumes and the market goes up, which is manipulation but it's a function of the fact, what's anybody going to do with money and nobody has any confidence in the future, so you limit your money to liquid. procter & gamble, anything that has a dividend is basically jumped for because there are no other alternatives. look at your capital numbers last week. nobody wants to make commitments beyond tomorrow. we run a company that does a lot of corporate enterprise installations and one of their triggers is when the enterprise projects start getting delayed, we're heading for a recession, and that's exactly what you're looking at right now. you're looking at capital expenditures across the board being deferred and being deferred for a very good reason. they have no confidence. there's nothing that's going on now, qe3 or nlrb, that ain't building confidence.

do the have any certainty when election comes?

i think the answer is the certainty of the election is that it will be over. which ever guy wins is going to have to do an enormous amount of stuff very immediately and very hard and based op. all of the other stuff we're looking at it's hard not to assume we're on the cusp of going back in a recession. that's frightening. well it's, the word frightening is too strong. the reality is that business is all about cycles. we did through positive and negative cycles and the opportunity for us is to take advantage of a positive cycles, so mitigate the negative cycles. what we've just come through is four years of a positive cycle that has been limited dramatically by political action. that's scary and that's not what's supposed to happen. we didn't get the bounce back that we were -- well, we created so many headwinds. we created so many issues and the environmental protection agency and you'd think on what it does t isn't part of america's education. nobody, no president, not me, not any other president could have done any better over the last four years, given what he was handed in this, when you heard bill clinton say that, bill clinton has not said that before. i could have done better. you could have done better. i think anybody who wasn't ideologically driven could have done better.

what would you have done? sorry? the meaningful steps. what wouldn't you have done?

we need jobs so therefore -- and we need exports so therefore the first thing you do is have the nlrb attack the number one exporter in the country on really preposterous grounds, then you in effect start yelling at business and threatening business and then you get on the tv and talk about las vegas and all of a sudden the hotel business dies. i mean, the answer is that we need leadership, not criticism. we need encouragement not discouragement and until that scenario changes i think the united states is quote/unquote, i hate to use this word, in a malaise. is that a function of new laws and legislation or a function of rhetoric? first of all it's both, okay, in other words, we hope that it's new laws. the reality is, it isn't new laws. it's using the executive branch to legislate by fear or by threat. you don't need a law. in effect the epa is doing stuff all over the place. the nlra is doing stuff that's not sanctioned by any law. it's a political decision and it's extraordinarily negative to our country and our economy. the journal did you read the lead editorial today how razor thin the obama care vote really was. we know scott brown they had to do reconciliation after he won. gym webb fairly won, al franken sort of harvested the votes to beat norm coleman. those made a difference. evan bayh and jim weber saying we wish we hadn't taken 20% of the economy with no republican votes and legislated the most unpopular bill in history that's still unpopular and really poisoned the whole political atmosphere, at the same time you weren't trying to add jobs. it was almost an impediment to adding jobs. using reconciliation process on prapts the most important piece of legislation in the last 20 years, it is basically contrary to what america was built on, america was built on consensus. america was built on getting people on board, and legislating accordingly, not in effect using a mickey mouse process to pass a staggering bill that nobody who voted for it had ever read. is this the way you run a country?

i guess chuck, our friend, pushed jim webb on, wish he hasn't voted for it. no, but even getting him to admit and evan bayh. he said he wouldn't? he didn't say he wouldn't, they both have great regrets about the way it was handled and that's what got me about, and i think a lot of -- the country just listening to bill clinton and nodding. you could see the approval ratings go up and that maybe we're not such, maybe he couldn't have done anything and all of a sudden one speech from clinton suddenly we're not at 8.1% unemployment for 43 months?

come on. the reality is that bill clinton was a politician. what we need in this country is a politician. hard as it is to say that. somebody to work with both sides. in effect who says my objective is this. now who do i have to corral to get from here to there. that's called leadership we know the stimulus bill is just sent down to nancy pelosi and she wrote it. president had no input. dodd-frank same thing, obama care similar. there's this cadre of people writing the laws of our country without input from at least half the country. what's the most important thing you think needs to be tackled head on. you think the fiscal cliff is the first issue? there are a multiple of issues that have to be acted on and obviously the fiscal cliff is a very important one. the trouble is the fiscal cliff is probably too easy to solve and kick down the road, and so therefore i doubt we would be in the fiscal cliff. i'm not sure, to be honest with you, that a fiscal cliff falling off the edge is not exactly what america needs.

is this a wake-up call do you think at this point?

it's a pretty severe wake-up call to get. you're describing a wake-up call to rip van winkle. how many years have we been kicking the can down the road. that's a wake-up call for rip van winkle, somebody who has been sleeping for a multitude of years.

you're suggesting play with fire a little bit?

i'm suggesting that i'm interested in solving the problem and have you ever solved a problem without playing with fire?

have you ever solved a problem without going to the edge? have you ever solved a problem with fear and uncertainty?

i certainly have. i do that every day. that's called taking risks. you assess risk and reward. that's how our system is predicated on, that's what built america and we have to look at every option with that in mind. we've tried everything under the sun and every solution has kept kicking the can down the road. erskine-bowles, it's inconceivable that wasn't endorsed by the president who in fact created the entity in the first place. so people keep playing games but the reality is time is running out. and if kicking the can down the road doesn't solve the problem, maybe you've got to do something else, and maybe the only way you can convince the american people that we really have a problem is to create one. we're going to talk more about this in a moment. we did have some people who were here earlier this week with some thoughts on simpson-bowles if there's a way to bring it back.

would you be in favor of that in.

i think that's too broad a question. there are obvious ents of erskine-bowles that are terrific and basically represent compromise, to say the whole enchilada is -- that's the problem if you pick it apart bit by bit what you like and what you don't. go back to our friend bill clinton, what was he so good at? getting both sides together. he got his rear end handed to him in the election. what did he do? he responded. what did president obama do? he went further to the left. so are you listening to me, american people, or are you ideologically driven, so that you in effect hear nothing. that's the $64 question or maybe $64 billion question. brilliant. we're going to talk more about this with sam zell, our guest for the rest of the program.

Monday, October 1, 2012

Fed's Evans: QE III and Fed's Monetary Policy Easing Will Continue Until Unemployment Falls Below 7%



CNBC's Steve Liesman interviews Chicago Federal Reserve President Charlie Evans
October 1, 2012

Rough Transcript:

let's get to our newsmaker of the morning. steve liesman joins us from chicago with a very exclusive interview. steve?

yes, thanks very much.

i'm here in chicago with the chicago federal reserve president charlie evans. nice to be here. a year ago you laid out this idea of pegging policy to unemployment, and to inflation, given what the federal reserve just did, do you feel vindicated and the follow-up to that is do you feel satisfied, is it enough?

well, last year i was here and i was talking a lot about our dual mandate responsibilities and i mentioned that with the unemployment rate at that time at 9% that was unacceptably high and we need to focus more on our dual mandate responsibilities. i feel good that our most recent statement and policy is focusing on strongly on the labor market, we're looking for substantial improvement in labor market conditions, the criteria for how long we're going to continue with very accommodative policies and that's a step in the right direction. a step in the right direction but is it enough?

you want the fed to do this for a particular reason, which was you felt it would make policy more effective. they haven't done exactly what you advocated which is to peg numbers to policies, so is it enough?

right to my own prescription has been that we become very explicit about our forward guidance and indicate the funds rate will remain low until at least the unemployment rate goes below 7%.

or if something goes wrong and inflation goes up to a higher tolerant range 3% maybe we should back off. i think that would be a clear guidance on top of our mid 2015 language.

what we're currently embarking upon with increasing our long duration assets on our balance sheet to the tune of $85 billion per month we're looking for substantial improvement in labor market conditions. for me, that seems like we ought to be seeing $200,000 increase in payroll employment per month, maybe a little higher than that for about six months really. we ought to see growth that is above trend which supports that continuing substantial improvement in labor market conditions. if we get those things to move at the same time, we'll see the unemployment rate go down. that would be movements towards having enough accommodation.

you have changed your growth forecast because of the fed's recent policy?

when we submit growth forecasts, we're supposed to do it under the assumption policy and i had been saying the last two years that policy ought to be far more accommodative than our actual actions should be. my most recent forecast has been for quite substantial improvements in the economy, premised on the idea that policy would be accommodative about like what we're seeing, i think we could do a little bit better by being explicit about our forward guidance, but so my forecast has unemployment coming down to the 7% range by the end of 2014 which is another reason why i think we should be accommodative. when do we get that above trend growth? during that period to get the unemployment rate continued to move down we would be seen above trend growth so we would be seeing growth next year, 2.5, 2.75 but after that above 3% substantially. as you might have imagine and read there's a lot of skepticism about the policy and how it's going to work.

can you explain how buying mortgages specifically will lead to lower unemployment?

well, to the extent that we make it more attractive and easier for people to refinance their mortgages it leaves that with more aftertax income to spend so if they need to save more, they can save more quickly. if they would like to spend and buy a durable good they put off buying for the last three years, buy a new car would increase demand. when you increase demand firms find their existing workforce isn't enough to meet demand. businesses are waiting for that demand to increase and they would begin to expand employment, more people come into the labor market they have higher income demand increases. if we could get things going a little bit more we have a lot of accommodation in place that can be more effective once mortgages are refinanced. interest rates were already so low. it seems like by the way that when it comes to home purchases, refinance something a different story but for home purchases there seems little sensitivity to the change of rates to actual home purchases.

why would even lower rates prompt people who essentially an american public trying to delever, why would they want to take more debt at lower rates?

financial conditions are not as accommodative as you're suggesting, they're pretty accommodating and every time we start talking about we might be concerned about inflation, we might have to increase the funds rate sooner than mid 2015, that imparts more restrict i haveness than is our intention with our policy. i think to the extent you get more people refinancing and having the opportunity to the extent that small business people find the environment more attractive to borrow. banks are looking for good quality creditor -- credits in order to make these loans to the extent we start to improve things, they'll be able to do that and things wil really start to burst forward i believe. in jeff lacquer's dissent he said further quantitative ease something unlikely to improve growth and likely to create inflation. i don't think we've seen inflationary concerns. our inflation outlook is for less than 2%. 2% is our long run observe jikt objective for inflation. i don't think we've done a good enough job describing ou attitudes. i don't see the inflationary pressures. the kind of concerns i hear from a lot of people are premised on the idea the natural rate of unemployment is substantially higher than what we really think about the current rate. if you believe that, you would believe inflation was going to take off and if you don't think inflation is going to take off now, instead well, i think this is going to depend on how things play out but eventually people will find inflation higher it's that inbetween period, i've never heard a good description of that describes how we get from our current period to higher inflation. i think the way we get to a point like that is you get the economy to grow, banks start lending and more money in circulation in a productive fashion. price pressures and interest rates would go up, that would be a healthy thing in terms of