YouSaid · the spoken record

Professor Jeremy Siegel

lines on the record: 48
first: 2023-09-12
most recent: 2023-09-12
sittings or episodes: 1
sources: podcast

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“CMBS office loans that expired, that matured in the most recent month, only 16% of them actually were paid off. So some percentage of them were modified and extended and some percentage of them entered maturity default. So yeah, it's not looking great. And does JPMorgan own this? Does Bank of America own this? Yes, but it's only commercial real estate is a small, small fraction of the loans on most big banks. I think on most large G-SIDs like globally systemically important banks or whatever, I think Walt Fargo has some commercial real estate loans, but a lot of these loans are, if they are owned by banks, are owned by regional banks, so not the biggest banks. Banks such as, I mean, I'm not going to even name them, but banks that are probably the 11th largest through the 50th largest, not like 1 through 10”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Where they still are paying the interest payments, but they've just extended the duration of when the actual loan payment is due. And yeah, that's pretty worrisome. And actually, I have it on good authority that the date, I don't know if this is public yet, but the data for August, August or July, but the most recent month where the data is available for not the prepayment rate, the actual payment rate is 16%. So of the”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yes, so this is a highly specific part of the commercial real estate market. So I don't want to say this is all commercial real estate by any market. It's probably like one or two percent, but it's office loans that are made in CMBS deals. So not insurance companies, not the banks, just CMBS deals. And yes, for the month of June, 70% of the office loans entered maturity default, which means they were supposed to pay back their money and they didn't. And if you or I do that, or if most people do that in a commercial transaction, I mean, we get paid charged a huge fee or interest rates go up. I mean, that's what happens with credit cards. But I mean, I think in commercial real estate, you borrow, if you owe $100,000, you're in trouble, if you borrow $100 million, the bank's in trouble, you know. And I think the bank, they do modify and extend where they just kind of say, I mean, it's called extend and pretend, oh, we'll extend the duration longer. So that's what's called the maturity default.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“As interest rates rise. However, I've asked commercial real estate people about how common is it for developers and people who own equity in commercial buildings to hedge interest rate risks. And I'm not getting a lot. I'm not, you know, I mean, David Basescu say, I don't know.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And the returns that they could expect, oh, we're getting a 7% cash flow yield, and then we're paying 2% on interest. Now they're paying 5.5% extension. And they use, unlike residential mortgage borrowers to buy a home for 30 years, in the US, most of that is fixed long-term 30-year debt for commercial real estate. A lot of it is floating rates, so they have a five-year, five-year where you have a five-year fixed payment and then a five-year floating rate. So they are on the hook for as interest rate rise. Their interest rate expense goes up. And if you look at some of some office ETFs, office real estate investment trusts like Ronado or SLG, they've actually hedged a fair amount of that. I'm not going to give numbers on it, but a lot of that is hedged. So when I was, you know, worried about it and I looked into it, I said, oh my God, that's great that they've hedged because they hurt.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Interest rates are at 5.5%, you would expect the value of that property to go down so that the expected return would go up. If you're buying now. Correct. Because who would invest in a property with a lower yield than a risk for U.S. treasury? So would go the thinking. And then also with commercial real estate, so much of it is using borrowed money, where people have equity in the deal, their own money or investors' money, but then they borrow money from a bank. banks have a lot of commercial real estate loans and real estate loans are really three i mean they're more of like three main lenders to commercial real estate the commercial cmbs commercial mortgage backed security market insurance companies and then banks as well as private debt funds and sort of private equity that kind of stuff it's it's all it's all roped in there together so i think you have that fundamental issue of borrowing costs for”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Those mortgages are being paid off and they will be paying off at the highest rate in 50 years. So that is residential real estate loans. Then there's a world of commercial real estate loans, which is for pretty much everything else. So multifamily, which is fancy for apartments. And then there's offices, industrial warehouses, hospitality, so hotels. And commercial real estate is not just one thing. So there is a few issues with commercial real estate. There are the fundamental issues of each asset class. So for example, multifamily, the fundamentals have been exceptionally strong in 2020-2020.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so first of all, anyone who says that this is like 2008, I would say challenge them and tell them this, that in 2008 it was residential mortgages which were packed into the bank balance sheets all around the world, subprime mortgages that went bad. Delinquencies, people not paying their mortgages. Now for residential people living in a house that they own, their families, those mortgages, delinquency rate is at a 50-year low. So residential, as much as banks and people who made mortgages have a problem from the interest rate rising, so that's worth less, households they find.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It is about ranger change, but people can overrate rate of change. And if a seven foot man shrinks by two inches and becomes six foot 10, he's not a short man. And likewise, our credit card delinquencies and all sorts of delinquencies were exceptionally low during 2021 and 2022, and they're rising. They are, quote, normalizing. So they're now at 2019 levels. And yes, if you draw a line on that chart and you just extend it, they might go a little bit higher. They might go a lot higher. I mean, I don't know. But I think that's always just important to remind people that they are normalizing and that delinquencies for credit cards are well below pre-GFC levels and they're at 2019 levels. But yeah, if credit becomes an issue and the unemployment rate ticks higher, then that then the banks were going to have a lot of issues.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And banks now right now are trading at a cheap price to earnings multiple. But for banks that literally means nothing because a bank's earnings, its equity is all based on like hundreds of assumptions about prepayments, about deposit betas and 98 other things. So if one of those assumptions is not true, for example, Silicon Valley Bank, there are assumptions about deposit beta were wrong. And 100% of the market value of that stock is now gone. And it no longer exists. But yeah, so but banks have actually scary kind of banks have had this issue and they've been struggling and their stock prices have been struggling even as credit losses have remained very very low. Yes, auto loan delinquencies and credit card delinquencies have gone up, but again this is a theme that I've been trying to talk about for the past few months is it's about rate of change. No, sorry.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and I'll say this if the economy avoids a recession and we have a soft landing scenario or a no landing scenario, I think banks will do well because yes, if you buy a, if you make a mortgage at 3% or you buy a mortgage-backed security at 3% coupon and then interest rates rise, you're sitting on a huge loss, but by the same token, you're actually making more, if you were to write down that to, oh, it's now 80 cents on the dollar, you're actually net interest margins would go up. So people say, oh, the banks are, quote, they're underwater, they're unrealized. You can take into account their unrealized lost securities. Their equity would be worth less. And it's like, yes, but if they did that, their net interest margins would be higher. So it's a two-sided coin. And I think the real disaster scenario for banks is if credit losses increase because so far that has been avoided.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We're not trying to do that in any way, either of us. But there is this general sense that the banks aren't paying what they should be. And so people need to look for those options. And it's just a tricky dynamic. I don't think anybody thinks their deposits aren't safe. I think it's a question for shareholders in these banks, what is the profit stream going to be? That's my view. Yeah.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Sorry, Jeremy. There was one time during probably March or April of 2023, and I posted a factual chart saying that I think Bank of America had over $100 billion of unrealized losses for its health maturity securities. I mean, that was a fact. It's on their annual report. And someone in the Twitter commented and said, Jack, how dare you? You're trying to start a bank run on the Bank of America. I'm like, are you kidding me? Do you actually think that I'm going to start a bank run on one of the world's largest banks? Like you are You're so out of line.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, and either the non interest bearing deposits leave, and they are leaving, it's just a question of the rate at which they leave, or they turn into interest-bearing deposits and they have to be paid on them. So it's not a great situation. And banks, or that impacts banks' capital because if their equity is worth less, they can be they can't be as levered.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There are vehicles, and clearly the trillion dollars that went into money market funds are people getting smarter with their cash. But I remember going to the investor relations deck of one of these large, small regional banks. And basically they were advertising on page one of their investor deck how we have the lowest cost of deposits in the industry, basically saying our clients are dumb. They don't care about getting paid interest on their checking because they need the checking account. It's like, well, OK. But this is there's new options like I don't think it's sustainable. Like I don't think that's sustainable.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They got greedy. They got greedy that they didn't have to pass along the interest income. And largely when you look at all the big banks today, they haven't passed along the interest. Now, maybe, yes, can people buy CDs? Do they offer money market funds?”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“It's not a good situation. I would also say that I have done a little bit of digging into how banks hedge. And I think it's kind of misunderstood. A lot of people think that banks should hedge their fixed income security. So if they make a mortgage, they'll hedge that interest rate risk. Or if they'll buy mortgage-backed security, they'll hedge that interest rate risk because as interest rates rise, they'll decline. I actually just pick a bank and look at it. I want to predict if you, you know, someone who does this at home, the bank either does not have interest rate hedges. If they're a regional bank or a less sophisticated bank, or if they do hedge that they are hedge the other way, they hedge that interest rates would decline, not that they would go up because they had assumptions about how much they could make new loans at higher yields.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“And what they have to pay depositors, which is a huge problem. And the Federal Reserve, they do that, but Federal Reserve prints money. So it's not an issue for them. Because they're paying 5.5% or around there on reverse repo and excess reserves. And they're earning the very low coupons of the treasuries and mortgage-backed securities that they bought in 2020 and 2021. And I think that is a form of money printing that is like the Fed quote losing money is the private private sector gaining money. So I think that is stimulative. So lesson number one is tons of fixed rate securities that the rate at which they reprice.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“My key takeaways, so I've learned a fair amount about the banking system since February. I've kind of did a crash course, which I think if you want to cover something, you got to put in the work. So I think banks are a lot less asset sensitive than I thought they were. I took the bank's rising rates are good for banks kind of at face value. So digging into the banking sector, yet they have a lot of fixed low coupon, long-duration, fixed income assets, and that is a problem. Let's say the Fed Reserve keeps interest at 5.5% and banks are going to have to pay, they're going to pay less than that, but 4%. I mean, there's a chance that the mortgages that they have in the book will literally be paying less.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I think I know why we have a different view. So I have no doubt that you're right on the macro. And I think you're looking at the amount of total dollars worth of buybacks. And most of those are a handful of stocks that are exceptional cash flow machines like Apple, for example. I am looking anecdotally at individual companies. And I'm just like, if I've looked at a company and I'm like, oh, wow, they bought their stock at the top. But yeah, but anyway, the point about mortgages is everyone wants a mortgage when it's 3% and everyone wants to borrow from a mortgage when it's a 3% and no one wants to refinance when they're at 7%. But banks, what banks want is not with the opposite of what they get. You know what I mean?”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“They buy at high levels, and people are saying NVIDIA is an example of that right now. But on balance, when I look at Majority, I'll call it 75% of the gross buyback. The stocks are like real value stocks.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Higher rates and their deposit costs are going up faster than their loan yields are going up as well. And that also has to do with their loans are not repricing a lot because surprise, surprise, if you gave everyone a 3% mortgage when mortgages go to 7%, people aren't going to pay that off. So there's a fancy economic term for this. I don't know if it's adverse selection, but it's basically the phenomenon that's similar of when everyone buys at the top or and everyone sells at the bottom like a company. Companies tend to buy their own stock do stock buybacks, which can be accretive to shareholders if it's like they're buying it cheap, but they tend to do it when the stock's high. And then when the company goes into trouble, they're like, we're pausing our stock buyback. And the same thing.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yes. It is not merely, oh, the reason my bank is giving me 0% and not 5% is because the bank is greedy. Obviously, banks are greedy, but it's also that they literally cannot because they made mortgages at 3%. So their net interest margins would be either zero or negative or so small that their operating cost, they would be losing a lot of money. So I think you're absolutely right. I think net interest margins will continue to compress with a handful of examples. So not going to obviously name any individual stocks. But if people can find financial companies that actually are like banks, but whether they're called a bank or not, but they have access to non-interest bearing deposits and they can invest that in loans or securities yielding 5%, those companies actually do benefit from rising rates. But yeah, most banks are their deposits are leaving them or they have to retain them with much.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“There's a short term rates and the long term rates. What does it do for profitability? And I think Schwab is an interesting example company because for a while when rates went down to zero and their money market rates were zero, the view was their income was collapsing because they made so much money off of sort of this interest rate spread in things like their money market type strategy. Now what was interesting. I still think there's a lot of pressure on these banks. And actually, I tweeted out this today, that the 5% bank you can be earning in treasuries and banks are not paying it. I'm not sure all the pain in the banks has fully been felt. And partly you see it where startups can actually disrupt because if you have all these customers, the banks can't afford to pay everybody 5%. They'd be a lot of trouble, a lot of pain. Yes.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Fascinating a lot to drill into this, particularly that credit card, you're starting to see some credit card delinquencies pick up. But it's one of those good narratives say, hey, people are taking way much less credit cards relative to their disposable income than they used to. I love that kind of long-term view that you put out on Twitter just a few days ago. But this thing about the banks is also super fascinating. There always was this statement about these higher rates benefiting the banks. with these rising rates”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A lot of their loan book was mortgages that they made at 2.8% or 3% or 4%. Or if they didn't make the mortgages themselves, they bought it in agency mortgage-backed securities, Silicon Valley Bank had over $100 billion worth of agency mortgage-backed securities whose value collapsed, again, a decline of 20%. For fixed income, that is a collapse for stocks. It's not. So I think a lot of banks are, a lot of the lenders have felt the”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Very levered, and the U.S. corporate sector is quite levered, but they termed out the debt. The duration of the debt is quite large. So the narrative of higher interest rates will hurt borrowers. It's actually incomplete. Higher interest rates imposes financial pain on someone. If the debt is short-term, it imposes it on the borrowers mostly. But if it's long-term debt, if I lend you money for a thousand years and then interest rates go up, you're going to have 20 generations of Schwarzes before that pain is felt. And I'm totally, totally screwed. So I think a lot of the banks, people, the line that is so commas, rising interest rates are good for banks because they can make loans at higher yields. And yes, there is truth to that. But a lot of banks who we thought of as very asset sensitive that would just be printing money when interest rates are high and deposit costs would stay low. It turns out a lot of their books.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Consumer debt is actually quite low. U.S. government exceptionally indebted US corporate sector very indebted, but actually consumer debt is not huge actually. I posted about this recently, that revolving credit obviously it always goes up over time because the economy grows and there's inflation, but as the percentage of disposable income, personal disposable income, or just personal income, it actually is lower than it was in the year 2000 from like 1950 to 2000. It was just a huge steady increase in personal revolving credit indebtedness, but it peaked in 2000 and it flatlined to 2010 and from 2010 to 2019, it steadily declined, and then it collapsed because there was a lot of money printing and people really needed the credit, I guess. And it is rising. Below 2,000. So I think the US consumer is not very...”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Higher rate burdens. So I think without a doubt, the one thing I can say with certainty is that the dominant or popular view 12 to 18 months ago that high real interest rates would crush the economy with rapidity has not occurred and that the interest rate, the ability of the private sector to withstand higher interest rates is higher than it was expected. you know, it's very hard to predict things with accuracy, but what is extraordinarily easy is to always justify things with the benefit of hindsight. So with the benefit of hindsight, now that we know that, why has that occurred? Because so many people locked in low interest rate mortgages because a lot of”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Of cash, you're putting it in treasuries. Government's paying out all this extra interest income, the household's collecting it. The question is, is anybody facing the burden of these higher rates? Torsten did a piece looking at the net payments people are making, and he shows the net interest payments are rising. So this is kind of like credit card debt rising. They did a version with rental net rental income also rising, maybe not to the sort of highs going all the way back, but it sort of does show it rising his first version of the chart did include housing payments when he showed that the household's payments as percent of interest income was high since 1959. That didn't include housing payments. But what even when you included housing payments is not the highest since 1959, but the trend is rising. Did you see anybody facing these?”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“So, in terms of the market bottoming or going down, anticipating the recession, there is this question of should the NBR have called last year a recession. We had two quarters of negative GDP growth. Was that the recession and the markets were trading down? Or is these, why haven't these higher rates hurt more is always the really big question? Even on Twitter, we're talking today, there's, you know, the Apollo economist Torsten Slock put out this piece on the amount of interest payments versus interest collected. And there's some people, even the Wall Street Journal did a story that showed how few people have been susceptible to these higher rates and saying, hey, people locked in these low mortgages. They're collecting all this higher interest income. On balance, are households better off or worse off? And there's a group of people who are definitely better off. I mean, if you had a mortgage and refinanced and you had a lot of...”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Less of we're firing people versus, hey, people were on the sidelines and coming back. So guys, the numerator isn't going down. It's the denominator's going up. Yeah. Yeah. And I think I posted about that on Twitter. When you post about something on Twitter and you know it might imply a certain point of view, there's always a thought in the back of your head of, oh, well, there's this nuance that unfortunately doesn't fit in the 200 characters or whatever. And that was, yeah, absolutely right. The labor force participation picked up as well. So it's the denominator getting bigger, not the numerator going down. Yeah.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Year, but I don't know. I mean, this data, a 0.3% increase in the unemployment rate, I just ran some numbers going back to 1948. And the 12 month forward increase in the unemployment rate was, I think, 92 basis points after every 30 basis point increase. I think the unemployment rate will go higher. I mean, at the Federal Reserve, we'll welcome that. I mean, if it goes to 4.2% and peaks or 4.5%, and that is enough to tame inflation, I think the Federal Reserve and many people will be happy. But I think there is a worry that it kicks up to a higher level. Although on a secular level, there is a shortage of workers, and that will be true on a secular level, even if we're in a cyclical slowdown. It's interesting to see if you can condition that little study on with the professor was saying of how much is actually people letting people go versus people coming back into the labor force. So that's sort of an interesting question because...”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Okay, this economy can stand higher real rates than I thought. I'm not as scared of the real rates as I was earlier when the money supply was collapsing and we had that tremendous rise. Doesn't mean I welcome them. I don't think the Fed should raise anymore. It probably shouldn't have even done the last quarter. But I think all the data, commodity prices, home prices, initial jobless claims, state of labor market tell you that the economy is holding out. And yes, rise in delinquency rate. Yes, there's some student loan repayments on the future. There are bumps there in the road. That's why the Fed should absolutely stay packed. But at this point, I don't think that's going to derail positive GDP. Outlook for not only this third quarter but also the fourth quarter.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Oh boy I Believe it or not, I think we could have another 5%, maybe even 10% rise on the mark, maybe not quite 10, but another 5% over a four-month period, that's pretty good. That's quite a nice annualized rate given already. We've had a pretty good year. Anything geopolitically can happen of the strangest political and presidential races, I think, in our history, what developments might occur there. Maybe that'll have to wait till 2024. Everyone will anticipate it. But, you know, in this particular point, when I, a couple months ago shifted my opinion saying,”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“No, you're antizy. You got both of them. Thanks, Professor. Jeremy? And so you just sort of wrap up your views. We wrap up the summer as you think about some of your seasonality. September has been a week, month of the year from some of all your work in stocks for long run. As you think through the year end and how far we've come, what's your base case for the rest of the year here?”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Have the payroll growth in terms of just numbers than we did in 2022. So this is the type of thing that the Fed really wanted to do. It's doing it without a real sacrifice in output. It has raised unemployment, but it's raised it because at this point, not because of layoffs, but because we are enticing more people into the job run. Now, we're enticing more people into the job market, maybe because they're running out of COVID excess savings. There's been a lot of talk about that. Whatever the reason people entering the job market, they don't find jobs immediately, they will find them, is a very positive development for the economy. And I think a positive development. For corporate profits.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“A federal welcome, it's saying, yeah, this is actually the looser labor market that we are seeking, and thank goodness it isn't really because of the jump in productivity affecting the real GDP. So I think from the Fed's point of view, this is a good result, loosening of this labor market. Again, we're not getting loosening of output, that 110,000 revision downward, yeah, it was rather big. I understand I haven't gone into all the details that some of it was again the strike, the writer's strike plus the yellow trucking strike, not strike collapse until these truckers are rehired and they will be, and that has caused some of that downward revision. So if you take a long-term look, we are running at less, if I do the math right, at less the...”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Increase at all your concerns about a recession. Yeah, these are good questions and people say when there's five tenths of a percentage we haven't had, that raises the probability recession. It was a lot of, again, people looking for work, not immediately finding it because we did, it wasn't claused by certain layouts, a positive net payroll. And we had one tick up on how it worked. So people are coming into the labor force. I really look at on the bright side. I mean, first of all, it does have political significance too because, you know, I mean, the Republicans make a lot of deal. This is the highest one and a half years on the unemployment rate, biographics is what the Democrats are relying on. Is it really doing the job? Certainly, again, you're going to see it. But I think what basically...”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“In the 10 year rate when the Bonahogers said, hey, there is a strong economy ahead. So, yeah, I'm surprised that Kate Schuer being so strong, continuing to rise. Demand for housing is, listen, housing and stocks are the best long-term hedges against inflation. And that's what people want.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“rise in M2 since it hit its bottom m2 is increasing at around a 3% rate i would like to see a little bit stronger but again we have movement away from those deposits because you know many banks are not paying competitive rates and people are moving into alternatives so i i would say um this this report is good for profits i looked a few days ago at the 2024 s p estimate of profits and actually it is higher now than it was a month ago and that's a rare situation because um normally as we know as time goes on the farther out estimates go down that means stronger economy better profits good view towards productivity you know equities can hold in here the only reason we didn't have a big rise today of course i think was that that rise”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I'm surprised about that in case showers just below the all-time high, he has two indices and it's just below that all-time high. Yeah, housing market, again, not many transactions, but demand for housing is strong. Let's mention the money supply. Those two things came out on Tuesday. a tiny increase for the month banks are still losing deposits. In fact, since the Feds started raising interest rates, we got a report that almost a trillion dollars of deposits have been lost and almost all of it has gone into money market usual funds, as you would expect and other liquid assets, but it has somewhat negatively impacted them too. But we do have a”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“We also got the K. Schiller housing data this week and your money supply numbers. Kay Schiller went up another nine tenths, but still negative department list data came in negative on the year. Still surprised about this housing resilience.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“I think this confirms the story. Real interest rates are going to stay high for a while. Productivity is the reason. It's non-inflationary. And that non-inflationary number means to me that the likelihood that the Fed will raise in September 20th is now almost nil. And in fact, it puts the November increase in doubt.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The ISM report and the pricing part was 48, which is just about equal prices rising and falling. We've got stability of commodity prices, and yet we got an easing of the labor market. So this is why we had a very strange bond market today. At first, I looked at the number of high-res and said, oh my God, that's low and bonds jump. But then as I look below the data, they say, you know what? This could mean strong regal GDP growth. And the bonds turned around, pressured the high duration assets such as NASDAQ and others, while at the same time, I think we got one of the largest jumps in the Russell 2000 that we've had in quite a mile. So that might be a little bit of rebalancing. We do have August and September.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“The labor market are definitely faded by the data today. In contrast, real data continues to come in strong, not overly strong, but you took a look at Java's claims, again, slightly below expectation. You took a look at the other real data. It's not coming in probably at a 5% GDP in the third quarter, but I could be 2.5 to 3%. So with little inflation, the inflation news began, the wages came in one-tenth below expectation. That was a very favorable sign that we got. However, on the whole, we don't have prices of goods falling much anymore.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Been stuck at a lower level, and that's why we got to jump in the unemployment rate unexpectedly actually to the highest in one and a half years. So there is what's good about this is there's people coming into the labor market, there's slack in the labor market. This is something that the Fed looks at more than anything else, or certainly along with everything else, is it's not tight as a drum anymore. There are people coming in. The demand is down because productivity is up. So a combination of those two things. And then, of course, that corresponded to the Jolts report that came out earlier in the week, again, a big drop in job openings from the peak, I think it was a two-year low. So the fears of two light types.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, absolutely. And I think obviously the Fed and everyone should welcome the data that we saw. Let's start with today's employment report. Certainly the numbers look low on the hiring, especially with 110 revision downward. We read that a lot of that was due to strikes and the closure of the trucking firm. We also had one tick increase in hours. So it wasn't that week, but it definitely confirms the downward trend in the hiring. But the most welcome is that jump in the participation rate are to the pre pandemic levels.”
2023-09-12 · Forward Guidance · Just How Interest Rate Sensitive Is The U.S. Economy? | Jeremy Schwartz & Professor Jeremy Seigel (Jack’s Guest Appearance On Behind The Markets Podcast) · IDENTIFIED FROM THE TRANSCRIPT