Jim Kee, chief economist for South Texas Money Management, on the Global Economy and Inflation

Before we go to the opening Belgian I have a text questions somebody was looking for where you can buy that Scott. Brown option 39 cent in the right direction now and earlier yes that's the the website yeah you go to the and I'm not. Testifying to its legality -- might -- I'm not sure I'm not gonna say that. But it's in trade dot com and then you have to go to political races you have to look for a little bit but if you go to new political races you can wager on any number you can wager on congressional races -- can wager on political races. They want in there that says. We you know would you like to place a wager that Joseph Biden is going to be our next priority -- -- that I wouldn't I wouldn't want a place that wager that the losing. You know possibility there it's just a cool let's -- because -- it's it shows you where the money is going and I did reflect earlier also. -- it down from he had been like sixty point 362%. Down to 59 point 9% chance of being elected so that number has the trend anyway on the Obama reelection number. Has been on the the opposite direction right opening bell rang at three minutes old the stock or how would do it okay. Are down six points NASDAQ down seven S&P 500 only down to the ten year US treasury at one point 923. 75 cents to one -- for eighteen a barrel. All right. Our next guest is Jim -- and Jim is the chief economist for two south Texas money management Jim welcome to the show -- you don't. Under and they thanks for having me. We appreciate your time Jim. You know -- still seemingly an awful lot of economy that problems in in both Europe and in Asia. As relates to worldwide economy. What evidence do you see that the world economy is improving. Well I mean there's there's two things -- -- to the first because the data is mixed is the question is on balance are things getting better or worse. I think the IMF's recent upgrade. Their forecast for global GDP. It's important just because of the direction of changes positive. And I think that's consistent with a lot of the data in the data providers like these showing that. It whether it's Chinese housing data or it's manufacturing data that looks like it's kind of trough saying it will trough here in the second quarter. And then had -- But I think mostly optimism would come from the fact the -- policy easing pretty much around the globe now. Both fiscal and monetary whether it's India China the emerging economies. Or Europe in the United States. Now what about the add your earnings season it looks like earning season it's been pretty strong but some are of the opinion that stocks again a little expensive do you agree or disagree. Well you know that's always the million dollar question how we start with the forecasters stocks being eight to 9%. Just because I think that's consistent with the risk of holding stocks. And I think that's what the market prices. What we saw it was a big spike in equity risk premium. That peak around November. The end of November and since then they equity risk streams kind of come back down as markets come back up sides say -- come -- Kind of normal -- from that plunged. So I would expect kind of normal year what he had next twelve to 24 months. There's a lot you know. And certainly in policy churning that'll take place over the next few quarters it'll be a bumpy ride but I don't see them -- and and based on whether it's discounted cash flow metric -- earnings Spector sentence him as wobbly over ore undervalued. Okay -- bigger -- stocks are basically trading in the range that they should be. Look at what else about inflation because I read your report you seemed to be of the opinion that inflation is relatively tame but I gotta tell you. From from my checkbook anyway it sure seems like inflation's high look at my gasoline bills my home heating oil bills my grocery bills. It it just seems that everything I spend money on college tuition. Seems to be inflating at a very rapid rate let's put that. Well it's a good question and it contained in most of my career you have really for the last twenty years I can tell you that. I think the the average guy on the street I always think inflation is higher than it is. And you know it does -- -- you know it it kind of ebbs and flows so there's times when it feels stronger terms what it -- weaker static history reasons for that one I think people down play -- facts don't realize the department but doesn't have. You know. And crank oh. -- windows things like that does brake battery you know 4000 miles. Substitution -- people aren't really cognizant of the fact that -- when the prices have been made by rises they can -- which it is some cheaper things they do that automatically. And I think that it's downplayed in the indices and also people's minds. And also. The in general. There are a lot of things that we buy these prices absolutely -- I mean I can buy things. For the same oh lot of manufactured did -- technology. The ally and I think people have kind of downplayed -- -- they tended to really. Partners say they can't lock in the prices of things imprisonment and the kind of overlook the prices things sort of followed. And the changes in quality as well. But if you look at the core inflation rate of the last fifteen years has basically come down in -- Kind of a control range -- 2% plus or minus you know one to 2%. Are you surprised given the economic policy in this fed policy that did that we have such low lows of inflation. Well I. I'm not because of a game changer on the part of the Fed in 2008. The Fed at -- received permission to pay interest on reserves held at the fat. On the excess reserves of the banking system. That gives -- more control. Over those reserves in the course inflation happens when you create excess reserves by purchasing securities. And then does start it will no doubt that through the banking system as the economy expands. And that inflation happens when the Fed loses control. Over those excess reserves but I think they've got more control with that ability to pay interest on it. So -- that was kind of a game changer. It's it's inflation really. Pretty deep subject that I overall I think if you just look at what's happened. The Fed has been able to maintain much more controlled a lot of people black people we're expecting double digit by now we. Certainly not fair no I beat the bigger. The bigger fear was disinflation turning into deep fallacious that's what Bernanke was concerned about the last three years and I carry -- you know I've debt -- at pictures saying our good sign. After the Fed's been trying to avoid deflation for three years. The bad side would be if inflation continues to take -- that means that something's seriously broken. Yeah and I guess the biggest probably still face right now locally here is housing and unemployment would you agree. Yes. And I think you know housing. Housing and -- typically lead expansions post world war two and this expansion is unique in the boat and on the back at that one it means department and drag it anymore to looks like they're both bottoming is well. That's a tough call to -- that the indications are that that's -- thing and I think that's probably one of the better signs along with increased. I credit availability and landings since the summer. Right -- Jim thank you very much for time appreciate it. We're sure as Jim -- chief economist for south Texas money management joining us today on the financial exchange.