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What's Up On Wall Street - Bob Pisani, CNBC

Feb 1, 2013|

What's Up On Wall Street - Bob Pisani, CNBC

Transcript - will not be 100% accurate

Well you've seen him for years on CNBC and of course I'm referring to Bob the sunny one of the top reporters and analysts over at CNBC. Bob it's a pleasure to -- thanks for coming on the show. -- -- -- Why did the economy clause so badly in the last quarter and really caught everybody by surprise. Yeah that fourth quarter GDP number yesterday was surprised that it was negative almost everybody is expecting only modestly positive ID if you. What you want you about it or couple things that defense spending was down dramatically. -- huge surprise because a lot of people were absolutely defense spending was gonna drop because of these sequestration issues that are going on they're gonna. Give less money the government going to be spending money on defense as part of the overall sort of well I mean that's going on. There was also a decline in inventories companies were not restocking as much before this before and you could look at that is good news events would -- have to restock. In general the fight about disparaged the Fed doesn't seem very worried about it they had a meeting yesterday in in the first sentence of their meeting statement based said that. The growth and economic activity has applause in recent months but that it -- to say that it was mostly due to weather related disruptions. And transitory factors and that's kind of stats speak for saying. We're not that worried about it it's sort of a reference to hurricane standing impacting things. And general and I think that the Fed is more optimistic that GDP report would indicate -- Would win the the Fed says that they're gonna continue its on to repurchase program. Greatly to what would how much are they buying -- I I thought it was for for long summit that is forty billion turns out it's a larger number. Well it's in the the number originally they were doing forty and about forty billion mortgage backed securities as well and the bottom line is they're going to continue. Purchasing treasuries and mortgage backed securities they need they need it absolutely clear tactic that essentially to place in the statement yesterday. Until they see an improvement in the economy and they've they've. Talk about specific targets as you know recently they adopted very specific targets they were saying they're gonna keep. Moving things along they want receive. Keep interest rates low until employment dropped below six and a half percent world all ways from natural. The only thing I could safer shores it looks right now like these on line programs are gonna continue for the foreseeable future I think very likely at least -- when he thirteenth in the points fourteen. And what is their balance -- now about three trillion dollars worth yeah. The exact number but it's its of its. It has ballooned dramatically. It essentially it started going through the roof in 2000. And eight. And has been going steadily up from there. What I've I've heard from other economists that the the size of their balance sheet let's say gets up to 5000000000006 trillion dollars. That it's gonna make it virtually impossible for them to raise rates maybe because they're gonna have be holding so much of this debt. Well it it's not impossible what may happen is if they too. There are two things that could happen that people work of 1% to -- Q2 loss you know put. They're sitting on the -- -- -- -- -- they have been out. Pumping money into the economy and the way they do that is state by bonds so you could make the bed literally goes out the window back. And they say all right everybody bring us your ball -- will give you money and they -- Money into the economy the Fed has accumulated. On its balance -- an enormous number. Of bonds if the value of those bonds start. Dropping dramatically the Fed will take a loss now ironically in the the weird thing about the spread the Fed could theoretically print money to make up for. The law but the other problem. Here is the delicate issue of inflation -- lay out inflation. It is basically under control and I know people have noted health care it's a bit of problems for inflation education has put. -- just said no it measures certain things inflation is not a major problem. However. We don't know. At what -- Point it will trigger a big increase in place and we don't know at what point keeper of the market is going to say we see inflation. Or the Fed is gonna start raising rates and so this. This thing is like a rubber band that's that's very tightly wound and once it's. -- We don't know how big the vibrations are going to be so the Fed might say what we wanna target -- one half percent inflation fact they have said that threshold and that's when it start getting worried. Break out below that but. They do not know if they can get -- 10% and and stop nobody knows if all right worth to him and instantly goes to three and -- Or 4%. How you would try to control that obviously the way to do -- and the way people done in the past if you raise interest rates even -- that's how they did it in the 1980s when poker game but. It's -- that we are rated area right now but nobody's ever been in what the Federal Reserve terms of the besides. Assets on the balance sheets so. It had. It's a little bit of uncertain territory were. It really is because say that to your point I don't know how they raise rates unless there it. I guess because they print the money they can take -- loss right. Yeah then this is something people have a hard time getting their hands around -- the United States and in this has been true for decades. Occurrence at the United States is backed by the full faith and credit of the United States and nothing else out many many years ago there were -- standards that existed. And the United States to a certain extent was backed. Like quantities of gold as -- other. Government to currencies around the world that's -- the case basically. The money is backed by. The basic credit of the United States what the government and the people on the taxpayers are actually worse to so. It that reserves -- radically and in fact and simply print money and the problem of course is that by doing this. You create massive increases in the money supply and historically that has been inflationary. This not happening right now. But people are expecting it to happen at some point we don't know when. By the way that people ask why are we see a lot of increase what why isn't the economy growing bullets start but ultimately -- It has to do the velocity of money people got to pick Dick get the economy going people can't just sit on a bunch is that money on the sidelines they got all the money in money market accounts. Group corporate America has. Billions of dollars. Sitting in their coffers they're not spending the velocity of money is not agreed that people have to spend money and money around and spin it around that not have. Happening and there's a number of other reasons why that's that's not happening. It will Bob I appreciate your time thanks for joining us our very pleasure as Bob Pisani you weighing in on what's going on with our economy and it isn't. That's why growth is so slow. We did learn there here's something -- very important alert. There is 85 billion dollars a month. The Fed buying. Treasuries and mortgage backed securities. That is resulting in artificially. Low interest rates on mortgages car loans and other types of consumer debt. And for instance on -- -- rate here you can borrow money on a fifteen year fixed rate mortgage at two point 99% why don't I bring this up. Because it's artificially low the rate is lower. By about one and a quarter to one and three quarters percent that it would be if the -- was not artificially. Depressing these mortgage rates so think about right now whatever your mortgage rate -- here's what I would suggest you do. If you -- fact. Have a mortgage rate. Greater than two point 99%. You can get a fifteen year fixed rate mortgage firm Ross mortgaged at exactly that rate two point 99 and you'll be debt free. In a mere. Fifteen years here's the number to call if you have a mortgage only call if your mortgage is higher than 3%. 888986. 0060. That's Ross mortgage they will make available to you a fifteen year fixed rate mortgage at. 3% 8889860060. The good news is. They have loan officers standing by right now. So you can call that number and say you're sitting in a 430 year four and a half percent we can refinance into a fifteen year your payments -- and cooperate much and to be debt free in fifteen years and you lower your rate by appoint half. -- -- now. Fifteen years at 2998889860060.