Latest / Best of Business / Sam Dickie: Fisher Funds expert ahead of Kevin Warsh's confirmation hearing next week

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Sam Dickie: Fisher Funds expert ahead of Kevin Warsh's confirmation hearing next week · Best of Business

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  Speaker 1: You're listening to a podcast from News Talk sed B.
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  Speaker 1: Follow this and our Wide Ranger podcasts now on iHeartRadio.
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  Speaker 2: The most powerful central banker on Earth is about to
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  Speaker 2: change Kevin Walsh's confirmation hearing his next Wednesday. This matter
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  Speaker 2: is obviously for the interest rates around the world. And
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  Speaker 2: Sam Dickey from Fisher Funds is with us. Now, Hi, Sam,
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  Speaker 2: Hey you the now. Sam remind us of who Kevin
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  Speaker 2: walshes and why we should care about a US Senate
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  Speaker 2: hearing next week.
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  Speaker 3: Yes, So, next Wednesday, the US Senate grills the man
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  Speaker 3: who will almost certainly become a next chair of the
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  Speaker 3: Federal Reserve. So prediction markets have him as a ninety
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  Speaker 3: five per cent probability he is. He's firty five. He
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  Speaker 3: was the youngest ever FED governor when he was appointed
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  Speaker 3: at thirty five twenty years ago. And interestingly, he was
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  Speaker 3: the Fed's main link to Wall Street during the two
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  Speaker 3: thousand and eight financial crisis, so he actually helped stitch
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  Speaker 3: together the emergency bailout of bear Stearns and AIG. And
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  Speaker 3: we should care because this one person sets the more
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  Speaker 3: than anyone else for global interest rates for the next
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  Speaker 3: four years. So in New Zealand. While shorter term interest
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  Speaker 3: rates to an extent beat to their own drum, medium
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  Speaker 3: and long term rates here are much more highly correlated
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  Speaker 3: with the US rates.
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  Speaker 2: So would you consider him a hawk or a dove?
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  Speaker 2: Is he going to cut rates like Trump wants?
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  Speaker 3: Yes, And again, hawkish means he prefers higher rates to
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  Speaker 3: lower and obviously dubvish as the inverse of that. So
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  Speaker 3: this is kind of the paradox of the appointment. Is
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  Speaker 3: Trump is, as we know, spent two years publicly demanding
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  Speaker 3: lower rates, and yet he's nominated a man who historically
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  Speaker 3: has been one of the most hawkish voices in central banking.
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  Speaker 3: Now what's he done? Historically he opposed rate cuts during
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  Speaker 3: the two thousand and eight financial crisis, and he actually
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  Speaker 3: resigned from the Feed and Protest in twenty eleven because
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  Speaker 3: he disagreed with the second round of money printing, or
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  Speaker 3: quantitative easy as it's called. And just recently on the
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  Speaker 3: thirtieth of January, when he was nominated by Trump, he
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  Speaker 3: triggered what traders are calling the war shock, which drove
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  Speaker 3: gold and silver prices down sort of ten forty eight hours.
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  Speaker 3: But this is the twist here, that is, he recently
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  Speaker 3: changed his tune. I'm not sure I'd be cynical enough
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  Speaker 3: to say he changed his tune to get the job,
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  Speaker 3: but he now argues that AI driven productivity gains. I mean,
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  Speaker 3: the economy can grow faster without stoking inflation, and therefore
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  Speaker 3: rates can come down.
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  Speaker 2: Okay, now there is a bit of political drama around this.
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  Speaker 2: What's the hold up?
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  Speaker 3: Yes drama. So Republican Senator Tom Tillis is blocking his
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  Speaker 3: own party's nomination. So obviously Trump and the Republicans are
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  Speaker 3: nominating this guy, and he's a Republican. And that's because
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  Speaker 3: the Department of Justice, and you and I have talked
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  Speaker 3: about this before, is criminally investigating the current FED chair
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  Speaker 3: Powe believe it or not, for a building renovation project.
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  Speaker 3: It's obviously a bit of a witch hunt. Now Tillius
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  Speaker 3: actually likes Walsh. He's not blocking him because he doubts
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  Speaker 3: his independence, which is critical for any federal federal bank
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  Speaker 3: governor or chairman. He's blocking all FED nominees, including Wash
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  Speaker 3: until the DOJ drops its criminal investigation. And the argument is, obviously,
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  Speaker 3: if the perception is that the FED chair serves at
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  Speaker 3: the pleasure of the President, the market will not think
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  Speaker 3: the FED is independent and that is key for any
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  Speaker 3: central bank.
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  Speaker 2: What does this all mean for investors then.
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  Speaker 3: Well, I think the big picture, if he stays true
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  Speaker 3: to form, I think we can say the era of
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  Speaker 3: the feed is a giant safety net for markets. And
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  Speaker 3: you and I have spoken about this before. What trade
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  Speaker 3: is called the FED put is possibly over, so he
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  Speaker 3: wants to actively you know, we talked about money printing
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  Speaker 3: before and quantitative easy. What that actually means is the
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  Speaker 3: feeders hoovered up and bought a lot of bonds over
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  Speaker 3: the years to stoke liquidity into the market. So he
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  Speaker 3: wants to actively sell the Fed's two trillion dollars of
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  Speaker 3: mortgage bonds, for example, rather than let them quietly roll off,
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  Speaker 3: which Jerome Powered wanted to do. And that's quite a
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  Speaker 3: fundamental regime shift. But the point is, while that sounds
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  Speaker 3: a bit it's scary because there's no safety net for markets,
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  Speaker 3: it's probably a good thing in the medium to long term,
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  Speaker 3: as this large ess of central banks around the world
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  Speaker 3: has really encouraged people to take on too much debt.
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  Speaker 3: Now that all assumes he doesn't get swayed by politics
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  Speaker 3: and he doesn't change his tune, But I think the
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  Speaker 3: lesson for investors for us all is don't try and
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  Speaker 3: trade the headlines. Don't try and trade the geopolitics, trade
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  Speaker 3: the quality of what you own.
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  Speaker 2: Yeah, that is a good lesson. Hey, thank you, Sam
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  Speaker 2: is always good to talk to you. Sam Dickey Fisher Funds.
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