tv Wall Street Week FOX Business May 21, 2016 9:30am-10:01am EDT
>> announcer: this show has never been solely about investments. we talk about anything that affects people and their money. the new "wall street week." anthony: welcome to "wall street week." i'm anthony scaramucci. gary: i'm gary kaminsky. we are still digesting the wealth of information from last
week's sky bridge investment conference. anthony: we'll show you a revealing and rare interview with passport capitals joe burbank from the salt conference. you will want to hear what he told us about the market and economy. gary: joining us now is another giant in the hedge fund world. jamie dinan. work capital management. welcome to the show. anthony: do you think this is the fish inning in a washout of the hedge fund industry? >> i know dan. he does have a tendency to be a bit dramatic. though he's probably one of the better writers in the industry. i hope it's not first inning of a 9-inning game.
but the first quarter was difficult for the industry. it's just accumulation, i think of a lot of people liquidating. big firms went to cash in equities and credit. i think a lot of people with the same names. the pfizer deal breaking didn't help the event driven guys. i'm one. we got you are in the that investment as well. but i don't think it's that bad. i have been through a lot of bad periods. i started in this business in the early 80s. 1984, 1991, 1994. 08-09 everyone remembers. it's been difficult. i have listened to stories about the demise of the hedge fund industry many times. it just doesn't happen. funds go in, fund go out. that's true for every asset
class. i view this as we are in a cyclical downdraft. anthony: the pension fund seem to be pulling capital out of the industry. is that cyclical or do you think it's more permanent? >> that's a good question and i don't know the answer. my guess is it's a little bit of both. investors have a natural tendency to focus on really like the last year's performance. >> you mention the pension plan. in 1999, right before the tech bubble, a lot of these managers were saying we are done with active managers, we are going to put all our money in the index funds. and they made a huge asset allegation shift to index fund and the market as a whole had a significant downturn. >> it collapses 50%. gary: the average investor, the
average viewer, they feel it's a difficult time into vest and make money. explain the continues between a cyclical downturn and a secular downturn. how will this get better to generate real returns? >> what i think is first of all, if the industry is contracting there will be fewer players. the washout story that dan is referring to, i think it's excellent to the industry that you will get fewer and smarter players. a lot of people panic because they don't have good risk models or risk systems. cut down on what i call the crowded nature of a lot of investment strategies. all this money flowed in, something like $3 trillion in the industry. that's a lot of money.
we have become the market. and as i look at it, this action, particularly in those overowned hedge fund type things the last year, it reminds me of the kind of action that still takes place in overcrowded shorts. we have seen the overcrowded shorts, they are overvalued. most people have enough sense to stay away from them or make them i would say much smaller positions so you can ride that. i think the good managers in the future will have to couple their own ideas. it will have to be portfolios and to the extent you are in something everybody likes you have to manage that side. gary: that can't and 10% position. another great hedge fund manager stevie cohen said we cannot find enough talented people, a number
of young people came up to me at the salt conference raising their hand saying i'm talented, i want to do that. why is it hard to find the right people to fulfill these roles right now? >> that's not an easy question to answer. there are too many people in the industry. this industry was when i started, i started my firm in 1991. if there was 150 helping fund in the world, that's probably the number. today, 10,000. that's a lot of hedge fund. this became like the restaurants of the new millennial. everybody left wall street used to start restaurants, and now they are saying i'm going to start a hedge fund. most of them didn't know what they were doing. there i a lot of high failure rate. you have a delusion of talent.
steve is right on that. no one has an information advantage. technology transformed this industry. everybody who has a high-speed hookup to these data bases, all the information i have on my bloomberg. now it's just a judgment advantage. you worked hard and made more phone calls. day it's machines reading these document much faster than you do. i think it's a more competitive environment. it's more efficient. and lastly i think as the bar goes higher, you need a higher kill set. 0 years ago you could be an and investor and do well, today you have to be a world class investor to do well. gary: in 1990, we had 100 million in capital in one those 150 hedge fund. we were one of the largest hedge
fund in the entire industry. think how it has changed. >> when i got to $100 it was big news. i'm bullish and the fact that the industry has the talent. it will be beneficial for the survivors. at york we have a lot of size. we have a lot of technology. we can create solutions for client. we have great banking relationships. we won't lose anything other firm have to worry about. i think the talent is there. you work hard, basically the numbers start coming back. 3/. >> announcer: coming up, the real impact a trump presidency
anthony: welcome back to "wall street week" we are joined by york capital's founder jamie dinan. >> one of the more entertaining elections in my lifetime, it might be the most entertaining elect in my lifetime. i think it' an important one. i think would have to say i think warren buffet is probably right, if either hillary clinton or donald trump becomes president it probably won't affect our economy. kennedy anthony: the systems are in pretty good shape. >> 200-plus years. we have had some bad leaders and dysfunctional governments. our government today is reasonably dysfunctional. a lot of checks and balances. our framer sort of got it right.
i'm not particularly worried about the outcome. anthony: how would you rate the health of the u.s. economy? >> we live in new york and i would say the people view the economy depending on how the dow jones trade week to week. but if you look at the numbers, the economy is pretty healthy. facts are sometimes inconvenient. but if you look at the job numbers. it's pretty good. wage increases. if you are the average person, things are getting better. the fed think raising rates. gary: it's an interesting week we just had, the idea that the fed may start to tighten again in june has come back in play. what did you think about the feds raising rates in december and do you think they should continue on this path. >> i'm personally in a big believer we are in a very low
inflation environment for a long time. i think the global economy suffers from a lack of demand. i think they will be with us for five, six, seven years. governments have to start spending. the private sector isn't picking it up. corporates always buy back their stock. ebb says they are getting their epfs up so they can get the bonuses. they don't see the demand. gary: if the fed moves it sounds like you continue to believe they are making a mistake, given where interest rates are and what the economics look like outside the united states. >> if i was a voting member i would say you are better off
waiting until you seat ghost of inflation materialize. there is the ghost deflation out there and that's a lot more scary. you can't have a 1937-1938 relapse taking place in this economy. anthony: where do you think the economies are globally? >> everything is reasonably well priced. there is not a lot of bargains out there. i'm not saying we are in a bubble. gary: what about the structured credit markets? do you like those? >> we at york don't do a lot of structured credit. but i know a little bit by the and i think it's okay. so the market commercial or residential, with corporates, it's okay. it's not going to withstand an
economic tsunami. but i don't see an economic tsunami out there. regardless of whether the fed raises 5 basis points or not. i think the economy is stronger than a lot of people are willing to admit. i don't think normalizing rates to 2 to 3 percentage points makes sense. and this really important. the fed is not looking to raise rates just for the sake of raising rates. janet is very conscious of the inflation issues, what's going on in the world. they are only raising if they have the data that clearly indicates the economy can withstand it. anthony: lots of good points. our thanks to york capital's jamie dinan for joining us today.
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anthony: last week at salt former treasury secretary larry summers made headlines when he told us on this show the united states could be facing a today he kade of slow growth. we asked the shej fund legend if he agrees with secretary summers. >> i totally agree and is there not a lot he can do about it. gary: one of the themes at this year's conference is the central banks around the world have lost control. do you agree with that?
>> they have become proactive so they are trying to exert control. gary: are they reaction air yaiy or are they able to d are they reactionary or still dictating the direction. >> i thought there would be a deflationary collapse and the fed actually flip flopped at a time which rescued the markets temporarily. gary: you had a great year last year figuring out how to plate mark wets this fed movement. >> last year we thought end of qe 13 would show a stronger dollar. the feds moved to be doveish hurt the dollar for a few months. i think the dollar is bottoming and it will hurt liquidity in
commodities. i don't think it will play in the u.s. i think money market accounts philosophically, americans can't get behind them. anthony: the consumer is confused by negative interest rates. >> i think the product of negative rates if they ever did it, they would save even more money. i think the more likely outcome as we do an infrastructure spending program. gary: a new administration putting an infrastructure project forward, how do you strategically get behind it. >> if that happened, it would be good for u.s. growth. it would be domestic growth focused. we would want longer u.s. equities and shorter the rest of the world. issue is what level will the dollar be and will the fed
participate to lower the dollar. that would determine how long i would in the u.s. market. anthony: the market is overvalued. what do you think the catalyst will be to bring the market down. >> one, we enter all of s. recession. we only grew a half percent in the first quarter. the ray consumer and retail stocks are trading, it's getting worse, not better. china, they have to recap their banks. the question is when do they do it? i think they fear donald trump and too big a change for their own global reasons. the third is the risk of donald trump actually winning. it's feared more by foreigners than actual americans. anthony: do you fear it? >> i don't. i think the discounting of a potential trump win is something you need to hedge yourself against. it's been radically changing.
i think there is a good chance he will win. i think if he did, i think he would do the infrastructure spending. i do not think he would be any more hawkish in terms of monetary policy. i think he might replace yellen. but he would want to be as loose as possible. the dream setup for me with the hedge fund is if we do get a china deval, there is a washout. gary: that sounds like a 2008 washout. >> 2017 after this recession there is a big infrastructure program, the fed realizes it and does something to relieve the dollar. gary: the next 12 months the orders of the recession. >> i think they are high. gary: 80%, 70%?
>> i will say two out of three. gary: if you are in retail and aperil and the energy -- apparel and the energy space. you have been in a recession. the fact we base a gdp at a certain level is immaterial for a lot of companies. >> we have been in a profits recession for 18 months. gary: best value in the market right now? >> if you mean something that will go up the next months it's not the best value. the most defensive companies in the market, dividend paying stocks. staples. even gold stocks have become beneficiaries of risk stocks. gary: i'm surprised you don't
think those different paying stocks are so overvalued. qe has forced so many people on to these names and they don't realize what the risk is going to be. >> it's a relative trade and a safety trade. anthony: you were one of the first guys to predict this downward trend and the persistence of it. is there not a lot we can do from a macro economic policy side to something more inflationary. >> it's a business cycle. unfortunately the fed as i understand it, do not actually encounter demographics as a big part of their policy making. the demographics of today's world is a lot different than it was in the last rate cycle in 2004. we are too old with too much debt. technology, the internet is
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lou dobbs and let's begin with a political earthquake. for the first time donald trump has pulled ahead of hillary clinton in the fox news poll. clinton has led trump in the head to head polling ever since he entered the race on june 16th of last year, but now trump tops her in a general election head to head match up. 45 to 42%. a 10 point swing from last month when clinton was ahead of trump by seven points. trump has not only pulled ahead of clinton but has done so with higher favorables and lower negatives than hers. a record 61% of voters