tv Wall Street Week FOX Business July 2, 2016 12:30am-1:01am EDT
have a wonderful fourth of july weekend. good night from new york. ♪ >> this show has never been solely about investments. we've talked about anything that affected people and their money. from fox business headquarters in new york city, the new wall street week. >> welcome to wall street week, the show of record for long-term investing. i'm anthony scaramucci along with gary, what a difference a week makes seven days ago on this show the main discussion the european vote to leave the
european union. the stock market seemed to be on the preface of this. >> quickly realized while the united kingdom did leave the eu,an it did not leave the planet and stocks around the world stage an impressive come back. >> what's the true long-term come back to separate from the eu? today we're joined by john schlifske, john, where are we right now? and do you think that the exit of great britain is a big deal for investors long-term? >> i think it's a harbinger for things to come. so in a way it's going to realign the commerce in europe and things like that. but i don't think it's a big deal in terms of investing right now or changing the way you're approaching the marketplace. it's probably going to slow global growth a little bit, put a little pressure on stocks. but i think it's not going to be a major negative factor on the stock market and we certainly don't view it as something to be afraid of. >> so nothing has changed in your overall asset allocation
plan or the way you're thinking about where you want your clients to be? >> certainly nothing has changed on the -- you know, from a major perspective allocation. i think on the margin, i think we're going to see a little bit slower growth globally, that's better fixed income security. the yield curve is flat, which would argue more global growth. i think on the margin a little bit more fixed income and a little bit less in more dicey equities around the world. but -- >> john, i would say the one that was consensus at the end of this week is that interest rates continue to remain low and probably continue to go lower. even some of the negative rates around the world. that has a huge impact on your business when you joined us last year, we talk about it. a you agree that we're basically now going to trend lower here in the united states and what does that do to your business? >> so we are in a low for long period. that's part of our philosophy. i was in japan in 2009 talking
about to a bunch of life insurance companies there, and it made a dramatic impact on me so we have been able to thrive in this economic environment, so i think we're well positioned. but of the camp that interest rates are going to stay low for a long time. i was meeting with a couple of governors with the federal reserve last week and everybody is talking about 2% growth plus or minus. when you have 2% growth globally, it's hard how to see interest rates go up. >> well, your assumption is in terms of return. you've got this huge portfolio premium that you have to invest in order to run the business. do you now think that from a year ago rates are where they are? your total return is going to be low in your portfolio? >> we think investors have to adjust for lower total returns over the near term. equities are going to be up 7% a year and you're going to get 5 and 6% on bonds are out that window and people have not fully adjusted for that but portfolio returns are not
going to be the way they were. >> 2% growth creates a lot of financial anxiety. you've got low income, low wages, low increases in wages, is there anything that we can do to make the individual investor less financially anxious? >> so there's a lot we can do and that's what our company's all about is figuring that out. we've done some studies and have found that 85% of americans are worried about their financial security, 25% of them worry about it on a day-to-day basis and over half of americans don't even know where to go. and the problem exists because i think historically the markets have done so well. people think all you need to do is put money in your 401(k), it will go up, and you're fine. but invest only approach to financial security is -- isn't enough. and what we're telling people is that you have to integrate your insurance and your investments are on the plan in order to be totally financially secure, and you can't expect the markets to bail you out of bad decisions. >> let's go back to when insurance was a product, because you did talk about that as well.
and i think we got tremendous feedback last year. peek saying i think about stocks, i think about bonds, i think about real estate, i don't think about insurance as an investment. how do you think about insurance as an investment? >> life insurance has several features that augment the portfolio. in some ways it's like your mobile phone. you use your mobile phone now not to make just phone calls. but, first of all, it has cash value that grows on a guaranteed basis each and every year. so that's a huge impact. >> it's tax deferd as well. >> and it's tax deferred as well. year after year, guaranteed. second of all what it does is give you access to liquidity especially in down markets. so if you did need cash over the last few days when the market was down, you could access that without having to sell securities at a loss or things like that. but the biggest thing really i think is that it gives you an ability as you near retirement to almost construct your own defined benefit plan. it gives you the ability to create income for life in a
way that's very safe and secure. and ultimately what it does to a portfolio is it reduces the volatility and increases your overall performance in the long run. >> you think there's a recession on the horizon given everything that's going on? >> we don't think there's a recession. we're modestly optimistic about the economy going forward. as i said i think it's going to be low growth but there's so many good things going on in america right now. you've got the demographics of our country, we've got a young population emerging, in fact, the fun fact i just saw yesterday, five years ago age 50 was the number one age in the united states. now the top five number one ages are under 30. all 20 something-year-olds. so we've got this millennial boomers, millennial generation that's moving into the consuming phase and that's going to help our economy. we're almost energy independent, we're an entrepreneur invaded society, so i think we're in a good position. >> the people like gary that still think they're millennials?
>> welcome back to wall street week. we're talking now with northwestern ceo john schlifske, john moving from the uk to the u.s. we've got really interesting political situation here. your business hates uncertainty. pretty uncertain right now. how do you read things? >> well, you know, from a presidential perspective, i don't think it really matters. with all due respect whether it's trump or hillary, they're only going to be in office for eight years. we invest for 30, on 40, 50 year cycles, so i think it
makes better reality television than it does in terms of what you should do fran investment perspective. i think ultimately it's a great place to invest. so from our perspective it's don't change anything. just stick with what you know. >> john, there's been a number of investors on our show, we've asked the question and they all say the same thing. it doesn't matter who the next president is. here's what the markets look like. do you think we're that disconnected from the political situation and the tax and regulatory potential policies from the future administration inspect. >> no. i don't think we're that disconnected, and i think -- i frankly think whoever gets in is going to have to have a better growth agenda. i think we've had eight years of very anemic growth and starting to show up in sort of personal in the accident and the way people feel about the country, and i think we have to get back on a growth trajectory but ultimately the politicians can only do so much. we have a fairly balanced political scene in washington right now between the democrats and the republicans. so i think it's going to be more of the same sort of just
middle of the road kind of stuff. >> interesting point, though though, -- >> no matter who gets in. >> interesting point, though, he said four years or eight years and we're just beginning this process and you're looking way past that already thinking about what the business will be. when bob joined us about a month ago, he talked about this idea of trying to come up with some way to bring back all the money overseas with a change in the corporate tax policy, corporate tax rate, and it would have even a 1% positive impact to the gdp. does that make sense to you? >> yeah. i think -- i spend a lot of time on capitol hill, i think that both parties are really interested in reforming the corporate tax situation. it's crazy what's going on now. and i do think if they find a way to make it more pro growth, i think that will have a huge positive impact on they . >> so they haven't been able to do that. and they all want to do that. they've all talked about repatrioting the capitol, creating more pro growth environment, but they just cannot seem to do it. so when you're on capitol
hill, and you ask them that question, what do they say? >> i think what you see is just a difference in opinion. one side wants lower rates and pro growth agenda and the or side wants to make there's a fair redistribution of wealth and things like that and on the ground from those situations. frankly from our perspective i would like to say we're a company. we have to thrive which party is in power, so i don't pay too much attention to that, and we just try to live within the rules that we're given and do as best we can. >> any sectors that you're super bullish on right now? >> well, given the low growth, low rate environment, we're very positive on corporate fixed income. i think high yields attractive right now. we're investing in real estate and mortgages. >> structured credit as well? >> we don't do a lot of structured credit but the higher quality and the high yield market strong double bs and strong single bs.
i wouldn't get down into the triple c category but there seems to be good value there. so i think where you can get good yields without taking an enormous amount of risk, that's kind of where we see the play right now. >> and what about the opportunities outside the united states? i know that you're focused on this country, and you're focused on your clients in this country, but as you talked about japan, you've got interest rates around the world down low and negative. do you look to try to take advantage of any opportunities outside of the country? >> sure. 20% of our investment portfolio is invested globally. europe, asia, south america. you know, the big thing i think we're focused on right now is 100% of our foreign investments are hedged. >> that was the second part of my question. given what has happened with the dollar this week, are you trying to take out the currency or get total return? >> we think the dollar is going to continue to strengthen, so we do not want to have a lot of foreign currency risk in our policy right now. we're 100% hedged and we're
just investing in companies that we think can grow globally. i think the separation vote in the uk could be an opportunity for some private equity investment in europe right now, you know, because things are cheaper than they were. >> you had to name two reasons why the dollar was going to shrink, what are they? >> i think the two big reasons are we have positive rates, i just read in the last day or two, i think there's $12 trillion in bonds globally that are in negative yielding securities. >> right. >> so we have a positive yield curve still. positive yield even at the shortened and then the second thing is safety. people know the united states is going to stand behind its debt and it's just the one last place where you can get certainty principle. >> really appreciate your time. and we want to thank john schlifske for joining us today on wall street week. we've got more ahead. stay with us [airplane sounds]
>> donald trump taking a tough stance on trade. vowing to reject free trade agreements like nafta and renegotiate better deals for american workers. trump also took aim at one of the nation's top trading partners, china. >> i'm going to instruct my treasury secretary to label china a currency manipulator. which should have been done years ago. any country that devalues
their currency in order to take unfair advantage of the united states, which is many countries, will be met with sharply. and that included tariffs and taxes. >> our fox business all-star, one of them is laughing right here, good friends charlie gasparino and liz claman joining us now. charlie, i love the music. >> i can't believe i'm sitting here. >> very traumatic. >> didn't you grow up watching this? >> what about the opening when i'm walking and he's working. >> let's talk about donald trump for a second. tough talk on trade. what do you think, liz? is that the right approach? >> i don't know why everybody think so this is such an original call to label china a currency manipulator. ever since china extricated itself or tried to crawl out of economic isolation in the '90s, everybody said you're manipulating your currency, you're weakening it to take advantage of a cheaper export opportunity so that we could
then see you export more to our countries? well, guess what. news flash. any country with a central bank could very well be labeled a currency manipulate, including the united states, they expand or contract their money supply depending on what works for them at the moment. >> do you think we have a free trade agreement with china that is fair? >> no. we don't. but guess what? we've got an agreement that is constantly morphing and, in fact, it was president obama who just a couple of years ago imposed much higher tariffs on cheap chinese steel so that they wouldn't take advantage of what was already a failing industry. >> let's try to explain to the american public we just said it's not fair so their sore about their because their incomes are down. so how do you explain to the american public that what's going on with our free trade agreement with china is good for them. >> i will say one thing when i saw the -- first saw that video of donald speaking, i thought it was a clip from christmas. it looked like a christmas -- you know, here's the thing. no trade agreement is perfect. you know, when the u.s. does
something known as qe, meaning -- manipulating our currency, by the way. we were buying stuff, we were lowering interest rates, we were manipulating -- we were changing the value of a dollar just by doing that. and doing it in our favor. so i remember every country does that. listen, if you tell me the chinese cheat, i would say, yeah, they do. there's ways of fighting that without getting into protectionism. now, the real question is this, and this is what donald trump refuses, and i expect you of all people, you know, adult in the room, to walk up to him and say, donald, here is economic -- because you know this guy. you're on the airplane with him. here is the number -- here are the numbers. here's what free trade has done for the u.s. and here's what it hasn't done, and i tell you every rational economic analysis. >> i think it's misunderstood. >> the hedge fund manager paul singer, big republican donor
said this week that if trump is successful -- if trump is elected and successful in these trade wars, we'll have a global depression. >> but i wanted to ask you. >> a lot of respect for paul. >> right. >> you've had him at the conference. >> very smart investors. but some an mouse going on there that i don't fully understand. >> the bigger question -- republicans is that the democrats seem to coalesce about -- around somebody that they may not necessarily like but the republicans are having a very hard time doing that. >> listen, maybe i'm missing something, and you guys are immersed in economics as much as i am. the numbers on free trade are positive to the american worker. they're better than they would be -- >> and to the american consumer because if you start to impose very high tariffs on things. >> yeah. >> i don't -- >> very high costs, everybody uses the walmart case. forget walmart. a lot of small businesses bring in goods, and they're cheaper for their -- >> again, my view, i don't
think that that was the reason for the speech. what he's basically saying is that we've had an imbalance in terms of our trade agreements for the last seven years. that was designed by the united states to help develop these other countries. and we all understand that. now opening the question up. we have the lower and middle class here that are struggling. do these trade agreements need to be as unfair as they have been over the lasts 70 years. >> so you really do think they were corrected -- >> there's no question about that, charlie -- go to atchinson and george marshal and the bipartisan plan. look at the world trade organization documented in 2000 when china was entering. >> but can i just make this point? when china becomes more prosperous, don't they buy our stuff? >> they don't. >> you sure? >> no. they actually don't. >> they don't? >> well, they've been able -- the people who have benefited have been able to buy a lot of real estate in the united states. >> very good friend of mine,
he's helping with the trump campaign. he told me if he was allowed to sell his cars, the chrysler cars into china during the 2008 financial crisis, they wouldn't have never had to declare bankruptcy. >> here's where donald is right. he's not saying let's tear up nafta, tpp. let's renegotiate because what's appropriate in 1994 perhaps may be inappropriate today. what did china get? china got a better growing economy, and it got a better middle class and what did we get? a loss of jobs. there's got to be some -- donald trump is right on that. >> why did liz make a more coherent argument than donald on this? >> excellent point, charlie. >> when i listen to donald, i hear a lot of banging on the table, a lot of currency manipulation. all of these scare things and almost no analytics, you know? it's all emotion, no analytics. and, boy, when you start appealing purely to emotion, that's when people get scared.
they start seeing -- >> liz, answer his question. why do you think donald trump is -- >> i grew in a family where dad loved the c word, compromise. you're never going to get anything you want or you're never going to be totally disappointed if you can work with somebody. donald trump is the guy who wrote the book the art of the deal. but to come out, i don't agree agree what with it but he's probably trying to grab voters who may have reached the tipping point and talking tough now he may say later let's negotiate versus -- >> i agree with liz. >> read the wall street journal editorial today. now, you can see what you want the journal being free trade, open borders, whatever, they make a coherent argument that these trade deals have benefited the u.s. worker more than -- >> we're not arguing -- >> yes, we are. >> no, we're not arguing. >> donald trump is all or nothing. and that's the -- >> final point is -- final point i'm going to stick with what liz said, it's time to
revisit these things in 2.0 the agreements; right? >> well, you're saying that. >> guys, we've got to go. charlie and liz, thanks for joining us. that does it for us. we'll see you next time. same time, same place. same time, same place. happy fourth o medical research has developed lots of antibiotics same time, same place. happy fourth o to fight many different bacteria. but some antibiotics are being overused and the bacteria are becoming resistant to our best medicines. remember, don't ask your doctor for antibiotics to treat a bad cold caused by a virus. antibiotics won't cure a virus and improper use allows the bacteria to becomeeeee strongerrrr. and always remember, finish your treatment of pills even if you start to feel better
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