tv Wall Street Week FOX Business November 19, 2016 12:30am-1:01am EST
>> from fox business headquarters in new york city, the new wall street week. gary gary welcome to wall street week, the show of record for long-term investing, i'm gary ca missky. maria: and i'm maria bartiromo. it should with no surprise that the markets have reacted with an extended rally. but to hear trump backer and wall street icon carl icahn say it, traders could be getting ahead of themselves. >> they went down a thousand points the night he was elected, it was ridiculous, and i bought, i bought stock then. i'm not a trader really. but now i think it's run ahead of itself somewhat. but, you know what?
no one can pick the market. gary gary does icahn have it right? joining us now, towner and president jim chanos. jim, thanks for joining us. you been on a number of trades on the opposite side of call. [laughter] what's your thoughts about what he had to say about this week's reaction in the market? >> well, i think you should listen to carl. it's pretty hard to time the market short term. so longer term i know he's been concerned. we try not to time the market ourselves, and certainly not to political events. gary: as it relates to the rally we've had since the election -- >> yep. gary: in the sense of what the trump administration might do in terms of growing the economy, is the market fundamentals getting ahead of the reality of what could actually be achieved? >> well, one of the things we told clients this week is to step back a little bit in that i'm a lot older than you two, and i remember previous election
excitement. and we can go back to '08. we had sort of a "kumbaya" moment, the whole country came together. he was going to dismantle the banks, the market as you recall was going down at that time. we were in the middle of the crisis. it kept going down after his election, and everybody was virtually certain, i had a long list of articles i sent out from late '08, early '09 on just how bad obama was going to be for the markets and the economy. and you know what? the people that watch this show, your viewers, they did okay. maria: yeah. >> they did okay. the market tripled, and he kept the bush tax cuts, and while it was not the greatest recovery in the world, generally financial assets did well. go back further. go back to george w. bush's election. perhaps the most corporate-friendly nominee before mr. trump to be elected.
he got the house, he got the senate, and we were going to be off to the races. but events conspired against it. maria: when you look at trump's actual economic policies, the tact that he wants to take the corporate tax rate to 15%, the fact that he wants to roll back regulations, do you think that would move the needle in terms of corporate earnings? do you think that alleviates pressure for companies? >> it depends, maria, because remember, the effective tax rate that corporations have been paying is quite a bit lower than the 35% or so. depending on who you believe, it's either 15-20, low 20s. so from a cash point of view are, they're not going to have a whole lot of improvement. now, guys like me are going to get their tax bills cut in half. i mean, we can argue that. maria: what about the rollback of regs? >> well, i think the rollback of regs is possibly a big positive for certain industries. but again, i've seen that washington has been awfully resistant when you get into the
weeds or the swamp, if you will, on actually doing the things they say they're going to do. and that, i think, we have to be mindful and cautious of. there are limits even for presidents that come in with both houses. and be presidents find this out very quickly. gary: you know, jim, you were a hillary clinton supporter -- >> i was not. gary: well, didn't you say you were going to vote democratic -- maria: divided. >> yes, i was -- gary: you were going to vote democratic down the ticket. maria: so you were a supporter, come on. >> no. i was not a clinton supporter. gary: not a clinton supporter -- maria: a democratic supporter. gary gary what do you think actually happened? what's the message from the election? what do you think hasn't? -- happened? >> well, i spent a lot of time in my home state of wisconsin. to me it is very career that her -- very clear that her message just didn't resonate with people they thought it would reds nate with. and i think they'll be doing postmortems for years to come on this. and i also think that had
someone like biden run from the party, i think he would have won. so, and so i think the question is how did the candidate not resonate with the voters to the extent in the heartland that they thought? and i think we know -- maria: the working man and woman. you're so smart to bring up wisconsin, because that's really the example of what happened this election. it was the working man and woman. and trump went to wisconsin a couple of times. hillary never went to wisconsin. >> and they kept telling me that. gary: well, the thought is, obviously, the pet polls show -- exit polls show that the economy was the main issue. we had david stockman, former reagan budget director on this program last week. take a listen to what he had to say about the economy. >> there's nothing to rescue this economy. we're going to have a recession. i follow the irs, not the bls. the irs tells me how much money they're collecting, ask it's been flat -- and it's been flat and, actually, negative for the
last four or five months each on payroll taxes. and that means the economy is long in the tooth, it's slipping into a recession. gary: is he right? >> i think data like that are the state withholding tax data is pretty good data, and it's always been a lot more accurate. i think this economy is not hitting on all cylinders, i think it hasn't been all year. and so i think that has helped, it helped, certainly, the republicans in the election. i think this is, you know, it's a big globe, and there's lots of stuff going on out there beyond just the u.s. economy. and i think that we have to watch what's happening in asia, in china, in europe. and so these things are all going to interplay. but as to whether we're not growing at all, i don't know. that's, that might be a stretch. maria: what about the sectors? you said there are a couple of groups that you can understand that would be positive in terms of the regulations rolling back. what are those industries, jim? >> well, i think there would be,
certainly, some areas like energy, various different parts of energying and transportation where -- energy and transportation where i think less regulation will be perceived as a positive. but again, be careful what you wish for because relaxation of certain rules may end up being deflationary for certain assets. and so it's always hard to sort of connect the dots in ways that we're certain of. maria: the banks, certainly, have been rallying, right? >> yeah. the banks have been rallying. but, again, if you look at say what mr. bannon has outlined as his world view, he calls it hard capitalism. and be hard capitalism wouldn't be too friendly to some of the banks. and he was vociferously calling for jailing of bankers, for example. so i -- by the way, hard capitalism would be fantastic from my perspective if actually winners win and losers lose and the taxpayer opportunity pick up the difference. you know, hoorah for that. whether you're democrat or
republican. gary: so is it safe to say that your overall outlook is i understand what happened and why the markets have moved, but warned that some of the things that may being thought, we may be over our skis? >> we may see things happen and change in ways we don't foresee, and that is the lesson of the last major clinton' 92, w. in 2000, obama in 2008 and possibly trump in '16. things don't work out as the road map says they should. and they haven't in each of those changes. so i'm just a little cautious to say, oh, well, this will happen because we expect that to happen. it opportunity always work that way. maria: you still brought your hat. >> this is actually a present for you guys. [laughter] i got this as a present, so i'm re-gifting, and i can think of no better place to do this, to the folks at "wall street week" make portfolios great again. [laughter] maria: make portfolios great again.
>> from the bears to the bulls. gary: don't go anywhere. "wall street week" will be right back. ♪ ♪ >> one vote down, one vote to go. could the fed be on the verge of trumping the trump rally? >> increase could well become >> increase could well become appropriate relatively soon. when they thought they should westart saving for retirement.le then we asked some older people when they actually did start saving. this gap between when we should start saving and when we actually do is one of the reasons why too many of us aren't prepared for retirement. just start as early as you can. it's going to pay off in the future. if we all start saving a little more today,
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♪ ♪ maria: with the election now in the rearview mirror, the next question facing investors is whether the federal reserve will raise rates. janet yellen was on capitol hill this week, and she was asked directly, and here's what she said. >> at our meeting earlier this month, the committee judged that the case for an increase in the target range had continued to strengthen. ask that such an increase -- and that such increase could well
become appropriate relatively soon. maria: and we're with jim chanos today. jim, it sounds like the fed's going to raise rates at the next meeting which is december 14th. do you believe so? >> before we talk about the fed, i should disclose that i sit on a fed committee of outside investors. that said, which means nothing, i have no idea. i assume they will. as the market does. but my views on the fed are probably worth as much as that hat i gave you -- maria: does it matter if they raise? >> i think it's built into the market at point. i think you can assume wherever the fed is on its verbal guidance, that's what's built into the market. they think they're going to go in december and two more times in 2017, so i would suspect that is what the market is expecting, and whether they deviate are that because events conspire to change it, we'll see. but that's pretty sure built into the market at this point. gary: jim, you're a fundamental guy. you make investments primarily
on the short side looking at companies that are significantly overvalued. but i know, and we've talked about this over the years, you do think about the markets, and you do think about things top-down. and you always hedge the portfolio by being market neutral. but you've got to have some thoughts about the stock market right now as we're in this period and rates are going up not jutte what the fed is. -- just what the fed is. what i found most interesting since the election is the bond market. the bond market is predicting significant growth and significant inflation, and what do you see when you look at all these variables out there now? >> the bond market certainly seems to be discounting more activity and/or inflation or some combination thereof. again, i'm not so sure. we're not seeing any acceleration yet, so the bond market may be looking further afield than the stock market is. there are some issues. i mean, we can have economic growth and it not necessarily accrue to corporate bottom lines, and that's an important distinction. and maybe that's been part of
the problem of the last eight years where corporate profits have been an a all-time high, and yet it didn't get to the worker or the voter. and you could certainly see accelerating wage growth which we're already starting to see a little bit which benefits, you know, the average guy to the debt criminate -- detriment of shareholders. and so if the trump election was one of those major, major turning points as i've said, like, 1932 or 1979-80 where we had the advent of big government, advent of labor in the '30s after the depression for 40 years and then thatcher and reagan turned that around in '79-'80, and capital became ascendant for at least the next 35 be years -- maria: wow. >> if this is a move back to more populism, to more little guy, you know, make sure the worker is the person that we're legislating for, then you've got
to rethink your portfolios because that is a sea change. in the '30s you didn't want to be anywhere near paper assets for the next 40 years. they generally did not do well. inflation hedges, labor, cash all did better. in 979 -- 1979 with thatcher and '80 with reagan, it was time to change a life portfolio and buy paper assets, right? and capital was going to be ascendant. are we at one of those turning points? because the signs are that things are changing with brexit, trump, variety of a rise of nationalist leaders. is the man in the street going to be doing better than the man on wall street? good question. maria: it sure is. so what would you attribute this move in rates? i mean, you're talking about the yield on the ten-year at the highest of 2016? >> yeah. but, i mean, let's be honest. it's -- maria: it's still very low. but you're still talking about from 0 to 2.5%. >> right. and the ten-year has not gone
anywhere for a number of years. it's -- and so are we seeing this once in a generation if not once in a lifetime change in sentiment in bond prices? is it time with rates at 0, bond rates at 0, 2% in the u.s., is it time to start thinking about going the other way? i'll leave that to the bond guys. gary: oh, i really wanted your opinion. [laughter] you know the bond guys were all over tv this week saying -- and many of them have said it in the last year or two years, that the bond rally, the 30-year bond rally is over. >> right. gary: the bull market's over. do you agree with that? >> who knows if they're right in terms of plead timing, but -- immediate timing, but the aoff could be enormous. >> a lot of people making that call for the last six years, and they've been dead wrong. maria: yeah. "wall street week" continues in a moment. >> why is the tech sector bucking the trend? jim theys not -- chanos gives us
♪ ♪ gary: welcome back to "wall street week." jim, let's talk about some stocks, some follow-ups. you came on the program and talked about valeant, news out this week that two executives at the company were arrested. additionally, you've got some insights and thoughts about what's happening with the company and what's happening with all of these companies right now that have been looked at by the congress. >> yeah. it's an interesting, valeant's an interesting example of what we're talking about. what we've noticed this year, and val janet was one -- value janet was one of the poster children for this, is kind of a sea change on capitol hill as well as on wall street in that for the first time now these
corporate wrongdoers or alleged wrongdoers are getting grilled in congress. if you think about wells fargo, valeant, think about mylan, by both parties. and it's not just the left wing of the democratic party that is ripping into this perceived ripping off of consumers, it's both parties. and be i think that lays back into what we were talking about. are we seeing a change in the roles of the parties, is the republican party becoming the party of the average person, and if so, what does that mean for the ability of corporate america, for example in the pharmaceutical industry, to just keep raising prices even though it's free market? and we can sort of think through a lot of these things. what we thought might be be perceived wisdom might, in fact, get turned on its head. gary: but on valeant, they have been to sell off assets. bill miller or, a legendary
value investor, has been recommending the stock, thinks it could with be a triple or greater. you thesis is still intact on the short side? >> yeah, our thesis is completely intact on the short side because this is a company that bought drug, they did not develop them. and they were buying drugs with a short shelf life of only a handful of years before patents expired or competition came in. and they were able to jack prices up 500, 1000% by gaming the reimbursement system. and that's what this whole controversy was about. and that gain is over. i mean, it is truly over. the ability to take a toe fungus drug and hike prices 1000%, you know, and get paid -- maria: incredible. >> -- is completely over. and while they have some assets like bausch and loam that are reasonably good -- i think they still overpaid for that as well -- a lot of the drugs they bought aren't going to be worth nearly what they paid for them, and that's the problem. maria: reallyincredible. congratulations.
you called out valeant when it was all the way up there, you called out enron when it was all the way up there. what's your big short right now? [laughter] come on, tell us. >> well, you know, a lot of those are, a lot of those are only visible in hindsight, maria. one name that certainly sort of juxtaposes our views on a couple different things isalibaba. and alibaba, the big internet e-commerce in china, is being perceived as a play on the growth of chinese e-commerce. and yet when you trillion down intoally -- drill down into alibaba, it's actually quite an interesting story. and for lots of reasons that are accounting related and corporate governance related. and yet wall street's piled into this stock without really understanding the fundamentals of what's driving the business. and my good friend jim grant has called china the people's
republic of maidoff, and -- me do you have, and i couldn't -- madoff, and i couldn't agree with him more. you actually don't own the assets if you're a western shareholder. you own a piece of paper -- maria: and the way the revenue moves is complicated -- >> and the way they account for the costs. you don't see a lot of them. the delivery costs are off the books. trigary a lot of off-balance sheet stuff. but with valeant, the end game was when they stopped doing the roll-ups and the deals, and obviously the stuff came out with philidor. how do you seeally what baa eventually having -- what will eventually crack the alibaba bulls? >> well, the problem is that alibaba, unlike amazon and u.s. e-commerce companies, alibaba gobbles up cash. it actually is a voracious user of cash. it does not generate cash. and the balance sheet is growing almost twice as fast as the business. and you know enough about corporate finance that if your assets are growing twice the
rate of your profits, your return on cap until a's -- capital's plummeting. and be alibaba last year employed more capital in one year than amazon had since its inception. maria: incredible. by the way, in terms of technology, are you surprised that tech stocks have not participated in this trump rally, and is there an opportunity there, or is that also a sell? >> well, there might be. again, we have to kind of step back, maria, and say the knee jerk is, oh, tech, silicon valley, anti-trump. not going to be favored. i think probably a more logical thought process would be tech feint upon exports -- dependent upon exports, dollar rallying, you know, hurting on the margin. and we've kind of forgotten in this whole thing that the dollar's had this rip-roaring rally. rates have gone up which may hurt profits for a lot of exporters. so it may be some combination of both. gary: well, after some excitement and euphoria since the election, it's always good to listen to jim chanos to bring
. >> not my president! >> some people are really mad. >> donald trump go away, racist, sexist, anti-gay. john: others are thrilled donald trump is president. >> usa! usa! >> take a breath both of you, trump is neither savior nor curse. >> we'll rescue kids from failing schools by helping their parents send them to a safe school of their choice. john: choice is great! but a president cannot legally rescue kids from bad schools. that's state law. the president can rule on the environment, but what the