Steen Jakobsen: Get Ready For The Biggest Margin Call In History
Economist Steen Jakobsen, Chief Investment Officer of Saxo Bank, believes 2015 will be another "lost year" for the economy. And he predicts the Federal Reserve will indeed start to raise rates later this year, surprising the market and taking the wind of out asset prices.
He recommends building cash and waiting to see how the coming storm — which he calls the "greatest margin call in history" — plays out:
0% interest rates at $0 down has not created the additional momentum to the economy The Fed was hoping for. The trickle down effect, the wealth effect, has instead made for bigger inequality in society. So I think we’re set for a rate hike in either in June or in September. I think this will be the biggest margin call in history on the asset inflation created by the Fed .
That’s where I differ from most Fed watchers. Everyone else is looking at employment, inflation targeting. I don’t think Fed is at all looking at those. They are saying “Listen, the 0% interest rate is getting us absolutely nowhere, we think it’s very, very important for us to move to a more neutral place”. At the same time we will communicate that we are open-minded to additional programs or whatever needs to be done to secure the long term growth of the economy. But that will be on the down side, not on the up side. And as year has progressed, and I’ve said this publicly, I think 2015 is already lost in terms of recovery here. And that will take the market by surprise.
The market will ask in September when the Fed hikes: “Why are you hiking interest rate when growth is below target, inflation below target”? Well, the Fed's response will be “Because this is the biggest asset inflation we’ve seen in human history and we need to address it”.
What the Fed is saying is that we have unintended consequences of low interest rates. Money is chasing yield: it's going to real estate making it over-valued, and flowing into the equity markets making them over-valued. And then the Fed says “Well. we have two choices. We can allow the market to run into a bubble, or we can burst the bubble and start all over again”. But they wrongly, in my opinion, believe they can actually micro manage that, even macro manage this. So what they would rather do is "lean up against the market". To take some of the excess out of prices by going in and telling in the market “We are concerned, we don’t want you to have more leverage. We want you to have less. And we certainly would like to see that market become flat-lined for a while in terms of return." Which by all metrics of measurements is actually also the expected return of the stock market. Don’t forget three, five and seven years expected return at the present multiples is exactly 0%.
Given this, at a bare minimum, I recommend taking the leverage out of your own portfolio so you sit with a nice pot of cash if the market does correct. If it doesn’t, you’re not really losing out much because again, they expect a return is 0% for the next couple of years.
Some time the best advice to anybody is to do nothing. And of course being, part of an online bank I’m not exactly popular with management for putting this advice out there. But I have to give the advice I believe in and share what I do myself; and I’m certainly reducing whatever equity I have in my portfolio to a minimum. So I’m scaling back to where I was in January last year.
I'll put it another way. I’m advising a hedge fund in London, analyzing 10,500 stocks from the bottom up. How many do you think of these 10,500 world stocks are cheap? Only 23. Which means 98% of all stocks are either fairly-priced or expensive.
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Steen Jakobsen: Get Ready For The Biggest Margin Call In History
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Chris Martenson: Welcome to the Peak Prosperity Show. I am your host Chris Martenson. You know, a couple of days ago a key Fed official came out in support of additional asset purchases by the Fed if necessary, which is code speak for "print up some more money and hand it to the financial industry." Now what are we to make of this? Clearly the world is mired in low growth and it can be said with certainty that lots and lots of money printing has not delivered us into a future of high or even much higher economic growth. And the cross currents and conflicting signals are driving even the most seasoned of investors I know absolutely batty. So how do we begin to make sense of all this?
Fortunately returning to be with us today is Steen Jakobsen, Chief Investment Officer of Saxo Bank. He has more than 25 years of experience within the fields of proprietary trading, alternative investment. He joined Saxo in 2000; he is now the Chief Investment Officer. Steen, it’s a real pleasure to have you back.
Steen Jakobsen: I’m very pleased to be back Chris, thank you.
Chris Martenson: Well let’s start with the most anticipated event in all of human history: Will the Fed raise rates in June?
Steen Jakobsen: "In all of human history" is probably a little rich but I like the set up. So I think what’s important to realize on the Federal Reserve is that the market right now seems to think that we have a traditional economic-based projectory of interest rate driven by data watching. I think the Fed is in a very different place. I think Fisher—since he came on board—Stanley Fisher has been instrumental in addressing the issue that the fact that we have zero interest rate zero bound has not created the additional momentum to the economy. The trickle down effect, the wealth effect is, if anything, the other way around; it makes for bigger inequality in society. So I think that we’re set to move either in June or in September. I think this is the biggest margin call in history on the asset inflation.
And that’s where I really differ from most Fed watchers, everyone else is looking at employment, inflation targeting. I don’t think Fed is at all there. They are saying “Listen zero interest rate is getting us absolutely nowhere, we think it’s very, very important for us to move to a more neutral place. At the same time we will communicate that we are open minded to additional programs or whatever needs to be done to secure the long term growth of the economy." But that will be on the down side, not on the up side. And as the year has progressed I think, and I’ve said this publically, I think 2015 again is already lost in terms of recovery here. People are using the weather again in the US; I find it very surprising that you have winters in the US and it tends to surprise all the economists, but it’s a bad excuse because of course it was only the East Coast in the US that really had problems with the weather and that’s not big enough really to have a material impact on US economy. So the US economy is simply again going to be a 2% economy and that will take the market by surprise.
Why would — the market will ask in September when the high comes, “Why are you hiking interest rates when growth is below target, inflation below target”? Well the response will be “Because this is the biggest asset inflation we’ve seen in human history and we need to address it”.
Chris Martenson: Well they certainly seem to be nervous about it because another Fed official came out yesterday and said that when they raise rates of course they are going to watch and see how the market responds. They’re getting much more direct in being clear about saying that they are watching the market somewhat nervously; do you share that perception?
Steen Jakobsen: Yeah and we’ve been warned. Don’t forget that the regulation, the capital requirement driven by [Inaudible 00:03:54] at the Federal Reserve has been more and more restrictive; so restrictive actually that now you probably saw that JP Morgan is selling off deposit accounts because they have too much requirement of capital on them. So the maximum leverage in the US society after all these regulations is 1 to 12; we are down from 1 to 30, 1 to 20, to 1 to 12. The old system is being deleveraged; there’s already on the regulation side, on the capital requirement side been a margin call, which by the way has driven interest rates at least 25 basis points lower than would be in the normal cycle because they need these treasuries to set aside for risk perspectives.
Chris Martenson: So when you say a margin call on assets—decode that for our average listener.
Steen Jakobsen: Yeah so what the Fed is saying is that we have unintended consequences of low interest rates which is that money is changing [Inaudible 00:04:54] it is going into real estate which is becoming overvalued, it's coming into the equity markets which are becoming overvalued. And then Fed says “Well we have two choices. We can allow the market to run into a bubble, burst the bubble and start all over again”. But they wrongly, in my opinion, believe they can actually micro manage that, even macro manage this. So what they would rather do is what you I think in the US calls "lean up against the market." They'd rather sort of take some of the excess out of the market by going in and telling in the market “We are concerned, we don’t want you to have more leverage. We want you to have less” and we certainly would like to see that market became flat lined for a while in terms of return. Which by all metrics of measurements is actually also the expected return of the stock market. Don’t forget three, five and seven years expected return at the present multiples is exactly zero.
Chris Martenson: I’m surprised it’s that high. When we look at the CAPE adjusted returns it’s in what historically is fairly elevated territory, the case could be made that it could be negative returns.
Steen Jakobsen: It depends whether you start your statistics after the crash in the 20’s or before it. I think the main point Chris however, is it doesn’t matter where the metrics is because at zero interest rate everything is priced to perfection in terms of spreadsheet and calculation. When you discount by close to zero you have infinity as a return. As I said very often, I can go to my bank manager and ask him to buy and operate 100 hamburger stands in a spreadsheet that would have infinite return.
Chris Martenson: At zero percent it’s infinite.
Steen Jakobsen: At zero percent it will have infinite return. All of them, a hundred next to each other on the same street.
Chris Martenson: So let’s talk about this going from the zero bound — when we’re talking about the Fed raising rates, what are we talking about? My assumption is it’s going to be a quarter point and I think that’s going to be fairly meaningless. Is this really one of the most over hyped moments in history?
Steen Jakobsen: I think it will turn out to be, but it will be surprising because they are data watching not margin watching. And I think the second thing is that they’re going to do 25% as a token gesture to show that they are moving toward normalized and they want to keep it. I think the yield curve will flatten significantly. I still think that 10 years and 20 years and 30 years US interest rate is going down. I think 10 year as a target is minimum 1.5 against nothing, 1.9 and overall I think the interest rates are still coming down because exactly what I said before. The capital requirement means that banks and pension companies need in their asset and liability they need to buy yield. And the US you know, trading close to 2% in 10 years it’s just about the most yield rewarding bond market in the world ironically, despite the fact it is the biggest, the deepest and the most accessible bond market in the world. You know every single European country in 10 years is pretty much below the US yield now; so people will be chasing yield, but I don’t think it will have a material impact on the economy on anything. It is leaning up against the margin inflation as I call it, and it is a token hike to show the market that you need to reign in this complacency under which you operate right now.
Chris Martenson: So if usual tug of war is between stocks and bonds—I noted that Mohamed El-Erian is now sitting in cash, a lot of cash, and his argument seems to be why sit in zero percent bonds when you can sit in zero percent cash? Why do you — is that a viable move at this point? Do you see a risk to bonds in this story as well?
Steen Jakobsen: Not really. As I just said I think there’s going to be sort of a replay of that and people get nervous but I don’t think — the thing is El-Erian is ignoring the fact that there is a huge institutional need. I mean don’t forget that the pension sector is almost 100% of GDP. So your 401k, 30-50% of that is in fixed income, they need constantly to be buying. There is a shortage of AAA and AA papers in the world. No, I don’t think that it is a matter of choosing one or the other. I’ve got a lot of press unfortunately sort of misunderstood when I was in Dubai last week said “Well my advice to anyone would be to sell your stock portfolio down to where it was January 1 last year and then take the cash and take six months vacation with your family and spend some quality time”, which I guess is pretty much the same thing. Because my argument is the same, if you — what we have right now is that the companies, the companies which are listed, they are taking more and more leverage onboard at zero interest rate to facilitate a higher volume and margin. So they have lower volume, lower margin. The only way you can keep up with this game of course, is to increase your balance sheet leverage. At the same time your portfolio is up 30-40% since last year so you are also having more leverage.
So I’m just pointing out listen, you can not do anything about getting the CEOs to get less risk because they have to make their own mistakes but at least at a bare minimum take the leverage out of your own portfolio so you see with a nice pot of cash if the market does correct. If it doesn’t, you’re not really losing out much because again, they expect a return of zero for the next couple years.
Chris Martenson: It seems like a great time to take a few chips off the table and go get a drink.
Steen Jakobsen: Absolutely and that is my point. It’s — sometimes the best advice to anybody is to do nothing. And of course being an executive at an online bank I’m not exactly popular with management for putting this advice out but you know I am — I have to give the advice I believe in and how I do it myself and I’m certainly reducing whatever equity I had in my portfolio to a minimum. So I’m scaling back to where I was January 1 last year. I want some exposure. Energy plays are cheap.
Put another way, I’m advising a hedge fund in London, they do bottom-up analysis, 10,500 stocks in the portfolio. How many do you think is cheap in a bottom-up filtering process in the US right now? How many stocks do you think out of 10,500 developed-world stocks is cheap?
Chris Martenson: Oh gosh, 1,000?
Steen Jakobsen: 23.
Chris Martenson: [Laughter] That’s a rather precise number. 23 are cheap.
Steen Jakobsen: I can even provide the names. But most of the names are actually in the energy sector, funny enough. Something like ConocoPhillips would be one, Chevron would be another one. So I find it very interesting that you know — that is the only good thing I get out of actually advising anyone is I get to see some of these reports. And I find it very, very interesting personally because 10,500 stocks, 23 is cheap. Which means 98% of all stocks is either fairly priced or expensive relatively to their data they are providing themselves in the economic condition under which we operate.
Chris Martenson: There are some that are horribly expensive. When I do my little screen and I ask the question, “Show me stocks with PE’s over 200” I get screen after screen of results.
Steen Jakobsen: Exactly and that is my point. We do not know — we do not have a crystal ball but there are some times in life when it is best to — the best advice you can give anybody is just get off. Get off at the next turn and just sit back and take the next bus when it comes in.
Chris Martenson: So let’s get back to these pension funds and their big buying needs. The news recently—which actually did make my eyebrows go up a bit—that Switzerland sold ten year debt with a negative rate of interest. Now this is a first in history kind of a move. You’re the chief investment officer for a major bank; tell us how do you process that news?
Steen Jakobsen: As long as inflation expectation is below that it’s a tangible and reasonable thing to do because you need the duration in the portfolios. So basically what — if you think about a pension sector or anyone who has long- term liabilities your problem right now is that your stock market portfolio, your fixed income portfolio is pretty much at all-time highs, both of them. So that’s good, you have a lot of money around but you’re — in terms of the discounting at zero your expected liability is just blowing up and in order to keep up with the blown up expectation for return in the future you need to be buying yield. The only yield on offer in Switzerland and Denmark by the way is negative yield, but they still buy it because without it they’re going to be short on duration. But they will constantly be short on expected return because they do know, as I said three times now, the expected return is zero. So it’s good for now but it’s very bad for the future and so we are creating this overhang of below-par returns for the market to normalize. And in that environment there’s going to be huge pressure on anyone who is involved in asset liability management because again, zero percent interest rate—it makes your assets very, very high but it also makes your future liability infinitely high.
Chris Martenson: Yeah let’s talk about that for a second because you know you can’t crack a paper without reading about some badly underfunded pension program here in the US and this is after several years of near record stock gains. But they’re getting zero or close to zero on the bond portion of their portfolios so they’re actually losing ground. So when I crack open these pensions and I look at their assumed rate of returns they’re still saying 7, 7.5 you know, somewhere in that zone and obviously they’re not getting anywhere close to that. So they’re just compounding their difficulties, aren’t they?
Steen Jakobsen: Well to be fair to them they have done 7, 7.5 recently but the expected return which they don’t see as a reality yet is different. And clearly pension funds should be putting more money aside. Instead what they do is to get — again as I said a few times, they are increasing their financial leverage by borrowing money to buy back their own stocks. So I think there has been a short term quarter by quarter management of the stock price where at least it should have been 50/50 trade off between the managing the stock market price and you know, making deposit into the pension scheme. So they will remain so because of zero interest rate, their liability is infinite.
Chris Martenson: So this is something that I think got surfaced in Bernanke’s first blog offering which, by the way, set me on edge a little bit where he said he was concerned about savers but first he had to hurt them to help them was how I interpreted what he said. We’re now seven years into the "hurt" part of this story. I don’t personally see that there’s any chance of interest rates getting back to normal. It’s going to take years and years; what’s your view?
Steen Jakobsen: I disagree because what we have — and I think last time we talked I introduced my 2018 model where 20% of the economy is the listed companies and the banks. They right now have a funding rate which is 200, 300 basis point lower than a normal business cycle. That explains why we have very high stock market valuations. The price for that unfortunately is that the 80% what you in the US call the main street, the average company, the average guy is not having enough access to credit, he’s not having enough access to disposable income and the like. So as soon as you see money flowing out of paper and into the real economy, you will have a — not a one for one tradeoff between increasing in earnings with disposable income and inflation but you will have a 1 to 3. Basically you will have exponential growth in inflation and growth as soon as you deactivate the model you presently have. And that serves perfectly back to where I started. What Fed and Stanley Fischer is trying to do indirectly is exactly that. He’s saying stop investing in paper and start investing in productivity. So you know my advice, which again is very difficult for an online bank like Saxo, is for people to go out and find someone to invest in. You know look people in their eyes and invest in what they believe in and the heart they have behind the idea they work with instead of buying Nestle in Switzerland and negative interest rates, bonds that are negative interest rate or buying you know dividend yields mindlessly in the US which give you 2% because it’s better than fixed income at 1%. That gain — we need to understand that to have a productive society you need to increase your investment into education and productivity returning investments.
Chris Martenson: Well you know in many cases those productivity investments are leading to, perversely, what I think is a low inflation environment so if I robotize my factory and I put all this capital into my robots and I have fewer workers, we’re just dead in the water on wage inflation over here. It’s — workers are getting no traction and given the overhang in the unemployment side of the story I think we’ve got probably 8-10 million people who are just anxious to jump into that labor pool. How do we get that inflation without wages?
Steen Jakobsen: First of all there’s some recent studies, I can’t remember from who, I think it was from Harvard that shows that actually a lot of these people not seeking jobs are doing it because they’re better off financially, one of the reasons. I think we also need to reset sort of what is people not seeking jobs—are they doing it for whatever reason? But taking your point about robots. In Denmark we did a very interesting experiment where the government said, “Listen we need to understand this robotics, how does it work”? So what it did they put aside a small amount, let’s say 100 million dollars which small companies could then activate and borrow from to buy robots. And so what we’re — surprisingly Chris the robotic experience was that yes they lost factory jobs but they gained in marketing and foreign sales and everything else. And the company becomes more competitive. So it was an astonishing success; probably the biggest surprise was that the state was actually making money which they never normally do. But robotics is not going to gain jobs but it’s going to have, as you say, correctly, it’s going to have five to six years more of the whole economy re-balancing and re-assessing yourself. And that re-balancing is slowed down by the zero percent interest rates because that keeps in place the 2018.
I mean the US is — I've traveled to 30 countries and I love the US but you have the worst infrastructure I know of. I mean going on the train from New York to Washington is a disgrace. Most of your airports remind of like when I was traveling to Eastern Europe in the 1980’s before the war came down. I mean think about it, you should be — the States, the US government should guarantee every infrastructure. Then you should be able to buy an infrastructure bond for building a railway between Washington and New York, paying you a coupon of 4%. That is real investment, that is real jobs on the ground. Instead you’re buying Net Book or Net — what are they all called? Net whatever. And that is the point; we have to own up to Chris, that we can complain but we also need to invest where productivity is and we need the incentive. We need a 3-4% coupon on infrastructure bonds in the US.
I really think we are making things way too complicated because there’s plenty of jobs, there’s plenty of things that need to be improved. The healthcare sector—you have the most expensive healthcare in the world. There must be ways around creating more jobs, better products and doing it. I just think we’re not ambitious enough. I’ve been thinking a lot recently Chris about when politicians and policy makers, my response to them at every given question is "you are not ambitious enough." I don’t want to hear your [Inaudible 00:21:13] solutions. I want to hear your big scale grand vision because we have no people with vision left in the world.
Chris Martenson: I totally agree. And to me you know what’s happening in my country, my analysis of it is that we’ve gotten into sort of CEO worship. This idea that the people who can accumulate the most stuff, somehow those are the people that we look up to and you know, we'll bid $500,000 to have breakfast with Warren Buffet or something like that. So we have this worship thing going on but at the same time what we’re seeing is there’s this huge gap between what we tell ourselves as a country about where we really are in the world and that train ride that you might take. If just anybody who drives around this country you can see all of our bridges have a collective D to D minus rating from the engineering association. We still have places which do not have internet and where we do have internet my internet is a fraction of what’s available in most other countries. We’re like 38th on that list. So there’s lots of places we could improve but for whatever reason, making those investments has become a politicized process, I’ve never seen my political environment more toxic than it currently is; so I feel stuck.
Steen Jakobsen: No, you are. But the beauty is—which goes back to my main theory on economics— we need to fail first. In a small way or in a big way you need — you have pot holes in the roads in New York; it’s dangerous to drive your car whatever. I mean you need people to get so upset that they are willing to commit, but the problem is our generation Chris and the ones before us are what I call — we are the entitlement generation. Everything we’ve ever done we’ve just been given pretty much; we really didn’t have to fight for it. I mean the generation that came after the war had to fight for rebalancing and had visions, you had great leadership. So I also think that this low interest rate complacency, update your life on Facebook but don’t live in the reality — I know it’s easy to complain but everything is so cushy and you’re not really being challenged. You are not ambitious enough Chris, I am not ambitious enough and certainly the average person is not ambitious enough. I want you to be more ambitious. I want you to show me your best ideas. Stop complaining and tell me what you can do. We need to make a whole movement that says “Do not tell me what you can’t do, tell me what you can do”, right?
Chris Martenson: Absolutely. I’ve had this idea percolating you know we have all this horrible difficulty with our police force which is very militarized and it turns out that our police killed more people in March than the UK police had killed in the 20th century. Right, so we have this very aggressive sort of way of policing and to me it would be—the simple thing is just it’s around incentives again. My solution to that would be listen if the police want to behave that way, that’s fine. But when they lose a civil judgment that comes straight out of the police pension and it’s not made whole or topped off by the taxpayers. Trust me, after the police lose a few million out of their pension the local police, the retired ones will all get together and say “We can’t have that guy on the force anymore” and it will solve itself. I think market forces could solve this.
But we don’t — here’s my assessment Steen: I don’t think we have market forces in my country. It feels like the political process and corporations and lobbying and money have all sort of spooled together where I personally—I think that 20 in your 80/20, the 20 has sort of a stranglehold on that and I don’t personally see any way through this before a failure that requires us to say “Oh gosh, maybe we should be doing this differently”.
Steen Jakobsen: No, no you know my number one choice is that the confrontation, the [Inaudible 00:25:00] whatever happens to start it, but having said that the reason that is the only solution is you are too complacent Chris. I know you are very active and I respect a lot of the things you do of course, but again you need to challenge people to be more in the face of people. You need to have incentive structure; you need to be pushing people to go into politics. You know in Europe we have youth unemployment 25% pretty much across the board. When I go to university I tell them “You are the most intelligent people, kids ever educated in terms of your at-hand knowledge but you’re also the laziest intellectually. You live your life through update on the social networks. You are not able to conduct yourself in a big room”. I mean it’s all about just creating incentives to be better and at least in America you have one thing going for you, you are very good at looking at successes. In Europe this is a little bit different but Chris we need people to be ambitious. "Be ambitious" should be the slogan for anyone who runs for president in the US. And Chris, US is still a great society. Yes the market is right there underneath the surface. I have no doubt that US will come back. Maybe that is — what I think the big challenge for the US is actually what’s going on in Asia right now with China doing the AIB bank and the whole Silk Road. That, in my opinion, is the massive wake up call to the US. You failed on the foreign policy to be able to be part of the construction, but this construction will carry 3 trillion dollars worth of orders every single year, which by definition, by US not wanting to be in it, they are excluded from, at least directly.
So I think maybe that is the challenge that you need some outside force, you need a stupid Danish economist like me to tell you to wake up and then you’re going to push back against me because I think our role, your role largely is to provoke people to think differently, to get people a little bit uncomfortable. But also for them to push back because you live in a great society Chris, you have to acknowledge that. If not, you are not thankful enough for where you are. But you are under-invested in real things and over-invested in paper things.
Chris Martenson: I couldn’t agree more, I couldn’t agree more. You know I was talking with a gentleman who framed this constellation of predicaments that we’re facing that what they really do is they’re calling us to greatness. Like if we don’t bring our very best selves and effort to this we’re going to be extremely disappointed in what happens next because you can’t open the paper without seeing that ocean fish stocks are collapsing and where’s the phytoplankton going and these sentinel ecological species are suddenly disappearing without saying “This doesn’t look like it has a great future in front of it”, you know? And so that conceit that we can lose these things and ignore them until they really slap us in the face is more a psychological problem than a technological problem as far as I’m concerned. But the kids today, they need to know that they’re stepping into something where they can make a difference and I see a lot of them feeling very cynical, a little disconnected from the process and feeling somewhat powerless.That’s what I see in my country.
Steen Jakobsen: And you will see that across the globe. The thing is everything I just said about US you could say pretty much the 30 countries I go to on average everywhere. I mean the thing is there’s no reform, there’s no ability politically to connect and we have the worst vision ever in history. I mean that is basically the story wherever I go; so to some extent my job as the economist part of me is very easy. It is for people, it is call to order and people to be challenged and I also think we need to have greater demands on your politicians, on your kids, on the local grocery store but not in terms of the — we need to realize we can’t be everything to everybody Chris. I think US; every single state in US needs to define what are the three things we’re going to focus on. Any politician in the US should not be allowed to talk on more than five subjects. He can have five subjects he really wants to pursue; everything else has to be left to the market place.
Chris Martenson: Interesting. Well I’ll tell you I would have a quick list of things that I would be working on but not — right at the top of my list would be re-fashioning the energy infrastructure towards that future we know is coming when we run out of oil, right? And whether that’s in 100 years or 500 years or in 50 years depending on whose numbers you like; it doesn’t matter. We’re going there and we’re totally unprepared for it.
Steen Jakobsen: So energy, very good topic; so the way you want to do that of course is to have best of breed. You have one opinion; you want to have the exact opposite. You will promise me you will go find the guy who has exactly the opposite view, Big oil or whatever it is; so that’s where we need to be. We need to be able to disagree with respect and the only thing we do now is disagree with disrespect. So the open discussion, the open really true, "what do I believe in, what will I fight for" that’s nowhere to be seen in politics and nowhere to be seen in corporate life either. And I think to some extent that’s why we have this disconnect. We have inequality being the worst ever in history and we have corporate profit highest ever and that is a function of a lot of things, among them of course your interest rate. But it is also a function of people’s inability to connect.
You know to be honest Chris, the stock market, the S&P 500— that impacts 10-15% of the US population, the rest couldn’t care less. But they do care
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