CIO Scott Martin Interviewed on Fox News 6.10.22
Program: Your World with Neil Cavuto
Station: Fox News Channel
NEIL CAVUTO: By the way, we told you about how this really stung stocks today. The Dow down 880 points. This was its 10th down week and the last 11 you know that story here. But the betting seems to be that the Federal Reserve, the only game in town to fight this inflation, since we’re not seeing anything done on Capitol Hill to deal with it, it means that we’re going to look at a lot higher prices when it comes to our borrowing costs. For example, the Federal Reserve meets next week. The betting is they’re going to hike rates by a half a percentage point. They may the month after that, another half point hike. The betting seems to be in September when they meet after that, another half point hike, some factoring in maybe a three quarters of a percentage point hike. So rates go higher, prices go higher, everything seems to go higher. To Scott Martin on what the implications could be. He’s with Kingsview Asset Management and Frances Newton. Stacy of Optimal Capital, the director of strategy there. Frances ended with you begin with you the notion that the Fed has no choice now but to up the ante when it comes to upping those rates. Do you agree?
FRANCES NEWTON: I do. I think in the interim, they have no choice. I think that the persistence and energy is giving them quite a challenge. But the problem is, is that we have a record amount of debt in the system and last time they hiked rates, they had to quit. They they didn’t quit because they wanted to quit. They had to quit. There was a liquidity shortage in the system and they couldn’t service that debt. And inflation is horrible as it is. It’s better than a credit crisis. And so I think that they’re going to be as aggressive as they possibly can be until they have to stop.
CAVUTO: You know what’s interesting about that? You talk about our $31 trillion debt, Scott. Just a nominal uptick in rates to where we think we’ll be by the end of the year to three and one half to 4% on the overnight bank lending rate, which is the rate they control. That’s going to add trillions to that.
SCOTT MARTIN: Yeah, it’s going to feel really tough. And actually, it’s ironic, Neal, maybe the government, the actual debtor there, will feel the pain that the consumers are feeling for the last several months. Oh, my goodness. And share some of that feeling around because goodness, this is a lot of trash talk. It feels like from the administration this week, I mean, pointing fingers, blaming oil producers, blaming Vladimir Putin, who’s been pretty quiet of late, certainly. I mean, all this finger pointing, all the efforts that the administration says they’re making, Neil, are just really not happening because fixing this inflation problem, opening up some of the oil fields, getting nice, lets say are nicer, playing with some of the oil producers out there, helping out consumers. I mean, fixing this problem should be as easy as walking up the steps to Air Force One. But it’s not because they can’t do it. They can’t change their tone and they’re going all the way down the road with it. Even the energy sector secretary, as Jeff Flock pointed out, you.
CAVUTO: Know, Francis, what’s a little weird here? You know, a combination and a confluence of events, right? I mean, we have the retail inflation now back to where we were 40 years ago, consumer sentiment and other. It’s how people feel about the future is also at or around a 40 year low. The cost of living increase that is planned for Social Security recipients is probably going to be around 8.6%, the highest end stop, if you’ve heard this before, about 40 years. Meat prices, the highest in about 41 years. Gas the highest in about 40 years. What’s going on with this 40 year thing? And is someone trying to tell us something that that we’re in for something big just like we were then?
NEWTON: Well, I think we’re going to see this show up in the polls in the midterms. And it’s really interesting that, you know, Jay Powell has kind of switched his religion to Paul Volcker ism. So that’s giving us an indication of how he’s going to try to solve this problem. And how much was your first mortgage? 13%. Neal, I think if I remember correctly. Right. The interest rate on your mortgage.
CAVUTO: Did I ever mention that story to you? Yeah. Well, that’s what our.
CAVUTO: That was a bargain buy back then, by the way.
NEWTON: That was a bargain. But the really sad thing here, and I think this is what’s going to get people motivated politically, is the people who have assets, of course, therefore in one case are suffering, but it’s the people who don’t have assets that not only are putting up with a on average 12% increase on their food, they’re putting it on credit cards. And now that we’re raising rates aggressively, the interest rates on their credit cards are going to go up. So they’re going to end up paying a 20 to 30% premium on their everyday items. And that’s the saddest part of this entire process.
CAVUTO: And Scott Martin it’s what you’re used to, right? Your perspective, your life experience. Some people have never seen anything like this. How are they going to judge?
MARTIN: They haven’t. It’s going to be really rough. You know, we’re already starting to see that. I mean, look at savings rates plummeting. Look at credit card usage. That’s increasing, obviously, at a crazy rate. Now, the fact that consumers are tapped, I mean, they’re spending, but they’re spending on essentials. So not spending on discretionary items. And your comment about the 40 years, my friend, I mean, we’re seeing prices as high as they’ve been since I was prom king. If that doesn’t tell you anything to be scared about over the weekend.
CAVUTO: You were a king. Wow. I was lucky to get it at all. But after 13.
NEWTON: Years in a bassinet.
CAVUTO: See? Listen to you. I don’t know. It brings back memories. Not not so far, not all good memories. Guys, I want to thank you very much.