The fed decision is coming today. A decision that has already been made by this point. Right. Any visurprises today . The market is discounted fully. The real issue is what the chair says in her press conference. It will either be a nonissue because its already discounted or whatever she says in terms of the future path and the key operative words are slow and gradual. Do they change from that or not . Well see. If you are sitting in the room today or you have been advising or around the table over the last several days, put into context what the trump rally means to that conversation. Thats a great question because weve seen rates come up. It started after brexit. Remember, the tenyear treasury was at 136. 6. Thats the lowest since hamilton. Not the musical. The real guy. The british rate. Things started to rise. It was at 188 before the election. Im talking about the tenyear treasury, and now its up bobbing its head. Whats interesting is that weve seen equities rise against that background. You would think you would be discounting future cash flows in a different rate than you were when rates were flat, and you thought it was going to stay that way forever. I think its driven purely, that is this equity market, this dow 20,000, and the other markets by business optimism, and you see it everywhere because of the trump election. If i would have sat with you three weeks, four weeks ago before the election, five weeks, whatever, you would have said that the whole stock market rallied because you said that it was drifb by fed policy and nothing else. Thats the now the whole environment has changed. Thats right. You know, we talk about black swans in the business of finance. I refer to donald trump as the orange swan. Boy. Weve had an orange swan event. First chance tax reform, first chance at deregulation, first chance at getting a Health Care System that may be better and more accommodative for people and can actually work. This was a surprise, an orange swan, but its a happy surprise from the business standpoint. I think thats why stocks have done so well. Ing to overall market conversation. We asked at the top of the show, im going to you first, pete. Dow 20,000 which is in striking distance. Striking. Its a warning sign or a sign of even greater things to come. What do you think . I would think that people are just looking at it as a number. I know the desk weve talked about it time and time again. 20,000 is just a number. Its still a big round number that everybody wants to look at and use as that gauge, right . Just like 10,000 was years ago. 20,000 is there again. Is it a pause . Its probably a pause, quite frankly, i think, if we get there. We probably hang around very close to that number for quite a lot of time, scott. Its every single couple of days and how quick it rolls over. Yesterday it was all about technology and energy. Today technology is leading once again. You look over at the financials. Everybody is expecting them to fall because theyve had this incredible run to the up side, and what do they do . They start to turn around. You look at the bank of americas. Yeah, theres a couple of big names that are pulling down the rest of the xlf, but you look at the financials. They are showing some strength off of the lows even today. Yeah, joe. Technology has underperformed since the election on the belief that the country would adopt policies that were more nationalistic. Technology needs that globalization story to advance earnings. Its not surprising. Pete talks about the performance yesterday and today and, oh, theres a really big meeting at trump tower today with all the technology ceos. Is the street getting ahead of that thinking that maybe the Movement Towards this total nationalistic approach is not going to be as conservative as we previously thought . I think the market thinks that thats the case. I think thats where you are seeing some buying come back. Good buying. Warranted buying in technology. You guys agree at all, you know, maybe with former president fisher that maybe the market is getting ahead of itself a little bit. Theres not going to be any surprise in the room today in d. C. That chair is going to come out in a press conference and not surprise anybody with her language more than her actions . I dont think her commentary is going to be very surprising at all. You can say we finally got it out of the way, and maybe its a rally until inauguration, and we continue to talk about the trump growth paradigm. Or we can say, guess what, weve run too far too fast. I come back to valuation. Were at 17, 18 times forward estimates. I think the estimates are too low. I think growth is going to improve. I think earnings are going to improve. Especially in some of the beaten down sectors. Weve talked about energy being a huge tail wind going forward, and i think thats going to help, and so dow 20,000, i get it. People are nervous about the number. If the valuation supports it,ing i think stocks can continue to run. Mr. Fisher, she said valuation. I saw you perk up there. Well, first of all, we talk about the dow, the dow, the dow. If you look at the russell, broader index, its up even more. This is a broad based thing. Youre right. Its all a question of valuat n valuation. Again, we have a competitive market now where we didnt have it before, and you have to do it in relative terms. I want to make one quick point. Expectations are very powerful. Ronald reagan gets elected. Markets are up measured by the broader market. 8. 5 . He gets inaugurated. The next year its down 20 . It takes time to put this in place. From everything i understand and the appointments this new president electric has made and given the Republican Congress, they actually may move faster than we saw when he didnt get his tax cuts until his second term. People have to realize that. Give me a good segue. Speaking of moving faster, is there a chance that the fed itself is forced to move faster because of Inflation Expectations today. Ppi, hotter than expected. Yeah, but not that much. You have the rally in and of itself and the worry inside the room on inflated asset prices and bubbles, et cetera. Yeah. Well, we are seeing more pressure and were also seeing the commodity cycle, the industrial commodities. Thats up 19 . You see the rollover in proteins and greens, and were seeing some wage price pressure because we have technology at work. We have to see what the pace of the economy is, and i think fwheed to keep the steady hand and not rush to judgment. Barbara. I was going to come back to something stephanie said about valuation and earnings because, obviously, earnings is what drives the market. Im not convinced earnings are going to be up significantly next year because i think what the market is appropriating right now and discounting fairly fully is that trump gets everything he wants. When you really look at the Republican Congress you have the majority leader saying at 77 debt to gdp, thats dangerous. He wants any tax cuts to be revenueneutral. Plus, we do have gridlock. That wasnt just democrats against republicans. I mean, you saw what happened to john boehner last year resigning as speaker of the house because of the difficulty that he had in dealing with the republican faction. Im not at all convinced that a lot of this is going to go through. Maybe some of us have pricing power, and as the economy actually does recover, i think it will add even more pricing power, and theyre very efficient, and i think margins actually stay pretty elevated. I dont think they roll over, and then i think you have this better gdp. Not growing 4 . Ill take 3 on a sustainable basis. Youll get top line growth. Youll get operating leverage. Its not going to be in every industry. It will be in certain industries. Are you inclined to buy into this market . Yes, sir. If we were on the Trading Floor, judge, whenever you hit a big number like this, 20 thousands, which we havent hit yet, but you would have everybody throwing up trading cars in the air and screaming and then and selling at the same time. I like the fact that Interest Rates went up as much as they did. You started the show saying is the market ahead of itself . Thats the markets job is to be ahead of itself. We cant trade what is today because then were not looking out into the future at what might be. We can be disappointed by what might be. I dont think we will be. I think im agreeing theres one thing getting ahead of itself. Theres one thing getting out of control. Your foot cant get off the ped pedal. I think overall the market is going to price in most of what they believe right now that were going to get in 2017 and like i say, barbara, im disagreeing with you because i think that mr. Trump by both the force of his personality and by the threat of his tweets is going to get what he wants out of the congress because he has the direct mouth piece to the public. Do you think anyone is worried about the magnitude that the speed at which 20,000 may be a number to most people. It has a little more umpf to it considering the speed in which weve gotten to 20 since the trump election. You know, the chafir, janet yellen, has said sthees e shes worried about building a bubble. To me thats what i i love janet. To me the testimony she gave at the last congressional hearing was what i call the Homer Simpson doh moment. Yeah. I mean, thats where weve been. I think this is the tugofwar that were seeing. Rising rates. Well see if the tenyear stops where it is. Thats an important bench mark. Fiveyear has come up even faster. How you can have that and rising stock prices comes back to your point, which is top line growth. We havent had great top line growth. Can i ask you . We talk about the press conference. With seems as though president elect trump has spoken to really everyone. Kanye west yesterday. The Federal Reserve is going into a press conference. Do we believe that possibly whether its secretary of treasuryelect or president elect trump that theyve had contact with janet yellin in approximate the Federal Reserve . I would have no idea. I this i in terms of responding to a press conference or whatever, i would caution president elect trump particularly the secretary treasury you really dont want to scare people. You are going to do it by saying were going to politicize the fed. Theres no need to do this right now. Chair yellin is in place until february 2018. I think it would be frightening for the markets if you did see political interference and attacking the fed, and also remember, this is a president elect that chided the fed for keeping rates too low for too long and creating bubbles. This is a move thats totally discounted. Is there any risk in a tweet following the decision depending maybe on whatever the language is . How would you folks in the room be dealing with that . I think you just read it. You let it roll off your back. Again, this is you have to remember, these are people whether you are a hawk or a dove or wherever you are, doing their ernest best just to get it right, and its also a group of hyperacademic people theoretically driven by lots of models and lots of training, and they live in a different world. I dont think you do have your best when were there. You check your politics at the door. I was a democrat once. I havent been for over 12 years. You never talk about these things at the table. You think the chair will serve out her full term . I hope so. What if she doesnt . Well, then there will be a new one. I know, about ut what happens to the stock market. Then this guy will be were in trouble. Do you think im serious. Do you think the market is ready for upheaval at the highest levels of the fed either through the chair herself or through vicechair fisher . Look, the president elect has two immediate seats to fill. Then i think leo brainerd who was quite partisan giving money to Hillary Clinton should go, will go. I think another person will go early will be dan terillo, and there are four seats that you can put in there, and two immediately that could have counter voices. They have only one known republican on the board of governors, and thats jay powell. My belief is he should be kept. He wants to stay, i think, and so youre going to be able to influence Monetary Policy just by putting the right people or his people on the board of governors without attacking the institution. Thats my point. Once you start attacking the institution, i think you make people very nervous. What if one vicechair fisher ask was replaced by another vicechair fisher. Tloo finally they would have one who spells his name correctly. Do you have any interest . Ive done my duty. Okay. Im really promoting these two guys. Have you seen their commercials . Theyre doing a good job of doing that themselves. Its all about promotion. You know how it is. You got to put it out there. Twitter, facebook. You name it. I have kevin oleary on the phone with us as well, and he is actually joining us today from geneva. Kevin, interesting to talk to you today. Certainly on whats ahead later this afternoon. Were watching the market creep towards 20,000. Youve heard from former president fisher here. What are your thoughts . I come here this time of year to try and understand whats going to happen with sovereign money. Geneva and zurich manages billions, hundreds of billions of sovereign capital, and most of its not in the u. S. Anymore. Ever since the troubles of the florida attorneys general against ubs, theyve shunned our money, and theyre now servicing the gulf and asian and Chinese Capital by the hundreds of billions. They dont publically search. They dont talk to many people. Over the years ive got to know a few of them in both zurich and geneva, and if i plied them with enough they tell me the two things i want to know. One is what are the allocations going to be for 2017 in sector and geography because they can invest anywhere, and they also play currency. We like to think of the strength of our u. S. Dollar, but the swiss franc has done much better than it has, and even though they get penalized as much as 50 basis points for having cash, this is what really struck me. They have now raised going into the end of the year up to 33 cash, extracting a lot of it out of our u. S. Equities. It really blew me away. I have never seen that much cash on the sidelines before, and i asked him why specifically. It is anecdotal, but it is a lot of money. They are not as optimistic as we are about the trump factor. They dont think the earnings are going to show up as euphorically as we do, but were closer to it. Sitting in new york or boston, you just feel the immense positive vibe. Theyre sitting in zurich and geneva and looking at the world a different way. The other thing that theyre concerned about is if the fed were not to raise, which i said was impossible. 25 bips is baked in, as mr. Fisher pointed out, they would consider that an extremely negative, and they wanted to buffer for that. There are some that believe that things can tougher than we think. The other area thats really interesting that they asked me a lot about because ive never really focused on this, theyre ready to put a ton of money to work in debt, in the energy space in america. Particularly around the bonds that were issued that are coming up in 2017 and 2018, around all the shale debt because they now feel as we do that this is going to be a very interesting space. They actually think the shortterm debt will do better than the equities, which is amazing. Theres going to be a lot of cash sitting around to refinance shale plays in the u. S. If the Regulatory Environment gets lifted as trump suggests. Particularly with that signal of secretary of state being an oil guy. They love that a lot. To have this much money go to cash, i have to circle back do that, has made me change a few a few ways im thinking about going into year end. Im kind of joining them a little bit. When this much money goes to cash, it just doesnt feel right. You got to be here. You know, we are so steeped in our own economy. You got to be here. They look at the world, and they just look at it differently. Thats my message from geneva. Did i hear this right . A little birdie told me that you met with president elect trump yesterday. Is that correct . No comment. No comment. No comment. From you . Theres a first time for everything. Apparently so. Seriously . No comment . Ill be coming home soon. Ill be coming home soon. Ive had enough of switzerland. Its a beautiful place, but, boy, these guys are tough, i have to tell you. If youre are not going to comment today, hopefully you will soon. Do you talk at all about the stock market though . Yeah. They are in the camp of pes are higher than we think. They just dont buy the earnings for next year. They just dont buy it. Im talking about you and the president elect. Now youre trying to deflect again. You cant nail me on that. I can only try so often. Not the trump my first meeting was yesterday in geneva, and i had time and i left that meeting not feeling as good as i went into it. You know, its all our perceptions about the animal spirits have returned, particularly into mr. Fishers comments about the russell 2,000. He is absolutely right. Thats not based on new cash flow for next year. Its based on optimism, and thats the position a swiss sovereign manager has when he goes to his model and says what is this . Why should i pay 20 more for all the sectors in the 2000s just because of one election cycle when we know it takes years to implement all of this optimism . Thats the difference they have in the view of whats going to happen in north america. You know, its a funny thing that some of it when you make decisions about portfolios, its happened to me yesterday, i needed someone from outside of boston and new york to tell me that, and that just i said to myself, whats my down side . Im taking tremendous up side off the table. Ive made my money. Maybe he is right. If it its a reason we didnt hit 20,000, i think the guys over here are pulling the sell trigger every day. Thats whats happening. I appreciate it. Enjoy geneva. Well see you back here soop. Take care. Byebye. Kevin oleary with us. You want to leave us with a sort of parting its very swiss. Its usually their opinion. Also, remember the basic rule. Whenever anybody wants to buy something, you dont want it. When everybody wants out, thats when you want to go. Right now we have enormous amount of optimism. Here, maybe in europe, you know, i would be a little more pessimistic too about the view only because you have a president elect who has made it quite clear that he is going to focus most certainly and especially on whats happening here in the United States. And making this an attractive place to invest. One last thing before i leave. So i talk about the rise in our tenyear rates and our its happened across europe, except for in switzerland, and maybe denmark. Let me ask the tenyear germans in positive territ