Consumer spending. Gets you over 3 . Probably not. I would take the under on that. Very interesting comments from the former fed chair. He was great and listen, he deserves a tremendous amount of credit for what he did for this economy. The recovery was called the obama recovery i believe he had the large hand, but hes 100 right. Getting to 3 is going to be difficult because the driver of gdp in this country now is software. Is services. It is the Technology Component and that is incredibly difficult to measure. We are a different economy, we are a time and convenience economy and to get the 3 , its not going to be the old bulk economy thats easy to measure. The treasury secretary says its going to take two years to get to 3 . Economic growth. This is the market debate. Over the next few years. Either youre going to get levels of Economic Growth to sustain stocks at high levels, profits and otherwise or youre not. Let me cast a scenario in which you get that 3 growth and a lot faster than two years. You get one major piece of legislation done. Say its tax reform. When bernanke is responding to that, hes just looking at the first impact of what is the size of that tax cut and spending it back to the economy. What hes missing and whats important here, the derivative effect of how do people feel. What are the socalled animal spirits. During this bernanke recovery, you know, you havent had consumption going up much at all. People have not felt good, even though job growth has been happening. If you have people feeli ining , theyll start consuming again. Hes not dismissive of thachlt he says, yeah, youll get a pop. But be unable to sustain. What do you mean car purchases . You think, are you going to buy two cars . What if bernanke bern is right . What does that mean if you look down the long runway . Rig before we came on, sarah said that the atlanta fed came out and said 4. 3 gdp is what they were looking for, so 3 would be groueat. Its a lot further. Its good to see him, who i think now is finally getting it right in the administration, which is lets underpromise then overdeliver. Give ourselves more runway, so you have to worry b about what are the politics of what theyre saying. 4 was thrown out at some point. Were dialing it back. Right now, lets put it out there. Were not promising anything. Nothings going to happen right now. Weve got a do nothing presidency, lots of executive orde orders, but no physical stimulus. So youll continue to see rotation underneath and i think right now, what were seeing is al goes drive and a very narrow advance. Now you be the kis. Joes point is dead on. We dont know how to measure this. We were measuring the economy as if its still a midwest rust belt economy. Thats not the case. Talking about the economy in the way the president himself is pledging to people that he can bring the kind of economy hes talking b ining about. Does he understand the impact of technology . Does anyone in washington understand technology . They deny it. I think he has to say that because the mexican, chinese story is better for the football stadiu stadiums, but the reality is no. Bigger picture though, investors not invest ng the economy. They have to live and work in the economy. Investors invest in the stock market. Go back to 1900. Look at 16 marriage markets. The long run correlation between Economic Growth and stock market growth, returns, is effectively zero. 06. We all feel better when the economy grows, but thats not comma dictates the ups and downs of the stock market. You can have a panic in a great economy. A great stock market in a lousy economy. I think we need the focus on forward returns. Is it lagging . Contemporaneous . Can i give an answer . Okay, United States, united k g kingdom. 190 to 2009. Literally, the u. S. Was able to grow gdp by a full percentage point fehr year greater than the ut. Returns if were the same. Cycles. Cycles are a different conversation. There is no correlation. Cycles and Economic Growth. None. Does not exist. Larry kudlow were sitting here, hed Say Something like corporate profits are the mothers hes also say stocks. Theres a lot of things we can strikewhileitshot trot out, but theyre not reality. Giving you the data. No, youre giving me data thats managed to include. Whos managing it . Im giving you data from the London School of business. Josh, josh, you got to listen. Very carefully. Numbers can tell you anything you want them to tell you. I tell you look at cycles. The only numbers that exist. Gdp versus stock. Somebody help me. Theres not another set of numbers. This is a difference betwe between and practical knowledge. Youve got to look at cycles. How the economic data. We dont disagree on that. Youre making a different argument. Youre shifting what im saying. Im not deny iing that for economic cycles. Stock market cycles a dove tail economic. Theres no disagreement. The question is do investors require greater than 2 or 3 growth in order to make money and the answer is no and this does not negate the fact there are cycles. That has nothing to do what what i said at all. What was your point . We agree. 3 . 3 . How do you get 3 in this economy right now . First of all, gdp is incorrectly measured. If we were properly measured and incorporating software and services, we might be at 3 , but let leave it how it is now. How you get to 3 , we had larry on friday. Simple. You need a grand infrastructure plan. You need to build out the midwest, you need to build out the bridges, the roads, the infrastructure in the country. If you do that, then you get to 3 . The president s party doesnt want to do it. Doesnt want to blow a 4 trillion hole in the deficit to do it. Lets bring in another voice. Jeremy siegel at the university of pennsylvania. Professor, welcome back. Happy to be here. I know youve been listening to this. A lot of back and forth. Why dont you weigh in. There is a lot of things, you know, you could say why do value stocks in the long run give better runs than Growth Stocks who have better earnings. It has to do with the pe ratio. That youre paying for. And slower growing stocks have lower pe ratios and higher dividend yields and they can do fairly well. Thats why you can earn quite decent returns in a lower growth environment. But all that said, the biggest shock to macro economists of a last ten years has been the growth of productivity. We useded to grow 2. 5 a year. Now, were between zero and one. Productivity is what makes wages grow, what makes the standard of living grow. So we can get a lot of jobs, but our standard of living isnt increasing, theres a lot of dissatisfaction, so we could argue about what effect it has on stocks, but it certainly has a lot of effect on people. On individual people and why it is economists are arguing, i would say one is a lot of excess regulation that weve had over the last ten years. A little bit of it might be mismeasurement because of technology. Were not preparing our students, i think well for the 21st century. And type of jobs that are available. I mean, theres a whole host of reasons we need faster productivity growth for standard of living to feel better. We can then argue about how much better it is. Let me ask you about the market. Nasdaq is above 6,000. People feeling good about where the major averages are. S p is not that far away from an all time high. You were starting to waiver. Then seemingly grew more bullish following the state of the Union Address from the president of the United States. We had that conversation on this program. On march 1st. Where are you today on that view . Well, i think clearly, first of all, i dont think nasdaq is the tech sectors pe we know based on this years earnings is the same at the s p. So, were talking about 18 to 19. In a low Interest Rate environment. Thats very reasonablreasonable. Its a world of difference. Its anticipation. The market does want Corporate Tax reform. And will be very disappointed if we dont get it this year. It seems in the last few weeks, moving on the health care and that is a prelude to moving on Corporate Tax reform, we could get that before personal tax reform. I also think the border adjustment tax, he didnt make it clear whether its dead or not. I do not think its a good idea. Personally, i would leave that out and i wouldnt get overly panicked about the deficit that might result, but the deficit of hawks are clearly only three votes are needed of republicans against the trump plan and it dies in the senate. Thats not very much. Zpl let me ask you this. I have a jpmorgan note in front of me today. Question they asks, their question of the day, how expensive are equities. They say and i quote, investors are concerned about ek quities being too expensive, focused on the level of u. S. Earnings multiples and recent rise. We are not worried about either. Do not consider equities expen cy and should stay long. Is that your view . Very much. First of all, where theyve been is not important. Its where they are now. Right now, were at 18. 5 times this years estimated earnings without a tax cut. Now, energy may disappoint. A lot of those are assuming energy is 55 to 60. Weve below that, but none the less in an environment where the tenyear is at 223, wow, thats not an expensive place and i still think equities are a place to be. So, you bring up a tenyear, 2. 33. Weve heard all year about the concerns about revenue dprogrow. We see it approaching 9 . We heard concerns about europe. It seems those concerns are now alleviated. Why is it we are sitting with a market where a tenyear trades at 233 and we began the year at 250 . Investment demand. It is, it is, we have had a softening of economic activity, we had. 7 gdp growth and yes, were going to have better. I dont think its going to be 4 like the fed. I think were going to be close to 3. 5. So were still stuck in that 2 range. Look at whats happened to the surprise drop in Consumer Prices and the pce inflations not a problem and dont forget, the long bond is the ultimate hedge. Against a stock market crash. If theres going to be a bad event internationally, north korea, europe or whatever, everyone runs to the long bond, to insurance policy. It gives it a premium and a premium means a low yield on that instrument. You think were taking the threats of Something Like that seriously enough . As investors . Well, as a very good outcome from the first round election. I dont think le pen at all has a chance. In the second round, im not fearing a confrontation on north korea. I think its its saber rattling. I dont see it, but there are a lot of investors that want to hold long treasuries because if managsomething happens, they wi up if the stock market goes down 500 points. Its good to talk to you. Thanks so much for coming back on the halftime show today. Thanks for having me. We have a news alert. Phil lebeau just spoke with boeings ceo. Hey, phil. Hey, scott, you guys were talking about the strength of the economy. Here are some fresh comments from chairman and ceo of boeing talking about commercial airplane demand and the fact that the amount of traffic or the number of people flying worldwide is e exceeding expectations. Big picture when you look at the 20year look, is very positive. More than 39,000 airplanes needed around the world. Traffic Growth Continues to be good and stable and in general, growing. First quarter this year, 8. 8 up. So even over the longer term trend. So, traffic growth patterns the positive. Overall, the market is very healthy. Combined with the backlog we have of about 5700 aircraft, that gives us the able thety to wramp up production and do it in a productive, longterm way. One other thing to think about when you consider the comments from dennis. Guy, remember, it was just three months ago ha the president was tweeting out boeing air force one contract, maybe we should rip it up and people were worried about the impact on boeing. Think about how things have changed since then. Youve got the prospect of more defense spending. Export import bank is going to be up and running again and you have got boeing looking at the prospects of more defense spending on top of that, so a number of these factors together, boeing is looking at things far different in terms of itself relationship with the Trump Administration than it was swrus a few months ago. Interesting. Good stuff. Thanks so much for popping on. Yet you threw in the towel on boeing recently. Its the i dont think uf michigan m. The stock had done so darn well that there are risks out there. Not with standing. Weve got to factor the emirates for instance has 150 orders for the triple 7 x yet that airline has seen demand fall off in the wake of the trump various manifestations of the travel ban. There are other risks. Today, in fact, American Airlines is deferring some 787 orders for a couple of quarters. Im by no means saying you should short this stock. I think this is one of the best companies in america, but at 182, i found it too price issy. If it comes down 2 , im in big. Back to the conversation we were having with professor siegel and wrap that up then well take a quick break. Sell in may. People are, may 1st, first trade ing day of a new month. Anybody thinking about that . Because the question is would show you in the first year of a presidency, it doesnt work. What are you sell selling because if you look at multiple assets now, whether its fixed income, taxable fixed income, high yield, emerging markets, european stocks, everything is performing well, so just to say im going to sell in may and go away and come back again and buy back at a later date. No one literately does that. Just because advice rhymes doesnt make it good advice. Its crazy. You never do it. If hem lines are too long, are you supposed to sell . To bring it back full circle to where we started, and i know we started off by talking about this 3 growth notion. Being sustain bable, which be bernanke says its not. Do investors just need an ov overall reality check on where we are . Where the markets are today . Nasdaq seems like it doesnt want to stop going up. I think theres unexplained behavior. No way you can justify the valuation certain stocks like m amazon, but you never could, so youre buying the story and the excuse. Throng as long as they kopt to execute, theres no reason to continue to sell it. So its a narrow advance weve seen before. There are other names that continue to work. We have a company like apple, when they report on tuesday, theyre going to tell us they have a quarter of a trillion dollars in cash. Now, its not all incumber ed, understand that, but just the point, never in history, you can go back to the east india company, the south seas company. There has never been a publicly traded security that people could invest in that had this much cash, this much power, this much dominance over its industry. And apple is one example of Many Companies that are at this stage in the game now consolidating power over huge verticals all over the economy. And its not just the four we always talk about. So, i think that we need to think about you know, relative valuations in this context that look, theres something going on here. That we have never witnessed in market history. The its just not happened before, so we have to have some humility and cant just point to, well, i dont like the pe ratio versus what it used to be. How much what . Humility is in the market. Hold your thought. We want to show you the president. The independent Community Bankers association. This happening moments ago. Sit down, please. Beautiful hats. Well, thanks, mike pence and mike has been so great and hes on your side. Hes on everybodys side. Its a pleasure to welcome the Community Bankers to the white house today. I want to in particular thank cam fine. Cam fine. Stand up, cam fine. Pret it wellknown guy, too. Congratulations, cam. For leading the independent Community Bankers of america and thank you for all being here today. Very, very special. Its also a very place, isnt it . When they say how about coming to the white house, urnl ly usually about 130 , we try to find the extras who are coming. We have to be careful. The its a great place. I want to thank our Small Business administrator, linda mcmahon. Is she around some place . Yes, thank you. Where . Thanks, linda. For joining us today, shes doing an incredible job helping Small Businesses just like you. Some of you i know you, youre not that small, i hate to tell you. Youre not small. A lot of people would like to be small, right, cam . Theyd like to be small like these Small Business people, but theyre great people. Employ a lot of people and what they do through Community Development is amazing. Community banks are the backbone of Small Business in america. Many of you are the reason that young families can purchase their first homes. Farmers can buy their next tractor and entrepreneurs can can can open up their next business. So true, Community Banks. Over half of the Small Business and loans going to Small Business and its really a a substantial number higher than that, come from their community banker. You provide critical access to capital, especially for the rural communities. Thats why in the first 100 day 0 days, i have taken action to roll back burdens and regulations that undermine Community Banks, especially i know youre going to be disappointed of this. Doddfrank. Its out of control. And by the way, not only for Community Banks, for banks period. We can take community out of that one, right . Now, doddfrank, were working on that right now and youll see a very big difference because you want to get out and make our country work properly. Ive directed by administration to provide Regulatory Reform and relief those those rules dont shut down Community Banks which have been shutting down and Small Businesses and put them on a compet