Welcome to the stay the markets podcast episode 80. I'm Paul Rodriguez of think trading.com. I'm Tim price of price value Partners.com at a very special guest is Daniel demartino Booth. She's the CEO and chief strategist for quill intelligence a research and analytics firm. She spent nine years at the Federal Reserve Bank of Dallas where she served as an advisor to President Richard W Fisher throughout the financial crisis.She found it quill intelligence in 2018 and is the author of fed up and inside his take on why the Federal Reserve is bad for America. She writes a full-time column for Bloomberg View and is a business speaker and commentator and is frequently featured on CNBC Bloomberg Fox News. Fox Business, BNN, Bloomberg Yahoo, finance and other major media Outlets. So Danielle, welcome to the show great to be here today.It's fantastic to have you on I'd like to start sort of at the beginning when you first got involved or interested in financial markets. Can you tell us a bit about that? Well, it's pretty simple my father taught economics and finance. So I swore on a stack of Bibles that I would never go into that industry. So it was a matter of Never Say Never because life came back to haunt me when I first visited the Salomon Brothers. It's no longer with us the Salomon Brothers two-story trading floor down on Wall Street, and I was hooked from the minute. I saw it. Wow. What a what a what a fantastic image. I've Got My Mind. Out that sounds amazing. I'm / yes. Yes indeed. Yeah, and so you have an instinct with which company to go for. Can you tell us about your journey after you graduated you had some choices you made some interesting ones? Yes indeed out sounds like you've heard me give it give a speech recently. Yes. I I had the option of going with Arthur Andersen. I was nine hours shy or three courses show. I have sitting for my CPA and they were going to put me up in corporate housing and Austin, which was is my favorite city and and put me on a fast track to Consulting. As soon as I passed my CPA. I didn't fancy myself a bean counter for the rest of my life. So I turned them down. My mother was adamant that I try and stay in the state of Texas close to home so to speak and so she suggested that I go with a firm that I did not understand I couldn't get my head. And their business model, so I disappointed my mother and said no to Enron and and then I went off to the bright lights and the big city of New York and joined a firm called Donaldson Lufkin & jenrette, which is also no longer with us. We sold out at the very top of the internet bubble and I had to convince my mother that I wasn't going to work for DHL and international letter carrier. So when when he when are you going to turn down an offer with? A banker Daniel gracious. I mean like when can we bring back bear Stearns and Lehman Brothers as well? We can just put them all together. I can say no to all of them, but you did actually say no to lose as well didn't you because you said you didn't like the culture that we weren't sure of the culture there and you know what I wasn't it didn't give me the same feel as as D LJ D. LJ was was Scrappy. It was very entrepreneurial there weren't a bunch of lines drawn up in between. They literally had in their in their annual report a line that said make money. Wow. Yeah, it was it was a much different Wall Street than what you have today, which is very siloed and compartmentalised and and now we're finding out maybe a little bit to compartmentalize because they seem to be rolling up divisions one after another and there's blood in the streets. What did you do it D LJ it Daniel. Well, I was I was recruited into sales and I ended up working quite a bit with with with corporations and institutional investors as well as some individuals. I think I might have learned more from the individuals than anybody else about the idea of greed, but I'm but it was the private Equity aspect of dlj the fact that we had an internal Merchant Bank solely on black would wander the Halls he been associated with Drexel toe. James who went on to Blackstone after dlj was sold. He was vice chairman at the time. He he sold dlj and I learned a lot about private Equity before it was this Mammoth industry and then I worked a lot with debt retirement and and the guys on the junk bond desk most of whom had come over from Drexel and who would have easily sold their mother down the river for the right bit aspirin. So you you've got a fantastic anecdote about Out price and Tim price my co-host here loves a good quote and he loves a good anecdote. And we love to tell the one that we both heard from you. But we think it's only fair that you tell it yourself. Well, I'll paraphrase I don't have it in front of me, but I've become good friends over the years with Arthur cashion. I consider myself to be very blessed to know him. He's probably the preeminent Market historian who's still with us and he loves to tell the story about Tiffany the Jeweler and JP Morgan the banker one day Tiffany came across this extraordinarily beautiful stickpin. He knew it had JP Morgan's name on it because he because JP Morgan had this acute affinity for these gorgeous stick pins that men used to wear and so he sent a man around to Morgan's office with the pin wrapped in a beautiful robin's egg blue gift wrap and with and said this this I know will will appeal to you the price. However, is is $5,000. Rose if you choose to accept send a man send your man back around tomorrow with the check for 5,000 if not send the box back. So one day goes by Morgan's Man shows up at Tiffany's offices the next day with a box wrapped differently and the check for $4,000 Tiffany sat long and hard thinking because $4,000 in that day was indeed a great sum of money, but he was quite certain that the In was worth $5,000. So he sent the man walking and said, please let mr. Mark Morgan note. My price was firm. And so then Tiffany goes on to unwrap the box and inside of that box. He finds not the stick pin, but rather a check from Morgan with a single sentence, which was just checking the price. So I love that story. Just checking the price because that is the way that price Discovery was always meant to operate in naturally functioning markets that are not impeded by. Oh, I don't know the Federal Reserve. So what's going wrong at the moment in your view? Well, I think I think what's going wrong. It has been going wrong since the aftermath of the 1987 crash Black Monday when Alan Greenspan put word out. The FED would would be there in the event of any kind of a Calamity in the banking or financial system and it's fine to put out a word of assurance. It's different to send word to bond trading desks on Wall Street via the New York Federal Reserve about intentions of of the FED to inject liquidity into the system prior to those injections in other words in in Market vernacular allowing Wall Street to front run the Fed and I think that that is kind of where moral hazard was born in the modern era and investors have come to know that regardless of how much risk they take on they no longer have to factor in the return side of the equation because they know if something goes really wrong like the tequila the crisis in 1994 or the municipal blow up in Orange County or long-term Capital Management a bunch of academics trying to blow up the financial system. They know that the FED is going to have their back and Jay Powell said as much when he was a rookie on the Federal Reserve board in the fall of 2012. So to cut to the chase is the problem with the the the mission statement of the fed or the staff of the federal is the problem the FED itself. Well, well, I think it goes down to to the focus which wasn't always the case but to the focus on having mostly PhD academics setting monetary policy by way of models that often times have absolutely nothing to do with how the economy or the markets operate and they have really come I use in my book. That up. I call them the MIT Mafia and they've really come to have an outsized influence on how policy is made. And I don't think that that's exclusive to the Federal Reserve. I think you could certainly find similar Dynamics in the European Central Bank bank of England bank of Japan, but they've they've come to have outside influence on how policy is made. But that leaves pop that least fed officials and fed leaders unaware of the critical role that financials financial markets. Play when they come together with economic data. So I think the disregard it pal even acknowledged it in his first Jackson Hole speech that the past two recessions in the United States have not been brought on by any type of inflationary pressures, but rather Financial instability. Could one argue that this perhaps goes back even further to when the u.s. Came off the gold standard in the 70s. Well, you know, I think that there's something to be said for looking back even further though. I have to say my hero is Paul volcker and I considered him to be a highly disciplined monetary policy maker, but there is something to be said I think for the lack of discipline in monetary policy making that has Alongside of coming off of the gold standard and and relying increasingly on on The Laurel Of Reserve currency status and what it can give you in the way of fiscal profligacy. You're not the kind of gold. But how large would you expect to have a percentage of gold in your portfolio? Well, I think you should always have gold in the background so to speak so you should always have that be you know, a good five ten percent. Let's call it as a permanent head because you never know if an asteroid is going to hit planet Earth on why hit with which is got a lot of gold in it, which is I don't know if you heard about that. No. No, I've seen this I've seen mainly My Twitter followers in the middle of the night. But but you always want to have that backbone of hedge built into your portfolio because if you look at correlations and how they behave in between asset classes when the peanut butter hits the fan so to speak there are very few places you can hide and that's why I personally do own gold as well as what I'm writing about for my weekly quilt municipal bonds, which may seem counterintuitive. To itive in that I am a huge critic of the worst run pensions in America. But but again gold municipal bonds very few places to hide when the peanut butter hits the fan and correlations line up and you end up losing money across the board which, you know, puts the efficient Frontier, you know, since it's the way of the dodo bird so to speak in relation to Gold the should should we should we that we as a kind of global we be concerned about the Didn't set by executive order 6102 in 1933. Well, if it was 33, when the ownership of gold is made illegal in the US. These are very heavy questions. They tend to come about in times of global depression. They click they tend to come about in times of not currency Wars but hot Wars and and one does want to be very careful about speculating but I would say that the very respected individuals can rogoff being one of Of them, you know, he he is one of the most highly regarded highly esteemed thinkers in monetary policy worldwide and need a he's written about the death of cash and an imposing haircuts on individuals who saw fit to hold hard cash as we saw to be the case in Tokyo after negative interest rates were imposed the number one selling good on the market was home safes. And so rogoff's rogoff solution to this in the United States if it was to be translated over a negative interest rate policy that would theoretically Force consumers to spend. So if you chose not to and you wanted to keep your your pennies in the bank, then you would get a haircut for doing so you would be penalized for doing so and I would draw a parallel to the confiscation of gold if you're talking about taking away part of my hard-earned dollar because I want to keep it safe do you have Any any view on cryptocurrencies? Well, I think cryptocurrencies are. In the day has been taken up post facto by China by Russia by Venezuela. I think that because it's already become a sovereign issue that the bank of England for example was probably the first develop Central Bank to begin exploring a sovereign cryptocurrency. I think that there are certainly circles within the US government that are exploring This Not That anybody wants to talk about it publicly, but I do think that that it will become a matter of National Security if Your cold war enemies economic enemies. So to speak have a cryptocurrency. It would be incumbent upon any country to have their own as well rather than be infiltrated. So those are kind of my views on where I stand on on cryptocurrencies. I think that a lot of a lot of speculation has been has been done with other cryptocurrencies, but when you hear and see headlines related to child pornography rings and They're being obstinate cated using crypto currencies. You see the security is not where it needs to be. I think that we're better off going The Sovereign route as long as there's no confiscation of cash and it doesn't become some means by which you you monitor the purchases of your populace, which is why I think it has started in places like China and Russia because I think that that is one of their Express purposes. Do you think that the the economy all the the stock market can continue on its current upward path for the for the foreseeable future or do you see that? There's headwinds coming that that people should be worried about So so full disclaimer. I'm on Bubble vision from time to time and doing these quick three-minute hits and it's interesting to hear the schadenfreude coming from the bullish cabal on Bubble vision and they're so excited that recession probabilities have vanished Into Thin Air, but they're making the assumption that the reason this has happened is because of some type of organic fundamental underlying Growth in the US economy and in other economies such as Europe where we're seeing a lot of green shoots. I would defer to Powell's printing press and suggest to you that tacking 250 billion dollars on to the balance sheet of the FED in the country that has the highest efficacy we get the biggest bang for our debt Buck. If you will, this is some fascinating research that came out of poison tenacity management recently and it shows that in the post-crisis era the United States is only lost about six percent of its efficacy in terms of deploying a dollar of debt to try and extract GDP growth that compares to Something in the twenty-some-odd percentage range for China where it's much more like water falling through a colander and they have much less efficacy in terms of every debt that they dollar of debt that they create but again, there is Little there is never been in my view a solid way to fight the FED if they're throwing so much liquidity at markets. That is also by the way, making sure that the share buyback machine stays up and running. So right now we have a double source of liquidity propping up risky asset prices and I would say that while this certainly cannot go on forever. Because I think that you're in funding pressures are going to compel the Federal Reserve to increase further its balance sheet expansion that we should we should be very careful about trying to fight the FED when it has got the Bazooka going Full Throttle or I should say the fire hose going Full Throttle. One of the the guys we had guess we had on the podcaster a while back with Gentleman by name is Steven Wilkinson. Who's a From business business analyst in Ireland and Germany and he sent me an e-mail early and I'd sooner eat a bit at I'm sure he won't mind. I'm currently unsure of whether I've maneuvered myself into an echo chamber of a clique of like-minded value investors who can see clearly that we're in extra time or whether the current narrative dangerously close to the end of the everything bubble and man. The lifeboats is now the popular View and therefore discounted as this is gets the heart of the quote as I mentioned to you. My view is colored strongly by a moral conviction that what we have now broken money punishment as Savers risk-free, we will reward for insiders Etc is simply wrong and possibly even evil at a societal level. So what I think will happen and what I believe should happen to purge the system of moral turpitude a conflated at the margin this technocratic disregard of the concerns and values of the saving classes personified in the ghastly Ms. Lagarde's most recent comments disgust me personally. Now I find it very difficult not to agree with with Stevens Point about if you like sir. Well, let's call it moral hazard for want of a better better way of putting it and the fact that no Christine Lagarde identity. You're familiar with the comments she made but they they were truly disgusting the idea that we should all be grateful people in Europe should be grateful, you know, okay, so interest rates might be negative, but at least we have jobs. I'm just thinking. Oh my God it is she for real. Yes, you know. II saw those comments and and the the blatant disregard worldwide I will tell you for the Working Man and working woman and the the inability to set aside money for retirement without being penalized is I would agree with the word criminal. I really really would you know, I again this week I'm writing about municipal bonds and and public pensions and forcing pensions to go into alternative Investments private Equity to increase, you know to their Equity Holdings are high yield Holdings to go into passive Investments that they won't be able to get out of there playing with somebody's mothers and somebody's grandfather's well-being and I don't think it's absolutely reprehensible. And it gets under my skin. I wrote a whole book about it. Yeah that there is something that is so fundamentally on American is what I wrote. I was writing about the Federal Reserve specifically, but if you consider the value of Liberty, it truly rips away at at Liberty and the ability to be self-determining and I don't think the word criminal is too strong. All a people at the moment you think just I mean, there's people like us who could obviously see this and are outraged by it. But that the man on the street doesn't seem to be bothered by it because they let's just say perhaps they don't know enough about it don't want to know enough about it. And as long as the stock market is going up they feel okay, but it's not how can we educate people? How can we let them know? How can we go? How can we change the system is do you think it's possible? Well, I think it would be possible to change the system if there was a floor on interest rates, for example, if financial literacy was better embraced if people understood that that the stock market doesn't go up forever, but it's very very difficult to convey, you know two times in US history 1968 1999 two other times stock market. If you look at household net worth have been larger than residential real estate holdings, which is typically the way you build wealth at least in this country. So and today dot dot dot meaning the real economy is has never been as tethered as it is to The Fortunes in the fates of the stock market and a lot of this has to do with how very unproductive monetary policy has made our economy. Mm. He's we had an entire cycle based on residential real estate. That was that was an unproductive Venture. We had a second one that we're in right now based on the financialization of the economy that is inherently unproductive and we're not getting anything to show for it over a long-term basis and yet the average person on the street will tell you especially if they've got a 401k that you need to be quiet that you need. That you're you're simply bitter because you've missed out on This Magnificent rally and you need to stop trying to talk down the stock market. Of course, that's not what you're doing. You're trying to say you need to understand what the underlying motivator has been and how very false it is in nature. And these are very difficult lessons to convey. I don't know what the sergeant I don't know what the status is of the u.s. Occasional system, but I can tell you that here in the UK. There is no provision that I'm aware of for financial literacy in our schools. And what one thing I've supported is a bit with the we've gone a bit petitioned crazy in the UK ever since the brexit referendum. So every everyone's firing off petitions to Parliament left right and Center about everything but one that I've supported recently as an idea is the idea to have some form of financial literacy be part of our national curriculum. Is there anything like that in the US? Good gosh. No, I mean probably the best of the best day of my career because my soapbox involves public education in America. I mean, I think that the I think that the main victim if you will of Federal Reserve policy and people say how do you draw those lines? I say well I drove those I draw those lines because federals our policy has made public the public pension system that favors unions as strong as it is and they they're they're By impede the average Americans ability to access public education, but there is there's nowhere to be seen financial literacy in our schools are best schools. Of course there are but that's probably what five percent of American schools. Otherwise as I said, probably the happiest moment of my career was when an AP economics classes is kind of a gifted and talented high school economics class tweeted out a picture of every student holding a copy of fed up because I Oh my gosh, there's going to be 15 students in America who actually know the truth and are embracing financial literacy it is it is if I knew a way to start a national petition, I would that's not how our democracy works unfortunately and it's certainly not how 90% of our politicians are. Do you think things would have been different under a Clinton administration? Well, yes, I think they would have been worse. I actually enjoyed the beginning of Jay Powell's tenure. ER he initially he was up in front of Congress but his initial Congressional testimony basically said it is not the feds duty to backstop the stock market. He even understood the idea of moral hazard which again you can see in the fomc transcripts from 2012. I happen to think that I mentioned Ken rogoff. I think he would probably be running the FED at this point if it was Hillary Clinton, I think that she had Earmarked to be at least among those leaders in the fed. And I think that we would have had even more dovish policies. I don't think there would have been an attempt at normalizing interest rates. I'm not trying to make a political statement at all, but prior to President Trump being elected nobody at the FED would talk about quantitative tightening or the very idea of shrinking the fed's balance sheet. It was simply a sacred cow. You didn't even touch the subject and the minute Trump was elected all of us. Sudden, it was time to normalize interest rates shrink the balance sheet do double tightening Etc. And I don't think that there was any type of a political motivation at work there. I think it was very much pointed at trying to put the u.s. US economy into recession. Are you familiar with an investor called Jim Rogers? I am I met Jim many years ago. I would have followed him. Yes, certainly. Okay. Well, it's just that As of the people that I've listened to over the years and listen to from on Bubble Vision many times and who I respect, you know a lot his view is his views always been that we don't need the fed and he says look I'm buying gold and I don't like what's going on in America and therefore he's moved to Singapore. And you know, I've got I've got a lot of sympathy with his point of view and he's very smart tell us. It tells it as it is but his view that why don't we just get rid of the central banks and let the markets let price Discovery be be free. Would you go that far? Um, so no, I would not go that far. The final chapter of fed up actually is a blueprint to what I would do with the FED given my druthers. I would I would take it all the way down to the studs and rebuild it from the ground. But I I am a little bit more circumspect when it comes to matters of National Security and would not like to see what what some of our enemies who have been prone to steal things would do if we had a completely unguarded Financial system, right? I say, yeah. So so if you were to do that though, wouldn't you have to rebuild all the central banks around the world you certainly would you hit the nail on the head with that because Because the groupthink is not something that is internalised at the FED. Most Central Bankers think alike act alike and come from this game same school of thought and that is very dangerous because you end up with these situations where you don't just have a boom-bust cycle in the United States. You have boom-bust Cycles worldwide and you end up spreading systemic risk with such a mechanism. So you right now we've got for example Japanese Banks own 10% of collateralized loan obligations in a desperate search for yield when the subprime crisis blew up. I had actually written about it. I predicted it I said it was going to be Global and systemic in nature. I was fairly alone off on a branch with the being Stone dead, you know by people in the masses and how could she be saying this but at the time as prescient as I can boast to having been I have never ever heard of a German Landis Bank never didn't know what it was and yet that is one of the places where we started to see subprime loans blow up and it was because when when all Central Bankers in the world think alike, they take on identical tax you end up having Financial systems begin to bleed into one another and when things do go wrong the the The instance of contagion is that much higher? Yes, because everything moves everything is correlated, basically. Exactly interrelated correlated incestuous call it what you want. Yes. Yes. So so when you look around the world at at currencies given the say the us could be going into recession saying next year or things could be slowing down what currencies at the moment do you think people should be looking at to buy basically gold apart from cold which we've got silver silver. Yeah, so So I'm going to say right now. I have no idea. I'm a bit out of my realm when it comes to asking me such questions. You know, I used to have faith in the Reserve Bank of Australia. I was there recently for a speech and was very disheartened because the Central Bank there is finally in an easing cycle as China Chinese growth slows and takes its toll on that that nation that has been absolutely Police swarmed with speculative real estate but there was a time that I would have said Mexico Poland and Australia, but I cannot throw those three examples out to you anymore. But you're bullish on the US dollar those still on you was that changed? No, one of my three predictions going into the new year was that Germany would go into recession that the u.s. Dollar would strengthen and that the 10-year Benchmark treasury would would close under 2% Cool intelligence put those out on December the 26th 2018. Wow, that's so cool. Well done. Well, you know what blind squirrels even principle that five days. That's my never discount the never discount The Power of Love. Well, come on. I mean, I think you yeah, I think more than that. So what are you thinking for next year? What's what's the called more of the same or well, we have to wait and see you know, where the thinking right? Now is that is that Europe is going to pull out of this that Breck's it's going to have a Kumbaya happy ending and their feet absolutely no ramifications worldwide on the economy these things that most of investors right now it really it stinks. Oh my God, they got a wake-up call coming. They that is that is the running assumption right now is that the Donald Trump has miraculously secured protections for intellectual property. Even though the Chinese haven't even hinted at such great strides, but that is the conventional wisdom. It is that Europe is going to pull out of its slump completely that the trade war is going to be resolved amicably and that brexit is going to have zero consequences and that are go recession probabilities have plummeted but also Elvis is still alive indeed. He is he and Jimmy Hoffer sitting down and having a nice game of bridge. Ready for anybody in the u.s. Listening to this podcast. I must make clear that break sitting I was defined in the Urban Dictionary as saying goodbye to everyone at a party and then proceeding to stick around so exactly so what do you have a view of the other so I mean to you you've given if you like the institutional view but I need what's your personal opinion in relation to what will happen What could conceivably have it? Well, I suppose first in in order first. In our our forthcoming Britain's forthcoming general election in December the 12th, and then depending on how that goes the likelihood of as ever managing to extract ourselves from the death. Grip. That is the Dead Hand of the European Union and The single currency and failing big state protectionist anti-free trade Bloc. Not that we have a strong view on the matter. I couldn't tell so I don't have a strong view on the Matter, but what I would say is that some of the work that we've done recently suggest that as is the case with the United States the bank of England has got a tall order on its hand to slow the slowdown in the British economy. And I would say the same goes for Europe because you cannot reorganize all of China and you're not going to make the industrial the internal combustion engine have a massive comeback. So I think German he's got structure. Roll and secular issues on its hands and it is of course the fourth largest economy in the world and the third largest exporting Nation. The reason I throw these out there is not to lead you off on a path but I would say that I think policy makers and politicians are going to know that the stakes are too high to do anything. But if you know if push comes to shove more of the same of kicking the can down the road as opposed to finding true resolution. It's interesting that you mentioned the the sir groupthink in the institutional world. I'm not sure if you're familiar with a British analyst Russell Napier. He's a financial Market. Yes. Yeah Furniture Market store and Russell's has been writing recently about what he I think he's just come back from a business trip this thing institutional clients around the world including in the States and what I was struck by what he said, which was he felt that everyone was his big consensus that Trump was going to secure a trade deal with China because it would help his re-election prospects and rustles rustles contentious exactly the opposite of that if you look at what's happening on the ground, these are the the US and China trade trade has been weaponized technology transfer has been weaponized currency has been weaponized and the military there is now a heightened military tension between the two Powers superpowers if you like and Russell's One would be that actually Trump doesn't really care less about you know securing a decent trade deal with China. He's probably he could conceivably be more be more incident actually having a hot war with China instead to boost his election brought re-election prospects. I will say this after I appreciate we getting kind of off the financial track here. So we're moving into the realm of geopolitics. You're actually not off the financial track because let's face it is related. It's all related now. Well, it is related when you consider the fact that we use our resources. currency status as a weapon and that that is the way that we ensure that we have that we have the dominant position on the world stage and it's certainly something I think that the Chinese can't stand I think part of their long-term plan is to quietly colonize a good chunk of the world because they're not able to to have their own currency take out the dollar so they're going about Out there going about growing the influence of the Chinese economy by way of effectively colonizing other countries with asset purchases of Key Resources. It wouldn't let me put it this way when it comes to this particular Administration and I don't think I'm making a political statement at all. Nothing would surprise me with regard to your book fed up when you when you wrote it when you you've obviously felt so strongly that you had to It would have been very easy just of left the FED after nine years and said I don't agree with what's going on there, but you actually sat down and wrote this book and it was it a cathartic experience. Oh gosh. Yes, it really really was sometime around 2010 or so. The there was an internal Discussion Group white Papers written and there was there was a consensus. Has inside the FED that they were using the wrong inflation measure the one that they can't ever seem to get to 2% but the problem was it was determined that that was by design. It did not take asset price inflation into account which of course is what sideswiped policymakers and it also had some fatal errors in its construct. For example the pce that the FED makes policy with Uses Medicare and Medicaid reimbursement rates to as an input for health care costs, which are the second largest of every household budget in the most recent October consumer price index report Healthcare inflation's actually up 4.3% If you look at what Americans are spending in terms of out-of-pocket expenses. So if you use something that is by its very nature flawed and it's construct. T' then it's time to find a new inflation metric such that you're not caught off guard again. And so anyways after coming to this Epiphany internally the FED decided to do absolutely nothing about it. And that is when I got fed up and that is when I decided to write the book, it was a very long five years that followed because the president of the Dallas fed Richard Fisher who I advised asked me to stay on for four more years through the end of his term. I accept it that call to duty and I don't have any regrets about it, but it was certainly cathartic the minute. I got out. I started writing the book because There's nothing quite like the hubris of academics who even acknowledge the error of their ways and choose to do nothing about it because finding a different inflation metric that reflected reality would have messed with their models and that float. It's incredible. It's just absolutely incredible. And also the the lessons of the previous crisis just haven't been learned. I mean, it's all so simple. I mean it's amazing to hear it from you because obviously you're on the inside and from the outside. This is all these are all things that we suspect and you know scratch our heads and think we'll how can they not see that but you know for you to say that they know and they just don't want to do anything about it is is so galling sorry, Tim, you know. Decide this at this is a website yet. This is still cool website. You might have seen called long or short capital.com and I'm not sure it's a it's a I'm not sure it's updated as often as it used to be but I do remember I mean most of the best posts were in relation to gaming the CFA exams. But what one of the best things they did a while back was they talked about their favorite inflation measure, which was the inflation X inflation statistic, which was remarkably remarkably stable over time at a flat line of 0. Isn't that wonderful? So you set up soon after you wrote the book or while you wrote the book you set up you set up quill intelligence. Is that right? I did I left the FED on June the 12th 2015. I published my first weekly on the 17th of June and I think I've skipped one week since then and about a year and a half ago. I found it quill intelligence and added a daily Market commentary. To my repertoire because I decided that there was absolutely no reason that I could find to sleep. So I decided to put a daily on top of the weekly and now we publish constantly and have a good cult following and we also have kind of also a hate group because we tend to point out Simply the data with absolutely no bias. And that was always my that was always my goal with quill intelligence and And and when I was inside the Fed was to present data agnostic Lee and free of bias and agenda and let me tell you there's nothing that gets under the skin of PhD economists more and not coincidentally sell-side economists as well. So suffice it to say I relish what I do. That's a fairly brutal regime though at Daily commentary. I used to write daily comedy right? I can't do it anymore. So I restrict myself to weekly but daily stuff is that's a hot dose of The odds no, absolutely. No doubt and I I do have a good team who I work with. But it I am addicted to people say that if I could watch Bloomberg in my sleep, I would and I it's always on mute but I love the I love the information in flow. So if there's one good way of making sure that you stay on top of the markets and economic data. It's to do a daily. Yes, the And of that, so you've got the daily feather and the weekly quill and so I guess you know, it's just thinking of a name for a monthly now are you oh gosh. No. No, I was kidding about the need to sleep. But I do it occasionally quiver just quiver doesn't quiver Works. Isn't that the monthly? Yeah, just yeah just increase my job description. I think you've got something you've got hashtag research Revolution. Tell me what that's about. So it's It's what I just mentioned. It's the it's the very idea of the clean presentation of data being able to look in the weeds get beyond the headlines, you know, there's a treasure Trove of information to be found. For example every month in the University of Michigan confidence data, it breaks out confidence by by income cohort for example, and we have seen just to throw one thing out there. We've seen throughout the past few. You years and the Trump Revolution that confidence among those making 50,000 and less the bottom third of income earners. If you will that has been leading the charge and it's a fascinating reflection of tearing down the regulatory apparatus and and being able to to increase employment among those with the least amount of Education, which is a fantastic thing. You have to have everybody participate in your economy if you You have terrible sclerosis, but it's been interesting to see that we also for example follow continuing jobless claims as opposed to the unemployment rate, which is about the most backward-looking indicator. You could ever site continuing jobless claims have been increasing for the past few weeks for the first time since December 2009 that is hard data that is not revised. Its not seasonally adjusted. It simply is good Hard clean data, and we're able to make determinations about where we are in this. Cycle and therefore how much liquidity we need to offset the slowing? So that is the type of analysis that we perform day in and day out does does your opportunity set in terms of potential Investments reach Beyond this is the traditional assets of equity listed Equity debt, you've mentioned municipal bonds. Would it include alternative things like, you know strategies like hedge funds or anything like that. Well, so I do There is something to be said for for finding a good manager in in Long volatility because I think that you need to its I think long volatility will be akin to Gold when the time comes so I think being positioned to take advantage of the return of volatility is going to be important and there are a few good managers out there. I'll give a Shameless plug to a friend of mine Christopher Cole who runs Artemis capital they've done more study on that particular area then then I've seen anywhere just brilliant and I also in years past and currently and invested in individual companies only from a seed basis and that's just on a personal level. If I if I if I can see it understand it and like Warren Buffett used to do kick the tires. Then I'm happy to invest in a company that I feel will be recession-proof over the long term. It's all about managing money for someone else setting up your own fund absent. Gracious me boy. Do I get asked that question quite a few? Yeah. Yes, I do. And as soon as they as they maximize cloning capabilities, I'll be ready. No. No it is it is definitely something that is that is being contemplated right now because it is credit shops, especially trade-off of the daily feather so you could obviously write a book about how to analyze the data views View. You I mean, there's obviously so many things a talented person can do but would that interest you as well? Because it seems like you're rewriting economics here and purposely so yes and no I that is something that would be fascinating to to have the time to do one day if I get quill big enough that somebody can write just like me hmm and be able to step back and look at the big picture because I think that it is I think one of the Achilles heels and it's so infuriating. Here all of the speakers say this is the lowest unemployment rate in 51 years and you're like, do you know what happened in December? 1969 after September 1969? Okay, October and November 69 surely. Well you had a boomerang effect. So you should be wary of being excited that you have these massive historic lows because they tend to not be long-lived. Which means that you need to look at secondary indicators in order to understand where that rate might be headed and when but it would be fascinating to write a book about what we call like will cycle chasing because that's what that's what we are. We're like a storm chasers chasing a tornado in the Midwest of the United States. We recycle Chasers just the dates of that you look at does you find pure unadulterated data, but just does that change or can you always rely on it? Oh, no sometimes. Sometimes data become Irrelevant in terms of what you're looking at. I mean we had layoffs increasing United States for example for a very long time, but because there has been a lot of stagnation in this in the skill set of the American Workforce layoffs don't necessarily matter as much if you're a skilled worker and you're going to get absorbed immediately because there's this skills Gap what we have started falling much more quickly out of the The saying outfit Challenger gray and Christmas is CEO turnover and in the month of September. We saw record numbers of CEOs change positions. Some of that might have had to do with misbehaving in the c-suite. Some of it surely has to do with the level of Insider selling that we've seen but a good portion of it is also presumably Boards of directors getting in New Blood that will be agnostic to the workforce. And be able to cut costs at economic inflection points. So that is something that is fairly new on our radar is is the level of CEO turnover because again, it is the highest that it's been in the current cycle Tim. Would you think should we go to Media picks? I'm not sure. I'm not sure we warned you about this Danielle, so probably not since I'm like you who yeah, basically what we do is we like to offer up a book. Or film or something like that that we you absolutely love or you absolutely hate. So my aha moment when I was reading a book came from the Lords of Finance. I became extremely nervous because I ran out of fingers and toes to count the parallels and that was kind of one of the things that led me to understand the long-term implications of what monetary policy was doing not just to our economies. But to our societies and that eventually led to war. So I think the Lords of Finance is something that everybody who would ever listen to this podcast would read and then probably the most influential book about how very precious life is and how short it can be is The Goldfinch. So if you're on a beach bring it with you read it, but understanding that it is a very heavy heavy read but again life is very short, which is Why you should always be fed up and speak the truth. Yeah, definitely fantastic picks Tim. What are you going to be briefly because I think that if we discussed this earlier, but I'm gonna go with something. I've just sort of watching on your recommendation, which is Ozark. I've long been a fan of if you have you seen Osaka Daniel. You know, I have not I don't see as much television as as I would like I am a fan of Black List because I like the idea of dark Brilliance. But no II Nazi Noah's Ark but I've heard wonderful things. Oh, it's guess. I think I happen to love Jason Bateman and it's got a nice little cars, but it's I notice it's for anyone that hasn't hasn't yet. Come across it. It's basically a financial advisor who It starts in rather black terms and doesn't exactly improve from there. So there's this let's say there's a drug called towel and you know in the Timeless words of aliens a few deaths were involved. And so this this guy the premises is Ted takes his family down to to the Ozarks to with a mission to launder half a billion dollars to to to buy his survival from a Mexican drug gang. It's a light romantic comedy person. Ali is like it and I've actually I'm actually quite the student of the drug cartel being that I live in Texas and grew up in San Antonio which was two and a half hours north of the border. So now I'm fascinated and I'm going to have to watch it. So I .3 on IMDb so Carlsbad, it's thank you for robbing me of one more hour of sleep. Well, I might have to do the same actually with I don't know if you've seen Fahrenheit 11 9, which is I was kind of hoping that you might have seen it Danielle, but I think because you're so busy. Obviously you don't hardly watch any but it's works. Well Martin not harder Danielle gosh. Yes. I do need a personal assistant since you mentioned it. Absolutely. Well, it's a Michael Moore documentary and it's about how Trump came to power and it's also just just about crony capitalism. And words just kept like fail me about this. I just couldn't believe what I was seeing and I think everybody should watch it. It's just incredible. So Fahrenheit 11/9, so, of course, he made not Fahrenheit 9/11 but Fahrenheit 11/9, it's about crony capitalism and the political arena in the US and it is just like you couldn't make it up. Basically. I was just jaw on the floor watching it. So I don't want to say anymore. I think people just have to watch it for themselves, but it's It change has to come. I mean, it's just the has to be changed and I think I didn't whether a documentaries enough to make to make people change what they do, but you know, it certainly makes them think and I think it's books like Fed Up and documentaries like Fahrenheit 11/9 that moving in the right direction. I hope so and I hope that I hope that there is a greater awareness rather than anger continuing to build up in the background because that Doesn't typically get us anywhere. Yes. Absolutely. We I mean Solutions is what people want really isn't it? I mean and also to protect their wealth and that's ultimately you know, what we're thinking here what we're looking forward into the future. It's not just to say things about it's like we'll look you've got to try and protect yourself. You got to take make decisions for yourself and think for yourself. You've obviously you obviously learned that a very early age Daniel you make your own decisions and you clearly not put off by what other people say and that's That's that's something that Tim and I you know sharing in our own views. We know it doesn't matter what other people thinking it's what we think is right and it's so easy to be kind of almost brainwashed by the education system that you've got to think there's always somebody else higher up who knows more than you, you know people like Jim Rogers who just say look do your own research. Look look it up find out is this right or is it wrong and and to get people to think like that rather than just accepting things? It's a very important process. That's what we should be teaching our kids. I couldn't agree more and I'm definitely teaching my own those. Very lessons. Yes, indeed. Well, that's absolutely fantastic Danielle. Thank you so much for coming on the show. Thank you for being so generous with your time. If our listeners want to get in contact with you. What is your web address and your Twitter handle? So my Twitter handle is at demartino booze. It's quite a mouthful, but you'll find me. I'm out there and have a look at equivalent. Halogens.com. I'll be providing you with a sample of a daily feather to put up alongside this so that they can get a feel for what the type of research is that we do rather than me. Just describing it brilliant. That would be absolutely fantastic Danielle. It's been a real pleasure. Thank you so much for coming on the show, and we hope to have you back if we can one day yes, indeed. I would enjoy that very much. Thank you. Thanks again. So once again Tim Thank you so much. Thank you, and thanks to everyone for listening and we'll catch you next time, bye-bye. This podcast is for entertainment purposes. Only, please do your own research or contact a professional and advisor.
Danielle is CEO & Chief Strategist for Quill Intelligence LLC, a research and analytics firm. She spent nine years at the Federal Reserve Bank of Dallas where she served as Advisor to President Richard W. Fisher throughout the financial crisis until his retirement in March 2015. DiMartino Booth founded Quill Intelligence and in 2018 authored ofFED UP: An Insider’s Take on Why the Federal Reserve is Bad for America (Portfolio, Feb 2017), a full-time columnist for Bloomberg View, a business speaker, and a commentator frequently featured on CNBC, Bloomberg, Fox News, Fox Business News, BNN Bloomberg, Yahoo Finance and other major media outlets. Prior to Quill, Her work at the Fed focused on financial stability and the efficacy of unconventional monetary policy. State of the Markets Podcast Paul Rodriguez of https://ThinkTrading.com  https://twitter.com/prodr1guez Tim Price of https://Pricevaluepartners.com https://twitter.com/timfprice Danielle DiMartino Booth https://quillintelligence.com https://twitter.com/DiMartinoBooth Fed Up https://g.co/kgs/YJB8JP Media pick Lords of Finance https://g.co/kgs/e91kCJ The Goldfinch https://g.co/kgs/ZGVDhx Tim's Media Pick: Ozark - Netflix https://g.co/kgs/ik1cqC Paul's Media pick Fahrenheit 11/9 https://g.co/kgs/KxPzRU Podcast links: https://sotmpodcast.com https://anchor.fm/stateofthemarkets https://apple.co/2OUGW6R All podcasts available on youtube:  https://www.youtube.com/channel/UC-tcfr0by81zN6DMn2Oii0A  ---   Send in a voice message: https://anchor.fm/stateofthemarkets/message 