Tom Keene, Bloomberg News editor-at-large, discusses Europe, the U.S. economy and critical issues facing investors.
John Nyaradi: Hi, I am John Nyaradi, Publisher of Wall Street Sector Selector, a financial media site specializing in exchange traded funds and global markets, and today I am pleased to welcome our special guest, Tom Keene. Tom, welcome to Wall Street Sector Selector.
Tom Keene: It is great to be with you.
John Nyaradi: Tom is an Editor at Large at Bloomberg News, he’s the host of “Bloomberg Surveillance” and “Surveillance Midday.” He is the founder of the Chart of the Day which can be found on Bloomberg Professional, author of a book, “Flying on One Engine,” a graduate of The Rochester Institute of Technology and a Chartered Financial Analyst.
Tom let’s start with Europe. That has been in the news everyday, Greece especially. Is it finally over, or will it ever end?
Tom Keene: It is decidedly not over. It will end, there will be a time. I would say that the majority of people I talk to, whether they are optimistic or not, put the ending in a number of years, three years, five years out. It is not over for two reasons. One, the liquidity and solvency issues are not over, they have certainly improved, but the real issue is the real economy. I have always focused on that from the get go; I interviewed Thomas Meyer of Deutsche Bank and five, six years ago he was predicting the challenges that a flawed European model would have, and essentially what happened is the solvency crisis which has become a real economy crisis.
John Nyaradi: If Greece is put to bed, is Portugal next or Spain? How do you see this unfolding as we go forward?
Tom Keene: I am having trouble measuring the contagion effect, but I don’t agree that Greece is put to bed. I think there are still some significant challenges there, again mostly based around very difficult problems with the real economy. The institutions are really beginning to line up to try to put a firewall around this. Away from the firewall, again, I would be much more concerned about the difficulty of growing Portugal and the difficulty of growing Italy which is frankly more important than worrying about firewalls and contagion.
John Nyaradi: If you look at 2012 going forward, what do you see as opportunities and dangers for the average retail investor?
Tom Keene: I am extremely optimistic, and I don’t mean to call the stock market, that’s not what I do and certainly that’s not what we try to do at Bloomberg. I would say the number one reason I am optimistic, though, is a new attitude of corporations about what to do with their cash. And I think that bears extremely close watching through the year as corporations struggle with where to deploy that cash, whether it is to investments or mergers or whether they give it back to shareholders.
John Nyaradi: Now how about your view of the U.S. economy?
Tom Keene: My view on U.S. economy is simple. There is a gloom crew who says we’re edging to recession. They are now looking sub 2 per cent GDP, and there is an optimistic crew which is maybe 2.8 or 3 per cent, and there is some real division between the two outlooks. I am in no way certain which one of them will prevail. But I will say it is about income growth and it is about consumption that is actually doing pretty well, and they strongly disagree about how consumption and income growth will do this year.
John Nyaradi: Dr. Brenanke and the Fed have been in the news for years now since this financial crisis began, what do you see as his or their next move?
Tom Keene: Well, I think the big question is QE. Here we are with some good economic data and still talking about some form of significant accommodation and the answer why is simple – jobs. They want to be very, very certain, given relative optimism or pessimism, that they have their 200-300 thousand per month job growth. And even though we did get a good report last month, there seems to be a tilt here towards more quantitative easing if that’s what the data brings. Again, so many of the gloom crew, John, are looking for a decline in GDP, in April, May, June. If we get that, that changes things. If we don’t get that, maybe we don’t see QE.
John Nyaradi: Tom, you talk with so many prestigious people in your work at Bloomberg, is there a consensus view, a common theme emerging, if you could summarize what you are hearing as you go through your day?
Tom Keene: I will say there is a consensus view of American exceptional-ism. The gloom that you read about, particularly in the political space, is not felt by so many of the people I talk to. It’s not that they are looking at an ascendant America, but they are looking at an America that can be very very competitive across parts of the economy, much more than what I think the public feels. The distinction is that 40% – 60% of America isn’t going to participate in that better economy and the real debate, the consensus debate, across all political persuasions and all economic persuasions, is how do we jump start this America that’s being kept back and lagging behind and that it is one thing to provide lip service to education programs and another thing to do something about it.
John Nyaradi: Let’s talk a little bit about your work at Bloomberg, you have done some great things there – you are founder of the chart of the day on Bloomberg Professional, can you talk just a little about that, what its about?
Tom Keene: Oh, years ago, Matt Winkler, our editor-in-chief, came to me and asked me that to put together a chart of the day. So I worked it up with my limited journalistic skills and, to be honest, I don’t remember what the first chart was, but we put it out about 1 pm and I got a phone call from the head of prop trading for JP Morgan, maybe 3 pm the same day, and she said, can we use it in our meetings this afternoon. So I said, by all means, and really with that we were off to the races.
John Nyaradi: Let’s talk about your two shows. I like Bloomberg a lot, I go there all the time. Let’s talk about “Surveillance Midday” on the television side and “Bloomberg Surveillance” on the radio side.
Tom Keene: Well, they are very different. I think “Bloomberg Surveillance” is wake up in the morning, where are the markets, talk to smart people, and “Surveillance Midday” is designed to be that 12 noon interlude in the market where – hey, here is where the markets are and we again try to talk to smart people. But the hallmark of my work is a belief that the audience is smarter than the media thinks. Our audiences are global Wall Street and the informed non-Wall Street, and they’re all very, very smart about investing. They read everything, they study everything, they’re in the market, and our other audience is what I call the curious and informed professionals. And the one thing that all three groups have in common is they are smart, and what we do is, if we get a little esoteric like sterilized QE, we will define that, we will explain what we are talking about, but we really try in both shows not to talk down to the audience. We just assume they are smart, they are in the game, they are informed so we can get to the important distinctions and the better questions quickly.
John Nyaradi: I always like to end these discussions with a sort of open ended question, and that is, Tom, is there is one thing on your mind right now, one thing that people should watch out for, that they should be thinking about in their investing lives as we move into 2012?
Tom Keene: I think the massive reality is the failure of ERISA of 1974 and the defined contribution program, that the vast majority of America is actuarially under-funded on their retirement plans and that everybody has to put away a lot more for retirement than they ever thought and they’re going to have to put it away a lot smarter than we did the first 10 or 20 years. It is appalling the low rate that the pros are assuming for return, and I think that is the topic of the moment, what are we going to do to be sure that we are not a burden to our children down the road. To me there is no other issue for the retail investor.
John Nyaradi: Well, folks we’ve been talking with Tom Keene, editor at large for Bloomberg News. He’s the host of “Bloomberg Surveillance” that airs from 7-10 am on WBBR 1130 Bloomberg Radio and “Surveillance Midday” that airs 12-1pm Eastern Time on Bloomberg Television. You can go to the link at the bottom of this interview and learn more about Tom Keene and his programs. They’re really great, I get lot out of them, and I know you will too. Tom it has been great chatting with you today, thanks for joining us and I know we’re all looking forward to talking with you again soon.
Tom Keene: Thanks so much.