Company Notes Digest — 4th of July Edition

This week was a light week for earnings, so we thought that with 4th of July coming up we would try something different. We put together a collection of quotes from US Presidents to help get our readers into the spirit of the 4th. We hope everyone has a great holiday!

The American experiment has been a successful one

“If we look to the history of other nations, ancient or modern, we find no example of a growth so rapid, so gigantic, of a people so prosperous and happy.” -James Monroe, 5th President of the United States

A key reason for our success is culture. We have business in our DNA

“After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of the opinion that the great majority of people will always find these the moving impulses of our life.” -Calvin Coolidge, 30th President of the United States

We value wealth

“Wealth can only be accumulated by the earnings of industry and the savings of frugality.” -John Tyler, 10th President of the United States

But we work hard because work helps shape our identities

“Determine never to be idle. No person will have occasion to complain of the want of time who never loses any. It is wonderful how much may be done if we are always doing.” -Thomas Jefferson, 3rd President of the United States

We have always focused on finding the right people for a job

“Associate yourself with men of good quality if you esteem your own reputation; for ’tis better to be alone than in bad company.” -George Washington, 1st President of the United States

And we have never cared where those people come from

“Remember, remember always, that all of us, and you and I especially, are descended from immigrants and revolutionists.” -Franklin Roosevelt, 32nd President of the United States

We believe that leaders are made

“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” -John Quincy Adams, 6th President of the United States

And we make educating those leaders a top priority

“The advancement and diffusion of knowledge is the only guardian of true liberty.” -James Madison, 3rd President of the United States

We place a strong emphasis on integrity

“The supreme quality for leadership is unquestionably integrity. Without it, no real success is possible, no matter whether it is on a section gang, a football field, in an army, or in an office.” -Dwight Eisenhower, 34th President of the United States

And we believe strongly in personal success

“Always bear in mind that your own resolution to succeed is more important than any other one thing.” -Abraham Lincoln, 16th President of the United States

But we also work effectively as a team

“It is amazing what you can accomplish if you do not care who gets the credit.” -Harry Truman, 33rd President of the United States

And we deeply believe that we can tackle the most extreme challenges

“Our problems are man-made, therefore they may be solved by man. And man can be as big as he wants. No problem of human destiny is beyond human beings.” -John Kennedy, 35th President of the United States

We are girded by a deep seated paranoia that we will lose what we have worked so hard for

“Remember, democracy never lasts long. It soon wastes, exhausts, and murders itself. There never was a democracy yet that did not commit suicide.” –John Adams, 2nd President of the United States

But we are not afraid to make mistakes

“If you live long enough, you’ll make mistakes. But if you learn from them, you’ll be a better person. It’s how you handle adversity, not how it affects you. The main thing is never quit.” -Bill Clinton, 42nd President of the United States”

We champion those who try, even if they fail

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.” -Theodore Roosevelt, 26th President of the United States

We have faith that the future will be better than the past

“Each generation goes further than the generation preceding it because it stands on the shoulders of that generation. You will have opportunities beyond anything we’ve ever known.” –Ronald Reagan, 40th President of the United States

Company Notes Digest 6.22.16

Each week we read dozens of transcripts from earnings calls and presentations as part of our investment process. Below is a weekly post which contains some of the most important quotes about the economy and industry trends from those transcripts. Click here to receive these posts weekly via email.

This Week’s Post: Winding down Q2

We’re in the slowest part of the earnings cycle for the next few weeks, but there were some companies speaking here and there. Among the newsworthy items of this week: Carmax saw weakness among subprime auto borrowers, homebuilders are positive and the oil industry sees a bottom, but a slow recovery.

The Macro Outlook:

Janet Yellen does not see a high chance of recession

“I think [chance of recession] is quite low. I think the US economy is doing well…we are watching this recent slowdown in the job market carefully, but my expectation is that the US economy will continue to grow…I remain quite optimistic. The kinds of conditions that have been associated in the past with US recessions, often that occurs when inflation is in the economy is overheated and inflation has been quite high the Fed has had to tighten monetary policy. We do not have any such conditions now.” —Federal Reserve Chair Janet Yellen (Central Bank)

Yellen increasingly seems to cite longer lasting factors for slow growth

“although I am optimistic about the longer-run prospects for the U.S. economy, we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future.” —Federal Reserve Chair Janet Yellen (Central Bank)

“We have looked very closely at investment spending and try to understand why it has been so very depressed in the aftermath of the crisis. I think one reason for it is simply that the economy has been growing slowly. Sales growth has been slow and many firms have found that they actually do not need to invest very much in order to satisfy the demand growth that they are seeing” —Federal Reserve Chair Janet Yellen (Central Bank)

International:

Trade creates net benefits but there are winners and losers

“I guess I would just say that in the view of most economists, more open trade creates net benefits, but that does not mean benefits for everyone. There are gainers, but there are also losers and that is certainly…I think it’s important to have policies that address the losses.” —Federal Reserve Chair Janet Yellen (Central Bank)

Chinese buyers continue to invest in California real estate

“We are seeing a sustained interest, particularly in the Asian or Chinese buyer. We haven’t seen that fall off. So if you look at a place like Irvine, where it’s been very significant. We have good data at the Great Park. That’s remains very consistent and healthy, same thing in the Bay Area marketplace, so we’re seeing consistency there.” —Lennar CEO Stuart Miller (Homebuilder)

Financials:

Carmax is seeing increased losses in subprime auto lending

“Over the last 2 years though we have been expanding at the lower end…we did have some unfavorable experience in the quarter as I mentioned due to – partially due to that expansion and partially due to the wholesale recovery rate.” —Carmax CFO Tom Reedy (Auto Dealership)

Santander stopped lending to subprime auto altogether

“In the quarter though we did see one line in particular a pullback and it was Santander I mean you have seen them out in the public domain, talking about how they are pulling back in sub-prime auto, letting other business to other folks.” —Carmax CEO Tom Folliard (Auto Dealership)

Homebuilders are bullish on rental markets even though they’re getting over-heated

“everybody is starting to hear that there might be a little bit more heat in some of the rental markets…we’re probably coming to the later innings of…the first game of a double header. We might see a little bit of softness for a period of time but it looks like and it feels like absorption is going to outstrip any kind of oversupply in fairly short order and we think that there’s a lot of run rate for the multifamily markets, for the rental markets going forward.” —Lennar CEO Stuart Miller (Homebuilder)

Home affordability is getting more challenging in coastal areas of California

“The California market can ebb and flow. And what we’re seeing right now is continued strength along the coasts, both north and south, that’s moved pricing up, and so it’s an affordability challenge in the more expensive coastal areas and it pushes demand further inland..” —KB Home CEO Jeff Mezger (Homebuilder)

Consumer:

Millenials still like to shop in stores

“We know from research that the millennial generation, the largest generational cohort in American history is not going to stop going to stores…e-commerce is fantastic and its going to continue to grow…but…it’s not going to…eliminate retail. What it may do is change the character of retail.” —FedEx CEO Fred Smith (Package Delivery)

Mondelez is excited about the potential for advertising on Facebook’s messaging platform

“Mobile is the most profound disruption we’ve ever seen in business. People are living their lives on mobile. It’s changed the way we discover, experience and share. It’s also changing the advertising industry, and messaging will have an even greater impact on how brands engage with consumers than social media has.” —Modelez CMO Bonin Bough (Packaged Foods)

Technology:

The internet helped musicians but hurt the record labels

“The internet helped artists even though it hurt the recording industry. Beyonce is huge in Columbia because of the internet, not because of the old gatekeepers. We just want to make sure we’re in every channel of live entertainment possible.” —Livenation CEO Michael Rapino (Ticketmaster)

Materials, Energy:

Oil companies are beginning to call the bottom of the oil cycle

“The Permian [basin] has bottomed out.” —Pioneer Resources CEO Steve Sheffield (Oil)

The recovery is expected to be slow though

“We think at this point in time in the cycle the market itself will be – we’re coming off of the bottom and we feel like we have kind of at the bottom at least in North American and approaching a bottom internationally. But that the recovery itself is going to be a lower slope recovery than maybe some others have been.” —Halliburton CFO Mark McCollum (Oil Service)

And oil prices are not expected to return to their previous highs any time soon

“The current downturn is now 20 months long since the US land rig count peaked in October 2014. It already outpaces that of 1986/87 and estimated E&P spend for 2016 is now about a third below that of 2014. At such levels, continual growth in production capacity cannot be maintained, and production lost to decline cannot be fully replaced. E&P capital expenditure has been cut with exploration halted, development aggressively curtailed, and service industry prices relentlessly squeezed. While this playbook might have allowed the business to return to normal in the past, we do not think that oil prices will return to their previous high levels any time soon, short of a major supply upset, given the greater availability of lower-cost Middle-Eastern supply and the progress that has been made in the cost of unconventional resource development in North America.” —Schlumberger President of Operations Patrick Schorn (Oil Service)

Iron Ore markets may not come back into balance for another 10 years

“One of the markets that will take longest to come back into balance is the iron ore market. The reality is we’ve settled down now to a price that we would say is more realistic on the basis of fundamentals of supply and demand. We’ve had such a long boom. To walk that through, in my view, may take another 10 years.” —BHP CEO Andrew MacKenzie (Mining)

Miscellaneous Nuggets of Wisdom:

Create “win-win-win” situations

“I just think that you should think about the business in such a way that you simultaneously create strategies where all your major stakeholders are winning. And if you’re not doing that, you’re not creating very good strategies. But once you take on the framework that your responsibility as a leader is to find strategies where you’re not making stakeholder trade offs but you’re actually creating stakeholders synergies, then you’re on the right track.” —Whole Foods CEO John Mackey (Grocery)

Develop personal relationships with your team

“You’ve probably heard the phrase ‘it’s business, it’s not personal.’ That phrase makes absolutely no sense. It’s a cliche that everyone uses. It’s sort of absurd when you think about it, people actually are the ingredient to creating amazing results in business. The reality is that it is business AND it’s personal. You need to understand what motivates your team and how you can deliver on that. You need to understand what people value, what their strengths are, and how you can enable them put their strength to use. As a leader, you need to develop a personal relationship with your team. As a leader, you’ve got to push yourself to develop those personal relationships. And there’s something that’s even a little more powerful, what’s more powerful is when you push yourself to share that same dimension about yourself with the team. When you’ve got members of the team that have a deep understanding of what motivates you. And when you do that, the results are phenomenal, you get to a level of understanding and trust amongst your team which drives you to results even faster than you imagine.” —Nike CFO Andy Campion (Apparel)

Relationships are everything

“The most important thing I would tell you is that relationships matter. What I have learned in my career is how important is relationships are and how you treat people and your relative success. There’s this perception amongst some that the way you get ahead is to backstab others. It doesn’t work. What matters is that people, in every relationship you have, you have to treat people with respect and dignity.” —American Airlines CEO Doug Parker (Airline)

Full transcripts can be found at www.seekingalpha.com

Visa (V) CEO Charles Scharf Video Interview

Visa (V) CEO Charles Scharf on the biggest misunderstanding folks have about his business

“When I first got to Visa, the first thing everyone wanted to know in all the town hall meetings I went to was were we a financial services company or were we a technology company.  And the answer is we’re definitely not a financial services company, we have to act like a technology company, but we really are a payments business and they’re fundamentally very different.  We don’t do what financial services company do, most financial services companies are our direct clients.  All issuers are financial services companies.  The payments industry has gone from this extremely boring back office function to a world driven by commerce and digital platforms.”

 

 

Source: Stanford Business School Video Interview https://www.youtube.com/watch?v=mn_qXoelgUM

American Airlines (AAL) CEO Doug Parker Interview

American Airlines (AAL) CEO Doug Parker on how having kids has made him a better CEO

“I learned so much from being a father that I can use at work.  Raising children is this amazing thing.  Watching development and watching your kids interact helps me manage the company.  I’ve become a better CEO because I’m a father.”

American Airlines (AAL) CEO Doug Parker on the importance of relationships

“The most important thing I would tell you is that relationships matter.  What I have learned in my career is how important is relationships are and how you treat people and your relative success.  There’s this perception amongst some that the way you get ahead is to backstab others.  It doesn’t work.  What matters is that people, in every relationship you have, you have to treat people with respect and dignity.”

 

 

Source: Stanford Business School Video Interview https://www.youtube.com/watch?v=gdSzOShYg2s

KB Home 1Q16 Earnings Call Notes

Jeff Mezger

There is an affordability issue in CA that is pushing demand inland

Sure. But Susan, you’ve followed us for a while and I’ve told this story before about how the California market can ebb and flow. And what we’re seeing right now is continued strength along the coasts, both north and south, that’s moved pricing up, and so it’s an affordability challenge in the more expensive coastal areas and it pushes demand further inland. And as we saw, as the quarter unfolded, the inland areas sold well and had good momentum coming out of the quarter.

Consistent market dynamics through the quarter

“sequentially as the quarter played out, we saw a fairly consistent market dynamics through the quarter, so, March, April, May held pretty well throughout, I think it got a little bit stronger toward the end.”

May was a little bit stronger than March

“Yup. Patrick, we’re two weeks into the quarter so we typically don’t give a lot of color on the current month activity. As I shared, May was probably a little bit stronger than March but we had a nice progression through the quarter with pretty consistent demand. We’re pleased with the results.”

Halliburton at Wells Fargo Conference Notes

Mark A. McCollum

Never been more differentiation between the service companies

“it strikes me at this point in time there is probably more differentiation between the major service companies than there ever has been. And so, if I am an investor in terms of thinking about who I would invest with, I don’t think at any point in time there has been a clear line of sight as to how everybody is attacking the market.”

Coming off the bottom, but lower slope recovery

“We think at this point in time in the cycle the market itself will be – we’re coming off of the bottom and we feel like we have kind of at the bottom at least in North American and approaching a bottom internationally. But that the recovery itself is going to be a lower slope recovery than maybe some others have been.”

This was a supply based downturn

” it’s probably not to going to be a straight line for the fact that this was a supply based downturn that you have a relatively low demand growth overall and the fact that North America is also now the swing producer in the world with relatively little energy policy and a free market at a lot of access to capital that the recovery itself may be somewhat choppy, because you have shorter cycles here, that as your best foot comes in prices modulate around the supply/demand equation.”

Unconventionals in NA are the swing supply

” let me also say that in this recovery we think that unconventionals in North America clearly are the first mover. They are the cheapest, fastest barrel to market and so they become the swing barrel, the incremental barrel out there.”

It is ugly out there from a pricing standpoint

” I mean clearly guys it is ugly right? I mean everybody is underwater at this point in time and there is – that’s you know, that is definition of an unsustainable market. Right? So, they cannot hold here for any of this and so we are going to do need some pricing relief here at some point of time. It’s really going to depend on who you are, where you are right? For us when we are negative, but yet, I mean essentially says you’re not covering your depreciation and may be some of the fixed cost allocation that’s you are making to your business, utilization actually becomes a more important factor than just price. “

FedEx FY 4Q16 Earnings Call Notes

Fred Smith

Our goal is not to maximize margins in every segment every year

This is Fred Smith. Let me take that question on a broader front, because this is one of my hot buttons as you probably know. We don’t manage FedEx Corporation trying to maximize each segment margin each year. If we did that, we would never be able to take advantage of this broad portfolio in the cross-selling that’s available to us.

Millenials are not going to stop going to stores

“We know from research that the millennial generation, the largest generational cohort in American history is not going to stop going to stores. In fact, we had a wonderful presentation about just a couple of weeks ago at our Board Meeting. So, e-commerce is fantastic and its going to continue to grow and we intend to be a major player in that space. But as Mike just said, it’s not going to — in our opinion and in the research from very credible sources, going to eliminate retail. What it may do is change the character of retail.”

B2B is the backbone of FedEx network

remember of all retail e-commerce is now about 10%, growing fast, taking share, but it’s going to be a long time before retail is threatened. And B2B meaning the underpinnings of the business world medical production, automotive, and things like that that in the main is not going to be diverted to e-commerce anytime soon and that is the backbone of the FedEx networks.”

Not a lot that doesn’t concern us with the election

“I would say, we would have a hard time putting up a list of the things that don’t concern us giving the two candidates position, but obviously we’re concerned about the anti-trade rhetoric a lot of the anti-business positions and it’s very worrisome. But hopefully after the election cooler heads will prevail.”

Mike Glenn

Continue to see moderate growth in global economy

“On the economic front, we continue to see moderate growth in the global economy. Our U.S GDP forecast is 1.8% for calendar ’16, which is 40 basis points lower than our forecast last quarter, and we forecast 2.4% for calendar ’17, led by gains in consumer spending.”

Ecommerce would not be possible without our networks

“Now I’d like to take a few minutes to further discuss and address the growth of e-commerce which continues to outpace GDP growth both in the U.S and globally. E-commerce has become a [indiscernible] for consumers acquiring goods around the world, but the success of e-commerce continues to be dependent on transportation companies ability to reliably and quickly make residential deliveries around the world.

One of the most profitable e-commerce companies today

As we noted during our last conference call on earnings, more than 95% of e-commerce packages in the U.S are delivered by FedEx, UPS, and the United States Postal Service, with whom we have a strategic relationship to transport their priority mail. E-commerce would be impossible without these companies and our expansive networks. If you were to isolate the FedEx e-commerce business, it would become clear FedEx is one of the most profitable e-commerce companies in business today.”

Continue to get questions about Amazon

“One additional point as we continue to get questions concerning Amazon in the evolution of their transportation capabilities and needs. Amazon continues to be a valuable customer and they’re among the large e-tailers that we stay in close dialogue with throughout the year to understand their transportation needs as they continue to experience significant growth and generate demand for FedEx transportation.”

Livenation (LYV) CEO Michael Rapino Interview

Livenation (LYV) CEO Michael Rapino described their average customer

“We’re closer to a travel company than a record label.  My real job is, 73 million fans will come to a Livenation show this year.  The average customer goes to 2 and a half shows this year, wherever it is be it middle America or France.  It’s a big adventure, it’s a destination, it’s a kodak moment for them in that it ranks up there as one of their most important experiences of the year.”

Livenation (LYV) CEO Michael Rapino said the internet actually helped musicians increase their popularity

“The internet helped artists even though it hurt the recording industry.  Beyonce is huge in Columbia because of the internet, not because of the old gatekeepers.  We just want to make sure we’re in every channel of live entertainment possible.”

 

 

Source: Audio Interview Podcast http://www.recode.net/2016/5/26/11714072/michael-rapino-live-nation-ticketmaster-beyonce-springsteen-disneyland

Nike (NKE) CFO Andy Campion Interview

Nike (NKE) CFO Andy Campion says the key ingredient to business success is a high performing team

“You’ve probably heard the phrase ‘it’s business, it’s not personal.’  That phrase makes absolutely no sense.  It’s a cliche that everyone uses.  It’s sort of absurd when you think about it, people actually are the ingredient to creating amazing results in business.  The reality is that it is business AND it’s personal.  You need to understand what motivates your team and how you can deliver on that.  You need to understand what people value, what their strengths are, and how you can enable them put their strength to use.  As a leader, you need to develop a personal relationship with your team.  As a leader, you’ve got to push yourself to develop those personal relationships.  And there’s something that’s even a little more powerful, what’s more powerful is when you push yourself to share that same dimension about yourself with the team.  When you’ve got members of the team that have a deep understanding of what motivates you.  And when you do that, the results are phenomenal, you get to a level of understanding and trust amongst your team which drives you to results even faster than you imagine.”

 

 

Source: Video Interview https://www.youtube.com/watch?v=JFlttbCGCFo

Janet Yellen June 2016 Congressional Testimony Notes

Pace of labor market improvement has slowed more recently

“However, the pace of improvement in the labor market appears to have slowed more recently, suggesting that our cautious approach to adjusting monetary policy remains appropriate.”

Two months of weak reports

“During the first quarter of this year, job gains averaged 200,000 per month, just a bit slower than last year’s pace. And while the unemployment rate held steady at 5 percent over this period, the labor force participation rate moved up noticeably. In April and May, however, the average pace of job gains slowed to only 80,000 per month or about 100,000 per month after adjustment for the effects of a strike. The unemployment rate fell to 4.7 percent in May, but that decline mainly occurred because fewer people reported that they were actively seeking work.”

Of course, it’s important not to over react to one or two reports

“Of course, it is important not to overreact to one or two reports, and several other timely indicators of labor market conditions still look favorable. One notable development is that there are some tentative signs that wage growth may finally be picking up. That said, we will be watching the job market carefully to see whether the recent slowing in employment growth is transitory, as we believe it is.”

Slow productivity may continue into the future

“although I am optimistic about the longer-run prospects for the U.S. economy, we cannot rule out the possibility expressed by some prominent economists that the slow productivity growth seen in recent years will continue into the future. Vulnerabilities in the global economy also remain. Although concerns about slowing growth in China and falling commodity prices appear to have eased from earlier this year, China continues to face considerable challenges as it rebalances its economy toward domestic demand and consumption and away from export-led growth.”

Investor sentiment can change abruptly

“More generally, in the current environment of sluggish growth, low inflation, and already very accommodative monetary policy in many advanced economies, investor perceptions of and appetite for risk can change abruptly. One development that could shift investor sentiment is the upcoming referendum in the United Kingdom. A U.K. vote to exit the European Union could have significant economic repercussions.”

Still planning to let securities run off balance sheet

(Note: caps because taken from the closed caption transcript)

” EVER SINCE QE THREE ENDED WE MADE CLEAR THAT WE WOULD REINVEST PROCEEDS AND WE BEEN DOING THAT EVER SINCE. WE DID SAY THAT AS THE ECONOMY RECOVERS AND THE FUNDS RATE RISES TO A HIGHER LEVEL THAN IT IS AT PRESENT, A DAY WOULD COME WHEN BASED ON ECONOMIC AND FINANCIAL CONDITIONS THE COMMITTEE WOULD BEGIN THE PROCESS YOU JUST DESCRIBED IS GRADUALLY ALLOWING SECURITIES TO RUN OFF OUR BALANCE SHEET SO WE REDUCE THINGS TO A MORE NORMAL LEVEL AND WE FULLY INTEND TO DO THAT BUT I CAN’T GIVE YOU A PRECISE TIMETABLE TO WIN THAT POLICY WILL BEGIN.”

Negative rates are not something we are considering

” I BELIEVE WE DO HAVE THE LEGAL BASIS TO PURSUE NEGATIVE RATES BUT I WANT TO EMPHASIZE, IT IS NOT SOMETHING THAT WE ARE CONSIDERING. THIS IS NOT THE MATTER THAT WE ARE ACTIVELY LOOKING AT, CONSIDERING WHEN WE LOOKED AT THAT IN THE PAST WE IDENTIFIED SIGNIFICANT SHORTCOMINGS WITH THAT TYPE OF APPROACH AND I DON’T THINK WE ARE GOING TO HAVE TO PROVIDE ACCOMMODATION AND IF WE DO, THAT’S NOT NOT SOMETHING THAT IS ON OUR LIST. ”

No extreme threats to financial stability at this time

” AS I SAID EARLIER I DON’T SEE SIGNS OF EXTREME THREATS TO FINANCIAL STABILITY AT THIS TIME. THIS IS SOMETHING WE MONITOR VERY CLOSELY BUT IT IS SOMETHING THAT CAN HAPPEN IN A LOW INTEREST RATE ENVIRONMENT. I DON’T THINK I SEE ANY BROAD-BASED EVIDENCE OF THOSE FINANCIAL STABILITY CONCERNS BUT IT IS SOMETHING THAT’S POSSIBLE”

Investment spending down because economy growing slowly

“WE HAVE LOOKED VERY CLOSELY AT INVESTMENT SPENDING AND TRY TO UNDERSTAND WHY IT HAS BEEN SO VERY DEPRESSED IN THE AFTERMATH OF THE CRISIS. I THINK ONE REASON FOR IT IS SIMPLY THAT THE ECONOMY HAS BEEN GROWING SLOWLY. SALES GROWTH HAS BEEN SLOW AND MANY FIRMS HAVE FOUND THEY ACTUALLY DO NOT NEED TO INVEST VERY MUCH IN ORDER TO SATISFY THE DEMAND GROWTH THAT THEY ARE SEEN.”

Brexit could have significant economic consequences

“I SAID IT COULD COME I DO NOT KNOW IF IT WOULD, BUT I I THINK IT COULD HAVE SIGNIFICANT ECONOMIC CONSEQUENCES BY LAUNCHING A PERIOD OF UNCERTAINTY BOTH FOR THE UNITED KINGDOM AND POSSIBLY ON THE FUTURE OF EUROPEAN ECONOMIC INTEGRATION, MOST ANALYSIS SUGGEST HE WOULD BE CONSEQUENCES FOR THE U.K. AND SPILLOVERS TO EUROPE MORE BROADLY SPEAKING. I THINK THE FINANCIAL MARKET REACTION TO THE UNCERTAINTIES WOULD BE UNLEASHED BY THAT DECISION COULD RESULT IN A KIND OF RISK SENTIMENT THAT WE WOULD SEE IMPACTS ON FINANCIAL MARKETS THAT WE MIGHT SEE FLIGHT TO SAFETY FLOWS THAT COULD PUSH UP THE DOLLAR OR OTHER SO-CALLED SAFE HAVEN CURRENCIES.”

We do not expect a recession

” I THINK IT IS QUITE LOW. I THINK THE U.S. ECONOMY IS DOING WELL AND OTHERWISE INDICATED THAT WE ARE WATCHING THIS RECENT SLOWDOWN IN THE JOB MARKET CAREFULLY, MY EXPECTATION IS THAT THE U.S. ECONOMY WILL CONTINUE TO GROW AND WE HAVE SEEN IT PICK UP OF A SUPERSTRONG PICKUP IN CONSUMER SPENDING AND GROWTH IN THE ECONOMY. IF THE WEAKNESS IN THE LABOR MARKET THE LAST COUPLE OF MONTHS WAS A REACTION TO EARLIER SLOWDOWN IN GROWTH, THAT LOOKS TO BE REVERSING. I REMAIN QUITE OPTIMISTIC IN THE KINDS OF CONDITIONS THAT HAVE BEEN ASSOCIATED IN THE PAST WITH U.S. RECESSIONS, OFTEN THAT OCCURS WHEN INFLATION IS THE ECONOMY IS OVERHEATED AND INFLATION HAS BEEN QUITE HIGH THE FED HAS HAD TO TIGHTEN MONETARY POLICY. WE DO NOT HAVE ANY SUCH CONDITIONS UNTIL NOW.”

Trade creates net benefits but there are also gainers and losers

“I GUESS I WOULD JUST SAY THAT IN THE VIEW OF MOST ECONOMISTS, MORE OPEN TRADE CREATES NET BENEFITS, BUT THAT THAT DOES NOT MEAN BENEFITS FOR EVERYONE. THERE ARE GAINERS, BUT THERE ARE ALSO LOSERS AND THAT IS CERTAINLY…I THINK IT’S IMPORTANT TO HAVE POLICIES THAT ADDRESS THE LOSSES.”