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Markets too quiet, QE has been a ‘bomb blanket’: Howard Lutnick

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    Detected Closed Captioning: MARIA: WHAT DOES THE DATA TELL YOU ABOUT THE ENVIRONMENT RIGHT NOW AS IT RELATES INTO THE RATES AND INFLATION? WAGE GROWTH UP 2.9% YEAR AFTER YEAR, UNNERVED MARKETS. I KNOW YOU WANTED TO SEE VOLATILITY. THAT’S A GREAT THING FOR YOUR BUSINESS. BUT WHAT SHOULD WE BE THINKING ABOUT INFLATION AND WAGE PRESSURE, THE TIGHT LABOR MARKET AND HIGHER INTEREST RATES AND THEIR IMPACT ON THE STOCK MARKET? HOWARD LUTNICK: WE HAVE TO REMEMBER THE HEADLINE UNEMPLOYMENT RATE IS NOT A TRUE FULL UNEMPLOYMENT RATE. IT’S PEOPLE LOOK. IF SOMEONE WAS UNEMPLOYED AND CHOSE NOT TO LOOK, THEY COME OFF THAT LIST. BUT THEY SAY I’M HEARING ALL THIS STUFF ON MARIA’S SHOW, MAYBE I SHOULD GO BACK OUT THERE. AND THERE IS LOTS OF EMPLOYMENT STILL LEFT IN AMERICA TO GROW WITHOUT HAVING EMPLOYMENT-RELATED INFLATION. I DON’T BUY THAT. I THINK YOU WILL GET PARTICULARS OF IT BACK AND FORTH AND YOU WILL SEE INTEREST RATES RISE. THIS WAS A SPRING THAT WAS CRUSHED TOO LOW. A 1% UNDER RATE GETS THE FEDS TO FIRST BASE. A HALF A%, WHAT ARE THEY GOING TO DO, MAKE IT A QUARTER? NOBODY CARES. MARIA: FOUR RATE HIKES IN 2018? HOWARD LUTNICK: I THINK THREE. MARIA: YOU ARE COMING FROM SUCH LOW LEVELS, WHY ARE PEOPLE FREAKING ABOUT THESE NUMBERS? HOWARD LUTNICK: BECAUSE THEY HAVE NOTHING ELSE TO DO. THINK ABOUT HOW MUCH WE GREW IN THE MONTH OF JANUARY. YOU GIVE A LITTLE BACK, SO WHAT? SHOULD THERE BE MORE VOLUME IT IN THIS MARKET? I THINK THERE SHOULD BE BECAUSE THERE ARE LOTS OF MOVING PARTS. RIGHT? WHO HAS EVER NOT ABOUT AN ADRENALINE POP FROM A TAX CUT FROM HE STORMR CORPORATION IN AMERICA COUPLED WITH INTEREST RATES RISING? I THINK WHAT’S GOING TO HAPPEN IS INFLATION WILL GO UP, BUT IT WILL GO TO WHERE THE FED WANTED IT TO GO, 2%. THE 10-YEAR TREASURY, 3%. IT WILL GO OVER 3%. MARIA: IS THAT WHAT YOU THINK, 3.25, NOT 4%? >> NO, NO, NO. IT’S JUST NOT HAPPENING. IF THE ECONOMY GROWS SO BEAUTIFULLY THESE THINGS ARE A POSSIBILITY. YOU HAVE TO REMEMBER THE FIRST PART OF THAT SENTENCE. THE ECONOMY IS GROWING SO BEAUTIFULLY THAT INTEREST RATES NEED TO RISE. MARIA: IF IT’S RISING FOR GOOD REASON. HOWARD LUTNICK: THERE ARE LOTS OF THINGS TO WORRY ABOUT. BUT WHAT I’M SUGGESTING IS WHEN YOU GO OUTSIDE AND IT’S GORGEOUS AND SUNNY, I DIDN’T SAY THERE IS NOTHING TO WORRY ABOUT. THERE IS JUST NOTHING TO WORRY ABOUT TODAY. MARIA: THAT SOUNDS LIKE A SCARY COMMENT. PEOPLE ARE AFRAID WHEN THEY SEAT DOW JONES INDUSTRIAL AVERAGE DOWN 1,000 POINTS. BUT YOU SAY VOLATILITY IS YOUR FRIEND. HOWARD LUTNICK: OUR COMPANY MAKES MONEY WHEN THE MARKETS GO UP OR DOWN. WHEN YOU SAY CHAOS IN THE MARKETS, WE ARE LIKE, THIS IS WONDERFUL. BUT IT’S BEEN TOO QUIET. YOU HAD VOLATILITY BECAUSE OF QUANTITATIVE EASING. IT’S A BOMB BLANKET ON MOVING STUFF AROUND, RIGHT? THE GOVERNMENT BUYS BONDS. EVERYONE ELSE IN THE WORLD WOULD HEDGE IT AND SAY I’M WORRIED ABOUT INTEREST RATES, I’LL HEDGE IT. AND THAT’S ALL VOLATILITY.

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