Business

Robert Shiller: Antagonizing Allies Will Eventually Hurt Confidence

Robert Shiller on trade war, antagonizing our allies will eventually hurt confidence.

Get The Timeless Reading eBook in PDF

Get the entire 10-part series on Timeless Reading in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q2 hedge fund letters, conference, scoops etc

stock investors Tourbillon Capital Partners SPX Partners

Robert Shiller: Antagonizing Our Allies Will Eventually Hurt Confidence

Transcript

You are recently back from China a trip there about a month or so ago. I wonder what you heard when you were over there about a brewing trade conflict or trade war. What does that what are the feelings over there like before we get to some of the other questions that are top of mind. I don't think that I have a lot to report. They don't like it. I think that they tend not to bring it up with me as an American. I had the same problem when I visited Russia a few months ago. It was just the sanctions. That was a delicate topic. Maybe not the right kind of ambassador but it tended to be just silent about the whole thing. Well let's turn then to some of the things that Steve just reported. Overall the president seems to get more than half of the country approving of of his stewardship of the economy. They seem to favor his renegotiation of trade deals by an even greater percentage or plurality I guess you would say. What does that tell you about about the feeling that the American people have about the business climate and business confidence and economic confidence in the face of all of these other things that could presumably bring it down a notch but it seems the Americans are angry and they've put someone who is prevailing mood you see them is captured on camera all the time angry about are being treated unfairly. President Trump says they're laughing at us for having made bad deals. That's calculated to bring out anger.

And I don't I think that Trump has been supporting the markets with his capitalist tilt. People believe that he is good for the markets but not necessarily if we start antagonizing the G7 meeting recently it looked kind of grim. This kind of antagonism with our allies that I think eventually harmed confidence. I mean that is the question Steve right. How how much how much of a pain tolerance does the president have to see the market go down and the economy get hit as a result of the trade action. So he has a bit in the bank on that issue. Right. He's got 40 percent up overall now each month that goes by that we don't have another game. It kind of ruins those monthly returns that we've had under the under President Trump and the work that we did shows there were like 15 or 16 days of minus 1 percent on the Dow and half of those were related to news from the Trump administration on trade. It is unusual. The president has listened to business on a lot of issues. He is not listening to business or the markets on this issue. He's apparently not listening to Larry Kudlow or Kevin Hassett on these issues who are two people that the market put a lot of stock in faith and to convince the president that these trade issues. I will tell you that when I looked at every single day where the trade was substantially about trade the market never rallied when they were going to be more tariffs only with easing tension and down when there were more tears. So Professor let's get to how you think this will impact the economy.

You actually say that you think it's going to result in an economic crisis. What's the shape and what's that. How deep is that crisis going to be. Well I think the market is highly valued at using my kape ratio and in the past it's very hard to predict exactly when the correction will come but it's perfectly normal that there should be a correction. We've seen a remarkable stock market ever since 2009 and it's not all Trump obviously. Mostly Obama but Trump is is maybe related to the last stages of it when it's looking really elevated and it's not just me who thinks that I do my own surveys. And I know that recent years people have been more and more concerned about overvaluation of the market and they're still investing in it. This is one of the paradoxes of human nature but I think that there could be. Every time the market goes down like it did you also in January of this year for a little while people are thinking Is this it then they've changed their mind and come back. We'll see if that happens consistently. Hey there. Thanks for checking out CNBC on YouTube. Be sure to subscribe to say. Up to date on all of the day's biggest stories you can also click on any of the videos around to watch the latest from CNBC. Thanks for watching.

Like Us On Facebook - For Business And General News: ValueWalk - For Tech And Science News: ValueWalk Tech - For Tech Insights, Technical Questions and Queries: Follow Our COO, Sheeraz Raza.