“A Greenlight for Risk Assets”

Published on
January 8th, 2020
42 minutes

“A Greenlight for Risk Assets”

Investment Ideas ·
Featuring Stephen Auth

Published on: January 8th, 2020 • Duration: 42 minutes

Stephen Auth, chief investment officer of Federated Investors and author of "The Missionary of Wall Street," sits down with Real Vision’s Ed Harrison to explain why he's still bullish on stocks. He estimates that, with low interest rates and high corporate earnings, the S&P 500 still has room to run, with particular opportunities in energy and healthcare. Auth argues, in a secular bull market, a drawdown is a signal to buy rather than sell. Other topics include: inflation, ISM manufacturing data, and the importance of spirituality. Filmed on December 19, 2019, in New York.



  • PK
    Pat K.
    14 March 2020 @ 06:12
    Pretty timely to seeing the psychology before coronavirus
  • CK
    Chris K.
    15 February 2020 @ 12:49
    Long consensus and belief in ancient books
  • ST
    Scot T.
    19 January 2020 @ 16:45
    Permabull. He shapes facts to his narrative. Love the way he brushed off health care inflation and said it was on the cusp of a decline.
  • AC
    Andrew C.
    15 January 2020 @ 03:32
    I had to go to the transcript to check exactly what he said, as I didn't believe it the first time! If someone says five years from now, are we going to sell more energy or not? I'm being tongue in cheek, we will sell a little more, but we're getting close to peak demand. Forget about peak supply for energy. Less energy? What? As the billions of people move out of poverty, they will want their "fair share". Energy demand is set to soar! And the best sources are uranium and oil, energy density per kilo. Get 'em whilst they're cheap now.
  • SA
    Scott A.
    12 January 2020 @ 20:49
    I think his comments on inflation was pretty weak. Politicians fixing health care is a joke over 20 years old. And college costs show no signs of reversing. I was looking at replacing my truck last week and the cost is over 75k. The thoughts on the service sector were interesting, but describing the sector as if it is a single entity is simplistic. You may keep your quant team, or engineering team during a downturn, but the hospitality workers get shed as needed. And those of us in the financial sector know being part of the service industry does not protect you from layoffs. To me it seemed the less macro and more specific the discussion went, the more intriguing the points became. The comments on FedEx were spot on and his comments on the oil sector alone made the interview worth listening to.
  • SJ
    Scott J.
    9 January 2020 @ 15:03
    Steven....thou almost persuadest....me to be a bull.
    • BT
      Barry T.
      11 January 2020 @ 18:52
      Well done. I gave you a thumbs up, just for the reference to King Agrippa and Paul (Acts 26:28)
  • AK
    Ado K.
    11 January 2020 @ 02:58
    He is long financials, I mean okay while the FED keeps injecting money like crazy in the Repo markets it might work, but this seems kind of like picking up pennies in front of a steamroller.
  • BA
    Bruce A.
    10 January 2020 @ 23:07
    There is only so far that the current 'debt and liquidity engine' of this economy can drive the stock market and bond market. Don't know where the sputtering really kicks in but I'm watching spreads and default rates on all credit (consumer, corporate, sovereign). Will be an interesting journey and a more interesting climax.
  • AT
    Andrea T.
    9 January 2020 @ 19:52
    Inflation is not absolute, it's relative. To say that there is no inflation or that there is inflation is not informative. A more accurate question is: where would prices be without CBs' reckless monetary money creation? Given demographics, technological development globalization and so on, it's fair to say that prices would be massively lower than they are now. So, lowflation is high inflation actually.
  • JM
    Jim M.
    9 January 2020 @ 16:22
    Relatively high percentage of DOWN VOTES which doesn't surprise me - it's Real Vision. Tells me we are going higher. The next five years are going to surprise.
  • PC
    Peter C.
    8 January 2020 @ 23:01
    Well, you really need to have faith and believe in your own narrative to construct a bull case that lasts for another decade. The question is: what is the probability that it is true and what is the impact of being wrong?
    • AM
      Alonso M.
      9 January 2020 @ 15:22
      Actually I don't think that's the question. I'd rather focus on the outcome of being right vs. the outcome of being wrong. The question is what is the skewness in outcomes? For example, if there is a 75% probability of the bull case being right over the next year with a 10% upside outcome and a 25% probability of the bull case being wrong over the next year with a -25% outcome, then you're better off in money market land from a risk-reward standpoint.
  • OM
    Owen M.
    9 January 2020 @ 14:50
    Another great RV interview.
  • PG
    Philippe G.
    9 January 2020 @ 13:08
    Interesting points. Great conversation!
  • WA
    Wissam A.
    9 January 2020 @ 10:50
    I'm hoping that for future interviews on the bull camp to be asked these 3 questions: 1) The rate of growth of credit for the corporate sector and the government sector is higher than the growth rate of the economy 2) Federal government deficit is close to 5%, so if it wasn't for this massive fiscal injection the US economy would be in recession 3) The FED is expansion of it balance sheet is pretty aggressive. How much of that is contributing to multiple expansion.
  • ns
    nikolay s.
    9 January 2020 @ 04:58
    As a Christian im happy that RV does not censor :) Subscription renewed
  • RV
    Ryan V.
    9 January 2020 @ 02:13
    I wish I could be a bull too. I just can’t. Central banks around the world using financial crisis type tools at all time highs to “sustain the expansion” and a massive bond bubble. I just can’t believe we are in the middle of a bull market. Things could get weirder but I highly doubt we will be returning to any sort of normal without a painful bond market correction.
    • NK
      Niro K.
      9 January 2020 @ 04:40
      Same here mate Bulls can be bulls we could only keep on building the positions to be ready for the correction
  • MS
    Matt S.
    9 January 2020 @ 02:14
    Really interesting - I was taken aback by the Christian section at the end but, was pleasantly surprised! It seems many people are finding faith, or belief in God again. It's quite obvious the West has fallen into a near Hell-like stasis, and having God to be a partner out of this mess is welcomed.
  • wj
    wiktor j.
    8 January 2020 @ 16:02
    A little funny. He says they are invested in biotek but he believes that healthcare costs will come down. So which is it? See what they do and not what they say. We will see if medical costs will come down. I live in a country with free healthcare and huge taxes. I rather be in the US. The health care here in Sweden is a disgrace! Although good interview.
    • JK
      Josh K.
      8 January 2020 @ 17:29
      I would imagine innovation in biotech will be deflationary for prices far more than price decreases. Similar to semis in decades past
    • RB
      Rahul B.
      9 January 2020 @ 01:41
      Why is healthcare in sweden a disgrace?
  • DS
    David S.
    8 January 2020 @ 23:41
    In Europe, I think that Ms Lagarde will lower short-term rates to help banks with a steepening yield curve and will allow indebted countries to exceed spending restraints to help get their economies started. Ms Lagarde may be able to go around Germany to allow spending in excess of the Maastricht Treaty where Mr Draghi was not able to. Printing money is about all that it left for most of the world. DLS
  • RM
    Robert M.
    8 January 2020 @ 23:40
    Don't agree with his comments on the service economy and a downturn. Yes, PMI needs to break 45 to really be heading to a downturn. This is due to the manufacturing percentage of employment dropping from 20% in the early 1980s to 8% today. But on the negative side, all the services jobs he referenced are lower paying jobs than in the past (restaurants and hospitality is now the #1 sector of employment in the US). And in a downturn, these jobs are threatened. I just look at how many people that I know that lost work in the last downturn that were part of the service economy (from architects to digital marketers to real estate related jobs), which is why a large percentage of today's workers are contract employees (and not full time employees). This employment situation is what drives people to drive for Uber and Lyft. And for baby boomers, many are facing changing careers as they have been laid off of jobs for different reasons (even in today's good economy). I know a number of people that are looking into becoming school teachers (for stability though the pay is low) as an example of limited opportunities due to aging. And the other day, leaving a nice men's retailer, a gentleman in his 60s got into his Porsche Cayenne and flipped on his Lyft light. So per the Fed, when 39% of people can't cover a $400 emergency, 30% work at least one gig activity per month, and 17% can't pay their bills in full each month, maybe things aren't so bright on the service side as well. Consumer debt, with credit card debt up over 5 years and car loans going to 7 years in length, is doing wonders to maintain consumer spending.
  • RM
    Robert M.
    8 January 2020 @ 22:54
    Had to laugh about the taxi driver analogy. At the gym where I work out, everyone talks about buying stocks including the guy checking you in who trades in options. Not sure that I agree that people on the street are not talking about the market.
    • DS
      David S.
      8 January 2020 @ 23:31
      The market keeps going up with all its fundamental problems. As long as money is being pumped into the market it will continue to go up. This gives the "man on the street" some wins and will build enthusiasm. DLS
  • DH
    Dabangg H.
    8 January 2020 @ 23:19
    A bull on RV, stop the press! :) Hoping for a Raoul vs a Bull debate, would be more interesting where they question/explore each others premise than a one sided narrative.
  • RC
    Rob C.
    8 January 2020 @ 21:27
    I didn't buy his narrative. Too defensive of his position and overly optimistic.
  • TJ
    Terry J.
    8 January 2020 @ 21:11
    Having the benefit of now understanding the phenomenal equity support provided to the equity bull every time it stumbles by the growing passive elephant, as explained so brilliantly by Mike Green in his superb interview with Raoul, I am totally persuaded by Stephen's continuing bull case! I agree with Stephen that we are very much in a secular bull that will probably run for many more years until the passive elephant masquerading as the golden goose lays its final overvalued egg, and then collapses under its own outrageous weight! At that point the secular (as opposed to cyclical) bear that follows will almost certainly compete in historical terms with anything we have seen before, simply because as Mike explained bids almost at any price in most stocks will have totally disappeared. The silver lining is that the stock market armageddon the passive elephant will finally trigger is probably a few years away yet, so I am with Stephen in riding the bull for now!
  • JA
    Justin A.
    8 January 2020 @ 20:22
    Good to hear from a credible bulls on RV. Would love to see a debate between Mr. Auth and Ed Easterling from Crestmont Research on Secular Bull/Bear analysis. Easterling makes the case for being in a Secular Bear fairly compelling as well. https://www.crestmontresearch.com/stock-market/#20-secular-stock-market-cycles
  • MR
    Mark R. | Contributor
    8 January 2020 @ 16:12
    The last 7 min of the video is the most realistic portrayal of real faith at work in 'real life' I've heard in a long time. Not easy and often costly but incredibly rewarding. Thanks to Steven & Ed outstanding!!
  • SM
    Sergio M.
    8 January 2020 @ 16:00
    Ed Harrison is an amazing interviewer & hes probably an amazing gamer.
  • RM
    Richard M.
    8 January 2020 @ 15:16
    Even though I currently have a somewhat bearish outlook (eg, late-cycle, stretched valuations, crazy monetary policy, etc, etc) I really appreciate hearing the viewpoints of someone like Mr Auth. He makes a very compelling case for further upside and backs it up with relevant data points. Really, really informative. Thank you! [And just another shout-out to Ed for his fantastic interviewing technique and his incredibly knowledgeable questions!]
  • DM
    Don M.
    8 January 2020 @ 11:01
    This interview would have been more meaningful after it was recorded 20 days ago.
  • DF
    Diamantino F.
    8 January 2020 @ 09:44
    Great start for the year RV all interviews until know superb quality
  • DH
    Daniel H.
    8 January 2020 @ 08:43
    No. Please no. No more Christian capitalists.
  • TR
    Travis R.
    8 January 2020 @ 07:23
    Really hate to beat a dead horse, but... Ed Harrison is an exceptional interviewer. Stephen Auth is the definition of smart money bringing fresh insights and perspectives. Outstanding interview.
  • AT
    Andre T.
    8 January 2020 @ 06:11
    Very interesting thoughts about a structural change in the business cycle as a result of the service based economy.