Ignore the Bond Market?

Published on
July 31st, 2019
35 minutes

Ignore the Bond Market?

The Interview ·
Featuring Stephen Auth

Published on: July 31st, 2019 • Duration: 35 minutes

Stephen Auth, CIO of Federated Global Equities, sits down with Real Vision’s Ed Harrison to make the case that bond markets have repeatedly overreacted to bearish economic data. In fact, Auth believes that the pieces are in place for the economy to continue growing and for equities to keep climbing. Auth also discusses his unique perspective as the “Missionary of Wall Street” — using his religious faith to strengthen his skills in the financial world. Filmed on July 1, 2019 in New York.



  • JD
    John D.
    1 August 2019 @ 23:46
    I rarely comment, but there were so many factual errors in this as to make it embarrassing. This guy is a clown.
    • JC
      James C.
      11 August 2019 @ 01:56
      Can you give us some specific examples?
  • JO
    Johnny O.
    6 August 2019 @ 18:09
    Well that escalated quickly, as they say. One minute we were debating in the Recession series whether the Fed-inflated bubble can persist until the election or is about to suffer a big downturn in the next couple of months (indicating recession). Suddenly we have a guy forecasting two decades of secular bull. Invariably the bull case downplays or does not mention the mountains of debt that have funded the bubble to date.
  • WS
    William S.
    4 August 2019 @ 21:28
    Try telling a working class man that there is no inflation.
    • GS
      Greg S.
      6 August 2019 @ 02:49
      Only out of touch coastal elites & economists think there is no inflation.
  • GS
    Greg S.
    6 August 2019 @ 02:44
    This is literally almost every baby boomer that started their career on Wall Street in 1980 & experienced an unprecedented credit expansion & Fed backstops for 30yrs. Difference is the credit expansion is ending. It’s also a symptom of large Asset allocators essentially be paid to always be invested. Even if it means losing client money but on a comparative basis you match other allocators.
  • SB
    Stewart B.
    5 August 2019 @ 12:19
    Shiller PE is 'Robert Shiller' not 'Arthur Shiller' who is fortunately still alive and well.
  • Sv
    Sid v.
    4 August 2019 @ 23:24
    Maybe its possible to have integrity and do well in business.
  • TD
    Theodore D.
    2 August 2019 @ 19:39
    Please keep the religious views out. Stay with your strengths, business, finance, economy, ....etc.
    • WS
      William S.
      4 August 2019 @ 21:35
      Disagree. We need more God and moral values, not less. It's refreshing. Predators eat and destroy, men of God build and maintain.
  • KP
    Kelvin P.
    3 August 2019 @ 00:56
    Didn’t like Ed, he always like to interrupt
  • JS
    John S.
    31 July 2019 @ 14:38
    Capitalism, left to its own devices, combined with collective human emotions create cycles. Can’t remove the latter but politicians impacting the former, which can extend and pretend, but not eliminate cycles.
    • EN
      Eric N.
      31 July 2019 @ 17:48
      Dynamism versus rationalism, two opposing world views, both equally true, and in my opinion the driving intellectual filter of many market participants.
    • DS
      David S.
      31 July 2019 @ 22:41
      Eric N. - Dynamism: The quality of being characterized by vigorous activity and progress. Rationalism: A belief or theory that opinions and actions should be based on reason and knowledge rather than on religious belief or emotional response. These two ideas are different. Some antonyms for dynamism are calmness, inactivity, depression. DLS
    • EN
      Eric N.
      3 August 2019 @ 00:14
      @DLS I see rationalism as a philosophy where the truth tends to be binary, facts are, once broken down, stagnant, universal. In my mind it neighbours idealism and mathematicism. There's a tendency to paint the world black and white. Stephen Auth is in my view an example of how rationalism can shine. Dynamism is the opposite, everything is in a constant state of change, or as you wrote, progress; push and pull are whereever you look. Neighbours might be realism and monadism (Leibnitz). I see much of real visions audience in this camp, people who have a sense for extremes to, almost like a law of physics, balance out eventually; for the bull to end. Auth however, is right for his environment and for his time. I think he will be right for some time to come too. With either hiking or easing done, which is binary, the market has become very rationalistic indeed, it is a stage practically made for rationalists, and a stage very difficult to operate on for dynamists.
  • BM
    Beat M.
    2 August 2019 @ 19:21
    I really didn’t like his views. Maybe I have to check my groupthink.
  • EK
    Edward K.
    2 August 2019 @ 15:37
    Bold call - beginning of a new secular bull market and no recession in 2020. Am reminded of Taleb's "Fooled By Randomness". Just imagine a Japanese grad entering the finance industry in 1949. 40 years bullish into 1989. However appreciate the contrary viewpoint and for the sake of pensioners, the soon to be retired, and the economy in general would prefer he is correct. Have never heard anybody publicly call the bond market wrong before so that is kind of refreshing.
  • cg
    christian g.
    2 August 2019 @ 13:36
    Fantastic Common sense !
  • DL
    David L.
    2 August 2019 @ 11:47
    Very good interview showing an interesting, non-consensus view to think about. A variety of viewpoints is, for me, one of the strengths of RV.
  • VF
    Vincent F.
    2 August 2019 @ 04:29
    Great thing about Real Vision is how they have guests with different perspectives which makes you question things more deeply. Keep it up!
  • RS
    Robert S.
    1 August 2019 @ 22:47
    This guy could not suck blood out of the economy if investment had a decent hurdle rate I.e. interest rate. I guess as long as bubbles are growing such an unreflective bloke can survive
  • PM
    Paul M.
    1 August 2019 @ 19:54
    There aren't religious wolves?
  • DD
    Dominik D.
    31 July 2019 @ 23:02
    (╯°_°)╯All praise Lord Bullish for he has come to lift our recessionary beliefs here, this day, in the kingdom of Real Vision
    • JC
      Joe C.
      1 August 2019 @ 00:18
      PRAISE BE.
    • CM
      Christopher M.
      1 August 2019 @ 13:24
      Under his eye
  • WW
    Wayne W.
    1 August 2019 @ 08:47
    Mad missionary nonsense, ponzi manipulated most overvalued stock market in history, if stock buybacks were disallowed this so called market would be down 40% for starters. Talking about trade deal soon, seriously. Chinese are way too smart for Trump. No meaningful trade deal in sight. There has been no real market since the GFC its all central bank coordinated manipulation to prop up the ponzi largest debt fueled bubble in history. The fed are intelligent idiots and stock market stooges who continue to lose credibility if they do in fact have any credibility left.
  • RM
    Russell M.
    1 August 2019 @ 02:10
    I hate setting myself up as know and tell all, and i comment on only a couple percent of videos I watch, but i should on this one for the people that coallate opinon. Ed continues to be one of the best interviewers. The guest expressed multiple long term market knowledge wisdoms and is to be respected as such. His personal story is part of his story and can can be included, but be careful not to over indulge guests in this way. Elder men have a way to express their views therein in brief pithy ways without being indulgent. So not over the line but pushing it in my opinion, so just be careful. As Raoul has said, this is not a not a social justice platform, or something like that. Maintain profesionalism and keep the human interest social or such portion small is my opinion.
  • JF
    John F.
    1 August 2019 @ 01:53
    Quite a bit of nonsense here, in my opinion: There are no cycles...? There are obviously cycles (both cyclical and secular), regardless of whether or not Central Bank policies play a role in those cycles (which they clearly do). And yes, cycles do eventually end. But a minute later he describes cycles...so which is it? The Federal Reserve is done hiking....so this bull market should go on for many more years... Then why did the Fed stop hiking at 2.5%? Why did the Fed begin lowering rates as of today... Because the economy is so strong... Ignore the bond market..... The trade deal (presumably with China) is underway? Stocks are cheaply priced.....? And who is actually claiming that stocks are overvalued simply due to how much they are up from the lows? And we should ignore the Shiller PE (CAPE) because "Arthur" (Robert, not Arthur) has been dead wrong. Shiller doesn't call market tops, but unless you reject the idea that there is such a thing as regression to the mean, then the CAPE can provide some value as a tool when considering the overall markets. The CAPE was at 15 when the markets bottomed in 2009 (great time to consider going long) and sits above 30 today. It could definitely go higher, but valuations matter. Jesus/divine providence "gave me all these talents" which helped me become a successful investor and fabulously wealthy....while simultaneously allowing 16,000 children (on average) to die from starvation (hunger-related causes) on this planet every day.... That makes sense.... This is what religion/religious faith/supernatural belief does to the human brain...It can literally be used to make anything mean anything. And you never have to provide a shred of evidence for your claims. Imagine Ed interviewing Stan Druckenmiller and asking..."What has been the primary reason that you have been able to be so insanely successful as an investor?" And Druck responding... "Because Jesus has favored me to reward me for my faith." Religious faith is a vice, not a virtue.
  • AM
    Alonso M.
    31 July 2019 @ 15:18
    Lots of good Wall Street sound bites. Not much in the way of sound economics unfortunately. Or logic. If you're banging the "he's done hiking" drums on national TV thinking this is somehow bullish for equity markets, it's worth pointing out the last two times the Fed was done hiking rates the S&P 500 dropped over 50% each time. Problems with Shiller PE are easy enough to quantify by looking at the correlation coefficient of its regression line. Shiller PE has been wrong so far, but to say it's a wrong altogether requires actual math which was not provided. Lots of other flies in the ointment. There are no cycles but we are in a secular bull? Come again.
    • CM
      Christopher M.
      31 July 2019 @ 15:47
      The Shiller PE says nothing about timing. It is just math, that shows valuations vs the history of valuations. How can that be wrong?
    • RE
      Richard E. | Contributor
      31 July 2019 @ 15:52
      I would agree with him on the Shiller P/E. One should price an equity on expected FUTURE profits not on realized PAST profits. What company was more valuable 10 years ago, Netflix or Blockbuster? The past is no predictor of the future. Of course, you need a scenario analysis around the expectations going forward because forecasts are always wrong. However, that approach makes far more sense than looking at the past.
    • CM
      Christopher M.
      31 July 2019 @ 17:32
      So you are saying the S&P 500 earnings as a whole are going to grow considerably faster going forward than the last 50 years? Or the PE multiple that we have today will stay intact going forward?
    • DS
      David S.
      31 July 2019 @ 22:23
      Christopher M. -Corporation buybacks do not distort the math, but they do distort the perception. DLS
  • SS
    Simeon S.
    31 July 2019 @ 20:54
    ;)... while the usual RV guest would spend hours remembering how they predicted ‘87 or another crash, this guy just enjoyed a great bull market with a little volatility here and there! Question of perspectives...
  • DS
    David S.
    31 July 2019 @ 19:00
    Faith is essential in religion. Soren Kierkegaard based his life’s work on a leap of faith in Christianity. Eric Hoffer, an American moralist and philosopher who said he wrote in railroad yards waiting for the next freight train, wrote the The True Believer. The book proposed that if someone was an ardent believer in one thing, he can more easily be an ardent believer in another thing. In addition, if one is skeptical, it is difficult to become an ardent believer in something. Being skeptical when it comes to predicting human behavior, I believe the only thing we can count on is that most governments will go deeper into debt – QE or MMT - until the bubble bursts. Buy some more gold in this world. DLS
  • DS
    David S.
    31 July 2019 @ 18:37
    It is interesting that in the whole discussion of the current market, sovereign, corporate and private debt was not mentioned. DLS
  • PW
    Phil W.
    31 July 2019 @ 17:51
    So big share Buy-Backs no Capx spending...............................not sure if I get is point of view
  • GC
    George C.
    31 July 2019 @ 14:07
    "The trade deal that's underway." That's where he lost me. Fear his forecast is built on quicksand.
    • ns
      niall s.
      31 July 2019 @ 17:43
      Totally lost me there also
  • TD
    Thomas D.
    31 July 2019 @ 17:35
    Another outstanding guest!
  • TR
    Thomas R.
    31 July 2019 @ 17:23
    This guy has not studied history nor has he any idea about geopolitcs. But still: good to hear a different perspective!
  • RE
    Richard E. | Contributor
    31 July 2019 @ 15:58
    Kudos to RV for bringing a very different perspective and kudos to Stephen for living out his faith.
  • EE
    Eric E.
    31 July 2019 @ 15:29
    trading with Christian values, amen
  • RM
    Richard M.
    31 July 2019 @ 15:08
    Great conversation! Really cogent arguments on the bullish side. I'll have to follow Stephen Auth more to counter my current semi-bearish bias!
  • JS
    John S.
    31 July 2019 @ 14:52
    Love your work in NYC! Way to answer His call.
  • MB
    Michael B.
    31 July 2019 @ 14:47
    wow!!!! someone bullish on a realvision! in all seriousness though, would be really great to get more bulls like this and the guy raoul interviewed from GS on here. It is nice to balance things out (though realise you're probably trying the balance out the non stop bullishness from the street)
  • WW
    William W.
    31 July 2019 @ 14:46
    Seems like a very big stretch to say that the rest of the world is dealing with deflation and negative rates but the S&P 500 can post $185 in earnings next year. Also, Arthur Shiller and the Shiller Curve?
  • GH
    Gary H.
    31 July 2019 @ 14:18
    Enjoyable perspective. I guess I always wonder where markets would be without central banks spending 20 trillion over the last decade. That's $63,400 every second...$380,400 every minute. $228,240,000 per hour, $5.477 billion per day. And now the Fed has to cut. Something is fundamentally wrong
  • EH
    Edward H. | Real Vision
    31 July 2019 @ 13:39
    Ed Harrison here: just a quick comment on this interview from behind the scenes. I actually did this interview back to back with my talk with Michael Lebowitz.https://www.realvision.com/tv/shows/investment-ideas/videos/steepening-curve-could-yield-generational-opportunities For me, it was a really good experience to talk to both of them because the two men were coming at the macro outlook from totally different perspectives, yielding wildly different conclusions. And I spoke to them literally 2 hours apart. As a Real Vision 'viewer', it highlighted for me the variety of perspectives on Real Vision, irrespective of whether I agree or disagree.
    • tW
      tgwtom W.
      31 July 2019 @ 13:55
      Yes, we all probably have similar reactions. I was thinking *not John Burbank* , haha.
  • JA
    James A.
    31 July 2019 @ 08:21
    What a breath of fresh air! The deflationary implications of the 3rd industrial revolution are not talked about enough in finance. Good to have a bull on RV who isnt a bendy line chartist.
    • JB
      Jon B.
      31 July 2019 @ 13:07
      Agreed. Finally a good reminder on this cycle's causes of deflation. Technology. Of course.
  • RB
    Richard B.
    31 July 2019 @ 11:55
    its nice to hear a bullish argument for once. They should call it 'permabearVision' !
  • JS
    John S.
    31 July 2019 @ 10:21
    Pass the bong!
  • TJ
    Terry J.
    31 July 2019 @ 10:10
    As a libertarian and real money advocate, I loved Stephen's comments on the adverse impact the Federal Reserve has had on the American economy since its creation. I also agree totally with his views that the cycles that exist, while not necessarily created by the Fed, are usually ended by their policy actions. In addition, in recent decades, their incessant debt creation and manipulation of the interest rate cycle has led to massive bubbles in most asset classes. The reality is however that love them or loathe them, we are stuck with the Fed and all the other Keynesian obsessed debt creating central banks. I think Stephen is wrong about the bond market (which as Raoul and others so often remind us is usually correct on the economy), although I would love his view of a secular equity bull market that has another decade or more to run to be correct. I found Stephen's views especially on the deflationary benefits of the third industrial revolution refreshingly different, and also enjoyed his uplifting spiritual perspective. Thank you RV for introducing him to me.
  • PJ
    Peter J.
    31 July 2019 @ 08:33
    interesting views, but suspect back up to some of his arguments. Trade deals a given - really! Stocks are cheap - Ed picked him up , but I didn't buy the follow up justification. Good to get a bullish perspective, but doesn't change any of my current bearish convictions .
  • DH
    Dabangg H.
    31 July 2019 @ 07:46
    A bull on RV!! Stop the press! :)
  • PB
    Patrick B.
    31 July 2019 @ 07:40
    Very refreshing pov. Thank you!
  • MB
    Martin B.
    31 July 2019 @ 06:22
    I'd love to have a link to check his performance... as a former analyst I'm sceptical about Stephen Auth. How he discredited cycles proved that he has not much knowledge about cycles and to value the future with where it could be... sorry that can't be serious. If RV brings optimistic and bullish guys, please add some serious content to it...