Moneybeat – Jobless claims and a new Fed head


MARY REICHARD, HOST: Coming up next on The World and Everything in It: The Monday Moneybeat.

NICK EICHER, HOST: Financial analyst and advisor David Bahnsen. Hope you had a great Thanksgiving and first Sunday in Advent!

DAVID BAHNSEN, GUEST: Well, same to you, Nick.

EICHER: Well, David, let’s hit jobs real fast. We’ve observed week by week the jobs returning in the sense of continued declines in ongoing unemployment benefits. 

And while enormous, week-by-week the number of new claims has been getting smaller. 

But now two weeks in a row, we’re seeing new claims rising. Are you optimistic or pessimistic?

BAHNSEN: I don’t think it’s really a matter of being optimistic or pessimistic. It’s really just a matter of a very objective assessment that over the last several weeks, for whatever reason, right or wrong—and I happen to think a lot more wrong than right—you have had more restrictions and shutdowns and varying degrees of new rules and constrictions on economic activity from various governors and counties, mayors, and so forth.

So you would expect that it would have some impact into the labor market and it hasn’t had that big of one yet, but it’s had some.

EICHER: Well, the market opens this morning less than 100 points from a milestone it hit last week.

And, obviously, we’ve seen it coming, but let’s think back—way back, pre-Covid—the Dow Jones Industrials were closing in on 30,000 in February of 2020, then came Covid and the shutdowns and the massive plunge in stock prices. Well, now here we are having crossed the 30,000 mark within the year. 

It is symbolic in a way, but substantive, too. What are your thoughts, David, on that achievement?

BAHNSEN: Well, it’s certainly a sentimental milestone. Closing over 30,000 as it did on, on Tuesday of last week is a big deal. 

But here’s one thing I would say: It was 1997—excuse me, 1999—when the Dow hit 10,000. And it was 2017 when it hit 20,000, so there was a 17- or 18-year period to go the next 10,000 points. 

And then it was just three and a half years or so to go from 20,000 to 30,000. The Dow is going to go to 40,000. And I don’t know if that’s in three years, five years. I think it’s going to surprise people how quickly it is.

Now most of this is mathematical. The percentage move required to move another 10,000 points gets lower and lower as the number is higher and higher, obviously. 

But people that used to laugh at this idea are being humbled. The notion that there was some cap to corporate profitability to the capability of companies to be more efficient, to expand not only their profits, but their profit margins, to grow more top-line revenue, to do more innovation.

I think that all people who value the morality of private enterprise, let alone the utility of it, should be cheering the fact that markets can get to these levels, not even in a bubble-like environment. Remember, this is the Dow we’re talking about, not the NASDAQ, the Dow is filled with a lot of old-economy stocks. 

But this is the by-product of the greatest aspect of freedom we have in our country, which is still in commercial enterprise. And so I do believe that it’s something for us to celebrate, and I believe that people should be optimistic about the future. We have a lot of challenges and yet that invisible hand that is so graciously provided for American prosperity, I think is alive and well.

EICHER: Let me ask about politics—in particular the story that former Federal Reserve chairman Janet Yellen is Joe Biden’s choice for Treasury Secretary. 

Yellen was the head of the Fed before her term ended and President Trump selected Jay Powell for that job, and Steve Mnuchin for Treasury. So now Mnuchin’s out, Powell likely stays at the Fed, and so Yellen takes Mnuchin’s seat over at Treasury.

It just seems so much musical chairs here. 

But is it reasonable to conclude that it’s bigger news not so much that it’s Yellen, but that it’s not, as we were hearing, Elizabeth Warren instead?

BAHNSEN: Well, it’s only a reasonable question in the sense that so many people had been throwing out there this idea that he may nominate Elizabeth Warren and it was such a completely ridiculous idea to begin with.

First and foremost, politically, it’s a Republican governor of Massachusetts who was going to appoint her successor. And if anyone believes the Democrats were going to voluntarily give up a Senate seat, they have another thing coming.

But second of all, Joe Biden didn’t owe Elizabeth Warren anything. She didn’t do anything to help him. She stayed in the race to the very last second. She endorsed him after everyone else was already out of the race.

So Elizabeth Warren was never a possibility for treasury secretary. But it made for kind of nice fear-mongering and some of the conservative talk radio and news outlets.

And yet Janet Yellen. I don’t want to say that she’s a moderate. I don’t think that her politics have ever been the front and center of her public profile. She is a center left Democrat, but economically we know exactly what she is. And she is exactly what anyone in the Democratic party would be nominating, which is a center-left, pro-finance Keynesian.

But the significance is this Nick, it’s something that Mnuchin and Powell have created throughout the COVID moment. It goes back to Greenspan and Bob Rubin during the 1990s, and it is what we call an accord between the Fed and the Treasury.

And you can’t really have much more of an accord or a symbiotic relationship than to actually have the former Fed head now be the Treasury head. So it’s a very coordinated monetary and fiscal stimulus that is at the heart of American economic policy now. 

So as far as someone who wishes he could pick the treasury secretary and knows, I can’t, if Joe Biden were going to pick the treasury secretary. And I said this when Obama picked Tim Geithner, if someone like Biden or Obama’s picking the treasury secretary, I just as soon have Janet Yellen as anybody else.

EICHER: Financial analyst and advisor David Bahnsen. David, thanks!

BAHNSEN: Thanks for having me, Nick.


(AP Photo/Seth Wenig) A street sign is displayed at the New York Stock Exchange in New York, Monday, Nov. 23, 2020. 

WORLD Radio transcripts are created on a rush deadline. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of WORLD Radio programming is the audio record.

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