Thomas Thorton, Founder of Hedge Fund Telemetry, joins Julia La Roche to weigh in on Jerome Powell and Steven Mnuchin’s testimony before the House Financial Services Committee.
- All right, Tom. I want to get your take on what we were listening to [INAUDIBLE] today with Mnuchin and Powell and what your views are on the second half of the year.
THOMAS THORTON: Well, look, I think, just to follow up with what David Zervos said, the Fed has done a great job at stabilizing the markets. They were quite unstable, as you know, in March, and they've thrown just about everything at this and then some, a lot more than, I think, anybody could have ever imagined. I think the question that I probably would have wanted to hear from, perhaps, some of the minority Congress people-- why are-- why is the Fed buying Apple bonds, foreign bonds like Daimler, BMW? They're buying Altice in the high yield.
But why are they buying those bonds rather than putting money directly towards those minority areas? Because I think that would be a bigger punch for the economy, especially in those really beat-up areas and cities. I think that would have been something really important. The last thing-- Apple also is buying back stock with the bonds that they issue. So I think there's a bit of a moral dilemma, too, of why they're buying Apple bonds.
- You know, it's interesting, Tom, because there is kind of this tension that you keep hearing [INAUDIBLE] around the corporate credit facility. And, you know, some folks are for it. Others are against it. As someone in the markets, you just kind of outlined your view, but has it been frustrating from a market viewpoint?
THOMAS THORTON: No, not at all. I mean, we were-- we headed into the March period short. We got long around the middle of March, which worked out well. It's now getting to a point where you just keep hearing more and more and more facilities, whether it's from the Fed or even with the federal government-- the federal government's going to have to make a big decision in the next month with some of these states that have a fiscal cliff looming because they're just depleted with all their funds. So it's-- it's not necessarily frustrating because we have the market that we have and we just have to trade that. But I think that there's some big questions for the second half.
- I guess if you had to [INAUDIBLE] on some of those questions for the second half-- also, I should mention we're about to get in to-- we're just finishing the quarter. We're going to getting into earnings season, those sorts of things. What are the questions that are top of mind for you as you go [INAUDIBLE] half of the year?
THOMAS THORTON: Well, look, we've seen a lot of companies come back from the recovery to even higher highs. And in my opinion, when they didn't give guidance, then everything was "withheld"-- withholding guidance for this quarter-- now they have to give guidance. And I think that's going to be tough. And I'm not sure if the market-- it's going to be enough for the market to keep this momentum going.
You also have a few other things happening. The election is going to be a complete mess, I think, on both sides, with the government-- excuse me, with the electorate so polarized. And with some of this tension in the streets, I really think there's going to be a lot of uncertainty around that, and that happened not so much as bad in 2000. But we didn't know who won the 2000 election, and the markets really took it hard with that uncertainty. So this could be another wild time.