we like to buy companies that are good companies with overleveraged balance sheet, not bad companies. what about retail? guest: retail is fine from here. there's some good buys there. we like neiman's, for instance, as a company that we are long. there are going to be winners and losers from where we go here. in terms of energy, i think energy is fine at this level. i think energy probably trends higher. i think a lot of debt shouldn't be on energy companies because we shouldn't be in equity investment as opposed to a highly indebted company. when oil prices go low, and it is a very cyclical commodity, the company can't support that level of debt. vonnie: you have a short basket of about six to eight bbb companies. tesla is one of those. does today make a difference to you? guest: tesla is in the news today. new chairwoman taking over. she has manufacturing knowledge and expertise. she will probably do a fine job in that role. the question around tesla is they burn cash. they burn about $3 billion a year, and have $12 billion in debt. it is a great company. it is great leadership, we

can i come up with some valuation of this thing and get a sense of how overleveraged it is or if it haseuverability? without covenance, which we seem to have gotten away from, yes, it gives the company's flexibility up until the time they don't have it. to us, i need to be much better and valuing the business, valuing the assets. when it finally doesn't work, whatever that case is, that's all i've got because i could never have a conversation with a company beforehand. we need to talk about leverage. you just talk about it when you're sitting in the lawyers office about bankruptcy. jonathan: is the price relative to what? for the last 10 years i could ask the question, am i being compensated for the risk i'm assuming? for the bulk of the last decade the answer might have been no. tom: this is not go to bank debt to a degree. you are much further up the capital structure than bank debt. bb or single b companies, the reason -- there is not a lot of shareholder equity. there may be none listed but it is very small. if i'm going to buy this bond, the next thing up the capital structure, i b

especially in companies that are overleveraged.ake that as a sign of commitment to deleveraging. caroline: is this ringing alarm bells? are things going to get much worse? >> this isn't anything new. what we are seeing right now, i think the statistics really speak to that. what is consistent with what we've been seeing. has largely been used for m&a and buyouts as well. generally, things that bondholders don't like to see. romaine: what is the outcome of this? if you have a long time where all this cash has been used to reward shareholders and not really buy back into the companies, into the economy themselves, when the ship start sailing, what does that mean for the debt market as a whole? >> that is not positive for the economy as a whole. . the lower corporate tax rate was going to be used to put that money back into the economy, which hasn't come into fruition. we're seeing economists come out with lower forecasts. romaine: what was the reason for taking out this debt? what did the company say they were doing? >> a lot of it h

you have written about how oil could be for overleveraged oil companies in particular. >> most of thesere junk issuers. the last time we had a very big late in the oil price, 2014, 2015, you saw a huge spike in the spreads, specifically on energy high-yield. a large chunk of the high-yield invest. and you are seeing a spike at the moment. isst points to make, yes, it a very significant spike in those spreads. you are seeing the overall beingield indices, jnk the best known. however, you also have to say compared to the last time oil really slid, this is still virtually nothing. the spreads are nowhere near as high and the high-yield sector is holding nothing like it did in 2015. scarlet: rachel, put this in perspective for us. what flows have we seen out of hyg and jnk during this oil selloff? rachel: slightly smaller but still important. about $1.3 billion in outflows just yesterday. people are pulling money out of the higher test high-yield folks. both of those funds have a 10% allocation to oil and gas exposure. that is kind of just why people might be putting them there. we see a ge

overleveraged relative to historical context? >> there are a number of lessons. , the ark is typically 200 years, 250 years. by the way it starts off with technological advances that raises gdp and then makes them very competitive in the world markets like the dutch was the reserve currency for the british empire and hours. what happens is later in the cycle there is that desire to push into leverage. usually it's a matter of they become global, they have global trade groups. when they travel they are carrying their currency. ,eople use that currency holland essentially amsterdam became half of world trade at that time and it became very rich because of those things. so there was borrowing and lending and then the cycle goes when you have a reserve currency, others want to save in it because the choices their local corn -- currency and they believe that's the thing to save in and when they are saving and it, that means there is borrowing in it by that country and they usually overextend and as a result of overextending they get p

overleveraging of corporate america. the reason why the fed needs to unwind its balance sheet and raise short term interest rates is because a, the economy is improving and number 2, you could have asset bubbles. we should not be incentivizing corporations and individuals, mainly corporations because they went on a debt binge to borrow more. >> neil: he's not worried about that. are you? >> i think what has changed in the last six weeks is what happened at general electric. in the blink of an eye, nobody cared that it was trading south of $10. when their bonds went to 80 cents on the dollar and started trying like a junk bond from mike milkin's day -- >> neil: what she's saying, the federal reserve was guided by the markets and responding to the markets. i didn't think federal reserves did that. >> i think it's a combination of things. part of the danger of where we are is if jay powell will hold off on raising rates, if that's where we're going to go, we we have room when a recession hits. one is coming. >> neil: so now

part is potentially overleveraged.look, too much leverage is a matter of a ratio compared to debt to cash flow. if you have plenty of cash flow, like at&t has $183 billion of debt, perhaps the most debt of any company in the world, and it also has leverage of three to four times that's probably not that worrisome. some have worried about ge which has $115 billion of debt jpmorgan chase says it has free cash flow. the question is, companies piled on debt in the last eight years. some of that -- and why not. it was cheap and you get a tax break for doing it it's coming back to roost. integrating at&t time warner together could be a bill challenge for a phone company. that may not work out so well. my point is, it's time to look at some of these things. is it time to hit the panic button of course not. but it's time to wonder why all this debt these companies have taken on >> talk me through, bill, the analog to the 2007-2008 mortgaged-backed sxurts mortgage crisis where it was a small number of defaults in any one of tho

we are overleveraged absolutely everywhere in society. point is a lot when you consider the amount of money in circulation and -- charles: coupled with the fact they are taking out $50 billion in accommodation, right? they are reversing all that money printing they did. this is the first time in history they have ever had to do that and to raise rates at the same time, it seems -- it may seem trivial to some people but to your point, it does make a difference. it's not that wall street doesn't expect rate hikes if the economy is great, fine. i just think it's sort of the ham-fisted approach it seemed powell was articulating last month. >> central bankers around the world are also becoming less accommodative. they have qualitative easing happening, reversing around the world. so it's really the fear of what's going on outside of the country that's exacerbating what's going, because here our story is very rosy and even the vice-chair's comments, definitely leaking dovish, talking about productivity gains, talking about inflation tempering.

where we are today in this overleveraged society because most of you in this room were headed to another financial crisis. that is the question before us what form of populism? i hope tonight that the good people in toronto will listen with open ears as we debate this topic. thank you very much. [applause] . >> now we will put eight minutes on the clock you have the stage. >> thank you. >> we are all here to welcome steve bannon to president trumps least favorite country. [laughter] [applause] i worry that some of those protesters may have confirmed the idea that canada does have a pillowcase national security threat. [laughter] but i would like to begin by taking the protesters question very seriously to answer this question. why are we here? what do we hope to achieve? this isn't to have entertainment or do a show but here to engage the most important and dangerous challenge that liberal democratic constitutions have faced since the constitution steve bannon advised the president on his way to losing and he helped turn the campaign around he has been an advisor to the president a resul

this is something you have been writing about which is these overleveraged oils companies -- oil companiesee problems with oil prices collapsing. john: that's the first question that should appear in anyone's mind. was latetime oil tank 14 early 2015 the response was real tariffs are among the energy sectors on the high-yield bond market. spreads,ok at the their credit compares to other bonds. it balloons out spectacularly. because therese is a lot of relatively small companies on the share revolution in the last few years. many did indeed leverage themselves to the hill to dive into the area. you have seen a sharp increase in that spread, but you have also seen a lot of interest in volumes and churn in high-yield bonds. nothing asked her medic as we saw back in 2014 and 2015 because there is a general belief the sector has its house in order. we may not be as bad as 2014 and 2015, but the bonds we saw today were so little jarring, right? >> i was look to volume on etf's. today traded 3.2 billion which is a lot for leaving down a little. there was a lot of activity of a trade of $150 milli

how the financial crisis was bailed out, where we are today in this overleveraged society because as you know, most of you in this room to work in finance were heading to another financial crisis. that is the question before us. what form of populism. and i hope tonight that the good people in toronto will listen with open ears as we debate this topic. thank you very much. [applause] >> thank you, stephen. david, we are going to put eight minutes on the clock for you for your opening statement. we now have the stage. >> thank you. we are all here welcomeow steve bennett who is president trump least favorite country. [laughter] i worry that some of the protesters may have confirmed the idea of the candidate does present a pillowcase national security threat. [laughter] what i'd like to begin tonight by taking the protesters question very seriously and to answer the question, why are wea here? what are we hoping to achieve tonight? were not going to mount entertainment or do a show. we are here to engage in the most important, most dangerous challenge the liberal democratic institution

credit exposure it's thinking much more company by company, thinking about which companies are not overleveragedabout do you have a buffer for the next recession? do you have quality fixed income. >> i think market structure has changed a bit so if you look at the high-yield market, which the fed is looking at saying it's orderly. it's bigger than the high yield market so we've had a shift there where suddenly bank debt is usually par unless it's not performing if you look at private equity multiple, ebita average just under nine so that's the crowding out effect we've lived in a world with assets have been crowded out and it's driven everything tighter and once that starts to unwind, that's when it gets interesting and there will be opportunities which is 2019, 2020. >> you sound like a man market ago bond fund. not that what you're saying isn't true is there going to be deterioration in credit that creeps into other markets? >> absolutely. credit has been the bell weather that held in so you've had interest rates artificially low caused by the central banks and credit spreads incredibly digti

prior cycle where with had the terrible downdraft and energy we didn't see the overbuilding and overleveraginghat we had last time we haven't seen that the risks are a bit lower. and the lower risks are priced into the bond prices >> yeah. >> yeah the problem with some of the oil high-yield is it's heavily weighted in the high-yield index and other areas that it prompts investors to sell what they can if they can't tell what they own the investment grade top traufrmg would be interesting going forward if we don't have a meaningful slowdown and theed fed stops raising rates. >> and it's over 4% in the yield. >> katie nixon of northern trust wealth management. and lee onof lpjr. >> another data breech, coming up, another 500 million marriott customers could be impacted, including passport information how bad could it get for marriott that's next. look at the map we are at teilr,bmndghs right now. carpla i a intel leading the way. stay tuned here at snowfest... for your worst sore throat pain, try new vicks vapocool drops. it's not candy. it's powerful relief. ♪ ahhhhhhhhhhhh vaporize sore throat

the futures get bad names has been aggressively overleveraged.them if you wish to do so. stuart, by the way we say labor in england. this is the united states where we say letter. are you okay with that, dennis? >> okay, what you've are. stuart: you're sharp and fast. mr. gartman, what a treat. we will see you again soon. >> i'm coming to new york next week. president trump meets with xi jinping this week and he says he may increase tariffs on $200 billion worth of chinese goods. 25% tariffs may be in store from january 1st. a gentleman under screen is john cochran, economist at the hoover institution. but suppose the worst. let's suppose 25% tariffs are imposed on january 1st. what impact on the economy? >> how bad is it for the economy? the good ideas that they blossom all come together the most get back to business. within both sides. not that envious terrorist. they damaged the u.s. no question about it. they're like a cartoon superhero. this will hurt me or than it hurts you to get the other side to do something. they really need to both bac

that you don't like but what you're really saying is the whole universe of companies that are overleveraged about because they have trouble. >> two things going on the business itself inherently has the leverage to oil prices so you have that on the downside as we sit today. if you combine that with financial leverage, it's a recipe for disaster. >> do you have any that are the worst? do you have a couple that are -- i don't know why i want to do the worst. but are there any that are over-leveraged >> there's definitely a few out there. but given our -- >> you're not buying those >> right given our quality bias and everything, we just avoid those and stay away from them. we don't fish in that universe we don't short anything. other than that, those would have been the candidates to pick >> but in large cap, i'm going to start with this one because i like the symbol. remember in the old days, it was soda and other things. this is diamondback energy symbol fang, because of rattlesnakes right? >> exactly >> because they own the rights to viper >> that's cool too that symbol is vonm. >> this ha