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Kevin O’Leary: Stop Whining About The Fed – It’s “Fantasy” to Think Powell Will Cut Rates This Year

The Daniela Cambone Show Mar 20, 2024

Shark Tank star Kevin O’Leary calls the Fed’s rate cuts a “fantasy” that “won’t happen” this year in an exclusive conversation with Daniela Cambone. He sees the current economic situation as stable and favorable and points out that the Fed’s mandate for inflation is 2%, and with inflation hovering around 3%, there’s no urgent need for rate cuts. Regarding the recent mishaps plaguing Boeing, O’Leary points out the amplified scrutiny brought by social media, making it challenging for the company to navigate its reputation. Additionally, he emphasizes the importance of maintaining separate financial identities for couples, advocating for each partner to have their own bank accounts, credit cards, and even investment accounts. Tune in now and be part of the conversation!

 

CHAPTERS:

00:00 Introduction and Fed Policy

02:30 Japan’s Economy and Global Financial Crisis

03:47 Banking Crisis and Digital Economy

05:17 Online Harms Act and Canadian Government

08:08 TikTok and Potential Buyers

10:15 US Politics and Election

12:01 Canadian Politics and Justin Trudeau

14:15 Investment in Canadian Mining

16:21 Digital Economy and Boeing

23:13 Separate Bank Accounts in Relationships

 

TRANSCRIPT FROM VIDEO:

Daniela Cambone (00:07.314)
Hi, this is Daniela Combone. Welcome back to the Daniela Cambone show now on ITM Trading, catching up with Shark Tank star Kevin O’Leary, ahead of the Fed here. Well, Kevin, so nice to see you. Welcome back.

Kevin O’Leary (00:21.37)
Thank you so much.

Daniela Cambone (00:23.046)
Yeah, I can’t wait to go over a few hot topics with you. But first, I see you, you’ve been saying, look, when it comes to the Fed, everyone just needs to stop whining because we most likely won’t get a cut at all this year, let alone this month. What’s your take on the Fed and what they should do?

Kevin O’Leary (00:39.734)
Yeah, I think everybody has to remember the Fed’s mandate for inflation is 2%. It’s not 2.1%, it’s not 2.5%, it’s not 3%, it’s 2%. And so…

At the same time, we have a soft landing that is agreed on by almost every economist now, which is very hard to engineer, but somehow that’s been achieved. Got to hand it to Powell on that. So he has absolutely no incentive to take any risk whatsoever and cut rates. So all this discussion about one or two or three rates starting in June, I think that’s just fantasy. It’s not going to happen. And so even the market is starting to adjust to the fact that you can get 5 percent.

in very short duration fixed income instruments, which is attractive to a lot of people for at least a portion of their portfolio, and you can remain in the equity markets because they have remained strong because of this situation. And perhaps it’s because of the productivity potential from AI or the fact that the economy has domesticated in many ways and we’ve solved a lot of supply chain risks, but whatever it is, it’s working. So cuts from the Fed.

ain’t going to happen. In my view, zero probability.

Daniela Cambone (01:55.058)
Mmm. So you’re saying with no cuts the way things are today. We just stay the course

Kevin O’Leary (02:01.83)
Absolutely. I mean, there is no reason to cut right now. For what reason would you do that? We’re almost at full employment still. The stock market is extremely strong, if you want to use that as a measure of the economy. The economy’s had a soft landing. It’s still fraught with inflation everywhere. I mean, the idea that inflation’s been tamed is a joke. It’s still up there north of 3%. And that may be the new normal, in which case these rates are the new normal. So everybody get over it.

Daniela Cambone (02:05.987)
Okay. What.

Daniela Cambone (02:30.622)
Well, let’s look at what’s happening in Japan because it’s in stagflation for the first time since the 1970s. So with Japan’s economy already in recession, could the higher rate set off a global financial crisis is the concern. Could Japan be the canary in the coal mine? Could it be the butterfly effect that just trickles down and creates a global financial crisis?

Kevin O’Leary (02:53.842)
No, I don’t think so. Japan has its own issues. Part of it is just the nature of their economy and where they’re located in terms of global trade and the age of their population. Lots of issues there are different than the U.S. And so we can’t use that in any ways, the canary in the coal mine. I think you should be more concerned about what’s going on in China. That’s more interesting in terms of what it could do overall.

But at the same time there are many of my companies and thousands of others, hundreds of thousands of others, have moved to India, we’ve moved to Vietnam, so we’re reducing our dependency on the Chinese economy and China is for sure a declared adversary. And so, you know, you’ve got to think about the nature of the globe in terms of how it’s changed in the last 20 years and this is the new normal and these rates make sense for the state of the American economy now.

Now I know that if you’re the incumbent in the White House, you would love the Fed to cut rates eight months away from an election. But they don’t have any reason to do that because they’re still fighting off inflation between 2.9 and 3.4 percent depending what you measure. Now part of that’s in housing. Where they’re still concerned is at the regional bank level. We don’t yet know what the effect of office.

Daniela Cambone (03:55.26)
Yes.

Kevin O’Leary (04:14.382)
and what commercial real estate is going to do, the portfolios of these small regional banks probably force a consolidation, but that looks like it’s happening in slow motion, which could also be a good outcome.

Daniela Cambone (04:26.558)
So we’re not out of the woods yet. I mean, would you say we’re facing a banking crisis or do you feel not concerned?

Kevin O’Leary (04:34.754)
Well, we’re the only economy on earth that has so many banks. I mean, you look at what happens in Australia, England, Canada, France, Switzerland. All of the G7 countries do not have 4,100 banks to service their—we have 11 sectors of the economy, but we don’t need 4,100 banks. I think more likely we’ll end up with 2,000 super regionals. It’ll take three to five years for that to happen. So during that consolidation period—

of some banks failing, some being acquired, some merging, whatever it’s going to be. There’ll be some volatility in regional banks, but it’s not by no means a crisis as it was 20 years ago. It’s a rolling modification to the banking system.

Daniela Cambone (05:17.462)
Mm-hmm. You say, speaking about that, you say there’s nowhere to run and we’re facing a new digital economy. What does that mean? Are you talking digital dollars?

Kevin O’Leary (05:31.81)
Well, I’m a big believer in digital payment systems. It means two things. First of all, in the banking area, one of the reasons you don’t need all these tiny regional brick and mortar outlets is that we do most of our banking, particularly the younger generation, the up and coming generation, they don’t do it from a teller’s window. They do it online and so do large corporations, which is why they move so much of their money out of regionals to money center banks, because it’s safer in terms of the imputed.

guarantee the government gives a large money center bank versus a small regional so that’s one thing. Number two, digital payment systems which were highly criticized in the beginning of crypto. Nobody differentiated between digital payment and bitcoin but today we now know that blockchain payment systems that are completely audible, transparent and very good for tracing money transfers are far superior to ACH or Fed wires.

or even the SWIFT system because they’re very slow, they’re very expensive, and they don’t serve in international economies. Just try transferring money from the US to Zurich or something. It takes days, very slow, very expensive, when it could happen in nanoseconds with a digital transfer. So whether that’s USDC, which would be something around a digital US dollar, and that’s the whole stable coin act that’s going through Congress very slowly.

Daniela Cambone (06:54.548)
Mm-hmm.

Kevin O’Leary (06:56.974)
Bitcoin ETF, that has bolstered the value of Bitcoin and made that a little bit more attractive institutions. Now the exchanges, FTX and of course what happened to Binance, those are the old digital cowboys. They’re gone. And that’s a good thing because now we’re integrating all of this digital technology into the existing banking system on a compliant basis. The most recent advance in this and the largest one that’s emerged is not in the US.

It’s in Abu Dhabi. It’s the M2 exchange, which is picking up a lot of the assets off Binance now. Because you’ve got to remember, Bitcoin, if you want to use that as a metric, as the measure, only 40% of Bitcoin held is in the US. The rest is around the world. So they’re starting to use the M2, and that’s a very interesting opportunity. But we have the same in Canada. There are now regulated exchanges there, as we have in Switzerland and France and England and Australia.

Daniela Cambone (07:46.312)
Right.

Kevin O’Leary (07:50.398)
So this is becoming more of the norm and being completely integrated and transparently done so under the auspices of regulators in a way it hasn’t done during the period of the crypto cowboys. And both of them are awaiting sentencing now. They’re on their way to a different jail.

Daniela Cambone (08:08.346)
I know you’ve always been a big advocate, but for the critics who say, well, the ETF basically go against what Bitcoin was created for, to be outside of the system. But now you’re just financializing Bitcoin like they financialized gold with the gold ETFs. So what do you say to those folks?

Kevin O’Leary (08:24.91)
Well I know the crypto cowboys love the idea of the rogue nation of independent traders not under the auspices of law anywhere.

That doesn’t matter anymore. Nobody cares about that. What people care about is that if you want appreciation of value of any digital currency, including Bitcoin or Ethereum or Solana or HBAR or all kinds of different ones are being used for different reasons, you’ve got to have institutional participation. And the only way you’re going to get that is if it’s highly regulated so it can be integrated into the compliance systems of every country. And that’s starting to happen. And I applaud that.

I’m looking forward to participating in that. I’m so optimistic that I think within five years, the digital economy will be the 12th sector of the S&P. It will service all the other 11 sectors, digital payment system, blockchain technology, even Bitcoin as a retention of value. You may want to consider it digital gold. It has volatility. And I know people who don’t like it, but they shouldn’t buy it if they don’t like it. I think everybody should have the optionality.

I’m using it as a 5% weighting in each of my portfolios and it’s been a very good performer in the last 24 months.

Daniela Cambone (09:39.53)
Do you still have a waiting in gold? I know you had exited at one point.

Kevin O’Leary (09:43.23)
No, I’m back in gold. I have a 5% weighting in that too. Half in bullion, half in ETF so I can balance. I keep everything at sort of 5%. And I’ve got lots of other holdings as well in digital currencies that I consider the same, more volatile but also long-term ways to store value. And I think you’ll see more and more of this particularly as it becomes something that is allowed by regulators.

I have no interest in being non-compliant. That doesn’t fit into my model at all.

Daniela Cambone (10:15.654)
want to go over a few headlines. I mean, you’ve been making waves, obviously, when you came out and said, Hey, tick talk won’t be banned because I want to buy it. But as you know, Steve Mnuchin and friends have thrown their name into the rink. I mean, have you spoken to him? Any interest in joining forces there?

Kevin O’Leary (10:32.526)
Well, I think there’ll be many buyers that form, many syndicates will form, but it’s all irrelevant until it passes the Senate. We don’t know what’s gonna happen there. So, I mean, everybody’s throwing their hat in the ring for good reason. There’s 170 million users there. The price has yet to be determined because there’s actually two stacks of value in the TikTok deal. One is the brand TikTok and the 170 million users associated with it. But right now it’s anticipated or speculated.

that the Chinese company, DanceBite, will not sell the algorithm because China will not allow that transfer technology. So if you don’t have the preferences in the history of these 170 million people, that’s far less valuable. So the number being bandied around if you got the company as it stands today with the algorithms would be 100 billion. But that’s highly unlikely to happen. I think it’s more like 40 billion if you didn’t get the algorithms.

because you have to reflect on the price that you have to recreate this algorithmic platform from scratch. Now we know what happened to TikTok. It was priced at 42, not TikTok, Twitter. We know what happened to Twitter. It was priced at 42 billion and then the new management started to tweak the algorithm, change the way it worked with users and it stopped growing.

Today it’s anticipated if it went public to be worth between $12 and $16 billion. So you lost two-thirds of your value there. I can’t, I don’t want to see that happen with TikTok. That would be a disaster.

Daniela Cambone (11:54.238)
Insane. Right.

Daniela Cambone (12:01.926)
Let’s turn to politics a second here. First US, then we’ll talk Canada. But you heard the controversy over the weekend when former president Donald Trump used blood bath in regards to if he didn’t win the next election, there would be a blood bath. Now some maga types got bent out of shape saying he was referring to the auto industry. I mean, any takes or opinions on his statement there on if he lost the next election?

Kevin O’Leary (12:29.574)
Trump has been Trump for nine years. I don’t think this stuff matters anymore. I really don’t. I think what people should be looking at in this election is on a bipartisan basis at policy. It should be a debate about policy. Obviously border security is now becoming one of the top issues in this election. Energy security is a huge issue. Taxation is a huge issue.

Daniela Cambone (12:33.362)
Yeah

Kevin O’Leary (12:57.298)
All of these are policy metrics and I would think it’d be far better to stop looking at what one candidate said or another said because it’s kind of irrelevant if you’re not looking at policy. You should vote, whichever side you’re on, you should decide what policy do I want for the next four years in this country and how it works with other countries. I’ve got, you know, foreign aid is becoming a policy issue and how we treat adversaries in the TikTok deal you detailed. That’s all policy.

Daniela Cambone (13:23.047)
Mm-hmm.

Kevin O’Leary (13:27.006)
And so, you know, one thing I would caution everybody, look at how each of these candidates try to manipulate very speculative statements each week to try and garner unpaid free media, because that’s the nature of a campaign today. It’s not just network television. You’ve got to command all of the social media platforms. And I would argue, look at AOC in New York, right here in New York.

She is a master politician at saying outrageous things as often as she can. Elizabeth Warren as well. Then they raise tremendous amounts of money off their social media platforms in small increments and that’s how you have to do it. Now, I don’t agree with their policies but I have to applaud what they do in terms of staying at the top of the heap.

Daniela Cambone (14:07.12)
Right.

Daniela Cambone (14:15.59)
It’s all part of the strategy. Well, you mentioned policy, so I couldn’t wait, Kevin, to bring this up to you because let’s get what people are calling Orwellian online harm bills, courtesy of Justin Trudeau, with the Canadian Prime Minister backing imprisoning people for life over speech crimes and social media safety crackdown. The Online Harms Act, designed to make social media platformers safe, is being slammed as Orwellian and overreach.

by voters, some say it’s like a page or a scene from Minority Report. I mean, your take on Trudeau’s latest year.

Kevin O’Leary (14:54.63)
I think I’ve been pretty consistent in my, and I want to choose my words carefully here because I want to be supportive of Canada. I’m a big believer in its potential and I’ll say it again, when you look at the per capita of Canada, 37 million people and you look at the natural resources the country has, per capita it’s one of the richest countries on earth.

run by complete idiots. And there’s no other way to put it. You might as well tell the truth. It’s so important that Justin Trudeau be thanked for his service and then removed from office. And an election will be coming in the next 18 months. He is the worst manager Canada has ever had. Total incompetency underneath him in the cabinet seats.

total incompetency in almost every mandate, absolutely the worst I’ve ever seen. The very, very worst. And I think the Canadian people are starting to see how horrific this management team is. And it’s very important. And listen, he’s been a wildly successful politician. But the derivatives you’re talking about are part of this incomplete, complete incompetency.

of managing Canada’s biggest business, Canada itself. This is a totally incompetent government from the top down. The worst managers in the country’s history.

Daniela Cambone (16:21.887)
Mmm.

Daniela Cambone (16:33.946)
You just reminded me Canadian billionaires, Pierre Lassonde and Frank Giustra have been vocal with a huge media campaign urging the fed saying they have to force pensions to fund Canadian mining, saying they’re more invested in China than in Canada itself. What do you make of that? Should the pension funds be invested in one of Canada’s greatest resources, mining?

Kevin O’Leary (16:59.502)
They can’t get anything done. That’s the problem. It’s not just Canadian pension plans, it’s sovereign wealth funds from all around the world. I’m in the business of building data centers because we need data centers all around the world because of the advance of AI. We’ve only got 8% of what we need. An AI data center is a $3.6 billion project, 100 megawatts. Canada should have at least five of them. There are none of them going on right now because you can’t get energy permits. That’s controlled.

by Trudeau’s government. And so you don’t even try. You wouldn’t even waste your time trying to go through the regulatory process of getting a permit issued. There’s nothing going to happen in Canada until Trudeau’s gone. No one is going to risk capital there. You cannot get anything done in Canada, not in mining, not in data centers, not in anything to do with the federal government. They are the worst managers on earth. They are crippling the Canadian economy with mismanagement.

Look, any measure you have during Trudeau’s tenure, it just gets worse every single year. It’s so important that he be swapped out. It’s just the most important thing Canadians can do. They could vote for anybody else and do better. Anybody else.

Daniela Cambone (18:18.794)
Yeah. I think he’s come to the realization his time may be limited. I watched a recent interview he did with Radio Canada where he basically said, you know, it’s just been a crazy life for him. That was his quote. Anywho, moving on, I want to know about the likelihood. What is the likelihood that Kevin O’Leary would step foot on a Boeing right now?

Kevin O’Leary (18:43.414)
You know, I really feel sorry for that company. Years ago, I used it in a global stock picking competition, and I won holding a 5% weighting in Boeing. Boeing is in the world of social media. Every single mishap on a Boeing aircraft, whether it be from inside the cabin or watching it land.

is captured on 5, 10, 15 cell phones. And so these mishaps happened 20, 30 years ago before social media, but now everything is chronicled, whether the door blows off or the wheel falls off, and so they can’t catch a break, and they just can’t. Boeing is a remarkable engineering company, but today you’ve got to wonder how long the CEO is going to last because he’s in a very precarious situation.

gets beaten up with the next incident, whatever it is, whether it’s the 737 MAX or bolts flying off or wheels falling off, whatever. And during this same period, that hasn’t been happening as much with Airbus. But at the same time, it’s a really complex, incredibly valuable company, not just for domestic aircraft production, but also for defense. And so…

Daniela Cambone (19:42.238)
Hmm.

Kevin O’Leary (20:00.762)
My own personal feeling is there’ll probably be a change in management soon, and that may be unfortunate or maybe not, but you’ve got to bring confidence back to the shareholder base but more importantly the consumers that fly on these aircraft. They don’t want to be sitting around worrying about what falls off next. It’s a difficult situation.

Daniela Cambone (20:16.836)
Right.

but you would fly it, you wouldn’t be worried.

Kevin O’Leary (20:23.115)
I flew a Boeing aircraft yesterday.

Daniela Cambone (20:25.406)
Okay, there you go. Kevin O’Leary, your thoughts on Oprah. She resigned from the Weight Watchers Board. She has a new special, Shame, Blame, Weight Loss Revolution. My question is, what do you make of the Ozempic Revolution? Is it something to be embraced or not?

Kevin O’Leary (20:42.094)
I’m trying to decide if Ozempic and this class of drug is in fact the next statin. As you know, statins have been around for decades. They’re widely used to help cholesterol management in people. I’ve been on statins for over 25 years and many doctors use it as well. In its own way, it’s a miracle drug. It has issues as well. You’ve got to be careful how it affects your liver, etc. The same thing with this.

It’s not just obesity, there’s a discussion now about liver, it may be beneficial for liver and even heart. So I would think that we need to explore this drug and its use because it could be a real saver. Obesity and the derivative disease around it is a huge cost to society in North America. And so when people talk about the $1,300 cost of Ozempic right now.

Daniela Cambone (21:11.046)
Yeah.

Kevin O’Leary (21:32.054)
Maybe this drug should go into the insurance mandates of North America because we suffer from obesity. I’ve become very, if I want to use this word, hip to the idea of longevity and that affects what I eat and what I drink and what I weigh and how I concern myself about just lifestyle. You know, I wear an aura ring for sleep. I wear a glucose monitor. I’m not a diabetic. I’m always watching what I eat.

And unfortunately I love wine, but I’ve learned how much it messes up my sleep, so I’ve got to reduce its amount and how often I drink it. But all of these things are what everybody should be doing about thinking of longevity and quality of life once you pass 50 years old. And that’s the amazing thing. This drug could really help in that respect.

Daniela Cambone (22:17.658)
Exactly and lowering the I mean if you compare it to Canada Ozempic the exact same drug under $300 Canadian versus whatever you know over $1,200 here in the US Finally sorry

Kevin O’Leary (22:31.982)
Yes, it’s true. Canada has some benefits to its… If you have catastrophic health problems in Canada like cancer, it’s one of the best systems on earth. If you need a hip replacement or cataract surgery or minor surgery, that’s where it doesn’t shine as much.

Daniela Cambone (22:48.718)
Yeah, I know. I always remember that conversation that you said, God forbid, critical illness. You’d rather be in Canada than the U.S.

Kevin O’Leary (22:57.858)
Well, on a cost basis, yes, but we have really great doctors in Canada. I think there’s a lot of criticism of the medical system and the way it should be modified to a two-tier system much like the British or the Swiss have, and I’d like to see that. I remember discussing that in 2016 and it’s still a narrative now.

Daniela Cambone (23:01.991)
We do, yeah.

Daniela Cambone (23:13.534)
Yeah.

Last point, last point, because most of the viewers are strategic investors and one of your latest talking points about having separate bank accounts as a married couple or partnership or whatever, everyone should keep their own separate bank account. This is getting people all up in a tizzy, Kevin.

Kevin O’Leary (23:35.366)
100%

Kevin O’Leary (23:39.222)
100%, and here’s why. In today’s society, you must keep your personal financial identity. That’s how it works because think about this, even if you get married and you’ve had a successful marriage that’s lasted 30, 40 years and your spouse dies, if you don’t have your own financial identity, you’re a ghost. You’re lost. You’re nobody.

You can’t build that back up when you’re 70 years old. It’s almost impossible. You must maintain your personal financial identity. You must have your own credit card, your own bank account, even preferably your own investment account, right through a successful marriage. I’d argue it even helps make the marriage more successful. The concept of independent financial identity is crucial.

And I’m asking my own kids and my extended family. Even if you’re not getting married and you’re going to go habitate, I want a cohabitational agreement. Prenups force you to do financial discovery on each other, which is very important pre-marriage. Remember, it’s euphoric to fall in love and it’s a wonderful thing. And then reality strikes. 50% of marriages fail not from infidelity, from financial pressure. I even own a company called HelloPrenup.com.

Daniela Cambone (24:26.524)
Yeah.

Kevin O’Leary (24:53.378)
allows women to do pre-nups online. It’s one of my most successful Shark Tank companies because I’m really telling people, focus on this. You can actually use it as a way to even become closer. And I always suggest this, it’s your third date, it’s your second glass of wine, let’s talk money. That’s how you show you really love someone.

Daniela Cambone (25:15.342)
Yes, and you don’t have to hear your spouse nagging about all the Nordstrom receipts. That’s the best part!

Kevin O’Leary (25:22.712)
Well, that’s how you find out if you’ve got a spender on your hands. Can you really live with somebody that outspends you? The answer is no. This is all about la more. I love and the way to stay in love is to respect money for what it is. It’s always the first child of any union.

Daniela Cambone (25:40.286)
Kevin O’Leary, I love catching up with you on so many topics. Thank you so much for joining us today.

Kevin O’Leary (25:48.014)
Take care, thank you, Daniela.

SOURCES:
https://twitter.com/kevinolearytv

https://www.cnn.com/2024/03/16/politics/trump-bloodbath-auto-industry-election/index.html

https://www.youtube.com/watch?v=o5GYm0_5TD4

https://youtu.be/-68P1W-l6Ws?si=ejmrmDUFhIzli5mP

https://www.youtube.com/watch?v=9dxaFYhbh5U

Sources & References In This Article

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