Sam Dickie: Fisher Funds expert ahead of Kevin Warsh's confirmation hearing next week

President Donald Trump named Kevin Warsh as his choice for Federal Reserve chair earlier in the year, and he's set to have an impact on the US economy.

Warsh's confirmation hearing is set to take place next Wednesday and there's speculation growing about what this means for interest rates. 

Sam Dickie from Fisher Funds explained further.

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Episode Transcript

Speaker 1 (00:00):
The most powerful central banker on Earth is about to change.
Kevin Walsh's confirmation hearing is next Wednesday. This matter is
obviously for the interest rates around the world. And Sam
Dickey from Fisher Funds is with us. Now, Hi, Sam,
Hey you the now Sam remind us of who Kevin
walshes and why we should care about a US Senate
hearing next week.

Speaker 2 (00:18):
Yes, So next Wednesday, the US Senate grills the man
who will almost certainly become a next chair of the
Federal Reserve. So prediction markets have him as a ninety
five percent probability he is. He's thirty five. He was
the youngest ever FED governor when he was appointed at
thirty five twenty years ago. And interestingly, he was the
Fed's main link to Wall Street during the two thousand

(00:40):
and eight financial crisis, so he actually helped stitch together
the emergency bailout of bear Stearns and AIG. And we
should care because this one person sets the time more
than anyone else for global interest rates for the next
four years. So in New Zealand, while shorter term interest
rates to an extent beat to their own drama, medium

(01:01):
and long term rates here are much more highly correlated
with US rates.

Speaker 1 (01:05):
So would you consider him a hawk or a dove?
Is he going to cut rates like Trump wants?

Speaker 2 (01:11):
Yes, And again, hawkish means he prefers higher rates to
lower and obviously dubbsh as the inverse of that. So
this is kind of the paradox of the appointment. Is
Trump is, as we know, spent two years publicly demanding
lower rates, and yet he's nominated a man who historically
has been one of the most hawkish voices in central banking.

(01:32):
Now what's he done? Historically he opposed rate cuts during
the two thousand and eight financial crisis, and he actually
resigned from the Feed and Protest in twenty eleven because
he disagreed with the second round of money printing, or
quantitative easy as it's called. And just recently, on the
thirtieth of January, when he was nominated by Trump, he

(01:53):
triggered what traders are calling the war shock, which drove
gold and silver prices down sort of ten twenty forty
eight hours. But this is the twist here, that is,
he recently changed his tune. I'm not sure i'd be
cynical enough to say he changed his tune to get
the job, but he now argues that AI driven productivity gains,
I mean, the economy can grow faster without stoking inflation,

(02:14):
and therefore rates can come down.

Speaker 1 (02:17):
Okay, now there is a bit of political drama around this.
What's the hold up?

Speaker 2 (02:21):
Yes drama? So Republican Senator Tom Tillis is blocking his
own party's nomination. So obviously Trump and the Republicans are
nominating this guy, and he's a Republican. And that's because
the Department of Justice, and you and I have talked
about this before, is criminally investigating the current FED chair
Powe believe it or not for a building renovation project.
It's obviously a bit of a witch hunt. Now Tillis

(02:44):
actually likes w Wassh. He's not blocking him because he
doubts his independence, which is critical for any federal bank
governor or chairman. He's blocking all FED nominees, including wash
until the DOJ drops its criminal investigation. And the argument is, obviously,
if the perception is that the FED chair serves at
the pleasure of the President, the market will not think

(03:05):
the FEED is independent, and that is key for any
central bank.

Speaker 1 (03:08):
What does this all mean for investors?

Speaker 2 (03:10):
Then? Well, I think the big picture. If he stays
true to form, I think we can say the era
of the feed is a giant safety net for markets,
and you and I have spoken about this before. What
trade is called the FED put is possibly over, so
he wants to actively You know, we talked about money
printing before and quantitative easy. What that actually means is

(03:31):
the feeders hoovered up and bought a lot of bonds
over the years to stoke liquidity into the market. So
he wants to actively sell the feed's two trillion dollars
of mortgage bonds, for example, rather than let them quietly
roll off, which Jerome Powered wanted to do. And that's
quite a fundamental regime shift. But the point is, while
that sounds a bit scary because of those safety net

(03:53):
for markets, it's probably a good thing in the medium
to long term, as this large ess of central banks
around the world has really encouraged people to take on
too much debt. Now that all assumes he doesn't get
swayed by politics and he doesn't change his tune. But
I think the lesson for investors for us all is
don't try and trade the headlines. Don't try and trade

(04:13):
the geopolitics, trade the quality of what you own.

Speaker 1 (04:16):
Yeah, that is a good lesson. Hey, thank you, Sam
is always good to talk to you. Sam Dickey Fisher Funds.

Speaker 2 (04:21):
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