Gary Cohn Talks Fed Chair, US Economy

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Well begin this out with stocks extending their sell off as President Donald Trump's push to take control of Greenland is sending fresh volatility into markets worldwide. The IBM Vice chairman and former Any Seat director Gary Cohne joined us Now for more. Carrie, good to see you, good, Thanks for having me. Hey, you had the weybeup in the program. There seem to be a concrete ideology when you were alongside the president in his first term or how would

No one knows for sure, but I think what we've seen evolve in the Trump presidency is this desire to negotiate and get a deal.

So ultimately is Greenland all about getting a deal.

We know that the North Atlantic is becoming much more of a sought after territory from a military stic standpoint, so I understand the presidence concern to have a military presence and protection of the North Atlantic is if we want to expand our air defense. Is Greenland is a pretty strategic spot, so I understand what the President's interest is.

They also have rarers, which is.

Something that we in the United States can't supply to ourselves. So the question is is this a negotiating posture to get a deal with Greenland, to get more rarers, to get a larger naval and air force presence, and it maybe it does seem like that's on the table and this may all evolve in a place where the United States ends up in a very good strategic position.

Do you think that's the way the business world sees it coming into the world eCOM before him this week?

You know, I think the business world's split on it. You know, you've he's got a European presence here in the US presence here. I think the US presence is a little bit more optimistic that this is going to end in the right place, and we've seen this before. I think the European contingency is a little more leary and say, look, you.

Know, maybe you're confident this ends well. We don't like being in the middle of this right now, which is a.

Reason why in European hours treasures are selling off much more of the dollar was much lower, and as the US wakes up, people are.

Coming in and buying it.

How much is the sell America trade real and how much is it a perception based on these moments, the ones that we saw.

On Liberation Day, there is some sell America going on right now.

I've met with a couple of different asset managers this morning, so that global funds are reallocating a little bit out of the United States.

So you see that.

You know, interest rates are higher, so people selling bonds rates go higher. People are repatriating currency back home. They're selling dollars to buy local currency, they're selling stock market they've got to repatriate currency.

So I think we're seeing a little bit of that.

I don't think that's what's driving the overall market right now. It doesn't feel like we've got a liquidate in America. It feels like we've got a trim around the edges in asset allocation models going on.

This goes back to the wrestling match we were describing AI on one side. You've got politics on the other, and they're facing off and sort of sell America until AI rears its head miss get into the lead.

And that's where we're sell America until the light turns green and everyone has to buy America. Because in the real reality, if you look at the US economy, what's going on. We've got one of the strongest economies.

In the world today. You know, we're growing at five plus percent and growth.

You know, we've got a pretty good tail wind going on behind us. I mean, right now, the only thing stopping is all this geopolitical risk. If and when, and I say, when this geopolitical risk settles down, the market's probably going to take off again.

That's been the history of this pattern.

Settles down Gary. Two and a half weeks ago, we captured Nicholas Medora.

It feels like a decade ago.

Now we're sitting in Davos talking about Greenland. You think you to settle down under administration two.

Weeks Yeah, we're going to settle down. I think that there's a.

There's a couple of balls up in the air right now. But you know, this two show pass.

We can go back in the last eight twelve years, and there's been periods of time where we've had these, you know, highly volatile geopolitical moments. We're in a highly valuable geopolitical moment right now. And by the way, I'm not sure it's a coincidence that Davlas is right in the middle.

All right, interesting, I want to ask you about the FED chair race, because you are in the room with the president in Trump won when he decided to go for J.

Powell.

What kind of questions do you think he's lobbing at these individuals and in the end, who do you think is going to come down to?

Look, the President's in an enviable position right now.

He's got what we know, He's got four really highly qualified candidates.

Any one of those four could do a really good job in there.

I think the President at this point is trying to understand the sort of mindset of the person he's going to put into the position. The President clearly has a view on what interest rate policy should be. The problem or the opportunity with the fat job is once he appoints someone into that job, they're an independent agency and he loses.

His day to day contact with that person.

So I think the president learned in the first administration that it's very important to who he puts in that job and that he should make sure that he's very comfortable with their policy mandate before he appoints them.

Do you think it's become even more important now that that individual needs to have the ability to persuade the rest of the committee in a way that maybe a few years ago that wasn't as relevant. There's just a sense on Wall Street that the president's approach in the last twelve months has galvanized the rest of the committee to dig in.

Look, I think the committee structure is going to be the committee structure. I'm not sure if the chairperson can ultimately sway the committee that far. Could they sway one vote or two votes potentially? But you've got some very strong regional bank presidents. You've got some very strong governors in the FED. I think the FED, ultimately, at the end of the day, is going to be a tough group to persuade. I think they'll come out in the

Have they been a little bit late?

Yeah, they were late in the transitory inflationary problem of.

COVID, but they've caught up. They've gotten to the right place.

I think if you look at the FED through the cycle, they end up getting to the right place.

You were diplomatic about the four candidates. Can I just talk about some of them individually? You can, Governor Chris wall You can too, Governor Chris Waller. I believe you were part of that process, right, Vice check clarity. You were part of that process too. What was the president's approach to that process back then? Was he as involved as he appears to be now?

He was not as involved then.

But you remember he was a first term president who was an outsider to Washington.

That was part of his mystique.

As he was an outsider to Washington, he knew he had to put someone into the FED char's role, and.

He approached it.

But I think now, understanding the importance of interest rate policy and understanding his view of interest rate policy, he's taking considerably more time talking to the navarious candidate.

I asked you a question might get even trouble. Is Kevin washer chameleon?

Is he a hawk?

Is he a dove? Is he whatever it takes to get the job? Why didn't you get the job last time?

Look, Kevin is highly qualified, without doubt.

Kevin has served in the FED without a doubt. Kevin was there during some of the toughest days of the FED during the financial crisis. Was dealing with Kevin on an hourly basis as we were trying to figure out what was going on in the United States financials system. Kevin was an active participant in the outcome that we all benefited from, and without Kevin's wisdom, I'm not sure we would have ended up in the same place. He's a highly qualified candidate.

It sounds like the four that's who you'd like to stay in the seat. Based on that strong defense of Kevin Wolf.

I think Kevin hasse It's a great quality candidate. I worked with Kevin Hasset when I was in the White House.

He was the CEA director, Show your thoughts, Kevin. Kevin Hasseid was an excellent CEA.

Let me tell you what some people say about Kevin Hasseid, But if he's appointed, that's a puppet of the President of the United States who'll sit there, smile and do whatever it takes.

Is that unfair? You know?

You and I both know whoever gets appointed, there will be people that are disappointed and will.

Have negative things to say about him.

On the flip side, there will be people that'll be very happy with whoever one of those four gets appointed. And if it's if it's a fifth candidate we haven't seen yet, they'll be equally as happy.

With that one.

There is a sense of whoever's going to be there they're going to cut rates. How much is the entire build out of AI, which is what you spend most of your time time talking about here, based on the idea that the FED is going to be easy policy no.

Matter what the AI buildout in rates their link, but they're not in a strictly link.

This AI buildout.

Is being built because there's demand, there's forward demand, and the AI companies feel like they are behind the curve and being able to facilitate the needs of their clients.

They are going to build these data centers.

The only question that rates have is what is the ultimate all in cost to build these things?

And interest rates are going to be important.

These are big, huge capex expenditures with thirty year lives, so you know the amount of interest you're going to pay to finance win these centers is important. So twenty five or fifty basis points has a lot to do with these decisions. But I will caution you, like I always do, the FED only controls FED funds. They control overnight rates. You've been talking all morning about the tenure, the ten years at four to thirty where these data

In the interest rate to financing, a data set could be unchanged.

Do you miss the trident floor?

Of course you missed the trading floor.

Yeah, I missed the tread and floor. Can you imagine how scary things were back at GOLM back in the day. But that's when the first year round list. Gary's walking the trident floor.

Yeah, I think that you have.

But John, that's when they really were trading floors, Like you actually stood up and talked on phones and smoked each other.

And did it prepare now now it's machines. Now it's machines.

Did it prepare you for the West Wing?

It did? It? Did it very much? Did in what way? Gary? Just I think.

The ability to be watching five different things going on at the same time and be listening in five places. People in the in the in the White House were always amazed that I could be like having conversation over here and talking to someone behind me because I heard them talking. But when you grew up in a trading floor, and you grew up in a trading environment. Your eyes and ears have to see everything.

With one im JG booze this morning as well. Yeah, thank you, it's good to see it. Thank you, thanks for sharing somebody for experience. That was Gary Cone there, the IBM Vice Chairman,