Marcum LLP CEO Jeffrey Weiner joins Yahoo Finance's Zack Guzman to discuss the market outlook as U.S. Consumer Sentiment hit a 6-month high in September.
ZACK GUZMAN: I guess as we sit here, and of course, we're seeing more volatility in the afternoon trade, but the theme has been much the same over the last few trading sessions. Pressure coming in the tech sector here. Barclays also downgrading some of those big FANG names here, saying the valuations are running still too hot, even after this 10% pullback when you look at the NASDAQ. And still, just as high as we saw back in the tech bubble. But what's your take on where we're sitting here as market jitters continue to persist?
JEFF WEINER: Well, first of all, good to see you, Zack. I think the market's starting to realize that the market is the market, the market's not the economy. And there's a lot of places in the economy that are not doing well. So while the techs have had a great run up, and certainly since March, the big tech or online shopping names, the Amazons of the world, the Apples of the world, have had a tremendous run up.
The Facebooks of the world. There's some underlying uncertainty in the economy. There's some underlying problems in the economy. And I think the stock market is getting more in line with what's happening in the economy than just the stock market itself.
ZACK GUZMAN: Yeah, I mean we got that update here too, from Fed Chair Jerome Powell earlier in the week, as they announced their change in policy and updated summary of economic projections. And on that front, I think there's still a lot to be said about where the state of the economy is here relative to the stock market, as you're pointing out here.
But when we think about risk reward, I mean, outside of a deal coming in Washington here, that the next phase of stimulus here, you can make the argument that the market's already built that in. Outside of that, it seems like there are far more catalysts here to the downside that would trigger more pressure, more selling pressure than anything that can get us back to those new all-time highs.
JEFF WEINER: Yeah, you mentioned the Fed. They signaled this week that they're going to leave interest rates where they are to 2023. But that's three years. That's unprecedented in the modern day Fed. You could argue that because of the Fed's stance on interest rates, it's propelling the market at these levels, because there's nowhere else to really invest money.
But there's underlying problems in the economy, which is why the Fed is acting. At some point, it's going to affect PE multiples, it's going to affect earnings. There's a whole segment of the economy, whether it's travel, entertainment, sports, leisure, hospitality, that accounts for 10% to 12% of the economy that's still closed, that's shut down.
And I don't think we've seen the worst of it. Retail names are going bankrupt by the week. Not only are they going bankrupt, but they're liquidating. So I don't think the worst is over for the Main Street economy. And I think if it weren't for interest rates being where they were, the stock market would be having similar problems.
ZACK GUZMAN: Yeah, I mean, but overall, as you noted though, those interest rates aren't expected to budge when you hear the Fed until 2023. At least their outlook would indicate that. I mean, if that's the case, it seems like all of their ammo, and I know, they always say that they haven't used everything here, and it's true. There are still levers to pull at the Fed.
But when you think about the fact that their Main Street Lending Program had remained largely untapped at 90%, what was it? Roughly 99% unused in that money that was just sitting there, and you hear more pressure from Jay Powell saying, look, Congress, it's on you to get this done, because we can't really help Main Street out clearly. So I mean, absent of a deal, I guess, how big is the fear that we could see the pain that we saw in the market eventually, stock market trading back to show you that maybe the underlying economy isn't what it is and it could return to what we saw back in March?
JEFF WEINER: You'll definitely see, you'll definitely still pullback from here. But the Main Street Lending Program is a bad example. It was a bad program. PPP, that money got taken right away. It was a good program. Perhaps too good, in some instances. The Main Street Lending Program, I looked at that for our company, because we didn't qualify for PPP. But it really was an unworkable program for most businesses. That's why it remains untapped.
The bigger problem is stimulus for unemployed people. The $600 a month supplement has run out. The president, by executive order, did some type of plan where people might get $300 a week, depending on the states to kick in. But there are people who still remain unemployed. That $600 a week was the difference between putting food on the table for three meals a day and maybe one meal a day.
Unless there's another stimulus package for people who remain unemployed; they're not unemployed because they want to be for the most part. Their restaurant is closed, their bar is closed, their hotel is closed, their venue is closed. Anybody who works at a stadium is out of work. Anyone who works at a movie theater or a Broadway theater, there's a whole segment of the population or the economy that's either closed or significantly reduced.
Those people are out of work. And it's not their fault. There's just not the jobs there for them now. So without the extra money, they can't pay for essentials, like food, like clothing, like gas in their car or things like that.
ZACK GUZMAN: Yeah.
JEFF WEINER: I think the other shoe in the economy is still going to drop.
ZACK GUZMAN: I mean, just to follow up on your point here about the Main Street lending Program, for those who aren't aware, I mean, you talk about PPP. That was targeted towards America's small businesses. That program also had its problems, when we think about some of the larger institutions they could tap public markets still getting some of those funds. And then after public outcry, gave it back. It seems to have been fixed on that front. But then there's also the idea that the Fed pulling all these levers have helped the big blue chip companies, because they're able to distribute cheap debt out here, and able to stay afloat by tapping those markets.
But to your point in the middle, I mean, I'd be curious more, because we've heard why banks don't want to take up the Main Street Money Program, because that means that they're on the hook should some of these loans not go the way they want to. But from a business' standpoint, what was kind of your thinking and maybe turning that down, and why you wouldn't go that route? Because that's something that does seem pretty interesting to hear from a business owner.
JEFF WEINER: The, there were onerous provisions of the Main Street Lending Program, and I don't remember all of them. But there were prohibitions on how much money you could take out of the company. The bank had to share the risk with the government. I think was either 5% or 10%, which a lot of banks didn't want to do. They didn't have to do that on PPP.
ZACK GUZMAN: Yeah.
JEFF WEINER: Private companies disclosing some of their information that could become public information under the Main Street Program, also was not appealing. Marcum's a private business. I don't need everybody in the world knowing my finances, and if I took a Main Street loan, some of that information would come public.
ZACK GUZMAN: Yeah.
JEFF WEINER: There were a lot of problems. I would tell you to some extent, PPP was too easy. But it was really needed, so most of the PPP money benefited companies that needed it. There's a small population of companies that got it that didn't really need it. But if you look at the criteria, they qualified. Where on Main Street, it took the government months to roll out the program. I don't think it was rolled out for three or four months after they announced it.
And you've got to look at 99% of the money is still available. What does that tell you? The interest rates were low. They were willing to give a lot of money, more than PPP. But for some reason, businesses aren't taking it. And every business I know, if they could get that low cost money, they would be taking advantage. So there's some fundamental issues with the Main Street Lending Program that are stopping companies from applying.