Is the Market Dependent on the Fed?

03/18/2014 9:38 am EST


Jack Ablin

CIO, Cresset Wealth Advisors

The US government is no longer looking for quick fixes for the economy, but concrete solutions, says Jack Ablin, Chief Investment Officer at BMO Private Bank.

TERRY:  I'm Terry Savage from talking with Jack Ablin.  He is the chief investment officer of BMO Private Bank, meaning you make money investment decisions for $66 billion.  Is the market dependent just on the fed which is now retreating a bit, or is it depending on things happening out of Washington?  What's your outlook for 2014? 

JACK:  Sure.  I think that the government, Washington in particular, has done a nice job throwing fixes at our problems.  We had the cash for clunkers, we've got quantitative easing.  We've done a lot of things to try to him things in but now we're looking for solutions, and solutions that will really address some of the imbalances that we have. 

TERRY:  Give us three solutions that could actually change the direction of the economy for the better and help the markets continue to grow. 

JACK:  Sure.  One solution, pretty simple, is to reform immigration.  Our H1B Visa program is a way to get qualified workers.  These are graduate students who are working, generally schooled in this country, that aren't allowed to work here.  We're currently capped at 180,000 people a year.  If we even raise that to 200,000 it's enough to move -

TERRY:  Allow smart people in to keep working.  Number two reform. 

JACK:  Number two, I think we need to train our work force to meet the needs of the private sector.  The good news is we don't have to rely exclusively on Washington.  We've got these new MOOCs, massively open online courses, that's going to change the overall cost curve for tuition, but it's also really favorably impacting our K through 12 experience.  That's starting, but we do need some help from Washington. 

TERRY:  And a third thing you'd like to see out of Washington. 

JACK:  The third thing really is just change the corporate tax rate.  The fact is we have the highest corporate tax rate in the world and we're discouraging companies from investing here in this country. 

TERRY:  Jack, we're seeing out of Washington inequality, we've got to tax the rich more, we've got to make everyone equal.  You'll never get a change in the corporate tax rate, will you? 

JACK:  Well, the funny is thing is, we don't even collect corporate taxes.  Of all the taxes that we collect, 96% of it is personal, so what we're doing is we're spending $200 billion a year hiring attorneys and accounts to figure out ways around the corporate tax code, and then we're sending our profits to other countries.  That's why we don't pay corporate taxes. 

TERRY:  We are appreciative of that analysis.  It's one I haven't heard before.  We've been talking about Jack Ablin, chief investment officer of BMO Private Bank.  I'm Terry Savage for

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