CREATE ETFs AND MARKETS, WE'LL

BRING IN GILBERT GARCIA MANAGING

PARTNER.

CNBC CONTRIBUTOR

I KIND OF JOKED THE OTHER DAY,

GILBERT, 5% RETURN MEANING 5% IS

THE NEW 25%, SHOULD WE FEEL GOOD

ABOUT THAT

>> I THINK WE SHOULD BUT I'LL

TELL YA WHAT, BONDS MAY BE DOWN

BUT NOT OUT.

WHEN YOU LOOK AT THE OLD 60/40

SPLIT THERE IS NO DOUBT THE

60/40 SPLIT IS PROBABLY THE

WORST IN 50 YEARS BUT I THINK

WHEN YOU LOOK AT THOSE TIME

PERIODS WHEN IT'S DONE POORLY,

IT TYPICALLY WAS FOLLOWED BY A

STRONG PERFORMANCE AND THAT'S

WHAT WE SEE NEXT YEAR.

>> YEAH, YOU PROBABLY HEARD MY

COMMENTS

I AM ONLY HALF JOKING.

WE'RE WRITING ECONOMIC HISTORY

AS WE GO ON.

THIS IS THE SINGLE WORST YEAR

EVER FOR STOCKS AND BONDS,

USUALLY ONE GOES DOWN AND THE

OTHER UP

THAT'S WHY EVERY FINANCIAL

ADVISOR IN THE WORLD SAYS YOU

HAVE TO DIVERSIFY YOUR

PORTFOLIO.

IT DIDN'T WORK THIS YEAR

WHY NOT?

>> SURE.

IT SHOULDN'T BE A SURPRISE

SOMETHING STRANGE WOULD HAPPEN

THE REASON IS THE GOVERNMENT IS

A BUYER OF LAST RESORT THAT

ARTIFICIALLY BROUGHT LEVELS WAY

TOO LOW.

KEEP IN MIND, THE GOVERNMENT

OWNS 30% OF THE TREASURIES, THE

TIPS MARKET, WHICH OF COURSE

INFLATION PROTECTED TREASURIES

AND THE MORTGAGE BACKED

SECURITIES MARKET AND THAT'S

DISTORTING EVERYTHING AND

DISTORTED THE RISK ALLOCATION

AND THE MARKETPLACE.

AND SO IF YOU GO BACK TO THE KEY

FUNDAMENTALS, MONEY SUPPLY HAS

GROWN AT A HISTORIC PACE

FISCAL STIMULUS RIVALLED WORLD

WAR II, IT WAS INDEEVITABLE THA

INFLATION WOULD BE HIGHER AND

LONGER THAN CHANCTRANSITORY ARE.

>> PEOPLE PUSH BACK.

IT'S FINE.

THEY SAY IT'S COVID, WE NEEDED

TO DO IT

I DON'T THINK ANYBODY DISAGREED

WITH THE INITIAL REACTION FROM

MARCH TO SEPTEMBER OF 2020

IT WAS TERRIFYING.

WE'RE UNDER OUR DESKS ON THE

EAST COAST

I KNOW YOU GUYS IN TEXAS JUST

KIND OF DID WHAT YOU WANTED.

A YEAR LATER, EVERYONE KIND OF

KNEW THE STORY

HALF THE COUNTRY WAS BACK TO

WIDE OPEN AND THEY'RE STILL

STIMULATING.

>> THAT'S THE POINT.

I THINK THEY HANDLED IT

BRILLIANTLY DURING COVID BUT

WHAT HAPPENED WAS THEY SHOULD

HAVE STOPPED BUYING SECURITIES,

STOPPED THE QUANTITATIVE EASING

BY THE FOURTH QUARTER.

BY THE FOURTH QUARTER, WE SAW

INFLATION RUNNING HOT AND THE 5,

6% ACCELERATING.

THEY SHOULD HAVE ALREADY STOPPED

BUYING AND THEY SHOULD HAVE BEEN

ALREADY RAISING RATES MUCH

SOONER IN CALENDAR YEAR '22.

I THINK THEY'RE MAKING THE SAME

MISTAKE, BRIAN

THEY KEEP LOOKING BACKWARDS AND

WANT TO WAIT UNTIL EMPLOYMENT

GOES HIGHER, UNEMPLOYMENT BUT BY

THE TIME THAT HAPPENS, WE'RE IN

PAIN

IF YOU LOOK, THERE IS NO MORE

FISCAL STIMULUS AND MONEY SUPPLY

ISN'T NOT ONLY GROWING BUT IT'S

NEGATIVE

THAT'S A PRECURSOR TO A

RECESSION.

>> WELL, I WANT TO BE POSITIVE

BUT, YOU KNOW, ALL THAT SPENDING

ADDED A FEW TRILLION TO OUR

NATIONAL DEBT.

WE WIPED OUT $10 TRILLION FROM

THE EQUITY MARKETS ALONE AND

WILL PROBABLY SEE A COUPLE

TRILLION WIPED OUT OF REAL

ESTATE

IT WILL BE LIKE A 20 OR $30

TRILLION COST.

IT'S MIND BOGGLING BUT I WANT TO

BE OPTIMISTIC.

HAVE A HAPPY NEW YEAR.

I CAN'T COUNT TO TRILLION.

IT'S TOO MANY --

>> BUT THANK Y