SOUTH ORANGE, NJ - Duncan Niederauer, Chief Executive Officer of the New York Stock Exchange, spoke at the fourth annual South Orange Performing Arts Center (SOPAC) Business Leaders Breakfast on Friday.
While claiming to be “practicing economics without a license,” Niederauer spoke to more than 100 local businesspeople about the economy and issues affecting both Wall Street and Main Street.
“The global economy, in spite of what the media might tell you, is actually doing okay,” Niederauer said. “But what we’re getting used to is the shifting sands.” He said that the group of world business leaders he recently met with at the global conference in Davos, Switzerland, which he attends every year, was optimistic for the first time in a decade.
He joked about Davos, saying, “Typically, if you go there optimistic, you leave there pessimistic. And if you go there pessimistic, you leave homicidal.” This year, there was a clear change in mood.
The second large shift he noticed involved emerging markets. He said, “For the last three or four years, all anybody wanted to talk about were the emerging market darlings.” He said all the developed countries like the United States, Japan and Great Britain were considered boring. All the growth was coming from emerging markets. This year, the discussion turned toward the unattractive volatility in those emerging markets.
“Japan is doing pretty well right now. Europe, I think, has finally turned the corner. The U.S. is growing pretty nicely, and if we had a functional government, I think it would be even growing better,” he said.
Regarding the fed tapering its bond buybacks, he predicted that the tapering will continue and probably be finished by 2015, and that interest rates will have to rise slightly as we move toward 2016.
“Corporate America is about as healthy as it’s ever been,” Niederauer said. “Interest rates around the world are the lowest they have been since we started measuring them in the early 1600’s. Companies have borrowed money at rates they never dreamed possible.” So, large companies have in essence refinanced their balance sheets. He noted, however, that small businesses and consumers have not been able to do the same thing. Rather than blaming the banks for this, Niederauer called out regulators for being too strict.
“The financial crisis is largely over, other than for Main Street and the consumer,” Niederauer said. “The world and particularly the U.S. has a jobs crisis, an employment crisis.” He said that small business has to be the key to solving that since that is where most jobs come from, but “the Federal government is unlikely to figure that out.”
Niederauer said he tries to use the NYSE as a policy advocate to help draft bills that he feels will benefit businesses and the economy. One such example is a portion of the jobs bill he helped create which allows new companies to ramp up to full financial compliance over their first five years, rather than all at once upon going public.
Crowdfunding is topic of great interest to Niederauer. He said that if federal policy will not encourage lending to small businesses and entrepreneurs, then crowdfunding is a viable alternative if it can be properly regulated.
Bringing more jobs back to the U.S. economy is the key to a full recovery and Niederauer blamed a tax law that discourages U.S. firms from bring money back from overseas operations, estimating that there is between $1 trillion and $2 trillion trapped overseas that would be subject to a 35% tax if brought home. He has proposed a change that would tax those funds at 8%, and estimates that if implemented, perhaps $1 trillion dollars would return to the U.S. and could be used to build domestic plants and employ more Americans.
Other topics covered in the wide-ranging talk included immigration reform, disruptive technologies and business practices, and team-building.
On the hot topic of flash-trading on the stock exchange, Niederauer declined to comment but said he would be addressing the issue in one week. He did say that the way markets operate should be addressed as a whole, not just high speed trading.