WEBVTT - Turbulence Ahead in the Markets, Ward Says 0:00:09.880 --> 0:00:13.880 Welcome to the Bloomberg Surveillance Podcast. I'm term Keene Jelie. 0:00:13.960 --> 0:00:16.960 We bring you insight from the best and economics, finance, 0:00:17.040 --> 0:00:23.520 investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.600 Bloomberg dot Com, and of course, on the Bloomberg. In 0:00:27.640 --> 0:00:30.800 the effects market, the dollar weaker pretty much across the 0:00:30.840 --> 0:00:33.720 board in G ten even against the pound just a 0:00:33.760 --> 0:00:35.960 little bit sterling on the front foot by a tenth 0:00:35.960 --> 0:00:39.320 of one percent at one thirty three fifty as inflation 0:00:39.360 --> 0:00:41.960 in the UK comes in higher than expected, north of 0:00:42.120 --> 0:00:46.200 three percent, which means that Governor Khney has to write 0:00:46.200 --> 0:00:48.879 a letter to the Chancellor about why he's missing his 0:00:48.960 --> 0:00:52.920 inflation target by so much. Howard Ward joins us in 0:00:53.000 --> 0:00:55.120 a studio in New York of Gabelly Funds, the c 0:00:55.320 --> 0:00:57.840 i O of Growth Equities. Can you imagine that, Howard, 0:00:57.880 --> 0:00:59.600 that you missed your target and you've got to write 0:00:59.600 --> 0:01:02.520 a letty your boss that is disclosed publicly as to 0:01:02.560 --> 0:01:06.479 why you haven't met it. Yeah, I'm sure that's uh 0:01:06.920 --> 0:01:09.240 not a lot of fun, But I think it's a 0:01:09.240 --> 0:01:13.920 bit of a wake up call regarding the universal complacency 0:01:14.080 --> 0:01:20.360 regarding inflation amongst the central bankers. Yeah, that inflation can 0:01:20.400 --> 0:01:24.040 come upon us sooner than expected. And uh, and then 0:01:24.080 --> 0:01:27.399 what because it's it's in nobody's expectations here in the 0:01:27.480 --> 0:01:31.080 US that we're going to have an inflation problem anytime soon. 0:01:31.520 --> 0:01:35.120 Lots of headlines about how inflation is still missing in action, 0:01:35.400 --> 0:01:38.839 but it can resurface unexpectedly. So there are some really 0:01:38.880 --> 0:01:42.240 specific issues in the UK, Brexit driven issues, a real 0:01:42.280 --> 0:01:45.000 collapse in Sterling after the Brexit vote. Here in the 0:01:45.080 --> 0:01:47.560 United States, we sit down and prepare for the two 0:01:47.600 --> 0:01:50.280 day meaning of the f WEMC, which concludes tomorrow. Most 0:01:50.320 --> 0:01:53.280 economists expect the rate hike. Everyone expects it to be 0:01:53.360 --> 0:01:55.400 Yelling's last press and we go into next year and 0:01:55.400 --> 0:01:58.480 it's just this unbelievable comfort Howard with how this is 0:01:58.480 --> 0:02:00.520 going to play out of the next couple of years 0:02:00.520 --> 0:02:02.640 and yet on two points and things are going to 0:02:02.680 --> 0:02:06.280 remain us They offer a while, do you believe that? Yeah, Well, actually, 0:02:06.360 --> 0:02:07.960 let me just go back from it and try to 0:02:07.960 --> 0:02:11.040 connect some dots here. Because of the because of the 0:02:11.120 --> 0:02:15.080 lag in monetary policy and in the lag impact that 0:02:15.360 --> 0:02:20.080 low rates have on economic growth, you can uh connect 0:02:20.160 --> 0:02:24.200 the surge that we've had in global economic growth in 0:02:24.240 --> 0:02:28.760 recent months to the breaks it period of June of 0:02:28.840 --> 0:02:32.200 sixteen when we had record low interest rates that's when 0:02:32.200 --> 0:02:37.200 the tenure had one point three percent and uh that 0:02:37.639 --> 0:02:39.600 and so because of the lag, we've had a surge. Well, 0:02:39.639 --> 0:02:43.679 now that lag is ending and we're gonna be going 0:02:43.680 --> 0:02:46.960 into a period where we we we haven't benefited from 0:02:46.960 --> 0:02:50.120 the ultra low rate period that we had then. Now 0:02:50.240 --> 0:02:52.239 rates are still very low. In fact, I still think 0:02:52.280 --> 0:02:55.880 there's eleven countries in the world with negative sovereign yields. 0:02:55.960 --> 0:02:57.680 So you know that is still a bit of an 0:02:57.760 --> 0:03:01.440 artificial situation. But what I do think we are we 0:03:01.480 --> 0:03:04.960 are at a point where growth is not it's not accelerating, 0:03:05.080 --> 0:03:08.079 it's actually beginning to slow, and it's going to begin 0:03:08.160 --> 0:03:12.079 to slow in Europe as as the months unwind h 0:03:12.200 --> 0:03:14.480 immediately ahead. Now that's going to be interesting because we 0:03:14.520 --> 0:03:16.760 approached the side of the equity market where a lot 0:03:16.760 --> 0:03:18.680 of people are saying this is late cycle stuff. Now 0:03:18.720 --> 0:03:21.160 position for the late cycle. Themes Bank of America said 0:03:21.160 --> 0:03:25.079 to me just yesterday, position for euphoria? Is it time 0:03:25.080 --> 0:03:27.960 to position for euphoria? Well, I think it's time to 0:03:28.200 --> 0:03:33.000 be prepared for uh. Turbulence because we've had far too 0:03:33.040 --> 0:03:37.200 long a period has passed without having any real turbulence 0:03:37.200 --> 0:03:43.000 in the equity market, and so I think that, uh, 0:03:43.040 --> 0:03:47.600 are things euphoric? No, uh, well, the bitcoin being a side, 0:03:47.680 --> 0:03:49.760 uh you know, something different. But as far as the 0:03:49.760 --> 0:03:52.480 stock market concerns, we don't have euphoria. But we have 0:03:52.560 --> 0:03:55.320 had a three hundred and seventy one total return on 0:03:55.360 --> 0:03:58.600 the SMP five hundred since March of oh nine, and folks, 0:03:58.640 --> 0:04:00.440 that doesn't get much better than that? Can we just 0:04:00.480 --> 0:04:03.040 site Tom Kane that bitcoin was brought up by Howard 0:04:03.040 --> 0:04:05.680 Ward and not me. I didn't mention it. Yeah, he 0:04:05.720 --> 0:04:08.240 did have this morning on television. He just just randomly 0:04:08.240 --> 0:04:11.440 brings up bitcoin. I like to talk about my mistakes 0:04:11.440 --> 0:04:13.520 because I haven't gotten bitcoin right. But let me just 0:04:13.560 --> 0:04:17.479 say this with respect to how bitcoin's price behavior in 0:04:17.480 --> 0:04:20.480 the last couple of weeks, I don't care what you're 0:04:20.480 --> 0:04:24.960 talking about. When anything rises the way bitcoin has risen 0:04:25.480 --> 0:04:27.599 in the last few weeks, to me, that is a 0:04:27.640 --> 0:04:31.400 definition of a mania, and it's smacks of greater greater 0:04:31.480 --> 0:04:34.039 fuel theory. I don't think most of the people that 0:04:34.080 --> 0:04:36.520 are buying bitcoin actually have any idea of what they're 0:04:36.520 --> 0:04:39.240 buying now, we will we will see you. We'll do 0:04:39.320 --> 0:04:43.080 some more on this as well today. Good morning everyone, 0:04:43.160 --> 0:04:47.279 John Pharaoh and Tom Keane in New York, a day 0:04:47.320 --> 0:04:49.680 before a FED meeting. I guess two day meeting, but 0:04:50.360 --> 0:04:53.080 we'll do a lot of FED coverage tomorrow as well. 0:04:53.160 --> 0:04:56.719 Bloomberg Surveillance this morning with Futures Up one brought you 0:04:56.760 --> 0:05:02.320 by Investco. Investco dedicated to delivering an investment experience that 0:05:02.360 --> 0:05:05.039 can help you get more out of life. Learn more 0:05:05.120 --> 0:05:10.040 at investco dot com slash more out of Life. I 0:05:10.120 --> 0:05:13.800 am v E s c O investco dot com slash 0:05:13.920 --> 0:05:19.920 more out of Life. When de FED rate increases, Howard 0:05:19.920 --> 0:05:23.599 Ward click in and begin to impinge in a normal 0:05:24.200 --> 0:05:29.520 traditional way that we have forgotten ages ago. Well, Tom Um, 0:05:29.560 --> 0:05:33.200 I think that, uh, we're at a point where ordinarily 0:05:33.240 --> 0:05:37.159 you would start to see some impact very shortly. Um. 0:05:37.279 --> 0:05:40.279 The reason that it really hasn't happened is that we've 0:05:40.320 --> 0:05:44.200 had no uh increase in longer yields during the last 0:05:44.240 --> 0:05:46.599 two years while the FED has been tightening, and that 0:05:46.720 --> 0:05:50.320 I think is largely because of the lack of yields 0:05:50.360 --> 0:05:55.040 abroad in Europe and Japan has created tremendous demand for treasuries. 0:05:55.360 --> 0:05:58.280 You're getting about twenty nine basis points on a five 0:05:58.360 --> 0:06:03.160 year German bond. You're getting really nothing on a five 0:06:03.240 --> 0:06:07.520 ten year Japanese bond. So the US looks like Mount 0:06:07.600 --> 0:06:12.320 Rushmore in terms of yields right now. So, so you've 0:06:12.360 --> 0:06:14.599 had a flat end of the of the yield curve, 0:06:14.680 --> 0:06:17.000 and as the FED continues to tighten, I don't think 0:06:17.040 --> 0:06:19.320 that yield curve is gonna Stephen. I think it's going 0:06:19.400 --> 0:06:22.359 to remain flat. It's going to get even flatter, And 0:06:22.480 --> 0:06:27.800 so I think that the pe ratios can sustain themselves. Uh, 0:06:28.200 --> 0:06:31.240 as long as that's the case, it's time to get 0:06:31.240 --> 0:06:34.040 out of growth and get into value. That's really the 0:06:34.040 --> 0:06:36.120 heart John, you've nailed. Do you know how many times 0:06:36.120 --> 0:06:41.120 I had that? Howard, all my radars up because of that. 0:06:40.920 --> 0:06:43.600 That's it is. It time to get out of growth 0:06:43.600 --> 0:06:46.159 and get into value. So you know, full confession, you 0:06:46.160 --> 0:06:48.400 know I am. I'm on the growth side of the ledger. 0:06:48.480 --> 0:06:52.400 That's why. Yes, So growth has outperformed value every month 0:06:52.480 --> 0:06:56.040 this year except for June and September. September was a 0:06:56.200 --> 0:07:00.360 violent rotation in the direction of value and smaller caps, 0:07:00.360 --> 0:07:03.520 but I would say this. Historically, we know that growth 0:07:03.520 --> 0:07:08.760 typically outperforms value during periods of of moderate to slowing 0:07:08.800 --> 0:07:12.679 economic growth. So as we look at two thousand and eighteen, 0:07:12.760 --> 0:07:15.600 you can go on the Bloomberg Economic Survey and you 0:07:15.640 --> 0:07:19.160 will see that the consensus for economic growth next year 0:07:19.240 --> 0:07:22.040 is slower growth, not faster growth. So if we're going 0:07:22.080 --> 0:07:24.640 to have slower growth next year and the old curve 0:07:24.720 --> 0:07:27.600 is flat and getting flatter as the Fed titans, I 0:07:27.600 --> 0:07:30.120 don't think I'd be wanting to rush into value stocks. 0:07:30.200 --> 0:07:31.480 So I talked to me about what this means at 0:07:31.520 --> 0:07:33.840 a sector level, because the sector level story that goes 0:07:33.880 --> 0:07:35.679 with that get out of growth and get into value 0:07:35.720 --> 0:07:38.640 story is get out of tech and get into financials. 0:07:38.760 --> 0:07:42.400 What do you say back to that? So, Uh, there's 0:07:42.440 --> 0:07:44.920 a wide variety of stocks that fall under the heading 0:07:44.920 --> 0:07:47.440 of financials, and some of them are not your traditional 0:07:47.480 --> 0:07:50.600 banks or insurance companies. So let me just talk about 0:07:51.040 --> 0:07:54.720 the more traditional financials. For the banks, um flat or 0:07:54.760 --> 0:07:57.640 yield curve is not good for them. Uh, loan demand 0:07:57.720 --> 0:08:02.000 is falling. That's strange. Again, it speaks to the lack 0:08:02.040 --> 0:08:05.200 of acceleration in economic growth. To see commercial industrial loan 0:08:05.200 --> 0:08:09.280 growth slowing, not not increasing, and so the banks are 0:08:09.280 --> 0:08:12.320 gonna have a more difficult time making profits on loans 0:08:12.320 --> 0:08:15.480 and loan demand is falling. Will they benefit from higher 0:08:15.520 --> 0:08:19.000 rates at the short end, yes, they will on their 0:08:19.040 --> 0:08:22.440 deposit base, But nevertheless, uh, you know, the banks have 0:08:22.520 --> 0:08:24.480 had a bit of a run. I don't think it's 0:08:24.520 --> 0:08:27.280 going to be anything surprisingly good for them in the 0:08:27.320 --> 0:08:29.480 near future. Hard word, thank you so much. With Jam 0:08:29.760 --> 0:08:32.679 greatly appreciate the briefing this morning, and of course John, 0:08:33.440 --> 0:08:35.760 I guess really this week we're at the time John, 0:08:35.760 --> 0:08:39.400 where every conversation is a next year coming and it 0:08:39.559 --> 0:08:42.040 has a year and feel. And what's interested about that, Tom, 0:08:42.120 --> 0:08:43.600 is that the year it really hasn't finished. I don't 0:08:43.640 --> 0:08:47.720 mean just by the day. We've got a FED hike 0:08:47.800 --> 0:08:49.720 coming up. We're still waiting for the tax bill to 0:08:49.760 --> 0:08:51.960 go through, and you need to get your Christmas shopping done, 0:08:52.000 --> 0:08:54.400 you know, to the point, and we really haven't discussed 0:08:54.400 --> 0:08:56.400 it yet this morning. You really wonder where is the 0:08:56.440 --> 0:09:01.400 tax bill? Late last night I saw one legit analysis 0:09:02.200 --> 0:09:05.600 that that suggested that they've only got four to five 0:09:06.559 --> 0:09:09.760 billion of the one point five trillion covered. They've got 0:09:09.760 --> 0:09:11.880 to work it out, which which I think is why 0:09:12.000 --> 0:09:14.440 we've we've kind of got this move away from twenty 0:09:14.480 --> 0:09:16.520 and talk at twenty two on the corporate rate to 0:09:16.679 --> 0:09:18.959 which might open up things a little bit. And we've 0:09:19.000 --> 0:09:22.760 got an Alabama special election or Kevin surreally in Alabama 0:09:22.800 --> 0:09:25.920 with some terrific perspective really turn out focused. I know 0:09:26.040 --> 0:09:28.320 Michael bar will be touching that in New York and 0:09:28.360 --> 0:09:32.080 with our news around the nation and world as well. 0:09:32.200 --> 0:09:36.040 Futures up one jeoff, Futures Up thirty. This is Bloomberg. 0:09:38.600 --> 0:09:40.920 And now with the news in New York City and 0:09:41.040 --> 0:09:44.360 sadness in San Francisco. Here's Michael Barr, Tom Jonathan, thank 0:09:44.400 --> 0:09:46.400 you very much, and as you mentioned out of San 0:09:46.440 --> 0:09:50.880 Francisco this morning news Mayor ad Lee has suddenly died. 0:09:51.640 --> 0:09:55.080 Lee when was the first Asian American mayor of San Francisco. 0:09:55.520 --> 0:09:58.680 Lee was sixty. It is election day in Alabama and 0:09:58.840 --> 0:10:02.040 highly it watched in at race. Voters will choose between 0:10:02.080 --> 0:10:06.160 Republican Roy Moore and Democrat Doug Jones. Multiple women have 0:10:06.200 --> 0:10:09.400 accused More of sexual misconduct when they were in their 0:10:09.440 --> 0:10:12.280 teens and he was in his thirties. More now seventy 0:10:12.320 --> 0:10:16.000 denies the charges. Top world officials have opened the Climate 0:10:16.040 --> 0:10:19.240 summon in Paris by saying investors and the entire global 0:10:19.240 --> 0:10:24.040 financial system need to shift faster toward energy and businesses 0:10:24.080 --> 0:10:27.040 that don't worsen climate change. The Prime Minister of the 0:10:27.080 --> 0:10:30.160 Island of Fiji said, we're all in the same canoe. 0:10:30.280 --> 0:10:33.439 Rich countries and poor Global news twenty four hours a day, 0:10:33.440 --> 0:10:37.640 powered by more journalists, analysts, more than a hundred twenty countries. 0:10:38.000 --> 0:10:41.440 Michael Barr, this is Bloomberg. Jonathan tomp Michael, thanks so much. 0:10:41.559 --> 0:10:44.680 Curve flattening this morning, not down to new record flat, 0:10:44.760 --> 0:10:48.640 but nevertheless a flatter yield curve fed day tomorrow. This 0:10:49.240 --> 0:10:55.800 is Bloomberg. Surveillance is brought to you by Bank America, 0:10:55.800 --> 0:10:58.120 Mary Lynch. Dedicated to bring in our clients insights and 0:10:58.160 --> 0:11:00.760 solutions to meet the challenges of a trend filming world. 0:11:00.880 --> 0:11:03.160 And that's the power of global connections. Marrow Ledge, Pace, 0:11:03.200 --> 0:11:24.600 Phenom and Smith Incorporated member Spike PC to be direct. 0:11:24.760 --> 0:11:27.680 It was the interview of the day given the huge 0:11:27.760 --> 0:11:32.000 tragedy we saw a number of months ago and Alexandria, Virginia, 0:11:32.080 --> 0:11:36.400 you remember the um, the shootings, the terror of a 0:11:36.440 --> 0:11:40.320 baseball field with a congressman struck down grievously, and many 0:11:40.360 --> 0:11:43.880 others dead. Nobody gave us better coverage than Terry Haines 0:11:43.920 --> 0:11:46.800 on that horrific morning. He used with ever Corps, I 0:11:47.000 --> 0:11:51.320 s I a citizen of Alexandria, Virginia and someone who, 0:11:51.400 --> 0:11:55.000 among other things, out of Oberlin provides political strategy to 0:11:55.200 --> 0:11:57.800 Ed Hyman and the team over at Evercrep I side. 0:11:57.800 --> 0:11:59.600 He's in her studios, which is a good thing, which 0:11:59.640 --> 0:12:01.680 wonderful to have you here, to be here, thank you 0:12:01.760 --> 0:12:04.360 very much. How do you get a turnout out? I mean, 0:12:04.400 --> 0:12:08.120 you are so steeped in the Washington game that if 0:12:08.160 --> 0:12:11.679 it's Alabama and everybody knows it's about to turn out 0:12:11.760 --> 0:12:14.400 real clear politics as Mr more I believe it had 0:12:14.400 --> 0:12:17.280 by two point two percent. How do you get the 0:12:17.360 --> 0:12:20.400 turnout out? Is that guys like you in Washington who 0:12:20.440 --> 0:12:24.040 fly into a place to get the turnout out? Or 0:12:24.080 --> 0:12:27.600 is that locally derived that The answer is it's a 0:12:27.640 --> 0:12:31.960 mix of both. Actually the what they and I I 0:12:32.000 --> 0:12:34.319 saw a lot of this with the Georgia sixth special 0:12:34.320 --> 0:12:36.120 earlier in the year. You get a lot of you 0:12:36.160 --> 0:12:39.479 get a lot of state party officials and UH and 0:12:39.600 --> 0:12:42.280 technology and the like. To get people out. And then 0:12:42.320 --> 0:12:45.280 you have a lot of money and expertise coming in 0:12:45.320 --> 0:12:48.040 from Washington as well as an overlay, and they hope 0:12:48.080 --> 0:12:50.160 that will help as well. Let's let's just do the 0:12:50.720 --> 0:12:56.199 bipolar outcome here. If Mr Moore wins the Republican hugely contentious, 0:12:56.800 --> 0:13:00.880 what happens next for your Washington? Uh? In my Washington, 0:13:02.720 --> 0:13:06.520 the tax bill still goes forward. Whoever wins this election 0:13:06.559 --> 0:13:11.040 won't be seated until the two of December at the earliest. 0:13:11.880 --> 0:13:15.560 So what the you know, the that goes forward? Uh, 0:13:15.640 --> 0:13:19.800 the more more spending bill negotiations go forward. I expect 0:13:19.800 --> 0:13:22.439 there to be a continue another short term bill to 0:13:22.559 --> 0:13:25.800 tide people into the new year. Uh. Not much changes. 0:13:25.960 --> 0:13:30.880 And there is a decision by the Republican leadership in 0:13:30.880 --> 0:13:35.240 the Senate as to whether they started investigating or all that. 0:13:35.480 --> 0:13:38.079 What about Mr Jones a Democrat? If he, I guess 0:13:38.080 --> 0:13:40.640 it's an upset, I'll use that word. If he wins, 0:13:40.679 --> 0:13:43.760 it's a it's a huge deal for next year, isn't it. Yeah? 0:13:43.800 --> 0:13:46.080 I think it's a huge deal anyway either way. The 0:13:46.440 --> 0:13:49.920 what you have is a situation where, uh, in a 0:13:50.000 --> 0:13:53.400 in a short term sense, Democrats can't lose because either 0:13:53.480 --> 0:13:55.800 More wins, in which case they decry that and uh, 0:13:56.000 --> 0:13:57.800 you put Republicans into a bit of a box. But 0:13:57.840 --> 0:14:00.600 if Jones wins, Uh, then they think they've got more 0:14:00.600 --> 0:14:04.280 wind in their sales for eighteen and uh, and they 0:14:04.360 --> 0:14:06.920 think they've got the last chance to knock off some 0:14:06.960 --> 0:14:08.800 of this stuff they get. They they think they have 0:14:08.880 --> 0:14:13.640 marginally more strength on spending bills. Uh. They probably don't 0:14:13.679 --> 0:14:15.880 think they have an opportunity to knock off the tax bill, 0:14:16.000 --> 0:14:18.800 but they think it might make Republicans think twice. It's 0:14:18.800 --> 0:14:23.160 the Trump miracle versus the nullification project. The words of 0:14:23.240 --> 0:14:26.680 Steve Bannon, The words of Steve Bannon on what is 0:14:26.720 --> 0:14:30.120 happening in Alabama? What's his what's his role? What's his 0:14:30.280 --> 0:14:34.680 role here? Terry? Uh? In other than uh, let's see 0:14:34.760 --> 0:14:40.880 sort of Adrian provocateur h slash uh informal strategist. Although 0:14:40.920 --> 0:14:45.160 I think that that that's probably a little overblown uh slash. 0:14:45.240 --> 0:14:47.240 You know, bringing some money into the campaign. Is he 0:14:47.320 --> 0:14:50.720 splitting the Republican Party? I don't think so. I don't. 0:14:50.960 --> 0:14:52.760 I really don't think so at all. I think I 0:14:52.800 --> 0:14:54.920 think a lot of that's overblown. Frankly, why do you 0:14:54.920 --> 0:14:56.640 think that because a lot of people think that he 0:14:56.680 --> 0:14:59.960 could possibly do what Nigel Farach did in the United Kingdom, 0:15:00.040 --> 0:15:02.960 which is drive a wedge between the between the center 0:15:03.080 --> 0:15:05.440 right party in this case, drive a wedge into the 0:15:05.480 --> 0:15:08.720 Republican Party. Why can Steve Bannon not do what Nigel 0:15:08.720 --> 0:15:11.160 Farage did in the UK? Um Well, and then I 0:15:11.160 --> 0:15:14.240 think that's a smart question. The I think the answer 0:15:14.240 --> 0:15:16.760 to that is what you've got is you've got a 0:15:16.800 --> 0:15:19.440 few races, and I mean a few, the Alabama Race, 0:15:19.520 --> 0:15:23.960 the race uh, couple, a couple of others where the 0:15:24.000 --> 0:15:29.440 Arizona Race where there was a situation where the incumbent 0:15:29.520 --> 0:15:31.880 was already getting way out of step with the state party. 0:15:32.600 --> 0:15:35.680 Bannon is taking that those races, and I think trying 0:15:35.720 --> 0:15:39.080 to project more into that. But as far as the 0:15:39.120 --> 0:15:41.800 fundamental rift in the party, I don't see it. Okay. 0:15:41.800 --> 0:15:44.080 Can I just say the tweet of the days this 0:15:44.200 --> 0:15:48.840 early in the morning, just Scarborough kills it over at MSNBC, say, hey, Bannon, 0:15:49.280 --> 0:15:51.880 you only went to Harvard because you couldn't get into 0:15:51.920 --> 0:15:55.960 Alabama rolled damn tide. You know this this back and 0:15:56.000 --> 0:15:58.160 forth they've had the last forty eight hours, that's just 0:15:58.680 --> 0:16:01.920 you know, I just that's the spirit of this, you know, John, 0:16:02.000 --> 0:16:06.240 that's the trenches debate, the cultural debate that we're seeing 0:16:06.240 --> 0:16:09.520 within this election. In this trenches debate, there is a 0:16:09.560 --> 0:16:12.880 serious discussion about the morals of the goop at this point, 0:16:12.920 --> 0:16:16.920 given the accusations around more in alabamatary, how does the 0:16:16.920 --> 0:16:20.320 president tread this really delicate line between the moral issues 0:16:20.360 --> 0:16:24.120 that are dominating this particular election and the idea that 0:16:24.160 --> 0:16:26.200 actually just got a really slim majority in the Senate. 0:16:26.280 --> 0:16:29.840 Againethan done. Well, there's two There's there's two ways that 0:16:29.920 --> 0:16:33.240 gets addressed. One is that the Republicans and the Senate, 0:16:33.480 --> 0:16:37.640 should More win, have to have to engage and uh 0:16:37.720 --> 0:16:39.760 and investigate more on their own and figure out what 0:16:39.760 --> 0:16:42.320 they want to do. They've got an awful lot of 0:16:42.320 --> 0:16:45.640 of leeway to do that. Number one. Number two, Uh, 0:16:46.040 --> 0:16:48.200 you know, Democrats have frankly helped here. This is not 0:16:48.240 --> 0:16:51.320 a republican problem. This is a political problem. It's a 0:16:51.640 --> 0:16:54.400 it's a political ruling class problem, and of course it 0:16:54.400 --> 0:16:57.920 goes far beyond politics. Uh So, what will end up 0:16:57.920 --> 0:17:01.680 happening is is that as the Democrats seek to make 0:17:01.720 --> 0:17:04.080 this a republican problem, what will end up happening is 0:17:04.119 --> 0:17:08.040 that Republicans will remind everybody that this is a problem. Uh, 0:17:08.440 --> 0:17:11.200 regardless of political affiliate. Your your claim, Terry Haynes with 0:17:11.280 --> 0:17:13.959 this ever corps I s I your your a claim 0:17:14.480 --> 0:17:19.399 is just a very calm Washington. The pragmatic. It's like, 0:17:19.480 --> 0:17:22.760 we're pragmatic. This is the legislation. We've got to get 0:17:22.800 --> 0:17:27.399 it through. What is the pragmatic view in this conference 0:17:27.440 --> 0:17:31.840 now on tax cuts on salt, on state and local taxes? 0:17:32.359 --> 0:17:36.320 What's the pragmatic discussion going on right now? The pragmatic 0:17:36.359 --> 0:17:39.840 discussion is really this the uh that that you have 0:17:40.440 --> 0:17:44.240 what I call the bones of the bill, corporate tax rate, 0:17:44.400 --> 0:17:48.199 keeping it under the trillion and a half dollar deficit cap, uh, 0:17:49.240 --> 0:17:53.000 tweaking the individual rates, that sort of thing. Uh. Every 0:17:53.240 --> 0:17:56.080 you know, you've got to keep that. Everything else is 0:17:56.119 --> 0:17:59.760 to pay for every other discussion about every other pay 0:17:59.840 --> 0:18:02.119 for means you gotta pay for it, You gotta you 0:18:02.200 --> 0:18:04.040 gotta pay for it. Do you see evidence of that? 0:18:04.080 --> 0:18:05.960 Because I don't see evidence of that as a ten 0:18:06.000 --> 0:18:09.200 pm last night, that it's not being paid for it. 0:18:09.480 --> 0:18:10.720 How are we gonna pay? How are we going to 0:18:10.800 --> 0:18:12.520 pay for it? To close a nut to one point 0:18:12.520 --> 0:18:16.480 five trillion. Well, both both bills have pay for us 0:18:16.560 --> 0:18:19.080 that get you within that. So it's a question of 0:18:19.119 --> 0:18:21.040 whether it's it's really a question of which one you 0:18:21.160 --> 0:18:24.040 pick from a from a fairly long laundry list. But 0:18:24.080 --> 0:18:28.639 nobody should be surprised to find that vast majority of 0:18:28.680 --> 0:18:32.040 the ending the salt deduction states in all that sort 0:18:32.040 --> 0:18:35.359 of stuff, because my conversation with Trump administration officials is simple. 0:18:36.040 --> 0:18:39.639 They seem to be modestly aware of how unpopular this 0:18:39.800 --> 0:18:44.439 legislation is. How do how does your Washington respond to 0:18:44.560 --> 0:18:47.680 the polling of this text cut bill. What they think 0:18:47.960 --> 0:18:51.119 is that six months, nine months from now, when the 0:18:51.160 --> 0:18:54.040 rubber starts meeting the road with the mid terms, Uh, 0:18:54.080 --> 0:18:59.440 they get credit for revivifying the economy. And the opinion 0:18:59.640 --> 0:19:03.280 that what's your opinion of that opinion? Well, what we 0:19:03.400 --> 0:19:06.960 see economically, and we wrote about this yesterday, is that 0:19:07.560 --> 0:19:12.920 we see a thirty BIPs increase so that you get 0:19:13.520 --> 0:19:16.439 our median growth is to seven to eight something like 0:19:16.480 --> 0:19:20.159 that for next year. That's a modest uptick, but it's uh, 0:19:21.000 --> 0:19:24.520 but it will help and and and politically, you also 0:19:24.560 --> 0:19:26.880 get to take your Republicans. You also get to take 0:19:26.920 --> 0:19:29.639 credit for every good thing that's happened between now and 0:19:29.680 --> 0:19:33.120 when the effects of the bill start uh start bringing Tom. 0:19:33.280 --> 0:19:35.080 We spent much of the last two years talking about 0:19:35.119 --> 0:19:38.280 the two Americas and the headline GDP number might increase, 0:19:38.320 --> 0:19:40.440 But I wonder whether this really helps the Second America. 0:19:40.800 --> 0:19:42.360 And whilst they might be able to go around next 0:19:42.440 --> 0:19:44.520 year saying that GDP is up, we promised you three 0:19:44.520 --> 0:19:47.040 pc and GDP has a three handle, I wonder what 0:19:47.080 --> 0:19:49.320 wage growth looks like in the Midwest and whether they've 0:19:49.359 --> 0:19:50.960 really moved the dial there, because that's going to be 0:19:51.000 --> 0:19:54.760 the real test of this administration, the promise to address 0:19:54.880 --> 0:19:57.640 the economic issues of the Second America outside of the 0:19:57.680 --> 0:20:01.080 metropolitan and leader New York City, etcetera, to help them. 0:20:01.200 --> 0:20:02.919 UM and I wonder whether this tax plan what he 0:20:02.960 --> 0:20:19.520 does that Terry's thrilled that he's with us right now. 0:20:19.560 --> 0:20:23.160 Brian Reynolds can of court Jenuity, you know Tony Dwyer 0:20:23.640 --> 0:20:28.919 giving wisdom there. Brian has done terrific research and something 0:20:29.320 --> 0:20:32.560 very important and that is shared by back Dynamics. Brian, 0:20:32.600 --> 0:20:35.800 give us the quick summary here what you've learned in 0:20:35.880 --> 0:20:41.120 your year in study of share by backs. Well, buy 0:20:41.200 --> 0:20:44.840 backs have been the main engine for this bull market 0:20:45.119 --> 0:20:48.800 since two thousand nine, and they're continuing to grow when 0:20:48.800 --> 0:20:52.800 they're actually accelerating a little bit. In fact, just yesterday 0:20:52.920 --> 0:20:56.200 Bowling announced an eighteen billions dollars buyback that comes on 0:20:56.280 --> 0:20:59.560 the heels of home depots fifteen billions dollars buy back 0:21:00.080 --> 0:21:04.680 last week. It is stunning the disparity. You've got a chart, folks, 0:21:04.760 --> 0:21:07.560 is too complicated even the discuss, but it's got like 0:21:07.600 --> 0:21:11.640 eight lines and then there's buy backs. I mean, are 0:21:11.680 --> 0:21:13.800 you willing to say we're getting these big double digit 0:21:13.840 --> 0:21:18.879 returns just because of buybacks? Yes? And well, letrot you 0:21:18.920 --> 0:21:22.080 refer to was really complex because it looks at every 0:21:22.080 --> 0:21:25.359 major participant in the stock market. I have another chart 0:21:25.440 --> 0:21:28.440 that's really simple towards the end of that column, which 0:21:28.520 --> 0:21:32.760 just compares buy backs to all investors combined. And what 0:21:32.920 --> 0:21:36.920 that shows is that investors have done very little point 0:21:36.960 --> 0:21:41.360 to point during this bull market. What do they say, 0:21:41.440 --> 0:21:43.920 What does this say about tax cuts though? And what's 0:21:43.920 --> 0:21:45.480 going to happen with the money once they fall to 0:21:45.520 --> 0:21:51.639 the bottom line? Well, these buy backs are fueled by debt. 0:21:52.520 --> 0:21:55.639 The debt is fueled by our nation's public pensions, who 0:21:55.720 --> 0:21:59.119 have become the dominant global investor, tax performer is going 0:21:59.160 --> 0:22:03.359 to do nothing in terms of changing the demand for debt, 0:22:05.640 --> 0:22:08.000 and so what it may do is that if it 0:22:08.119 --> 0:22:12.480 makes companies issue less death then there's two outcomes. One 0:22:12.720 --> 0:22:16.119 is that bond fields decline or two there's more shadow 0:22:16.160 --> 0:22:20.040 banking to fill that void. Either way, that results in 0:22:20.160 --> 0:22:23.560 more money for share buybacks going forward for the next 0:22:23.640 --> 0:22:26.800 few years. So the bullmarket rolls on. Is that basically 0:22:26.800 --> 0:22:30.639 the conclusion then, Brian, Yes, and there's a chance that 0:22:30.720 --> 0:22:35.159 may accelerate. So you've expected to mount up. Is that 0:22:35.160 --> 0:22:39.600 what you're looking for, the classic top, that's just a 0:22:39.720 --> 0:22:45.440 mount up to infinity and then not quite beyond rollover aggressively. Well, 0:22:45.440 --> 0:22:48.080 the amount of money going into public pension is increasing, 0:22:48.480 --> 0:22:52.320 so the melt up may come after two. But don't 0:22:52.359 --> 0:22:55.719 forget this is just a credit cycle. Credit cycles always end, 0:22:55.760 --> 0:22:58.240 and they always end badly. I don't think it's going 0:22:58.320 --> 0:22:59.959 to end for a while, but when it does end, 0:23:00.800 --> 0:23:03.960 we're likely going to have another financial disaster on our hands. 0:23:04.000 --> 0:23:08.080 But in the meantime, all this financial engineering results in 0:23:08.160 --> 0:23:10.359 higher stock prices. Brian, what's going to lead to a 0:23:10.400 --> 0:23:13.520 financial disaster? Though? The banks, the CEOs would say we're 0:23:13.560 --> 0:23:15.720 really well capitalized. In fact, what we'd like to see 0:23:15.800 --> 0:23:19.320