Speaker 1: Welcome to Chopping it Up.
Speaker 2: I'm your host, Mike Hallen, the senior restaurant and food
Speaker 2: service analysts at Bloomberg Intelligence. Our research and that of
Speaker 2: bi's five hundred analysts around the globe can be found
Speaker 2: exclusively on the Bloomberg terminal. Today, Nathan Dean, BI senior
Speaker 2: US policy analyst, is here to give us a download
Speaker 2: on the US election. Thanks for doing this, Nathan.
Speaker 3: Oh, thanks for having me. Really appreciate it.
Speaker 1: Nathan does great work here for BI.
Speaker 2: They put out a very very large, deep dive report
Speaker 2: on the election, so I figured i'd have him here
Speaker 2: to let us know how it's going to impact consumer
Speaker 2: spending and potentially the restaurants.
Speaker 3: Yeah, if anybody wants to copy that, you can always
Speaker 3: just reach out to us. We'll get you a PDF
Speaker 3: and we'll give you about sixty five pages that I
Speaker 3: think you can read from probably Grand Central station I'm
Speaker 3: guessing to maybe Westchester or Connecticut. I think if that's
Speaker 3: the train station that goes to Connecticut.
Speaker 2: So I try to avoid the trains, especially New Jersey
Speaker 2: Trains has had a lot of trouble this summer, so
Speaker 2: I can't help you with where the trains are going.
Speaker 2: But yeah, how about that first debate? Man, that's two
Speaker 2: hours of my life that I'll never get back.
Speaker 3: So I was asked on Bloomberg Radio what my preferred
Speaker 3: food was for the debate? What is the Dean household
Speaker 3: going to be? And my response was I was going
Speaker 3: to take as much Bloomberg popcorn as the pinetry as
Speaker 3: security would allow me to. But it was a very
Speaker 3: entertaining debate. But for those of us in the policy
Speaker 3: side where I was looking for policy statements, a I
Speaker 3: wasn't anticipating it. This is not a policy election, you know.
Speaker 3: This is an election between two different candidates, former President
Speaker 3: Donald Trump and Vice President Kamala Harris, that both have
Speaker 3: very stark differences on the view of where this country
Speaker 3: should go. And when you have that combined with the
Speaker 3: fact that Kamala Harris only had about one hundred and
Speaker 3: twenty days to put a campaign together, you don't have
Speaker 3: in an equation where you're going to get into policy,
Speaker 3: and getting into policy probably it'd even hurt you more
Speaker 3: so than help you. For all the talk. I mean,
Speaker 3: obviously I don't run campaigns, so I can't accurately preview
Speaker 3: say that. But you know, going into the debate, we
Speaker 3: did not anticipate that there was going to be much
Speaker 3: of the way of policy. However, we got some nuggets.
Speaker 3: President Trump talked about tariff, something very important to a
Speaker 3: lot of the investors of the clients of Bloomberg, and
Speaker 3: you know, just I'm guessing for people who are listening
Speaker 3: to this podcast right now, we got some on taxes,
Speaker 3: so tariff taxes, and we also got a little bit
Speaker 3: of you know, Vice President Harris's views on price gouging
Speaker 3: and so forth like that. But for the most part,
Speaker 3: I don't think the debate. In fact, my post debate
Speaker 3: note that I put on the terminal said, look, there
Speaker 3: wasn't much. The endorsement of Taylor Swift was, you know,
Speaker 3: certainly a big deal that could you know, that could
Speaker 3: do stuff. But I think the race and you know,
Speaker 3: for those of you who have a terminal, you can
Speaker 3: look at the betting markets a WSL election go and
Speaker 3: I was watching this during the debate, and you could
Speaker 3: see the betting markets decline for President Trump an increase
Speaker 3: for Vice President Harris. And this is both poly market
Speaker 3: and predicted. Is on the terminal, But when I looked
Speaker 3: at it yesterday, things are normalized a little bit. And
Speaker 3: so in the poly market space, President Trump is leading
Speaker 3: in the predicted space, Vice President Harris is leading. To me,
Speaker 3: that is no change from prior to the debate. So
Speaker 3: life continues.
Speaker 2: Okay, So basically we spoke about this before. You know,
Speaker 2: he looked pretty miserable. He did not have a very
Speaker 2: good performance. But so it sounds like it doesn't really matter.
Speaker 2: I know some people have been saying a conservative pundits
Speaker 2: have been saying it. Say, you know, do I believe
Speaker 2: that what they're telling me that it doesn't matter? But
Speaker 2: if you're telling me it doesn't matter, maybe it really doesn't.
Speaker 3: Well, but for all the argument that it doesn't matter,
Speaker 3: let's also remember that there's going to be approximately one
Speaker 3: hundred and fifty million Americans that are going to vote
Speaker 3: in the selection. One hundred thousand of them spread across
Speaker 3: seven swing states, are going to be the ones that
Speaker 3: ultimately decide who's going to be the next president. And
Speaker 3: if you're listening to us right now in Philadelphia, I
Speaker 3: am sorry for all the advertisements that you're seeing. I
Speaker 3: saw that the NBC affiliate had twenty eight advertisements between
Speaker 3: five am and seven am earlier this week, and so
Speaker 3: it's the folks at Pennsylvania, North Carolina, Georgia, Arizona, and Nevada.
Speaker 3: You know, they're the ones that are ultimately can decide.
Speaker 3: And what both candidates are trying to do here is
Speaker 3: get people off the couch or stay on the couch.
Speaker 3: Because this isn't a race between Vice President Harris and
Speaker 3: Donald Trump. This is a race between Vice President Harris,
Speaker 3: President Trump and the couch. And if you remember in
Speaker 3: that debate, Vice President Harris said, you know, she was
Speaker 3: talking about NATO and Ukraine and she said, they're eight
Speaker 3: hundred thousand Polish Americans living in the state of Pennsylvania.
Speaker 3: That was a way of taking a statement that President
Speaker 3: Trump had used and trying to push some of those
Speaker 3: eight hundred thousand Polish Americans to get off the couch.
Speaker 3: If people stay on the couch, more likely than not,
Speaker 3: President Trump wins.
Speaker 1: Yeah. It's interesting, man.
Speaker 2: They sounds like their neck and neck. So do you
Speaker 2: have any opinion on who you think is going to
Speaker 2: pull this out?
Speaker 3: Look, I can show you pulling. You know, I can
Speaker 3: show you polling that President Trump is going to win.
Speaker 3: I'm going to show you pulling. I can show you
Speaker 3: the polling the Vice President Harris will Win. In fact,
Speaker 3: I had to. I've been flying around the US and
Speaker 3: one of the things that I've been saying to clients
Speaker 3: when I go to them is like, I apologize that
Speaker 3: the DC expert flies all the way out here just
Speaker 3: to tell you that he doesn't know who's going to
Speaker 3: win the election. But it is going to be that close.
Speaker 3: I mean, we're talking about if there is a snowstorm
Speaker 3: in the greater Philadelphia area or in the greater Pittsburgh
Speaker 3: area the day of election, of election day, that potentially
Speaker 3: swing things left and right. President Trump has actually, you know,
Speaker 3: embraced the crypto community fairly aggressively to try and make
Speaker 3: the United States the crypto capital of the world because
Speaker 3: there are potentially, let's just call it, three thousand individuals
Speaker 3: in the United States in those seven swing states that
Speaker 3: crypto is their only issue that they're voting on, and
Speaker 3: as a result, you need every single vote. So it's
Speaker 3: going to be that close, and you know, I can
Speaker 3: still see scenarios for both.
Speaker 2: Yeah, and I'd assume the last debate is going to
Speaker 2: be really important.
Speaker 3: If they hold it.
Speaker 1: If they hold it, all right, yeah, so.
Speaker 3: Right now, the next debate is on October first, that
Speaker 3: is between vice president of the vice presidential candidates, so
Speaker 3: Governor Tim Wallas and Minnesota and Senator J. D. E.
Speaker 3: Vans of Ohio. Vice president debates usually are good popcorn watching,
Speaker 3: but they don't ultimate. I mean, how many folks can
Speaker 3: you think that vote primarily because of the vice president.
Speaker 3: Certainly for the folks in Ohio and Minnesota it's a
Speaker 3: little bit more personal to them. For the rest of
Speaker 3: the folks in the United States, the vice president debate
Speaker 3: usually doesn't matter all that much. But then we have
Speaker 3: the third debate, which may or may not happen, as
Speaker 3: if we're recording this, you know, September thirteenth, you know,
Speaker 3: President Trump said there's not going to be a third debate.
Speaker 3: Immediately after the second debate, Vice President Harris's team came
Speaker 3: out and said, we want a third let's do this,
Speaker 3: Let's do so forth, and President Trump said, no, I'm good,
Speaker 3: untruth social he said something and I'm paraphrasing here. You know,
Speaker 3: the winner, the person who's calling for the rematch isn't
Speaker 3: the winner. I won the debate, and so forth. Therefore,
Speaker 3: there's no need to have a third debate. What I
Speaker 3: will say is is that there potentially could be a
Speaker 3: third debate. I don't want to say it's not going
Speaker 3: to happen because it is September thirteenth. We don't know
Speaker 3: what the race is going to look like on October fifteenth,
Speaker 3: and if Kamala Harris begins to move, you know, maybe
Speaker 3: some additional voter enthusiasm in Pennsylvania, for example, President Trump
Speaker 3: may want to have that debate again because you know,
Speaker 3: he could be better prepared, and it could be a
Speaker 3: different story because President Trump. I mean, look, anybody watched
Speaker 3: the first debate between President Trump and President Biden. Debates matter,
Speaker 3: and so you know, debates have real consequences, and so
Speaker 3: let's give both candidates time. I think, you know, we'll
Speaker 3: see how it plays out. But around that October fifteenth
Speaker 3: October twentieth timeline, you certainly could have a third debate.
Speaker 3: But you know, right now, it seems like the debate's off.
Speaker 3: But maybe in a week or two they'll come back
Speaker 3: to it.
Speaker 2: Okay, interesting and remind me last four years ago the
Speaker 2: first debate, how did that pan out?
Speaker 3: Well? You know which which one I mean it was?
Speaker 3: There was there were multiple debates, but I think I
Speaker 3: was referring to the first debate. This s this cycle.
Speaker 3: So when President Trump and President Biden had their debate,
Speaker 3: President Biden came across, you know, you know, he came
Speaker 3: across in a way that essentially made a lot of
Speaker 3: people question his ability to be present. And within a
Speaker 3: few weeks he was announcing that he's not going to
Speaker 3: run anymore. And so, you know, some debates have matter.
Speaker 3: I mean, look, I remember watching a debate, one of
Speaker 3: the debates between President Obama and current Utah Senator Mitt Romney.
Speaker 3: And Senator Romney I think handily won that debate, but
Speaker 3: as we all know, President Obama won the election. And so,
Speaker 3: you know, debates have real consequences. But so do policy statements.
Speaker 3: So does the economy, So does the FED either cutting
Speaker 3: or not cutting interest rates, and so there's all these
Speaker 3: different factors. And when you're talking about one hundred thousand
Speaker 3: voters over some swing states, you know, it's that how
Speaker 3: how I mean the amount of regression analyzes you have
Speaker 3: to run to try and figure out how those factors
Speaker 3: are going to impact those one hundred thousand votes is
Speaker 3: extremely difficult. And that's why polling in particular is very
Speaker 3: difficult to get.
Speaker 1: Right, gotcha.
Speaker 2: Yeah, And you know, I was curious because I thought
Speaker 2: I saw something on Twitter. Some pundit was saying how
Speaker 2: in the last cycle four years ago, Trump performed poorly
Speaker 2: on the first debate, but then had a nice rebound
Speaker 2: in the second one.
Speaker 1: That was kind of what I oh.
Speaker 3: Yeah, yeah, okay, yeah, I mean, look, you know, President
Speaker 3: Trump had a great first debate against President Biden. The
Speaker 3: second debate not so well. You know, if they have
Speaker 3: a third debate, you know, there are real risk and
Speaker 3: opportunities for both candidates. If it's a replay of the
Speaker 3: second debate, Kamala Harris certainly would do well if President
Speaker 3: Trump shows up and you know, begins to put the
Speaker 3: onus back on her. You know, essentially, the way it
Speaker 3: works is that whoever we're talking about at the end
Speaker 3: of the debate is the one that loses. And if
Speaker 3: we're talking about President Trump and President Trump's policies and
Speaker 3: statements and things like cats and dogs, you know, that
Speaker 3: means the chances are you lost the debate. If we're
Speaker 3: talking about things like Kamala Harris's policies or maybe the
Speaker 3: lack there of of policies, then she's lost the debate.
Speaker 3: So you know, it's really just I think a challenge,
Speaker 3: and I think that both candidates will go back and
Speaker 3: they'll conduct their analysis and so forth, and I think
Speaker 3: that if they decide, if they both decide that a
Speaker 3: third debate is you know, advantageous to them, we'll see
Speaker 3: one around that October fifteenth, October twentieth time frame.
Speaker 2: Okay, Yeah, it'll be interesting to see how it unfalls, right,
Speaker 2: because I thought the Democrats did a good job of
Speaker 2: setting the bar very low for Kamala, right, and she
Speaker 2: clearly outperformed those expectations. But you're always curious to see
Speaker 2: how that would change if she's expected to win the
Speaker 2: third debate or you know, actually outline some policies.
Speaker 1: So it's going to be interesting to watch.
Speaker 3: Well, just remember that's politics, one on one. You never
Speaker 3: set the debate or the bar high, you know. So,
Speaker 3: I mean that's they could you know, a candidate could
Speaker 3: be up by thirty points and they still are going
Speaker 3: to go in there saying that they're the underdog. They're
Speaker 3: going to you know, they're going to try and do
Speaker 3: their best and so forth, but they don't have great
Speaker 3: expectations because then they overperform.
Speaker 2: If they do all right, so I you know, almost
Speaker 2: as important. How do you expect the Senate in the
Speaker 2: House to pan out?
Speaker 3: Yeah? So this is this is where Poland gets a
Speaker 3: little bit more difficult because if everybody thinks of the
Speaker 3: text messages or you're getting on your phone at the moment,
Speaker 3: it's always how are you going to vote? For the
Speaker 3: presidential race. Nobody's texting you to say, how are you
Speaker 3: going to vote in the third district of Colorado. I
Speaker 3: mean maybe the folks that live in the third District
Speaker 3: of Colorado are getting that text, but I'm certainly not
Speaker 3: getting that text about the House and Senate. So it's
Speaker 3: a little bit more difficult. So when it comes to
Speaker 3: the House, I rely on our friends over at Bloomberg
Speaker 3: Government and they rely on the Cook Political Report and
Speaker 3: so forth like that. And the Cook Political Report is
Speaker 3: showing that there's about forty four seats that are either
Speaker 3: leaning or toss up. Now, if you're listening and you're
Speaker 3: not in the United States, just remember four hundred and
Speaker 3: thirty five members of the House Representatives. Every single one
Speaker 3: of them is up for reelection this sight. They serve
Speaker 3: two year terms. Currently, the Republicans have the House two
Speaker 3: hundred and twenty to two hundred and eleven. You need
Speaker 3: two hundred and eighteen for majority, So the Republicans can
Speaker 3: only afford to lose three. And this is why Speaker
Speaker 3: Mike Johnson has struggled in a lot of times, and
Speaker 3: current you know, the current spending bill is a perfect
Speaker 3: example of that of why the Republicans have struggled to
Speaker 3: get the certain bills across the line. Now when it
Speaker 3: comes to the House with you know, because I said
Speaker 3: forty four are leaning or toss ups, that means eighty
Speaker 3: eight percent of the House are going to go to
Speaker 3: bed on election night knowing that they've won their race. Well,
Speaker 3: what happens for the other twelve, Well a couple things
Speaker 3: to note. One, it's not the swing states that matter.
Speaker 3: It's more so swing districts in states like New York
Speaker 3: and California that matter. And it's going to be certainly
Speaker 3: interesting that's going to be tying out to turnout. So
Speaker 3: if Vice President Harris has great turnout, chances are that
Speaker 3: could then go down into the House races as well.
Speaker 3: Taking my Bloomberg hat off and putting my own personal
Speaker 3: hat on, my view on the House is whoever wins
Speaker 3: the presidency will ultimately win the House. And the reason
Speaker 3: why that's important is because twenty twenty five is going
Speaker 3: to be a year about tax debate and tax reform,
Speaker 3: and generally tax policy starts in the House of Representatives
Speaker 3: and then goes to the Senate. So whoever controls the
Speaker 3: House controls the committees, and then whoever is the chairman
Speaker 3: or the chairwoman of the House Ways and Means Committee
Speaker 3: will be the one that offers the opening salvo, the
Speaker 3: base case negotiation, if you will, of tax reform. But again,
Speaker 3: I think whoever wins the presidency will probably win the House. Now,
Speaker 3: on the Senate, this is a much better picture for
Speaker 3: the Republicans, much more difficult picture for the Democrats because
Speaker 3: thirty three, roughly one third of the Senate, goes up
Speaker 3: every two years one hundred senators, two from every state
Speaker 3: they serve six year terms. This year we have thirty
Speaker 3: four because Nebraska has a special election, so there's two
Speaker 3: senator votes upctually going on in Nebraska right now. But
Speaker 3: this is an extremely difficult election for the Democrats. The
Speaker 3: reason being is of those thirty four seats, f three
Speaker 3: of them are held by Democrats and a lot of
Speaker 3: them are held in Trump states or in swing states.
Speaker 3: So currently the Democrats control the Senate fifty one to
Speaker 3: forty nine. There are four independents. They give Senator Joe
Speaker 3: Manchin Senator Bernie Sanders independence that caucus with the Democrats,
Speaker 3: and immediately they're going to go down to fifty to
Speaker 3: fifty because Senator Joe Manchin is retiring. Now again, I'm
Speaker 3: not a polster, I'm not a political expert, but you
Speaker 3: don't need to be one to know that more likely
Speaker 3: than not, West Virginia is going to turn to a
Speaker 3: Republican and the former governor, Jim Justice is going to
Speaker 3: take that seat. So now the Democrats are down to
Speaker 3: fifty to fifty. And if you have fifty to fifty,
Speaker 3: remember the vice president is the one that ultimately controls
Speaker 3: fifty to fifty votes. But in order for the Democrats
Speaker 3: even to get to fifty to fifty, they have to
Speaker 3: run the gauntlet and they have to defend a seat
Speaker 3: like Senator Sherit Brown, the chairman of Senate Banking Committee
Speaker 3: in Ohio. Senator John Tester in Montana, Montana is a
Speaker 3: Republican state Senator. Tester on his last two elections just
Speaker 3: by Finn Margins, Senator Jackie Rosen in Michigan, the retiring
Speaker 3: seat of Senator Dabbie Stabenow in Michigan. The Democrats have
Speaker 3: to run the gauntlet of those seats to potentially even
Speaker 3: just get back to fifty to fifty. So the general
Speaker 3: thought here is is that the Republicans have a very
Speaker 3: good shot of taking the Senate. And the reason why
Speaker 3: that's important is because the Senate filibuster exists for legislation.
Speaker 3: It does not exist for regulatory appointments, judges, and nominations.
Speaker 3: And for those of you who aren't familiar with the philibuster,
Speaker 3: it is two hundred and fifty years of best practice.
Speaker 3: It's not written down in the Constitution anywhere, but essentially
Speaker 3: it's just two hundred and fifty years of best practice
Speaker 3: which allows one Senator to stand up and say I
Speaker 3: blocked this legislation and sixty senators need to overturn it. Now,
Speaker 3: there used to be a filibuster for nominations and appointments,
Speaker 3: and that went away under the Obama administration. And as
Speaker 3: a result, if the Republicans take the Senate and President
Speaker 3: Trump wins, are appointments in the the appointments of his
Speaker 3: cabinet and so forth will move much quicker. In the
Speaker 3: flip scenario, if the Republicans take the Senate and Vice
Speaker 3: President Harris wins, the Republicans could jam up a good
Speaker 3: portion of the first one hundred days of her presidency
Speaker 3: by you know, blocking a lot of her appointments.
Speaker 1: They have thrown some sand in the gears.
Speaker 2: All right, let's figure out what's going on with consumer
Speaker 2: spending under each potential administration. You know, talk to us
Speaker 2: a little bit about the policies on regulation, taxes, and
Speaker 2: stuff like that.
Speaker 3: So it's important to remember. And this is if there's
Speaker 3: ever a debate. If you're watching a campaign speech, it's
Speaker 3: like it's like the Hamilton Musical when Aaron Burr says
Speaker 3: to Hamilton, how are you going to get your debt
Speaker 3: plan through? Hamilton responds and says, by listening to you,
Speaker 3: aka negotiate. So any single time a candidate says I
Speaker 3: want to do this tax, or I want to do
Speaker 3: this policy, or I want to do that, the question
Speaker 3: is how you going to do it? And there's three
Speaker 3: ways of I would argue three ways of how things
Speaker 3: get done in Washington. The first is legislation. You don't
Speaker 3: need to be me to know that. Legislation is hard
Speaker 3: to come by. The second is regulation. Regulation takes time.
Speaker 3: You have to get those leaders in place. It has
Speaker 3: to go through a rulemaking process. Probably usually takes you know,
Speaker 3: usually takes the quickest ever ever seen it done is
Speaker 3: about a year. More likely not it's two to three years.
Speaker 3: And the third is executive orders eighty five percent. My
Speaker 3: estimation of executive orders are a headline risk. You'll see
Speaker 3: a red line on the terminal, it'll be flashing, you'll
Speaker 3: look into it, but more likely than not, it's a
Speaker 3: fancy way of the president picking up the phone and
Speaker 3: saying to his staff, I want you to do something,
Speaker 3: either the legislative route or the regulatory route. Now, the
Speaker 3: other fifteen percent, though, is a little bit different. The
Speaker 3: power of the presidency is a lot more powerful when
Speaker 3: it comes to things like trade, tariffs, foreign relations, national security,
Speaker 3: because Congress over the last fifty to one hundred years
Speaker 3: has delegated a lot of that to the president. If
Speaker 3: you're investing right now in US steel and you've been
Speaker 3: watching Sifius review, you know exactly what I'm talking about.
Speaker 3: Ciphius is most likely going to make a recommendation that
Speaker 3: President Biden blocks the Nippon Steel US Steel and that
Speaker 3: he can do that, and there's very little recourse that
Speaker 3: Congress or the judges could do in response. So let's
Speaker 3: talk about consumer facing in various in both the Harris
Speaker 3: presidents and a Trump president's. Let's start with Vice President Harris. Now,
Speaker 3: Vice President Harris wins. She has already come out and
Speaker 3: said price gouging food inflation, if you will, is one
Speaker 3: of her big you know, this is something that she
Speaker 3: has talked about. So our initial assessment is the risk
Speaker 3: of any bad things happening. And I say risk and
Speaker 3: opportunity because remember for every risk there's an opportunity. But
Speaker 3: for the risk to these grocery stores that they then
Speaker 3: could be targeted by price caps and so forth like that,
Speaker 3: or to food who's wholesalers or anything, it's actually quite low.
Speaker 3: The reason being is that price gouging we'll have to
Speaker 3: go via the legislative route. The filibuster will still exist
Speaker 3: even if the Democrats have the Senate, and we don't
Speaker 3: see the filibuster going away, and as a result, there's
Speaker 3: going to be a block there. Okay, So if there's
Speaker 3: a block there let's go to the executive order route. Well,
Speaker 3: if we go to the executive order route and she
Speaker 3: can only do things within the that she has the
Speaker 3: authority of the executive order or the executive branch, it
Speaker 3: may turn up very similar to how President Biden had
Speaker 3: with his student debt relief reforms, where they ran into
Speaker 3: the courts and then you know, sort of so you know,
Speaker 3: I think that you know, again a risk or an
Speaker 3: opportunity for the price gouging argument, it's somewhat quite low
Speaker 3: because a states already have price gouging laws and b
Speaker 3: we just don't see one actually being implemented at the
Speaker 3: federal level. Now, she will certainly go after consumer facing
Speaker 3: sectors for bad actors. And this is where it's important
Speaker 3: to go back to her time as the Attorney General
Speaker 3: of California, because as Vice president, remember she's supporting President Biden,
Speaker 3: she's supporting the White House line. And then it's as Senator,
Speaker 3: she was just one of one hundred. You know, Senator,
Speaker 3: it's difficult to actually create a policy that you're you know,
Speaker 3: specifically geared on because a lot of times you're negotiating
Speaker 3: and working. But as Attorney General of California, she was
Speaker 3: one of the attorney generals that led and received a
Speaker 3: twenty five billion dollars settlement against the big banks for
Speaker 3: home foreclosures. And so we think that if as president,
Speaker 3: she will certainly institute a policy amongst the staffers and
Speaker 3: the agencies like the Department of Justice and maybe even
Speaker 3: the SEC or the Federal Trade Commission and so forth
Speaker 3: to go after bad actors. So if you're looking at
Speaker 3: a company, and let's just say, look, we can't say
Speaker 3: that there are certain companies are going to be targeted
Speaker 3: because we don't know who bad actors are and so
Speaker 3: forth like that, but it's certainly something that compliance and
Speaker 3: risk individuals that these companies should keep in mind, and
Speaker 3: it's something that they probably keep the chief compliance officer
Speaker 3: up at night. Probably won't make up the CEO unless
Speaker 3: there's something that there's there, but certainly is going to
Speaker 3: be because if you can go after the examination side
Speaker 3: or the enforcement side, a lot more investigations and a
Speaker 3: lot more so forth like that. Now when it comes
Speaker 3: to President Trump, you know, we think that these tariffs
Speaker 3: are certainly a real threat slash opportunity here because, like
Speaker 3: I said before, the powers of presidency is a lot
Speaker 3: more powerful. I would call that a phase one argument,
Speaker 3: because that's something they will probably do in the first say,
Speaker 3: six months of his presidency. Now again, if the tariffs
Speaker 3: come out, I think he'll have an executive order, he'll
Speaker 3: hind out, we'll hold it up, he'll have a ceremony,
Speaker 3: but there will be language in that executive order saying
Speaker 3: these tariffs don't take you in place until a certain dates,
Speaker 3: say six, nine, twelve months down the line, because presidencies
Speaker 3: always want to give themselves flexibility. But Phase two is
Speaker 3: this tax reform debate. And the reason why I'm bringing
Speaker 3: this up in the consumer sector's discussion is because one
Speaker 3: of the questions we get often is what is the
Speaker 3: probability for a deficit increasing policy to come out over
Speaker 3: the next administration? And the if the Republicans take the House,
Speaker 3: the Senate, and the presidency, then there is a real
Speaker 3: risk slash opportunity for massive tax cuts coming at the
Speaker 3: tail into twenty twenty five because the tax cuts, the
Speaker 3: Trump era tax cuts for individuals expires at the tail
Speaker 3: into twenty twenty five, and neither president wants to see
Speaker 3: those individual tax cuts go up. Now, they have differences.
Speaker 3: You know, if you're Kamala Harris, you want to see
Speaker 3: them go up for four hundred thousand individuals that make
Speaker 3: more than four hundred thousand dollars. But if you're looking
Speaker 3: at this from a deficit inducing, grandiose, multi trillion dollar bill,
Speaker 3: this reconciliation process, if the House is the Republicans, the Senate,
Speaker 3: if the Republicans take the House, the Senate, and the presidency,
Speaker 3: the probability of that there is much more. Because I
Speaker 3: don't want to get too wonky. I'm happy to do
Speaker 3: it if you like. But there's this process called reconciliation.
Speaker 3: This is how President Obama got Obamacare through, this is
Speaker 3: how President Trump got his tax cuts through, and this
Speaker 3: is how President Biden got the Inflation Reduction Act through.
Speaker 3: What reconciliation is is that it is a budgetary maneuver.
Speaker 3: It's not actually a it's not actually a legislation, but
Speaker 3: it's a budgetary maneuver that would allow the House, the
Speaker 3: Senate to avoid the filibuster and said something to the
Speaker 3: president desk. You can only do it by a you
Speaker 3: can only do it once per fiscal year. And now
Speaker 3: the Democrats have been tried in the past as part
Speaker 3: of the inflation Reduction Act debate, they tried to raise
Speaker 3: the national wage to fifteen dollars. Now, the Senate parliamentarian
Speaker 3: came in and said that doesn't it actually break what
Speaker 3: breaks what's called the Bird rule. Senate parliamentarian says, that
Speaker 3: doesn't adhere to the Bird rule. You can't do it. Now. Look,
Speaker 3: the Senate could then just fire the Senate parliamentarian and
Speaker 3: get a new Senate parliamentarian, and it's certainly feasible they
Speaker 3: could do that, but more likely than not they wouldn't.
Speaker 3: And so you know, keep that in mind. If you
Speaker 3: hear anybody talking about reconciliation, just remember it's got to
Speaker 3: impact the budget. And so in a republican administration it's
Speaker 3: mostly going to be tax cuts. In a democratic administration,
Speaker 3: it will probably be some form of tax cuts or
Speaker 3: at least tax extenders, combined with some potentially additional inflation
Speaker 3: reduction at two point on language.
Speaker 2: Yeah, from where I sit, you know, as a guy
Speaker 2: who's a student of the Austrian School economics, it's like,
Speaker 2: you know, they're both leading us down the path of
Speaker 2: financial ruin. To be honest, it's nice to hear that
Speaker 2: price gouging is low risk, but the fact that you
Speaker 2: know tariffs are still on the table. It's like, come on,
Speaker 2: haven't haven't we experienced enough inflation over the last four years?
Speaker 3: Well, I mean, but also remember tariffs are popular, you know.
Speaker 3: I say that knowing that that's a lot of consensus statement.
Speaker 3: Because look, if I've gone to my local, I have
Speaker 3: Harris I sit in Washington, d C. I'm in Northern Virginia.
Speaker 3: I've got Harris Teeter, I've got Giant, I've got Whole Foods,
Speaker 3: got Trader Joe's fresh Market. I've got a whole host
Speaker 3: of grocery stores that I can choose from. When I
Speaker 3: go to it, I see the price of chicken going up.
Speaker 3: So food inflation is real, but when it comes to tariffs,
Speaker 3: they are still somewhat popular. Because let's start with China.
Speaker 3: Being tough on China is good politics no matter who
Speaker 3: you are. It's easy, though, for a policymaker in the
Speaker 3: House and the Senate to be seen being tough on
Speaker 3: China because they are not the one that looks Jiji
Speaker 3: opinion in the face, and they're not the one that
Speaker 3: actually has this by letteral negotiation with the Chinese government.
Speaker 3: That is up to the President and so you know,
Speaker 3: if President Trump wins, I certainly think there is a
Speaker 3: real risk slash opportunity for very broad tariffs to be
Speaker 3: placed onto the Chinese the government. President Trump has said
Speaker 3: sixty percent tariffs on all goods coming in from China,
Speaker 3: one hundred percent tariffs on any country that moves away from.
Speaker 1: The dollar and buys Amazon bills are going to go
Speaker 1: through the roof.
Speaker 3: Well, and you know, you know it's We've had discussions
Speaker 3: with clients and they've said, especially non US clients, they've said,
Speaker 3: we're not playing in China anymore. You know, let's look
Speaker 3: at Vietnam and Thailand and see what's going on there,
Speaker 3: because potentially they again to the opportunity side of the equation.
Speaker 3: You know, Vietnam and Thailand could be certainly a place
Speaker 3: for opportunities there. But let's talk about Kamala Harrison tariffs.
Speaker 3: President Biden put tariffs on several industries earlier this year
Speaker 3: to protect you know, certain industries in the rust belt
Speaker 3: Ohio and Pennsylvania, in Michigan, and my colleague Holley from
Speaker 3: put out a piece just yesterday talking about how we
Speaker 3: think there's a seventy percent chance of tariffs no matter
Speaker 3: who wins. It's just is it broad or is it targeted?
Speaker 3: And so you know, the tariff argument is a tool
Speaker 3: the presidents love because a it helps them politically, be
Speaker 3: it also helps them with certain industries and so forth.
Speaker 3: But see, they can also be easily reversed because the
Speaker 3: power of the presidency is a lot more powerful there
Speaker 3: and so you don't need to go through Congress. This
Speaker 3: is essentially just a tool. And so again I go
Speaker 3: back to my at my piece where if the if
Speaker 3: the president, whether it being former President Donald Trump or
Speaker 3: Vice President Harris, if the president institute tariffs, you'll see
Speaker 3: an executive order. Chances are you will have heard this
Speaker 3: six months before they do it. But again, in that
Speaker 3: executive order, there will probably be language that allows them
Speaker 3: opt out cards because it is a tool. It's a
Speaker 3: negotiation tool, and you know they will certainly want not
Speaker 3: want to go there unless they think they have a
Speaker 3: winning hand.
Speaker 2: Okay, so talk to me about tariffs and how they
Speaker 2: can impact food costs.
Speaker 3: So obviously, you know, if you come from the side
Speaker 3: of the school where tariffs are attacks, you know it's
Speaker 3: like okay, So, but the best way of doing this
Speaker 3: is I'm gonna go back to my financial regulation days,
Speaker 3: and there was something called the Durbin Amendment. So during
Speaker 3: Dodd Frank in twenty eleven, there was a proposal and
Speaker 3: then a final rule called the Durbin Amendment. And what
Speaker 3: the Derbin Amendment did is it it capped the amount
Speaker 3: that banks could charge for using debit cards. So every
Speaker 3: time you go to a debit card and you go
Speaker 3: to Chipotle or you go to you know, I'm gonna
Speaker 3: call it Portillo's, my favorite place in Chicago. So if
Speaker 3: I go to Portillos and I get an Italian beef,
Speaker 3: and if there's anybody from Portillos listening to this, please
Speaker 3: put up one in the Washington, DC area. I know,
Speaker 3: I see you expanding down to Florida and Arizona and
Speaker 3: so forth. You can come to DC. But if I
Speaker 3: go to Portillo's and use my debit card, how much
Speaker 3: the banks get is capped. Okay. Now, the argument here
Speaker 3: was is that then the companies that the big retailers,
Speaker 3: for example, when you use these debit cards, they would
Speaker 3: pass it on to consumers. Now I can show you
Speaker 3: studies that they pass to consumers. I can show you
Speaker 3: studies they didn't pass it onto consumers. But more often
Speaker 3: than not, anytime that there's a tariff, I view it
Speaker 3: as sort of like a tax, because the tariff comes in,
Speaker 3: and if the tariff, if I'm sitting at the company,
Speaker 3: I'm gonna say, Okay, well, we've got a huge amount
Speaker 3: of tariffs now coming in. We have to pay for this,
Speaker 3: for the imports and so forth. It's going to take
Speaker 3: us two to three years to move our supply chain.
Speaker 3: How do we protect ourselves in the interim? More likely
Speaker 3: than not price increases And might correct me if for' wrong.
Speaker 3: Every single time my restaurant has a new menu, it
Speaker 3: means that they've increased prices, right, So you know, I
Speaker 3: think that if you have a lot of tariffs, and
Speaker 3: then again this is my own personal opinion, there could
Speaker 3: be a lot of menus being changed over the next uh,
Speaker 3: you know, the next one to two years.
Speaker 2: Yeah, and that's put some of my restaurants in a
Speaker 2: tough spot because traffic's been declining pretty consistently for three years, right,
Speaker 2: and so we've got to that tipping point where people
Speaker 2: are pushing back hard against price increases. So restaurants have
Speaker 2: been squeezed, the consumer has been squeezed it's been a
Speaker 2: difficult a year or so, especially, trends have definitely gotten
Speaker 2: worse over last year or so.
Speaker 3: But I'll also say that before they do tariffs, there
Speaker 3: will be an analysis done. And you know, I think
Speaker 3: a lot of people just presume that candidate says something
Speaker 3: and then they put it out there. That's not usually
Speaker 3: how it happens in Washington. Every once in a while
Speaker 3: it does. The President will say something and then it
Speaker 3: just immediately happens and so forth like that. But President
Speaker 3: Biden's tariffs from earlier this year, I think the working
Speaker 3: group that was working on this was working on it
Speaker 3: for like at least twelve months, if not longer. And so,
Speaker 3: you know, I think politicians of both sides of the
Speaker 3: aisle are very sensitive to price increases and they know
Speaker 3: that this is one of the biggest issues that Americans
Speaker 3: are facing today. And look, it's not just America. I
Speaker 3: mean we've seen this in the UK, We've seen this
Speaker 3: in Canada, we've seen this in France, and for length,
Speaker 3: this is something that we've seen across the globe. And
Speaker 3: so I'm going to be the optimist here and I'm
Speaker 3: going to say that I think no matter which candidate wins,
Speaker 3: there will be analysis done. Now the candidate may ignore
Speaker 3: that analysis, but there will be analysis done on what
Speaker 3: that ultimately does to the end consumer.
Speaker 2: Yeah, I appreciate that. I appreciate your optimism. Uh, I
Speaker 2: myself have more cynical I wish we had more. We
Speaker 2: had more politicians that understood that they're spending and the
Speaker 2: FEDS printing of money actually contributes greatly to inflation. All right,
Speaker 2: let's keep it moving. Making tips non tax deductible should
Speaker 2: boosts low and middle income consumer spending. Will that get
Speaker 2: through Congress?
Speaker 3: I don't think so. I mean, I was talking to
Speaker 3: Andrew Silverman, who is our tax guru. So if anybody
Speaker 3: does have a terminal and they want to like really
Speaker 3: get into the weeds with tax, contact Andrew because he
Speaker 3: loves tax. I mean, and so I was talking to
Speaker 3: Andrew Silverman about this. And the thing is is that
Speaker 3: when they do this tax reform debate next year, the
Speaker 3: number one goal is do no harm. Because you go
Speaker 3: back to George H. W. Bush read my lips, no
Speaker 3: new taxes. He paid a political price for that, and
Speaker 3: so raising taxes is not good policy no matter who
Speaker 3: you are. And so you know when Kamala Harris is
Speaker 3: approaching this tax debate. You'll hear her say, I don't
Speaker 3: want to increase taxes. I want to extend the tax
Speaker 3: cuts from the Trump era. Now I want to increase
Speaker 3: taxes unwealthy. That's a different argument. There's a different political
Speaker 3: aspect to that. But so going back to this idea
Speaker 3: of no taxes on tips or President Trump just last
Speaker 3: night proposed no taxes on overtime pay. You know, going
Speaker 3: back to that, how are you going to pay for that? Now? Look,
Speaker 3: Washingtonians can certainly say that economic growth will pay for it.
Speaker 3: There's always and whenever you look at certain analyzes of
Speaker 3: how they're going to pay for certain things, there's always
Speaker 3: this line of economic growth. For any bankers that are
Speaker 3: listening right now, you'd probably be very upset with your
Speaker 3: first year associate if you did something like this, But
Speaker 3: you know, they have this economic growth and certainly economic
Speaker 3: growth is a way you can pay for certain things,
Speaker 3: but it has to be more concrete than just that.
Speaker 3: And so when these proposals come out and you'll say, look,
Speaker 3: it's going to be X billions of dollars that it's
Speaker 3: going to cost us for this, how are you going
Speaker 3: to pay for it. That's where the salt deduction comes in.
Speaker 3: So for folks that are living in New York and
Speaker 3: New Jersey right now, the salt deduction, it's supposed to
Speaker 3: come back, But the salt deduction is also an easy
Speaker 3: way to pay for something. So how are you going
Speaker 3: to pay for it? How does it come in? So
Speaker 3: I think, you know, let's let's let's run the odds.
Speaker 3: If Vice President wins. If Vice President Harris wins, the
Speaker 3: tax reform debate next year is going to be very constrained,
Speaker 3: very small, very negotiated, because she's more likely not going
Speaker 3: to have to work with a Republican Senate. If President
Speaker 3: Trump wins, you know he's going to have to work
Speaker 3: with Republicans, but it'll have a little bit more leeway.
Speaker 3: Going to the corporate tax debate, corporate tax rate right
Speaker 3: now was twenty one percent. That's a permanent fixture. President
Speaker 3: Trump has said I want to go down to fifteen percent.
Speaker 3: Vice President Harris said, I want to go to twenty
Speaker 3: eight percent. I doubt, in talking with Andrew, I doubt
Speaker 3: either scenario is going to play out because I've seen
Speaker 3: I can give you Democrats that say, yeah, maybe I'll
Speaker 3: give you twenty two to twenty three percent, but I'm
Speaker 3: not going to twenty eight. And I can give you
Speaker 3: Republicans saying, man, maybe i'll give you twenty or nineteen percent,
Speaker 3: but we're not going to fifteen just because you gotta
Speaker 3: pay for it.
Speaker 1: That's great color. How will each candidate impact M and A.
Speaker 3: If there's anybody here that loves restaurants and big tech,
Speaker 3: you know, this is where I'm going to go for
Speaker 3: this because right now, I think if you if I
Speaker 3: were to give if I were to bring big tech
Speaker 3: CEOs in their given truth serum, they would probably say
Speaker 3: that the Biden era regime has been very tough on
Speaker 3: big tech and very tough on M and A, and
Speaker 3: I agree. You know, our anti trust analyst Jenriy would
Speaker 3: certainly agree with you. There's a lot of tough scrutiny
Speaker 3: on big tech that's led by Lena Khan, the chairwoman
Speaker 3: over the Federal Trade Commission. Now, in a Harris presidency,
Speaker 3: that will probably continue, maybe a little bit of moderation
Speaker 3: in certain areas, but they'll probably continue tough scrutiny on
Speaker 3: big tech. Now when it comes to a Trump presidency,
Speaker 3: this is where it gets a little bit more interesting
Speaker 3: because you have this perception out there, I'll call it
Speaker 3: the US Chamber of Commerce perception that Republicans equal good
Speaker 3: for big business. And if that's the type of thinking
Speaker 3: that comes into the White House, then M and A
Speaker 3: activity will get a little bit easier. Notwithstanding the court argument.
Speaker 3: I'll talk about the court argument in a minute. But
Speaker 3: then you have the JD. Vance economic populism side of
Speaker 3: the Republican Party. And what I mean by that is
Speaker 3: Senator Vance came to the Bloomberg office in DC about
Speaker 3: five months ago and he called Lena Khan, the chairwoman
Speaker 3: of the FTC, one of the best things President Biden
Speaker 3: has ever done, and even insinuated that President Trump should
Speaker 3: keep her on to continue the crusade against big tech.
Speaker 3: That is not the type of thinking that a typical
Speaker 3: Republican big business thinking. And so if that is going
Speaker 3: to get into the White House, then big tech could
Speaker 3: have much different M and A may have a very
Speaker 3: much different of antitrust may be very different. We don't
Speaker 3: know which side of the thinking would get into the
Speaker 3: White House if President Trump wins. And so you know
Speaker 3: what we have to do right now, Let's just play
Speaker 3: what if scenarios. I think overall, because of the way
Speaker 3: certain courts, the courts are acting these days, I think overall,
Speaker 3: if President Trump wins m and a activity, at least
Speaker 3: the scrutiny of it will get a little bit easier.
Speaker 3: But how much we just really don't know.
Speaker 1: Yeah, I'll be interesting to watch.
Speaker 2: In A lot of the libertarian pundits that I follow
Speaker 2: are not happy with Vanci's commentary that you at referring.
Speaker 3: You know, but the economic populism side of the Republican
Speaker 3: Party is validing out there, and you know, it's certainly
Speaker 3: something that you need to take into a consideration because
Speaker 3: if President Trump wins and that type of thinking gets
Speaker 3: into his fear of influence, you know, it's certainly a
Speaker 3: it will be an interesting time.
Speaker 2: Okay, And so let's wrap it up with marijuana. It's Friday,
Speaker 2: so legalization. So is Kamala gonna you know, I'd assume
Speaker 2: Trump would probably continue to leave it to the states.
Speaker 2: You know, Is Kamala going to make a good push
Speaker 2: for federal marijuana legalization?
Speaker 3: No, So there's really three issues here. You have full
Speaker 3: federal legalization, which I personally don't think is going to happen.
Speaker 3: For at least another four to five years there. And
Speaker 3: forget the candidates at the White House, there's just enough
Speaker 3: folks in the Senate that I don't think are on
Speaker 3: board with this at the federal level, especially when the
Speaker 3: states are either legalizing it or decriminalizing it. So I
Speaker 3: don't think I don't think there's gonna be a ton
Speaker 3: of political capital at the federal legalization side, which you
Speaker 3: know is interesting because like in the District of Columbia,
Speaker 3: we have district land where it is decriminalized and then
Speaker 3: federal land where it is not. And so there's like
Speaker 3: hot pockets of the District of Columbia and that's where
Speaker 3: it'd be really interesting to see it play out. But
Speaker 3: then you have this idea of reschedulization. Currently, marijuana is
Speaker 3: a Schedule one drug. It's on there with cocaine. The
Speaker 3: FDA has proposed moving into Schedule three. Think tiling all
Speaker 3: with codeine. You need a doctor's prescription. Now the prescription
Speaker 3: thing doesn't apply, but what applies here is that if
Speaker 3: you move it too Schedule three, you get something that's
Speaker 3: known as two to eighty tax relief. So for a
Speaker 3: lot of these marijuana firms out there, your effective tax
Speaker 3: rate goes from about forty percent to five percent. That's
Speaker 3: a lot of cash back. And so you know, if
Speaker 3: reschedulization happens, and I do think it will happen in
Speaker 3: twenty twenty five, I'm giving it a sixty to seventy
Speaker 3: percent chance of happening at the end of twenty twenty five,
Speaker 3: no matter who wins, I do think it's going to happen.
Speaker 3: I don't think it's going to happen in twenty twenty four.
Speaker 3: And I'm just calling that out BECA because there are
Speaker 3: a lot of marijuana investors right now who think that
Speaker 3: this will be one of President Biden's last acts is
Speaker 3: to complete this rule making. I don't think it's going
Speaker 3: to happen. I may be out of consensus on that,
Speaker 3: and the reason being is is that we still have
Speaker 3: heard anecdotally that there are a lot of career staffers
Speaker 3: over at the Drug Enforcement Agency the DEA, that are
Speaker 3: not on board with this, and in fact, in the
Speaker 3: proposal there was language that said, we at the DEA
Speaker 3: are not making a determination on going to Schedule three.
Speaker 3: We're just putting this out here for comment, and then
Speaker 3: if you follow the administrative Procedures Act, which is the
Speaker 3: rule that these regulators have to follow to conduct these rulemakings.
Speaker 3: To go from language where it says we're not making
Speaker 3: a determination to finalization within the quickest time frame that
Speaker 3: I have ever seen in my history of Washington. That
Speaker 3: means to me that the courts could eventually get involved.
Speaker 3: And I don't think the President Biden would want to
Speaker 3: go there now, but President Trump has said that he's
Speaker 3: open to it, and you know, I think that, you know,
Speaker 3: maybe at the tail end of twenty two twenty five,
Speaker 3: this could happen. And then the final issue for marijuana
Speaker 3: is to call it something called the Safe Banking Act,
Speaker 3: and this is the bill that will allow banks to
Speaker 3: service marijuana businesses. And the reason why I cover the
Speaker 3: Safe Banking Act so much is because these marijuana equities
Speaker 3: have what I call is hot sauce. You know, there's
Speaker 3: a lot of volatility on these things. One policy statement
Speaker 3: saying we're going to get Safe Banking Act, and then
Speaker 3: these things start moving up and down fifteen to twenty percent.
Speaker 3: It's very low dollar denomination, high probability change. Safe Banking
Speaker 3: Act has the votes. There are enough votes, I would
Speaker 3: estimate to get this through. The question is how does
Speaker 3: it get through right now? You would have to spend
Speaker 3: about thirty right now. There's not enough time for the
Speaker 3: rest of the year to get this done. And I
Speaker 3: don't think it can be attached to something as a
Speaker 3: vehicle to get something done. So I think safe Banking
Speaker 3: will come back next year. I think there's a decent chance.
Speaker 3: But full disclosure, I said safe Banking was going to
Speaker 3: get done at the end of the last congressional term
Speaker 3: and it hasn't, and so full disclosure, I was wrong
Speaker 3: on this one once. So but still I'm going to
Speaker 3: go again and say that I think it's going to
Speaker 3: get done next year.
Speaker 2: All right, great, we're going to end it there on
Speaker 2: some good news. Thanks for doing this, Nathan, You're great man.
Speaker 2: I learned so much. Where can listeners find your work
Speaker 2: outside of the Bloomberg terminal?
Speaker 3: Well, so the best thing to do is we actually
Speaker 3: have a call every Monday at ten am. It's open
Speaker 3: to both Bloomberg and non Bloomberg. If you want to
Speaker 3: join that, just shoot me an email at end ten
Speaker 3: at Bloomberg dot net or find me on LinkedIn or
Speaker 3: Twitter at Nathan Dan DC. But we'll be more than
Speaker 3: happy to have you host you on that call. We'll
Speaker 3: put you on our distribution list and then we'll get
Speaker 3: you access to a lot of the information that we
Speaker 3: provide as well.
Speaker 2: Yeah, it's a great, very in depth newsletter with some
Speaker 2: humor sprinkled in.
Speaker 1: I highly recommend it and thanks to the audience for
Speaker 1: tuning in.
Speaker 2: If you liked the episode, please share it with your
Speaker 2: friends and colleagues. Check back soon for a discussion with
Speaker 2: Brandon Barton
Speaker 1: The CEO of Bite.