Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller. Every business day, we bring
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
Speaker 1: at Bloomberg dot com slash podcast. John was just mentioning oil, Matt.
Speaker 1: I'm looking at Brent crude here, sixty seven dollars sixty
Speaker 1: four cents a barrel, up about one point eight four plus.
Speaker 1: You know I also mentioned earlier, Matt, that article I
Speaker 1: saw on Bloomberg terminal four dollars a gallon, UH to
Speaker 1: fill up your car if you live in the state
Speaker 1: of California. Energy pushing higher. Let's get behind the drivers
Speaker 1: of this crucial commodity. We do that the Virginia Regina
Speaker 1: mayor Global Energy head for KPMG Regina, thanks so much
Speaker 1: for joining us here. We're seeing energy prices move up,
Speaker 1: oil move higher. Is this simply a demand play here?
Speaker 1: As more and more vaccines get into arms on a
Speaker 1: global basis, the expectation is that the demand for oil
Speaker 1: will be rising as well. Clearly it is a big
Speaker 1: A big part of the story is demand and how
Speaker 1: quickly demand has recovered. You know, prices are incredible and
Speaker 1: very buoyant, but I like to take people back to
Speaker 1: where were we one year ago this month, when w
Speaker 1: t I settled in negative territory, and now look at
Speaker 1: where we are, and I think there's still upward momentum
Speaker 1: because we're seeing some potential supply disruptions and it's still
Speaker 1: a question of how quickly opec plus is going to
Speaker 1: bring back those surplus barrels into the market. And in addition,
Speaker 1: the world seems to have worked through the billion plus
Speaker 1: supply overhang that we predicted a year ago, so I'm excited.
Speaker 1: It's very buoyant. I wouldn't have predicted these fundamentals even
Speaker 1: six months ago, but the industry is quite quite favorable.
Speaker 1: How much of cramp on demand is the tragedy that
Speaker 1: we're seeing play out in India truly a tragic event um,
Speaker 1: and and that will have an impact on global demand.
Speaker 1: But I think the the overall global demand story from
Speaker 1: places like the US and China are overcoming the tragedy
Speaker 1: that we're seeing in India as well as you know,
Speaker 1: the challenges that we're seeing in other strong fuels markets
Speaker 1: like Brazil. The market seems to be very bullish that
Speaker 1: demand will continue to increase. We've got summer driving season
Speaker 1: coming up, We've got summer vacation season coming up. People
Speaker 1: are trying to countries are trying to look at ways
Speaker 1: that they can open up their borders. So even my
Speaker 1: refining clients that were pretty pessimistic about gasoline demand return
Speaker 1: and jet fuel demand return are are actually quite optimistic
Speaker 1: as they look into and definitely into alright, Regina. So
Speaker 1: the demand side seems pretty solid improving. Let's talk about
Speaker 1: the supply side here. Talk to us about OPEC plus
Speaker 1: and the pressure on some of those key members of
Speaker 1: OPEC plus start ramping up production. Yeah, so it's interesting
Speaker 1: that OPEC plus decided not to have the meeting that
Speaker 1: they were going to have today. I think that shows
Speaker 1: that they're very confident in their strategy and they're very
Speaker 1: confident in the commitment that they have and a part
Speaker 1: of the members to retain the cuts and slowly trickle
Speaker 1: those barrels back into the market. Um, there is still
Speaker 1: even after the two million barrels per day come back
Speaker 1: into the market, that they've committed will come back by
Speaker 1: the end of July. There's still six million barrels per
Speaker 1: day that they're still sitting on, So that is the
Speaker 1: governor against a huge price spike, and how they trickle
Speaker 1: that back will be will be interesting. The sixty range
Speaker 1: that we're in now is not enough to balance the
Speaker 1: budgets of all of those OPEC plus nations, but it
Speaker 1: is a nice buffer that's building on their financial reserves.
Speaker 1: But I could see them trying to push it to
Speaker 1: see can we get Brent over the seventy dollar mark
Speaker 1: before we start more actively putting those withheld barrels back
Speaker 1: into the market. What do OPEC nations need to balance
Speaker 1: the budget? The most estimates are that it's in the
Speaker 1: eighties UM for most of the countries. So I but
Speaker 1: I don't think the world can survive that. I think
Speaker 1: there will be a lot of pressure on the OPEC
Speaker 1: plus countries. You already saw it a couple of months
Speaker 1: ago with calls from the Biden administration into Saudi Arabia
Speaker 1: as well as calls from the Indian government into Saudi
Speaker 1: Arabia that we can't have crude oil price be too hot.
Speaker 1: You mentioned that it's four dollars per gallon in California.
Speaker 1: The average retail price for gasoline in the US right
Speaker 1: now is almost three dollars, and that's for all grades
Speaker 1: in all markets. So I think we're sort of at
Speaker 1: that tipping point. Seventy for Brent might be as high
Speaker 1: as people feel comfortable. Um, but I think they're really
Speaker 1: enjoying threading the needle by keeping things relatively stable in
Speaker 1: the high sixties, which makes them more comfortable with their
Speaker 1: board looking position. Three dollars a gallon would be a
Speaker 1: dream come true for me here in Berlin. I would
Speaker 1: drive so much if I had three dollars per game.
Speaker 1: What is it's it's it's about seven and change, I
Speaker 1: think right, it's um, I mean I tank up with
Speaker 1: shell V power, of course, because I care about my engine.
Speaker 1: All right, all right, So let's talk about the shale patch.
Speaker 1: Are we gonna start to see some of these share
Speaker 1: patch producers ramping up production and maybe mucking up the
Speaker 1: works a little bit? I don't think so. And you know,
Speaker 1: you never say never with the with US exuberants around
Speaker 1: oil production, right that's in our d n A and
Speaker 1: I sit in Texas and I definitely don't pay as
Speaker 1: much as you do for your kathleen, um, but they
Speaker 1: are making commitments to their shareholders that the the returns
Speaker 1: above some of you even said above forty dollars per
Speaker 1: barrel will be returned in terms of dividend growth to
Speaker 1: their shareholders. That could be a very strong message if
Speaker 1: we take those profits and instead of funneling it all
Speaker 1: into captics, we pay down debt and we return that
Speaker 1: cash to the shareholders in the form of dividends. That's
Speaker 1: a story that all of the large ones have told
Speaker 1: to the marketplace, and I expect them to hold to that.
Speaker 1: And I think OPEC plus will be watching rig counts
Speaker 1: and US activity. Rick counts have had held very stable,
Speaker 1: so most predictions are we might get to twelve million
Speaker 1: barrels per day by the end of but I don't
Speaker 1: think we'll see the thirteen million barrels per day or
Speaker 1: higher and the exuberance that we saw in the shale
Speaker 1: patch to quote mark up the works as you put it.
Speaker 1: By the way, I sit in Berlin, which is why
Speaker 1: my gas prices are so high. Um, Regina, let me
Speaker 1: just ask you quickly. We only got thirty seconds here.
Speaker 1: But having noted that, does the electric vehicle push do
Speaker 1: anything to hurt demand in the near term. Not in
Speaker 1: the near term. It only degrades about two um uh
Speaker 1: gallons of total fuel, and so we only see maybe
Speaker 1: a million two a couple million barrels per day coming
Speaker 1: off in the next five years from v penetration, and
Speaker 1: so it's just a drop in the proverbial bucket. I see,
Speaker 1: all right, Well that's what I thought, but I just
Speaker 1: wanted to get it confirmed by the experts. There are
Speaker 1: a bunch of electric vehicles whizzing around here, but obviously
Speaker 1: it's not even close to um the majority, not not
Speaker 1: even close to half. When I'm in California, I see
Speaker 1: a lot more than really much more prevalent. Well, maybe
Speaker 1: California is the future. Man, Regina, thanks very much for
Speaker 1: joining us. Regina Mayor, their global energy head at KPMG
Speaker 1: talking to us about UM, this commodity price, the games,
Speaker 1: maybe transitory. We're waiting for FED chair J. Powell. This
Speaker 1: is Bloomberg. Let's bring in now Stephen Kine. He is
Speaker 1: the group managing director and a portfolio manager at tc W.
Speaker 1: They have about two hundred fifty three billion dollars in
Speaker 1: assets under management. I know Paul when he was working
Speaker 1: in the finance sector. You must a musty when you
Speaker 1: go to stop out there every time he was on
Speaker 1: the on the best coast. Stephen, UM, big day today,
Speaker 1: right because we had kicked off the day with news
Speaker 1: about the Biden tax plan, which is very big, and
Speaker 1: we're gonna finish the session with the Fed. Um. These
Speaker 1: two pillars to me seem key for your business. What
Speaker 1: do you make of the current environment? Uh? Well, what
Speaker 1: I would say, I think you're you're dead on. As
Speaker 1: a matter of fact, I think the bigger point as
Speaker 1: we think about the markets in general is the markets
Speaker 1: are always affected by fiscal and monetary policy. But I
Speaker 1: think given the degree of involvement of the government currently
Speaker 1: not only in the uh COVID era, but as we
Speaker 1: move forward and the degree of involvement by the FED,
Speaker 1: I don't think the capital markets have ever been as
Speaker 1: as driven and influenced um by my policy right now.
Speaker 1: So UM, in terms of today and what's going on. Um,
Speaker 1: you know, I don't think there's much to talk about
Speaker 1: in terms of the FED. I think it's it's going
Speaker 1: to be a bit of a snoozer. I wouldn't hold
Speaker 1: your breath for anything significant out of the Fed. The
Speaker 1: Fed is extremely duvish. They've changed their framework, as they've
Speaker 1: articulated uh numerous times to be outcome driven and not
Speaker 1: outlook out uh look driven. And therefore, given that inflation
Speaker 1: is running far below the two plus percent that they're
Speaker 1: looking to see for a stain period and unemployment it's six, um,
Speaker 1: it would be shocking to see the Fed do anything
Speaker 1: but maybe tweak the language on on the current you know,
Speaker 1: statements around the current economic environment. UM. On the fiscal side, um, yeah,
Speaker 1: this is developing. It seems to be one big package
Speaker 1: after another. What's changing now is those packages are now
Speaker 1: being balanced to some degree with potential tax increases. And
Speaker 1: we'll just have to see how things go. But if
Speaker 1: it goes in this direction, uh, not to get to
Speaker 1: uh uh you know uh loud about this, but you know,
Speaker 1: we could be entering an era bigger government um, and
Speaker 1: you know that could have bigger implications for for the
Speaker 1: economy long term. Alright, So, given where we are in
Speaker 1: the cycle here, Stephen, we have this reopening trade, if
Speaker 1: you will, We have in a comminent date of federal reserve.
Speaker 1: We have fiscal stimulus, perhaps partially offset by taxes. What
Speaker 1: are some of the sectors that TCW is looking at,
Speaker 1: know and your unconstrained fund do you do top down
Speaker 1: but also a lot of bottoms up work as well? Yeah? Yeah,
Speaker 1: So kind of the good news bad news for UM
Speaker 1: for the credit sectors is that the good news is
Speaker 1: we do have significant fundamental tail winds in terms of
Speaker 1: strong economic growth and good operating leverage for businesses. There's
Speaker 1: gonna be a lot of good earnings and cash flow
Speaker 1: and all those good things that tend to support risk taking.
Speaker 1: The bad news is that's already in the markets. Spreads
Speaker 1: are extremely tight. The the overall yield and the high
Speaker 1: yield market is just under four percent, So you're really
Speaker 1: not getting paid, uh for for taking a ton of risks.
Speaker 1: So as we look at sectors UM, we are up
Speaker 1: in quality just due to the value and UM. One
Speaker 1: of the sectors that we think offers probably the best
Speaker 1: risk return is the highest quality sector outside of treasuries,
Speaker 1: which is agency mortgage backed securities. And the reason for
Speaker 1: that is that it's a FED controlled asset. UM they're
Speaker 1: buying forty billion a month and therefore really controlling the
Speaker 1: price and the spread. And then the second reason, and
Speaker 1: what makes them really attractive to us is to buy
Speaker 1: them in the forward or tb a market where, due
Speaker 1: to the fact that the Fed's buying up all the
Speaker 1: net supply of production of agency mortgages, the financing rate
Speaker 1: to to not own the mortgages but roll them forward
Speaker 1: in the forward market is extremely attractive. It's it's minus
Speaker 1: seventy basis points, so you're picking up one and a
Speaker 1: half to two percent spread to treasuries for a risk
Speaker 1: free credit, risk free asset that is controlled by the FED.
Speaker 1: That's you know, double the spread that you get from
Speaker 1: investment great corporate bond. So we'd start there and then
Speaker 1: from there we would, uh, you know, go to other
Speaker 1: areas of the securitized market where you can stay relatively
Speaker 1: high in quality, double A, triple A in the non
Speaker 1: agency mortgage market, in the CLO market collateralized loan obligation UM,
Speaker 1: and you can get spreads in the mid one, you know,
Speaker 1: far better than you can do in the corporate bond
Speaker 1: market with uh, you know, with reasonable volatility. When is
Speaker 1: the FED I'm going to be interesting, you know, we
Speaker 1: we had UM some people start to talk about talking
Speaker 1: about tapering and expecting that to happen towards the end
Speaker 1: of this year. Does that time frame make sense to you?
Speaker 1: You know, I think it's I think it depends on
Speaker 1: what happens in the economy and with inflation. UM. People
Speaker 1: tend to be focusing on the the Jackson Hole meeting
Speaker 1: or time period is when they might start to introduce it,
Speaker 1: and certainly that's it's good. At time frame is any,
Speaker 1: but it really sort of depends on how things go.
Speaker 1: I think the FED is if the mark financial conditions
Speaker 1: stay loose, UM, I think the Fed will probably sit
Speaker 1: on its hands as long as it wants. If things
Speaker 1: start to get volatile at the market starts to um
Speaker 1: worry about inflation more than today, you could you could
Speaker 1: see the Fed move that time frame up a little bit. Hey, Steven,
Speaker 1: thanks so much for joining us. We really appreciate getting
Speaker 1: your insights and thoughts there. Stephen Kane, Group Managing Director,
Speaker 1: Portfolio manager at t c W. As more and more
Speaker 1: people in this country get vaccinated, we're starting to see
Speaker 1: economic activity pick up the reopening trade, if you will.
Speaker 1: We're starting to see that in the economic data. Are
Speaker 1: we seeing it on Main Street America? Let's check in
Speaker 1: with Don McCree. He is vice chairman and the head
Speaker 1: of Commercial Banking for Citizens Financial Group that's the New
Speaker 1: York Stock Exchange listed financial services company onto the CIBIL
Speaker 1: cf G. Don thanks so much for joining us here.
Speaker 1: I'd love to get a feeling from you as you
Speaker 1: talk to your clients, the businesses, the small emit sized
Speaker 1: businesses that you guys deal with. Are they investing in
Speaker 1: their businesses? Are they seeing a pickup in business activity?
Speaker 1: You know, it couldn't be here fall it's a tuck
Speaker 1: you again. UM. We we're definitely seeing indications across the
Speaker 1: board of of companies coming out of their dormancy stage,
Speaker 1: at the stage as I would call it UM, not
Speaker 1: not huge amounts of investment going on, but beginning to
Speaker 1: see it in the form of a little bit more
Speaker 1: loan growth than we had seen before UM and certainly
Speaker 1: seeing it in terms of the results of companies. Results
Speaker 1: are generally coming in broadly much stronger than we expected
Speaker 1: as as revenue lines recover UM and companies begin to
Speaker 1: get back to business. And of course it's it's at
Speaker 1: different speeds in different parts of the country UM, with
Speaker 1: with some of the southern states opening more quickly through
Speaker 1: the outdoor activity UM in the Northern States, but we're
Speaker 1: seeing it up north. Also, what kind of loan demand
Speaker 1: are you seeing and what kind of loan demand do
Speaker 1: you forecast throughout the year. Loan loan demand on the
Speaker 1: commercial side, that's been relatively muted, and I think part
Speaker 1: of that is due to the significant securities issue instead
Speaker 1: of taken place over the last year or so. Companies
Speaker 1: are pretty flushed with liquidity, particularly the midsized companies UM,
Speaker 1: and there's lots of deposits sitting in the banking system.
Speaker 1: So what I would expect is to see some of
Speaker 1: that excess liquidity burned down before we begin to see
Speaker 1: loan demand. What our what our base cases is really
Speaker 1: the second half of the year, we expect to see
Speaker 1: UH loan growth on the On the commercial side, we
Speaker 1: are seeing quite significant transactional activity, both in support of
Speaker 1: of M and A and then other corporate events that
Speaker 1: are beginning to materialize. So really record activity in the
Speaker 1: syndicated loan markets and continued record activity in the in
Speaker 1: the bond markets. Don I'd love to get a sense
Speaker 1: of kind of maybe the credit quality out there. It's
Speaker 1: been obviously a very difficult period for corporate America. What's
Speaker 1: the credit quality of your portfolio right here? Are you
Speaker 1: seeing any cracks in there? Uh? It feels good. It
Speaker 1: feels a lot better than it felt a year ago.
Speaker 1: And you saw most banks including US released reserves in
Speaker 1: the first quarter, and that's an indication that the credit
Speaker 1: is improving across the board. We still have a ways
Speaker 1: to go and things like you know, service businesses like
Speaker 1: hotels and restaurants who were only beginning to recover as
Speaker 1: the vaccines, uh take take hold across the country. But
Speaker 1: we're seeing every indicator of credit is improving. And you know,
Speaker 1: we had you know, billions and billions on watch a
Speaker 1: year ago and that's down by about seventy in terms
Speaker 1: of a total amount of credit that we're we're still
Speaker 1: working through the back ends of the pandemic risks. What
Speaker 1: are your net interest margins look like? And what can
Speaker 1: you do in a in an environment like this? You know,
Speaker 1: we we were very deliberate around how we price credit.
Speaker 1: Our Our net interest margin actually held up well in
Speaker 1: the first quarter um as we as we achieved slightly
Speaker 1: better spreads on our lending than we expected to by
Speaker 1: being disciplined, really because we were able to lower our
Speaker 1: deposit costs aggressively UM and with the with the amount
Speaker 1: of liquidity that's in the system, both on the consumer
Speaker 1: side and on the commercial side. UM, there's just a
Speaker 1: very attractive deposit UH costs to financial institutions right now.
Speaker 1: You know that could compress a little bit as we
Speaker 1: go forward, but we're very focused on maintaining that interest margin.
Speaker 1: And of course, if you see a little bit of
Speaker 1: uptick in the tenure like we're seeing over the last
Speaker 1: couple of weeks, that helps a little bit in terms
Speaker 1: of doing interest margining DON in your business in the
Speaker 1: commercial banking business, are you guys looking for M and
Speaker 1: A opportunities to grow? Is that something that's in UH
Speaker 1: in the space that you compete in. Is that something
Speaker 1: you're looking to do with the strategic vision going forward. Yes,
Speaker 1: so so a couple of different things. We we actually
Speaker 1: have acquired three merger and acquisition firms over the last
Speaker 1: three years. UM. Our M and A activity for our
Speaker 1: clients is at record levels right now. UM. It's it's
Speaker 1: really concentrated in changes ownership, where private companies are selling
Speaker 1: themselves to take advantage of what has relatively attracted multiples
Speaker 1: and very very attractive financing markets. So the macros on
Speaker 1: the on the client side are quite good and on
Speaker 1: the M and A side are quite good. Right now
Speaker 1: for us, we're really focused on, you know, small add
Speaker 1: ons to the portfolio like we've been doing. We're constantly
Speaker 1: looking and what we really try to do is is
Speaker 1: build industry expertise by bringing on corporate finance and M
Speaker 1: and A expertise that we can differentiate with our clients
Speaker 1: versus competition. Don, what about clients who want to avoid
Speaker 1: the step up basis changes? I mean, Um, these tax
Speaker 1: plan changes are significant. Must be significant to your wealthy
Speaker 1: clients and institutions. Yeah, they you know, the their their
Speaker 1: their proposals at this point, so there will see where
Speaker 1: they land. But I would expect some some form of
Speaker 1: increases of taxes. It's definitely accelerating things on the M
Speaker 1: and A side. So if we were, if we were
Speaker 1: in a robust market before the proposals that came out
Speaker 1: of the administration, I think people are looking to UM too.
Speaker 1: If if they're sellers, they're looking to sell their companies
Speaker 1: probably within the calendar year of two thousand one. Don,
Speaker 1: thanks so much, great to get your insight you have
Speaker 1: a really unique point of view that I think is
Speaker 1: helpful for everybody looking at this market. Don McCree is
Speaker 1: the vice chair and the head of commercial banking at
Speaker 1: Citizens Financial Group. Really a policy day today in addition
Speaker 1: to earnings, Matt, you know, we've got the Federal Reserve
Speaker 1: it too was John was just mentioning, which Bloomberg will
Speaker 1: bring you as well as President Biden's speech at nine
Speaker 1: pm Wall Street time again Walls, Bloomberg will be bringing
Speaker 1: that to you. So a lot of policy initiatives here
Speaker 1: that are likely to have a, you know, pretty significant
Speaker 1: impact on this economic recovery as this reopening begins to
Speaker 1: really accelerate here in the US. Yeah. Absolutely. Let's check
Speaker 1: in right now with someone who knows a little bit
Speaker 1: more about, um, the policy and effects. Casey Matthews joins
Speaker 1: US Chief Investment Officer at U m B on what
Speaker 1: we could get from these tax changes. In Casey, I
Speaker 1: want to start first with the with the arguments, Um,
Speaker 1: if this had happened ten years ago, you would have
Speaker 1: heard freshwater economists go absolutely nuts with the jump in
Speaker 1: a capital gains tax, even if it is for people
Speaker 1: who are in more than a million dollars a year.
Speaker 1: But as it is, it doesn't seem like there are
Speaker 1: any more freshwater economists with any cloud. At least all
Speaker 1: of the economists who have influenced these days are um
Speaker 1: of the salt water variety or more um Kynesian. So
Speaker 1: where is the pushback on this? Well, good morning, you know,
Speaker 1: I don't think there's much pushback because our takeaway is
Speaker 1: taxes don't drive economic activity. There's all kinds of data
Speaker 1: out there. Even though every cycle, you know, you talk
Speaker 1: about your years ago, every economic cycle, every potential tax
Speaker 1: policy change has its own set of nuances. But yeah,
Speaker 1: we know and economists know that. One the academic research
Speaker 1: says tax policy doesn't drive economic activity, and we can
Speaker 1: use the fiscal multiplier to prove that. And that is
Speaker 1: the bang for the buck that each government, that the
Speaker 1: government spends for stimulus, what happens if they spend a dollar,
Speaker 1: do we get more than a dollar of economic activity?
Speaker 1: And the data shows us that low and behold direct
Speaker 1: purchases of goods and services has the highest potential the
Speaker 1: biggest bang for its buck to stimulate the economy. The
Speaker 1: lowest initiative would be corporate tax cuts and tax cuts
Speaker 1: for um, high way earners. So this stuff doesn't impact
Speaker 1: economic activity at all. It's not a catalyst, it's not
Speaker 1: a driver. All right, Casey, how much do you think, uh,
Speaker 1: these tax increases, the post tax increases are economically based
Speaker 1: i e. To pay in part for President Biden's fiscal
Speaker 1: stimulus plans. And how much is maybe social i e.
Speaker 1: Trying to deal with the income inequality, wealth inequality, the
Speaker 1: redistribution type of issue. How do you think about that? Well,
Speaker 1: I would go back and look at the empirical evidence
Speaker 1: that we've seen tax policy changes before, and some of
Speaker 1: these things just um. I think it was Mark Twain
Speaker 1: who said maybe history doesn't repeat itself. Maybe at rhymes,
Speaker 1: but we hear a lot of rhyming right now. Right.
Speaker 1: So back in UH was President Clinton who changed the
Speaker 1: highest marginal tax bracket for individuals from to thirty nine
Speaker 1: point six. He bumped up corporate taxes a little bit, right, So,
Speaker 1: I don't know. I think it was for economic reasons
Speaker 1: were trying to do. That was the Deficit Reduction Act
Speaker 1: in Lowell Behold that had little impact on the economy
Speaker 1: and no impact on markets. And we saw it again
Speaker 1: in two thousand and thirteen. Of course, President Obama changed
Speaker 1: the top marginal tax bracket on those making over four
Speaker 1: and thousand dollars a year, So you can see this rhyming.
Speaker 1: And even in nineteen Apartment two thousand thirteen, I mentioned
Speaker 1: that these cycles have their own nuances. The tenure Treasury
Speaker 1: rate went from one point seven to three percent that year.
Speaker 1: But she would think would be negative for markets, negative
Speaker 1: for economic growth, so I would probably be in the
Speaker 1: economic camp. I think what they're trying to do is
Speaker 1: just pay for the stimulus to make sure we um
Speaker 1: get out of the COVID recession, stay out of it,
Speaker 1: and get back to a sense of normalcy. One of
Speaker 1: the things, one of the changes were likely to see.
Speaker 1: We just spoke with Don McCree over a Citizens Financial
Speaker 1: and he told us private companies now are looking to
Speaker 1: to sell in this calendar year, a lot of them
Speaker 1: to avoid things like step up basis changes. You know,
Speaker 1: if you're gonna get danged, or your kids are gonna
Speaker 1: get danged when you when you pass it onto them,
Speaker 1: you may as well sell and deal with it in
Speaker 1: a different way. Do you see that kind of behavior
Speaker 1: changing some of it? Yes. Of course, with these smaller
Speaker 1: family owned business. I don't think it's driven again by uh,
Speaker 1: capital gain taxes or the elimination of the stept up
Speaker 1: cost spaces. The family wants to run the business and
Speaker 1: they feel good about it. They're just going to row harder,
Speaker 1: if you will, case some more tax in row harder.
Speaker 1: But I would tell you the the empirical evidence suggests
Speaker 1: you see some behavior changes. So back in when capital
Speaker 1: gain tax rates were increased, you saw realized capital gains
Speaker 1: surged by And this isn't the public markets the same
Speaker 1: thing in two thousand and twelve, but there was a
Speaker 1: change in the capital gain tax rate, realized gains increased by.
Speaker 1: So yes, you do see a slight change of behavior
Speaker 1: when you have some of these tax policies. But you
Speaker 1: don't see a drop an investment because that's the concern,
Speaker 1: the sort of awesome concern, not at all. Because here's
Speaker 1: the thing. I mean, of course, when we talk to
Speaker 1: our clients, a lot of small business owners if the
Speaker 1: tax policy change changes to some degree, are they going
Speaker 1: to sell risk based assets? What you think about it?
Speaker 1: Just using the SMP as a proxy. Last year we
Speaker 1: made this year, we're up eleven. You're gonna sell those assets?
Speaker 1: To avoid some type of tax to what go by
Speaker 1: a tenure treasury at one point six ten year yield? Right,
Speaker 1: I don't think so? All right. Veriously, we will pay
Speaker 1: attention certainly to the Feds for noon, and obviously President
Speaker 1: Biden tonight to get a handle on his tax plans.
Speaker 1: Casey Matthews, economist and chief investment officer for U m
Speaker 1: B Bank giving us his thoughts, and certainly we will
Speaker 1: cover both of those later on today and this evening.
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