WEBVTT - Vilifying Wall Street Is a Big Mistake, Mary Jo White Says 0:00:00.240 --> 0:00:04.040 Runt You by Bank of America Mary Lynch. With virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a, mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierced Fenner, and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment, and international relations. 0:00:38.120 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:50.360 and of course, on the Bloomberg. Good Morning. This is 0:00:50.400 --> 0:00:54.240 Bloomberg Surveillance with Tom Keene and UH. The only one 0:00:54.280 --> 0:00:56.880 who's missing is David Gura. Today I'm Michael McKee sitting 0:00:56.880 --> 0:00:59.360 in for David, who is on assignment. He will be 0:00:59.400 --> 0:01:02.319 back tomorrow those of you who are worried about him. 0:01:02.440 --> 0:01:07.280 He's just doing some very key interviews out there in 0:01:07.600 --> 0:01:11.080 TV land and radio land. UH. This morning, we are 0:01:11.160 --> 0:01:15.039 following the China downgrade. Moody's knocks him down a peg, 0:01:15.760 --> 0:01:19.520 no major impact. The Chinese stock market finished up by 0:01:19.560 --> 0:01:25.400 a tenth Shanghai composite by about tenth of a percent overnight. 0:01:25.920 --> 0:01:29.679 Futures in the US are mixed at this point, S 0:01:29.720 --> 0:01:32.920 and P futures unchanged, OW futures down by four points, 0:01:33.040 --> 0:01:37.160 Nasdaq futures up by five. So no real direction there, 0:01:37.240 --> 0:01:39.640 and that's going to be a theme here with our 0:01:39.680 --> 0:01:42.520 first guest. In just a moment I mentioned we are 0:01:42.840 --> 0:01:47.560 starting the day without real direction. Futures are mixed, and 0:01:47.600 --> 0:01:51.040 our first guest, Mike Wilson, is the chief US equity 0:01:51.080 --> 0:01:54.280 strategist at Morgan Stanley. Uh. You sort of sum that 0:01:54.480 --> 0:01:57.040 up in your most recent note when you said, well, 0:01:57.080 --> 0:02:00.400 we're past earning season, we gotta figure out what we're 0:02:00.400 --> 0:02:04.400 going to trade on next. Um, is there a theme 0:02:04.640 --> 0:02:07.400 to look for here beyond the general what the heck 0:02:07.480 --> 0:02:10.200 is going on in Washington? Uh? Thing that we're going 0:02:10.240 --> 0:02:12.520 on with that that we have all the time. Yeah, 0:02:12.760 --> 0:02:15.000 I think the next catalyst is the last catalyst. It's 0:02:15.080 --> 0:02:17.600 just continuation of the same, which is that the next 0:02:17.600 --> 0:02:20.320 two quarters were very confident about where earnings are in 0:02:20.360 --> 0:02:23.359 terms of estimates and the achievability of those. So give 0:02:23.360 --> 0:02:25.520 an example. Q one in the US we did about 0:02:25.520 --> 0:02:28.079 we'll do about fiftent year over year growth, and Q 0:02:28.280 --> 0:02:30.400 two we're only you know, the consensus. Now, I was 0:02:30.440 --> 0:02:32.440 only looking for about six point eight percent year over 0:02:32.520 --> 0:02:35.320 your growth. And that's where the backdrop where we're pretty 0:02:35.320 --> 0:02:38.760 confident that nominal GDP is going to accelerate sharply. We 0:02:38.760 --> 0:02:40.920 could see nominal GDP in two Q in the US 0:02:41.120 --> 0:02:43.960 between five and six percent as things snap back. So 0:02:44.040 --> 0:02:47.240 that's your proxy for sales growth, which is almost as 0:02:47.320 --> 0:02:50.120 high as the expected earnings growth. That's just an easy 0:02:50.160 --> 0:02:52.679 bar to get past. And so once again we're being 0:02:52.680 --> 0:02:56.560 distracted by the news of Washington or the latest political event, 0:02:56.919 --> 0:02:59.560 and you know, the markets are consolidating. Look, we should 0:02:59.600 --> 0:03:01.799 have sold off much more at some point in the 0:03:01.880 --> 0:03:03.920 last six or seven weeks given all the events that 0:03:03.960 --> 0:03:06.079 have transpired, and we did not. To me, that's a 0:03:06.160 --> 0:03:08.920 very constructive back drop. It's a consolidation. You don't think 0:03:09.680 --> 0:03:11.600 that the risk or do you think the risk is 0:03:11.639 --> 0:03:14.000 still out there? When you look at a pe for 0:03:14.040 --> 0:03:17.960 the SMP of twenty one UM, it's not near the 0:03:18.000 --> 0:03:21.440 records we saw in the past, but it is significantly 0:03:21.480 --> 0:03:25.560 higher than the average. Uh. The the idea that we 0:03:25.600 --> 0:03:28.120 could see a sell off still out there, well, we 0:03:28.160 --> 0:03:30.440 have a little different view on that. So last you know, 0:03:30.520 --> 0:03:32.680 we've talked about earnings, but the other story that's going 0:03:32.680 --> 0:03:35.040 on is we are getting multiple expansion this year, So 0:03:35.120 --> 0:03:37.000 we look at a little differently. We think we're training 0:03:37.080 --> 0:03:39.800 seventeen and a half times right now forward twelve month 0:03:39.880 --> 0:03:43.280 estimates of about one thirty eight, and those numbers are 0:03:43.320 --> 0:03:45.560 likely going up over the next two quarters. Our our 0:03:45.640 --> 0:03:48.520 thesis has been for a while that equity rist premiums 0:03:48.520 --> 0:03:51.960 are now finally normalizing, much like other risk assets. And 0:03:52.000 --> 0:03:54.000 if if we just get to a normal equity risk 0:03:54.040 --> 0:03:57.080 premium in the US, we should trade nineteen times. And 0:03:57.080 --> 0:03:58.640 how do we get there. That's two fifty and an 0:03:58.680 --> 0:04:01.200 equity risk premium which is normal for the last hundred years, 0:04:01.400 --> 0:04:04.360 plus a two seventy year which is five and a quarter, 0:04:04.440 --> 0:04:07.360 and that's nineteen times. So nineteen times, you know, call 0:04:07.400 --> 0:04:10.080 it a one two number, which we think is very visible. 0:04:10.160 --> 0:04:12.440 The next sort of six months is something the market 0:04:12.480 --> 0:04:14.720 should start to think about. So we think there's meaningful upside, 0:04:14.800 --> 0:04:17.560 not just a couple percent, but meaningful upside. Mr Keene 0:04:17.600 --> 0:04:20.080 has joined us from the television set, and to I 0:04:20.160 --> 0:04:24.080 point out that Mike is looking for to seventy five tenure, 0:04:24.120 --> 0:04:27.640 where at two eight this morning, there's some distance to go, 0:04:28.040 --> 0:04:30.360 some distance to go but with kurve flattening that we've 0:04:30.360 --> 0:04:32.800 seen in the last couple of days as well. We'll 0:04:32.800 --> 0:04:34.640 do that within our data checks this morning. But as 0:04:34.680 --> 0:04:37.040 Mike mentioned, it pretty quiet, nice day have you here, Michael, 0:04:37.360 --> 0:04:39.239 we have to find time within the morning to speak 0:04:39.279 --> 0:04:45.719 Denver Broncos football. Why exactly? That's what they would say 0:04:45.720 --> 0:04:48.800 in Denver Good Morning and syrus Sex Channel one nineteen 0:04:49.480 --> 0:04:52.839 in Denver, Michael Wilson with us with Morgan selling. Michael, 0:04:52.960 --> 0:04:55.719 I want to go to the great secrets of Morgan 0:04:55.839 --> 0:04:59.719 Stanley which are in your file. You are carrying a 0:05:00.000 --> 0:05:05.720 Finder file that my father used in nineteen fifty eight. 0:05:05.880 --> 0:05:07.920 This is folks. You have to see this. I'm gonna 0:05:07.960 --> 0:05:11.359 take a photo of this and put it out on Twitter. 0:05:11.800 --> 0:05:14.680 What what is in your file? What an equity strategies 0:05:14.800 --> 0:05:16.840 carry around with them? I got this from a guy 0:05:16.920 --> 0:05:19.200 named Clarence Speaks. Does that mean anything to you? It's 0:05:19.400 --> 0:05:21.880 this is a cheap version of of of a fold. 0:05:21.920 --> 0:05:23.840 It's lighter, it's paper. I can throw it away and 0:05:24.080 --> 0:05:25.719 if I if I feeling fancy, I can get a 0:05:25.720 --> 0:05:28.279 new one. Pretty pretty, pretty pretty good. You know. It's great. 0:05:28.440 --> 0:05:30.839 So such a it's a massive throwback we're looking at 0:05:30.920 --> 0:05:34.400 off folks, at this flexible one of those off red 0:05:34.640 --> 0:05:38.680 Crownish files. I think Tom Hanks used that in you know, 0:05:39.160 --> 0:05:41.200 tink Her Tip, whatever the spy movie was he had 0:05:41.240 --> 0:05:42.919 a couple of years ago. What do you read it, 0:05:42.960 --> 0:05:46.599 Morgan Stanley? What forms your equity opinion? Yeah? So we 0:05:46.600 --> 0:05:49.039 we actually, uh, you know, I try to stay current 0:05:49.120 --> 0:05:51.280 on everything, not just what's going on within the four 0:05:51.279 --> 0:05:53.320 walls of Morgan Stanley because it's quite frankly, you know, 0:05:53.520 --> 0:05:55.839 we don't have all the answers. Uh, And you have 0:05:55.920 --> 0:05:58.560 to be yet to be wary of getting a group think. 0:05:58.960 --> 0:06:01.360 So the advantage we have as we're global, we have 0:06:01.480 --> 0:06:03.960 strategists and economists all over the world. We meet frequently, 0:06:03.960 --> 0:06:07.479 we talked regularly, we email, but we but I read everything, Tom, 0:06:07.520 --> 0:06:09.480 I mean you have to stay current. Is you're you're 0:06:09.480 --> 0:06:12.040 well informed at what's the group think right now? What's 0:06:12.080 --> 0:06:14.760 the group think that scares you right now? Well? I 0:06:14.800 --> 0:06:16.760 think you know, we were early last year on the 0:06:16.880 --> 0:06:19.880 idea that the you know, global economy had a recession 0:06:19.960 --> 0:06:23.480 in fifteen and so sixteen was a recovery year, and 0:06:23.520 --> 0:06:26.039 so we've been uh, we were early on that call 0:06:26.240 --> 0:06:30.200 we've gotten more. Uh. I would argue conviction in that 0:06:30.240 --> 0:06:32.760 call that it's more synchronous in nature now that we're 0:06:32.760 --> 0:06:35.719 getting not just right GDP growth, we're getting a little 0:06:35.720 --> 0:06:38.760 bit more inflation, that runaway inflation, and that really has 0:06:38.800 --> 0:06:41.800 given us confidence that nominal GDP you know, is now 0:06:41.839 --> 0:06:44.919 at a more sustainably higher level, which is critical in 0:06:44.920 --> 0:06:47.520 the world has overlevered. And so the risk is is 0:06:47.560 --> 0:06:50.440 that we have been right, uh, and that we now 0:06:50.480 --> 0:06:53.280 are you know, we're looking for the self affrica, you know, 0:06:53.320 --> 0:06:55.800 affirming data points. Okay, so we got to be very 0:06:56.520 --> 0:06:59.599 just cognizant that we don't overstay our welcome because markets, 0:06:59.640 --> 0:07:03.480 you know, eventually will have a tougher time when you 0:07:04.320 --> 0:07:06.680 when you look at what the group think is, how 0:07:06.720 --> 0:07:11.200 often do you step back and say they're right? I mean, 0:07:11.600 --> 0:07:14.560 there's a reason the group is thinking this way. I 0:07:14.560 --> 0:07:16.640 mean how much weight do you put on trying to 0:07:16.640 --> 0:07:21.040 be contrary or worry about what other people I think? 0:07:21.440 --> 0:07:23.559 You know, that's that's a great question, Michael. They Uh, 0:07:24.160 --> 0:07:27.040 I've learned. I've spent the last four years I've spent 0:07:27.080 --> 0:07:30.080 in our wealth management area. Prior to twenty years was 0:07:30.120 --> 0:07:32.840 in the institutional world, and the biggest advantage of being 0:07:32.840 --> 0:07:36.160 in that world was not being is easily distracted by 0:07:36.200 --> 0:07:39.640 the noise. So I've learned to kind of not get 0:07:39.680 --> 0:07:43.360 such an itchy trigger finger. When you know things are 0:07:43.400 --> 0:07:45.040 working and your call is right, you have to let 0:07:45.040 --> 0:07:47.160 things run a little bit. And quite frankly, I think 0:07:47.400 --> 0:07:50.040 the reason why a lot of institutional managers have had 0:07:50.080 --> 0:07:52.560 struggled the last seven or eight years is because they 0:07:52.600 --> 0:07:56.160 haven't been willing to stay with their investments, that their 0:07:56.240 --> 0:07:58.920 their thought process. They've been too willing to trade it 0:07:58.960 --> 0:08:00.720 to to kind of move in and out of things. 0:08:00.760 --> 0:08:04.400 And quite frankly, there's been some terrific, uh, you know, 0:08:04.520 --> 0:08:06.440 longer term themes in the last seven or eight years. 0:08:06.480 --> 0:08:08.240 If you, if you, if you could have captured it 0:08:08.240 --> 0:08:10.720 will defend for me the idea of buying hold. I'm 0:08:10.720 --> 0:08:12.640 sure you saw the Wall Street Journal story this week. 0:08:12.840 --> 0:08:15.200 This is the quants are taking over, and that's trade 0:08:15.200 --> 0:08:17.360 in and out as fast as you can. Well, I think, 0:08:17.360 --> 0:08:19.200 and I think they're in lies the opportunity. So the 0:08:19.240 --> 0:08:22.240 two advantages that the two I would argue advantages that 0:08:22.280 --> 0:08:25.440 are still out there right now are sort of liquidity 0:08:25.480 --> 0:08:29.160 and time, uh and and actually individual investors or wealth 0:08:29.200 --> 0:08:32.240 owners had those advantagers. We don't, you know, individuals don't 0:08:32.280 --> 0:08:34.080 need to perform every day or every month or even 0:08:34.080 --> 0:08:37.440 every year. And so the idea that buy and hold 0:08:37.800 --> 0:08:40.360 went out of style in sort of two thousand and 0:08:40.400 --> 0:08:44.080 two after the you know, tech crisis is classic behavioral 0:08:44.120 --> 0:08:46.040 economics one O one. Right. Everybody wanted to be buy 0:08:46.040 --> 0:08:48.440 and holding the nineties when it's exactly when you should 0:08:48.440 --> 0:08:50.720 have been thinking about, you know, maybe being a bit 0:08:50.760 --> 0:08:53.040 more tactical as we were going into a secular bear market. 0:08:53.040 --> 0:08:55.040 But of course now we're in a secular bowl market, 0:08:55.559 --> 0:08:58.840 and everybody wants to be a trader. And the reality 0:08:58.920 --> 0:09:00.600 is that this is a time time to be more 0:09:00.640 --> 0:09:03.280 of a buy and hold mentality, not not because the 0:09:03.320 --> 0:09:07.880 world's perfect place, but because the compound returns tax deferred 0:09:07.920 --> 0:09:09.319 is the best way to be. I'm putting his on 0:09:09.440 --> 0:09:12.680 on Twitter, and there's a massive global viral support for 0:09:12.720 --> 0:09:19.360 the pendeflex indexed expanding files lettercraft January to December index 0:09:19.440 --> 0:09:25.200 twelve pockets each sixteen dollars. It's no it comes in. 0:09:25.480 --> 0:09:29.200 It's called Wilson red at Staples, and it was Michael 0:09:29.200 --> 0:09:32.040 Wilson with and we will continue with a smart discussion 0:09:32.120 --> 0:09:36.280 on equity uh markets as well. Michael McKee and Tom Keane. 0:09:36.320 --> 0:09:38.840 Michael McKee and for David Girl, where's David today? Michael, 0:09:39.280 --> 0:09:45.440 He's just an assignment as he's on assignment. I always 0:09:45.480 --> 0:09:48.760 have fascinated by that Tiffany news and um, you live 0:09:48.840 --> 0:09:50.679 right by there. You're not chatting? Yeah, I know, but 0:09:50.800 --> 0:09:53.840 I went through. I went through the entire press release, 0:09:53.880 --> 0:09:56.240 and thank you Tiffany's for writing a press release in English. 0:09:56.280 --> 0:09:59.400 It's really quite good their earnings report. And I believe 0:09:59.520 --> 0:10:02.520 I saw no mention of the Trump effect. I was 0:10:02.600 --> 0:10:05.600 just gonna do. I'm curious because, of course, for those 0:10:05.640 --> 0:10:07.800 of you who don't live in New York, Trump Tower 0:10:08.440 --> 0:10:13.320 is literally next door to Tiffany's and you can't get near. 0:10:13.880 --> 0:10:16.840 Um the place. It's better than it was. It's it's 0:10:16.840 --> 0:10:18.560 better than it was. But I don't believe I saw 0:10:18.679 --> 0:10:21.760 like a single line com sales at Fifth Avenue or 0:10:22.160 --> 0:10:24.760 or you know, lower etcetera. But but never those is there. 0:10:24.800 --> 0:10:28.760 And then Google on the other side. Impact, Yeah, a 0:10:28.800 --> 0:10:31.600 great impact at the Keene household. Michael Wilson with us 0:10:31.640 --> 0:10:35.240 with Morgan Stanley on the equity markets, how do you 0:10:35.320 --> 0:10:38.800 advise and not about individual stocks, but you're with with 0:10:38.960 --> 0:10:42.760 your wealth management people or even institutional and they go, look, 0:10:42.800 --> 0:10:45.960 I just need to own four stocks Apple, Amazon, and 0:10:46.080 --> 0:10:49.520 named two others. You know, this isn't in Graham, Dodd 0:10:49.559 --> 0:10:53.680 and Coddle, is it? I mean, Amazon is not in Graham, 0:10:53.760 --> 0:10:55.880 is it? Yeah? I don't think it would qualify as 0:10:55.920 --> 0:10:58.920 a value stocked the way, But is it a value 0:10:59.000 --> 0:11:01.320 given the growth that's out there? Well, Like, I'm not 0:11:01.320 --> 0:11:03.360 gonna comment on Amazon specifically, but I mean I would 0:11:03.360 --> 0:11:05.920 I would say that the secular growth stocks that have 0:11:06.000 --> 0:11:08.920 done so well, there's a whole cohort of them. Uh. 0:11:08.960 --> 0:11:10.920 You know, look, this is the world that we are in. 0:11:10.920 --> 0:11:13.480 In a world that's been starred for growth, the market 0:11:13.559 --> 0:11:17.240 has been up very fast growing companies that can grow 0:11:17.360 --> 0:11:21.040 organically with or without an economic backdrop that's conducive for growth. 0:11:21.320 --> 0:11:23.200 And then going back to we were talking about last 0:11:23.200 --> 0:11:25.200 hour and the dividend pairs, right, So that's the barbell 0:11:25.280 --> 0:11:28.360 that's been working. Uh. And the reality though, is that 0:11:28.480 --> 0:11:31.520 the breath in the market has been much better than 0:11:31.600 --> 0:11:34.360 people might think. Okay, to go back, Mike on television, 0:11:34.840 --> 0:11:38.560 we said Verizon a twelve or thirteen times earnings Colgate 0:11:38.600 --> 0:11:43.880 Palmato the nifty fifty six times earnings, I'm gonna center 0:11:43.960 --> 0:11:52.280 tendency Amazon at a hundred and sixty times earnings one zero. Wow. Well, uh, 0:11:52.679 --> 0:11:57.400 it has been a good run for Jeff Bezos and company. Um, 0:11:57.440 --> 0:12:03.160 but you gotta wonder how your suggestion, Michael, that uh, 0:12:03.960 --> 0:12:06.920 with nominal growth picking up and still room to run 0:12:07.520 --> 0:12:12.040 in terms of multiples, Um, we should see more breath 0:12:12.120 --> 0:12:14.920 developed that we've had. Yeah, but I want to go 0:12:14.960 --> 0:12:16.840 back to that because the breath has actually been quite good. 0:12:17.280 --> 0:12:19.880 It's just that the the you know, the leaders have 0:12:20.040 --> 0:12:23.200 been extraordinary. Uh. And let let's go back to like 0:12:23.240 --> 0:12:27.160 the New York Marathon where you've got four guys from verybody, 0:12:27.160 --> 0:12:29.240 but you still ran a good races. Okay, you know, 0:12:29.800 --> 0:12:31.240 but you know, and that's what kind of what's going 0:12:31.280 --> 0:12:33.040 on is that there are a lot of stocks running 0:12:33.080 --> 0:12:35.320 a good race. There are some stocks that are running 0:12:35.360 --> 0:12:39.280 a ridiculous race. Uh. And they have they have goosed 0:12:39.280 --> 0:12:41.120 the returns. But if you took those stocks out, the 0:12:41.160 --> 0:12:43.400 returns this year would be quite good for the for 0:12:43.440 --> 0:12:45.600 the overall market. And and I also go back to 0:12:45.600 --> 0:12:47.880 the breath of the broader equity market, not just in 0:12:47.880 --> 0:12:50.160 the US but globally. That that the signal from the 0:12:50.200 --> 0:12:53.920 global equity market is I think confirmation of this idea 0:12:53.960 --> 0:12:56.240 that this is a global economic and earnings recovery. It's 0:12:56.280 --> 0:12:59.280 not about the four stocks. This is not let's put 0:12:59.280 --> 0:13:01.520 it that way, whether they're really were only the t 0:13:01.640 --> 0:13:03.840 MT area that was working and everything else was going down, 0:13:03.960 --> 0:13:07.160 or two thousand fifteen when it was extraordinarily narrow and 0:13:07.200 --> 0:13:09.839 there was an outright recession in the old economy. Let's 0:13:09.880 --> 0:13:12.120 talk about two thousand and sixteen, just real quick, um, 0:13:12.160 --> 0:13:13.560 this is you know, this is what happens when we 0:13:13.640 --> 0:13:16.360 come off the recession. Those stocks that we were just 0:13:16.400 --> 0:13:21.120 mentioning the fast growers, uh, they underperformed significantly, and the 0:13:21.280 --> 0:13:26.400 value cyclical areas like financials, industrials, materials really outperformed. We 0:13:26.440 --> 0:13:29.079 think there's another leg of that probably in the second 0:13:29.080 --> 0:13:31.680 half of this year, as people get comfortable, particularly fixed 0:13:31.679 --> 0:13:33.959 income investors, get comfortable that growth is not rolling over, 0:13:34.000 --> 0:13:36.319 that it's actually maybe even accelerating again in the US. 0:13:36.640 --> 0:13:39.960 And then do you see age spots start to develop 0:13:40.160 --> 0:13:43.439 or is it too hard to know given the uncertainty 0:13:43.480 --> 0:13:45.720 with what's happening with fiscal policy in the US and 0:13:46.320 --> 0:13:48.640 monetary policy in Europe. Well, I think the things that 0:13:48.679 --> 0:13:50.840 we were looking for to tell us that we're getting closed, 0:13:50.880 --> 0:13:54.319 it's getting more dangerous, right, would be credit spreads is 0:13:54.360 --> 0:13:56.480 probably a good thing to watch. The YEO curve, as 0:13:56.480 --> 0:13:59.320 we mentioned earlier, tom is not flat yet. It's still 0:13:59.360 --> 0:14:02.720 got you know, eighty basis ninety basis points of steepness 0:14:02.760 --> 0:14:05.000 to it. And that's okay, that's a decent environment. Go 0:14:05.080 --> 0:14:07.559 back in time and look at look at the periods 0:14:07.559 --> 0:14:10.280 when you had about ninety basis points after a big flattening. 0:14:10.480 --> 0:14:13.040 That was actually a pretty good time down stocks. Michael Wilson, 0:14:13.080 --> 0:14:15.520 thank you for joining US Today Television Radio. He is 0:14:16.160 --> 0:14:20.680 chief equity strategist from Morgan Stanley with decades at the firm, 0:14:20.720 --> 0:14:36.800 taking a more fundamental view of these equity markets. Surely 0:14:36.840 --> 0:14:40.640 one of our most valuable guests. Stanley Collendar of Corvis 0:14:41.360 --> 0:14:45.040 MSL Group on the Budget, on his expertise of what 0:14:45.080 --> 0:14:49.920 the hill actually does with your tax dollars. Stan Collendar, 0:14:49.960 --> 0:14:52.800 Michael McKee wants to dive into the budget, but I've 0:14:52.840 --> 0:14:57.600 got to ask about CBO. I keep refreshing CBO waiting 0:14:57.680 --> 0:15:00.920 for that scoring which we will se today. Do you 0:15:00.960 --> 0:15:04.840 have a guestimate of when we'll see the actual healthcare 0:15:04.960 --> 0:15:09.680 scoring by CBO? My guess is later this afternoon, Tom, 0:15:09.720 --> 0:15:11.840 I would stop refreshing for a couple of hours. I 0:15:13.280 --> 0:15:16.480 don't want to jump in here and sound like an expert, 0:15:16.560 --> 0:15:21.440 but you but I will know because the CBO actually 0:15:21.600 --> 0:15:26.400 said they will put it out this afternoon. Blog um, 0:15:26.440 --> 0:15:30.800 they are going to release it in the afternoon. It 0:15:30.880 --> 0:15:32.880 says it doesn't say what didn't I didn't. I just 0:15:32.880 --> 0:15:35.080 say that, Yeah, that's okay, that's why we pay you 0:15:35.160 --> 0:15:37.680 Can I go? Should I just go home? Why you can? 0:15:37.720 --> 0:15:40.480 I just want to leave now and let Colin post 0:15:40.560 --> 0:15:43.200 the show. Stan. What is the scoring actually gonna say? 0:15:43.200 --> 0:15:46.800 What are we gonna see? Well, look, I don't I 0:15:47.160 --> 0:15:49.960 didn't ask, and I don't know precisely what they're gonna say. 0:15:50.040 --> 0:15:51.680 It's going to be an update of the scoring they 0:15:51.680 --> 0:15:55.360 did of the previous version, and there are two things 0:15:55.360 --> 0:15:57.600 to watch. There'll be two numbers that are important. One 0:15:57.680 --> 0:16:00.200 is the impact on the deficit I'll talk about in 0:16:00.200 --> 0:16:02.960 the second, and the second is how many people will 0:16:03.000 --> 0:16:05.400 be thrown off health will lose their health care coverage 0:16:05.440 --> 0:16:08.720 because of this. UM. The first number, the deficit number, 0:16:08.840 --> 0:16:12.080 is important because if it doesn't reduce the deficit by 0:16:12.120 --> 0:16:15.480 two billion dollars, Uh, then it won't comply with the 0:16:15.480 --> 0:16:18.080 reconciliation instructions in the House will have to take another 0:16:18.160 --> 0:16:20.720 vote on this, which it probably can't do and pass. 0:16:21.080 --> 0:16:23.280 But there's that's not gonna happen, right. I mean the 0:16:23.800 --> 0:16:27.640 last scoring UM found it would save a hundred and 0:16:27.640 --> 0:16:30.440 fifty billions, So I mean they got at eight to 0:16:30.480 --> 0:16:35.400 play with. UM. Yeah, I look, they're they're they're they're close. Uh, 0:16:36.000 --> 0:16:37.960 but we don't know what the impact of the changes 0:16:38.000 --> 0:16:41.760 that the House made in the second version. So this 0:16:41.840 --> 0:16:43.760 is this is the big, the big thing that everyone's 0:16:43.800 --> 0:16:45.840 holding their breath on because the House won't be able 0:16:45.840 --> 0:16:49.240 to repass this the second time. But political number that's 0:16:49.240 --> 0:16:51.120 going to be more important is the second one, and 0:16:51.160 --> 0:16:53.120 that's that's the one. How many people are likely to 0:16:53.160 --> 0:16:57.080 lose their healthcare coverage because of this change from Obamacare. Uh. 0:16:57.120 --> 0:16:59.360 If it's if it's around the twenty or twenty four 0:16:59.400 --> 0:17:02.600 billion men that we had the first time, Uh, it's 0:17:02.640 --> 0:17:04.679 going to be a real political problem and it's going 0:17:04.720 --> 0:17:06.840 to make life very very difficult for the Senate and 0:17:07.240 --> 0:17:10.320 probably makes passage of anything, any kind of healthcare reform 0:17:10.400 --> 0:17:13.159 this year much more problematic. As long as we're in healthcare, 0:17:13.200 --> 0:17:16.119 let's stay on that subject for a moment and ask 0:17:16.400 --> 0:17:18.520 where the Senate is at this point. I mean, they 0:17:18.520 --> 0:17:20.480 basically said, forget what the House did, We're going to 0:17:20.520 --> 0:17:25.280 write our own bill. Um, where are they Basically nowhere? 0:17:25.320 --> 0:17:28.280 They're there, you know, Mike, after it's been eight years 0:17:28.280 --> 0:17:30.960 that the Republicans were screaming about Obamacare, but they didn't 0:17:30.960 --> 0:17:33.520 make any serious effort during that time to come up 0:17:33.560 --> 0:17:36.360 with an alternative. They're just dealing with that now. Uh, 0:17:36.440 --> 0:17:39.000 the Senate has got a gang of anywhere from thirteen 0:17:39.040 --> 0:17:41.040 to twenty members, which is a fifth of the Senate 0:17:41.359 --> 0:17:43.639 at any one time, trying to trying to explain to 0:17:43.880 --> 0:17:46.720 uh Mr McConnell, the Senate majority leader, what they want 0:17:46.720 --> 0:17:48.280 and what they need in order to in order to 0:17:48.359 --> 0:17:50.639 be able to vote for something. So these are just 0:17:50.680 --> 0:17:53.280 preliminary discussions that my guess would be and it's just 0:17:53.359 --> 0:17:55.880 a guess that if you see anything had come out 0:17:55.880 --> 0:17:58.280 of the Senate, it won't be until after Labor Day. 0:17:58.840 --> 0:18:02.400 Send condor were gonna continue this discussion here with Ah, 0:18:02.640 --> 0:18:05.880 it's a double I guess it's scathing squared the calendar 0:18:05.880 --> 0:18:09.560 with a scathing note in Forbes, followed by Laurence Summers, 0:18:09.560 --> 0:18:12.920 a former Secretary of Treasury, with an equally terse note 0:18:12.960 --> 0:18:16.320 in The Washington Post. We'll dive into the actual budget 0:18:16.320 --> 0:18:19.840 debate of yesterday and actually to move the story forward 0:18:20.320 --> 0:18:24.440 to where Congress may go again with your tax at dollars. 0:18:24.480 --> 0:18:26.119 Michael McKee and Tom you know I'm gonna ask a 0:18:26.160 --> 0:18:29.679 question here of stand calendar and get out of the way, 0:18:29.680 --> 0:18:32.280 because McKeon knows a lot more about this than I do. 0:18:32.480 --> 0:18:39.520 Stand cold three growth assumptions. Are you kidding me? Good? Look, 0:18:39.560 --> 0:18:42.320 I didn't say it. This is what the administration is 0:18:42.320 --> 0:18:45.639 saying is it's gonna happen, but they don't say exactly 0:18:45.720 --> 0:18:48.520 how it's gonna happen. It's more wishful thinking. And it's 0:18:48.640 --> 0:18:51.399 it's at least a full point Mike, correct me if 0:18:51.400 --> 0:18:53.240 I'm wrong. It's at least a full point over what 0:18:53.600 --> 0:18:56.080 the Congressional Budget Offices is likely to happen over the 0:18:56.080 --> 0:18:58.280 next decade and what the Federal Reserve says it is 0:18:58.280 --> 0:19:01.040 going to happen over the next decade. Um And and 0:19:01.320 --> 0:19:03.959 Mick Mulveny onb director yesterday said if he doesn't get 0:19:04.000 --> 0:19:06.879 three gross, he can't balance the budget. I guess that 0:19:06.880 --> 0:19:08.639 means we're going to have a much bigger deficit than 0:19:08.720 --> 0:19:13.000 anyone any anyone's projecting right now. Uh, let's unpack a 0:19:13.080 --> 0:19:19.159 little bit of this. Uh. The the interesting thing, you 0:19:19.240 --> 0:19:21.840 and I are old enough. Uh. We won't say how 0:19:21.880 --> 0:19:25.280 old we are. But I don't remember a presidential budget 0:19:25.320 --> 0:19:29.040 being delivered to Capitol Hill that wasn't considered dead on arrival. 0:19:29.080 --> 0:19:32.840 It's more a political statement about what they want um. 0:19:33.080 --> 0:19:38.399 And so I don't quite get the fixation with the 0:19:38.520 --> 0:19:42.560 balanced budget in the sense that mulveney is not a 0:19:42.640 --> 0:19:45.040 dumb guy and he has to know that this thing 0:19:45.160 --> 0:19:50.040 is is a jury rigged um kind of joke in 0:19:50.160 --> 0:19:53.280 terms of some of the things the accounting gimmicks they use, 0:19:53.359 --> 0:19:55.760 which a lot of people, including Bloomberg News have written about. 0:19:56.080 --> 0:19:58.919 So why do they do that? I mean, why, why, 0:19:58.960 --> 0:20:04.280 what's the motivation? Why don't they just do a realistic budget? Um? Look, 0:20:04.320 --> 0:20:07.119 the last realistic budget I can remember was Gerald Ford 0:20:07.160 --> 0:20:09.719 when he was predicting that the economy was gonna GDP 0:20:09.920 --> 0:20:13.040 was not going to grow, and he got widely criticized 0:20:13.080 --> 0:20:14.840 for it for saying, how can you predict it it's 0:20:14.840 --> 0:20:16.119 not going to grow and not come up with a 0:20:16.119 --> 0:20:19.080 plan to make it grow. Um. The President promised to 0:20:19.119 --> 0:20:22.479 balance budget during the campaign. He promised economic growth is 0:20:22.840 --> 0:20:24.680 three eight four. I think at one point he said 0:20:24.680 --> 0:20:28.440 it could even be five. Um. So this is you 0:20:28.520 --> 0:20:30.200 got to look at this budget. You're right, it's a 0:20:30.200 --> 0:20:32.840 political statement. You got to look at what the administration 0:20:32.920 --> 0:20:36.359 yesterday did essentially as a Trump political rally. On paper, 0:20:37.160 --> 0:20:39.520 it's just a play to the base to say, see, 0:20:39.560 --> 0:20:41.439 we did what we're doing, what we told you we 0:20:41.440 --> 0:20:44.200 were going to do. I don't think anybody takes it seriously. 0:20:44.840 --> 0:20:47.720 I mean, what struck me about it is it's the 0:20:47.800 --> 0:20:51.480 President appointed a Tea Party congressman as omb director, and 0:20:51.480 --> 0:20:54.400 he got a Tea Party document. The real news here 0:20:54.520 --> 0:20:58.159 is that the people like mc mulvaney and and the 0:20:58.240 --> 0:21:01.560 Freedom Caucus believe that from it is too big. So 0:21:01.920 --> 0:21:04.399 the document says, here's what you do about it. You 0:21:04.480 --> 0:21:07.680 cut funding for everything and you make it go away. Yeah, 0:21:07.760 --> 0:21:09.960