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Speaker 2: Well of the latest reading on consumer confidence just down,
Speaker 2: in fact, reaching a seven month high. Let's break it
Speaker 2: down right now with Joy and Shuey, director of the
Speaker 2: University of Michigan, surveys of consumers joining us. You're in
Speaker 2: ann arbor, right, That's correct. So it doesn't necessarily reflect
Speaker 2: the outcome of the election, because it looks like pretty confidence.
Speaker 2: People were pretty confident about the economy of the US.
Speaker 3: That's correct. So I want to note that the data
Speaker 3: that we're releasing today, the interviews ended on Monday, prior
Speaker 3: to the election, and so what we saw on the
Speaker 3: EU of the election and the two weeks leading into it,
Speaker 3: consumers we're feeling much more confident about the future of
Speaker 3: the economy. Not much change in current conditions, but in
Speaker 3: terms of the future of the economy, we saw improvements
Speaker 3: in terms of business conditions, personal finances, people's incomes, unemployment rates,
Speaker 3: consumers were really feeling like the future of the economy
Speaker 3: was on an upper trajectory.
Speaker 4: Joan, what did the survey tell us about how Americans
Speaker 4: are thinking about the future path of inflation.
Speaker 3: With inflation, we saw a very slight decrease in short
Speaker 3: one inflation expectations as well as a very small increase
Speaker 3: in long run expectations. So consumers are broadly expecting inflation
Speaker 3: to continue stabilizing. You know, they continue to be pretty
Speaker 3: frustrated by high prices, though. We have over forty percent
Speaker 3: of consumers continuing to tell us that high prices are
Speaker 3: eroding their personal finances in spite of the fact that
Speaker 3: they have fully acknowledged and noticed that inflation has slowed.
Speaker 2: What can we extrapolate from this about consumer spending or
Speaker 2: anything else in terms of consumer behavior overall?
Speaker 3: You know, consumers have been telling us all year long
Speaker 3: that the future of the economy is highly contingent on
Speaker 3: the election, and so the fact that the election has
Speaker 3: been resolved means that consumers are really starting to adjust
Speaker 3: their views for the future, which will allow them to
Speaker 3: plan and think more strongly about about the kinds of
Speaker 3: purchases they want to make. Consumers have told us that
Speaker 3: their high priced concerns for large purchases like durable goods, cars,
Speaker 3: and homes, those have all eased this month, and so
Speaker 3: things for them are headed in the right trajectory. However,
Speaker 3: they're still feeling you know, they're still not feeling as
Speaker 3: happy about the economy as they did prior to the pandemic.
Speaker 2: JO and always a pleasure. Thanks for being with us
Speaker 2: today and Happy Friday. Joined sure that the director of
Speaker 2: the University of Michigan surveys of consumers.
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Speaker 1: say Alexa Play Bloomberg eleven thirty.
Speaker 2: Paramount Global, the parent of CBSTV, MTV and it namesake
Speaker 2: Hollywood Movie Studio, reported third quarter sales that missed analyst instiments.
Speaker 2: Let's break it down right now with our next guest, KEITHA.
Speaker 2: Raganoth and the Bloomberg Intelligence Analyst. Thanks for being with us.
Speaker 2: Shouldn't we really be focusing on streaming here?
Speaker 5: Well, we should, I mean streaming is making up only
Speaker 5: twenty five percent of total revenue. John, but remember they
Speaker 5: are in the midst as most of the old media companies.
Speaker 5: Paramount is in the midst of this whole transition away
Speaker 5: from the linear TV model to the streaming model. And
Speaker 5: the reason we need to focus on streaming is because
Speaker 5: up until this point, streaming was really weighing on overall profitability.
Speaker 5: So we saw the streaming segment contribute to something like
Speaker 5: two to two and a half billion dollars in losses,
Speaker 5: and that was really pressuring overall company profitability. Now what
Speaker 5: has happened now is we're finally seeing, you know, some
Speaker 5: signs of a turnaround. There's some signs of hope for
Speaker 5: the streaming business because for the second straight quarter in
Speaker 5: a row, Paramount actually posted a positive profit number. So
Speaker 5: that is definitely good news. The bad news, however, which
Speaker 5: is kind of causing a little bit of you know,
Speaker 5: the fall in the stock after the earnings call, is
Speaker 5: because they said that in the fourth quarter they're again
Speaker 5: going to go back to some amount of streaming losses. However,
Speaker 5: the long term view still is that you know, the
Speaker 5: streaming business, which is Paramount plus their streaming platform, will
Speaker 5: be profitable in twenty twenty five, at least in the US.
Speaker 4: How does that stuck up with paramount streaming competitors. I
Speaker 4: feel like these days, you go and you turn on
Speaker 4: your Roku TV and there's maybe six or seven different
Speaker 4: options for streaming, and I don't know if I if
Speaker 4: Paramount is you know, the first one that comes up
Speaker 4: on at least my suggested apps to click on.
Speaker 5: Now, you bring up a very very good point. I mean,
Speaker 5: there's absolutely no doubt that, you know, Netflix has won
Speaker 5: the streaming wars. They are the default go to option.
Speaker 5: But when you kind of look across the board and
Speaker 5: you look at some of the other streaming services, Paramount
Speaker 5: definitely is there. Of course, they might not be your
Speaker 5: first choice as you kind of gravitate to streaming, but
Speaker 5: they definitely have a lot of content that people want
Speaker 5: to watch. So they have a lot of content from
Speaker 5: their linear TV platform itself, you know, a lot of
Speaker 5: sports content. They're one of the streaming platforms that's pretty
Speaker 5: sports heavy with NFL with UEFA, so people definitely like that.
Speaker 5: And then they have some pretty good scripted content as well,
Speaker 5: you know, whether you're talking about Star Trek or Yellowstone,
Speaker 5: they have Telsa King.
Speaker 6: So they have a lot.
Speaker 5: Of you know, good pieces that people want to watch.
Speaker 5: But you're absolutely right when it comes to scale and
Speaker 5: streaming is you know, a game of scale. They're nowhere
Speaker 5: near Netflix or even Disney Plus. They have only about
Speaker 5: seventy million subscribers on their Paramount Plus platforms. Obviously the
Speaker 5: competitive dynamics still working a little bit against Paramount. Having
Speaker 5: said that, though, I mean, not all bad.
Speaker 2: What's the update with the merger with Skydance Media.
Speaker 5: So the sky Dance Media, I mean, of course, this
Speaker 5: was a merger John that was in the works for
Speaker 5: almost ever was going on and on the saga. It
Speaker 5: is going to close sometime in the first half of
Speaker 5: twenty twenty five, and so we're seeing that a lot
Speaker 5: of the progress that the company has made in terms
Speaker 5: of cutting costs, in terms of cost efficiencies, in terms
Speaker 5: of restructuring, that's all the first step towards you know,
Speaker 5: achieving the two billion dollars in annual cost synergies that
Speaker 5: sky Dance has laid out, you know, after mergers. So
Speaker 5: you know that will kind of happen sometime I guess
Speaker 5: next year, and then you know, we kind of get
Speaker 5: a whole fresh set of eyes here, you know, a
Speaker 5: new management team, some new capital, one and a half
Speaker 5: billion dollars that goes straight to you know, the balance sheet.
Speaker 5: So all of those are definitely positives. But the hard
Speaker 5: truth is that the backdrop continues to be very, very difficult.
Speaker 2: Well, is this the joint venture partner they were looking
Speaker 2: for for streaming or something else?
Speaker 1: Now this is.
Speaker 5: Something Now, this is something else. So this is you know,
Speaker 5: the whole the sky dance, which is you know, an
Speaker 5: independent studio has been led of course by David Ellison
Speaker 5: has been wanting to buy Paramount for the longest time,
Speaker 5: and of course their main interest was really in the studio,
Speaker 5: but then ultimately they decided that they could do something
Speaker 5: with the entire company and kind of give it more
Speaker 5: of this tech driven focus.
Speaker 2: Always a pleasure, appreciate it. Getha Ragananthan and the Bloomberg
Speaker 2: Intelligence Analyst.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 2: I'm John Tucker along with Emily GRIFFEO. We are in
Speaker 2: for Alex and Paul today. So what is the panther
Speaker 2: ahead for the Federal Reserve after yesterday's twenty five bases
Speaker 2: point cut. Daniel Di Martino Booth is the CEO and
Speaker 2: the chief strategist for QI Research. Good to see you again.
Speaker 7: It's great to be here in studio, New.
Speaker 2: York on this beautiful day Friday. Thank you very much
Speaker 2: forf So what was your takeaway from the FED meeting yesterday?
Speaker 7: So we were speaking offline before I came on, and
Speaker 7: I you know, I think it was the guests.
Speaker 8: Indeed, indeed, I think I think.
Speaker 7: The version of Chair Powell who showed up yesterday was
Speaker 7: like the Dirty Harry version, extremely succinct, very few words.
Speaker 7: He wasn't scripted, he wasn't reading his answers, he wasn't nervous.
Speaker 7: He was expecting all of the political angles that the
Speaker 7: reporters were going to take, and he was ready for them,
Speaker 7: and he cut them off at.
Speaker 8: The past time and again. So how are we.
Speaker 4: Supposed to make sense of the market action and what
Speaker 4: is driving i mean treasury yields?
Speaker 5: Right now?
Speaker 8: We were also just talking about this.
Speaker 4: They've dropped about sixteen.
Speaker 7: Basics sixteen basis points on the tenure in a matter
Speaker 7: of two days. In fact, the ten year dropped four
Speaker 7: basis points the minute he was asked by a reporter
Speaker 7: that if you're asked to step down by President Trump,
Speaker 7: will you And he said no, And so she rephrased
Speaker 7: the question and he looked over his glasses and he
Speaker 7: said no. And at that minute, the tenure yield drop
Speaker 7: four basis points. So I think I think markets right
Speaker 7: now are celebrating continuity and steadiness and the fact that
Speaker 7: I think the Fed's going to continue to cut rates.
Speaker 8: I really do see that as a path forward.
Speaker 7: I know a bunch of sales side banks this morning
Speaker 7: have come out and said they're going to be much
Speaker 7: fewer cuts in twenty twenty five. As a nine year
Speaker 7: veteran of the FED, it's extremely rare for us to
Speaker 7: have seen the pause in the hiking cycle. It would
Speaker 7: be nearly unprecedented to see a paw in an easing cycle.
Speaker 7: We tend to see unemployment rates tick up in chunks,
Speaker 7: and we were just a smidge of a percentage away
Speaker 7: from the unemployment rate having been four point two percent
Speaker 7: in October, and we know that layoffs have picked up
Speaker 7: appreciably since September, so we can see what's coming.
Speaker 8: And I think.
Speaker 7: Powell leaned on the employment mandate yesterday with good reason,
Speaker 7: and he said, I'm not making any decisions. There's two
Speaker 7: inflation reports, there's one employment report. Before we meet again, I'll.
Speaker 8: Let you know.
Speaker 2: Can the Fed be at all preemptive when it comes
Speaker 2: to it's not their mandate, but fiscal policy.
Speaker 8: Well, the answers no.
Speaker 7: When you land on day one at the Fed, you
Speaker 7: learn two things. You learn about the lag effect of
Speaker 7: monetary policy, which we're still seeing.
Speaker 8: I mean, BC, why go pull it up.
Speaker 7: You've had thirty bankruptcies in September and October since two
Speaker 7: thousand and your average two month average is twenty large bankruptcy.
Speaker 7: So pull up BCY, goo on on Bloomberg. But the
Speaker 7: second lesson you learn at the FED is never talk
Speaker 7: about the dollar. Fiscal policy is the purview of the
Speaker 7: Treasury Department. Now, Powell said yesterday, if things begin to
Speaker 7: go haywire, I'm telling you right now, our debt levels
Speaker 7: in this country are way too high. They're absolutely untenably high.
Speaker 7: He said that, But in terms of can the Fed
Speaker 7: preemptively take part in crafting legislation, because that's effectively what
Speaker 7: a lot of the reporters were asking him, Well.
Speaker 2: I guess more anticipating on the next ridge, the bond
Speaker 2: vigilantes ring to saddle up and ride.
Speaker 8: You know, we'll see, we will see.
Speaker 7: I think markets are mistaking flow for stock. In other words,
Speaker 7: if we see an extension of the tax cuts, is
Speaker 7: that going to be equivalent to depositing cash in US
Speaker 7: household bank accounts that's going to reignite inflation overnight.
Speaker 8: No, it's just going to be continuation of the status quo.
Speaker 7: So at the margin, we're not going to see money
Speaker 7: pumped into the economy the way that we did with
Speaker 7: the first and the second and the third stimulus checks,
Speaker 7: or with the child tax credit.
Speaker 8: Being in cash.
Speaker 7: Cash is a much different instrument when it comes to
Speaker 7: monetary policy and the transmission mechanism. It's immediate, as opposed
Speaker 7: to the FED lowering interest rates and then saying okay,
Speaker 7: banks go to be easier on your lending standards now
Speaker 7: that barring costs are lower, so you be the transmission
Speaker 7: mechanism into the economy.
Speaker 8: So much different dynamics.
Speaker 7: If we're not talking about this new administration mailing out
Speaker 7: checks on day one.
Speaker 4: So should investors then not be worried about inflation reigniting?
Speaker 4: Because I've been seeing a lot of notes in my
Speaker 4: inbox all talking about Trump's policies are going to increase inflation,
Speaker 4: yields are going to go up. Who knows what's going
Speaker 4: to happen to stocks.
Speaker 7: You know, if you listen to the likeliest candidate on
Speaker 7: the terminal last night, the where it's a very good
Speaker 7: profile of potential Treasury secretary candidates under Trump, if you
Speaker 7: listen to what a lot of them are saying, they're saying,
Speaker 7: you know what, companies, We're going to give you two
Speaker 7: years to build a factory in the United States, and
Speaker 7: if you don't re on shore or on shore and
Speaker 7: move your supply chains away, then we're going to penalize you.
Speaker 7: That's a much different take than imposing tariffs on day one.
Speaker 7: So I think people should listen to who these.
Speaker 8: Potential candidates are.
Speaker 7: And I think that the second Trump term, I'm not
Speaker 7: beginning to suggest that there's wisdom here or that he's
Speaker 7: not going to fly off the handle for any reason
Speaker 7: at all, but I think this time he's going to
Speaker 7: take more counsel. I think this time he's going to
Speaker 7: listen to those around him a little bit more and
Speaker 7: be more thoughtful about who he brings into his administration.
Speaker 2: Back to tax policy. With respect to corporate tax policy,
Speaker 2: is from where you sit, it's a fifteen percent corporate
Speaker 2: rate really feasible. And what are the pay for is
Speaker 2: for that? Yeah, multipart quids.
Speaker 7: Milton Friedman would tell you there's no free lunch, right, So,
Speaker 7: I mean, you have to find a way to pay
Speaker 7: for these things realistically. And I think that that's where
Speaker 7: the construct of the new Congress is going to come
Speaker 7: in and how they're going to not just throw promises
Speaker 7: out there that you can't pay for.
Speaker 8: And that's a good thing.
Speaker 7: So the instantaneous aspect of tax cuts, I think is.
Speaker 8: A big presumption because it ain't free.
Speaker 4: How does this bleed into different sectors of the stock market,
Speaker 4: because we've seen a really big bid in small cap
Speaker 4: stocks this week. I guess on the bet that if
Speaker 4: you have more domestic manufacturing, you're going to do better
Speaker 4: in Trump's economy, does that mean.
Speaker 8: In small caps right now?
Speaker 7: In theory, what you cannot do with small tax is
Speaker 7: wave a magic wand and make their leverage go away.
Speaker 7: You can't make the small cap sector any healthier than
Speaker 7: it is when you're talking about their balance sheets, and
Speaker 7: that's really what has to be addressed first.
Speaker 8: And I think that.
Speaker 7: What we're seeing here is a lot of technical movements,
Speaker 7: whether you're talking about this whiplash effect in the bond
Speaker 7: market or this rush into the rustle that wasn't even
Speaker 7: sustained for a day, excuse me, for two trading days.
Speaker 7: So I think investors, or at least veteran investors I'm
Speaker 7: showing my age here, are going to be really focused
Speaker 7: on top line revenue growth, cash flow generation, the ability
Speaker 7: to protect dividends going forward, and that that's what's going.
Speaker 8: To be important.
Speaker 7: We have just seen a month where according to macro
Speaker 7: Edge they track layoff announcements, in September they were about
Speaker 7: fifty thousand. In October there one hundred and nine thousand.
Speaker 7: And we've seen one company after another in the current
Speaker 7: earning season prior to retailers of reporting.
Speaker 8: Continue to say.
Speaker 7: We're going to bolster our margins by laying off. They
Speaker 7: were just you guys were just talking about Paramount and
Speaker 7: laying off fifteen percent of its workforce.
Speaker 8: So we have to bear all this.
Speaker 7: In mind, and until CEOs and CFOs get out of
Speaker 7: the cost cutting mode to protect their margins, I think
Speaker 7: we have to be realistic about what sectors are going
Speaker 7: to benefit and what sectors aren't.
Speaker 2: Is anybody baking the tax cuts getting back to that
Speaker 2: into the rastimates right now?
Speaker 8: I think a lot of people are.
Speaker 7: I think a lot of I think I think a
Speaker 7: lot of strategists on the street right now are baking
Speaker 7: in tariffs yesterday and tax cuts yesterday in the effect
Speaker 7: that it would have on the bond market.
Speaker 2: I think the bond mar those tariffs are to some
Speaker 2: extent intended as a pay for for any anticipated tax
Speaker 2: cuts the corporate quote or personal. But that's not going
Speaker 2: to do it right.
Speaker 7: Not even not realistically and not even close.
Speaker 2: That's right.
Speaker 4: So I.
Speaker 8: Mean, I'm an independent research firm. I can say whatever
Speaker 8: I want.
Speaker 7: I think the streets getting ahead of itself, and I
Speaker 7: think the rally in the bond market is saying that
Speaker 7: out loud.
Speaker 2: Yeah, any other messages you are extracting from the bond
Speaker 2: market at this.
Speaker 7: Point, Well, the United States does not live on an island.
Speaker 7: And when you see factory orders retrenching, when you see
Speaker 7: import volumes falling, I'm going to be paying attention to
Speaker 7: the PPI and CPI data that come out of China tonight.
Speaker 7: I think until we stop stop getting deflationary impulses and
Speaker 7: waking up to hearing Michelin and Volkswagen and layoffs and
Speaker 7: countries with really strict labor standards, until we stop hearing that,
Speaker 7: I think we have to appreciate the United States is
Speaker 7: part of a global economy and the rest of the
Speaker 7: countries in the world and how they're faring is going
Speaker 7: to affect our country as well.
Speaker 2: I don't know if it's part of your remit, but
Speaker 2: Europe we have the sick man. Well, we have many
Speaker 2: sick men in Europe right now, are in total panic.
Speaker 7: Yeah, France is definitely sicker than most people want to appreciate,
Speaker 7: and we forced our banking system to capitalized after the
Speaker 7: financial crisis in many ways Europe did not. So yeah,
Speaker 7: I think you're going to see a much more aggresive
Speaker 7: rate cutting campaign there and we'll see how that plays out. Look,
Speaker 7: bond yields are down, dollars stronger today. Not everything plays
Speaker 7: out exactly the script.
Speaker 2: Okay, just one more period, just another minute, the Basil
Speaker 2: three endgame. So increasing the capital requirements for the financialist institutions,
Speaker 2: does that just get ignored at this point like forty
Speaker 2: five seconds? And is that a good thing? Well, it's
Speaker 2: a good thing for the financials.
Speaker 8: But it's a good thing for the financials.
Speaker 7: But we're still we're still in the comment period, and
Speaker 7: Michael Barr and j Powell are intent on pressing forward
Speaker 7: with this, and they've backed off of their more stringent
Speaker 7: capital requirements to begin with a few months ago.
Speaker 8: I don't think that.
Speaker 7: We should necessarily say that Basil three endgame is.
Speaker 2: Over all, right. Thanks, Thanks for showing up. Daniel Di Martino,
Speaker 2: both CEO and chief strategist for QI Research.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 2: I'm John Tucker along with Emily Graffeo. We are in
Speaker 2: for Alex Steele at Paul Sweeney today, and this is
Speaker 2: Bloomberg Intelligence. Let's move on to our next guest and
Speaker 2: our next subject today, what is the impact of the
Speaker 2: Trump presidency on tax policy. Let's break that down right
Speaker 2: now with Erica York. She's senior Cannabist Research director with
Speaker 2: Tax Foundation Center for Federal Tax Policy. Thanks for being
Speaker 2: with us, appreciate it. Happy Friday by the way. Hey, So,
Speaker 2: there are a couple of fronts here as I understand it,
Speaker 2: the corporate tax rate as well as exten the existing
Speaker 2: Trump tax cuts.
Speaker 4: Right, that's right.
Speaker 9: So one of the things that President elect Trump will
Speaker 9: have to deal with is the expiration of the twenty
Speaker 9: seventeen tax law, that's the Tax Cuts and Jobs Act.
Speaker 9: It lowered the corporate tax rate, permanently, made a lot
Speaker 9: of changes on the international tax side, and it also
Speaker 9: temporarily cut taxes for the vast majority of American taxpayers.
Speaker 9: Lowered rates, double the standard deduction, increased the child tax credit,
Speaker 9: lots of moving pieces, but those all sunset after the
Speaker 9: end of twenty twenty five. And so that's the first
Speaker 9: major thing that Congress is going to have to deal with.
Speaker 9: What do we do about that tax cliff? Trump promised
Speaker 9: extending all of those tax cuts, which we've estimated would
Speaker 9: come with a price tag of more than four trillion
Speaker 9: dollars in lost revenue over the next decade. And then,
Speaker 9: of course, on the campaign trail, Trump outlined trillions dollars
Speaker 9: trillions of dollars more in tax cuts. He talked about
Speaker 9: further reductions to the corporate tax rate, He talked about
Speaker 9: exempting income, social security benefits over time pay from taxes,
Speaker 9: and creating a new deduction for auto loan interest.
Speaker 4: So I want to zoom out and ask you about
Speaker 4: how investors should be thinking about how these tax cuts
Speaker 4: are going to impact the economy because you talk about
Speaker 4: tax cuts and lost revenue. But then of course, if
Speaker 4: a corporation has to pay less taxes, you think that
Speaker 4: they have more money on hand for cap X, R
Speaker 4: and D. So just big picture, how are we supposed
Speaker 4: to be thinking about the impact of the corporate tax
Speaker 4: cuts or potential more cuts coming on businesses in the economy.
Speaker 9: Yeah, so, on the one hand, the tax cuts for
Speaker 9: businesses should have a positive effect on the economy. You know,
Speaker 9: a couple of the big provisions that have expired or
Speaker 9: tightening our deductions for machinery and equipment investment and deductions
Speaker 9: for research and development expenditures restoring full deductions for that
Speaker 9: with lower the cost of capital would boost incentives to
Speaker 9: invest in the domestic economy. But one of the mitigating
Speaker 9: factors to that could be one of the ways that
Speaker 9: Trump and Congress are thinking through offsetting the cost of
Speaker 9: that tax cut, and that is through higher import tariffs.
Speaker 9: And ultimately the effect that this total package has on
Speaker 9: the economy will depend on how harmful the offsets are.
Speaker 9: If we are in a situation with some tax cuts
Speaker 9: and significant tariff hikes like ten twenty percent baseline tariffs,
Speaker 9: higher tariffs on China, higher tariffs on Mexico, those tariffs
Speaker 9: themselves plus the likely foreign retaliation could swamp the economic
Speaker 9: benefit of better tax policy.
Speaker 2: Yeah, even if there is no impact those pay fors,
Speaker 2: they're not going to get the job done, are they.
Speaker 3: No.
Speaker 9: We've estimated that the ten percent universal tariff would raise
Speaker 9: about two trillion dollars over the ten year window, So
Speaker 9: that falls well short of the.
Speaker 5: Yeah.
Speaker 9: Yeah, and that's on a conventional basis. So on a
Speaker 9: dynamic basis, figuring in how that tariff would reduce economic output,
Speaker 9: revenue falls further. And then if you factor in foreign retaliation,
Speaker 9: it falls even further. So comes up well short, and
Speaker 9: again you have that economic drag created by the tariffs
Speaker 9: and the potential trade war as another factor weighing that down.
Speaker 2: I put on your political analysis hat for me. The
Speaker 2: makeup of Congress. I mean, we don't know still, but
Speaker 2: it looks like a red wave. I can guess that
Speaker 2: at this point is everybody on board with this? I mean,
Speaker 2: you do have members of Congress in the same party
Speaker 2: who are opposed to increasing the deficits to pay.
Speaker 9: For a lot of this, right, Yeah, So that's the question.
Speaker 9: How big do deficit concerns weigh against the desire to
Speaker 9: continue tax cuts. Unfortunately, we're seeing some reporting right now
Speaker 9: that Congress is in the works of dusting off processes
Speaker 9: legislative processes used to impose tariffs in like the nineteen thirties.
Speaker 9: So the last time Congress passed a law to increase
Speaker 9: tariffs line by line was, of course, the nineteen thirty
Speaker 9: Smooth Hally Tariff Act.
Speaker 2: And we all remember Smooth Haley from our classes in
Speaker 2: well high school.
Speaker 4: Even I thought you're going to see because we were
Speaker 4: there in thirty No.
Speaker 2: I wasn't going to say that, but please continue ignor.
Speaker 9: If we you know, revert almost a century and Congress
Speaker 9: legislates on tariffs now, even though they're just reporting that
Speaker 9: that some wamakers are interested in that as an offset.
Speaker 9: I don't see, you know, the entire Republican Party throwing out,
Speaker 9: you know, the well accepted economics that tariffs are really harmful,
Speaker 9: that free trade is beneficial. So I think that's uncertain.
Speaker 9: But there are certainly pockets of the GOP on board
Speaker 9: with Trump's desire to significantly hike tariffs.
Speaker 4: We've talked about corporations, but how are Trump's tax policies
Speaker 4: going to affect Americans? I'm thinking maybe the middle class.
Speaker 9: Yeah, again, it depends. If it's just extending the TCJA.
Speaker 9: We've estimated that the individual provisions, sixty two percent of
Speaker 9: taxpayers would see a tax cut or would just see
Speaker 9: the tax system that they're paying taxes under now continue.
Speaker 9: So that status quo would preserve tax cuts for the
Speaker 9: vast majority of Americans. But if that's paired with tariff increases,
Speaker 9: that actually increases taxes on net for lower and middle
Speaker 9: income taxpayers. Because tariffs, of course have a regressive tax burden.
Speaker 9: They place a higher percentage tax increase on low and
Speaker 9: middle income households who consume more of their income than
Speaker 9: wealthier people do, and then the distribution of the tax
Speaker 9: cuts is also somewhat in opposition to that it does.
Speaker 9: The TCJA provided tax cuts to people across the income spectrum,
Speaker 9: but larger tax cuts to higher income individuals, which makes
Speaker 9: sense given the very progressive nature of our income tax,
Speaker 9: but those in combination could mean that lower and middle
Speaker 9: income households are worse off under this combination of tax
Speaker 9: cuts paid for by tariffs.
Speaker 2: All right, before you go near and dear to our
Speaker 2: hearts and high tax states, thirty seconds on salt. Is
Speaker 2: the salt deduction going to be raised?
Speaker 9: I think yes. I think if it is, you know,
Speaker 9: GOP trib effecta very narrow margins in the House, those
Speaker 9: lawmakers who want to see an increase in the salt
Speaker 9: cap have more sway. I don't think we'll see unlimited
Speaker 9: salt comeback. That would be a big reversion on a
Speaker 9: big reform that was included in the twenty seventeen tax law.
Speaker 9: But I imagine we'll see some sort of doubling for joint filers,
Speaker 9: and maybe even some increase for both single and joint filers.
Speaker 9: That of course makes the budget map harder because that
Speaker 9: increases the cost of extending the TCJ.
Speaker 2: Yes, that's not cheap either. Erica York, Senior accountists, Research
Speaker 2: director with the Tax Foundation Center for Federal Tax Policy.
Speaker 2: Thanks very much for me with us. Appreciate it.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 6: Let's get a Barry Ridtholts right now, founder of Ridthults
Speaker 6: Wealth Management, the host of my favorite podcast, Master's in
Speaker 6: Business after my own, that is, I have a podcast
Speaker 6: Hot Pursuit with you, Elliott, and actually Barry's on that
Speaker 6: podcast a lot too, So in any case, Barry joins
Speaker 6: us now to talk about I guess first and foremost, Barry,
Speaker 6: we have to get your take on the election. I know,
Speaker 6: in a twenty four hour news cycle, we should have
Speaker 6: been done talking about this one day.
Speaker 1: But.
Speaker 6: What do you think we all got so wrong in
Speaker 6: saying like this is going to be a toss up?
Speaker 6: And it was actually, you know Trump and the Republicans
Speaker 6: like demolishing the Democrats on Tuesday.
Speaker 10: Right, So so first, Billie Eilish is not a pop star.
Speaker 10: She's a Sean Truce. She's going to do a whole
Speaker 10: album of great American songbook. We'll come back to that later,
Speaker 10: don't don't underestimated.
Speaker 6: I'll put a pin in it because I agree, and
Speaker 6: I agree and would like to talk more about Billy Eilish.
Speaker 10: But first, fantastic thing. But let you know, the what
Speaker 10: I love about elections is that all of the errors
Speaker 10: that we make as investors, because of that's how we're wired,
Speaker 10: we engage in the same behavioral mistakes when it comes
Speaker 10: to elections that that we make with capital and risk
Speaker 10: and decision making. So it's really kind of fascinating. I
Speaker 10: do this every election. The last one I did that
Speaker 10: really kind of a lot of people to chatted about
Speaker 10: was back in twenty sixteen. But let's just pick a
Speaker 10: few things that everybody got wrong. So first of all,
Speaker 10: you know forecasting, Lol, how many times are the polls
Speaker 10: going to be wrong?
Speaker 6: And before we stop listening media and right, I mean,
Speaker 6: I've had.
Speaker 10: Conversations with various people at MSNBC, at CNN, at Bloomberg. Hey,
Speaker 10: why a year out are you guys spending so much
Speaker 10: time talking about polls. It's fifty to fifty that even
Speaker 10: the people in the polls are going to be the
Speaker 10: actual candidates. And that happened this year, that happened in
Speaker 10: twenty and sixteen. It happens surprisingly regularly. But the polls
Speaker 10: blew it in sixteen, eighteen, twenty twenty two, now again
Speaker 10: in twenty four Why do we listen to people who
Speaker 10: make forecasts when they're consistently wrong? And I want you
Speaker 10: to to keep that in the back of your head
Speaker 10: the next time you ask a strategis during economists, what's
Speaker 10: GDP or non farm payroll going to be? Because they
Speaker 10: don't know, they can't know someone is randomly going to
Speaker 10: be right. So that's number one.
Speaker 6: Well, non farm payrolls different. I mean, the margin of
Speaker 6: error is bigger than the number. Typically, the benny markets
Speaker 6: got this right and the options market got this right.
Speaker 10: And that's the second question, which is when you see
Speaker 10: someone who gets something right, was its skill or luck?
Speaker 2: You know?
Speaker 10: The probably the poster child for this is the Arc
Speaker 10: Innovation ETF and Kathy Wood, who had the greatest year
Speaker 10: in twenty twenty of any any ETF for mutual fund
Speaker 10: manager just about in history. You know, Pika Trough's shoe
Speaker 10: is the fund more than tripled for the year, was
Speaker 10: up something like one hundred and sixty four percent, and
Speaker 10: then mean, you know, reversion to the mean happened, and
Speaker 10: it turned out that Hey wasn't skill. It was just
Speaker 10: a lot of luck. And she's been unable to reproduce
Speaker 10: that before or since. Despite having the greatest year in history,
Speaker 10: she's still underperforming the SMP since inception in twenty fourteen.
Speaker 10: And the SMP is the wrong index, it should be
Speaker 10: the NAZAQ one hundred, where she's substantially into performing. So
Speaker 10: that's the second issue, is being able to separate skill
Speaker 10: from luck. The people who got it right, I'm not
Speaker 10: convinced that it was anything more than someone who's gonna
Speaker 10: get it right, but it's dumb luck. Probably the single
Speaker 10: biggest thing that investors get wrong, that we all got
Speaker 10: wrong this election was how much we allow narratives to
Speaker 10: dominate our thinking and just think about what the consensus
Speaker 10: agreed this This election was about. It's razor thin margin,
Speaker 10: it's deadlocked. This is the year of turnout. This is
Speaker 10: the year of the woman voter. None of that turned.
Speaker 2: Out to be true. We just love a great story.
Speaker 4: Well, we don't have a ton of time.
Speaker 6: No, we got to swap guys. Can you swap Berry's
Speaker 6: block with the Uni block? We had fifty Yeah, let's
Speaker 6: kill the break. We had fifteen minutes to talk Muni's right,
Speaker 6: and five for Barry.
Speaker 4: That doesn't seem right, because I want to talk more markets,
Speaker 4: but I also want to talk music quickly. But let's
Speaker 4: just stay on markets, because I mean, Barry. How are
Speaker 4: we then supposed to kind of understand we talk so
Speaker 4: much about the Trump trade. Should we not be thinking
Speaker 4: that the reason why, you know, bitcoin is now reaching
Speaker 4: a new record high, stocks are all near a record high.
Speaker 4: Should we not be kind of connecting that to the
Speaker 4: narrative that, oh, the market is just is happy that
Speaker 4: we have a new a new president.
Speaker 10: Well, generally speaking, we like to the market collectively, we
Speaker 10: like tax cuts, we like deficit spending, we like deregulation.
Speaker 10: So the markets like this. Although let's be blunts. The
Speaker 10: market you know, did great under Obama, did great under
Speaker 10: Trump other than the pandemic, and even then there was
Speaker 10: a huge recovery. It did great under Biden. We here's
Speaker 10: another lesson. We put way too much impact and import
Speaker 10: on who's in the white House. You know, if you
Speaker 10: only if you only invested when a Democrat was in
Speaker 10: the White House, going back to the I think it's
Speaker 10: the nineteen fifties, you would see a return that was
Speaker 10: about your one hundred dollars would generate a return of
Speaker 10: about a buck seventy. And if you only invested when
Speaker 10: Republicans were in the White House, who would be slightly
Speaker 10: less than that, like a buck forty. But if you
Speaker 10: invested over the entire time, well, then compounding as your friend,
Speaker 10: and that one hundred dollars turns into something like twenty
Speaker 10: four hundred dollars. And so you know, markets compound over time.
Speaker 10: Dividend reinvestment is a big part of that, and who
Speaker 10: the president is it matters a little bit around the fringe,
Speaker 10: around the edge. If they really mess up, well then
Speaker 10: that could have a pretty big impact.
Speaker 2: But for the most.
Speaker 10: Part, every day everybody has to get up, they have
Speaker 10: to dress their kids, send them off to school, pay
Speaker 10: the mortgage, take your car to work. In a twenty
Speaker 10: four trillion dollar economy, what I just described is more
Speaker 10: or less twenty trillion dollars of it, So there's a
Speaker 10: little flexibility around the edges, but not a whole lot.
Speaker 10: The US economy is so enormous and the global economy
Speaker 10: is so big that who's in office matters much less
Speaker 10: than what's the overall trend in jobs, what's the wage trend,
Speaker 10: where are we with inflation, what's consumer spending? Like that
Speaker 10: matters a whole lot, and the President has really a
Speaker 10: deminimous impact on that.
Speaker 6: Barry, I wonder you make a point on your blog
Speaker 6: retols dot com that we all have this filter bubble.
Speaker 6: And I noticed that, even though I don't want to
Speaker 6: be in an echo chamber. On Instagram, for example, I
Speaker 6: always unfollow people that are complete morons, and that probably
Speaker 6: just means I always unfollow people who don't agree with me.
Speaker 6: Is there anyone who's good at getting outside the the
Speaker 6: echo chamber? Are there any you know, investors or you know, leaders,
Speaker 6: billionaires who are good at getting rid of yes men
Speaker 6: and actually, you know, getting a diversity of opinion?
Speaker 10: You know, it's very very challenging to do that. And
Speaker 10: I like to quote Danny Kahneman who wrote Thinking Fast
Speaker 10: and Slow won the Nobel Prize for essentially create helping
Speaker 10: to create the field of behavioral economics. And he used
Speaker 10: to say, now you have a bias blind spot. We
Speaker 10: all do. You could take steps to try and operate,
Speaker 10: put rules in place, put strategies in place that prevent
Speaker 10: you from getting in your own way. But it's really
Speaker 10: hot we think about it. What drives your bubble. It's
Speaker 10: not just the media you consume. It's who your friends are.
Speaker 10: They're probably have similar thoughts and values to you. Even
Speaker 10: when I get together with my car group, you know
Speaker 10: there are Biden and Harris voters and Trump voters in
Speaker 10: this But separate from that, everybody in this group is
Speaker 10: driving a pricey car. They're all making a nice income,
Speaker 10: they're all heavily highly educated, they're all I live on
Speaker 10: the north shore of Long Island, so they're all in
Speaker 10: a very hi tax neighborhood, rich neighborhood. And so as
Speaker 10: much as we all think we're politically different, hey, the
Speaker 10: things that we share in common are much more similar
Speaker 10: than the things that separate us. And so even if
Speaker 10: you're trying to have a conversation with people who are
Speaker 10: different from you, your friends, your family, your neighbors. You
Speaker 10: are so similar. And so the example I like to
Speaker 10: tell people, even if you're a farmer or a blue
Speaker 10: collar work or internet you know, Instagram creator, or a
Speaker 10: finance bro or someone in the media, the people you
Speaker 10: spend a lot of time with are probably very similar
Speaker 10: to you. And most of the rest of the country
Speaker 10: has a very different personal experience than you do. Even
Speaker 10: if you're a farmer, you probably spend a lot of
Speaker 10: time with other farmers, and you know, your view is
Speaker 10: of the world is going to be different than the
Speaker 10: blue collar worker in the factory, the knowledge worker in
Speaker 10: an office. And that's just human nature. Everything you do
Speaker 10: within your bubble is becomes a lens that you look
Speaker 10: at the world. It's very hard to get outside of that.
Speaker 10: One of the most distute things I heard from someone
Speaker 10: on the losing side of this election, and a little
Speaker 10: bit of self reflection, they said, I guess there are
Speaker 10: a lot fewer people like me than I previously realized. Yes,
Speaker 10: and that's true for all of us. We're all in
Speaker 10: our little group. And and you know, although very not
Speaker 10: represent the electorate.
Speaker 6: Everyone I know on the losing side, which is you
Speaker 6: know everyone I know because we're in New York. Right,
Speaker 6: Oh really, they have said like, I can't believe it,
Speaker 6: I can't believe I didn't know this. I can't believe
Speaker 6: I didn't see this. But it's still a horrible outcome.
Speaker 6: And then they proceed to say the same thing they
Speaker 6: were saying before the election and haven't expanded their horizons
Speaker 6: at all. Verry, great to have you on. Uh, I'm
Speaker 6: gonna call you after because I still have a million questions.
Speaker 6: Barrier holds there. He is the founder of Redults Wealth
Speaker 6: Management and the host of Masters in Business.
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