WEBVTT - It Will Take a Generation Before the Renminbi Plays a Global Role, Eichengreen Says 0:00:09.720 --> 0:00:12.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 0:00:13.560 --> 0:00:16.520 David Gura. Daily we bring you insight from the best 0:00:16.560 --> 0:00:22.279 of economics, finance, investment, and international relations. Find Bloomberg Surveillance 0:00:22.320 --> 0:00:27.000 on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 0:00:27.320 --> 0:00:34.239 on the Bloomberg Gabrielle Santos, as I mentioned, is here 0:00:34.280 --> 0:00:37.960 with this from GPM Funds. She's the chief global strategist 0:00:38.000 --> 0:00:40.640 and we're happy to have her here. She's drinking hot 0:00:40.640 --> 0:00:45.360 coffee because the Holy East Coast is free. I was 0:00:45.479 --> 0:00:51.760 noticing that hockey season Tom Keene has wandered in the 0:00:51.800 --> 0:00:55.800 studio and his Montreal Canadians jersey. Um, he's he's ready 0:00:55.840 --> 0:01:01.240 for hockey season. Uh. When you look at uh, the 0:01:01.320 --> 0:01:04.960 markets have been down, up, down, but not going rocketing 0:01:05.040 --> 0:01:07.399 higher as they have been as we get deeper and 0:01:07.440 --> 0:01:11.120 deeper into tax reform. Is that because people are holding 0:01:11.120 --> 0:01:14.720 their breath at this point? Or has sentiment kind of turned? 0:01:14.720 --> 0:01:17.160 This was a discussion that we were having on Bloomberg 0:01:17.200 --> 0:01:20.199 Television yesterday and what did you miss? Um? Has sentiment turned? 0:01:20.400 --> 0:01:23.399 Are we now thinking maybe it won't pass until you've 0:01:23.400 --> 0:01:25.840 got to start pricing that in or is it too early. 0:01:26.120 --> 0:01:27.880 So I think that one of the first questions is 0:01:28.280 --> 0:01:31.200 is corporate tax reform priceton already we would say I 0:01:31.600 --> 0:01:34.280 not really know. Um that the rally we've seen so 0:01:34.400 --> 0:01:37.120 far this year has been much more about the trends, 0:01:37.200 --> 0:01:39.520 the good global trends we're seeing in terms of growth 0:01:39.600 --> 0:01:42.800 and earnings as well as stability and energy as well 0:01:42.840 --> 0:01:46.520 as the dollar, rather than some huge expectation of corporate 0:01:46.600 --> 0:01:49.200 tax reform happening. So I don't think it's on an 0:01:49.400 --> 0:01:53.560 unwind of expectations around tax or anything like that. It 0:01:53.640 --> 0:01:56.920 could be something just innocuous, like investors wanting to take 0:01:56.960 --> 0:01:59.120 a little bit of profit off the table, right, especially 0:01:59.160 --> 0:02:02.680 receptors that how done super well this year, like technology, 0:02:03.000 --> 0:02:05.200 which is the sector for example, that was down yesterday, 0:02:05.400 --> 0:02:08.959 rather than something really really bad. I'm also when a 0:02:09.080 --> 0:02:11.440 lot is going to get wrapped up in December, we 0:02:11.560 --> 0:02:15.720 have tax reform will either pass or won't get could 0:02:15.760 --> 0:02:18.160 get delayed. But you've got the possibility of a government shutdown, 0:02:18.160 --> 0:02:20.200 and you get the dead ceiling which will be attached 0:02:20.240 --> 0:02:22.959 to that even if it's not solved. And it's the 0:02:23.080 --> 0:02:25.400 end of the year and it's been a heck of 0:02:25.480 --> 0:02:29.400 a year. So are people actually going to invest in December? 0:02:29.440 --> 0:02:31.679 Are we going to start seeing people get cautious and 0:02:31.720 --> 0:02:37.200 say I'm gonna do that and I'm gonna take the 0:02:37.280 --> 0:02:40.120 month off. I'm not sure. I think it depends on 0:02:40.520 --> 0:02:42.840 where you've been so far this year. If if you've 0:02:42.880 --> 0:02:45.320 been in the market the entire year, maybe you do 0:02:45.840 --> 0:02:48.120 kind of trimmed down a little bit. Your your position 0:02:48.160 --> 0:02:50.000 has probably gone a little bit too big. By now 0:02:50.200 --> 0:02:53.639 right we're up fift percent. But for those investors that 0:02:53.760 --> 0:02:56.440 still haven't participated in the market, and there are actually 0:02:56.440 --> 0:02:59.120 a lot of them, maybe there is still a desire 0:02:59.160 --> 0:03:00.960 to get in the market. And we talked about selling 0:03:01.040 --> 0:03:03.079 May and go away, and Mike, your question is dead on. 0:03:03.280 --> 0:03:05.799 I mean, sell you know, before Thanksgiving and run run. 0:03:06.560 --> 0:03:08.040 Let's come back to that in a minute. Good morning. 0:03:08.080 --> 0:03:12.800 If you want Bloomberg surveillance in institutions people that are behind, 0:03:14.080 --> 0:03:16.760 is there a level of panic this year that I 0:03:16.880 --> 0:03:19.240 need to catch up in six weeks. I've never bought 0:03:19.840 --> 0:03:23.000 that song and dance, but it's always there to people 0:03:23.080 --> 0:03:26.639 actually do that. For institutional clients, I would say, especially 0:03:26.680 --> 0:03:29.280 when it comes to equities, that they've been pretty well 0:03:29.320 --> 0:03:32.400 positioned going into the year. What makes me think much 0:03:32.440 --> 0:03:36.320 more about people wanting to actually chase or participate in 0:03:36.360 --> 0:03:39.720 this performance is much more in the individual level, where 0:03:39.920 --> 0:03:43.280 so many investors for the last eight nine years have 0:03:43.480 --> 0:03:46.280 still not participated in the rally. So I think there's 0:03:46.360 --> 0:03:48.440 this sense of, oh my gosh, I'm not participating in 0:03:48.480 --> 0:03:51.640 this enthusiasm rally. The way this works is as on 0:03:51.720 --> 0:03:54.320 the West Side two nights ago, and I walked in 0:03:54.400 --> 0:03:55.880 the Apple store because I walked by it and there 0:03:55.960 --> 0:03:58.280 was the iPhone X and I held it my hand. Wow, 0:03:58.320 --> 0:04:00.880 wow Wow. So do I come out the triple leverage 0:04:00.920 --> 0:04:04.600 all cash fun and like you know, double margin Apple 0:04:05.000 --> 0:04:09.640 to get myself to January to December? Idea? The problem 0:04:09.760 --> 0:04:11.720 is is going to take every penny you made this 0:04:11.880 --> 0:04:17.520 year to buy an iphoned Doug cass is going in 0:04:17.600 --> 0:04:22.039 Florida top of market right there. Tom, We're starting to hear. 0:04:22.400 --> 0:04:24.280 It's interesting because you're talking about all these people who 0:04:24.279 --> 0:04:27.000 haven't participated, and of course the old saws once retail 0:04:27.080 --> 0:04:30.000 comes in, it's over. But you're starting to see some 0:04:30.120 --> 0:04:35.600 of the pros talk about not necessarily a correction or 0:04:35.640 --> 0:04:38.120 anything like that, but that maybe we're gonna top out 0:04:38.120 --> 0:04:40.840 for a little while. I noted, uh, and I have 0:04:40.960 --> 0:04:42.440 the I brought the story in here somewhere, and I 0:04:42.480 --> 0:04:45.080 can't find it right now. But people are looking at 0:04:46.000 --> 0:04:49.040 high yield and how it's kind of rolled over, and 0:04:49.160 --> 0:04:51.320 they say that's a sign that the stock market is 0:04:51.360 --> 0:04:53.640 going to start coming to an end as well. Are 0:04:53.760 --> 0:04:56.120 you seeing any of those tea leaves that you're starting 0:04:56.120 --> 0:04:59.240 to say, hey, maybe there's something to look at here 0:04:59.440 --> 0:05:03.039 coming to an end? No, I mean, it's always about 0:05:03.080 --> 0:05:04.920 the kind of earnings growth we're seeing, which is still 0:05:04.960 --> 0:05:09.640 incredibly solid even pre any sort of corporate tax reform implementation, 0:05:09.720 --> 0:05:12.600 which is which is really a great sign um, and 0:05:12.720 --> 0:05:15.040 that's really the fundamental driver of the market, right, So 0:05:15.080 --> 0:05:17.920 as long as the economy keeps growing, earnings keep growing, 0:05:18.080 --> 0:05:21.360 the market should continue to grind higher. But I do 0:05:21.560 --> 0:05:24.200 think that we should be expecting some sort of correction, 0:05:24.440 --> 0:05:27.960 absolutely right. The average going back to would be to 0:05:28.000 --> 0:05:31.520 have a ten percent correction every single year, and the 0:05:31.640 --> 0:05:33.880 maximum we've had this year has been three percent. So 0:05:34.120 --> 0:05:38.040 definitely a correction would be very possible. Probabilities high, but 0:05:38.160 --> 0:05:40.080 we don't think this is the end of what we 0:05:40.160 --> 0:05:42.840 think is a much more secular ble market. Do you think, 0:05:42.880 --> 0:05:45.760 because it's been so long that if we did get 0:05:46.000 --> 0:05:49.000 a correction, it could be magnified by fear. You know, 0:05:49.360 --> 0:05:52.760 people who've seen nothing but stocks go up for a 0:05:52.839 --> 0:05:55.520 long time start to get nervous and and pull back 0:05:55.600 --> 0:05:57.680 more than the otherwise would. Or the pro is going 0:05:57.760 --> 0:05:59.200 to come in and save us and say O time 0:05:59.240 --> 0:06:02.360 to buy. Well, we'll do our best. But I do 0:06:02.520 --> 0:06:06.200 think that sentiment is has improved a lot this year. 0:06:06.800 --> 0:06:09.200 I think whenever we got to pull back last year, 0:06:09.320 --> 0:06:13.760 the year before even there was this feeling that maybe 0:06:13.800 --> 0:06:16.240 there's a recession around the corner, maybe there's something I 0:06:16.240 --> 0:06:19.920 should be worried about with emerging markets. So the pullbacks 0:06:20.000 --> 0:06:24.280 felt very, very rapid and fearful. Uh. And where we 0:06:24.360 --> 0:06:27.400 are today is much better comfort with the global economy 0:06:27.960 --> 0:06:30.880 with stability, and so I actually think that sentiments is 0:06:30.880 --> 0:06:33.960 a little bit better this time around going into any 0:06:34.040 --> 0:06:36.000 sort of altility as I'm going to protect you from 0:06:36.040 --> 0:06:38.600 the general Council. I know, Mr Diamond Hanks on everywhere 0:06:38.680 --> 0:06:42.240 you say, can you buy the banks here? The financial 0:06:42.320 --> 0:06:45.839 sector is one of our favorite sectors along with technology. 0:06:46.000 --> 0:06:50.360 So there's a laundry list to tell me about the 0:06:50.480 --> 0:06:52.840 Mike McKee wants to know about the yield curve. All right, 0:06:52.920 --> 0:06:55.600 so we've got for the financial sector. We've got a 0:06:55.640 --> 0:06:59.599 growing economy, so credit growth should continue being decently good. 0:07:00.120 --> 0:07:02.880 Number two, we do believe that the yield curve is 0:07:02.920 --> 0:07:06.080 going to stop flattening at this incessant rate we've been 0:07:06.080 --> 0:07:08.520 seeing for the past couple of weeks, which has been 0:07:08.560 --> 0:07:10.280 a little bit of a headwind here in the short 0:07:10.400 --> 0:07:14.080 term UM. And then lastly, there is this underlying current 0:07:14.400 --> 0:07:17.280 of smarter regulation that I don't know is getting necessarily 0:07:17.360 --> 0:07:20.200 the due amount of air time, which help our pros. 0:07:20.240 --> 0:07:22.560 Here two tends of vanilla curve. Which curve do you 0:07:22.680 --> 0:07:27.120 look at to gauge financial forecasting? We look at the 0:07:27.200 --> 0:07:30.160 two tens. You look at the two tends to decide 0:07:30.200 --> 0:07:33.000 what Bank of America is doing, or bank or whatever. 0:07:33.280 --> 0:07:35.480 We look at it as as an indication of what's 0:07:35.480 --> 0:07:38.520 happening with the yield curve. UM, and what we have 0:07:38.720 --> 0:07:41.040 been seeing for the past couple of weeks is a 0:07:41.200 --> 0:07:44.440 very what to us seems like a very surprising flattening 0:07:44.520 --> 0:07:46.960 of the yield curve. Now, we don't think that this 0:07:47.160 --> 0:07:48.400 is all of a sudden going to go to a 0:07:48.480 --> 0:07:51.520 completely flat or even inverted yield curve. As I was saying, 0:07:51.920 --> 0:07:53.720 we do think that this is due for a pause 0:07:53.760 --> 0:07:56.960 and a bit of a reversal here before we let 0:07:57.040 --> 0:07:59.960 you go very quickly, new FED coming in next year, 0:08:00.280 --> 0:08:03.520 causing you to think about anything differently. Not at the moment. 0:08:04.200 --> 0:08:07.240 We do think we'll continue with the kind of pace 0:08:07.320 --> 0:08:11.040 we've seen. This year should look pretty similar unless we 0:08:11.200 --> 0:08:14.640 get some sort of overheating in the economy or big 0:08:14.720 --> 0:08:18.280 tarn and inflation, which we don't expect. Um if we 0:08:18.400 --> 0:08:21.680 don't three rate hikes, continuing to wind down the balance sheet. 0:08:22.080 --> 0:08:24.000 I've got a wonderful email that just came in that 0:08:24.120 --> 0:08:26.760 disagrees with you. And this is the debate over earnings 0:08:26.880 --> 0:08:31.800 driven market versus valuation driving market. That's a great nuance. 0:08:31.840 --> 0:08:32.959 You have to come back and we have to talk 0:08:32.960 --> 0:08:35.839 about and this has been an earnings driven market though 0:08:35.920 --> 0:08:38.720 this this year. This should be a great conversation, Michael. 0:08:38.720 --> 0:08:42.640 We get gabriel As Santos with Douglas Cass, put us 0:08:42.679 --> 0:08:44.840 a differing view, put it down for a couple of hours, 0:08:44.920 --> 0:08:48.400 and we'll duck Cass and Gabriel a scientists together would 0:08:48.400 --> 0:08:51.320 be smart, smart, smart they live in two different worlds. 0:08:51.360 --> 0:09:07.600 Thank you Mr Cass for that observation, well researched. Joining 0:09:07.640 --> 0:09:10.040 sound Stephen Ratner with will advise, that's what should point 0:09:10.080 --> 0:09:14.040 out that he manages the four one k of Michael Bloomberg, 0:09:14.120 --> 0:09:17.960 who has a modest amount to do with this seven 0:09:18.040 --> 0:09:20.000 hundred dollars a year and as far oh one k. Well, 0:09:20.000 --> 0:09:23.120 they wanted to they wanted to adjust that this is 0:09:23.640 --> 0:09:31.760 a limited liability corporation. I guess the limited partnership. Well, 0:09:31.880 --> 0:09:35.280 this is a subject of not inconsequential interest. We'll have 0:09:35.360 --> 0:09:37.240 to see how the rights are, but it's not out 0:09:37.240 --> 0:09:40.280 of the question. We don't want to talk about Michael's money, 0:09:40.400 --> 0:09:43.360 but it does matter to a lot of people who 0:09:43.440 --> 0:09:46.719 are not small businesses. Well, the whole thing is is 0:09:46.760 --> 0:09:48.719 a little bit crazy because they're going to have to 0:09:48.800 --> 0:09:51.640 try to write these rules and somehow distinguished between all 0:09:51.679 --> 0:09:54.439 the hedge funds, all the private equity guys, all the 0:09:54.520 --> 0:09:57.920 people UH present company included, perhaps who could just simply 0:09:57.960 --> 0:10:00.560 turn ourselves into a pass through to be eat the system. 0:10:00.679 --> 0:10:03.200 I want to back up, you were the cars are, etcetera. 0:10:03.280 --> 0:10:05.160 I know you hate that phrase. I don't care. You 0:10:05.240 --> 0:10:07.720 were the cars are, and you had to herd cats 0:10:08.559 --> 0:10:13.640 across many institutions in Washington. If you were the texts are. Now, 0:10:14.240 --> 0:10:18.679 given your tangible, real world experience in the trenches of 0:10:18.800 --> 0:10:22.920 the Beltway, what would you do is texts are? Well? 0:10:23.040 --> 0:10:25.000 For first of all, I was able to succeed is 0:10:25.080 --> 0:10:27.080 cars are because I didn't have to deal with Congress. 0:10:27.440 --> 0:10:29.360 Taxes you have to go to Congress. But let's assume, 0:10:29.600 --> 0:10:31.880 let's assume you don't look. There's no doubt that the 0:10:32.000 --> 0:10:34.760 tax code is riddled with problems. The corporate side of 0:10:34.800 --> 0:10:37.280 the tax code creates all the wrong incentives, all kinds 0:10:37.320 --> 0:10:40.000 of distancentives to invest here, to locate here. You would 0:10:40.000 --> 0:10:43.160 certainly change that. Around the personal side, there's a certain 0:10:43.240 --> 0:10:45.959 number of deductions, uh, certain of loophole's. You know, the 0:10:46.320 --> 0:10:49.079 six Tax Act did a pretty good job, still amazingly enough, 0:10:49.160 --> 0:10:52.040 of cleaning out the worst of the shelters. So I 0:10:52.120 --> 0:10:55.040 would I would eliminate a bunch of individual deductions. I 0:10:55.040 --> 0:10:56.920 would fix the corporate tax code. I would try to 0:10:57.000 --> 0:10:58.960 lower rates, but I would do it on a deficit 0:10:59.000 --> 0:11:01.679 neutral basis. And I knew I knew you were going 0:11:01.880 --> 0:11:04.360 knew I was going to say, I've seen a single article, 0:11:04.679 --> 0:11:09.599 Tax Policy Center, Joint Tax all the other experts on this. 0:11:10.640 --> 0:11:14.199 That's a pipe dream to be deficit neutral, right, Why 0:11:14.280 --> 0:11:17.160 is that a pipe dree I'm asking you. I'm asking you. No, Look, 0:11:17.200 --> 0:11:19.040 it's not a pipe dream. It's easy enough to do. 0:11:19.280 --> 0:11:22.000 You just have to not cut some taxes as much. 0:11:22.080 --> 0:11:24.280 And and the problem is that the deficit has been 0:11:24.320 --> 0:11:26.439 going is going up at the moment on the order 0:11:26.480 --> 0:11:28.679 of the say very round numbers a hundred billion dollars 0:11:28.720 --> 0:11:32.200 a year. We're on the wrong end of the expansionary cycle. 0:11:32.480 --> 0:11:34.560 This is not a time for a stimulative tax cut. 0:11:34.600 --> 0:11:38.319 It's just not in here. Yeah, I want to follow 0:11:38.320 --> 0:11:40.640 on that because obviously you spent all your time looking 0:11:40.679 --> 0:11:43.600 at financial markets. What's the danger that we see interest 0:11:43.720 --> 0:11:47.760 rates rise more than they should because you've raised the 0:11:47.840 --> 0:11:51.240 deficits significantly, and then you run into a problem where 0:11:51.280 --> 0:11:54.440 you're working against yourself. Well, well, by definition, interest rates 0:11:54.480 --> 0:11:56.880 full rise more than the otherwise would have. It has to. 0:11:56.920 --> 0:11:59.440 It's just math. But what the but what the sort 0:11:59.480 --> 0:12:02.560 of uh conservatives for lack of a better word, want 0:12:02.679 --> 0:12:05.000 you know want in fact is a tighter fed policy 0:12:05.240 --> 0:12:07.720 and a lucio fiscal policy that that was the recipe 0:12:07.800 --> 0:12:10.480 back in the Reagan years, and it's the recipe again today. 0:12:10.640 --> 0:12:13.600 I don't particularly see the argument for piling on more 0:12:13.679 --> 0:12:16.120 debt that we're going to leave to our kids. Okay, 0:12:16.160 --> 0:12:21.360 but within that tandem to review, they want a bigger deficit. 0:12:21.760 --> 0:12:24.160 What do you mean by tighter FED policy? They want 0:12:24.280 --> 0:12:28.920 more rate hikes, they want a more restrictive monetary policy. Sure. 0:12:29.000 --> 0:12:30.959 I mean, if you look at the tailor rule and 0:12:31.040 --> 0:12:34.640 what low rate don it's low rate Janet, low rate Donald, 0:12:34.760 --> 0:12:37.559 it's but Janet is leaving and Donald absolutely is a 0:12:37.600 --> 0:12:40.320 low rate guy. But I didn't say I didn't say Donald. 0:12:40.360 --> 0:12:43.440 I said the conservatives, the traditional sort of fairly hard 0:12:43.559 --> 0:12:46.960 right conservatives. They hated the Quei. They want that gone 0:12:47.000 --> 0:12:49.280 and done. They think rate should have gone up sooner, 0:12:49.360 --> 0:12:53.280 keeven Kevin Warsh. They have power in Steve Ratner's Washington 0:12:53.880 --> 0:12:57.000 to the conservatives of know. What's what's so interesting is 0:12:57.040 --> 0:12:59.439 that the president made his choice and uh and I 0:12:59.520 --> 0:13:01.800 wrote a p about it, one of the one much 0:13:01.880 --> 0:13:04.800 to my happy surprise, he actually picked the right guy, 0:13:05.080 --> 0:13:07.480 and he made it. He took a stand against Mike Pence, 0:13:07.720 --> 0:13:11.280 who wanted John Taylor, against the traditional conservatives who wanted 0:13:11.720 --> 0:13:15.360 uh John Kevin Worsher, John Taylor type, and he picked 0:13:15.400 --> 0:13:17.920 someone who's, you know, not that different from Janet Yellen 0:13:18.000 --> 0:13:21.839 and that's great. Well, where do they go from here? 0:13:21.880 --> 0:13:27.800 Do you think? Do they continue with traditional um, well 0:13:27.880 --> 0:13:31.160 known kinds of people or do they put a Trump 0:13:31.200 --> 0:13:35.719 agenda in there into the Fed? I don't, I don't know. 0:13:35.960 --> 0:13:38.080 You know, sometimes it becomes like Noah's Ark, where if 0:13:38.120 --> 0:13:40.400 you give one faction somebody, then you have to give 0:13:40.440 --> 0:13:45.960 the other faction somebody to exactly that's exactly you need 0:13:46.040 --> 0:13:48.599 a Republican um. So we'll see where it goes. But 0:13:48.720 --> 0:13:51.280 the chairman, as you know, uh, the last time a 0:13:51.400 --> 0:13:55.360 chairman was outvoted was Bill Miller in seventy something or another. 0:13:55.440 --> 0:13:57.960 I was actually covering it back then. So the chairman 0:13:57.960 --> 0:14:01.520 wheel is enormous power, enormous influence. Don't you hate it? Tom? 0:14:01.640 --> 0:14:05.559 And he knows more about reporting than we do. I 0:14:05.640 --> 0:14:07.440 don't know more, but I did it for a good while. 0:14:08.160 --> 0:14:10.839 William Miller is a lot of people. But this is 0:14:10.920 --> 0:14:12.800 that brings up a good point, Steve. Right now, the 0:14:12.880 --> 0:14:17.920 collective memory of Washington is about one election ago. They 0:14:18.000 --> 0:14:20.080 really don't have a memory of vulgar. They don't have 0:14:20.120 --> 0:14:23.680 a memory that nobody. They don't have a memory of 0:14:23.920 --> 0:14:27.480 mckchesley Martin. I mean, there's there's really no historical memory 0:14:27.880 --> 0:14:31.760 that is that that is true on tax reform, What 0:14:31.880 --> 0:14:34.880 should we look for next? We've had the Senate trot 0:14:34.960 --> 0:14:37.480 out what are you looking for into the weekend of 0:14:37.560 --> 0:14:41.080 the Sunday talk shows and then into the holiday season. 0:14:41.120 --> 0:14:43.600 I'm not sure too well. They certainly hope to pass 0:14:43.680 --> 0:14:45.560 something in the holiday season. I look at what we're 0:14:45.600 --> 0:14:50.600 obviously looking for is to see uh in individual senators 0:14:51.080 --> 0:14:53.600 and then the Republicans who are in the bluer states 0:14:53.640 --> 0:14:56.960 where there are state and local tax deduction issues there 0:14:57.000 --> 0:14:59.120 that Peter called Peter King has made his position clear, 0:14:59.480 --> 0:15:02.080 But to why watch these swing voters, because it's gonna 0:15:02.160 --> 0:15:05.000 be like healthcare, We're gonna have to they're gonna have 0:15:05.080 --> 0:15:06.960 to be counting votes, and they're gonna have to be 0:15:07.040 --> 0:15:08.880 counting votes in the House this time as well as 0:15:08.920 --> 0:15:11.560 the Senate. The House wasn't so hard for them last time. 0:15:11.920 --> 0:15:14.120 But there are a number of Republicans. Some people say 0:15:14.160 --> 0:15:16.880 it's twenty, some thirty, some thirty some forty. We don't 0:15:16.920 --> 0:15:20.640 know who who could well be influenced by the salt issue. 0:15:20.960 --> 0:15:23.240 And then on the Senate side, it's, you know, it's 0:15:23.240 --> 0:15:24.880 a bit of a director set. You've got you've got 0:15:25.000 --> 0:15:26.880 to you've got to assemble fifty and if you and 0:15:26.880 --> 0:15:28.560 if one drops out, you've got to find another one 0:15:28.560 --> 0:15:30.200 and put in their place. So the trade off between 0:15:30.200 --> 0:15:33.160 the estate tax and the other kinds of things, Corker 0:15:33.240 --> 0:15:35.800 and his deficit concerns, they're gonna have to try to 0:15:35.880 --> 0:15:37.840 juggle all that and come up with fifty votes. And 0:15:37.880 --> 0:15:39.800 that's what we're gonna be watching. Well, since you come 0:15:39.920 --> 0:15:44.680 from both worlds political and financial, um, do you think 0:15:44.720 --> 0:15:47.920 that this is uh going to be a situation where 0:15:47.920 --> 0:15:51.200 Republicans are so desperate for a win it won't matter 0:15:51.280 --> 0:15:54.480 what's in the bill, They'll just pass something. I think 0:15:54.520 --> 0:15:56.240 if we're up to the White House, that would be 0:15:56.320 --> 0:15:59.120 the case. And probably even the leadership they are desperate 0:15:59.160 --> 0:16:01.280 for a bill because if they don't get this bill done, 0:16:01.400 --> 0:16:04.200 and perhaps if they don't get this bill done this year, 0:16:04.840 --> 0:16:07.040 then they could end up going to the eighteen elections 0:16:07.120 --> 0:16:11.040 with nothing, and that is something that terrifies the leadership. 0:16:11.240 --> 0:16:12.880 The rank and file. They have to worry about their 0:16:12.920 --> 0:16:14.760 own skins. They're not worried so much about the party 0:16:14.760 --> 0:16:17.080 because I let me say one last thing. The Virginia 0:16:17.280 --> 0:16:19.720 results and all the other results that happened that day 0:16:20.320 --> 0:16:22.880 could be a watershed here because it was a message 0:16:23.160 --> 0:16:26.200 and it may well influence a number of Republicans who 0:16:26.240 --> 0:16:28.560 are on the edge as to whether vote for another 0:16:28.680 --> 0:16:31.080 program that, by the time it's over, in my prediction, 0:16:31.400 --> 0:16:34.000 will be as unpopular as their healthcare play. And Steve, 0:16:34.080 --> 0:16:36.360 this is the distrust that Mike brought up on passers 0:16:36.360 --> 0:16:38.560 at the beginning. Mike and Steve, have you got nothing 0:16:38.600 --> 0:16:40.680 to do this weekend? Out in East Hampton South, there's 0:16:40.680 --> 0:16:43.360 a thirty million dollar unit, and the headline here and 0:16:43.440 --> 0:16:47.280 thirty million dollars is it's two thousand eight square feet, 0:16:48.480 --> 0:16:51.160 uh two bedroom to bath. So the headline here is 0:16:51.200 --> 0:16:53.320 it's on three point six acres, which is how you 0:16:53.360 --> 0:16:55.840 get out to thirty million dollars. Rob Urban has a 0:16:55.920 --> 0:16:59.080 phenomenal Bloomberg story how they're already game in the system. 0:16:59.280 --> 0:17:03.120 They're gonna turn vacation homes into investment properties to get 0:17:03.160 --> 0:17:07.159 around the legislation. Our audience believes the fancy guys like 0:17:07.359 --> 0:17:10.880 you and others are going to gain the system. Why 0:17:10.920 --> 0:17:14.159 will that not happen? Uh, it will happen, and it 0:17:14.240 --> 0:17:17.359 always happens. And the problem with this tax bill is 0:17:17.480 --> 0:17:21.159 that in some ways it makes it more complicated than 0:17:21.280 --> 0:17:23.280 less because of the past. Through is because of all 0:17:23.359 --> 0:17:26.439 these rules, and if you really genuinely wanted to reform 0:17:26.520 --> 0:17:28.600 the tax code, you'd get rid of a lot of 0:17:28.680 --> 0:17:31.240 this stuff that allows people to game the system. But 0:17:31.359 --> 0:17:35.840 they're not doing that. Mike, this property says you. Actually 0:17:36.480 --> 0:17:40.000 it's idyllic. It's an idyllic property. Well, I read that. 0:17:40.480 --> 0:17:42.400 When I read the Senate bill last night. My first 0:17:42.440 --> 0:17:45.720 thought was I should incorporate as a limited partnership or 0:17:45.800 --> 0:17:50.919 limited liability corporation and buy a house through the corporation 0:17:51.440 --> 0:17:54.960 because the state and local tax deduction remains for companies 0:17:55.119 --> 0:17:57.800 even though individuals losing. So, I mean, you can see 0:17:58.160 --> 0:18:01.280 the route to gaming this just laid out. We're trying 0:18:01.320 --> 0:18:04.280 to give you perspective on some of these events, including 0:18:04.359 --> 0:18:07.240 tax reform now, and really get away from the cliches 0:18:07.280 --> 0:18:08.840 that are out there. You can do that with Stephen 0:18:08.920 --> 0:18:12.080 Ratner will It Advisors, Michael, When you start us off, well, 0:18:12.119 --> 0:18:15.040 I was going to ask him a non tax question 0:18:15.160 --> 0:18:18.960 because I noted the story, and and you had Harvard 0:18:19.040 --> 0:18:22.240 football coach on yesterday to Murphy, there's a possibility of 0:18:22.320 --> 0:18:25.800 a seven way tie in the eight team IVY League 0:18:25.920 --> 0:18:28.720 in football this year for first place. There's only one 0:18:28.800 --> 0:18:31.080 team that's winless at the bottom of the conference that 0:18:31.240 --> 0:18:37.439 cannot possibly tie Brown University. Now Brown University graduates. Stephen 0:18:37.520 --> 0:18:40.280 Ratner is with you've done your homework. You know when 0:18:40.320 --> 0:18:42.520 I was at Brown, we were pretty much winless. The 0:18:42.560 --> 0:18:45.399 only team that was worse was Columbia, And so I 0:18:45.400 --> 0:18:47.680 guess we're right back where we started from. Tom Tom, 0:18:47.720 --> 0:18:52.959 and I well, Columbia three and two started from they 0:18:53.000 --> 0:18:55.560 have they have turned things around. We were doing college 0:18:55.600 --> 0:18:58.880 football today since we we thought we would. We get 0:18:58.960 --> 0:19:04.200 your contribution in there. Thank you for sharing um the 0:19:04.920 --> 0:19:08.960 the The distinguished journalist John Hartwood from The New York 0:19:09.000 --> 0:19:12.280 Times and a competitor of ours, did an interview yesterday 0:19:12.400 --> 0:19:15.639 with Gary Kohne in which Gary Cohne suggested that the 0:19:15.800 --> 0:19:20.280 tax reform plan will be a perfect example of trickle 0:19:20.359 --> 0:19:25.320 down economics. By helping the rich and businesses, it will 0:19:25.440 --> 0:19:28.960 mean higher pay for the average worker. From what you've seen, 0:19:29.280 --> 0:19:33.920 do you think there's any truth to that, well, you know, look, 0:19:33.960 --> 0:19:36.160 there's a little bit of truth to it. But it's 0:19:36.200 --> 0:19:40.120 now been hotly debated or relitigated within the economics community 0:19:40.200 --> 0:19:42.200 for the last few weeks, as you guys have undoubtedly 0:19:42.280 --> 0:19:44.720 followed and saw on it, and I think by far 0:19:44.880 --> 0:19:47.879 the better argument is that the is that the share 0:19:48.000 --> 0:19:50.600 of any kind of corporate tax cut that would actually 0:19:50.640 --> 0:19:52.680 go to the workers versus go to the capitalists like 0:19:52.800 --> 0:19:55.800 myself is very small. This idea that it's going to 0:19:55.920 --> 0:19:58.760 raise family incomes by four thousand dollars, and all this, 0:19:59.160 --> 0:20:02.399 I think has been has been thoroughly and completely proven 0:20:02.480 --> 0:20:07.719 to be ridiculous. So does it Who gets something out 0:20:07.800 --> 0:20:09.879 of this? Obviously there's a lot in there for Donald 0:20:09.880 --> 0:20:13.760 Trump and his family, but who else? Owners of capital 0:20:13.840 --> 0:20:15.200 get a lot out of this? And if you want 0:20:15.240 --> 0:20:17.480 to know why the stock market is up seventeen percent 0:20:17.560 --> 0:20:19.560 or wherever it is at the moment for the year, 0:20:19.760 --> 0:20:21.640 a lot of this obviously, and part of why it's 0:20:21.680 --> 0:20:24.240 been week the last few days as anticipation of a 0:20:24.320 --> 0:20:27.600 significant corporate rate cut that would flow right down directly 0:20:27.720 --> 0:20:30.720 to the EPs line, ray share prices and those of 0:20:30.800 --> 0:20:33.600 us who own shares, which is a relatively small fraction 0:20:33.640 --> 0:20:35.800 of the country would be a good bit better off. 0:20:36.160 --> 0:20:39.960 The debate I find extraordinary, and it is to me 0:20:40.320 --> 0:20:45.000 a debate of a plutocracy. Are we a national plutocracy? 0:20:45.520 --> 0:20:48.200 It's interesting, I think, and this is gonna sound very partisan, 0:20:48.320 --> 0:20:51.479 but I think the Republicans have managed to operate as 0:20:51.480 --> 0:20:55.200 a plutocracy while pretending that they are something else that 0:20:55.320 --> 0:20:57.120 there for the middle class, that they want to help 0:20:57.160 --> 0:21:00.560 the average American, they want to help the forgotten Trump voter, whatever. 0:21:01.119 --> 0:21:04.280 But as we saw in healthcare, people didn't ultimately buy it. 0:21:04.760 --> 0:21:07.320 And I think in the case of tax reform, as 0:21:07.400 --> 0:21:09.760 this unfolds, as you get more and more dispassionate and 0:21:09.840 --> 0:21:12.960 now you know nonpartisan analyses from Tax Policy Center and 0:21:13.640 --> 0:21:16.639 Committee for Responsible Federal Budget and people like that, I 0:21:16.800 --> 0:21:20.000 think that the public will figure out that there is 0:21:20.119 --> 0:21:23.159