WEBVTT - M&A Volumes Peaked in 2015 Says Bory 0:00:00.720 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jai Ley. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:31.720 Bloomberg dot Com, and of course on the Bloomberg. John, 0:00:31.920 --> 0:00:34.240 you know that there's Germany, which is a huge deal, 0:00:34.280 --> 0:00:37.280 way bigger than the US press is given it. And 0:00:37.320 --> 0:00:39.479 there's the budget in the United Kingdom. I guess we've 0:00:39.479 --> 0:00:42.680 got to go like we did yesterday and Arsenal Tottenham. 0:00:42.720 --> 0:00:45.559 The budget process in the United Kingdom, John, seems so 0:00:45.680 --> 0:00:48.960 different than over here. What's a distinctive feature from the 0:00:49.040 --> 0:00:51.479 lad from Coventry. Well, it's a parliamentary system and I 0:00:51.479 --> 0:00:53.159 think it's a lot easier to execute the budget in 0:00:53.200 --> 0:00:55.560 the United Kingdom than it is here in the United States. 0:00:56.000 --> 0:00:57.640 For one, I mean there's so many people that have 0:00:57.720 --> 0:00:59.800 told me when I first moved over here, when they 0:01:00.000 --> 0:01:02.000 reduce the budget here in the United States, it's a 0:01:02.040 --> 0:01:04.160 little bit different because it takes a long long time 0:01:04.200 --> 0:01:06.560 to actually get any kind of approval. In the UK, 0:01:07.080 --> 0:01:09.920 you have a majority in parliament, the chance to introduces 0:01:09.959 --> 0:01:12.920 the budget, and it's kind of just done. You accept 0:01:12.959 --> 0:01:14.960 what comes through and then that's it through the term 0:01:14.959 --> 0:01:17.800 of parliament. Very good one, and then they redo it 0:01:17.840 --> 0:01:20.440 the following year. Well spreads are in I mean, you 0:01:20.440 --> 0:01:21.840 know that's where we are they going to deal with 0:01:21.840 --> 0:01:23.520 that in the United Kingdom and EVERYWHERELSE, Why don't you 0:01:23.560 --> 0:01:27.319 bring in our gentleman from Wells Fargo, John George Bori, 0:01:27.640 --> 0:01:30.960 joining us now of course to BC Securities Global Equity 0:01:31.000 --> 0:01:33.120 strategists on on the market. George is great to have 0:01:33.120 --> 0:01:35.920 you with us on the program. Looking at the situation 0:01:36.520 --> 0:01:38.959 at the moment, tom as I'm looking at the markets, 0:01:39.840 --> 0:01:44.520 I'm looking at a situation where things futures are positive 0:01:44.600 --> 0:01:48.640 at the moment by about sixty eight points, futures up 0:01:48.640 --> 0:01:52.000 by about six or seven points. The story for me 0:01:52.960 --> 0:01:56.280 looking at the situation in the United States is whether 0:01:56.320 --> 0:01:59.279 they get tax reformed done? Is that going to happen? 0:01:59.720 --> 0:02:02.800 And it's it gonna be the bill that we connrety see. Yeah, thanks, 0:02:03.000 --> 0:02:05.280 it's good to be on the show this morning. You 0:02:05.280 --> 0:02:08.160 know the tax bill, you know it, something is going 0:02:08.200 --> 0:02:10.120 to get done. People keep saying that. I think it's 0:02:10.160 --> 0:02:12.640 been repeated over and over that certainly our firm view 0:02:12.880 --> 0:02:15.320 and that's what we expected. We don't think it's sort 0:02:15.360 --> 0:02:18.440 of what is exactly proposed today. You know, we're going 0:02:18.520 --> 0:02:23.080 through the process of iteration between the House and the Senate. 0:02:23.440 --> 0:02:25.680 Um what seems very likely. It's it's sort of a 0:02:25.720 --> 0:02:28.520 pro it's a pro business tax bill, likely to implement 0:02:28.600 --> 0:02:32.560 meaningful tax cuts for corporations, and it's it's attempting to 0:02:32.600 --> 0:02:38.000 incentivize companies to both bring money home through repatriation and 0:02:38.040 --> 0:02:40.640 reinvest that money here in the US. UM. You know, 0:02:40.720 --> 0:02:43.040 I balanced that should be a good thing, but the 0:02:43.160 --> 0:02:46.600 question of whether it ultimately gets done is probably on 0:02:46.639 --> 0:02:48.640 the other side of the ledger when you think about 0:02:48.680 --> 0:02:51.280 what's happening with individuals. That's my fault. We have a 0:02:51.280 --> 0:02:54.640 surveillance correction here. I told John Farrow's HSBC, and I 0:02:54.720 --> 0:02:57.400 was I was looking east wells Fargo is like the 0:02:57.440 --> 0:03:00.720 stage coaches, John, wherever you go there have age coaches 0:03:01.040 --> 0:03:05.399 and it's far far west in San Francisco. But HSBC 0:03:05.600 --> 0:03:07.600 is farther west across the Pacify that you have to 0:03:07.600 --> 0:03:11.280 get to Asia's home. Yeah, completely went down in flames 0:03:11.280 --> 0:03:14.760 on that excuse, right, No, I mean, and so I 0:03:14.800 --> 0:03:18.480 think tax reform becomes absolutely pivotal for for next year 0:03:18.520 --> 0:03:20.560 and in the corporate bondmark in the area that that 0:03:20.600 --> 0:03:23.200 I focus on, you know that that becomes a very 0:03:23.240 --> 0:03:25.960 big issue. So what a company is gonna do with 0:03:26.160 --> 0:03:29.200 a that that tax cut and then ultimately with access 0:03:29.240 --> 0:03:31.440 to sort of this money they have sitting all over 0:03:31.480 --> 0:03:34.239 the world, and our basic expectation is they're going to 0:03:34.360 --> 0:03:36.920 try and use it. They're gonna lever up that saved 0:03:36.960 --> 0:03:39.560 earnings from a tax cut. They're gonna lever up that 0:03:39.800 --> 0:03:43.440 cash that sits overseas and in various jurisdictions, and that 0:03:43.480 --> 0:03:46.000 could drive a little bit of investment here in the US. 0:03:46.040 --> 0:03:47.600 But I think what it's really going to drive is 0:03:47.640 --> 0:03:50.120 a big increase in M and A. UM. You know, 0:03:50.240 --> 0:03:54.960 they're they're a whole. That's fascinating because I T and 0:03:55.040 --> 0:03:58.240 T is fronts and cents of worldwide. Today. A big 0:03:58.280 --> 0:04:00.600 conversation about whether that deal was going to get blocks. 0:04:00.640 --> 0:04:03.880 We thought this administration would have the doors open for 0:04:03.960 --> 0:04:06.320 some big deals if these companies bring that money home 0:04:06.400 --> 0:04:07.960 and want to do big M and I Are you 0:04:08.040 --> 0:04:11.480 confident that it gets done well? I think certainty for 0:04:11.480 --> 0:04:15.040 for tax reform is important, and I think if you 0:04:15.080 --> 0:04:17.880 look at m and A activity over the past year. Uh, 0:04:17.880 --> 0:04:20.840 it's down about from the prior year. We peaked in 0:04:21.000 --> 0:04:23.200 M and A volumes back in two thousand and fifteen. 0:04:23.320 --> 0:04:25.760 Sixteen was a pretty good year as well. This year 0:04:25.800 --> 0:04:28.400 has been a notable slowdown. And I think there's there's 0:04:28.440 --> 0:04:30.960 sort of two issues at play. One is political, as 0:04:31.000 --> 0:04:34.440 you mentioned, and that has a few very deal specific 0:04:34.520 --> 0:04:37.320 issues attached to it. But the other issue is is 0:04:37.360 --> 0:04:40.800 really just what is your tax structure? A lot of 0:04:40.880 --> 0:04:42.960 a lot of um M and A deals are are 0:04:43.040 --> 0:04:47.200 driven around how how tax the tax structure sets up 0:04:47.279 --> 0:04:50.600 for the deal. Once that's clear, then you have a 0:04:50.640 --> 0:04:54.560 lot of industries, several very big industries that have a 0:04:54.640 --> 0:04:57.640 significant amount of pipeline um M and A activity that 0:04:57.680 --> 0:05:00.600 I think ultimately comes through George Boy this with Wells 0:05:00.640 --> 0:05:03.960 Fargo how to credit strategy. George, Wells Fargo has got 0:05:03.960 --> 0:05:09.120 a huge platform, a nationwide platform. What is the analysis 0:05:09.120 --> 0:05:12.040 of the entire team, your credit strategy, your economics of 0:05:12.120 --> 0:05:15.359 John Sylvia and the rest. What is the analysis of 0:05:15.400 --> 0:05:19.159 this tax cut bill if it actually goes through, does 0:05:19.200 --> 0:05:23.800 it really does it help business for you? Forget about 0:05:23.839 --> 0:05:26.720 the middle class, forget about John Farrell forget about me, 0:05:26.760 --> 0:05:31.080 forget about Rich Truman. Does it help businesses? It's called 0:05:32.160 --> 0:05:34.839 I think on balance it should, and I think what 0:05:34.680 --> 0:05:37.760 it what it can do? Um. You know, a material 0:05:37.839 --> 0:05:41.320 tax cut to corporations improves cash flow, and then it 0:05:41.400 --> 0:05:44.039 really becomes what do companies do with the cash flow? 0:05:44.200 --> 0:05:47.719 I think the actual economic impact will be modest, you know, 0:05:47.760 --> 0:05:50.440 a few tents of a few of a percent over 0:05:50.480 --> 0:05:53.440 a couple of years. UM. That's sort of the actual 0:05:53.520 --> 0:05:57.720 economic impact. But corporate activity should actually kind of kind 0:05:57.720 --> 0:05:59.400 of pick up, and I think that's where you could 0:05:59.400 --> 0:06:02.479 start to see, you know, maybe the momentum impact of 0:06:02.480 --> 0:06:05.040 of of a tax change. The The other issue is 0:06:05.080 --> 0:06:08.640 it does incentivized companies um to spend a little bit 0:06:08.640 --> 0:06:11.719 more on capital spending that is a mild positive, and 0:06:11.839 --> 0:06:14.640 to utilize kind of these big pools of cash that 0:06:14.680 --> 0:06:17.040 are that are sitting all around the world. And then 0:06:17.040 --> 0:06:19.359 the last bit, which doesn't really I didn't get a 0:06:19.360 --> 0:06:23.599 lot of attention, UM, is it's it's intended to pull 0:06:24.080 --> 0:06:26.880 money back to the US. A corporate tax rate of 0:06:27.640 --> 0:06:32.880 for America makes the US corporate structure very competitive versus 0:06:32.880 --> 0:06:35.440 the rest of the developed world and even some of 0:06:35.480 --> 0:06:38.279 the not so developed world, so that that low cost 0:06:38.360 --> 0:06:42.479 base could actually kind of pull some investment into the country. 0:06:42.680 --> 0:06:45.320 To be fair, it is a redistribution of taxes, and 0:06:45.400 --> 0:06:48.200 so you know, sort of that's where the economic impact 0:06:48.440 --> 0:06:51.320 is a little uncertain because the individual doesn't benefit as 0:06:51.400 --> 0:06:54.800 much as you know, maybe you know, the economy would rely. 0:06:54.920 --> 0:06:56.760 I don't know what your males like, John John Farrell, 0:06:56.839 --> 0:07:00.719 My male's brutal in this vicious and was sent. People 0:07:00.839 --> 0:07:03.440 can't stand it. It's a top to a bout them 0:07:04.040 --> 0:07:08.400 every politics. People are really upset about these two proposals. 0:07:08.839 --> 0:07:11.040 I just think looking at the corpora sana things. George, 0:07:11.200 --> 0:07:14.400 you mentioned the competitiveness of US companies. When I look 0:07:14.440 --> 0:07:18.280 at US multinationals, I don't see a competitiveness problem. They're 0:07:18.280 --> 0:07:21.679 dominating pretty much every sector therein So what's the argument 0:07:21.680 --> 0:07:24.200 now that we need to come down Why? Well, I 0:07:25.000 --> 0:07:27.920 think it it helps improve the competitiveness of the US. 0:07:28.040 --> 0:07:31.240 It actually draws capital to the US. It creates a 0:07:31.240 --> 0:07:36.720 competitive capital structure on an already competitive capital base, and 0:07:36.840 --> 0:07:39.040 I think that you know, that ensures that you know, 0:07:39.200 --> 0:07:44.160 US economic competitive competitiveness kind of persist for the foreseeable future. 0:07:44.720 --> 0:07:47.800 And I think there's Also there's a much bigger rotation 0:07:47.840 --> 0:07:50.080 here that governments sort of around the world have been 0:07:50.120 --> 0:07:53.200 evolving to and that's you know, less taxes on corporations 0:07:53.200 --> 0:07:56.400 and more taxes on individuals, and the US is trying 0:07:56.400 --> 0:07:58.800 to thread that needle, if you will, and take it 0:07:58.920 --> 0:08:03.640 one step further. How much price down should I enjoy 0:08:03.800 --> 0:08:07.040 before I sweat? Is it like price down of a 0:08:07.120 --> 0:08:11.200 year's coupon, price down of two years? What does price 0:08:11.280 --> 0:08:14.880 down become painful down? Yeah? Yeah, pain you know, I 0:08:14.960 --> 0:08:18.160 think you're talking about price down yields up. That would 0:08:18.200 --> 0:08:22.600 be true. That's very good, John, John Ferrell Maker, Michael Barr. 0:08:22.640 --> 0:08:25.400 This is too complicated for we just got a bump. 0:08:29.720 --> 0:08:33.040 When the pain set it, I think it depends on 0:08:33.120 --> 0:08:35.200 the pace of the pain. You can you can be 0:08:35.440 --> 0:08:37.120 you know, it's sort of cut by a foul, you know, 0:08:37.200 --> 0:08:40.640 death by a thousand cuts. You know, sometimes it hurts 0:08:40.640 --> 0:08:43.120 a little over a long period of time versus one 0:08:43.200 --> 0:08:46.439 fell swoop. And that seems to be the environment we 0:08:46.440 --> 0:08:49.640 we seem to be moving into. We're not quite there yet. 0:08:49.760 --> 0:08:52.280 So when you look at the front end of the curve, 0:08:52.320 --> 0:08:54.199 I think it's a good good example of that. It 0:08:54.360 --> 0:08:57.480 yields have crept a little bit higher. Believe, price went down. 0:08:57.520 --> 0:09:01.959 Price went down, and and you are seeing some dislocations. 0:09:02.840 --> 0:09:05.240 I think, I think hot some of the dislocations you've 0:09:05.240 --> 0:09:07.520 seen in the high yield market over the last couple 0:09:07.520 --> 0:09:11.079 of weeks are a function of those higher yields and 0:09:11.200 --> 0:09:15.160 lower price. Some dislocations, as George Bori talked for, somebody 0:09:15.240 --> 0:09:20.600 just gave up their bonus, some two institutional portfolio. George Bori, 0:09:20.720 --> 0:09:23.760 thank you so much for spreading the glee on the Gloom. 0:09:24.000 --> 0:09:26.680 He is with Wells Fargo head of Credit Strategy. We 0:09:26.720 --> 0:09:30.800 greatly appreciate his attendance. It is a classic book. And 0:09:31.200 --> 0:09:33.560 John Farrell, I'm sorry to say next year will be 0:09:33.600 --> 0:09:37.920 thirty years on Jeffrey Burnba on the outstanding Jeffrey Burnbaum 0:09:37.920 --> 0:09:43.800 with the outstanding Allen Murray showdown at Gucci Gulch. Steve 0:09:43.840 --> 0:09:47.720 Bell has never worn Gucci, but he was there and 0:09:47.800 --> 0:09:51.400 he's with us now. He's with a Bipartisan Policy Center 0:09:51.600 --> 0:09:55.760 and was with Senate Budget in six and is truly 0:09:55.920 --> 0:09:58.800 one of the wise men of Washington. Steve Bell, what 0:09:58.840 --> 0:10:01.839 was it like two weeks four they got this thing 0:10:01.960 --> 0:10:06.440 through the House in what was it like. I think 0:10:06.440 --> 0:10:11.480 it was great enthusiasm. Um. Everyone knew that the votes 0:10:11.559 --> 0:10:15.800 were there. You had bipartisan support, is support from the 0:10:15.800 --> 0:10:19.400 President of course, um. And I think there was a 0:10:19.480 --> 0:10:24.600 really upbeat mood. Uh. When you get something bipartisan like that, 0:10:25.080 --> 0:10:28.960 you have Republicans and Democrats and the executive branch all 0:10:29.000 --> 0:10:32.120 on the same page, you really can do something historic 0:10:32.200 --> 0:10:36.000 like act. And I think that's the big difference between 0:10:36.120 --> 0:10:39.559 now and thirty years ago. Within this, can you predict 0:10:39.640 --> 0:10:44.400 with your immense experience experience of Baker, Dashville, Mitchell and 0:10:44.440 --> 0:10:50.319 the rest, can you predict the next four weeks? Yeah, 0:10:50.360 --> 0:10:54.280 I'm going to give give it a shot. Actually. One, 0:10:54.559 --> 0:10:56.320 I think they're going to run into a lot of 0:10:56.360 --> 0:10:59.560 problems on the floor of the Senate with the tax bill, 0:10:59.760 --> 0:11:03.240 over reasons that not many people have mentioned. One, the 0:11:03.480 --> 0:11:06.960 likelihood that this will increase the deficit much larger than 0:11:07.040 --> 0:11:11.199 people expect. Number Two, I think they know that if 0:11:11.240 --> 0:11:14.120 the deficit estimates go up, it's going to make it 0:11:14.280 --> 0:11:17.400 very hard to pass all the spending bills that keep 0:11:17.440 --> 0:11:20.199 the government open just three weeks from now Tom eight. 0:11:21.280 --> 0:11:24.280 And at the bottom of it, there are elements in 0:11:24.320 --> 0:11:29.720 here which seem to favor um real estate high income 0:11:30.160 --> 0:11:36.320 UH recipient high income earns, and the possibility that the 0:11:36.360 --> 0:11:40.880 fact that certain provisions may advantage the real estate industry 0:11:41.200 --> 0:11:44.800 could make Democrats start to talk about the president's empire 0:11:45.240 --> 0:11:47.920 in real estate again, as they did last year. So 0:11:48.000 --> 0:11:50.920 I you know, I know that we'll solve state and 0:11:51.000 --> 0:11:54.559 local in some way, will solve the mortgage interest deduction 0:11:54.640 --> 0:11:57.200 in some way, So we'll take care of those things. 0:11:57.200 --> 0:11:59.920 And that's what's been in the news. But underlying all 0:12:00.120 --> 0:12:03.800 this are these generalized bears. What is this going to 0:12:03.960 --> 0:12:06.760 do to deficit and debt? Because we have a debt 0:12:06.800 --> 0:12:11.000 ceiling that's about ready to hit us probably early next year, 0:12:11.760 --> 0:12:14.160 and you know, if we get if we get to 0:12:14.200 --> 0:12:17.640 a trillion dollar deficit estimates, which I think we will 0:12:17.920 --> 0:12:21.040 for f y n um, that's really want to bring 0:12:21.080 --> 0:12:23.560 people's attention back to that, Steve, Steve, let me bring 0:12:23.559 --> 0:12:26.080 in John Farrell, who wears glasses that look like Howard 0:12:26.120 --> 0:12:31.480 Baker's from another time, and Steve about help me out here. 0:12:31.880 --> 0:12:37.160 What's the rush? Oh, the Republicans need This is really simple, 0:12:37.200 --> 0:12:40.160 and it's really kind of funny. They are frantic to 0:12:40.280 --> 0:12:46.800 get something done, so they don't really care about what 0:12:46.840 --> 0:12:49.800 people say about Roy Moore. All they want is to 0:12:49.840 --> 0:12:54.000 get this done before if More loses in Alabama, before 0:12:54.120 --> 0:12:57.760 his Democratic UH opponent would be seated in the Senate, 0:12:57.760 --> 0:13:01.360 that would be about December of the rush. One, we 0:13:01.440 --> 0:13:04.600 got to do something because they're frantic. Two, we have 0:13:04.720 --> 0:13:08.640 to do it before December because we'll lose one vote 0:13:08.800 --> 0:13:11.760 in the Senate, which is critical. And number three, we 0:13:11.800 --> 0:13:15.120 have to be honest about this bill. This is a 0:13:15.160 --> 0:13:19.040 bill that was designed to cut taxes for business and 0:13:19.160 --> 0:13:22.480 admirable goal, but they said, you know that's not going 0:13:22.520 --> 0:13:24.520 to fly in this day and age, So we have 0:13:24.600 --> 0:13:26.440 to put in some stuff that looks like we're helping 0:13:26.480 --> 0:13:31.160 the average worker. And that's really, in my view, strategically 0:13:31.160 --> 0:13:33.360 how it was concocted. So I think for many people, 0:13:33.480 --> 0:13:36.160 they're already looking ahead to the next election, the midterms. 0:13:36.720 --> 0:13:40.520 What are the consequences if this bill gets rushed through 0:13:40.960 --> 0:13:45.640 in the midterms next year. Well, Number one, Republicans think 0:13:45.679 --> 0:13:48.120 it will really enhance their chances to retain the House 0:13:48.160 --> 0:13:51.160 and Senate, especially in the House, whether there are there 0:13:51.200 --> 0:13:55.680 are some questions about retention. Number two Democrats and we're 0:13:55.720 --> 0:13:58.760 here to buy pars and policy center have active democrats 0:13:58.800 --> 0:14:01.160 as well as active you do have democrats. You have 0:14:01.200 --> 0:14:06.760 democrats in the building. Oh my goodness, Yes, surveillance break exclusive. 0:14:07.880 --> 0:14:09.679 And one of the very best of them said to me, 0:14:09.960 --> 0:14:11.880 you guys think you should pass this because it will 0:14:11.920 --> 0:14:14.480 help you in two thousand eighteen. We think you should 0:14:14.480 --> 0:14:16.880 pass it because it's gonna help us in two thousand eighteen. 0:14:17.000 --> 0:14:19.200 And what do you think, Well, I think it's going 0:14:19.240 --> 0:14:22.560 to help the Democrats. I think this bill, by the 0:14:22.560 --> 0:14:26.560 time it's cost it out next year by independent people 0:14:26.600 --> 0:14:30.240 liked a Congressional Budget office, by the time the distribution tables, 0:14:30.240 --> 0:14:34.440 who gets how much benefit from it? I think this 0:14:34.520 --> 0:14:37.360 will lead to a lot of nice thirty second ads 0:14:37.360 --> 0:14:40.200 and a lot of social media adds. So, Steve, when 0:14:40.240 --> 0:14:44.480 these senateces go back to that constituents this week, does 0:14:44.520 --> 0:14:48.680 the penny drop. No. I think they have got talking 0:14:48.720 --> 0:14:51.000 points you will get and you saw the talking points 0:14:51.040 --> 0:14:53.360 on the House floor. You're going to get a thousand 0:14:53.400 --> 0:14:56.640 dollar tax break. I promise you. They will not say 0:14:56.760 --> 0:15:00.800 that that tax break is going to expire in seven years. Uh, 0:15:01.040 --> 0:15:03.160 We're going to have a cut for business and we 0:15:03.280 --> 0:15:06.720 have thousands and thousands of new jobs. They won't say 0:15:06.720 --> 0:15:11.840 we're already at the lowest unemployment in decades, so they 0:15:11.880 --> 0:15:14.320 will be able to get away. I think this week, 0:15:14.800 --> 0:15:18.920 with people's attention really devoted to Thanksgiving and stuff, I 0:15:18.920 --> 0:15:22.280 think they'll get away this week without a lot of kickback. 0:15:23.160 --> 0:15:26.720 I think two weeks from now, UM, when we know 0:15:26.840 --> 0:15:28.920 the results, three weeks from now, when we know the 0:15:28.920 --> 0:15:33.720 results of the Alabama election. UM, when we have had 0:15:33.800 --> 0:15:36.480 people really take a look at this bill and they 0:15:36.520 --> 0:15:40.800 read editorials in the papers saying, hey, we'll get a 0:15:40.800 --> 0:15:43.120 big tax that. Like you said, it's so and so 0:15:43.160 --> 0:15:48.120 and so and so, I think then the erosion will start. Say. 0:15:48.200 --> 0:15:50.240 Something we've explored on this program in the last twenty 0:15:50.240 --> 0:15:52.920 four hours is the politics of the campaign trail and 0:15:52.960 --> 0:15:56.680 the economics that underpend the win of President Donald Trump. 0:15:57.360 --> 0:16:01.360 We seem to have a big divorce between that and 0:16:01.400 --> 0:16:03.800 the policies they're executing down in DC. At the moment, 0:16:04.120 --> 0:16:06.560 it does not appear to me that this tax bill 0:16:06.600 --> 0:16:10.400 would address the inequality that came up on the campaign trail. 0:16:11.080 --> 0:16:14.920 Does it address those things for you? Oh? No, I 0:16:14.960 --> 0:16:17.760 think when you take a look at some of the details. UM. 0:16:18.040 --> 0:16:21.760 For example, if you're a graduate assistant you're making twenty 0:16:22.200 --> 0:16:25.240 dollars a year, you know, to be a graduate assistant, 0:16:26.120 --> 0:16:30.400 and they forgive you your tuition very now, tens of 0:16:30.440 --> 0:16:34.160 thousands of people do that. Now, under this bill, you 0:16:34.200 --> 0:16:37.520 would be taxed on the tutition benefits. So let's say 0:16:37.560 --> 0:16:41.040 that tuition was forty, you would be taxing at forty, 0:16:41.520 --> 0:16:45.720 which means you wouldn't be making dollars for your work. Okay, well, 0:16:45.720 --> 0:16:48.160 Steve Bell, let's take this to Washington. Good morning, nine 0:16:47.880 --> 0:16:51.640 and nine one FM, Washington. Let's say that graduate assistant 0:16:51.720 --> 0:16:57.360 is it American University? Killer school outside Washington. A lot 0:16:57.400 --> 0:16:59.600 of people good, good morning, David Gregory. A lot of 0:16:59.640 --> 0:17:02.960 people go there who really get things done down the road. 0:17:03.760 --> 0:17:06.920 Is this just a mean spirited idea? I mean, you've 0:17:06.960 --> 0:17:10.960 been doing this since time began? Where does this what's 0:17:10.960 --> 0:17:13.000 the right word, John, there's a British word for this, Like, 0:17:13.320 --> 0:17:18.040 where does this this mean spiritedness come from little tenC 0:17:18.200 --> 0:17:24.640 weency thing to the next tenC weency thing? Is this original? Oh? 0:17:24.680 --> 0:17:27.360 It's original? And and and frankly it's because they need 0:17:27.359 --> 0:17:29.959 the money. It's just that, come on, well, what are 0:17:29.960 --> 0:17:31.879 they going to get out of a graduate student of 0:17:31.920 --> 0:17:36.160 American University Coast to coast a couple of million bucks. Yeah, 0:17:36.200 --> 0:17:41.520 not very much. But I there are provisions in here 0:17:41.560 --> 0:17:44.199 which make you scratch your head. I agree that you 0:17:44.240 --> 0:17:48.600 wonder who is mad at the university's Well, apparently somebody 0:17:49.640 --> 0:17:53.200 on the Senate Finance Committee or this Finance Committee staff 0:17:53.720 --> 0:17:56.239 really doesn't like this break and doesn't like perhaps, as 0:17:56.240 --> 0:17:59.640 you said, American University. So I I've got to tell 0:17:59.680 --> 0:18:02.840 you that one has caused a lot of discussion among 0:18:02.880 --> 0:18:06.639 the universities because he could have a significant impact on 0:18:06.720 --> 0:18:11.280 gradual resistance and graculate education. There's some other things in here. 0:18:11.880 --> 0:18:15.240 Let's take a look at this so called transfer. This 0:18:15.280 --> 0:18:18.000 is a crazy thing. You buy a piece of art 0:18:18.040 --> 0:18:21.040 for five million, now it's worth twenty. You come to 0:18:21.080 --> 0:18:23.240 me and you say, Belle, you've got something worth twenty. 0:18:23.240 --> 0:18:26.000 I want to trade you even under the law now 0:18:26.800 --> 0:18:29.800 you're from five to twenty, but you weren't taxed on it. 0:18:29.840 --> 0:18:33.359 May we just considered ten transfer. There's a language in 0:18:33.359 --> 0:18:36.679 this bill. There's language in this bill that prohibits that 0:18:38.359 --> 0:18:42.560 takes away your ability just to do that trade except 0:18:43.160 --> 0:18:47.960 real estate development. That's interesting, isn't it. Steve, you gotta 0:18:48.000 --> 0:18:49.440 leave it there, Steve Bell, thank you so much so 0:18:49.520 --> 0:18:54.840 Bipartisan Policy Center today with US right now, Tobias Levkovich 0:18:55.480 --> 0:18:57.320 of City Group, and Tobias, I really want to go 0:18:57.359 --> 0:19:01.480 to the wheelhouse, which is these city groups surprise Index. 0:19:01.880 --> 0:19:04.879 It's actually very cool. A lot of people outside City 0:19:04.880 --> 0:19:09.080 Group follow it. What what does it say it right now? UM? 0:19:09.160 --> 0:19:11.240 So the data is actually pretty strong. If you look 0:19:11.280 --> 0:19:14.600 at the City US Economic Surprise Index, UM, it's kind 0:19:14.600 --> 0:19:16.840 of nearing five year highs. That gets me a little 0:19:16.880 --> 0:19:19.080 bit concerned that it could roll because there is some 0:19:19.280 --> 0:19:23.680 inherent mean reversion to the model. UM. But I'm also 0:19:23.720 --> 0:19:26.560 hoping the intellectual capital comment was not directed to me. 0:19:27.480 --> 0:19:29.960 It's very much directed. It makes the boss don't worrying 0:19:29.960 --> 0:19:33.000 about that going into next year. It's kind of shut 0:19:33.040 --> 0:19:35.440 your eyes and hope for more from what I'm saying 0:19:35.480 --> 0:19:39.639 in some of the forecasts on SMP year. So I 0:19:39.680 --> 0:19:42.480 think it's, you know, a question about what you think 0:19:42.920 --> 0:19:47.680 the concerns around FED policy, for example, relative to economic trend. 0:19:47.720 --> 0:19:50.800 In other words, if economic trend is actually looking stronger, 0:19:50.800 --> 0:19:53.560 and most of our leading indicators suggest it is, then 0:19:53.640 --> 0:19:55.560 what's the pace at which the Fed moves and do 0:19:55.600 --> 0:19:59.280 you kind of cap off the opportunity. There's also some 0:19:59.359 --> 0:20:01.720 element of we're bringing forward some of the next year's 0:20:01.720 --> 0:20:05.120 return into this year as a result of, for example, 0:20:05.240 --> 0:20:08.080 tax policy initiatives to bias. I think a big thing 0:20:08.119 --> 0:20:10.439 for money is waiting for that late cycle behavior that 0:20:10.560 --> 0:20:13.840 melts up in equity market. A lot of people thought 0:20:13.880 --> 0:20:17.080 it would happen this year. We've not seen it. Are 0:20:17.119 --> 0:20:19.080 you starting to see signs of it? At least that 0:20:19.119 --> 0:20:21.240 we're at that late cycle mounts up phase in the 0:20:21.320 --> 0:20:23.800 in the bull market, So we haven't really seen signs 0:20:23.840 --> 0:20:26.160 of in terms of big money flow coming in, which 0:20:26.200 --> 0:20:28.080 is where the meltuple would come. We are seeing our 0:20:29.200 --> 0:20:32.879 for example, are panickyphoria UH index or model which tracts 0:20:33.000 --> 0:20:36.000 sentiment in a variety of ways, starting to edge higher. 0:20:36.000 --> 0:20:38.080 It's still in neutral territory, but it's the upper end 0:20:38.119 --> 0:20:40.719 of neutral. You've said, that's sending someone the yellow caution 0:20:40.840 --> 0:20:43.919 sign at the moment, but not a red flag quite yet. 0:20:44.359 --> 0:20:45.919 Um So I do see in that sense, but not 0:20:45.960 --> 0:20:48.040 in the money flow. And I think investors are caught. 0:20:48.119 --> 0:20:51.000 We refer to it as being caught between two very 0:20:51.000 --> 0:20:54.000 powerful forces foam O, the fear of missing out, and 0:20:54.119 --> 0:20:57.000 foam move the fear of messing up. So they're there, 0:20:57.080 --> 0:20:59.639 they're you know, they had a nice run, they're little 0:20:59.720 --> 0:21:03.480 do overstair welcome concern kind of question pops up or 0:21:03.960 --> 0:21:05.640 did I miss the run? Do I come in now? 0:21:05.840 --> 0:21:07.640 And then it comes down and I mess up? Well, 0:21:07.720 --> 0:21:10.159 let's do the look back. But now twelve months trailing 0:21:11.200 --> 0:21:16.359 return SMP return NASDAQ four could almost round it up 0:21:16.400 --> 0:21:20.879 to return. I've been told that it's a single digit world. 0:21:21.520 --> 0:21:24.560 I'm not observing that. When does it become a single 0:21:24.560 --> 0:21:27.480 digit world? So what we suspect next year? But part 0:21:27.560 --> 0:21:29.639 of it is also we've had double digit earnings growth 0:21:29.640 --> 0:21:31.639 in the first to three quarters of the year, and 0:21:31.760 --> 0:21:33.680 up and down the income statement, you've got the same 0:21:33.760 --> 0:21:37.920 kind of constructive revenue down through the margins. It is 0:21:38.000 --> 0:21:41.119 happening that way. But it's also momentum driven. So you're seeing, 0:21:41.480 --> 0:21:44.280 for example, you sided number of statistics, but if you 0:21:44.280 --> 0:21:47.520 look at momentum driven factors, you're probably up thirty seven percent. 0:21:48.119 --> 0:21:50.760 So it's not across the board. Certain areas like energy, 0:21:50.760 --> 0:21:54.160 telecom you've lost money this year. Um. What is fascinating 0:21:54.640 --> 0:21:57.040 is if you look at the constituents of the SMP. 0:21:57.080 --> 0:21:59.080 A lot of people have talked about faying. For example, 0:21:59.480 --> 0:22:03.119 about fifty percent of the SMPI constituents have outperformed the 0:22:03.200 --> 0:22:06.159 SMP this year, so it's a very widespread rally. It 0:22:06.240 --> 0:22:08.440 is not just about four or five names. It's speaking 0:22:08.440 --> 0:22:10.640 of momentum. To Bus, it seems to me that this year, 0:22:10.880 --> 0:22:13.320 at the beginning of the year, if I'd said that's 0:22:13.320 --> 0:22:15.199 in a bubble, that's in a bubble, that's in a bubble, 0:22:15.320 --> 0:22:17.760 and you bought the bubbles, you've done pretty well this year. 0:22:17.840 --> 0:22:19.679 Someone might have said the fangs were in a bubble, 0:22:19.840 --> 0:22:22.560 You've done well. Bitcoin ev we won't go that to bus, 0:22:22.600 --> 0:22:24.760 don't worry. I could have said that was a bubble 0:22:24.840 --> 0:22:27.040 for the last five years, and you would have done 0:22:27.080 --> 0:22:29.200