November 8, 2024 • 38 mins
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Joanne Hsu, University of Michigan Surveys of Consumers Director, discusses Friday's UMich consumer confidence data. Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, discusses Paramount earnings. Danielle DiMartino Booth, CEO and Chief Strategist for QI Research, discusses Friday’s Fed decision and the markets. Erica York, Senior Economist and Research Director with Tax Foundation’s Center for Federal Tax Policy, discusses the impact of a Trump Presidency on tax policy. Barry Ritholtz, Founder of Ritholtz Wealth Management and Host of “Masters in Business” discusses the U.S election.
Hosts: Emily Graffeo, John Tucker, and Matt Miller
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Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:23):
Well of the latest reading on consumer confidence just down,
in fact, reaching a seven month high. Let's break it
down right now with Joy and Shuey, director of the
University of Michigan, surveys of consumers joining us. You're in
ann arbor, right, That's correct. So it doesn't necessarily reflect
the outcome of the election, because it looks like pretty confidence.
(00:46):
People were pretty confident about the economy of the US.
Speaker 3 (00:51):
That's correct. So I want to note that the data
that we're releasing today, the interviews ended on Monday, prior
to the election, and so what we saw on the
EU of the election and the two weeks leading into it,
consumers we're feeling much more confident about the future of
the economy. Not much change in current conditions, but in
terms of the future of the economy, we saw improvements
in terms of business conditions, personal finances, people's incomes, unemployment rates,
(01:15):
consumers were really feeling like the future of the economy
was on an upper trajectory.
Speaker 4 (01:20):
Joan, what did the survey tell us about how Americans
are thinking about the future path of inflation.
Speaker 3 (01:27):
With inflation, we saw a very slight decrease in short
one inflation expectations as well as a very small increase
in long run expectations. So consumers are broadly expecting inflation
to continue stabilizing. You know, they continue to be pretty
frustrated by high prices, though. We have over forty percent
of consumers continuing to tell us that high prices are
(01:47):
eroding their personal finances in spite of the fact that
they have fully acknowledged and noticed that inflation has slowed.
Speaker 2 (01:55):
What can we extrapolate from this about consumer spending or
anything else in terms of consumer behavior overall?
Speaker 3 (02:04):
You know, consumers have been telling us all year long
that the future of the economy is highly contingent on
the election, and so the fact that the election has
been resolved means that consumers are really starting to adjust
their views for the future, which will allow them to
plan and think more strongly about about the kinds of
purchases they want to make. Consumers have told us that
their high priced concerns for large purchases like durable goods, cars,
(02:28):
and homes, those have all eased this month, and so
things for them are headed in the right trajectory. However,
they're still feeling you know, they're still not feeling as
happy about the economy as they did prior to the pandemic.
Speaker 2 (02:43):
JO and always a pleasure. Thanks for being with us
today and Happy Friday. Joined sure that the director of
the University of Michigan surveys of consumers.
Speaker 1 (02:53):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
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say Alexa Play Bloomberg eleven thirty.
Speaker 2 (03:11):
Paramount Global, the parent of CBSTV, MTV and it namesake
Hollywood Movie Studio, reported third quarter sales that missed analyst instiments.
Let's break it down right now with our next guest, KEITHA.
Raganoth and the Bloomberg Intelligence Analyst. Thanks for being with us.
Shouldn't we really be focusing on streaming here?
Speaker 5 (03:33):
Well, we should, I mean streaming is making up only
twenty five percent of total revenue. John, but remember they
are in the midst as most of the old media companies.
Paramount is in the midst of this whole transition away
from the linear TV model to the streaming model. And
the reason we need to focus on streaming is because
up until this point, streaming was really weighing on overall profitability.
(03:56):
So we saw the streaming segment contribute to something like
two to two and a half billion dollars in losses,
and that was really pressuring overall company profitability. Now what
has happened now is we're finally seeing, you know, some
signs of a turnaround. There's some signs of hope for
the streaming business because for the second straight quarter in
(04:16):
a row, Paramount actually posted a positive profit number. So
that is definitely good news. The bad news, however, which
is kind of causing a little bit of you know,
the fall in the stock after the earnings call, is
because they said that in the fourth quarter they're again
going to go back to some amount of streaming losses. However,
(04:37):
the long term view still is that you know, the
streaming business, which is Paramount plus their streaming platform, will
be profitable in twenty twenty five, at least in the US.
Speaker 4 (04:48):
How does that stuck up with paramount streaming competitors. I
feel like these days, you go and you turn on
your Roku TV and there's maybe six or seven different
options for streaming, and I don't know if I if
Paramount is you know, the first one that comes up
on at least my suggested apps to click on.
Speaker 5 (05:08):
Now, you bring up a very very good point. I mean,
there's absolutely no doubt that, you know, Netflix has won
the streaming wars. They are the default go to option.
But when you kind of look across the board and
you look at some of the other streaming services, Paramount
definitely is there. Of course, they might not be your
first choice as you kind of gravitate to streaming, but
(05:29):
they definitely have a lot of content that people want
to watch. So they have a lot of content from
their linear TV platform itself, you know, a lot of
sports content. They're one of the streaming platforms that's pretty
sports heavy with NFL with UEFA, so people definitely like that.
And then they have some pretty good scripted content as well,
you know, whether you're talking about Star Trek or Yellowstone,
(05:50):
they have Telsa King.
Speaker 6 (05:52):
So they have a lot.
Speaker 5 (05:53):
Of you know, good pieces that people want to watch.
But you're absolutely right when it comes to scale and
streaming is you know, a game of scale. They're nowhere
near Netflix or even Disney Plus. They have only about
seventy million subscribers on their Paramount Plus platforms. Obviously the
competitive dynamics still working a little bit against Paramount. Having
said that, though, I mean, not all bad.
Speaker 2 (06:16):
What's the update with the merger with Skydance Media.
Speaker 5 (06:20):
So the sky Dance Media, I mean, of course, this
was a merger John that was in the works for
almost ever was going on and on the saga. It
is going to close sometime in the first half of
twenty twenty five, and so we're seeing that a lot
of the progress that the company has made in terms
of cutting costs, in terms of cost efficiencies, in terms
(06:41):
of restructuring, that's all the first step towards you know,
achieving the two billion dollars in annual cost synergies that
sky Dance has laid out, you know, after mergers. So
you know that will kind of happen sometime I guess
next year, and then you know, we kind of get
a whole fresh set of eyes here, you know, a
new management team, some new capital, one and a half
(07:03):
billion dollars that goes straight to you know, the balance sheet.
So all of those are definitely positives. But the hard
truth is that the backdrop continues to be very, very difficult.
Speaker 2 (07:14):
Well, is this the joint venture partner they were looking
for for streaming or something else?
Speaker 1 (07:19):
Now this is.
Speaker 5 (07:20):
Something Now, this is something else. So this is you know,
the whole the sky dance, which is you know, an
independent studio has been led of course by David Ellison
has been wanting to buy Paramount for the longest time,
and of course their main interest was really in the studio,
but then ultimately they decided that they could do something
with the entire company and kind of give it more
of this tech driven focus.
Speaker 2 (07:40):
Always a pleasure, appreciate it. Getha Ragananthan and the Bloomberg
Intelligence Analyst.
Speaker 1 (07:46):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple car Play and
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Speaker 2 (08:01):
I'm John Tucker along with Emily GRIFFEO. We are in
for Alex and Paul today. So what is the panther
ahead for the Federal Reserve after yesterday's twenty five bases
point cut. Daniel Di Martino Booth is the CEO and
the chief strategist for QI Research. Good to see you again.
Speaker 7 (08:18):
It's great to be here in studio, New.
Speaker 2 (08:20):
York on this beautiful day Friday. Thank you very much
forf So what was your takeaway from the FED meeting yesterday?
Speaker 7 (08:27):
So we were speaking offline before I came on, and
I you know, I think it was the guests.
Speaker 8 (08:32):
Indeed, indeed, I think I think.
Speaker 7 (08:34):
The version of Chair Powell who showed up yesterday was
like the Dirty Harry version, extremely succinct, very few words.
He wasn't scripted, he wasn't reading his answers, he wasn't nervous.
He was expecting all of the political angles that the
reporters were going to take, and he was ready for them,
and he cut them off at.
Speaker 8 (08:55):
The past time and again. So how are we.
Speaker 4 (08:58):
Supposed to make sense of the market action and what
is driving i mean treasury yields?
Speaker 5 (09:03):
Right now?
Speaker 8 (09:04):
We were also just talking about this.
Speaker 4 (09:05):
They've dropped about sixteen.
Speaker 7 (09:08):
Basics sixteen basis points on the tenure in a matter
of two days. In fact, the ten year dropped four
basis points the minute he was asked by a reporter
that if you're asked to step down by President Trump,
will you And he said no, And so she rephrased
the question and he looked over his glasses and he
said no. And at that minute, the tenure yield drop
(09:29):
four basis points. So I think I think markets right
now are celebrating continuity and steadiness and the fact that
I think the Fed's going to continue to cut rates.
Speaker 8 (09:42):
I really do see that as a path forward.
Speaker 7 (09:44):
I know a bunch of sales side banks this morning
have come out and said they're going to be much
fewer cuts in twenty twenty five. As a nine year
veteran of the FED, it's extremely rare for us to
have seen the pause in the hiking cycle. It would
be nearly unprecedented to see a paw in an easing cycle.
We tend to see unemployment rates tick up in chunks,
(10:07):
and we were just a smidge of a percentage away
from the unemployment rate having been four point two percent
in October, and we know that layoffs have picked up
appreciably since September, so we can see what's coming.
Speaker 8 (10:21):
And I think.
Speaker 7 (10:21):
Powell leaned on the employment mandate yesterday with good reason,
and he said, I'm not making any decisions. There's two
inflation reports, there's one employment report. Before we meet again, I'll.
Speaker 8 (10:32):
Let you know.
Speaker 2 (10:33):
Can the Fed be at all preemptive when it comes
to it's not their mandate, but fiscal policy.
Speaker 8 (10:41):
Well, the answers no.
Speaker 7 (10:43):
When you land on day one at the Fed, you
learn two things. You learn about the lag effect of
monetary policy, which we're still seeing.
Speaker 8 (10:51):
I mean, BC, why go pull it up.
Speaker 7 (10:53):
You've had thirty bankruptcies in September and October since two
thousand and your average two month average is twenty large bankruptcy.
So pull up BCY, goo on on Bloomberg. But the
second lesson you learn at the FED is never talk
about the dollar. Fiscal policy is the purview of the
Treasury Department. Now, Powell said yesterday, if things begin to
(11:15):
go haywire, I'm telling you right now, our debt levels
in this country are way too high. They're absolutely untenably high.
He said that, But in terms of can the Fed
preemptively take part in crafting legislation, because that's effectively what
a lot of the reporters were asking him, Well.
Speaker 2 (11:34):
I guess more anticipating on the next ridge, the bond
vigilantes ring to saddle up and ride.
Speaker 8 (11:41):
You know, we'll see, we will see.
Speaker 7 (11:44):
I think markets are mistaking flow for stock. In other words,
if we see an extension of the tax cuts, is
that going to be equivalent to depositing cash in US
household bank accounts that's going to reignite inflation overnight.
Speaker 8 (11:58):
No, it's just going to be continuation of the status quo.
Speaker 7 (12:01):
So at the margin, we're not going to see money
pumped into the economy the way that we did with
the first and the second and the third stimulus checks,
or with the child tax credit.
Speaker 8 (12:11):
Being in cash.
Speaker 7 (12:12):
Cash is a much different instrument when it comes to
monetary policy and the transmission mechanism. It's immediate, as opposed
to the FED lowering interest rates and then saying okay,
banks go to be easier on your lending standards now
that barring costs are lower, so you be the transmission
mechanism into the economy.
Speaker 8 (12:30):
So much different dynamics.
Speaker 7 (12:32):
If we're not talking about this new administration mailing out
checks on day one.
Speaker 4 (12:37):
So should investors then not be worried about inflation reigniting?
Because I've been seeing a lot of notes in my
inbox all talking about Trump's policies are going to increase inflation,
yields are going to go up. Who knows what's going
to happen to stocks.
Speaker 7 (12:52):
You know, if you listen to the likeliest candidate on
the terminal last night, the where it's a very good
profile of potential Treasury secretary candidates under Trump, if you
listen to what a lot of them are saying, they're saying,
you know what, companies, We're going to give you two
years to build a factory in the United States, and
if you don't re on shore or on shore and
(13:14):
move your supply chains away, then we're going to penalize you.
That's a much different take than imposing tariffs on day one.
So I think people should listen to who these.
Speaker 8 (13:24):
Potential candidates are.
Speaker 7 (13:25):
And I think that the second Trump term, I'm not
beginning to suggest that there's wisdom here or that he's
not going to fly off the handle for any reason
at all, but I think this time he's going to
take more counsel. I think this time he's going to
listen to those around him a little bit more and
be more thoughtful about who he brings into his administration.
Speaker 2 (13:45):
Back to tax policy. With respect to corporate tax policy,
is from where you sit, it's a fifteen percent corporate
rate really feasible. And what are the pay for is
for that? Yeah, multipart quids.
Speaker 7 (13:57):
Milton Friedman would tell you there's no free lunch, right, So,
I mean, you have to find a way to pay
for these things realistically. And I think that that's where
the construct of the new Congress is going to come
in and how they're going to not just throw promises
out there that you can't pay for.
Speaker 8 (14:18):
And that's a good thing.
Speaker 7 (14:20):
So the instantaneous aspect of tax cuts, I think is.
Speaker 8 (14:24):
A big presumption because it ain't free.
Speaker 4 (14:28):
How does this bleed into different sectors of the stock market,
because we've seen a really big bid in small cap
stocks this week. I guess on the bet that if
you have more domestic manufacturing, you're going to do better
in Trump's economy, does that mean.
Speaker 8 (14:48):
In small caps right now?
Speaker 7 (14:50):
In theory, what you cannot do with small tax is
wave a magic wand and make their leverage go away.
You can't make the small cap sector any healthier than
it is when you're talking about their balance sheets, and
that's really what has to be addressed first.
Speaker 8 (15:04):
And I think that.
Speaker 7 (15:05):
What we're seeing here is a lot of technical movements,
whether you're talking about this whiplash effect in the bond
market or this rush into the rustle that wasn't even
sustained for a day, excuse me, for two trading days.
So I think investors, or at least veteran investors I'm
showing my age here, are going to be really focused
(15:27):
on top line revenue growth, cash flow generation, the ability
to protect dividends going forward, and that that's what's going.
Speaker 8 (15:35):
To be important.
Speaker 7 (15:36):
We have just seen a month where according to macro
Edge they track layoff announcements, in September they were about
fifty thousand. In October there one hundred and nine thousand.
And we've seen one company after another in the current
earning season prior to retailers of reporting.
Speaker 8 (15:54):
Continue to say.
Speaker 7 (15:56):
We're going to bolster our margins by laying off. They
were just you guys were just talking about Paramount and
laying off fifteen percent of its workforce.
Speaker 8 (16:04):
So we have to bear all this.
Speaker 7 (16:06):
In mind, and until CEOs and CFOs get out of
the cost cutting mode to protect their margins, I think
we have to be realistic about what sectors are going
to benefit and what sectors aren't.
Speaker 2 (16:17):
Is anybody baking the tax cuts getting back to that
into the rastimates right now?
Speaker 8 (16:22):
I think a lot of people are.
Speaker 7 (16:23):
I think a lot of I think I think a
lot of strategists on the street right now are baking
in tariffs yesterday and tax cuts yesterday in the effect
that it would have on the bond market.
Speaker 2 (16:35):
I think the bond mar those tariffs are to some
extent intended as a pay for for any anticipated tax
cuts the corporate quote or personal. But that's not going
to do it right.
Speaker 7 (16:50):
Not even not realistically and not even close.
Speaker 2 (16:52):
That's right.
Speaker 4 (16:53):
So I.
Speaker 8 (16:57):
Mean, I'm an independent research firm. I can say whatever
I want.
Speaker 7 (17:00):
I think the streets getting ahead of itself, and I
think the rally in the bond market is saying that
out loud.
Speaker 2 (17:07):
Yeah, any other messages you are extracting from the bond
market at this.
Speaker 7 (17:11):
Point, Well, the United States does not live on an island.
And when you see factory orders retrenching, when you see
import volumes falling, I'm going to be paying attention to
the PPI and CPI data that come out of China tonight.
I think until we stop stop getting deflationary impulses and
(17:32):
waking up to hearing Michelin and Volkswagen and layoffs and
countries with really strict labor standards, until we stop hearing that,
I think we have to appreciate the United States is
part of a global economy and the rest of the
countries in the world and how they're faring is going
to affect our country as well.
Speaker 2 (17:47):
I don't know if it's part of your remit, but
Europe we have the sick man. Well, we have many
sick men in Europe right now, are in total panic.
Speaker 7 (17:54):
Yeah, France is definitely sicker than most people want to appreciate,
and we forced our banking system to capitalized after the
financial crisis in many ways Europe did not. So yeah,
I think you're going to see a much more aggresive
rate cutting campaign there and we'll see how that plays out. Look,
bond yields are down, dollars stronger today. Not everything plays
(18:16):
out exactly the script.
Speaker 2 (18:18):
Okay, just one more period, just another minute, the Basil
three endgame. So increasing the capital requirements for the financialist institutions,
does that just get ignored at this point like forty
five seconds? And is that a good thing? Well, it's
a good thing for the financials.
Speaker 8 (18:36):
But it's a good thing for the financials.
Speaker 7 (18:38):
But we're still we're still in the comment period, and
Michael Barr and j Powell are intent on pressing forward
with this, and they've backed off of their more stringent
capital requirements to begin with a few months ago.
Speaker 8 (18:51):
I don't think that.
Speaker 7 (18:52):
We should necessarily say that Basil three endgame is.
Speaker 2 (18:55):
Over all, right. Thanks, Thanks for showing up. Daniel Di Martino,
both CEO and chief strategist for QI Research.
Speaker 1 (19:05):
You're listening to the Bloomberg Intelligence podcast. Catch us live
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Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (19:23):
I'm John Tucker along with Emily Graffeo. We are in
for Alex Steele at Paul Sweeney today, and this is
Bloomberg Intelligence. Let's move on to our next guest and
our next subject today, what is the impact of the
Trump presidency on tax policy. Let's break that down right
now with Erica York. She's senior Cannabist Research director with
(19:44):
Tax Foundation Center for Federal Tax Policy. Thanks for being
with us, appreciate it. Happy Friday by the way. Hey, So,
there are a couple of fronts here as I understand it,
the corporate tax rate as well as exten the existing
Trump tax cuts.
Speaker 4 (20:03):
Right, that's right.
Speaker 9 (20:05):
So one of the things that President elect Trump will
have to deal with is the expiration of the twenty
seventeen tax law, that's the Tax Cuts and Jobs Act.
It lowered the corporate tax rate, permanently, made a lot
of changes on the international tax side, and it also
temporarily cut taxes for the vast majority of American taxpayers.
Lowered rates, double the standard deduction, increased the child tax credit,
(20:28):
lots of moving pieces, but those all sunset after the
end of twenty twenty five. And so that's the first
major thing that Congress is going to have to deal with.
What do we do about that tax cliff? Trump promised
extending all of those tax cuts, which we've estimated would
come with a price tag of more than four trillion
dollars in lost revenue over the next decade. And then,
(20:49):
of course, on the campaign trail, Trump outlined trillions dollars
trillions of dollars more in tax cuts. He talked about
further reductions to the corporate tax rate, He talked about
exempting income, social security benefits over time pay from taxes,
and creating a new deduction for auto loan interest.
Speaker 4 (21:07):
So I want to zoom out and ask you about
how investors should be thinking about how these tax cuts
are going to impact the economy because you talk about
tax cuts and lost revenue. But then of course, if
a corporation has to pay less taxes, you think that
they have more money on hand for cap X, R
(21:28):
and D. So just big picture, how are we supposed
to be thinking about the impact of the corporate tax
cuts or potential more cuts coming on businesses in the economy.
Speaker 9 (21:39):
Yeah, so, on the one hand, the tax cuts for
businesses should have a positive effect on the economy. You know,
a couple of the big provisions that have expired or
tightening our deductions for machinery and equipment investment and deductions
for research and development expenditures restoring full deductions for that
with lower the cost of capital would boost incentives to
(22:01):
invest in the domestic economy. But one of the mitigating
factors to that could be one of the ways that
Trump and Congress are thinking through offsetting the cost of
that tax cut, and that is through higher import tariffs.
And ultimately the effect that this total package has on
(22:21):
the economy will depend on how harmful the offsets are.
If we are in a situation with some tax cuts
and significant tariff hikes like ten twenty percent baseline tariffs,
higher tariffs on China, higher tariffs on Mexico, those tariffs
themselves plus the likely foreign retaliation could swamp the economic
(22:42):
benefit of better tax policy.
Speaker 2 (22:44):
Yeah, even if there is no impact those pay fors,
they're not going to get the job done, are they.
Speaker 3 (22:51):
No.
Speaker 9 (22:51):
We've estimated that the ten percent universal tariff would raise
about two trillion dollars over the ten year window, So
that falls well short of the.
Speaker 5 (23:02):
Yeah.
Speaker 9 (23:03):
Yeah, and that's on a conventional basis. So on a
dynamic basis, figuring in how that tariff would reduce economic output,
revenue falls further. And then if you factor in foreign retaliation,
it falls even further. So comes up well short, and
again you have that economic drag created by the tariffs
and the potential trade war as another factor weighing that down.
Speaker 2 (23:26):
I put on your political analysis hat for me. The
makeup of Congress. I mean, we don't know still, but
it looks like a red wave. I can guess that
at this point is everybody on board with this? I mean,
you do have members of Congress in the same party
(23:46):
who are opposed to increasing the deficits to pay.
Speaker 9 (23:50):
For a lot of this, right, Yeah, So that's the question.
How big do deficit concerns weigh against the desire to
continue tax cuts. Unfortunately, we're seeing some reporting right now
that Congress is in the works of dusting off processes
legislative processes used to impose tariffs in like the nineteen thirties.
(24:11):
So the last time Congress passed a law to increase
tariffs line by line was, of course, the nineteen thirty
Smooth Hally Tariff Act.
Speaker 2 (24:19):
And we all remember Smooth Haley from our classes in
well high school.
Speaker 4 (24:24):
Even I thought you're going to see because we were
there in thirty No.
Speaker 2 (24:27):
I wasn't going to say that, but please continue ignor.
Speaker 9 (24:34):
If we you know, revert almost a century and Congress
legislates on tariffs now, even though they're just reporting that
that some wamakers are interested in that as an offset.
I don't see, you know, the entire Republican Party throwing out,
you know, the well accepted economics that tariffs are really harmful,
(24:55):
that free trade is beneficial. So I think that's uncertain.
But there are certainly pockets of the GOP on board
with Trump's desire to significantly hike tariffs.
Speaker 4 (25:08):
We've talked about corporations, but how are Trump's tax policies
going to affect Americans? I'm thinking maybe the middle class.
Speaker 9 (25:18):
Yeah, again, it depends. If it's just extending the TCJA.
We've estimated that the individual provisions, sixty two percent of
taxpayers would see a tax cut or would just see
the tax system that they're paying taxes under now continue.
So that status quo would preserve tax cuts for the
(25:39):
vast majority of Americans. But if that's paired with tariff increases,
that actually increases taxes on net for lower and middle
income taxpayers. Because tariffs, of course have a regressive tax burden.
They place a higher percentage tax increase on low and
middle income households who consume more of their income than
wealthier people do, and then the distribution of the tax
(26:01):
cuts is also somewhat in opposition to that it does.
The TCJA provided tax cuts to people across the income spectrum,
but larger tax cuts to higher income individuals, which makes
sense given the very progressive nature of our income tax,
but those in combination could mean that lower and middle
income households are worse off under this combination of tax
(26:24):
cuts paid for by tariffs.
Speaker 2 (26:26):
All right, before you go near and dear to our
hearts and high tax states, thirty seconds on salt. Is
the salt deduction going to be raised?
Speaker 9 (26:36):
I think yes. I think if it is, you know,
GOP trib effecta very narrow margins in the House, those
lawmakers who want to see an increase in the salt
cap have more sway. I don't think we'll see unlimited
salt comeback. That would be a big reversion on a
big reform that was included in the twenty seventeen tax law.
But I imagine we'll see some sort of doubling for joint filers,
(26:59):
and maybe even some increase for both single and joint filers.
That of course makes the budget map harder because that
increases the cost of extending the TCJ.
Speaker 2 (27:08):
Yes, that's not cheap either. Erica York, Senior accountists, Research
director with the Tax Foundation Center for Federal Tax Policy.
Thanks very much for me with us. Appreciate it.
Speaker 1 (27:18):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (27:36):
Let's get a Barry Ridtholts right now, founder of Ridthults
Wealth Management, the host of my favorite podcast, Master's in
Business after my own, that is, I have a podcast
Hot Pursuit with you, Elliott, and actually Barry's on that
podcast a lot too, So in any case, Barry joins
us now to talk about I guess first and foremost, Barry,
we have to get your take on the election. I know,
(27:57):
in a twenty four hour news cycle, we should have
been done talking about this one day.
Speaker 1 (28:00):
But.
Speaker 6 (28:02):
What do you think we all got so wrong in
saying like this is going to be a toss up?
And it was actually, you know Trump and the Republicans
like demolishing the Democrats on Tuesday.
Speaker 10 (28:14):
Right, So so first, Billie Eilish is not a pop star.
She's a Sean Truce. She's going to do a whole
album of great American songbook. We'll come back to that later,
don't don't underestimated.
Speaker 6 (28:26):
I'll put a pin in it because I agree, and
I agree and would like to talk more about Billy Eilish.
Speaker 10 (28:30):
But first, fantastic thing. But let you know, the what
I love about elections is that all of the errors
that we make as investors, because of that's how we're wired,
we engage in the same behavioral mistakes when it comes
to elections that that we make with capital and risk
and decision making. So it's really kind of fascinating. I
(28:55):
do this every election. The last one I did that
really kind of a lot of people to chatted about
was back in twenty sixteen. But let's just pick a
few things that everybody got wrong. So first of all,
you know forecasting, Lol, how many times are the polls
going to be wrong?
Speaker 6 (29:14):
And before we stop listening media and right, I mean,
I've had.
Speaker 10 (29:19):
Conversations with various people at MSNBC, at CNN, at Bloomberg. Hey,
why a year out are you guys spending so much
time talking about polls. It's fifty to fifty that even
the people in the polls are going to be the
actual candidates. And that happened this year, that happened in
(29:39):
twenty and sixteen. It happens surprisingly regularly. But the polls
blew it in sixteen, eighteen, twenty twenty two, now again
in twenty four Why do we listen to people who
make forecasts when they're consistently wrong? And I want you
to to keep that in the back of your head
the next time you ask a strategis during economists, what's
(30:00):
GDP or non farm payroll going to be? Because they
don't know, they can't know someone is randomly going to
be right. So that's number one.
Speaker 6 (30:08):
Well, non farm payrolls different. I mean, the margin of
error is bigger than the number. Typically, the benny markets
got this right and the options market got this right.
Speaker 10 (30:20):
And that's the second question, which is when you see
someone who gets something right, was its skill or luck?
Speaker 2 (30:27):
You know?
Speaker 10 (30:27):
The probably the poster child for this is the Arc
Innovation ETF and Kathy Wood, who had the greatest year
in twenty twenty of any any ETF for mutual fund
manager just about in history. You know, Pika Trough's shoe
is the fund more than tripled for the year, was
(30:48):
up something like one hundred and sixty four percent, and
then mean, you know, reversion to the mean happened, and
it turned out that Hey wasn't skill. It was just
a lot of luck. And she's been unable to reproduce
that before or since. Despite having the greatest year in history,
she's still underperforming the SMP since inception in twenty fourteen.
(31:09):
And the SMP is the wrong index, it should be
the NAZAQ one hundred, where she's substantially into performing. So
that's the second issue, is being able to separate skill
from luck. The people who got it right, I'm not
convinced that it was anything more than someone who's gonna
get it right, but it's dumb luck. Probably the single
biggest thing that investors get wrong, that we all got
(31:31):
wrong this election was how much we allow narratives to
dominate our thinking and just think about what the consensus
agreed this This election was about. It's razor thin margin,
it's deadlocked. This is the year of turnout. This is
the year of the woman voter. None of that turned.
Speaker 2 (31:54):
Out to be true. We just love a great story.
Speaker 4 (31:59):
Well, we don't have a ton of time.
Speaker 6 (32:01):
No, we got to swap guys. Can you swap Berry's
block with the Uni block? We had fifty Yeah, let's
kill the break. We had fifteen minutes to talk Muni's right,
and five for Barry.
Speaker 4 (32:10):
That doesn't seem right, because I want to talk more markets,
but I also want to talk music quickly. But let's
just stay on markets, because I mean, Barry. How are
we then supposed to kind of understand we talk so
much about the Trump trade. Should we not be thinking
that the reason why, you know, bitcoin is now reaching
(32:31):
a new record high, stocks are all near a record high.
Should we not be kind of connecting that to the
narrative that, oh, the market is just is happy that
we have a new a new president.
Speaker 10 (32:42):
Well, generally speaking, we like to the market collectively, we
like tax cuts, we like deficit spending, we like deregulation.
So the markets like this. Although let's be blunts. The
market you know, did great under Obama, did great under
Trump other than the pandemic, and even then there was
(33:04):
a huge recovery. It did great under Biden. We here's
another lesson. We put way too much impact and import
on who's in the white House. You know, if you
only if you only invested when a Democrat was in
the White House, going back to the I think it's
the nineteen fifties, you would see a return that was
(33:26):
about your one hundred dollars would generate a return of
about a buck seventy. And if you only invested when
Republicans were in the White House, who would be slightly
less than that, like a buck forty. But if you
invested over the entire time, well, then compounding as your friend,
and that one hundred dollars turns into something like twenty
four hundred dollars. And so you know, markets compound over time.
(33:51):
Dividend reinvestment is a big part of that, and who
the president is it matters a little bit around the fringe,
around the edge. If they really mess up, well then
that could have a pretty big impact.
Speaker 2 (34:07):
But for the most.
Speaker 10 (34:08):
Part, every day everybody has to get up, they have
to dress their kids, send them off to school, pay
the mortgage, take your car to work. In a twenty
four trillion dollar economy, what I just described is more
or less twenty trillion dollars of it, So there's a
little flexibility around the edges, but not a whole lot.
The US economy is so enormous and the global economy
(34:31):
is so big that who's in office matters much less
than what's the overall trend in jobs, what's the wage trend,
where are we with inflation, what's consumer spending? Like that
matters a whole lot, and the President has really a
deminimous impact on that.
Speaker 6 (34:48):
Barry, I wonder you make a point on your blog
retols dot com that we all have this filter bubble.
And I noticed that, even though I don't want to
be in an echo chamber. On Instagram, for example, I
always unfollow people that are complete morons, and that probably
just means I always unfollow people who don't agree with me.
(35:12):
Is there anyone who's good at getting outside the the
echo chamber? Are there any you know, investors or you know, leaders,
billionaires who are good at getting rid of yes men
and actually, you know, getting a diversity of opinion?
Speaker 10 (35:30):
You know, it's very very challenging to do that. And
I like to quote Danny Kahneman who wrote Thinking Fast
and Slow won the Nobel Prize for essentially create helping
to create the field of behavioral economics. And he used
to say, now you have a bias blind spot. We
all do. You could take steps to try and operate,
(35:53):
put rules in place, put strategies in place that prevent
you from getting in your own way. But it's really
hot we think about it. What drives your bubble. It's
not just the media you consume. It's who your friends are.
They're probably have similar thoughts and values to you. Even
when I get together with my car group, you know
(36:15):
there are Biden and Harris voters and Trump voters in
this But separate from that, everybody in this group is
driving a pricey car. They're all making a nice income,
they're all heavily highly educated, they're all I live on
the north shore of Long Island, so they're all in
a very hi tax neighborhood, rich neighborhood. And so as
(36:36):
much as we all think we're politically different, hey, the
things that we share in common are much more similar
than the things that separate us. And so even if
you're trying to have a conversation with people who are
different from you, your friends, your family, your neighbors. You
are so similar. And so the example I like to
tell people, even if you're a farmer or a blue
(36:59):
collar work or internet you know, Instagram creator, or a
finance bro or someone in the media, the people you
spend a lot of time with are probably very similar
to you. And most of the rest of the country
has a very different personal experience than you do. Even
if you're a farmer, you probably spend a lot of
time with other farmers, and you know, your view is
(37:20):
of the world is going to be different than the
blue collar worker in the factory, the knowledge worker in
an office. And that's just human nature. Everything you do
within your bubble is becomes a lens that you look
at the world. It's very hard to get outside of that.
One of the most distute things I heard from someone
(37:41):
on the losing side of this election, and a little
bit of self reflection, they said, I guess there are
a lot fewer people like me than I previously realized. Yes,
and that's true for all of us. We're all in
our little group. And and you know, although very not
represent the electorate.
Speaker 6 (38:00):
Everyone I know on the losing side, which is you
know everyone I know because we're in New York. Right,
Oh really, they have said like, I can't believe it,
I can't believe I didn't know this. I can't believe
I didn't see this. But it's still a horrible outcome.
And then they proceed to say the same thing they
were saying before the election and haven't expanded their horizons
at all. Verry, great to have you on. Uh, I'm
(38:20):
gonna call you after because I still have a million questions.
Barrier holds there. He is the founder of Redults Wealth
Management and the host of Masters in Business.
Speaker 1 (38:28):
This is the Bloomberg Intelligence podcast, available on Apples, Spotify,
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or watch us live on YouTube.
Speaker 2 (00:23):
Well of the latest reading on consumer confidence just down,
in fact, reaching a seven month high. Let's break it
down right now with Joy and Shuey, director of the
University of Michigan, surveys of consumers joining us. You're in
ann arbor, right, That's correct. So it doesn't necessarily reflect
the outcome of the election, because it looks like pretty confidence.
(00:46):
People were pretty confident about the economy of the US.
Speaker 3 (00:51):
That's correct. So I want to note that the data
that we're releasing today, the interviews ended on Monday, prior
to the election, and so what we saw on the
EU of the election and the two weeks leading into it,
consumers we're feeling much more confident about the future of
the economy. Not much change in current conditions, but in
terms of the future of the economy, we saw improvements
in terms of business conditions, personal finances, people's incomes, unemployment rates,
(01:15):
consumers were really feeling like the future of the economy
was on an upper trajectory.
Speaker 4 (01:20):
Joan, what did the survey tell us about how Americans
are thinking about the future path of inflation.
Speaker 3 (01:27):
With inflation, we saw a very slight decrease in short
one inflation expectations as well as a very small increase
in long run expectations. So consumers are broadly expecting inflation
to continue stabilizing. You know, they continue to be pretty
frustrated by high prices, though. We have over forty percent
of consumers continuing to tell us that high prices are
(01:47):
eroding their personal finances in spite of the fact that
they have fully acknowledged and noticed that inflation has slowed.
Speaker 2 (01:55):
What can we extrapolate from this about consumer spending or
anything else in terms of consumer behavior overall?
Speaker 3 (02:04):
You know, consumers have been telling us all year long
that the future of the economy is highly contingent on
the election, and so the fact that the election has
been resolved means that consumers are really starting to adjust
their views for the future, which will allow them to
plan and think more strongly about about the kinds of
purchases they want to make. Consumers have told us that
their high priced concerns for large purchases like durable goods, cars,
(02:28):
and homes, those have all eased this month, and so
things for them are headed in the right trajectory. However,
they're still feeling you know, they're still not feeling as
happy about the economy as they did prior to the pandemic.
Speaker 2 (02:43):
JO and always a pleasure. Thanks for being with us
today and Happy Friday. Joined sure that the director of
the University of Michigan surveys of consumers.
Speaker 1 (02:53):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Plays and Android
Auto with the Bloomberg Business. You can also listen live
on Amazon Alexa from our flagship New York station, Just
say Alexa Play Bloomberg eleven thirty.
Speaker 2 (03:11):
Paramount Global, the parent of CBSTV, MTV and it namesake
Hollywood Movie Studio, reported third quarter sales that missed analyst instiments.
Let's break it down right now with our next guest, KEITHA.
Raganoth and the Bloomberg Intelligence Analyst. Thanks for being with us.
Shouldn't we really be focusing on streaming here?
Speaker 5 (03:33):
Well, we should, I mean streaming is making up only
twenty five percent of total revenue. John, but remember they
are in the midst as most of the old media companies.
Paramount is in the midst of this whole transition away
from the linear TV model to the streaming model. And
the reason we need to focus on streaming is because
up until this point, streaming was really weighing on overall profitability.
(03:56):
So we saw the streaming segment contribute to something like
two to two and a half billion dollars in losses,
and that was really pressuring overall company profitability. Now what
has happened now is we're finally seeing, you know, some
signs of a turnaround. There's some signs of hope for
the streaming business because for the second straight quarter in
(04:16):
a row, Paramount actually posted a positive profit number. So
that is definitely good news. The bad news, however, which
is kind of causing a little bit of you know,
the fall in the stock after the earnings call, is
because they said that in the fourth quarter they're again
going to go back to some amount of streaming losses. However,
(04:37):
the long term view still is that you know, the
streaming business, which is Paramount plus their streaming platform, will
be profitable in twenty twenty five, at least in the US.
Speaker 4 (04:48):
How does that stuck up with paramount streaming competitors. I
feel like these days, you go and you turn on
your Roku TV and there's maybe six or seven different
options for streaming, and I don't know if I if
Paramount is you know, the first one that comes up
on at least my suggested apps to click on.
Speaker 5 (05:08):
Now, you bring up a very very good point. I mean,
there's absolutely no doubt that, you know, Netflix has won
the streaming wars. They are the default go to option.
But when you kind of look across the board and
you look at some of the other streaming services, Paramount
definitely is there. Of course, they might not be your
first choice as you kind of gravitate to streaming, but
(05:29):
they definitely have a lot of content that people want
to watch. So they have a lot of content from
their linear TV platform itself, you know, a lot of
sports content. They're one of the streaming platforms that's pretty
sports heavy with NFL with UEFA, so people definitely like that.
And then they have some pretty good scripted content as well,
you know, whether you're talking about Star Trek or Yellowstone,
(05:50):
they have Telsa King.
Speaker 6 (05:52):
So they have a lot.
Speaker 5 (05:53):
Of you know, good pieces that people want to watch.
But you're absolutely right when it comes to scale and
streaming is you know, a game of scale. They're nowhere
near Netflix or even Disney Plus. They have only about
seventy million subscribers on their Paramount Plus platforms. Obviously the
competitive dynamics still working a little bit against Paramount. Having
said that, though, I mean, not all bad.
Speaker 2 (06:16):
What's the update with the merger with Skydance Media.
Speaker 5 (06:20):
So the sky Dance Media, I mean, of course, this
was a merger John that was in the works for
almost ever was going on and on the saga. It
is going to close sometime in the first half of
twenty twenty five, and so we're seeing that a lot
of the progress that the company has made in terms
of cutting costs, in terms of cost efficiencies, in terms
(06:41):
of restructuring, that's all the first step towards you know,
achieving the two billion dollars in annual cost synergies that
sky Dance has laid out, you know, after mergers. So
you know that will kind of happen sometime I guess
next year, and then you know, we kind of get
a whole fresh set of eyes here, you know, a
new management team, some new capital, one and a half
(07:03):
billion dollars that goes straight to you know, the balance sheet.
So all of those are definitely positives. But the hard
truth is that the backdrop continues to be very, very difficult.
Speaker 2 (07:14):
Well, is this the joint venture partner they were looking
for for streaming or something else?
Speaker 1 (07:19):
Now this is.
Speaker 5 (07:20):
Something Now, this is something else. So this is you know,
the whole the sky dance, which is you know, an
independent studio has been led of course by David Ellison
has been wanting to buy Paramount for the longest time,
and of course their main interest was really in the studio,
but then ultimately they decided that they could do something
with the entire company and kind of give it more
of this tech driven focus.
Speaker 2 (07:40):
Always a pleasure, appreciate it. Getha Ragananthan and the Bloomberg
Intelligence Analyst.
Speaker 1 (07:46):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple car Play and
Enroud Auto with the Bloomberg Business app. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 2 (08:01):
I'm John Tucker along with Emily GRIFFEO. We are in
for Alex and Paul today. So what is the panther
ahead for the Federal Reserve after yesterday's twenty five bases
point cut. Daniel Di Martino Booth is the CEO and
the chief strategist for QI Research. Good to see you again.
Speaker 7 (08:18):
It's great to be here in studio, New.
Speaker 2 (08:20):
York on this beautiful day Friday. Thank you very much
forf So what was your takeaway from the FED meeting yesterday?
Speaker 7 (08:27):
So we were speaking offline before I came on, and
I you know, I think it was the guests.
Speaker 8 (08:32):
Indeed, indeed, I think I think.
Speaker 7 (08:34):
The version of Chair Powell who showed up yesterday was
like the Dirty Harry version, extremely succinct, very few words.
He wasn't scripted, he wasn't reading his answers, he wasn't nervous.
He was expecting all of the political angles that the
reporters were going to take, and he was ready for them,
and he cut them off at.
Speaker 8 (08:55):
The past time and again. So how are we.
Speaker 4 (08:58):
Supposed to make sense of the market action and what
is driving i mean treasury yields?
Speaker 5 (09:03):
Right now?
Speaker 8 (09:04):
We were also just talking about this.
Speaker 4 (09:05):
They've dropped about sixteen.
Speaker 7 (09:08):
Basics sixteen basis points on the tenure in a matter
of two days. In fact, the ten year dropped four
basis points the minute he was asked by a reporter
that if you're asked to step down by President Trump,
will you And he said no, And so she rephrased
the question and he looked over his glasses and he
said no. And at that minute, the tenure yield drop
(09:29):
four basis points. So I think I think markets right
now are celebrating continuity and steadiness and the fact that
I think the Fed's going to continue to cut rates.
Speaker 8 (09:42):
I really do see that as a path forward.
Speaker 7 (09:44):
I know a bunch of sales side banks this morning
have come out and said they're going to be much
fewer cuts in twenty twenty five. As a nine year
veteran of the FED, it's extremely rare for us to
have seen the pause in the hiking cycle. It would
be nearly unprecedented to see a paw in an easing cycle.
We tend to see unemployment rates tick up in chunks,
(10:07):
and we were just a smidge of a percentage away
from the unemployment rate having been four point two percent
in October, and we know that layoffs have picked up
appreciably since September, so we can see what's coming.
Speaker 8 (10:21):
And I think.
Speaker 7 (10:21):
Powell leaned on the employment mandate yesterday with good reason,
and he said, I'm not making any decisions. There's two
inflation reports, there's one employment report. Before we meet again, I'll.
Speaker 8 (10:32):
Let you know.
Speaker 2 (10:33):
Can the Fed be at all preemptive when it comes
to it's not their mandate, but fiscal policy.
Speaker 8 (10:41):
Well, the answers no.
Speaker 7 (10:43):
When you land on day one at the Fed, you
learn two things. You learn about the lag effect of
monetary policy, which we're still seeing.
Speaker 8 (10:51):
I mean, BC, why go pull it up.
Speaker 7 (10:53):
You've had thirty bankruptcies in September and October since two
thousand and your average two month average is twenty large bankruptcy.
So pull up BCY, goo on on Bloomberg. But the
second lesson you learn at the FED is never talk
about the dollar. Fiscal policy is the purview of the
Treasury Department. Now, Powell said yesterday, if things begin to
(11:15):
go haywire, I'm telling you right now, our debt levels
in this country are way too high. They're absolutely untenably high.
He said that, But in terms of can the Fed
preemptively take part in crafting legislation, because that's effectively what
a lot of the reporters were asking him, Well.
Speaker 2 (11:34):
I guess more anticipating on the next ridge, the bond
vigilantes ring to saddle up and ride.
Speaker 8 (11:41):
You know, we'll see, we will see.
Speaker 7 (11:44):
I think markets are mistaking flow for stock. In other words,
if we see an extension of the tax cuts, is
that going to be equivalent to depositing cash in US
household bank accounts that's going to reignite inflation overnight.
Speaker 8 (11:58):
No, it's just going to be continuation of the status quo.
Speaker 7 (12:01):
So at the margin, we're not going to see money
pumped into the economy the way that we did with
the first and the second and the third stimulus checks,
or with the child tax credit.
Speaker 8 (12:11):
Being in cash.
Speaker 7 (12:12):
Cash is a much different instrument when it comes to
monetary policy and the transmission mechanism. It's immediate, as opposed
to the FED lowering interest rates and then saying okay,
banks go to be easier on your lending standards now
that barring costs are lower, so you be the transmission
mechanism into the economy.
Speaker 8 (12:30):
So much different dynamics.
Speaker 7 (12:32):
If we're not talking about this new administration mailing out
checks on day one.
Speaker 4 (12:37):
So should investors then not be worried about inflation reigniting?
Because I've been seeing a lot of notes in my
inbox all talking about Trump's policies are going to increase inflation,
yields are going to go up. Who knows what's going
to happen to stocks.
Speaker 7 (12:52):
You know, if you listen to the likeliest candidate on
the terminal last night, the where it's a very good
profile of potential Treasury secretary candidates under Trump, if you
listen to what a lot of them are saying, they're saying,
you know what, companies, We're going to give you two
years to build a factory in the United States, and
if you don't re on shore or on shore and
(13:14):
move your supply chains away, then we're going to penalize you.
That's a much different take than imposing tariffs on day one.
So I think people should listen to who these.
Speaker 8 (13:24):
Potential candidates are.
Speaker 7 (13:25):
And I think that the second Trump term, I'm not
beginning to suggest that there's wisdom here or that he's
not going to fly off the handle for any reason
at all, but I think this time he's going to
take more counsel. I think this time he's going to
listen to those around him a little bit more and
be more thoughtful about who he brings into his administration.
Speaker 2 (13:45):
Back to tax policy. With respect to corporate tax policy,
is from where you sit, it's a fifteen percent corporate
rate really feasible. And what are the pay for is
for that? Yeah, multipart quids.
Speaker 7 (13:57):
Milton Friedman would tell you there's no free lunch, right, So,
I mean, you have to find a way to pay
for these things realistically. And I think that that's where
the construct of the new Congress is going to come
in and how they're going to not just throw promises
out there that you can't pay for.
Speaker 8 (14:18):
And that's a good thing.
Speaker 7 (14:20):
So the instantaneous aspect of tax cuts, I think is.
Speaker 8 (14:24):
A big presumption because it ain't free.
Speaker 4 (14:28):
How does this bleed into different sectors of the stock market,
because we've seen a really big bid in small cap
stocks this week. I guess on the bet that if
you have more domestic manufacturing, you're going to do better
in Trump's economy, does that mean.
Speaker 8 (14:48):
In small caps right now?
Speaker 7 (14:50):
In theory, what you cannot do with small tax is
wave a magic wand and make their leverage go away.
You can't make the small cap sector any healthier than
it is when you're talking about their balance sheets, and
that's really what has to be addressed first.
Speaker 8 (15:04):
And I think that.
Speaker 7 (15:05):
What we're seeing here is a lot of technical movements,
whether you're talking about this whiplash effect in the bond
market or this rush into the rustle that wasn't even
sustained for a day, excuse me, for two trading days.
So I think investors, or at least veteran investors I'm
showing my age here, are going to be really focused
(15:27):
on top line revenue growth, cash flow generation, the ability
to protect dividends going forward, and that that's what's going.
Speaker 8 (15:35):
To be important.
Speaker 7 (15:36):
We have just seen a month where according to macro
Edge they track layoff announcements, in September they were about
fifty thousand. In October there one hundred and nine thousand.
And we've seen one company after another in the current
earning season prior to retailers of reporting.
Speaker 8 (15:54):
Continue to say.
Speaker 7 (15:56):
We're going to bolster our margins by laying off. They
were just you guys were just talking about Paramount and
laying off fifteen percent of its workforce.
Speaker 8 (16:04):
So we have to bear all this.
Speaker 7 (16:06):
In mind, and until CEOs and CFOs get out of
the cost cutting mode to protect their margins, I think
we have to be realistic about what sectors are going
to benefit and what sectors aren't.
Speaker 2 (16:17):
Is anybody baking the tax cuts getting back to that
into the rastimates right now?
Speaker 8 (16:22):
I think a lot of people are.
Speaker 7 (16:23):
I think a lot of I think I think a
lot of strategists on the street right now are baking
in tariffs yesterday and tax cuts yesterday in the effect
that it would have on the bond market.
Speaker 2 (16:35):
I think the bond mar those tariffs are to some
extent intended as a pay for for any anticipated tax
cuts the corporate quote or personal. But that's not going
to do it right.
Speaker 7 (16:50):
Not even not realistically and not even close.
Speaker 2 (16:52):
That's right.
Speaker 4 (16:53):
So I.
Speaker 8 (16:57):
Mean, I'm an independent research firm. I can say whatever
I want.
Speaker 7 (17:00):
I think the streets getting ahead of itself, and I
think the rally in the bond market is saying that
out loud.
Speaker 2 (17:07):
Yeah, any other messages you are extracting from the bond
market at this.
Speaker 7 (17:11):
Point, Well, the United States does not live on an island.
And when you see factory orders retrenching, when you see
import volumes falling, I'm going to be paying attention to
the PPI and CPI data that come out of China tonight.
I think until we stop stop getting deflationary impulses and
(17:32):
waking up to hearing Michelin and Volkswagen and layoffs and
countries with really strict labor standards, until we stop hearing that,
I think we have to appreciate the United States is
part of a global economy and the rest of the
countries in the world and how they're faring is going
to affect our country as well.
Speaker 2 (17:47):
I don't know if it's part of your remit, but
Europe we have the sick man. Well, we have many
sick men in Europe right now, are in total panic.
Speaker 7 (17:54):
Yeah, France is definitely sicker than most people want to appreciate,
and we forced our banking system to capitalized after the
financial crisis in many ways Europe did not. So yeah,
I think you're going to see a much more aggresive
rate cutting campaign there and we'll see how that plays out. Look,
bond yields are down, dollars stronger today. Not everything plays
(18:16):
out exactly the script.
Speaker 2 (18:18):
Okay, just one more period, just another minute, the Basil
three endgame. So increasing the capital requirements for the financialist institutions,
does that just get ignored at this point like forty
five seconds? And is that a good thing? Well, it's
a good thing for the financials.
Speaker 8 (18:36):
But it's a good thing for the financials.
Speaker 7 (18:38):
But we're still we're still in the comment period, and
Michael Barr and j Powell are intent on pressing forward
with this, and they've backed off of their more stringent
capital requirements to begin with a few months ago.
Speaker 8 (18:51):
I don't think that.
Speaker 7 (18:52):
We should necessarily say that Basil three endgame is.
Speaker 2 (18:55):
Over all, right. Thanks, Thanks for showing up. Daniel Di Martino,
both CEO and chief strategist for QI Research.
Speaker 1 (19:05):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on applecar Play and Android
Otto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (19:23):
I'm John Tucker along with Emily Graffeo. We are in
for Alex Steele at Paul Sweeney today, and this is
Bloomberg Intelligence. Let's move on to our next guest and
our next subject today, what is the impact of the
Trump presidency on tax policy. Let's break that down right
now with Erica York. She's senior Cannabist Research director with
(19:44):
Tax Foundation Center for Federal Tax Policy. Thanks for being
with us, appreciate it. Happy Friday by the way. Hey, So,
there are a couple of fronts here as I understand it,
the corporate tax rate as well as exten the existing
Trump tax cuts.
Speaker 4 (20:03):
Right, that's right.
Speaker 9 (20:05):
So one of the things that President elect Trump will
have to deal with is the expiration of the twenty
seventeen tax law, that's the Tax Cuts and Jobs Act.
It lowered the corporate tax rate, permanently, made a lot
of changes on the international tax side, and it also
temporarily cut taxes for the vast majority of American taxpayers.
Lowered rates, double the standard deduction, increased the child tax credit,
(20:28):
lots of moving pieces, but those all sunset after the
end of twenty twenty five. And so that's the first
major thing that Congress is going to have to deal with.
What do we do about that tax cliff? Trump promised
extending all of those tax cuts, which we've estimated would
come with a price tag of more than four trillion
dollars in lost revenue over the next decade. And then,
(20:49):
of course, on the campaign trail, Trump outlined trillions dollars
trillions of dollars more in tax cuts. He talked about
further reductions to the corporate tax rate, He talked about
exempting income, social security benefits over time pay from taxes,
and creating a new deduction for auto loan interest.
Speaker 4 (21:07):
So I want to zoom out and ask you about
how investors should be thinking about how these tax cuts
are going to impact the economy because you talk about
tax cuts and lost revenue. But then of course, if
a corporation has to pay less taxes, you think that
they have more money on hand for cap X, R
(21:28):
and D. So just big picture, how are we supposed
to be thinking about the impact of the corporate tax
cuts or potential more cuts coming on businesses in the economy.
Speaker 9 (21:39):
Yeah, so, on the one hand, the tax cuts for
businesses should have a positive effect on the economy. You know,
a couple of the big provisions that have expired or
tightening our deductions for machinery and equipment investment and deductions
for research and development expenditures restoring full deductions for that
with lower the cost of capital would boost incentives to
(22:01):
invest in the domestic economy. But one of the mitigating
factors to that could be one of the ways that
Trump and Congress are thinking through offsetting the cost of
that tax cut, and that is through higher import tariffs.
And ultimately the effect that this total package has on
(22:21):
the economy will depend on how harmful the offsets are.
If we are in a situation with some tax cuts
and significant tariff hikes like ten twenty percent baseline tariffs,
higher tariffs on China, higher tariffs on Mexico, those tariffs
themselves plus the likely foreign retaliation could swamp the economic
(22:42):
benefit of better tax policy.
Speaker 2 (22:44):
Yeah, even if there is no impact those pay fors,
they're not going to get the job done, are they.
Speaker 3 (22:51):
No.
Speaker 9 (22:51):
We've estimated that the ten percent universal tariff would raise
about two trillion dollars over the ten year window, So
that falls well short of the.
Speaker 5 (23:02):
Yeah.
Speaker 9 (23:03):
Yeah, and that's on a conventional basis. So on a
dynamic basis, figuring in how that tariff would reduce economic output,
revenue falls further. And then if you factor in foreign retaliation,
it falls even further. So comes up well short, and
again you have that economic drag created by the tariffs
and the potential trade war as another factor weighing that down.
Speaker 2 (23:26):
I put on your political analysis hat for me. The
makeup of Congress. I mean, we don't know still, but
it looks like a red wave. I can guess that
at this point is everybody on board with this? I mean,
you do have members of Congress in the same party
(23:46):
who are opposed to increasing the deficits to pay.
Speaker 9 (23:50):
For a lot of this, right, Yeah, So that's the question.
How big do deficit concerns weigh against the desire to
continue tax cuts. Unfortunately, we're seeing some reporting right now
that Congress is in the works of dusting off processes
legislative processes used to impose tariffs in like the nineteen thirties.
(24:11):
So the last time Congress passed a law to increase
tariffs line by line was, of course, the nineteen thirty
Smooth Hally Tariff Act.
Speaker 2 (24:19):
And we all remember Smooth Haley from our classes in
well high school.
Speaker 4 (24:24):
Even I thought you're going to see because we were
there in thirty No.
Speaker 2 (24:27):
I wasn't going to say that, but please continue ignor.
Speaker 9 (24:34):
If we you know, revert almost a century and Congress
legislates on tariffs now, even though they're just reporting that
that some wamakers are interested in that as an offset.
I don't see, you know, the entire Republican Party throwing out,
you know, the well accepted economics that tariffs are really harmful,
(24:55):
that free trade is beneficial. So I think that's uncertain.
But there are certainly pockets of the GOP on board
with Trump's desire to significantly hike tariffs.
Speaker 4 (25:08):
We've talked about corporations, but how are Trump's tax policies
going to affect Americans? I'm thinking maybe the middle class.
Speaker 9 (25:18):
Yeah, again, it depends. If it's just extending the TCJA.
We've estimated that the individual provisions, sixty two percent of
taxpayers would see a tax cut or would just see
the tax system that they're paying taxes under now continue.
So that status quo would preserve tax cuts for the
(25:39):
vast majority of Americans. But if that's paired with tariff increases,
that actually increases taxes on net for lower and middle
income taxpayers. Because tariffs, of course have a regressive tax burden.
They place a higher percentage tax increase on low and
middle income households who consume more of their income than
wealthier people do, and then the distribution of the tax
(26:01):
cuts is also somewhat in opposition to that it does.
The TCJA provided tax cuts to people across the income spectrum,
but larger tax cuts to higher income individuals, which makes
sense given the very progressive nature of our income tax,
but those in combination could mean that lower and middle
income households are worse off under this combination of tax
(26:24):
cuts paid for by tariffs.
Speaker 2 (26:26):
All right, before you go near and dear to our
hearts and high tax states, thirty seconds on salt. Is
the salt deduction going to be raised?
Speaker 9 (26:36):
I think yes. I think if it is, you know,
GOP trib effecta very narrow margins in the House, those
lawmakers who want to see an increase in the salt
cap have more sway. I don't think we'll see unlimited
salt comeback. That would be a big reversion on a
big reform that was included in the twenty seventeen tax law.
But I imagine we'll see some sort of doubling for joint filers,
(26:59):
and maybe even some increase for both single and joint filers.
That of course makes the budget map harder because that
increases the cost of extending the TCJ.
Speaker 2 (27:08):
Yes, that's not cheap either. Erica York, Senior accountists, Research
director with the Tax Foundation Center for Federal Tax Policy.
Thanks very much for me with us. Appreciate it.
Speaker 1 (27:18):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on applecar Play and Android
Auto with the Bloomberg Business app. You can also listen
live on Amazon Alexa from our flagship New York station,
Just say Alexa play Bloomberg eleven thirty.
Speaker 6 (27:36):
Let's get a Barry Ridtholts right now, founder of Ridthults
Wealth Management, the host of my favorite podcast, Master's in
Business after my own, that is, I have a podcast
Hot Pursuit with you, Elliott, and actually Barry's on that
podcast a lot too, So in any case, Barry joins
us now to talk about I guess first and foremost, Barry,
we have to get your take on the election. I know,
(27:57):
in a twenty four hour news cycle, we should have
been done talking about this one day.
Speaker 1 (28:00):
But.
Speaker 6 (28:02):
What do you think we all got so wrong in
saying like this is going to be a toss up?
And it was actually, you know Trump and the Republicans
like demolishing the Democrats on Tuesday.
Speaker 10 (28:14):
Right, So so first, Billie Eilish is not a pop star.
She's a Sean Truce. She's going to do a whole
album of great American songbook. We'll come back to that later,
don't don't underestimated.
Speaker 6 (28:26):
I'll put a pin in it because I agree, and
I agree and would like to talk more about Billy Eilish.
Speaker 10 (28:30):
But first, fantastic thing. But let you know, the what
I love about elections is that all of the errors
that we make as investors, because of that's how we're wired,
we engage in the same behavioral mistakes when it comes
to elections that that we make with capital and risk
and decision making. So it's really kind of fascinating. I
(28:55):
do this every election. The last one I did that
really kind of a lot of people to chatted about
was back in twenty sixteen. But let's just pick a
few things that everybody got wrong. So first of all,
you know forecasting, Lol, how many times are the polls
going to be wrong?
Speaker 6 (29:14):
And before we stop listening media and right, I mean,
I've had.
Speaker 10 (29:19):
Conversations with various people at MSNBC, at CNN, at Bloomberg. Hey,
why a year out are you guys spending so much
time talking about polls. It's fifty to fifty that even
the people in the polls are going to be the
actual candidates. And that happened this year, that happened in
(29:39):
twenty and sixteen. It happens surprisingly regularly. But the polls
blew it in sixteen, eighteen, twenty twenty two, now again
in twenty four Why do we listen to people who
make forecasts when they're consistently wrong? And I want you
to to keep that in the back of your head
the next time you ask a strategis during economists, what's
(30:00):
GDP or non farm payroll going to be? Because they
don't know, they can't know someone is randomly going to
be right. So that's number one.
Speaker 6 (30:08):
Well, non farm payrolls different. I mean, the margin of
error is bigger than the number. Typically, the benny markets
got this right and the options market got this right.
Speaker 10 (30:20):
And that's the second question, which is when you see
someone who gets something right, was its skill or luck?
Speaker 2 (30:27):
You know?
Speaker 10 (30:27):
The probably the poster child for this is the Arc
Innovation ETF and Kathy Wood, who had the greatest year
in twenty twenty of any any ETF for mutual fund
manager just about in history. You know, Pika Trough's shoe
is the fund more than tripled for the year, was
(30:48):
up something like one hundred and sixty four percent, and
then mean, you know, reversion to the mean happened, and
it turned out that Hey wasn't skill. It was just
a lot of luck. And she's been unable to reproduce
that before or since. Despite having the greatest year in history,
she's still underperforming the SMP since inception in twenty fourteen.
(31:09):
And the SMP is the wrong index, it should be
the NAZAQ one hundred, where she's substantially into performing. So
that's the second issue, is being able to separate skill
from luck. The people who got it right, I'm not
convinced that it was anything more than someone who's gonna
get it right, but it's dumb luck. Probably the single
biggest thing that investors get wrong, that we all got
(31:31):
wrong this election was how much we allow narratives to
dominate our thinking and just think about what the consensus
agreed this This election was about. It's razor thin margin,
it's deadlocked. This is the year of turnout. This is
the year of the woman voter. None of that turned.
Speaker 2 (31:54):
Out to be true. We just love a great story.
Speaker 4 (31:59):
Well, we don't have a ton of time.
Speaker 6 (32:01):
No, we got to swap guys. Can you swap Berry's
block with the Uni block? We had fifty Yeah, let's
kill the break. We had fifteen minutes to talk Muni's right,
and five for Barry.
Speaker 4 (32:10):
That doesn't seem right, because I want to talk more markets,
but I also want to talk music quickly. But let's
just stay on markets, because I mean, Barry. How are
we then supposed to kind of understand we talk so
much about the Trump trade. Should we not be thinking
that the reason why, you know, bitcoin is now reaching
(32:31):
a new record high, stocks are all near a record high.
Should we not be kind of connecting that to the
narrative that, oh, the market is just is happy that
we have a new a new president.
Speaker 10 (32:42):
Well, generally speaking, we like to the market collectively, we
like tax cuts, we like deficit spending, we like deregulation.
So the markets like this. Although let's be blunts. The
market you know, did great under Obama, did great under
Trump other than the pandemic, and even then there was
(33:04):
a huge recovery. It did great under Biden. We here's
another lesson. We put way too much impact and import
on who's in the white House. You know, if you
only if you only invested when a Democrat was in
the White House, going back to the I think it's
the nineteen fifties, you would see a return that was
(33:26):
about your one hundred dollars would generate a return of
about a buck seventy. And if you only invested when
Republicans were in the White House, who would be slightly
less than that, like a buck forty. But if you
invested over the entire time, well, then compounding as your friend,
and that one hundred dollars turns into something like twenty
four hundred dollars. And so you know, markets compound over time.
(33:51):
Dividend reinvestment is a big part of that, and who
the president is it matters a little bit around the fringe,
around the edge. If they really mess up, well then
that could have a pretty big impact.
Speaker 2 (34:07):
But for the most.
Speaker 10 (34:08):
Part, every day everybody has to get up, they have
to dress their kids, send them off to school, pay
the mortgage, take your car to work. In a twenty
four trillion dollar economy, what I just described is more
or less twenty trillion dollars of it, So there's a
little flexibility around the edges, but not a whole lot.
The US economy is so enormous and the global economy
(34:31):
is so big that who's in office matters much less
than what's the overall trend in jobs, what's the wage trend,
where are we with inflation, what's consumer spending? Like that
matters a whole lot, and the President has really a
deminimous impact on that.
Speaker 6 (34:48):
Barry, I wonder you make a point on your blog
retols dot com that we all have this filter bubble.
And I noticed that, even though I don't want to
be in an echo chamber. On Instagram, for example, I
always unfollow people that are complete morons, and that probably
just means I always unfollow people who don't agree with me.
(35:12):
Is there anyone who's good at getting outside the the
echo chamber? Are there any you know, investors or you know, leaders,
billionaires who are good at getting rid of yes men
and actually, you know, getting a diversity of opinion?
Speaker 10 (35:30):
You know, it's very very challenging to do that. And
I like to quote Danny Kahneman who wrote Thinking Fast
and Slow won the Nobel Prize for essentially create helping
to create the field of behavioral economics. And he used
to say, now you have a bias blind spot. We
all do. You could take steps to try and operate,
(35:53):
put rules in place, put strategies in place that prevent
you from getting in your own way. But it's really
hot we think about it. What drives your bubble. It's
not just the media you consume. It's who your friends are.
They're probably have similar thoughts and values to you. Even
when I get together with my car group, you know
(36:15):
there are Biden and Harris voters and Trump voters in
this But separate from that, everybody in this group is
driving a pricey car. They're all making a nice income,
they're all heavily highly educated, they're all I live on
the north shore of Long Island, so they're all in
a very hi tax neighborhood, rich neighborhood. And so as
(36:36):
much as we all think we're politically different, hey, the
things that we share in common are much more similar
than the things that separate us. And so even if
you're trying to have a conversation with people who are
different from you, your friends, your family, your neighbors. You
are so similar. And so the example I like to
tell people, even if you're a farmer or a blue
(36:59):
collar work or internet you know, Instagram creator, or a
finance bro or someone in the media, the people you
spend a lot of time with are probably very similar
to you. And most of the rest of the country
has a very different personal experience than you do. Even
if you're a farmer, you probably spend a lot of
time with other farmers, and you know, your view is
(37:20):
of the world is going to be different than the
blue collar worker in the factory, the knowledge worker in
an office. And that's just human nature. Everything you do
within your bubble is becomes a lens that you look
at the world. It's very hard to get outside of that.
One of the most distute things I heard from someone
(37:41):
on the losing side of this election, and a little
bit of self reflection, they said, I guess there are
a lot fewer people like me than I previously realized. Yes,
and that's true for all of us. We're all in
our little group. And and you know, although very not
represent the electorate.
Speaker 6 (38:00):
Everyone I know on the losing side, which is you
know everyone I know because we're in New York. Right,
Oh really, they have said like, I can't believe it,
I can't believe I didn't know this. I can't believe
I didn't see this. But it's still a horrible outcome.
And then they proceed to say the same thing they
were saying before the election and haven't expanded their horizons
at all. Verry, great to have you on. Uh, I'm
(38:20):
gonna call you after because I still have a million questions.
Barrier holds there. He is the founder of Redults Wealth
Management and the host of Masters in Business.
Speaker 1 (38:28):
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