Prof G Markets: How the Debate Moved the Market & Wall Street’s Take on Trump - with Josh Brown

Josh Brown, co-founder and CEO of Ritholtz Wealth Management, fills in for Scott to talk about how the markets reacted to the Presidential debate. Then Josh and Ed discuss how Trump and Biden presidencies could impact investors and Josh breaks down why he isn’t concerned about Trump’s potential tariffs on China. Follow Prof G Markets: Apple Podcasts Spotify Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Here's your report.

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• 1:10Ed Elson?

  Welcome to Prof G Markets. I'm Ed Elson, and I have some good news and I have some bad news. The bad news is that we are unfortunately missing Scott this week. He's floating around in Greece on a yacht right now. And I'm very embarrassed to say this on his behalf, but he does not have Starlink. I know he's been talking a lot about that. He has standard Wi-Fi on the super yacht, and apparently it's not good enough to record a podcast. So he is out. He's out of commission. But here's the good news. We have our favorite New Yorker standing in for Scott this week. He's the co-founder and CEO of Ritholtz Wealth Management. He's a regular on CNBC. We're working on that. He's a sharper, meaner, hungrier version of the dog, and at this point, a great friend of this podcast. Ladies and gentlemen, please welcome the one and only Josh Brown.

• 1:55Ed Elson?

  Josh, thank you so much for joining us.

• 1:57Josh Brown?

  I'm just gonna pause for applause.

• 2:02Josh Brown?

  Hey, I actually got an update on Scott's Odyssey.

• 2:05Ed Elson?

  Oh, you did?

• 2:06Josh Brown?

  He has just passed between Scylla and Corribdis.

• 2:09Ed Elson?

  Okay.

• 2:10Josh Brown?

  The crew has slaughtered the cattle of Helios. And shortly, they will be arriving at the land of the Lotus Eaters en route to Calypso's island.

• 2:21Ed Elson?

  Oh, dear.

• 2:22Josh Brown?

  So we're getting updates sporadically, and I will keep you posted.

• 2:26Ed Elson?

  Do you want to deliver a message to Scott, who's going to be listening to this episode when he's probably in Bodrum, or I don't know where else he goes, the Aeolian Islands somewhere?

• 2:34Josh Brown?

  I'm going to let my performance on the pod be the message.

• 2:38Ed Elson?

  Speak for itself, all right. I love it. We're already off to a great start. I'm not too worried about this one, so let's start with the headlines.

• 2:52Ed Elson?

  A GameStop shareholder filed a lawsuit against Keith Gill, also known as Roaring Kitty, for an alleged pump and dump scheme. Martin Radev claimed Gill was manipulating the stock for his own gain after Gill's posts in May triggered a 180% rise in GameStop shares. However, Radev dropped the suit within days of the filing. Warren Buffett has reworked his will to put nearly all of his remaining wealth, about $130 billion, in a charitable trust. The billionaire said his three children will oversee the trust and unanimously decide where to donate the money once he dies. And finally, the Supreme Court voted to overturn a 40-year-old decision that provided increased regulatory authority to federal agencies. That decision, known as Chevron deference, created a legal precedent that courts should

• 3:35Ed Elson?

  defer to federal agencies on how to interpret laws from Congress. With the ruling now overturned, federal agencies are likely to face increased legal challenges when regulating things such as the environment, healthcare, and taxes. Let's start, Josh, with this Roaring Kitty lawsuit, which we discussed a little bit when you were on the show last time, but there have been more developments. One, the lawsuit. Two, he also bought a stake in this company, this pet retailer Chewy, which caused the stock to rise 20%. So this is kind of becoming Keith Gill's playbook. He buys a large stake in a small, kind of questionable company. He posts- About it on Twitter, he watches the stock explode and then it's up to him if he wants to

• 4:17Ed Elson?

  hold or sell. Any reactions to roaring kitty and his influence on the markets right now?

• 4:22Josh Brown?

  Well, I'm a freedom of speech guy. So from my perspective, he's an investor. There is no rule that says he can't come out and say he bought a stock. In fact, I would argue he is more transparent in his transactions than most professionals on the street. If he were a hedge fund manager, the minimum requirement that he would have to meet would be to file within 45 days of the end of the quarter, whatever positions he finished the quarter holding, which means in real time, he would never have to say a word. So if any, if anything, he's been more transparent. You know, I think, I think the guy should be able to buy and sell at will. And I think if he chooses to reveal his portfolio, you know,

• 5:06Josh Brown?

  that there's nothing wrong with that. Where it gets into a gray area is if we think he is deliberately manipulating the stock in order to pump and dump on other investors. The truth is, he's not selling. So what, you know, to have a pump and dump, there's got to be a dump, right? So I, I have no problem with what Keith Gill is doing. And nobody's, the last part of this is, Ed, no one's putting a gun to anyone's head and forcing them to follow his trades. People are doing that of their own volition. So I think he should be able to get long, get loud, so long as he's not running afoul of manipulation rules, which it does not appear that that's what's happening.

• 5:48Ed Elson?

  Yeah, which is likely why it was rescinded. It seemed a flimsy argument to begin with. What if he sold though? Do you have any opinions on that? Say he dumped, he did dump everything?

• 5:57Josh Brown?

  It's America.

• 5:57Ed Elson?

  Would that change your opinion on this?

• 5:59Josh Brown?

  He's, he's allowed, he's allowed to like, we're, I'm not saying he should get an exception and be able to do something that any investor isn't able to do. And honestly, again, in the, in the first go around with the meme stocks, he was among the most transparent people. He came out and said, I haven't sold, I haven't sold. Okay, I'm planning to sell. And, you know, again, This is, this is, it's strange because it's very rare that an individual investor who is not registered, who is not running a fund, who is not working at an asset management firm, would have this much influence over the actions of other investors. If you tell me Bill Ackman

• 6:40Josh Brown?

  came out and said, you know, he's, he's long a stock, I could understand why so many people would want to follow him in. This is just one of those weird fluky things that there's not much precedent. He doesn't work professionally on Wall Street. He's just an individual and he's got an army of hundreds of thousands of people who want to do what he's doing and he's got tens of millions of people who are paying close attention to it. It's really rare. I can't think of another example of it. And I, I don't think that that means that he should be held to some above and beyond standard that no one else is held to, even professional investors.

• 7:18Ed Elson?

  Yeah, it's interesting because it is so similar to everything we've seen. I mean, you mentioned Bill Ackman. I think the other example that Scott's been talking about is Chamath or any of these other guys who have gone on CNBC and pumped the stock and then they indeed do dump the stock. It's, it's a very similar thing. I know that people had complaints with some of these guys, but it feels like, I hadn't thought of what you just said, which is the difference with this guy is he's not a traditional player. He's not your average, you know, hedge fund manager or investor. He's sort of outside of the, of the in-group. Do you think that's why we're seeing so much, I don't know, chaos and anger and issue? Is that why people are taking issue with this? Because he's not one of the traditional players?

• 8:00Josh Brown?

  Maybe. I mean, look, it doesn't, if you're not a professional, but you buy over 5% of a public company, you still have to file notify. So that rule applies to everyone. And as far as I can see, he is doing what he's supposed to be doing. He is disclosing this activity. The fact that he's not a professional, is that, is that creating chaos? I don't think so. I think these are small, heavily shorted stocks with, with small market caps and a torrent of buying from a million people at once, especially utilizing options, is going to lead to that sort of wild volatility. But here's the thing about the stock market.

• 8:41Josh Brown?

  It's it's like going to an amusement park. You choose which rides you want to ride. I don't do log flumes. I just I I don't want to walk around with wet sneakers. So even if even if the log flume looks like it's going to be the best attraction in the park.

• 8:57Ed Elson?

  Mm hmm.

• 8:57Josh Brown?

  I I'm not forced to do it if I don't want to do it. No one is telling any other investor that they need to start trading in shares of GameStop and Chewy and AMC. Just don't take that ride.

• 9:09Ed Elson?

  Hundred percent.

• 9:10Josh Brown?

  If you want to take that ride, buckle up and understand what's happening there. And, you know, it's you you enter the park, you're in the investment game, but you don't have to ride all the rides.

• 9:20Ed Elson?

  Hundred percent. I love that. It's, yeah, we've got a guy who is suing the log flume because he got wet at the end of the ride.

• 9:26Josh Brown?

  Yeah, maybe get off the log flume, you know, is is is how I would think about it.

• 9:31Ed Elson?

  Let's move on to Buffett and this charitable trust. So $127 billion to this charitable trust that's overseen by his children. I'm not one of these like radical, effective altruist guys, but I do believe in, you know, just generally speaking, we should be allocating capital efficiently, whether that's in private investment or in, in this case, philanthropy. And what's striking about this move to me is there is no overarching mission or theme or vision as to where this money is going to go, how it's going to be put to work. He simply handed it over to his children. He said, OK, it's yours. You guys go figure out where to donate all this money, which is very different from, say,

• 10:14Ed Elson?

  the Gates Foundation, which a lot of people are making these comparisons, which has been extremely precise, extremely intentional about its strategy. And then I look at this and it's like there's no real strategy at all. Maybe I'm being a little cynical. It is charity after all, and, you know, $130 billion, it's going to make a difference somewhere. But what is your reaction to this to this move by Warren Buffett? Do you agree with with my cynicism?

• 10:39Josh Brown?

  I think I disagree, Ed. It's true that Warren Buffett doesn't specifically talk intensively about, you know, where he wants his money to go, but it's not true that we can be sure there is no plan. Understand what's happening here. He's turning the money over to his family members. And they've got their own foundations and effectively he's putting it in their hands. And they are pretty specific in what they've done philanthropically over the years. We do, uh, wealth management for high net worth individuals and a lot of the stuff that we do is involved with funding our clients philanthropy.

• 11:20Josh Brown?

  So I have a, I have a couple of people in-house who specialize in this sort of situation. And I turn this over to them to get their take on what's been announced. And I want to quote, uh, Gary Pollard, who is in our Orange County office. And he said, "I believe what he has created is a charitable foundation with a trust structure." So Buffett is calling it a charitable trust, but we think it's a foundation that is structured as a trust. That is different from a foundation that's structured as a corporation, which is what you'll see, uh, most of the time. The difference here is that if Warren Buffett dies and his money is in a, a corporate foundation, the officers of the corporation can change the bylaws.

• 12:05Josh Brown?

  And therefore they can change the philanthropic focus of the corporation. This is different. This looks more like an irrevocable trust. What makes it irrevocable is if he dies, that's the end. Um, you know, no- nothing can really be changed there.

• 12:19Ed Elson?

  So the, the, the kids couldn't in, in, in some situations say, "Oh, actually I don't want to, I don't want to donate this. I want to keep this for myself." You're saying that, that couldn't happen?

• 12:28Josh Brown?

  Correct. Now, Suzy runs the Sherwood Foundation, which focuses on reproductive rights and college scholarships, if you read their tax filings. Howard Buffett runs the Howard G. Buffett Foundation, which specifically works for food security, conflict mitigation and combating human trafficking. Peter Buffett, the other son, leads something called the Novo Foundation. That's, those are projects that include working with indigenous communities. Um, Warren Buffett is basically saying this, quote, "It should be used to help the people that haven't been as lucky as we have been. There's eight billion people in the world and me and my kids. We've been in the luckiest one hundredth of one percent. There's lots of ways to help people.

• 13:11Josh Brown?

  So yes, it's broad, but no, it's not that unspecific. He knows what the pet causes are of his children. And that seems to be what he would prefer to have happen here. Rather than set up some corporation that, you know, 10 years after his death, could completely choose to, you know, go in a different direction.

• 13:32Ed Elson?

  Uh huh. Yeah, it seems that he's also just putting a lot of trust and faith into his kids that they're gonna, they're gonna make the right decisions here. I mean, this is, this is basically his life's work.

• 13:43Josh Brown?

  Yes.

• 13:43Ed Elson?

  He's handed over to them, which is pretty remarkable when you think about it.

• 13:47Josh Brown?

  Yes, but it should be pointed out. Suzy, Howard and Peter have spent their lives on philanthropy. They haven't, they haven't, you know, they're, they're not software developers. They're not lawyers, right? So they, they, they have always had this responsibility. They've, they've grown up with it, immense, unspendable, unfathomable wealth. This is a hundred thirty billion dollars. Most of it Berkshire Hathaway stock. And, you know, the, the kids have grown up, kids, they're, I don't know, they're in their sixties. The adult children of Warren Buffett are not strangers to, um, giving responsibly.

• 14:24Ed Elson?

  And let's finally move on to this Supreme Court decision. Now, this is different from the presidential immunity decision, which has also been making a lot of headlines. We're focusing on this Chevron decision because it, generally speaking, has more of a direct effect on, on companies and on markets. It means, overall, it's going to mean less regulation for companies. Because, you know, what the decision does is it withdraws the power from federal agencies. Uh, it, it sort of takes away their ability to adjudicate based on their interpretation of the law. And that's going to be less incentive for companies to comply with, with federal agency regulations. This is generally a win for corporate America.

• 15:07Ed Elson?

  As I've said on this podcast before, I feel. That corporate America has gotten enough wins recently. Do we really need to hand corporate America another win, which will likely come at the expense of a whole host of other things, such as consumer protection and health and safety and, you know, all these things that regulations exist for. That's why we have regulation. What is your take on this?

• 15:32Josh Brown?

  So this Chevron thing dates back to 1984. And so for 40 years, this has been a hobby horse of the business community. And, you know, I think the, I think the big takeaway here is it's just a continued rollback of things that the business community doesn't want. And one of those things is being called in front of an in-house tribunal, for example, or having, having a disagreement with a regulator be adjudicated with no jury, with no judge, or with, with a judge, but under the terms of the agency itself. And, you know, we, the Supreme Court just ruled against the SEC and their use of in-house

• 16:14Josh Brown?

  tribunals as being unconstitutional in a case on June 27, Supreme Court versus Jarkisi. So this is somebody that the SEC was seeking civil penalties for securities fraud. And Jarkisi's argument was, no, the Seventh Amendment requires you to bring this to action in a court of law, and I am entitled as a defendant to a trial by jury. So this will slow down, I think, the ability of government agencies to quickly interpret the rules that Congress has set up and then make a judgment. It's definitely a victory for the Chamber of Commerce, folks. I don't think anyone would argue otherwise.

• 16:55Ed Elson?

  How do you feel about, I mean, this podcast, we're pretty, I would say Scott is certainly very pro-regulation and he makes that opinion very clear. I think I would say I'm, I feel the same way. How do you feel about this as an investor, as someone who has a financial interest in the success of corporate America?

• 17:14Josh Brown?

  I'm pro-regulation. So my, my, my wealth management firm is 10 years old. We've already, already had Two onsite examinations, which is pretty, pretty much the standard, somewhere between three and five years. Um, a registered investment advisor should expect the S E C to send a letter and then follow up. And, uh, and conduct an examination. And, you know, it's a lot of work. It's a ton of document production. It's a ton of back and forth. But in the end, if that doesn't happen, if that doesn't exist, no one would trust. A registered investment advisory firm like mine, we're doing business in all 50 states. If, if there's this sense among the general public that nobody's paying attention.

• 17:56Josh Brown?

  And there are firms doing whatever they want and, and running through the, the rules willy nilly. It doesn't benefit us. So I, I actually, the way I think about regulation on Wall Street and, and in the. Investment advisory world, it's a barrier of entry to bad actors. And it increases the public trust and they don't see it that, you know, they don't. Uh, the public doesn't really see all of the work that regulators do. They hear about things every once in a while when there's a blow up. Like the Archegos hedge fund, for example, or Bernie Madoff or F T X. But they don't see the day in, day out, dotting I's and crossing T's.

• 18:34Josh Brown?

  That, uh, in my opinion, keeps the, keeps the, the train on the track. So I'm, I'm pro regulation and, and, uh. You know, I think the thing that we always have to guard against as a society is regulatory overreach. When somebody at the head of an agency decides that they want to redefine what the rules are. Um, and they want to use fines and they want to use public executions. As the way they're going to do that. Like, I think that's the, the other end of the spectrum that of course, nobody wants to see.

• 19:03Ed Elson?

  Would you say that you're alone in, in, in that opinion, in terms of people on Wall Street? Are you? Are you a rare breed?

• 19:10Josh Brown?

  No, I wouldn't say that. Uh, there are 18,000 registered investment advisory firms. And I think what they mostly have in common, of course, a few bad apples at all times, but what they mostly have in common. Is their rule followers, the type of people who are attracted to wealth management. Are not renegade rock star, Steve Jobsian, you know, G. Geniuses who want to break the rules. It's just not the type of people who gravitate toward our side of the business. So I don't think I'm alone in that. I think if you talk to a typical investment advisor, and again, we're not a hedge fund. We're not high flying, you know, investment bankers. If you talk to a typical person in my neck of the woods and my part of the industry, they would probably say something similar to what I've just said.

• 19:55Ed Elson?

  All right, we'll be right back with Josh's reaction to the presidential debate.

• 20:08Scott Galloway?

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• 23:32Ed Elson?

  We're back with Dr. Markets. The presidential debate was largely considered a disaster. While Trump was his usual chaotic self, Biden showed much more notable signs of age than he has previously. His answers were slow, halting and confused. By the end of the night, even prominent Democrats were calling for Biden to step aside for a new candidate. Now, Josh, we're going to discuss Wall Street's reaction to this debate, but I first just want to offer an observation about this idea of managing expectations. And this is something we talk a lot about on this show, particularly as it relates to earnings calls. And that is, if you are a company and you're about to report a bad quarter, let the market know ahead of time. Give them some signals.

• 24:17Ed Elson?

  Tell them maybe it's the demand is softening or that the macroeconomics aren't as good as they used to be. Give them some guidance and make it clear that you know what the problems are and you also know how to address them. Now, let's shift to Biden's performance here in this debate. This to me was like delivering the worst earnings call ever and at the same time doing nothing to prepare your investors for it. He had this weak, raspy voice, they're saying he had a cold. Tell us he had a cold ahead of time. Tell us that he's tired. Tell us, maybe he's not as good as he used to be. That's what he's now saying, but tell us something and don't lie to us that he's sharp as a tack and then suddenly shock us with the reality of the situation on the biggest stage in the world.

• 25:02Ed Elson?

  You are, you're a student of the markets and I feel like a lot of markets is just communication. Is this not one of the worst PR management disasters you've ever seen?

• 25:13Josh Brown?

  You know, look, I'm not, I'm not a partisan, like I'm not, I'm not somebody that's overly political, but I think, I think even, even if you're, even if you're someone that is hoping the Democrats win the White House or you're okay, I don't think Biden has like diehard Biden fans, but like if you're a pro Biden person, it's probably because you're anti-Trump or anti-Trump's policies. All right, fine. But so even if you're in that camp. A couple of things you have to admit. Number one, it was the Biden camp that wanted the debate. So talk about mismanaging expectations. Not only did they not sandbag, or or give you any sense that, hey, guys, debating is not really his thing. Right.

• 25:56Josh Brown?

  They actually pushed, they actually pushed for it. Trump would have been perfectly happy to have no debates. He doesn't need them. Uh, he doesn't, he doesn't necessarily win as a result of debates. He wins as a result of the rallies and his own social media activities. So he didn't, so, so not only did they not manage the situation or prepare us, uh, it went hard the other way. It gave people the impression that Biden was about to kick the door down. The other thing I would say is, he's never been good at this. He was good in, he was good enough at debates throughout his career, but I don't think I've ever seen him uh, do well in a situation where you've got to come up with rapid fire answers. He's got to stutter.

• 26:39Josh Brown?

  Even when he was younger, this is just not his strong suit. I heard some of the coverage on MSNBC. I was curious to hear the, if there would be as much panic there as there was at CNN. It's crazy. There wasn't. Oh, there wasn't. Okay. Their primetime people came out the next night and said, uh, Lawrence O'Donnell, his monologue is, no president, as part of his duties as the president, ever has to debate anyone else in a format like this. It's not part of the job. It, it may be a part of how you get the job, but it's not part of the job, so don't worry. That's not, if that's the best argument for like, why we should just gloss over this, it's not gonna, it's not gonna, the, so the impression that people now have is everything

• 27:24Josh Brown?

  the anti-Biden people have been saying is wrong with him, has now been confirmed. Like, like, we've all seen it with, with our own two eyes. So you could say, well, who cares? He never has to debate again once he wins. All right, fine. Um, but for most people, that's not the, the, uh, it's not the takeaway they're gonna have. The takeaway they're gonna have is, this is not the guy right now.

• 27:45Ed Elson?

  Yeah, Lawrence O'Donnell can gloss over it all he wants, but you look at the prediction markets, Biden's chances of winning fell thirty percent after that debate. So a huge drop.

• 27:55Josh Brown?

  Well, so from a market, so from a, from a market perspective, the knee jerk reaction that we saw was what's called a, a bear steepener. So in English, we saw the two-year Treasury rise about five basis points, very little, because everyone knows, you know, the short-term rates are coming down. If they don't come down by the end of this year, they'll be coming down next year. But longer-term rates is where the action was. Um, and so you had that steepening of the yield curve, which is indicative of Wall Street placing a bet that the Trump tax cuts, the Tax Cuts and Jobs Act, twenty seventeen tax cuts, will be extended because it's less likely that Biden will win, more likely that Trump will win.

• 28:37Josh Brown?

  And that's also sort of pricing in a faster economy, uh, the, the rise in ten-year rates. So that was the Wall Street reaction. And if you look at the betting marketplace, PredictIt, um, that's confirming that. And the reason why I like PredictIt better than polls, PredictIt is people buying contracts on Kamala Harris, on Biden, on Trump, uh, winning the election. And that's people putting up their own money. That's not people blowing smoke at a pollster or people virtue signaling to their neighbor. That's like actual dollars being bet. And immediately, um, you saw Trump separate himself from, from Biden. And you saw the Harris contract, uh, pick up steam as well.

• 29:19Ed Elson?

  Yeah, that's a great point. Just going back to the Treasury yields, you, you mentioned that that's Wall Street placing a bet. One, placing a bet, I assume that, that Trump is going to win. And two, that the tax cuts will go through. How does the, how do the tax cuts going through relates to higher yields on?

• 29:36Josh Brown?

  Let me just clarify that.

• 29:37Ed Elson?

  Yeah.

• 29:38Josh Brown?

  The tax cuts aren't going through. The issue is that they will sunset at the end of twenty twenty-five if they are not extended. So a Trump presidency means a higher likelihood that he will be signing the bill in the White House that extends those tax cuts. Why is that meaningful on Wall Street? Well, number one, we're not going to have a billionaires tax. So, so, uh, which is a minimum 25% uh, tax on billionaires. One of the difficult things about taxing billionaires is they don't exactly have W2s. So they, they, they're not paying income tax the way people that are on a salary pay income tax.

• 30:18Josh Brown?

  But more importantly, the corporate tax rate under Trump was taken down to 21%. Biden says he wants it up at 28%. That would have a material impact on the stock market and probably on economic growth. So that's really acutely felt in stock prices. Number two, or number three, um, the buyback tax. Biden wants to quadruple, I think it's a 1% excise tax on share buybacks and Biden wants that to be uh, 4% or 5%. Again, that would have a material impact on the stock market. If those things are not going to happen and the TCAJ is going to be uh, extended, then

• 31:00Josh Brown?

  you would bet on faster economic growth that curve steepener makes sense in the treasury curve and you would certainly bet on a better stock market. And I think that's exactly what the reaction was to the debate.

• 31:12Ed Elson?

  It sounds like Wall, Wall Street, all they care about really are, are the tax cuts. I, I want to bring up one other economic proposal that, that Trump has proposed, which is the tariffs. He wants to charge 60% on goods from, coming from China and 10% on goods coming from everywhere else, which every economist has said is going to make everything in America more expensive. And the number that they're saying is that for middle income families, it's going to be an extra $1,700 per year. Larry Summers called it, quote, "A prescription for the mother of all stagflations." These tariffs. And by the way, I can't, I, I can't tell if he's actually serious about them. I mean, I can't tell if it's a legitimate proposal or if he's just saying it to kind of rally up the base.

• 31:54Ed Elson?

  But these tariffs seem to me to be probably the worst economic idea that Trump has ever come up with. Is Wall Street not more worried about this? I mean, couldn't this lead to, I mean, if Larry Summers is predicting stagflation, this could lead to a depression. Why isn't, why doesn't Wall Street care about this?

• 32:12Josh Brown?

  Uh, Wall Street doesn't think he's gonna do it.

• 32:14Ed Elson?

  Okay.

• 32:14Josh Brown?

  I think, uh, part, part of the way Trump operates is he throws something out there to provoke a reaction. We saw him do that with NATO and look, again, I'm not like a Trump guy, but you can't argue with the fact that he threatened to pull out of NATO and within a month.

• 32:32Ed Elson?

  Yeah.

• 32:33Josh Brown?

  Germany, France, all of these countries started writing checks again and honoring their commitments to NATO. So in a very weird way, his threatening of NATO, which at the time looked like, oh my God, he's about to roll back a 50 year, 60 year peace we've had since World War II. But in reality, the effect that that provoked, throwing that out there and just like a grenade and just letting it go off, the effect that that provoked actually strengthened NATO. So I, I, look, there, there was a, a, a meeting of CEOs with Trump, I think last week. Nobody does press after that. People are like sneaking into the building. Nobody wants to be seen talking to him.

• 33:17Josh Brown?

  But I think there is the public Trump, um, who throws grenades. And then I think there's the private Trump who's much more pragmatic. And one of the observations that I had about Trump during his first term, where I wasn't so freaked out every time he tweeted something.

• 33:31Ed Elson?

  Uh huh.

• 33:32Josh Brown?

  He sort of agrees with the last person he talks to. Now, the problem in the first term was he had this maniac, I forget the guy's name, Peter or something or other, as his economic advisor, maybe one of the ones that's indicted or something now, who had written a book about why China needs to be tariffed into the Stone Age. So that was a guy in his ear. He had Bannon in his ear. He had China Hawks, professional China Hawks, in his ear. But he does kind of have a tendency to just like, sort of, listen to whoever the last person he talks to. And as evidence of that, he got a meeting with Kim Kardashian, and the next thing you know, he was freeing people

• 34:13Josh Brown?

  from prison. That was not the platform, the tough-on-crime, pro-law enforcement platform. So, that's why I'm not so freaked out about it. The third thing I would say, the experience of 2018, I think, taught him something. There were two separate 20% declines in the S&P 500 in calendar 2018. The Fed played a role in that. The Fed was tightening during the onset of those Chinese tariffs. So, if you think back, 2017, the S&P went up like 25%. It was a great year. Why? We got the Tax Cuts and Jobs Act in November or December. So, the market ran up into that. We were pricing it in, in advance. 2018, you get

• 34:56Josh Brown?

  like an 18% sell-off in February, you get another one into Christmas Eve. Both of those caused by global economic strain as a result of the first round of Trump tariffs. I think he's heavily fixated on the stock market, and I think he does not want to repeat what went on in 2018, which, by the way, was not a great midterm election for him. The tariffs were unpopular on both sides. So, I'm not, I'm not as worried about that as maybe other people are.

• 35:27Ed Elson?

  It's interesting, because it sounds like what you're saying is...

• 35:32Ed Elson?

  Wall Street just believes to its core that Trump is on Wall Street's side.

• 35:36Josh Brown?

  Well, he is.

• 35:37Ed Elson?

  Exactly. And even if, even if he says that he's going to go through with these tariffs, they're like, no, he won't, because ultimately, his, his, his true loyalty lies with us, and he's not going to do anything to piss us off.

• 35:49Josh Brown?

  Or he will do them, and then when he pulls them off, the Dow Jones will go up a thousand points. You see?

• 35:54Ed Elson?

  Good point, yeah.

• 35:55Josh Brown?

  You see, there's an element of showmanship, there's an element of bluffing, and he gives himself the option of saying he's going to do this big, bad thing, seeing how other people react to it, and then at the last minute, saving the day by, by calling it off. Dude, it's, I, I don't want to ascribe too much like strategy to him, or give you the impression that I think he's playing 12-dimensional chess, but just going by the, the first term, to say that because he said something from behind a lectern, it's definitely what he's going to do, I think would be a really big mistake.

• 36:34Josh Brown?

  We'll be right back. Stay with us.

• 36:44Speaker 00

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• 36:45Speaker 01

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• 38:56Ed Elson?

  We're back with Prof G Markets. Shifting focus to the stock market itself, there's been some debate on which candidate would be better for the stock market. So just some numbers here. The S and P generated an annual return of 16% during Trump's tenure. Under Biden, that number was 12% or 12% so far. At the same time, on average, markets have performed better under Democrat presidents versus Republicans. 12% under Democrats, 8% under Republicans. Slightly an obtuse question, but we're having fun here. Which candidate do you believe would be better for the stock market?

• 39:30Josh Brown?

  On the surface, I think the stock market itself, if I could anthropomorphize the billions of trades that go through each day, I think the stock market itself believes it would be better under Trump. We've done tons of work on this, and the actual reality is this is very fluky and dependent on factors that have nothing to do with who the president is. Clinton comes in, immediately Following a recession and the savings and loan crisis in the early 1990s and the spike in oil prices as a result of the the first Iraq war. He comes in and it just so happens that the internet and mobile telephony are both basically have their renaissance during his second term. It's it's it's nothing that he did.

• 40:16Josh Brown?

  Barack Obama took office literally after Lehman Brothers went under and Madoff and the the great financial crisis. He had one of the all time great starting points. He was sworn in on January 20th, 2009. The stock market bottomed in March of 09. Are we going to say that Barack Obama's policies led to the stock market tripling? Or did he inherit a stock market that had just been cut in half? Twice in seven years, by the way. So I I these things are, these things are very fluky. I think the other thing to observe is actually the best outcome is a president from one party and either party, it doesn't matter. And a Congress that's under the control of the other party. Those actually are the things that have led to the best possible outcomes. And let's go back to Clinton.

• 41:02Josh Brown?

  He's in the White House. Newt Gingrich takes takes over Congress in 94, Contract with America. And we get six years of incredible prosperity. So it's not true that any one party is necessarily better or worse for stock prices. The real story is that stocks go up three out of every four years. This goes back 95 years. You could tell me at some point that paradigm will shift. Okay, maybe. But really what's more important in the long run is corporate profits and interest rates. And here's the setup right now. All 11 of the S and P 500 sectors are expected to have earnings growth in calendar 2025.

• 41:44Josh Brown?

  And we know that the Fed's next move, whether it happens in July, September, December, is lower. So if I tell you the most important things are corporate profits and and interest rates, the setup is not looking bad regardless of which these guys ends up winning in November.

• 42:00Ed Elson?

  Yeah, we're already, we've had the best half of an election year for the stock market. And this is the best half in 50 years. The S and P is up nearly 15% year to date. And that's also saying something because generally speaking, if you just look at the data, election years have been pretty good for the stock market. But it sounds like you're saying that we could expect this to to continue regardless of the candidate.

• 42:22Josh Brown?

  I think you'll get some volatility as we get closer to the election. One thing that's interesting, my my firm's chief market strategist put out a note last night, Callie Cox, she notes that the month of June is the calmest month for stocks in five years. We've had effectively no volatility so far this summer. We haven't had a down 1% day for the S and P 500 since April. She went back and looked at 50 years of market history and on average, so half the years more, but on average, the S and P 500 has seven down 1% or worse days during the course of any given summer.

• 43:03Josh Brown?

  So I would say the the the incredible calmness in the market that we've experienced in June, historically, should not be expected to be repeated in July and August. So we we are, I think, in a really interesting place because of the AI boom, the nature of the companies that are involved in it. They happen to be the most stable companies with the most stable cash flows, the biggest cash cushions, the largest market caps, the most institutional support. And that is why we've had this placid S and P 500. Beneath the surface, there's been much more turmoil. It's just that those stocks are so much smaller and less consequential

• 43:47Josh Brown?

  that if you're an index fund investor, which more than half the population is, you don't feel the volatility of those individual stocks.

• 43:54Ed Elson?

  It's very interesting because you mentioned that because the political volatility is higher than ever right now. And then you compare that to the stock market and the market's reaction. And you've just described it as placid. Has it surprised you just sort of the lack of correlation between the two?

• 44:13Josh Brown?

  I don't believe the political volatility is higher than ever. In in in 1998, Bill Clinton spent that year testifying about sleeping with interns and whether or not he lied about it. But there were impeachment proceedings and 1998 was an incredible year for the stock market. Why? Because the market doesn't prioritize political volatility. The market prioritizes, remember what I said, earnings growth or lack thereof and interest rates. We had had a massive interest rate cut, emergency cut in the summer of 1998, after the currency crisis rippled through Asia and Russia. And in the meanwhile, we had this internet build out, this Y2K build out,

• 44:57Josh Brown?

  that was propelling earnings, not just for tech, but for the entire economy. And so as a result, that political volatility, which I would argue is as great or greater than what we're experiencing at this current moment.

• 45:12Ed Elson?

  Debatable, but fair.

• 45:14Josh Brown?

  Well, we had the vote. We we Trump had two impeachments. We had we had that volatility.

• 45:19Ed Elson?

  And it's back.

• 45:21Josh Brown?

  We had a riot in at the Capitol. So like, you would argue this is more volatile than that? I wouldn't.

• 45:28Ed Elson?

  But yeah, I don't think it was more more volatile than that. But I think but it goes to a larger point, which is that the market seems to be largely unresponsive to those sort of volatile events. I mean, what we saw during the pandemic too, and and the market was generally doing very well, and it didn't seem to be tied to whatever fundamentals were happening in the market did not seem tied to what was happening in politics. Do you think that generally that we maybe overestimate how the two are connected?

• 45:57Josh Brown?

  Well, I don't think professionals do. I think civilians overestimate. I think they draw connections that just aren't there. When the market reopened after JFK was assassinated, it went up. Most people don't know that.

• 46:09Ed Elson?

  Did not know that. So interesting.

• 46:11Josh Brown?

  No, it only it only took, I think it only took five months for the market to regain what it had lost after nine 11. So this idea that geopolitics has this sustained impact on stock and bond prices is just flatly incorrect. It's just incorrect. In fact, it's World War II that put an end to the depression. So so one of the things that people forget, look at the pandemic. 2020, the stock market closed higher.

• 46:41Josh Brown?

  If, so if I told you in January, hey, Ed, two months from now, your employer is gonna tell you to stay home for the rest of the year, the kids, the kids will be out of school nationwide, a million Americans are gonna die, um, the president is gonna pretend that nothing's happening, there's going to be a black plague spreading around the earth, would your assumption be, stock market ends the year up?

• 47:05Ed Elson?

  Absolutely not.

• 47:06Josh Brown?

  Of course not. The thing that people forget is that when something negative happens in geopolitics, there is usually a policy response, and that policy response is, just keep shopping.

• 47:19Ed Elson?

  Yeah.

• 47:20Josh Brown?

  Here's money.

• 47:22Ed Elson?

  Yeah.

• 47:23Josh Brown?

  Buy more, buy fucking meme stocks, here's money, go, go, open your Robin Hood and gamble. That's, I mean, I, I wish I could, I wish I could say it more artfully, but, so, so I think, so I think you have to, you have to know the history.

• 47:37Ed Elson?

  Yeah.

• 47:38Josh Brown?

  You have to understand the history. I'm not saying like, oh, never worry about anything, I'm just saying, for every action is a reaction, and for every geopolitical crisis, there's probably gonna be a policy response, if it affects the economy, and those policy responses lead to higher earnings, higher profits, higher stock prices, not immediately, but ultimately, that, what, what, you and I are talking right now, within 3% of all time highs for the S and P 500, what else could you conclude?

• 48:08Ed Elson?

  What would your, just to wrap up here, what would your advice be to investors when they read the news? I mean, it's gonna be-

• 48:15Josh Brown?

  Don't read the news.

• 48:16Ed Elson?

  Just, don't, is that, yeah, I was gonna say, is it, is it, don't read, don't, don't pay attention, don't worry about it, how much should we be, cause it's gonna be an assault.

• 48:25Josh Brown?

  Okay, it's not, don't worry about it, it's, don't react to it, that's the answer. Now, if you had been reading reports in early 2020, from the Italian Alps, or dispatches from Wuhan, China, and you had gotten this idea that, you know what, this sounds really bad, this sounds like it's gonna get much worse, I'm selling my stocks, you might have had a temporary reprieve, where you would've said, thank God I got out, you know how long that lasted for? 11 days.

• 48:57Josh Brown?

  11 days. If you had done the same thing a generation earlier during the Ebola scare, which I think was 2014, you would have missed out on some of the best years in the S and P, had you not known when to buy back in. So it's not, don't worry about it. Definitely worry about it. The, the better thing to say is, don't think that your reaction is going to be the right one. And don't think that there's some sort of logic whereby something scary happens in the news, therefore something scary is going to happen in the market.

• 49:29Ed Elson?

  I love that. Let's take a look at the week ahead. We'll see the consumer price and producer price indices for June and second quarter earning season kicks off with JP Morgan, Wells Fargo, Citi and BlackRock reporting. And finally, we will get the lowdown from Scott on his vacation in Greece. Josh, thank you again for filling in today. You have a book coming out September 3. It's available for preorder now. Could you tell us a little bit about it?

• 49:51Josh Brown?

  Yes, the book is called You Weren't Supposed to See That. And some of the things that we talked about in terms of inequality and the issues with our economy and why it's not working for anyone, those things are in part the focus of the book. So I have much more to say on these topics and you will be able to read all about it this September.

• 50:11Ed Elson?

  And Josh, where should people follow you?

• 50:13Josh Brown?

  Uh, just don't.

• 50:16Ed Elson?

  You'll find, you'll find Josh.

• 50:18Josh Brown?

  I have a, I have a podcast. It's called The Compound and Friends. It's twice, it's twice a week. We talk markets. I'm not, I'm not, I'm not like doing Twitter shit. Like I, don't worry about following me. You'll be better off. I'll be better off. It's fine.

• 50:32Ed Elson?

  Josh Brown is the CEO and co-founder of Ritholtz Wealth Management. His new book, You Weren't Supposed to See That: Secrets Every Investor Should Know, is available for preorder now. Josh, you are the hero we need and don't deserve. Thank you so much for joining us.

• 50:44Josh Brown?

  Thanks, Ed, and thanks Scott for, for the shot. And I'll, I'll be, I'll be listening next week. Thanks, guys.

• 50:52Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavas and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Anthony Scaramucci, only on Prof G Markets.

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