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President Trump kicks off his affordability tour in Pennsylvania tomorrow. Top advisers say the president will focus on wages, housing costs, and inflation. Three issues still dominating kitchen table conversations nationwide. Welcome to the Big Money Show. I'm Brian Brenberg along with my co-host Jackie D'Angelus, Taylor Riggs, Dega McDow, and with us for the hour, Strategus partner and chief market strategist Chris Verrone.
Welcome, sir. Good to see you. Great to be here, Brian. Well, JP Morgan CEO Jamie Diamond weighing in on the affordability debate, telling Maria Barto Romo that the economy is far from disaster, but that inflation isn't going away. In the short run, it looks like the American consumer is doing fine, is chugging along, companies are making profits, stock markets are high.
Uh, and that that could easily continue. There are a little small negatives, you know, like jobs are weakening, but just a little bit. Inflation is there and maybe not going down. And the Federal Reserve is set for a big interest rate decision on Wednesday, one that could boost or squash the Santa Claus rally.
Stocks are nearing all-time highs. Chris, I go your way. You've got your finger on the pulse of the North Pole and Santa Claus rallies and all these things. I know you're going to tell me what the markets are telling us about what next year looks like, inflation, growth. What are they saying? Well, I think if anything when you look out to 26, the market seems to be anticipatory of a better economy here.
I mean, everything we look at suggests real economy is actually inflecting. Consumer discretionary has turned up pretty meaningfully over the last six or eight weeks. Regional banks have broken out. Transports all acting better. Uh I think it's important that bond yields have not gone down a lot from here.
You know, if you go back to April, that that 3605 level on 10 was kind of really the line in the sand between when the economy really weakened. So I I'm actually comforted that that that yields have held kind of this this 415 420 range. So everywhere we look, whether it's commodities, whether it's rates, whether it's consumer, whether it's industrials, I think the message is of an economy that's actually inlecting to the good uh ahead of 26.
Okay. So it is a lot about messaging right now, Jackie. The president's going out to do the big He's starting out in Pennsylvania. He's going to go do the big speeches across the country. They're saying that Democrats are honing their message on affordability. Do you think the Democrat message on affordability is really salient with the people that President Trump's going to be talking to out there on the street?
No, not at all. The people President Trump is talking to are walking around saying the average for a gas price uh the national average now is now under $3 and they appreciate that. They're also waiting patiently to see the benefits of the big beautiful bill next year because Bessant made his rounds this Sunday um and he said that affordability has two components.
There's inflation and there's real incomes. Real incomes are up about 1%. We've been discussing that on this show. The problem with this is the inflation aspect of it. Nobody really cares about the 3% where we are right now. I mean, certainly you don't want to see that go higher. But remember, under the Biden administration, it went up to 9.1% and those prices never came down.
So prices are a kitchen table issue and they continue to be and people have been discussing them for 5 years now. So what President Trump is trying to do is spur growth in the economy and through this bill put some of that money back into people's hands. It might not be coming directly as wage growth translates as we see it in the labor department reports.
But remember, you're talking about no tax on tips, no tax on overtime. That's part of people's wages and they will see a benefit of it. Um Scott Besson did say that as well. He said the best way to address the affordability crisis is to give Americans more money in their pockets, which this bill has done.
Um, I'm hopeful that that will make a difference for people. But also recall, not to take a victory lap for our show, we kept running around and saying when you jack inflation up to 9% and prices go up. Sure, some things that trade like commodities may come down, and I'm talking about a food item here or there, but not everything is going to come down.
And when those wages spiked under Biden and minimum wage went up, now you have to keep up with that pace. And wages are the most important thing. I'm not opposed to victory elapse because I don't get to take many in life. So when I got one of us, I'm taking it. Nobody believes that. Nobody. You No, you look like a Kendall.
Nobody believes that. You know, Ken actually didn't take many victory. He was modest. Didn't you see him in the Pixar movies? Kind of. I meant that as a compliment. He lived in Barbie's shadow. He did. God bless him. Indeed. Yes. A moment of silence for Ken. Okay, Dan. I'm coming your way. You go wherever you want.
But I this story did catch my eye on the president saying he wants to kind of do a crackdown on grocery prices, sort of looking for collusion. I think he's focusing more on foreign firms maybe. I don't know. I'm curious what you think about that and all the aforementioned things we've discussed. Uh it's very Bidenesque, isn't it?
it. Let's focus on uh alleged my allegations of does it smell like collusion? Does it look like a semi monopoly? Since we started off with a little Jamie Diamond uh quote, let's talk about the banking industry. If President [snorts] Trump wants to throw the verbal hammer down on some people, these banks are in your checking account, in your savings account, you earn nothing and they earn four to 7% off of your money.
in say for example condominium complex, condominium building in South Florida as one example. You have a you have millions of dollars in reserves that you by law have to keep set aside in a bank account. That condo earns nothing on those reserves at Chase JP Morgan. However, then they turn around and make loans to the condo owners on to pay for the special assessments and they're earning 7% on those loans.
That's JP Morgan. And every bank gives you the same raw deal. Does that smell like collusion? It certainly has the whiff of it, does it not? So you they again give you nothing and make a fortune off of your nothing in essence. So you're getting robbed by all of these banks. Let's look at them. President Trump rather than the grocery stores.
Uh you'll get nothing and like it. Is that Judge Schmail's? Is that Catty Shack to um his his grandson? That's right. The judge's approach to banking. Taylor, I'm I'm coming your way. Um, I saw this headline, the year of America's cranky consumer. Ooh, yes. So, are consumers cranky or are they really justifiably uh upset about a big affordability crisis?
How much of this is political? How much of this is economic reality? So, we learned in the last administration, feelings are real. I'm not going to tell you that you don't feel a certain way. if you feel like things are unaffordable, you have to listen to that. And I think in New York City, as we all sit here, we learn that you have to listen to that.
Um because then people like mom Donnie get elected if you don't listen, right? So it's important in that way. But from an economic perspective, from a market perspective, I would say some of the best bull markets, some of the best rallies we have climb that wall of fear, climb that cranky consumer. [snorts] So blink and you miss it.
were almost within about 1% from record highs. And what was interesting is pretty much from April to October, it was a straight line up in equity markets, but consumers and surveys weren't overly bullish. You didn't have extreme greed. You didn't have extreme bullishness. There was still sort of that bearish sentiment out there.
Evercore is one of those firms saying that leads us to think the rally continues because you're not at these extreme levels even though at a record high you typically would start to feel that extreme levels. Another note this morning I mean a veteran on Wall Street is finally actually saying they want to go underweight the mag seven and just do a market weight instead of an overweight.
So taking that down a little bit because the rally has been so much. So again, I think we can all feel frustrated by the affordability issues, but you can't necessarily translate that into betting against the equity market. We could also bring this all full circle and say maybe the equity market's one of the best ways to grow ourselves into uh the unaffordability, if you know what I mean.
You want to afford more things, get in equity markets. Totally. Yeah. No, Chris mentioned this. So, consumer discretionary stocks were down 11% earlier this fall and now they have rallied back 7% in just two weeks. Yeah, they've had a pretty impressive move the last six, seven, eight weeks. Ironically, when you look at all the consumer sentiment surveys, whether it's University of Michigan or Conference Board, you actually want to be buying discretionary stocks when those surveys are as bad as they currently are.
So, we're in like the bottom decile right now. If you look at consumer sentiment, that's generally where excess performance has come from. from the discretionary sector. As counterintuitive as that sounds, you know, I I I I think one thing that professional economists or strategists get wrong is when we talk about inflation, which is a rate of change, we forget that most Americans don't think of life in terms of rate of change.
They think of life in terms of levels. I think Jackie, you you certainly touched on this. So, I want to give you some data that I think is important. Um, retail gasoline 5-year low, 295. That's the average around the country, 5-year low. The median is actually 285. So why is the median less than the average?
Because California, California, the average is still 450 a gallon. If you look at blue states versus red states, blue state average, uh, $3.25. Red state average $2.75. So there is this wide disparity between what the price at the pump is around the country and it really breaks uh on red state, blue state.
Can I also just add one thing quick? um the the wealth effect that we've seen over the course of the last three years now because we're almost at the end of this year and there were gang buster two years for the stock market going into Trump's presidency that is real. Um when you walk around this city in particular or malls in New Jersey, both of which I've done, people are out and they are spending.
You can't get a reservation next Saturday night at a restaurant. I had to call 20 places to try to be able to find a table that wasn't at 10:30. um people are outspending and they do feel good about the gains they've received in the stock market and that is where the disconnect is with respect to you know prices the cranky consumer the overall sentiment um but then yet the companies are still saying I believe it was Jamie Diamond said companies are still saying people are spending and things are robust and we're poised to continue to go higher that's hard for people to get their head around but that is very very real
but that's one of the reasons that Zoron Mandani got elected you bet And and with respect, one of our viewers um emailed me last week about um the watch check. Mhm. Oh, I saw that. Or and he said the no the Copela watch, the $5 million watch. Um remember your concerns prior to the New York City mayoral election.
This is why Mandani got elected and our country has the beginnings of socialism or communism worship. Yeah. It's just the you're talking about something that is just completely out of the reach of our viewers and Americans. And it it's fine to, you know, praise people who have made it and and and encourage capitalism and business formation, but when people are struggling.
Yeah. I would just add to that there's a balance and I'm I'm talking about one of our viewers sent us. No, I know. And and the wealth gap that you're talking about that they're highlighting there is real also. Um, I would just say that wealth gap hasn't gotten wider in the last year alone. That wealth gap got significantly wider and more polarized under Joe Biden who said that he was going to work for the middle class and try to make things better for them.
Actually, he made things worse for them. Um, and and here we are. So, when we get to the socialism conversation and who's going to fix the problem and what are the right answers and solutions, you don't go to the person who broke your arm and then say, "Oh, can you fix it for me?" Yeah. And for everybody who can't do the big watches, remember I've got zero on at all times.
So I It wasn't the do it. It It was the Copa watch. Copa watch. I definitely don't have one of those as well. Taylor, I want you to tell me about Warner Brothers cuz there's a lot going on here. Holy smokes, you guys. The fight just got what's the word? Thicker. The plot thickened. The fight got nastier.
Oh my goodness. So Warner Brother Paramounts come in with pretty much a hostile bid. They went straight to shareholders and said, "We are offering you now about $30 a share." And this is for the entire company, not the separated company the way that Netflix did when they come in at 2775 with a cash and stock offer.
So again, the plot thicken thickens here a little bit. Um there's a Trump angle here. There's a fundamental issue here. Um there's a debt issue here. You guys jump and weigh in. Can I comment on it? Yeah. Either way, David Zazzlav is going to become a billionaire. So, we know that if they go the route with Netflix and they don't don't get approval, there's a massive breakup fee.
So, uh I'm sorry, deal breakage fee. So, they're kind of banking on that. Um I actually think this hostile bid will move forward. I think it's better value for the shareholders. I think it's better to take all the assets and not start spinning things off here and there um in that way and face the regulatory hurdles.
Um, I I also think when it comes to this deal, um, I believe it was in a note that I saw it was the Ellison family and Redbird Capital are backing backstopping it. Um, which is very substantial. So, let's see how it shakes out, but time is of the essence here. Watch the stock cuz it was it's close to being in the red for the year.
It It's up a little bit, but it was like gang busters and it's falling off a cliff. And if they're selling it and selling it that hard. Oh, and Netflix sent out a email to all the customers over the weekend saying welcoming Oh, HBO. Welcoming Warner Brothers. Okay. To our firm HBO. I'm like putting the card on that cuz that means it's it's getting ready to jack your
prices. Well, they're going to jack they're going to jack your price to pay for this monstrosity that it's trying to buy. There were rumors of the um hostile bid I believe on Friday. I'm getting my it was either as early as Thursday, but definitely on Friday. So, I was expecting this to come in today.
Um that is very aggressive of them to send that email out to say we got this. Yeah. Nothing's changing today. Mhm. Wait for tomorrow. I already cancelled Netflix. Can't afford it. Oh my gosh. Affordability.
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