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Earlier, you know, we did get some deal news. Charles Schwab agreed to buy Forge Global Holdings. It's a marketplace for buying and selling shares of private companies.
The deal about six hundred and sixty million or forty five dollars to share.
That is a seventy two percent premium to the Wednesday close. Rick Worster, as you know, is president and CEO of Charles Schwab, and he stopped by earlier today for a second interview with us here at Impact twenty twenty five. My first question to Rick, why this deal, why now, and why this company?
Well, we're thrilled to be able to democratize access to private investing. This is a market that forever has been for the high net worth and the ultra high net worth and with the acquisition of Forge, we'll be able to bring access to private companies to every investor, and
so we're thrilled about that. Second, it continues our history of innovation, and our innovation has always centered around what can we do to provide more access, more opportunity to our clients so that they can grow and improve their net worth. So we're just thrilled about this, and Forge was the firm we really wanted to work with.
It's been a lot of speculation about this company, as you know, yes.
Well you know there's stock who's down ninety percent off its highs and at the same time they're the leader in the private company of marketplace, and so for us to be able to acquire the leading company that has the deepest relationships with the private companies and who have the stock opportunity, it's just phenomenal for us.
Rick was it a bit competitive and I'm just thinking about the premium that you guys paid, what was it seventy two percent above the closing price yesterday? I'm thinking of was that Morgan Stanley just did a deal to buy equity Zen, which is another similar platform. So it does feel like big firms are jockeying to provide this access to their investors. So was there pressure to do this deal and get it done now?
Well, as a public company, Forge has to run a process, and so absolutely this was a competitive process.
They've been pretty I think transparent about this.
Yes.
From our standpoint though, we think we're paying a very reasonable price where it's five times revenue less than what we trade on a revenue basis, and the opportunity for us in private markets is so much bigger than what we're paying for the company. We're paying six hundred and sixty million dollars for the company. This market could be huge, and when we bring our forty six million clients to this marketplace, I think the opportunity to grow our economics
is significant. But most importantly and why we did this deal was not about making money.
Relative to the purchase price.
It was about democratizing access to private investing and to helping our clients grow their wealth.
Will this only be for accredited investors or what's the plan in terms of new product placement or product offerings to offer it up to the retail investor.
What I'm so excited about is we're going to have an opportunity for every type of investor to invest in alternatives with this acquisition. Well, three ways that clients can invest today. We already have for both our rias and retail clients a menu of alternative managers, the leaders that you're aware of, some of the big names in private equity and venture capital. That's one way our clients can invest.
The second way is through this acquisition of Forge, which owns an asset management company, we will in the first quarter of next year launch an indexed fund that is an index.
Of the sixty biggest private.
Companies, and any investor with any wealth, if they have interests in that, we'll be able to invest. And then third, for accredited investors, we will have a marketplace opportunity for those investors to buy individual private companies and invest in those companies directly. That does require you being an accredited investor.
A couple of questions I want to ask you, so, how does it kind of improve your ability to win more wallet share when it comes specifically to clients. We know that retail investors have been clamoring for more access.
To private markets.
I think we've gone I.
Know it's not about money, yeah, or I know it's not about in terms of the price you paid, but it is about right, Like you want to make sure your clients are happy and they're getting all the offerings.
So I'm just curious, how does it help you win more share?
Over the last ten years, we've become a premier destination for high net worth and alternate high networth clients. And the reason for that is we have a product offer that can't be matched, whether it's access to privates, lending capabilities that are straightforward, fast efficient with great rates, wealth support on their tax, trust and estate needs, and access
to live individuals to speak to. They can walk into one of our four hundred branches all across the country, have a conversation with a real life person about their financial needs, have a discussion about financial planning and what's going on in their life. And so we really have become over the last decade a premier destination for high network clients.
And this acquisition just adds to our capabilities.
What about from your rias?
And I think about all the independent advisors who are here right this is what this event is all about.
So how much does this kind of help them in their pitch to clients?
And I'm just curious, is this to some extent in response to what you've been hearing from independent advisors.
It absolutely is and this is a game changer for us in the RIA space. Today, we have five trillion dollars of RIA assets that we custody, one point two percent of them sitting in alternatives. We know there's more demand that number probably should be closer to five, six or seven percent. And with this acquisition, we've now given them three different ways to get invested, and I expect over the coming years we'll see that one percent grow more towards the five percent. So the rias are thrilled.
They've wanted us to do more in alternatives, and I think with this acquisition.
We've nailed it.
And you said the new client offering, it's next year. We'll see early part of next year.
Well, Forge is up and going today, so hopefully some of our clients will go find it starting tomorrow and start getting invested if that's what they want to do.
But what I have non accredited I think about like that.
We're going to launch the fund in the first quarter of next year. That's the current plan, and then we'll continue to roll out their services in the coming months.
You know, the other side of this rick is, you know, concerns about hurdles in terms of transparency and investors really understanding what they're buying when they tap into anything in the private markets. So are there any kind of hurdles that you anticipate, regulatory or otherwise.
That's why we really wanted to work with Forge, Okay, because Forge is the market leader in providing robust research to clients, and so clients will be able to access that level of research through Forge. In addition to that, we've also stood up a team of alternative investment experts at our firm that any client can call and talk to about, you know, a question they have about a type of alternative or a particular investment that they want to make, And so we really are trying to do
everything we can to support clients. This is a great opportunity for clients to be diversified to grow their wealth in a new aset class. But at the same time, we want to make sure we do everything we can that they for them to be able to do this in a thoughtful, well researched way.
Is there a company you're most excited about that's on the Forge platform or that might be on the Forge platform?
At some point.
I mean, there's opening, there's anthropic. Is there any company that you're really excited about?
Is not a.
Particular one I'm interested in, but I am thrilled that there are a lot of people on our platform and a lot of people that listen to your show that are active in markets and they want to get into cracking because they love crypto or you know, they love Elon Musk and want to get into SpaceX.
So that say, sex is another one.
Yeah, I think that's.
What's so interesting is that we find a lot of our investors do have these passions and now they're going to be able to invest in them through private companies.
So we know you took over in January, this is your first deal. Is there more m and A to coom Like, how are you thinking about what else you need to bring under the Schwab umbrella.
Well, with forty six million clients on our platform, we have an incredible opportunity to continue to add capabilities to serve and meet more of their financial life. The average fifty year older than fifty year old client has seven financial services relationships in their life, so we want to add more and more capabilities so they can handle more
of their financial life at Schwab. And as we add those capabilities, we'll either build them, we can partner, or we can buy, and so we'll look at all three of those. But we want to round out our capabilities and do everything we can to stand behind our clients and make a difference in their financial life.
And just one last question, mostly small, probably tack ons.
I mean, you guys already have digested a large company, so I'm just curious or could it be a pretty significant and any deal.
You know, it's going to depend when. Again, we'll look at build by partner based on what capabilities we want to add, But I think we're open to just about anything. We want to grow our company. We want to do the best job we can serve in clients. We want to make a difference in their lives. And if there's a company or capability out there that we can add to our platform that's going to make a difference, we're going.
To do it.
That is That is Rick Wurster, He's President's that you have to Schwab.
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All right, today we're going to go from Schwab corporate strategy to really macro strategy today's environment, and he is back with us. Delighted that he is Kevin Gordon, head of macro Research and Strategy at Schwab Center for Financial Research.
Good to have you here, guys, Welcome to Impact. Where's up? We get such a great feel, so much fun of how things are going.
But I do feel like there's kind of this internal turmoil right now in terms of the environment.
Is it inflation we have to worry about?
We saw that companies announced the most job cuts for any October and more than two decades. This from Challenger, Gray and Chris Christmas and the did talk about an AI component to it.
I can't figure out where we are. What do you think?
You know?
It's like the flavor changes almost literally every day, because this morning, I mean, it was much more labor driven. You had the Challenger data you mentioned, but you also had data from Revellio Labs, which has become much more important to look at in terms of private sector providers and what they're looking at for job growth, and what they showed for October was a decline of nine thousand
for payrolls. But you know, for me, the labor market stuff is almost this hall of mirrors because all of the different indicators tell you completely different things as to what's going on in the labor market. If you look at claims data, which we're not getting at the national level, right, but if you aggregate everything at the state level, it still looks relatively healthy.
It's state relatively low and stable.
If you look at ADP for October, surprise to the upside as we learned, you know, a couple of days ago. If you look at something like Revellio though week if you look at something.
Like Challenger also weak.
The interesting thing with Challenger is, and we always try to make this, you know, important distinction and emphasis for investors layoff announcements. They're not exactly cuts themselves. So there is a little bit of a lag there in terms of what you can expect.
Yeah, oftentimes ninety days, right.
Plus I think the one thing that is i will say maybe a little bit more worrisome with the one for October relative to what we saw earlier this year, because there was a huge pickup and challenge your job cut announcements earlier this year, but most of that was at the federal level that was focused on what everything was going on regarding to this one was a little bit more broad based. As you mentioned with the AI overlay, the concentration for the sectors was mostly in tech and warehousing.
So clearly this cost cutting going on by companies, yeah, which is never a good feeling.
No, And I think what's what's been interesting so far it's been relatively methodical where it's gone sector by sector. It hasn't been broad based across the economy, which I know. I've talked about this with you guys a lot and Lazanne you know who I work with closely on this are the sort of this concept and thesis of rolling
recessions in the economy. You're still experiencing that to some extent where it's not filtering up to the surface and it's not aggregating together to give you a full blown traditional recession, but it's still happening at pockets.
Or is Lizan We all call her liz Ane Saunders too. That's the Lizanne you're referring to.
Well, yeah, and she's their chief global strategyment strategis so yeah, the big part.
And you guys are my first boss, my mentor, and she loves you on our program yesterday.
She's the best Kevin corporate Going from.
The corporate world and thinking about, Okay, what are companies doing with employees? How are they hiring, how are they firing? How are they announcing this to consumer spending? Because the consumer powers this economy. Yeah, we're getting some troubling anecdotes.
What do you see?
You know, what's interesting is that when you look at I mean, this is where the labor market's so crucial to understand the differences between the stock and the flow. So the stock of labor is still relatively healthy. I mean, you look at a mostly fully employed America and that's where we're at.
Any of the.
Layoff activity we've seen, it's just at the margin, relatively minimal. So if you see relatively low layoffs despite a very low hiring rate, which we're basically at psycho lows, the fact that the stock of labor is strong means that the aggregate income growth month to month, assuming you stay employed is relatively strong. So that's why real spending is
still positive. But to your point about some of these anecdotes and some of these cracks under the surface, they are starting to widen a little bit more, especially if you look at that bottom half of the what everybody calls now the K shaped sort of economy.
There are economists look at that bottom wrong.
You could break it down by wealth level, I like the FED data and looking at sort of percentile levels of well.
In terms of it like overall economic growth and what the FED like, how do you think.
About this is the tough part because you know.
There's a social answer and then they're sych.
Well, the multiplier effect up the wealth and the income spectrum is just much stronger.
It's just the math.
And when you look at how well asset markets have done over the past couple of years, even this year, the bounce from the April lows. I mean, if you're benefiting from that as an asset owner, we have household exposure to equities at an all time high, beyond where we were just slightly but still beyond where we were at the at the peak in two thousand.
So the wealth effect and the power of the market.
In terms of an economic driver, has become quite strong and quite potent. So I think when you add that together with what is true ditionally an economy that has become more or I shouldn't say traditionally, but over time has become more powered by that wealthy cohort, then you've got a pretty strong effect.
When you say full employment, do you how do you define that? And then how does the FED define that?
Because relatively low and employment rate to history compared to history, there has been a little bit of an uptick. But you look at that, and you look at overall payrolls and we're still right around, you know, all time time.
But does it mean the person who's who's has the computer science undergraduate degree is working in computer science or working at Chipotle?
Oh yeah, exactly.
Fully, the question just sort of in nominal terms, looking at at face value, a job being a job, whether that job is perfectly matched with what the person is doing.
That's a little bit of how do.
We measure that well? Because it doesn't that seems like a concern right now.
Well, then I think is going to show up, probably start to show up a lot more within the next year. In a lot of the labor flows that we're going to get because one of the you know, one of the longer term concerns I have for the labor market is what's happening right now in some of the churn with the pretty significant decline in immigration, but also not sort of the lack of replacement.
A lot of a lot of those jobs. We're just not seeing that happen.
And you see that happening in you know, youth unemployment, black unemployment. It's really starting to spread in some of those pockets. So the areas that were supposed to benefit, you know, throughout this year as you had more of a domestic strengthening the in the fate of born labor force, it's not yet happening. So it's a little bit lagged.
I hope it's delayed and not completely derailed. But I think in the next year, figuring out replacements for a lot of those lost jobs that's going to be key.
And the reason I brought up the Chipotle computer science exactly well, always ungry, but that was what's be cited in that New York Times article back in August. Yes, computer science degrees having trouble finding those computer science jobs.
It's kind of this interesting environment we are when we look at the labor force. Hey, one of the things I wanted to ask you your team shared with us that you believe Tina is back, and it's not the Tina that we think about.
There is no alternative in terms of like US difequities.
Yeah, but it's something we started off with about US government data.
It is important no alternative. I mean, the depth and the breadth of the government debt you just can't imagine. And I think you know, so far, Thank goodness, the markets have been sort of, maybe in a negative way, whistling sort of passed the graveyard of no government data. But you know, they've been able to manage through with corporate earnings. I think that's been a nice bridge to
get us to when the shutdown ends. I think though, you know, the longer this goes on, I think what we have to keep in mind, and what we've really been emphasizing to our clients is that you know, when you don't collect this data, yes you can go back and retroactively.
Get it, but it's not going to be clean.
So the longer this extends and we don't get you know, presumably we're not getting a jobs report tomorrow. Even if you don't get when the next week, it's weird. So you're going basically almost a quarter without this really key data. So you're going to have a delayed third quarter GDP report, You're going to have missing data in a way for the fourth quarter, and then you have benchmark revisions coming in February, which kind of throws another wrench into this for label.
So what does it mean for Like I think I asked Lezanne this yesterday, Zanne Saunders, that do we get a FED misstep in terms of policy?
Do they err on the side of doing nothing?
Yeah, I think they're nudging that way, and you know, you look at some of the vote and.
Which is what kind of got from the October meeting, right.
Yes, exactly.
I mean Powell mentioned in himself Austin Goosbi was just out from the Chicago FED saying that he's a little more he's a little less.
Comfortable making a move when you're driving in the dark, in the fog.
So I can understand why they have to be in this reactive position. I don't fault the FED at all for any decision they make. I mean, if they feel very strongly and highly convicted that inflation is not as much of a problem. They want to save labor, then sure you can open up the door for more cuts. I would be sympathetic to that view if you get
more data like Challenger this morning and Raveluo. But on the other hand, if you do have the shutdown lasting longer and more of a delay in a lot of these government data, then I totally understand why they would want to wait, especially if corporate earnings look like they do. I mean, the blended growth rate for S and P five hundred earnings for the reporting quarter is almost seventeen percent. So you look at that and you say, well, corporate
America is still relatively healthy. We haven't seen mass layoffs. They've been in pockets.
And it wasn't just the MACS seven right exactly.
It's spread a lot more.
It's come over to utilities to some extent parts of just consumer discretionary helping a little bit at x max. I have an ex tesla on Amazon right, So it is it is a little bit of a broader story.
For the quarter.
Teviick Gordon Macro Research and Strategy at the Schwaba Center is a document research.
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You might recall over the summer, it was in August President Trump signing an executive order directing the Labor Department to reevaluate guidance to fiduciaries to get them more comfortable with including private credit, digital assets, and other alternative assets in their retirement plans.
Now, the SEC may also issue some new rules or guides.
To change the definition of a credited investor or qualified purchasers. There's a lot going on that could open up a lot of different types of assets to retail investors.
It's something that we've gotten into with the Schwab CEO and.
Kind of on pause right now, at least at the SEC level because the government shut down. Yes, but still this seems to be the direction that things are moving all right.
We have a great guest to get into on all of this with some thoughts and here at Denver in Denver at Swab Impact twenty twenty five, Kyla Culvert. She's head of Risk and Controls for Schwab Advisor Services.
Good to have you here.
There's a lot going on that could change, or there's a lot that is going on that means we won't see changes. How are you assessing kind of the regulatory environment and things that could change what investors can be investing in.
So I feel like for advisors it's a lot of whiplash right now. If we look at the prior administration and SEC Chair Gensler, there was constantly new rules coming out and it was just like regulation overload for people. And now under Paul Atkins, we're expecting to see.
A reduced pace of regulation.
So we see it as a good opportunity for advisors to really focus on getting back to basics and making sure that their compliance programs are up to date.
That all of their ADVs are accurate.
What are avs, they're disclosure documents that have to file with the SEC. Really just making sure that like their house is in order so that because if we're not under a constant flood of new things coming out and then you know, we heard you talking about the executive order related to four oh one k's and being able to hold alternatives different things in four oh one k accounts. That's something that you know, some advisors have interest in for their clients, and it's going to really depend on
the plan. Like is this something that the plan chooses to allow for that client or you know, for their plan participants, or does the plan not want to allow that?
What direction do you see that moving in if it does get approved, if it if it happens, if the sec says okay, this is totally fine, is everyone going to be Is it going to be like us having stocks and bonds in our I.
Don't think it will be for everybody.
I think that we see you well everybody at the option. Well, it's going to be up to the plan administrator. So who's ever sponsoring that plan. They're the fiduciary. They've got the ability to say you're allowed to invest in X, or you're allowed to invest in you know, not allowed.
So would that be at the company level for a certain company and it's employees, or would it be at the whoever they decide as the planned administrator?
Like an empower for example, it's really like the planned sponsor, who's choosing that?
Okay, So why would a plan sponsor say no? Why would a planned sponsor say yes?
I think they would say yes if they wanted to give their their participants, you know, additional choices. Some plan sponsors may say no. You know, we see it on the Schwab side where we've got some plan sponsors that have opted into our Personal Choice Retirement account offering where you can basically have your four oh one K and you know, self directed invest in stocks, bonds and things that are outside of the allocation the plan allocation. It
just really depends on their comfort level. Like from a conservative perspective, you might say, we want to stick more with you know, these funds that we've chosen.
Is it a good thing?
I think it's you know, choice is always a good thing. So more freedom of choice. But as long as people are doing it smartly with it, you know, with the advice of an investment advisor, I think it's a smart decision. But I think there's always additional risk there.
Well, the risks are right in terms of all the assets. Some things are not as liquid or as others, and you need to understand that if you need to be able to get out of something it's not liquid like stocks and bonds.
Exactly in many ways, And that's why I think doing things with the advice of a professional versus just you know, your friend told you this was a good investment, it makes more sense that way.
On the regulatory front, and having advisors have less regulation right now, does more fall on them in terms of making sure that they're doing what's right because those those regulations aren't necessarily in place. And I know kind of a judgment for me to say, you know, quate regulations with right, that's not what I need to do. But we know, we know the DNA that Paul Atkins has the SEC chair when it comes to this stuff, and he's much more laisse faire than other SEC chairs in the past.
Yeah, So what what we keep reminding advisors of is just because there's you know, all this noise about deregulation and less new regulations, you still have to follow the fiduciary duty. You still have. You know, there's still regulations on the books, there's still rules.
Who still have to.
Do all the things and be making sure you're in the best interest of your client.
So just because it's.
A more like laisse fair kind of environment doesn't mean you still don't have principles that you have to adhere to.
Our advisors independents a little nervous about like kind of what's coming at them and the changes, especially when it comes to all thassets potentially.
Yeah, I think that they're just there's the unknown. I mean, we get a lot of questions from advisors right now about artificial intelligence, so, you know, because everybody wants to use it, but there's not a lot of guidance out there, advisors, and so we get a lot of questions on how can we do this compliantly when there's not really any guidance?
Kayla, where's that guidance going to come from?
I mean, you know, and I do this with all due respect, but with all due knowledge about social media and things that many folks would say we didn't We weren't legislators, policymakers just didn't understand the power, the impact and the oversight and the liabilities perhaps, And so I'm just thinking, how do we do that with AI?
Yeah? I think where the thought is that we would.
Most likely see how do we do it with AI and get it right? Yeah?
And you know we've been we've been talking about that. So I attended the Investment Advisor Association's Advocacy Day in DC back in September, and artificial intelligence was one of the topics that we were talking to lawmakers about, and really just from the standpoint of don't create regulation that stifles innovation, don't make it be prescriptive, and really reminding them that advisors already have to follow the fiduciary duty, so don't be prescripted and what you're trying to do.
I think where we would eventually see something come from, most likely is probably the SEC. This SEC, well, it's a very hot topic, so you know that's that's where we would think it would come from.
But in how.
We think it'll be more principles based with this SEC than prior administrations.
It sounds like advisors right now have to keep up with a lot just in thirty seconds. Where do they where do they do professional education, Where do they make sure that they are on top of the regulations, they make sure they're on top of what's happening with AI.
Well, if they're a Schwab client, we have so many resources that we make available for them on our website, we do regulatory webcasts, we put out compliance review articles. We've got relationships with compliance consultants that they can use. And then they should also look at alerts that the SEC and other regulators put out. I'm not pretty getting out route right now, but on a normal basis, there'll be things.
That they put out.
But certainly for your advisors, there's lots of ongoing education, yes, which is pretty cool and interesting to hear.
Hey, Caleb, thank you so much. Thank you.
This is an important area and I'm so glad we could cover it with you. Kayla Culver, she's head of risk and Controls for Schwab Advisors Services.
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I think it's fair to say that Washington and Wall Street and the markets are inextricably bound in a way right now that totally kind of feels a bit different from other times in modern history.
Yeah, well, listen, we're glued to news out of the nation's capital because things the President says or administration does, even today in terms of the drug makers, like it's moving.
Markets, or maybe even things that are beyond the administration's control, like what the Supreme Court is going to decide when it comes to tariff policy, the US government taking ownership of publicly traded companies, social media posts from the President that can move markets and take company leaders by surprise. This is enough to keep Mike Townsend on his toes. He's Meta director of Legislative and Regulatory Affairs for Charles Schwab.
He's a political analyst based in Washington. He also the host of Schwab's Washington Wise podcast. He joins us here on site at Schwab Impact twenty twenty five. You said that you can't walk like five steps without somebody grabbing you and saying, can I ask you.
A question about politics?
Right now?
What are they asking you? Well, I mean obviously just since we've been here, right. I spoke on the main stage at the opening session on Tuesday. Then Tuesday night we had the election results. Then Wednesday we had the Supreme Court case. You know, argued on the terrace and so this is my life now, Like ten things happen then the course are every day that people want to talk about, so pretty fascinating times.
So what do you make of what we've had in the last forty eight.
Hours or so?
Yeah, I mean, you know, the first thing I would say on the election in particular is that it's very easy and I think you're seeing a lot now of the sort of overreaction to an off year election. And I said, you know, I told the conference here, off yr elections are kind of unique to their particular places New York City, Virginia, and New Jersey. Obviously the California district initiative, but they're relatively confined to those places. So no question, big, big night for the Democrats.
But is it a referendum on the sitting president?
I mean some degree I think it is. But you know, I live in Virginia and that race was about federal workers being you know, fired from their jobs, and you know, the economy and that sort of thing, So you know, I yes, it was partly a referendum. I certainly think you can read it as a rebuke to the president in some of his actions, but whether that extrapolates out farther. We'll have to see you.
Went to voting college in Maine. Also someone who went to vote in college Zorron Mamdani, the mayor elect of New York City. You guys did not overlap because he's only been out of there for like you, I've never met him, but he's a Democratic socialist, and I'm wondering if you see that as insulated to New York and New York politics or if you see him as the face of the Democratic Party moving forward.
So I think you can answer that question in sort of both ways, right, So, I think it was unique to New York. He is a very dynamic personality. He's very very good at social media, and he clearly touched a nerve with people in terms of the issues he was focusing on.
Sorry, you could have just been describing President Trump. Those things you just said applied totally to President Trump.
So so absolutely so, I think and President Trump has probably taught us that personality is a huge, huge part of the political landscape now. So I think, Mom, Dommy, you know, did did you know incredible at connecting with people and reaching out to people who maybe hadn't felt heard in the public in the political process. Does that mean that he's going to become the face of the Democratic Party? I you know, I think Republicans are certainly
going to try to make that the case. But I also think, you know, he's going to have to He's going to have a really hard time doing a lot of the things that he said he wants to do. That's just the nature of the role. And you know, the ability of the mayor of New York City to act unilaterally is extremely narrow. So you know, we'll have
to see. And I do think you're seeing. You know, you can juxtapose that with the retirem announcement of Nancy Pelosi earlier today, You're seeing some generational change in the Democratic Party that I think is really you know, important and probably necessary for the Democrats.
So is that her passing the baton or acknowledging that that era is over?
Like, what is that in your view?
Yeah? I mean, I think that it's a realization that the Democratic Party has to get younger and appeal to younger people. I mean, the leaders, you know, the most of the veterans of the Democratic Party, particular in the House, are in their eighties. In Nancy Pelosi, Stanny hoy or Jim Clyburn, and so I think you're seeing that kind of transition happen.
One thing I wanted to ask you, and I think about the titles we give to politicians a Republican Donald Trump, most people would say he's not really your standard Republican Zara Mundani, like, we're talking to socialists. But you know what, he's going to have to take the job and look at his entire constituents. Do those classifications even matter in today's political environment.
Yeah, I think that's a really good question, because, you know, one of the things that really fascinates me is what does the Republican Party look like post twenty twenty eight into twenty twenty nine, after Donald Trump is no longer president, no longer on the ballot, Do what we would call traditional Republicans sort of wake up and think, oh, that
was weird. Let's go back to you know, and if you want a great example of it, look at the Supreme Court case that was that was held on Wednesday, where you have essentially Republicans arguing for restricted trade and higher taxes and Democrats arguing the opposite. That can be seen as a complete flip of the world.
A little bit right, Yeah, Okay, speaking of bizarre worlds, when when the US government buys ten percent of Intel owns of a publicly traded company, or takes a stake in MP Materials, for example, that's.
A bizarre world or Intel, did you say that?
Yeah, Yeah, that's that's that's what we're living in right now.
Yeah. And it's amazing to me how little reaction there has been to that.
Are you worried about that?
I think it's a very strange and I think it has a lot of risk to it.
But we are we getting to the point of state ownership of state owned enterprises.
I mean, this is like, I mean, the President today was in the in the White House talking about with a couple of drug companies about lowering the prices of drugs, and he made, you know, one of his offann references about maybe we should buy a stake in your company, and you know, that's just become part of funny.
Not funny, not funny. Yeah, we're talking with Mike Townsend. He's managing director of Legislative and Regulatory Affairs for Charles Schwab.
He's based in Washington. He's also a host of Schwab's Washington Wise podcast.
You know, I was talking to her Britt this morning, and he said, you know, you guys are a young country. Your political environment is still a baby or a toddler, or however you want to classify it. You're going to go through these tough moments.
And she's thinking about Britain.
And all the king well, all the things that it's gone through, right, and taxing, and there were kings that tax and then there was pushback and you know, didn't have maybe that power or anymore.
How should we as Americans?
And I do think there's we're kind of apathetic in terms of some of these severe things that are going on.
So I'm just trying to understand where we are in our political process.
I think a couple of things. First of all, when you say you're apathetic the thing's going on, I think it's just overwhelmed by the things going on. You can't react to everything.
I mean ten things have produce that could you.
But you know, and I think the ordinary person, the ordinary voter, just can't take it all in every day and can't figure out what to be mad at. But you know, when I go around the country, I talk to clients all over about the intersection between Washington and the markets, and there's so much emotion. I feel like I'm part emotional counselor right now. And part of what I say is a lot of what you may be emotional about isn't affecting the markets. It's not The market
is not concerned about that. That's fine that you have those feelings, but remember to separate those feelings from your investing.
How many records have we had in the S and P five.
Thirty year thirty something records? Yeah? So yeah, I think you know, historically, probably the most common question I've been getting asked over the last couple of days is is this the worst you've ever seen?
Right?
Or is this the worst we've ever been in terms of our partisan divide? And you think, well, we had a civil war, you know, we're not there, so that seem pretty divisive. You know. So historically there's kind of a pendulum, and maybe we're way out on one end of the pendulum. Historically the pendum comes back toward the middle.
You know.
David Sachs, the AIS are for this administration, said today on in a post on X there will be no federal bailout for AI. He said, the US has at least five major frontier model companies. If one fails, others will take its place. He said in a follow up post, the White House wants to make permitting empower generation easier from the executive branches perspective. How can they actually do that?
Yeah, I mean, I think this is a really fascinating question. I tell people all the time. I fly in and out of Dallas Airport in Washington. If you fly out of Dallas, you look down, you see these gigantic buildings with all these air conditioning units on the top.
Right.
Those are the data centers. They can't build them fast enough. Well, what's happening in northern Virginia. Electricity prices are going up and water prices are going up because of the cooling for the water, And all of a sudden, you've brought this kind of back to ordinary people's bills, right, and they're they're sort of paying for it. So when the administration says something like that, I get it politically and it makes sense, and I think a lot of people
want to hear that. But what can the government actually do to lower my water bill? I'm not as sure.
I don't know. Maybe make those who are building the AI data centers.
Pay some kind of fee they're using or like x, I don't know, some kind of tax or something.
And I've seen some of these companies are like building their own power generating, you know, to try to take on some of that.
Yeah, they're partnering with like utilities directly. I'm just good about a minute, Mike Man. I could go really.
Long and I should come back.
Yeah.
Yeah, it is an investment investing audience that's here at Schwab Impact.
It's certainly the Bloomberg audience. What's your final thoughts to that?
Yeah, you know, again, my one of my biggest things is, you know, try to separate how emotional you feel about everything that's going on in Washington and remember that relatively few things are actually affecting the market. The market cares about what the Fed is doing. The market cares a lot about this Fed independence battle that is going to be play out in the Supreme Court in January over
Lisa Cook's firing. The FED cares about it. I mean, the market cares about tariffs and cares about tax policy that sort of thing. But you know that's not that all those things aren't what people are emotional about and you've got to sort of separate that.
Emotion ten seconds. Do folks in Washington policymakers care that the FED stays independent? I think they, even in this administration.
I think they do. I think that would be a huge, huge setback for the country and the whole concept of central banks.
So could we.
See policy makers, even members of the Trump team fight back if that was in question real quickly.
I don't know if you'll see members of the Trump team fight back, but I think a lot of policymakers will be upset.
Mike Townsend of SCHWAP, thank you so much.
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