Dems Reverse Roles With GOP To Mobilize on SCOTUS: Dr. Zaino

and on Bloomberg dot com. On a time when there's just seemingly stunning news almost on a daily basis, this weekend we heard of the passing of Justice Ginsburg from the Supreme Court, raising and media questions about replacement of uh Justice Ginsburg, as well as the political ramifications heading into just the final weeks of the presidential election. Help us kind of parsed through that we are fortunate have. H Jennie is a no political science professor at I own,

a college professor. Thanks so much for joining us here. Give us your sense of kind of the passing of Justice Ginsburg. How does that change the narrative here in the final weeks heading into the selection. Yeah, I mean, I couldn't agree with you more. Even news just breaking almost every moment, it seems, and to hear that news late on Friday, particularly on a Jewish holiday so important

to so many Jewish Americans. She was the first woman, um, who was Jewish to sit on the Court, only the second woman on the court, and she served for so long and so nobly and so beloved by so many people, men and women that it was really just you know, stunning and sad to hear the news. And of course in the midst forty now forty three days to an election, and we understand that she had dictated to her granddaughter her wish that she not be replaced until the next

president was inaugurated. Um, So, you know, just stunning all around, and an already really contentious election that seemed to be you know, decided by you know, the big issues. We're going to be COVID, they were going to be the economy, and now of course you put into the mix the

future of the Supreme Court. And of course we are talking about the future of the Supreme Court because she was a solid liberal on the court that is increasingly conservative and hanging in the balance, as Democrats have been talking about for the last few days, or things like the future of the Affordable Care Act, and of course Roe v. Wade, abortion and so many other issues. So what does the justice is passing due to the odds of Democrats flipping the Senate. Does the passing mobilizer voting

base that wouldn't have been mobilized anyway. It's such a good question because traditionally it's been conservatives Republicans who have cared so much and voted, you know, year after year, every four years on the future of the Supreme Court. And in fact, we look back at sixteen and one of the key reasons many Republicans who are in moderates, who are on the fence about Donald Trump, decided to

vote for him was because he did something unprecedented. He released a list of conservatives he would name to the Court, and that really made them support him. And of he was able to nominate and confirm two justices. But now it seems like Democrats have suddenly caught up to the fact that they too have a real interest in the court. You know. Part of what has been going on is since the early seventies, the court has been largely liberal,

but increasingly conservative. Now Democrats seem to be energized. We saw outrageous fundraising numbers, incredible on the Democratic side in the days since Ruth Bader Ginsburg passed to indicate there's a lot of energy there. So a long winded way of saying, I think that whereas Republicans usually vote on the Court in much larger numbers than Democrats, I think this year we may see for the first time a

switch there. We don't know yet, but if Democrats are able to do that and able to take the Senate, that could really change the game, maybe not about this nomination to replace Ruth Bader Ginsburg, but the court going forward, because we've heard over the weekend Democrats talking about things like packing the court. So I guess just in the immediate term, professor, is it your sense that the Republicans will be able to get a nominee through in time?

It's going to be very dicey. The Congressional Research Service says it's traditionally about average sixty nine days. We're looking at about forty three days until election day. But what I would caution is that, you know, we have forty three days until election day, but we have much longer until the inauguration. So whether we get a nomination before

election day is I think a little bit tougher. But I think certainly Republicans could push through a nomination before inauguration day, and then depending on who won the presidency and took the Senate, you could be talking about a lame duck president's nomination going through and a lame duck Senate confirming. So that I think would really add to the firestorm and and really strong feelings out there. But I do think it's possible. One thing to watch is

any of these Republicans that are on the fence. Of course we know Lisa Murkowski for instance, Susan collinst Romney. I think those are the people to watch right now. Do they put a stop to this? Because it would really take about four Republicans putting a stop to this. And let's not forget the senators all want to go home and campaign, many of them running in tight seats, so it is a very difficult time for the Republicans to push this through. It could be done, but I

think it's going to be an uphill battle. Genie, what would be defectors motivations for not voting? So what would be in it? Let's say, for any Republican senator that decided they didn't want to back a nominee. I mean, some of the nominees are probably people that they would be quite happy to back in another year. Absolutely. I

think number one would be this issue of hypocrisy. Say, they had publicly stated that they didn't want to vote on Merrick Garland four years ago when Obama named him, to now go back on that and to then half of face voters in their district. So I think there's that, you know, issue of quote unquote hypocrisy. But I also think importantly it's that they have to face voters in their district, many of whom are in purple states. They are facing tough reelection bids. So people like Susan Collins,

she's already about twelve points down in her race. She has got a lot of flack for supporting Judge Kavanaugh, as we remember, and that's one of the reasons why she's not doing so well in her race now. So I think the combination of those two things makes it very difficult for Republicans to say we should wait on this professor. Is there since that the average American voter cares about the Supreme Court? Yeah, you know, as since I teach the court. I want to say, yes, yes, yes,

you know, But that's just self interested. It's usually not the number one issue, but again for Republicans, it has been an issue of real importance. And I think, and this is something I think we're all going to have to watch. It looks like we may see the same thing happen with Democrats this time around. You know, the numbers we're hearing ninety million dollars raised in you know, forty eight hours or whatever that number was since Ruth

Pader Ginsburg passed on the Democratic side. Those are huge numbers and indicate that Democrats do care. Now, do they care more than they care about the pandemic, more than they care about getting rid of Donald Trump or supporting Donald Trump, depending on their side. We don't know yet, but I do think that, you know, if there's any year where the court is important, it's going to be

this year. Yeah, that's for sure. And President Trump saying this morning on Fox that we will have a name on Friday, so we shall see that may or may not happen, but that's at least his plan today anyway, Genie, thank you so much for jumping on with us. Really just wonderful perspective there from Jennie's political science professor at Iona College. And indeed, if we have a name on Friday.

You know, we already have a short list, and obviously the President has already said he wants his pick confirmed by the November three elect and so whether the confirmation itself is possible or not, there would at least be a big effort in that direction. We know, of course that majority leader Mitch McConnell is all on board with that idea. Well, it's Charlie Fellert was just reporting markets are plumbing their lows right here, with the STP off

about two and a quarter percent. Is this an entry point for Tom Keene to get out of his triple leverage all cash fun or is this signaling something new for the markets? We're fortunately Matt Maley joined us to answer some of those questions. Matt is a managing director and chief market strategist at Miller, tay Back and Company. Matt, let's just start off real quickly. What do you make

it today's action and even that of the last several days. Well, you know, it's something I thought that uh uh, we were kind of right for anyway. I mean, obviously, we have some new news out here that has has raised concerns about what's going on in the marketplace. But you know, we have to remember that back in the beginning of September, I mean, we had the market, the market overall, and

especially these mega cap tech names had become incredible. We overbought, incredibly over valued, and uh, usually when you get the huge extremes we had then, I mean, they weren't the extremes we saw, but they were still very, very big. And usually when you see a pullback like that, it comes in more than one wave. The first wave kind of makes people a little nervous, but it's usually not enough to u wash out the froth it's in the marketplace.

It's usually a second wave, which we seem to be getting right now, that finally kind of washed the things out. So in many ways, this is scary, but but it was predictable, and uh, it's also normal and healthy. How much is this an election trade mat with all of the healthcare stocks released, the insurance component and healthcare lower, Well, it's it's certainly a big part of it because we

now have even more uncertainty involved. I mean a lot of people have strong opinions about what, uh what the should happen here with with the passing of Ruth Bader Ginsburg, and what what should you know? Should we have somebody before should President Trump have to be able to nominate and and and get somebody installed before the election. We can talk about that all we want, but a lot of people are don't have strong opinions and are very unsure about what it will mean for the for the election.

Will it be more positive for President Trump, will be more positive for Biden? We don't know. So there's already a lot of uncertainty of that. In that issue, it creates more uncertainty, and of course markets just don't like uncertainty, as we all know. All right, mat So, how are you approaching the market these days? Are you constructive here?

And if so kind of are you still in that growth techie trade or you suggesting perhaps people think about rotating into some more cyclical names to the extent that we can look to the other side of this pandemic. Yeah, I think people should be looking to rotate a little bit. Now. Again, we had, you know, what, do you want to call it a bubble or not. We certainly had a huge overvaluation situation with the tech stocks, but again not like two thousands, so it's not like, oh my gosh, dump

all your tech stocks. There's I mean, these may attact tech stocks that we're doing so well. We're doing well for a reason. They just went to far. So you don't want to dump the whole group. You still want to be uh invested in in these tech names, especially on any further weakness, so you can add to them.

But I do you know, you look at what the what's happened, and some of these uh economically sense of group, like the railroad stocks and some of these material names, and of course housing has done very well all along. So these are typic groups you want to be rotating towards uh as as if the market comes back in a little bit more, which I think it will, and that will really bode well I think for a for the longer term. You've always been a specialist in bank

stocks both sides of the Atlantic. I'm curious as to your thoughts on this report that banks might have been engaged more than normal in dodgy behavior, and particularly some of the European banks. And now we have the f c A, the Financial Conduct Authority in Britain, saying that it is launching a probe and that it will, you know, decide on on what to do with that probe later on. Yeah, I mean, it's the group has been such a tough

one for for a long time. Know, it's it's it's funny that all the group certainly had a nice rally off the March lows, but it was, you know, except for one little period there in May, the it's have still continued to lag and it's been doing so for almost three years, three years now, And this just throws another rent of the works. If anybody has been bullish on the group, they say, well, jeez, the valuations look good, you know, trading sometimes below book value in some cases.

But again, this is this also has something to do with confidence. I mean, we had this problem where you know, the same thing with this Nicola uh situation. It's like, oh, jeesus, something going on there. Every time we get a sneak and pull back on the stock market, it exposes something out there. And jeez, we bailed out all these banks and yet they were still doing uh, still doing these

things they shouldn't have been doing. What's going on here, And it just takes away some of the not only confidence in the overall market, but certainly confidence in the group. And so it's still one I'm afraid I want to avoid right now. So Mat, I mean, when we think about the financials, I mean that net interest margin story, it just seems like a tough, tough story for that next several years, particularly if you're take into account, you know,

some of the recent comments of that chairman Pal. It just doesn't that that revenue driver. It just doesn't seem to be there for the banks now. And it's it's it's funny because I look back to the well in several different cases in the past. But you can go all the way back to the early nineties when we had the after coming out of the SNL crisis back then, and of course uh the financial crisis of of ten

to twelve years ago. Each time, uh, the kind of the core banking and like you said, Nishi margins were something that they relied on. I mean in back on the nineteen nineties, they was called right, they rode the yield curve back to uh to solvency and not they're not gonna be able to do that right now. I mean, again, I'm not worried about the banks like we were back in two thousand and nine, two thousand and eight, but

it's still your question, where is the reward? At some point this is going to be a great group to buy. But I've been cautious on it for three years and I think it's, uh, it's still something that you want to avoid. And again it's it's not so much you're gonna lose money, but they're just other places that you're gonn I do much better, all right, Matt. It is

always great to speak with you. Lots of insight into market movements, both day by day and sort of longer term Matt mainly as chief market strategist at Miller's hay Back, founder of the Maine Report. And we have a little bit of a deterioration again, the SMP down two point four percent, the Dow actually down two point eight percented is the NASDAC that is leading if you like, it's

only quote unquote down one point eight percent. And again those headlines that I was speaking about the Financial Conduct Authority in Britain saying it has several probes open into money laundering and will make decisions by the end of the year on those probes. This after Buzzfeeds big article about the various banks that have been engaged in shady activity, to say the least. Shelley Banjo, senior writer for Bloomberg, giving us the latest on what's going on with TikTok,

and Shelley, thanks so much for joining us here. But I have to be honest, I'm kind of confused here. I thought the initial expectation here was that President Trump was saying, Hey, you have to say l your US operations or we're going to close it. But that's not what's happening here, is it. No, And I don't think

you're the only one confused. It's been a roller coaster a ride with TikTok and it's still going so definitely we don't have a done deal yet, but the Trump and Trump came out over the weekend and gave his blessing to a deal on the table. I'm what Trump had initially asked for is an outright sale of TikTok to a US, to an American company, and as well as a cut to the U. S. Treasury you know, key money as it's been referred to. So neither of

those things happened. What deal we actually ended up getting so far on the table is one in which by Dance, the Chinese parent of TikTok. Uh maintains a majority stake UM in the company of TikTok and ument of this new company. Up to of the new company will be owned by UM, by Walmart, and by Oracle. The hope of doing a pre I p O fundraising round and then listing doing an I p O on an American exchange in about a year so complicated, and China hasn't

even agreed. In fact, last I heard, well, we did get the headline this morning that the Global Times is reporting that China is not going to accept the deal the way it is. But previously, the last I had heard from China was that they'd rather kill off the US operations of TikTok then sell out. Yeah. I mean, just like everybody else there, it's gone up and down

with China as well. You know, Global Times was an interesting example because over the weekend, the editor in chief came out and said, you know, this isn't great, but you know, I think it's just something China can stomach. And then over the UM over just the last hour, UM tweeted to say, um, you know, this is not actually something that that China can accept, and so you know, we are in the stage where the you know, the

words are going back and forth like a tennis match. Um, and uh, you know right now the company is stuck in between all of this is, of course TikTok, So Shelley, I mean, clearly, there are reasonable arguments to be made as relates to national security and what data the Chinese may or may not be gathering about US consumers. Does

this deal address that at all? So most of the national security and privacy experts that we've spoken to over the last few years, last few days I'm sorry, um, have said that this doesn't address that, but it was really about national security, then it really wouldn't matter that TikTok was creating twenty thousand jobs, as as Trump had head said over the weekend, and none of those things

would really enter into the discussion. By including Oracle as a technology partner, what that does is it gives Oracle access to to look at the source code and to look at the algorithm. Um, but it doesn't give them ownership of it, and so they can kind of monitor it. And um, you know that too many national security experts is just not enough to really identify a threat if there,

if there is one. It's so strange because it's effectively an administration picking the companies that are allowed access to this information. Right, So we know that other companies were interested, but it's Oregon and Walmart now that are the chosen to Shelley, have we ever seen this before? No. I mean the issue with other companies that were interested, like Microsoft,

was that they got in them too the game. When they thought it was going to be an all out sail, they said, yeah, of course we want to own this asset, you know, own this this popular company. Um. But when it became clear that it would just become a partnership, Microsoft um, you know, didn't end up didn't end up actually wanting to go much further and invite Dance the same way. They couldn't reach an agreement. And so you know, all of this jarekicking of companies and banning them and

things like that. It's just completely completely unprecedented, um in the US, particularly for social media company. So Shelly, just real quickly here is this expected to close? Was well, I think there's still a few hurdles that have to happen. I mean, Trump it was the biggest one and gave his you know to using his words, gave his blessings over the weekend. Um, but it's anything but done deal there. There's a lot of momentum within the administration to get

this across the finish line. Um. But again, a lot of these things can be delayed. You know, Donald Trump put out it. This is all being done, you know, via executive order. So if you just put out another delay, he can delay it again. Um. You know, we can keep going with these delays until after the US presidential election and then who knows what happened. Okay, Shelley, thank you so much for joining us. We really appreciate you coming on and sharing your knowledge share of this ever

changing issue. Here, Shelley Banjo, senior writer for Bloomberg TikTok Oracle. Will a deal happen? Will it really be material to national security? We will see. And we have a VIX that is above thirty today. That's a pretty big increase, but not to rising when you see the volatility in the Market's another down day for the in disease, and we are dipping further into down territory with the Dow back down below three percent three point three percent lower

at this point, and it's picking up as well. The steam for the SMP and the NASDAC and of course a big move in the thirty year yield as well. Today Paul the third year yield now yielding just below one one. This presumably a little bit to do with

Robert Camplan's commons to Bloomberg. Yeah. Absolutely, I think the you know, no matter how you slice it here, um, we are lower for longer as it relates to rates and uh um, you know you hear Chairman Pal talking about three maybe even beyond that in terms of being accommodated here and injecting liquidity into the marketplace, and we're seeing that in the in the yields. But I think the market today just a lot more uncertainly about political

issues and the pandemic as well. Indeed, and somebody that might know a lot about this is somebody who watches rates constantly. He's a fixed income senior portfolio manager and also head of the Municipal bond group at Federated Hermes, so basically spends his entire day watching these rates and watching spreads and all sorts of markets. R J. Gallo joins us, Now, are J the move in the thirty year Is it a big move relatively speaking? I mean we saw a six basis point move basically. Oh, it's

certainly material. I mean we've been in a very constrained interest rate environment now for many months, pretty much since the highly dramatic, crazy days of of March COVID as a crisis really took off. We've been constrained to a narrow range in treasury yields. We've been in a risk on environment for corporate bonds relative to treasury yields of high yield and investment grade. So when you see moves like you're saying today, I don't want to overstate it,

but I think this is a material shift in the outlook. Um, I understand the election is a asking a big shadow over everything, and it just got bigger with the passing of Justice Ginsburg. Everything has gotten a little bit more complicated, and I think that the rates market is reacting to that.

One of the areas that the Fed obviously is looking at his inflation and you know, talking about Chairman Powell and as jackson Hole address, suggesting that the Fed would allow inflation to go above two percent for a certain period of time. To me, I just want to kind of how you how you take that in because we've have. It's been a long time since we've had two percent inflation. I'm just wondering what the policy is behind that and

how you view inflation going forward. The FED has disappointed, to put it mildly, in terms of its ability to hit its inflation target. We've had two percent written down in black and white by the FED since you know, since twelve in a formal sense, but well before that in an informal sense, and we've spent most of the last decade plus with inflation below that. So I think there's a tendency in the markets to look at what the FED said at Jackson Hole, what they reaffirmed at

the FOC meeting on September sixteenth. I think it was UM saying, Okay, you didn't tell us anything new. You basically said that it's it's no, it's no, it's not a target. It's it's a long run objective. You can go above it, you can go below it due to the now clear overlay of an average inflation inflation objective. UM. But they did say something that was very significant. They basically overturned decades have said precedent when they said that

only shortfalls unemployment will be considered in setting policy. In other words, when unemployment is really low, say three and a half per cent, where it wasn't all that long ago, the said won't by itself look at that variable and preemptively tightened for fear that inflation will build from tight labor markets. That's very different than what Paul Volker or Alan Greenspan or even Bernankee and Yellen would have told you.

So that is a big change. Yeah. And in fact, I don't know if you managed to see the comments from Robert Captain speaking with Swimberg earlier, but essentially you dissentered last month and said we have carefully or because the pandemic world pass at some point. Yes, I feel that I did see just the headlines on from from the fetes chaplain and I felt when I saw his descent, Uh, he probably has a little bit more consistency with the FEDS framework that has prevailed for decades, which I just

alluded to. UM. I do think that Chairman Powell was asked directly in the press conference following the FROMC meeting, UM, how do you square ultra low rates and basically tabling the whole idea of being preemptive when labor markets are tight, how do you square that with financial stability? Won't that change in framework that asymmetry with respect to labor markets

build excesses in the financial system. Chare Powell came back and basically echoed chair yelling from years ago that they don't believe monetary policy is the primary means by which you regulate stability in the financial system. They have other tools macropredential tools, regular relation to be specific, to try to prevent accesses from building. Jury is out on that

in my opinion. I mean, when when rates are very very low, when the set is telling you they're going to target zero rates, that can help to fuel imbalances accesses in the financial system are It's not clear that our financial regulatory framework has evolved so much that we'll be able to tamp down those accesses from becoming regrettable, you know, building the next bubble if you will. And that's basically where Kaplan was coming out. I think, hey,

r J, thank you so much for joining us. We appreciate that got to be tough work for a fixed income manager in a zero rate environment. R J. Gallows, senior portfolio manager, is also head of the municipal bond group at Federated hermes Um based in Pittsburgh. We appreciate his comments. And Vannie, it's again that no matter where you look here, it just screams out at your lower rates for longer. Uh. And it seems like the FET is very comfortable with that outlook. No shorties of supply

at least if there's a silver lining pool. I mean, everywhere you look, you're just getting bonds thrown at you from the media markets right through treasuries. It's it's really pretty phenomenal for somebody like R. J. Gallo. I'm sure thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn. And Paul Sweeney I'm on Twitter at pt Sweeney.

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