Surveillance: Wealth Tax 'Baloney' With Cooperman

Lee Brody, get Leon Cooperman on. There's any number of reasons we can always speak with a gentleman from Goldman Sachs and of course now chairman, chief executive officer at the aged seventy eight of Omega Family Office. But far more it's about the never ending debate of a wealth tax and of going after the billionaires. Mr Cooperman has been more than vocal marketing back to a letter of

two three years ago to the Senator from Massachusetts. It is a five page, single line doozy where Leon Cooperman takes on the liberals, the Progressives, and Senator Warren. We are honored that Leon Cooperman could join us on Bloomberg surveillance this morning, Lee Cooperman, the debate is the same, and yet it's different. What's different now versus when you

wrote that letter to three years ago. Well, I think it's becoming a little bit clearer that the general populace UH is not in alignment with the progressive You know, you saw that election in New Jersey, you saw the election in Virginia, UM and they dropped the proposal to have this tax on unrealized games. But I'd like to take a second, with your permission, I'm not involved in politics.

About two years ago, I gave a speech at a Hedge Fund conference at a time when Elizabeth Warren was running strongly in the polls, and none of my speech was directed towards politics. At the end of my spee, each the moderator asked me, what do I think the market would do if for Ludith Warren presidency? And I said, you know, maybe I was optimistic. I said the mark would drop at least the very next day. Not knowing anything about me, she treats Leon, I'm only looking for

two give others a chance of the American dream. And I made a decision to take the high road and basically uh. Michelle Obama once observed that when they go low, we go high. And I wrote her a very good letter and let her you decided a moment ago, and she showed to me that in the best sense, you know, if I wanted to be polite, I would say, uh, and respectful, I would say that she's a politician in the worst sense of the word. Uh. And if I wanted to be a bit more shop tongue, I would

say that she's a nasty fool. But let me explain, you know, um, when I wrote the letter. Basically, her response was, you know, inside a trader and owned stock and navigant, totally unresp answer to the intellectual contract letter. You know, the fact that you live with me. I won the case with the sec Yeah, I'm sorry to leon.

This is really important at a moment when what you call the vilification of the rich is gaining steam, that the idea that people feel like there is a fair share to be paid and that the wealthiest individuals are not paying it. What is the backdrop leading to the increasing calls for the fair share rather than trying to close loopholes and some of the other proposals that you've put out there. It's a good question. I think it's results of income disparity and the income disparity lodging results

and government policies. You know, go back to two thousand eight. Mr Bernankee figured out the economy is going down the toilet. He had to rescue the economy. You think the best way to rescue the economy was to get wealth up. And his wealth leads to consumption. Uh. And the best way to get wealth up was to get the stock

walking up. The trouble was the stocks very much one was sent to the people, and so income disparity group, right, And I'm gonna try to get that money back by creating an environment where there's been no return for maybe Leon I want to. I've got to get to the heart of the matter. In two thousand twenty one, and here's the bottom line. We've got a definition in this nation that four hundred thousand is filthy rich. It's St.

Barnabus Hospital in New Jersey. If you've got a full line doctor, surgeon, whatever, and the spouse is working as well, or even if it's a single person, they're paying four hundred thousand, and they're deemed by liberals to be rich with all your experience growing up dirt poor is four hundred thousand and two thousand, twenty two rich. I don't

think so. I don't think so. I think doctors have gotten totally screwed by the government when I look at what they have to go through to get their degree and be able to practice, and then with the controls over their income. Look, I believe in the progressive income

tax structure. I believe rich people should pay more in tax is you know the question we have to deal with is a nation is coalesced around the question what should the maxim tax rate be unwealthy people, because that will be that will define the revenue to the government, that government exercize themselves that revenue. You okay, and all of this talk about wealth taxes, it's all bolay. They said,

let them close the loopholes. You mentioned it a moment ago, Lisa, did you know ten thirty one billy a roll forward and definitely real estate gains, you know, get rid of that, get rid of carrot interest for head, raise a tax rate. We don't need new forms of taxation. Okay, we just deal with the loopholes. I do want to just go into something that you were talking about the idea of monetary policy pushing up equity pricing and that that does

not reach everybody. Do you think that monetary policy where it has been has exacerbated the divide that has led to the discussion that you were talking about right now. Yeah, I would say, so, Look, you gotta go back. You know, Bill Clinton didn't vilify wealthy p people. Ronald Reagan didn't vilify wealthy people. George Bush didn't vilify wealthy people. I respect Obama as an individual, but he started the whole thing.

I become a letter write I wrote him a letter nine years ago and I said, you know, you're basically telling you they being screwed by the one percent. Why do you tell the ent with a lot of hard work and luck, they could become part of the one percent instead of vilifying the wealthy. I think the world has been a place because of Bill Gates, Jeff Bezos, Bernie mark As, Kenn ln God and people like that. You know, I don't see a reason to veloped by

them tax him. I have no problem with taxes. You know. I'm actually have taken the giving pledge to the Buffett and I've taken another giving pledge by friend Mike Leavin, the Jewish giving pledge. I'm giving away all my money, you know, so it's not a selfish motivation. Leon, we gotta leave it there. We are out of time. We'd like to continue this discussion as well. Leon, We've got to get you into our studios here in Manhattan when you decide to leave the acreage in New Jersey. Leon Cooper,

Man with Omega Family Office. At the heritage of Credit Sweets and Derivatives is immense, It's dominant, constant and any number of other people, including I believe not seeing till ab ages, ago, derivatives and the mathness of it has always been front and center at Credit Suis Holding Court is their chief equity derivative strategist, the statistician and economist. Man. As you joins us this morning, many thrilled to have you with us. Can you explain the voll that you

see in the cross moment Skew to mere mortals. Explain the oddities of the third cross moment Skew. We're not doing crotosis, we're cretosis ray today, but your world of skew. Explain how skewed Skew is to mere Mortals, so thanks for that introduction. Tom. You know, I can say definitely Skew is us Skew right now. Um. But you know, when you talk about all the macro risks and you guys let off with all the macro risk that's facing markets, inflation, the Fed, et cetera, I would say, you know, what

was currently priced into the equity market is actually fairly bullish. Um. So, one of the more notable things that we've seen the equity market right now is that on market rallies, volatilities actually going up. Now that's very unusual because typically vaulting umply volatility decline on market rally and on the surface you might think that, you know, more of a cautious signal that people are you know, buying puts or you know,

pricing in more downside risk. But actually, over the past week on the market rally, implying vaults are going higher on the back of demand for upside calls. And this is I would say particularly pronounced in small caps. So if you look at the Russell Index, for example, Russell had a very large breakout move last week up six percent. Russell Skew actually flattened to not just a one year low,

but actually towards a ten year low. Right, this was primarily driven by demand for those upside calls um and call vollowing thing. They're very elevated and rustle as well. Many can you describe the character of that upside position where it's coming from. Is it primarily retail? Is it short dated coal options? What does it look like? Yeah? Sure, so at the index level, I don't think it's primarily retail.

I mean at the single stock level. So you know, when we talk about skew flattening, this is a dynamic that we're seeing not just you know, for the Russell Index, but actually at the single stock level SMP, you know, top fifty, top one hundred stocks, we've also seen a very pronounced flattening in the skew and again primarily driven by the call side. And at the single stock level, we do think mostly this is coming from retail because in terms of the institutional flow that we see, it's

actually the opposite. A lot of institutional investers, asset managers, pensions, hedge funds are actually coming into cell calls to overwrite their position. So taking advantage of that did to the upside that is I believe you know, primarily driven by retail man. You're taking a step back. Throughout the year, people have been talking about options being the tail that wags the dog, the idea that on a single stock name, You've seen the options market really overwhelmed the fundamentals and

dictate some of the moves. Are we seeing that on a broader basis more than we have typically in the past. We have definitely seen more pronounced, you know, single stock moves. I don't necessarily attribute that to the option positioning, so I would say no, recently, it's really been driven by earning. So what we have seen over the past month is actually one of the biggest increase in single stock dispersion

during earning season in five quarters. When I say seeing stock dispersion, I mean, you know, large single stock moves relative to the index UM and and this you know this quarter was not just the largest in five quarters, the third largest going back fifteen quarters UM And I'm going out thinking that thinking of that is that you know, a correlation, realized correlation in SMP, you know, has fallen significantly as we get these vidiosyncratic moves on earnings. So

correlation SMP is currently at a one year low. On both an implied and realized basis, and again the moves are I say, pretty broad based. It is not really driven by one particular sector. The correlation is currently at a one year low for seven of the ten SMP sectors as well, Mandy, on a broad basis, looking at cash derivatives versus the huge nominal gross up of what all that papers really worth. Are we at a point of derivative speculation now? Or is it rather a contained

normal market? You know, That's that's always kind of the the question, right, I think at certainly at the index level, UM, I do not think you know, we're in a situation where the derivatives market is overwhelming. UM, certainly, no, you're not not as a market like SMP as deep and liquid s the SMP certainly on single names, UM, particular single names you might, you know, make that case where

your option activity has been very concentrated. But at the induct level, you know, we do not think so, Mandy. Always quite to hear from you have mischion. It's been too long, Mandy, see that I have quite swaste on the sanquity market. Thank you very much. Chrisma Rangi joining us now. Cacio of Gabelly Funds on the sanquity market. Chris, We've got to start there, haven't weight. How did you react when you saw that six handle on CPI in America? Well,

unfortunately not with a lot of surprise. We're just getting through Q three earning season now, and unquestionably the theme of all these calls, whether it's autos or food or even the Walt Disney Company last night, is inflation and supply chain issues um, which inflation being one manifestation um so um. Everything is transitory along enough timeframe. This is changing anytime soon from what we're hearing from companies. Uh. Fred is probably gonna loose it up first. Uh but

Semis we're gonna take a longer time. And labor we don't know. Chris Sperring, How do you inflation proof of portfolio? A measured value? Mario Gabelli's a certified starred portfolio. How do you inflation proof it? Well, the reality is that there's no way to inflation proof it um and not something that equity managers have had to think about for decades really. Notwithstanding that there are ways to to uh limit the impact of inflation. Looking for companies with pricing

power in particular. Uh. And then the nirvana is really defined companies with both the pricing power and fixed fixed costs UM. You know, waste companies I've talked about before. It doesn't cost more to to get rid of garbage in a landfill that's already paid for UM. So we're looking for those, We're looking for stores of value, just like everybody else. I think the whole inflation the prospect

of inflation is driven the crypto market. So if you look at gross margin, or you're bringing even down to a healthy but big percentage margin, that helps you with the inflation proofing. Does that steer you back to big tech? Well, there's no question that least some of the big tech companies Google comes to mind, have enormous pricing power. Uh. And and are many ways inflation conduits UM that we think about. Okay, well, what's the what's the impact of

interest rates? And obviously the higher interest rates probably more impactful on those companies that have cash flow as well into the future. So we've got to balance those things. Chris. It was Warren Buffett who came out and said, only when the tide rolls out to discover who's been swimming naked. Is the tide starting to roll out right now? Uh? Well, we know, we know that the tides come in and out. We don't have a great schedule for that at at

the present time. But yeah, I think we're probably closer to the tide going out. Um. I was saying that listen, Ribbean's got an eighty five billion dollar marketing gap. So, um, this isn't this isn't changing yet. At what point do we start to see some real disruptions however, where we see the most vulnerable players shaken out? Yeah, I think

I think we're already ready to see that. Um. You know this will uh, an inability to pass along costs will cause financial pressure, will cause pressure on debt service for a lot of companies that that have leverage, and you know is the as the debt markets perhaps tightened up, Um, they might not be there for those companies. So this is a process that probably plays out over over time.

Can you weigh in on that just briefly, Chris, that we've got an eighty six billion dollar market camp on an automaker that only just started delivering vehicles a couple of months ago. How do you respond to that, Chris? Someone like you Yeah, someone like me who you know owns GM with which is a very similar market cap and obviously a much larger market share. Um, it's puzzling with without Amazon, I don't think they have nearly the market cap that they do. But rib It appears to

be a real company. But it's challenging to actually make stuff, make cars, get them delivered to customer, service them, and all those other things. So I think it's gonna be a bumpy road for that company. But um, you know, they're probably gonna be a good competitor. Have you built it us? Did you find a stock? Now? You know? We have Uh. We like to participate in some of these stories through suppliers. And one of the suppliers Tribbian as a company called Tenneco, a little teeny tiny auto

supplier that makes a suspension for them. So that's a long way one way we play it. Let's see if they can run pump production in a big way, Chris cried to catch up. Remarkable moment for that industry. Chris Marangi Belly funds right now an important voice on your inflation Chairman Paul's inflation as well. Julia Cornado is president and founder of macro policy perspectives out of Texas, Austin, and of course always vetted for a position with the Fed,

where she's worked for a good number of years. Of course, iconic at BMP Perry BA really talking a tepid GDP A crisis ago. Dr Coronado, thank you so much for joining us today. You are read worldwide for itty bitty charts on page seven where you go. Oh and your O chart this week is old and new guestimates of rent inflation. What is the dynamic of rent inflation in America? Well, it looks like we have a hot rent cycle on our hand as well. So we've had a couple two

months of prints. We came basically a month earlier than we were expecting, but you know, a lot of the indicators have been pointing in this direction. This isn't a surprise, of course, Calibrating the magnitude is always the trick. So it came in a bit hotter uh in October. But it looks like we're going to have a surgeon rents in the first half of next year, starting now, going

into the first half of next year. Um, you know, like many things this cycle, there was a surge of demand early in the cycle, we are seeing a building response, but of course the building response takes some time always, and it's going to take even more time given supply chain bottlenecks. So that's also going to probably be three

issue before we see that moderate back down. So that's adding to the other pressures that were coming more related to COVID disruptions and civilizing issues that have renewed an intensity because of the delta variant. So it's sort of a combination of things that look more transitory and things that look more cyclical that are combining to produce some pretty Oh and the third factor, of course energy prices. And that really wasn't coming from the Google or from

the U S situation. That's really you know, China European driven dynamic, but it sort of rolls into the US and UH and hits US consumers. Tell me about the timeline of FED and waiting for an inflation to turn around and become disinflation? Is it out to January of next year? The FED meeting of March sixteen or dare I say can they be data dependent to May fourth? Yeah?

I think I think they can be data dependent. This is really an uncomfortable situation because again, the inflation is being frontloaded near term, anything they do today isn't going to have an effect for a year or more. And meanwhile, what we know is in train, we're still surfing this epic wave of fiscal support that will fade over two, that that money will be spent, that consumers will demand will cool off to some extent um. That's what everybody's forecasting,

including the Fed. So uh, you know, as these forces come together, do you want to pile on to this front loaded tightening? Do you want to bide your time and wait for some of those forces to play out. Uh, It's going to be a tough road for the a tough balance for the Fed to strike. We we do think they will lift off in two, but we don't We don't think it will be towards till towards the end. We've got a taper. The we we are putting in a lot of global removal of accommodation and we haven't

yet seen its impact on markets or the economy. Uh. And so you know, I think the FED proceeds. I think still the bar is pretty high to accelerating a tapering um. But you know, look, The good news is that some of this reflects a US recovery that's pretty darn resilient. As delta fades, we're seeing demand uh stay strong, and that bodes well for the staying power of the

recovery through this verston inflation. In other words, you know, one thing you might worry about, and and some a few handful of analysts do, is that this could be demand destroying. This burst of global inflation tends to be sort of a harbinger of of recessions. We don't think that's the case because there's just such a good foundation for for the US recovery. Judy. And the next st off for this market, as you know, is the December meeting.

At that meeting will get some forecasts. We get the summary of economic projections, and I'm just looking at the full for cole p c A at the FED for next year. It's two point. I just wanted from your perspective, Ju, how much does that need to change. I mean, that's actually our forecast, so it's um not that is a strong forecast. That's a forecast that includes a very strong rent cycle. But the key there is that goods inflation moderates as the year progresses, so that remember that's above

target inflation, that that is strong inflation. All it builds into it is that the supply chain issues ease, that semiconductors become more available, that car prices flatten out, maybe cool off a little bit. But all you have to do is have goods prices stop going up at the pace they've been going up to get to that forecast. So it's not an unreasonable forecast that's set. I do think they raise the near term. Uh. The current year

forecast looks too low. Uh. And I do think in the like half a hike, we do get a full hike in the baseline. It becomes the modal outcome for the committee. Uh. And and then you know, steady as she goes, it's gonna be. They're gonna feel the heat from all the questions. But I think the Fed's job here is to be the steady hand and keep their

eye on that medium term. Julia, the idea of them being a steady hand when it's not as if they're not affecting some of these dynamics, I mean the idea of rent inflation we're talking about at a time when they're buying mortgage debt. They're buying bonds that actually reduces the yield on the margins of like the loans that people take out elevating prices. At what point will be staying the course, not be adding accommodation and will they

be forced to end the taper sooner? I mean, to me, this is going to be an increasing question, especially since they didn't give guidance as to how much they were going to be pulling back at the beginning of the year yet again, at least I think, you know, if you think about what the choices are here, slamming on the brakes, will that be better? And you know, letting demand run a little hotter for a little longer. You know, what,

what are the pros and cons of these scenarios? I think ideally, if the Fed could calibrate policy, you know, with a fine point in a timely way, they would have been maybe less accommodative now and then more accommodative, you know, towards the end of two when when fiscal the fiscal impulse becomes a drag. You know, when you model out the fiscal impulse, We've just had this epic impulse. But from a growth perspective, that's going to run out of gas. Even with this new you know fiscal packages.

These are medium term, longer term packages. They don't have anything to do with really the near term demand profile. So if the FED could you know, fine tune things, they would do a little less now and then maybe a little more later to pass that baton between fiscal and monetary and smooth the recovery. They don't have that luxury,

So you know, what, what is the best thing to do. Obviously, you know, if there are signs of you know, wage price dynamics becoming more entrenched in the economy, they can lift off in June and go pretty steadily. That would be a pretty significant tightening. And monetary policy we can kill inflation, that's not the question. We could kill this recovery. The FED could kill this recovery anytime they want. That's

not what they want to do. Uh. And you know, if we we the good news is the other important piece of October data was a really strong jobs report. Uh. And that's creating the foundation for the FED to pull away eventually and hand the responsibility for for growth back to do you know, the private sector and the labor market. Organic momentum, UH, and you know they're they're in process of doing that. But ripping away stimulus and slamming on the brakes probably won't be good for anybody in the

glow economy. What one thing that I think the FED is well aware of this cycle is that the US is outperforming. We have more support and more momentum than most other countries and regions, and yet we are the keeper of the global currency. So that's a pretty important responsibility. If we slam on the brakes and that hits the global economy which is more fragile, uh, then you know that's going to roll back onto our shores as well

and destabilized global markets. So you know that means the US runs a little hotter for a little longer, and that's probably a price well worth paying. Running hot right now, Judia, it's gonna catch up. Judy Karnado, Micro Policy Perspectives. This is the Bloomberg Surveillance Podcast. Thanks for listening. Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment,

and international relations. And subscribe to the Surveillance Podcast, on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the Terminal. I'm Tom keene In. This is Bloomberg.