A Political Reporter Argues That Wall Street Doesn't Get DC

less than six days to go. It's time to start making predictions about the outcome of the election. So everyone who listens to this after it actually happens can tell us we were wrong. Perfect timing. Yeah, that's exactly that's that's the perfect way. Also, if all of our predictions are off, we just want to air the episode. Now. I'm justing, but I mean I do feel like, hey, I don't I'm not going to stick my neck out and make any predictions and be you know, election decide.

And of course the election is sucking all the oxygen out of the room in terms of people's attention. Just paying attention to what's going on in d C has been increasing and important for markets it seems like for a long time now. Yeah, I think that's right, and I mean has basically taken everything to an extreme. All these long term economic and business trends that have been in play for many years now seemed to have accelerated

this year. But I think you can argue that there was more of a focus on politics after the financial crisis. You had a lot of attention paid to financial regulation than you had the Eurozone crisis. You had Brexit, then you have the US China trade war, and now in you have the fiscal stimulus and the response to the coronavirus risk crisis. So it does feel like we've been in this long running trend of investors paying more attention to politics and policy and has really just shifted that

into high gear. And now we have the election on top of it. Yeah, exactly right. And you know, I think like one of the things we've learned, and it's a pretty widely held view now, but something that comes up a lot of times in our discussions is that if the government gives people money, Um, that is a very effective economic policy. It's very powerful, but that but you know, the government doesn't always just hand out money to people and you need to corrall vote to get

it done. So here you have this lever this policy tool that's extremely effective, and there's not really much debate about can it be done sort of from a fiscal standpoint or a monetary standpoint, but about whether there's the political capacity to do it. I think it's going to be. It's an issue now, It's probably gonna be an issue

in one regardless of the makeup of government. Man. And so I feel like there's going to be increasing demand on the part of investors, on the part of economists to understand whether that political capacity continues to exist in in d C and what it takes to make it happen. Yeah. Absolutely, And I think there's sometimes a tendency on Wall Street. I guess because a lot of investors and analysts tend to be quite rational people. I think there's sometimes a

tendency to ascribe rationality to politicians. Uh. And you think, well, they're going to do what's good for people, They're going to do what's good for the economy, and maybe in this case that's fiscal stimulus, but sometimes they don't always do that. But also, wait, I'm not voicing this, no,

I get it. You're making on No. Well, I was gonna say, sometimes I think there are also motivations that Wall Street isn't necessarily aware of, so they look at everything from a sort of zero sum game why wouldn't you do this? But there are things that politicians are thinking about that wouldn't necessarily jump out to your average sell side analysts. No. I mean, for one thing, they're all focused on re election in large part. And the number of times I've read an analysts say well, maybe

we'll get an infrastructure deal is just totally embarrassing. Anyway, Uh, this is a good set up to our guest because he has asserted quite prominently several times the Wall Street is just totally clueless or markets are totally clueless, or maybe both. We can sort of get into the distinctions about how DC really works. And so if that's true, that's something important for people to internalize given the increasing importance of DC. We're gonna be speaking with Jake Sherman.

He's at Politico. He's also the author of the popular playbook Newsletter. He's going on to do something else after this year, but we don't know what it is, so we'll I'll be waiting to see where Jake goes next. But in the meantime we could talk about what, in his view, Wall Street gets wrong. So, Jake, thank you very much for joining us. Thanks guys, I'm a huge fan and I'm really happy to be here. Thanks. Yeah, it's great to have you. So we've gotten into some

Twitter fights. I don't know if Twitter fights are the right word, but especially in these last few weeks about the stimulus up and ups and downs. Sometimes it look more promising, sometimes it's looked less promising. The market moves on these headlines. Pelosian Minuchin will say their meeting in the afternoon, stocks go up half a percent, meeting ends

with no agreement, stocks go down. And in your view, the fact that the markets are so sensitive to these headlines just shows that somehow they don't really get it. I think, yes, I let me agree with all of the things you just said. Um my argument has been and I just my way. Background. I've been covering Congress since two thousand and nine, so I've been a part of covering every major crisis for the last the last decade, and there's been plenty. Right, We've almost had our debt downgraded,

we've had government shut shut downs, all those things. I think that on Wall Street and generally speaking, people are making judgments about the probability of events without taking into consideration the personalities that are driving these events. Right and and Tracy, you did a really good job, although you said you didn't, but you actually did a great job of of explaining some of that at the top of this right, Like, people are not rational. Politicians are not

always rational in a traditional sense. They're not going to just pass a trillion dollars of stimulus because it makes the most sense. You need to take into into into account a broad array of of human behavior and assumptions of human behavior when making these predictions. For example, Nancy Pelosi hates Mark Meadows. She's not going to make a

deal if Mark Meadows is there. Um Stephen Manuchin like, I think investors and markets generally speaking have not only been too sensitive to these things, but have just ignored fundamental realities of governing and um and are just passing off information shin as gospel when it really is just nothing but a singular data point in a broad array of data points that need to be under consideration. So

can you elaborate on that point? Then? Uh, you know, Joe mentioned in the beginning that politicians clearly want to be reelected, so that's always a focus for them. You mentioned some personal feuds, and you know, likes and dislikes. There might be alliances in the background that people aren't even aware of. What motivates the average politician in your opinion, reelection and power. Right, I mean, my personal hobby horse

is um, one of my many personal hobby horses. And Joe could probably attest to this since he follows me on Twitter and we have some back and forths. I mean, listen, we I think the media is guilty in this too, because we're we concentrate on whether Congressman X believes there is a deal in hand or not. I'll pick a random member of Congress, right, I mean Josh Gottheimer is a Democrat whose chairs the Problem Solvers Caucus, a caucus that has not solved any problems, but calls itself the

problem solvers Caucus. He's a Democrat from northern New Jersey. His district is heavily populated with people in the financial services industry and who work in New York. And he will go on TV or he will make some sort of remark to a newspaper to somebody that I think a deal is close and stocks will go up or go down based on that, or I'll get a thousand text messages from from sources on Wall Street or people

in the financial services community based on that. There are like four or five people in Washington that you need to understand to understand what's going to happen. And those people are Nancy Pelosi, Mitch McConnell, Chuck Schumer, Donald Trump, even Minuton and Kevin McCarthy. It's no more complicated than that. And there within you need to focus on what's at stake for each individual participant. Right, So let's let's dissect

this a little bit more. Nancy Pelosi decided to not do a medium sized a school deal because she wanted a large fiscal deal, and she was incentivized by Stephen Mnuchin, who kept running back to the negotiating table every single time something was about to fall apart and giving into Pelosi. So then Pelosi takes a look at the the legislative landscape and says, oh, I could get a lot out of this, So why don't I try to get a

lot out of this? Um, I could get tons of of priorities because Stephen Manuchin really wants a deal, and I've been in this game for thirty years. He's a new participant, so I could string him along for a ride. Those are the kinds of things that that you know. I just think that we're oftentimes listening to the noise and not looking for the signal in understanding this. And some of my sources on Wall Street have indicated, well,

we're trading headlines, and we're a macro fund. We care about the headline that comes out and whether it's a positive or negative headline, and markets will go up and down based on that. But like, that is not that's mine. Maybe that's a business, but that's not that's not an indicator of whether there will be a deal. I mean, I have been on the on the since I think since August or September, and again we're taping this before we know for sure it's six days before the election.

There could there be a deal in the next six days. I put a point five percent probability on that, but just assuming there's not. But let me just finishes one thought. I mean, I've been saying since September. The dynamics have been obvious for people who understand this stuffs in September.

So you say, like, okay, the guy from the Problem Solvers Caucus goes on cable news and said, I think there's a deal that's noise, and I get that, and I think a lot of people get that, and if they don't, you know, they really should pay more attention. On the other hand, your assertion that markets don't get it. Okay, so the SNP bounces a quarter of a percent, I

could tell you that's noise. I don't think that's necessarily reflective of some broad consensus and to the extent that since the beginning of September, um the odds of a deal have really diminished. Well, markets are down since the beginning of September, at least a lot of them are. So doesn't that actually reflect perhaps a you're the one, uh reading too much into noise and be that markets

have more or less gotten it right? Well, yes and no, Because when you have Nancy Pelosi go out and say I'm optimistic for a deal, we're putting pen to paper, uh, and you see stocks bounce on that, and you see and I see a headline in the morning stimulus hopes uh increase based on Nancy Pelosi saying there's optimism and you see, you know, I see Bloomberg charts on Twitter and stocks you're pointing up and futures are up based

on based on renewed stimulus hopes. I mean, the dynamic here has been remarkably static since August or September, and still there have been these momentary swings where stocks are up a good deal and maybe they're not up net net over, uh, you know, since September, but you do get these momentary bounces which are just complete garbage. It's it's it's it's it's completely made up. It's not there art.

I mean, Nancy Pelosi says she's optimistic about everything, So I think, uh, and maybe I'm maybe what I'm saying is that there the structure is off, and the incentive structure for Wall Street is off. But what I'm saying is that broadly speaking, the dynamics have been static for months and have not changed appreciably at all. Part of me wonders, and I hate to, I hate to be really self referential, but some of this could well be

a financial media problem. Right markets. Markets are up half a percent because Pelosi said something optimistic about financial stimulus. I mean, that's a narrative that someone who covers markets is basically putting together when you could actually write. You know, it could be any number of things. It could be positioning, or you know, it could be something completely random that

we don't even know about. I don't know what my point is, um, I guess like I wonder if there's a tendency in financial markets among investors to seek out narratives to explain market moves, and that's why we end up with this sort of simple, simplistic construction around what's going on in d C. I think there's some truth to that. I think it's Listen, everything boils down to a media problem at some level, right, But um, I think that, Uh, I think that's right and to some degree.

And I don't mean to wrap on the media. We're all card carrying members of said groups. So I don't mean to uh to to wrap on the media. But also remember these politicians are are playing you to write, there playing all of us. They know broadly speaking, they're not. So I've heard a lot of times I have people that I talked to on Wall Street. I'm sure you talked to a lot of similar people to who say, well, what's the buzz like on on the markets? What are

people thinking like? I could tell you that most members of Congress are only vaguely aware of financial markets in the sense that they know whether they are up and down as a general proposition. They don't know the momentary moves of markets, and probably north should they, right, I mean, they shouldn't be focused on that unless there's some calamitous

events that they need to be aware of. But I don't know if I ever reported this, but Nancy Pelosi when she gave her press conference last week, I forget what she said exactly, but afterwards she said on a call with her leadership, the market was up when I was talking. She they understand what it takes to game markets and what it takes to to push markets up and to give more hope when there shouldn't be hope at all. They get this, They get this game better

than anybody is. Donald Trump might say so uh and and they go on Fox Business, and they go on Bloomberg, and they go on CNBC because they know that they could instill hope whether where there might not be any reason for hope. So this is all part of a large game, and to be what I'm saying is the game is is stupid and rigged in every sense of the word, and and uh it shouldn't be, or maybe it should be. So that's kind of my my overall take.

You know, I'm curious is as we were talking about the intro, we had an incredibly powerful fiscal stimulus this year, arguably the biggest and most effective one in history, in the form of the Cares Act. Setting aside the current gamesmanship. Right now, looking forward, we don't know what the makeup of government is. What did it take to make that happen? Why did CARES come into existence? Why? Why how did

the politics align for that one? In your view, because I think this is gonna be an important thing in terms of people thinking about like the prospects for another fiscal stimulus is what does it actually take for the wheels of politics to make it happen. What it took was the find was the incentives of every member of the leadership to get this done, meaning Nancy Pelosi, Mitch McConnell,

Chuck Schumer, and Kevin McCarthy. Every single person had to be bought in and had to agree to the general proposition that this was an extraordinary time and extraordinary measures need to be taken. Once Mitch, so that's why it happened. Mitch McConnell was up for reelection and there was no

question that something needed to be done. Then we moved into another phase where Senate Republicans were looking at decreasing unemployment numbers, increasing stock market numbers, and a general marginally

rosier picture of the economy. And then the incentive started to diverge, and you had a president who was not really sure what he wanted and was out of the game, and a party that was generally a drift and a speaker, a Democratic speaker that saw opportunity to play members of the administration off of each other, Mark Meadows Againsteven Manuchin, Stephen Manuchin against Mark Meadows, and and that and Mark Meadows and the President against each other, and against even Manuchin.

So let's talk about going forward, what will it take to get another stimulus deal passed? So the general conventional wisdom tends to be that no matter what happens on November three, there will be what we call a lame duck stimulus deal. So some sort of deal between November four and January twenty whatever, when the new Congress is in, when the new president's inaugurated and the new Congress takes the seat takes its its place. I'm very barish on that.

I think that's an unlikely scenario that there will be some sort of large scale fiscal deal UH in that period. Now, that could change. I don't feel as strongly about that, and I'll tell you why. So let's talk about the incentives again. Nancy Pelosi, if she wants to clear the decks for Joe Biden, if she believes it's advantageous for Joe Biden to come in and to not have to do that, then she will push for it. Because Mitch McConnell, is he about to lose the Senate? Is Chuck Schumer

want to get it off? Biden's played as well. If all of those things converge, then that could happen. But if any of those things slide away, I don't care what Josh Kodheimer or Rocana or uh pat to me or any of these people say, it doesn't make a difference. Every all of the leadership has to be aligned. Now, listen, if this doesn't happen in the lane you're talking about a fiscal stimulus deal that I would view as somebody who's covered this, unlikely until late February, you know, sometime

in February or March. And I'm I know that's not what people want to hear. But January is shot. The President doesn't get into office until the end of the month. Then it's going to take some weeks. I mean, it takes the Senate a week to do anything. Then you have fights over whether to eliminate the so called filibuster, the sixty vote requirement to do things. So I mean, there's just things don't happen in a vacuum. Things don't happen because people want them to happen on the outside.

This is an institution that could only take so much external pressure or so much water, and everything has to align for something big like that to happen. So on that note, one of the conversations that Joe and I have had this year is about the idea of automatic stabilizers in the economy, or basically the notion that you could bypass all this political gridlock if you had an automatic thing that kicked in and say, unemployment went above

a certain level. So you know, if unemployment reached twelve percent or something like that. That's pretty extreme. You would have I don't know, additional checks that suddenly get mailed out to Americans making below a certain income. And that's something that we spoke about with the economist Claudia some Do you think that's an interesting, uh solution or potential solution to the problem that we're discussing here. So it's interesting, but it's not going to happen. And I'll tell you why.

I mean, this would require Congress, Congress giving away the one thing that it has, which is power. People don't get into this business by and large for noble reasons. They don't get into it because they want to solve some sort of major crisis. In many cases, they get into this business because they want power and want to increase it and exercise it in ways that benefit them

and their constituents and their party a large. And if you have some sort of automatic turn offs which that turns off that power, that says, well, like think about it, think about it this way, Tracy. Like. The big argument here over fiscal stimulus is the White House's disagreement with Nancy Pelosi that the that states and state and local

governments need money. This entire argument has been over that dynamic at its core, right like, and it's a difference of really a hundred fifty billion dollars, and there's a ton of disagreements that's that come off of that. So an entire deal is being held up because of one dynamic. People wouldn't have the ability to do that if they

set something on a glide path. We've had similar discussions when I mean we, I mean like America and Congress over the debt ceiling, whether there should be some sort of automatic trigger by which Congress should raise the nation's borrowing limit to avoid kind of you know, uh crises that that come up when the borrowing limit is reached. And Congress has by and large said note to that because they see it as a safety valve. Congress likes

this conflict. This tension animates Congress, This tension drives Congress. There's no if we had automatic switches in in our government system, the power would diminish and it would almost not need to exist in the same way that it exists. So I just think that everybody has an incentive to keep these things on the table because it lends it lends leverage points for other things that Congress wants to accomplish. I think this is a super super interesting point, just

an interesting thing to think of. You know, you also hear it in the context of, well, what about giving the Federal Reserve more tools through legislation such that it could print money and put put dollars into people's bank account. But all of that, as you say, implicitly means that Congress would have to be willing to permanently give up the power or in the future and permanently sort of

be willing to not be there. And as it sounds like, the sort of the fiscal clip ification of policy in the end is something that even know it's miserable, is actually something Congress wants to keep. Yeah, and Congress likes inefficiency, right. Inefficiency drives Congress and drives policymakers because it gives opportunity to get other things done. I mean, you see this all the time. Mitch McConnell said, no fiscal stimulus will come to the Senate floor unless we have the chance

to overhaul liability laws. That is a it's a it's a related issue. But like everybody agrees on a subset of things, everybody agrees to paycheck protection program should be extended. Everybody. Most people agree with a set of stimulus checks um some level of state and government funding. There is the lowest common denominator. But these kind of leverage points exist

for a reason in our system of government. Maybe not for the best and most noble reasons, but exist, and and it's difficult to to remove those because that would be basically undermining our entire system of government and the

system of government that allows these leverage points. You put it earlier that politicians are basically playing the American public and that a lot of these choke points in the system and these varying motivations that prevent politicians from actually doing what might be needed by the economy is fairly obvious. Why don't Americans see that? Why don't they put more

pressure on politicians? And you know, for instance, one of the things that's been coming up a lot lately is the notion that even though under the Trump administration, the US federal deficit jump to I can't remember what it is right now, but you know, like I think the highest on record, and we've seen government debt really balloon. Republicans haven't said much about that, but if Biden gets selected, uh,

and is an office come January. You a lot of Republicans have been talking about they are going to potentially start complaining about the deficit, and they've been like pretty open about that. And it seems fairly obvious that when Republicans are in office, they don't say anything about US that levels, and then when they're out of office, suddenly US that matters. And it's basically a hammer at which to, you know, with which to hit the Democrats. How Come

people don't see that, like why does this work? Why is TC able to to play this game? Well? I think many reasons. I mean I when I started covering politics in two thousand and nine, Republicans were unwilling to spend a single dollar of federal money without offsetting it in another area. It was a way to to ding the president. And it was at the time Barack Obama, and it was it was organizing governing theory right um.

And and it was led by John Bayner and Mitch McConnell, who at that point were fiscal hawks and saw it within their interests to do that. Obviously, that all changed with Donald Trump, who's not a conservative or even really a Republican by any traditional definition when it comes to fiscal policy and and things of that nature. Um, without putting Donald Trump on the proverbial therapist couch, I will try to answer the underlying question, which is, here's what

Here's what I found. I found that voters and interested parties, and when I say interested parties, I mean financial markets and Hollywood and Silicon Valley only engage in politics when they absolutely need to and don't really understand the general organizing philosophies. So when they when these kinds of things happen, uh, they're taken by surprise and um and listen, I would say broadly speaking that, um, we live in a tribal society.

We really do. And our country is organized in congressional districts that are extremely partisan and where the top of the party sets the agenda and no one has the sentive to go toward the middle. Because when when Congressman Republican Congressman X goes back to his district and is faces his voters for the first time, uh in a week or two weeks, the question is not what are you doing to keep Donald Trump and check? The question is what are you doing? Why aren't you supporting him more.

And it's really a tone set by the top of the party because uh, Donald Trump has spent like a drunken sailor. Everybody agrees with that, but people fell in line because that was the thing to do. And it's not an intellectually honest exercise. It's just not I mean that the tax that the the we saw that with the tax reform in two thousand and uh eighteen, seventeen, eighteen, and and it just people are looking for intellectual honesty

where there really is none. And I do believe, to be honest with you, if Joe Biden is elected, uh and organizing theory will be a fiscal discipline and Donald Trump has said if I'm elected to a second term, fiscal discipline will be my priority. As if we're to believe that after four years of it not being anyone's priority. So I actually want to go back to this question of the politics of automatic stabilizers because I'm I'm curious.

You know, you've like described the last ten years in d C. And the one consistent theme is that under Obama and under Trump, Republicans, as you described it, sought to use crisis to sort of uh in the certain policy goals. So obviously, UM do a sort of this desire to use the two thousand nine through two thousand eleven period to get some sort of austerity spending cuts

supposed alongside the dead sailing hike. The current Phase four stimulus talks have hit a snag, largely around the view that Republicans have seen this as an opportunity too exact reforms for cities and states. I mean, I know this is a huge issue. I say, like talk radio, this idea of like a blue state bailout, and the perception has been forever that they have unsustainable pensions and so forth, and so the GOP has seen this as a moment

of like, Okay, this may be a moment of reform. Meanwhile, on the left, more broadly, um, there is this sort of like policy push that yes, uh, you know, automatic stabilizers, more aggressive, more aggressive unemployment insurance should be a thing if there is a you know, and again by the who by the time people are listening to this, who knows.

But if there is a big democratic sweep, is it possible that it's like that the Democrats may view it's like, yeah, okay, there's political gains to be had by governing in a cliff, but the last ten years have showed us that's largely Republicans using these moments to get spending cuts or reforms. We could have a permanent gain in our sort of like policy agenda by taking some of these opportunities off

the table. Is it possible that the dynamics shift on automatic stabilizers if Democrats were to win really big No, I don't think so. I think Pelosi's against them, although her number two, Stenny Hoyer of Maryland, who's her uh sometimes ally and sometimes rival, is for them. Broadly speaking, I think he has spoken favorably because there are people

in the Democratic Party who want that done. Um. I think again, I think members of Congress like the opportunity to review policies, and if things are on autopilot, they

get that opportunity taken away. I will say this though, Um, I think there is a period of time in the first hundred days of this if if let's let's work with a base case that Democrats when the White House to Senate in the House, there will be a hundred or so days where Democrats will have a huge mandate to get things done and Republicans will be de incentivized to block them and will be incentivized to work with them on some order fiscal package coupled with maybe some

sort of infrastructure element, and I think that that will be easier, and you know, I think it will be easier than it is now. I think that they could get away with more in that time period. I don't think they can get away with automatic stabilizers. I just think that's a bridge too far. One other thing I want to mention that I don't want to. I don't want to get off of your platform without mentioning this. Another thing I think people are vastly misreading, and I

could be wrong on this. My confidence level is relatively low, is that Joe Biden will be eager to raise the corporate tax rate. I think that is a I just don't see that right now. Um as, especially in the

first year of his presidency. I think it's unlikely. I think that the economy will still be shaky, and I don't think Listen, the question that is going to drive both my world, which is the political world and the market world in the next year is whether Democrats learned lessons from two thousand and nine and two thousand and ten.

I mean, the last Democratic president came in when the world was on fire and had to pass the stimulus, passed a cap and trade deal through the House of Representatives, and then passed a healthcare bill and lost sixty something seats the next year. Have Democrats learned from that experience? And I don't know the answer to that yet, But if you assume they have, then attacks increase on corporations. I don't think. I don't feel confident about this. I

don't think is going to be a top agenda. Heighter, you know, I just want to go back to the sort of fundamental question about like what what markets or Wall Street gets wrong. I mean, you know, there is all this noise and I you know, even people in who are active market participants laugh at the sort of market headline driven, maybe elgo driven reaction of market sometimes. I mean, we had this also um in the UH the a lot during the trade talks with China, up

and down market. In the end, a lot of this hasn't seemed to matter. I mean, in the end, the fact that our trading relationship with China changed, I didn't make much of a difference, and markets were sort of right to ignore it. And to not get you know, not to read too much into anything at the time, like in the end, like maybe is it? Is it

the kind of thing where it's just short term. Sure you can point to things where the markets get it off, but in the big picture, markets sort of all get it right and most of the stuff doesn't really matter either way. But aren't we and this is a question for you guys more than anybody else, aren't we living in a an economy at least? Uh? In a micro sense, I guess that that there are so many retail investors

that are playing these swings. I mean, I listened to a previous episode of your of that you guys did um about these options and puts and stuff like that, and people are people are You might have taped that a million years ago, But I just listened to recently

and I and um, I was. I was struck by the fact that there are people that are like me, who know, who have no business in these kind of daily market swings, who are making big bets based on kind of momentary swings in the market that are driven by what I consider to be b s headlines. So yes, if you're if you're a long term investor like me, Like my the money that I have is in an account that I don't even know. I could barely get access to it, have to search my email to find

the password. And I just hope that at some point when I retire there will be some money in it for me to live on. Like but there are people with robin Hood accounts who are sitting around making these massive making what are massive bets to them based on these based on the momentary movements of the S and P, which are largely based on nonsense. So I think I think our final concluding thought from this point is nobody

followed Jake Sherman. If you're in the market, unfollow him on Twitter, don't subscribe to his newsletter or anything like that. Just look along. I assume that's where you wanted us to take it. To take this converse, unfollow him. Um No, But seriously, Jake, thank you so much for joining it. I enjoy I really enjoy your coverage. Looking forward to seeing whatever it is to do next your next mystery project, and I'm thanks for coming out a lot. Thanks guys,

I appreciate it. Take care of Jake. Thanks man. You know I joked about that that last comment, and but I have sort of like, but you're you're really serious. No,

But it's like it's kind of an interesting question. It's like we always preach there is this tension, right, because we're always like you all, there is just so much noise, long term un economic data point, a headline out of DC, a virus number, um and mortkets do react on it, but at the same time, and they sort of like feature this idea of like ignoring the noise, Like there is kind of like a tension between following the media and following all this stuff and then looking back and saying, like,

how little of it actually matters. Well, this is the old signal versus noise debate, And I know you touched upon it, but to me, you know, it's easy to say that markets should ignore the short term noise and they should focus on longer term trends and you know, stay committed to their core positions and things like that. But I think what we overlook when we do that is that markets are inherently forward looking and everyone is

trying to pinpoint the next turning point. And I think that's why you end up getting a lot of focus on these short term things. And you know, I've seen some pretty good points made about, for instance, how the market reacted in the lead up to World War two, and that actually people looked through a lot of statements and of coal developments that in retrospect marked a clear change in the way the world's political system was actually functioning.

And I think that's what we're missing. Like everything, everything hindsight is in retrospect. You could say, well, it doesn't really matter that Pelosi said she was optimistic on this particular day, but if you do get that stimulus bill in the next week or so, then suddenly that noise looks like a signal, right, like, and that's what everyone's trying to figure out. Yes, I think that's exactly right.

And I think this is where I would like push back. Um, And you know, I could have done it while it's here, and I meant to. But you know, like I think, when you see these moves, you know, people might say, like, oh, the market believes that there's a stimulus, or the market doesn't believe that there's a stimulus. So the market so this headline and believes, now these moves may not be

the market believing in the stimulus. These moves maybe the market leaving there was a one percent chance of a stimulus moving to a two percent chance of a stimulus, And I think that's sort of like and maybe like it should be less like maybe these comments should cause the market to go from one percent to one point

one percent or whatever it is. Maybe the calibration is off, But I don't think that these reactions are so binary, Like we don't really know what the market it's like implied stimulus odds are are at any time, or how much it's waiting stimulus. But these moves may not really be that much. And so I think you're exactly right. Most news items are noise, but you don't really know which ones are going to mark some sort of turning point, and so in the short term, investors have to assess

probabilistically the how much they could represent something new. And so I think, like, well, may look like that's a rational headline driven markets how it goes whatever, Maybe less crazy, uh than we think they are, just because sometimes headlines

do turn into things that then become something else. And I think, like, you know, like the virus itself was at some point a thing back in junior February that markets had to assess based on sort of conditional odds and without some sort of clear idea of how big it would be. Sometimes big things happen, Oh yeah, And anyone trading short term headlines that we're coming out of Asia in you know, January and February, it would have been in a really good position for the rest of

the year. I think the one other thing I would say is I feel like there's there's this undercurrent of sort of market nihilism in this conversation, this idea that nothing really matters, and I think I think there is a portion of the market where I feel that, And I gotta say it's it's I mean, Jake kind of touched on this, but he went in a different direction.

For me, it's robin Hood, right, it's robin Hood and Bitcoin, where people are trading stuff that is almost completely divorced from fundamentals and economic reality at this point, and it's all based on headlines or you know, just getting together and saying that you're going to push up this particular stock using options and things like that. Like, to me, that particular market seems to have gone off in a totally different direction. Yeah, I mean that exists, Does that

make sense. This is like this is the sort of like betting, you know, like that that part of the market has just descended into short term betting and gambling. Yeah, there is a lot of gambling and games playing for sure. Whether that results in major miss pricings of how it given stock or index is relative to the earnings of the components of that stock or indec I think there's another question. But there is a lot of sort of pure, sort of pure online poker happening in the financial world

these days. Yeah, I think that's fair. Okay, Well, um, six days to go until the election, and by the time we release this, uh, lots of stuff might have changed, or it'll all be irrelevant. Yeah, it'll all be irrelevant. Um. I don't know if that's comforting or not. Um, hopefully it is. Okay. Should we leave it there. Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Chracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't All?

You can follow me on Twitter at the Stalwart, and you should follow our guest Jake Sherman at Jake Sherman. Follow our producer Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesco Leavi at Francesco Today, and check out all of our podcasts onto the handle at podcasts. And if you like Odd Lots, please leave us a five star review on iTunes help more people discover discover the podcast, but really appreciate it. Thanks for listening to