Transcript generated automatically by AI and may contain errors.
Chapter 1: What is the main topic discussed in this episode?
Hello and welcome to The Rest Is Politics US. I'm Anthony Scaramucci, joined today by my friend and a friend of the show, the very brilliant Stephanie Ruhl, who's the anchor of the 11th Hour on MSNOW. She's also a senior business analyst there. And Stephanie, I don't like telling people how long I know you because I'm lying about my age.
I mean, I'm only 29. So what? We met in high school. We've known each other for a long, long time.
Stephanie, if we met in high school, you and I would have never gotten out of high school. This is true. So we have sort of a fortune for both of us that we didn't meet in high school. But today, we're going to be talking about the markets, which you are an expert about.
So are you.
We're going to be trying to understand why the market is ignoring the Strait of Hormuz. And while oil flows are under threat, and I'm here in London, and some of the European analysts are saying there's only six weeks left of jet fuel, stocks are doing the exact opposite of what I would expect. Maybe you expect this. And if you do, you have to explain why.
And then, of course, in the second half, we're going to talk about Donald Trump heading for a head-to-head collision with Fed Chair Jerome Powell. And can the president force him out? And what happens if Chairman Powell refuses to go? Let's start with your view of the economic situation in the stock market. Why have they decoupled?
So thank you for having me. We've always said that the market and the economy are two different things, and we've said we have this K-shaped economy. Right now, I feel like that is the case more than ever. In the last 24 hours, the president on the Great Lawn was asked about high gas prices, and his response was, well, they're not really that high after all.
And that right there shows that this president is focused on institutional investors, not the American people. And while you have members of the GOP basically begging the president to get on message and start talking about the economy, well, what has he done in the last week? He's attacking the Pope. He's sending unhinged tweets. And we've got this war with Iran and what the president does.
And it blows my mind and it disappoints me in terms of the markets. We watch what he does. Bad news about the war comes out on a quiet news time Saturdays. By Sunday night, he's like, hey, there's going to be peace talks in the morning. And then the market goes up. He tells Fox Business, the war is over. And then there's absolutely no facts to back that up.
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Chapter 2: Why are markets ignoring Trump's naval blockade of the Strait of Hormuz?
If you... Think that Trump is full of it. If you think this war isn't ending for the foreseeable future and you're just an investor, no big deal. He says something positive, you know the market's gonna go up. You can buy the market today, you can go long today, and tomorrow you can sell everything. That's different from operating a real business, right?
I just learned this morning, I'm in DC for the Semaphore Conference, and I learned that a toilet manufacturer, you know those Japanese toilets, Toto, they make the fancy toilets? They're going to stop manufacturing a few of their models because of what's happening in Iran, because they're going to be missing inputs that they need for manufacturing.
So businesses that actually operate, real businesses, not just... investors who are trading the markets are struggling. You opened the conversation with, you've got airports in five different countries that are now potentially facing jet fuel shortages.
You've got countries that are having kids go to school from home or have a four day work week, not because of a global pandemic, because of what's happening in terms of oil prices. So investors are like, yeah, oil prices will be down. We'll deal with the long-term impact down the road. But today, as long as Trump is giving us news, which he gives us every day, let's just play the markets.
And I think that's totally distressing because the president is focused on those markets and not the everyday Americans who are at the bottom of the K economy and they're struggling. What do you think?
Well, I want to be the bull here for a second and look past the war and look at liquidity and rate expectations. I think that's one thing booing the market. You and I both know with the Fed at like, let's say four and a quarter, roughly between four and a quarter and 437 on the 10 year, that's the interest rate in the United States.
The expectations are that if the war ends, they'll be able to cut rates and rates are coming lower. And so the market's pricing some of that in. The AI CapEx is part of a real earning cycle here. It's not just a narrative, in my opinion. And so you've got billions of dollars that's flowing into this, which is
It's hurting us on energy prices, but it's really creating a tremendous amount of capital expenditure throughout the entire economy. And that's causing a lot of profits. We saw what's going on with the banks. You saw the print from Goldman Sachs.
Bank of America, JP Morgan.
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Chapter 3: What factors are causing oil flow threats and market reactions?
Even though there's a war going on, they think the war is going to end relatively quickly. The unwind is going to be beneficial to these companies. Defense spending is likely to go up. The defense stocks are doing quite well. But Americans are suffering. And the unemployment rate is moving. It went to 4.6%.
You and I know that that's a garbage number because the labor participation rate, meaning people are exhausted from looking for work and so they stop looking for work. And you know they fall off the unemployment scrolls once they go past a year. So the labor participation rate is terrible. And the IMF is saying that we're going to have a global recession if we keep the war up. So go ahead.
What do you think happens?
Yeah, I mean, Ken Griffin from Citadel said two days ago, if the Strait of Hormuz is closed for six months, 12 months, we are going to inevitably face a global recession. And, you know, the one thing that's interesting is everybody's sort of dogging on the U.S.
and saying, like, in previous global economic crises, the United States has always been the reliable partner, the stable partner, and we're not... that partner this time around. That's true, but it's not like other countries have stepped up to take our place to be the world leader. We're getting worse, but nobody else is stepping in.
But to your political question, it's interesting because people were fed up with the cost of living during the Biden administration. When Janet Yellen and others talked about inflation and kept saying, it's transitory, it's short-term, we're still better than the rest of the world. Nobody wanted to hear it. They were angry when the Biden administration said that to them.
And I think that's one of the main drivers what elected Donald Trump. Now here we are months away from the election, the midterms, and the president The GOP has been asking the president to get on message about the economy for months and months. And the reason I just think I mean, he's not doing it because he's distracted with, as I said, fighting with the pope and the war and everything else.
But but one of the biggest challenges about like, why can't he just get on message about the economy? He can't get on message because he's currently responsible for. for the economic woes that the bottom half of the K are facing, right? So the trade wars have made life more expensive.
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Chapter 4: How is the K-shaped economy impacting different demographics?
That was the president's choice. So the war in Iran that's making gas prices more expensive has been the president's choice. And our extremely harsh immigration policies and war on science and education, the president's choice.
So you could say that there have been presidents that have presided over an economy when the housing crisis, the financial crisis hit, and we could judge or vote for or against them based on how they handled that crisis. But the woes that we face now economically, that bottom half of the K, Donald Trump can't talk around them because his signature is on the bottom of them. What do you think?
Disagree with me.
I think he loses. No, well, I don't necessarily want to disagree because I think a lot of what you're saying is true, but I just think that he's not going to get out of this intact for the midterms. He may even lose the Senate at this point.
I don't think he loses the Senate to the point where he gets impeached and removed from office, but I do think he's going to have a lot of pressure on him if things don't Turn it around quickly. We have a lot of viewers and listeners from outside the United States. I just want to explain to people, when the US says it has a 4.6% unemployment rate, it's a garbage number.
The right number to look at is the U6 number. What does that mean? Stephanie knows this. You include everybody that's been looking for a job in addition to the people that are looking for a job past one year. When you do that, that number is closer to 7.9%. Just to take people back 40 plus years, when we were at 10% unemployment, Stephanie, we were in a full-on recession in 1982.
For me, I think we end up now in a recession. I think the CapEx spending will be fine, the market will probably be somewhat buoyed, but When recessionary forces kick in in the United States, it's very deconsumptive for the bottom half of the country. You know, Stephanie, I just give these numbers.
People need to think about this, about America and about the general unfairness that's going on in America. The realtor.com says that the average price of a home is $383,000. If you reverse engineer a salary that you need to pay a mortgage on that home, you got to make at least $170,000 to afford that home and not be house poor. The median income in the United States is $83,000.
So that means people are missing dental appointments. They're skipping prescription drugs. They get into a fender bender. They're not taking the car to the collision shop because they can't afford even the insurance deductible and they don't want their rates to go higher. So I guess what I'm saying, because you came from an environment similar to me.
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Chapter 5: What are the implications of Trump's attacks on Jerome Powell?
What's different this time, Anthony, is... I don't think he cares. And I'm not saying he definitely cared last time, but let me just draw the comparison. In Trump 1.0, you went to many of them. He did rallies all the time, right? Trump's original make America great again, America first platform is what thrust him into office. He did rallies all the time. He's barely done two this term.
And he spends all of his time between the White House and Mar-a-Lago. So he's basically in a gilded cage.
And in this gilded cage, he is surrounded by people who have made a phenomenal, mind-blowing amount of money, whether it's their businesses that are Trump-adjacent, whether they're in the crypto space, whether they're investors who seemingly know exactly what the market's going to do before anyone else. So he's surrounded by people, or he's suddenly around many, many tech leaders
who've grown close to him because now the AI universe is gonna face almost no regulation in Trump 2.0. So those frustrated, angry Americans, many of whom voted for him or didn't vote for him or didn't vote at all because they're so frustrated that the government doesn't work for them despite the fact that they pay taxes, I don't think he's seeing or hearing those people right now.
However, unlike Trump 1.0, where he was very frustrated, by people in his own administration who weren't doing what he liked, I think he's very happy now. Even if he's leading policies that aren't wildly popular, he has a 100% accommodative administration who executes whatever he fancies. And he's only surrounding himself by Americans who are winning big time economically.
And he himself and his family and the family of Howard Lutnick and Howard Lutnick's children and so on and so forth have become so phenomenally wealthy. Good times are here again for them, right? We've talked about this before. Think about Trump's World Liberty Financial. Trump's meme coin, it's down 82%. But Trump and his family have extracted billions of dollars.
So while I think the American people are frustrated and angry, I don't think that he is. I saw the president three weeks ago. I went to lunch at the White House on the day of the State of the Union, which to me, he was facing a very frustrated, angry America. He almost seemed joyous. And I think it's because who he is surrounded by. And I think the American people are certainly not.
The same sentiment that elected him, elected Mamdani in New York, who are saying, this doesn't work for me. I can't afford my life.
So when I tell people that really only he cares about is making money for himself, you're providing evidence of that, Stephanie, by saying he looks joyous, even though most people are suffering?
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Chapter 6: Can Trump successfully force Jerome Powell out as Federal Reserve chair?
Why are you laughing?
Chapter 7: What are the potential consequences of a global recession due to ongoing conflicts?
I wasn't ready for that answer.
Well, because that's the answer, okay? And that's, you know, look, I mean, you know, you know that's the answer. Our viewers and listeners know that he's a retribution-oriented, retribution-centric asshole. And he's running the Department of Injustice, and he wants to use the cudgel of that against people like Comey and John Bolton and Jerome Powell,
They make me and my opposition to Donald Trump is like a cakewalk actually. It's like a very light in comparison.
Okay, but then Anthony, explain this to me. I would argue that Jay Powell being in that job has only helped the markets. Donald Trump's most important, if only guardrail, are the markets. And Jay Powell being in that seat and giving investors here and abroad the assurance that the Fed has maintained its independence, has only helped the markets. How doesn't Donald Trump even see that?
So let's say, listen, he's a phenomenal communicator. I can't think of someone who's been more effective in terms of messaging as a modern day politician. So he could put on his dog and pony show and say, I'm trying to get Jay Powell to cut rates. I know it's so hard to get a mortgage out there. And that would be enough. But instead, to take it to the mat,
to try to take Jay Powell down when the booming markets have been one of the things that Donald Trump can surround himself with in a cushion of joy. I just don't understand, besides having a personal vendetta, why he doesn't think strategically and just leave Jay Powell the heck alone.
He's a bully and he's trying to send a message to his new Fed chair. If you don't do exactly what I want, we're going to have a criminal investigation against you. You see what I'm doing to Jerome Powell right now? That's your future if you don't do exactly what I want. But remember, Powell has the right to stay-
on the Board of Governors until January of 2028, and Powell has said he's not going anywhere until this criminal investigation is in complete finality. So trust me, okay, Besant is talking to Trump, and he's telling him, drop the case, figure out a way to get the case dropped, I'll get your own Powell off the board, and you'll get a twofer. You'll have Warshin as Fed chair,
And then you'll get to pick another Steve Moran lookalike as a Fed governor. And so to me, that's what I think is the most likely outcome. We'll see if I'm right about it.
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