WALL $TREET WRAP-UP WITH ANDRÉ LABORDE February 12, 2021

Hi, welcome to Wall Street Wrap-Up, and I hope your week went well. I'm Andre Laborde. Our goal is bringing Wall Street to your street for this Friday, February 12, 2021.

Our

goal is to inform you of what happened in finance this week to get you better prepared for the events of next week.

Well, last

week on Wall Street Wrap-Up, we did a story on how capitalism and the stock market, due to the pandemic, was moving more brokerage houses away from New York to the other 49 states.

And

using a term such as Wall Street is now really capitalism itself. And we even specified that the New York Stock Exchange is located at 11 Wall Street. Well, what we did not know at the time was just how prophetic that story really was. Because the governor of New York, Andrew Cuomo, and the New York State Legislature are now imposing considering to impose a transfer tax on all stock sales.

Now, the threat of that type of tax drove the CEO of the New York Stock Exchange, Stacey Cunningham, to write an op-ed in this past Wednesday's Wall Street Journal, stating that if this tax is implemented, the New York Stock Exchange could be forced to move to another state, along with all the other brokerages out of New York that we mentioned about last week.

She

also emphasized this move out of New York

is

not a bluff.

What

we discussed last Friday on the Wrap-Up was coming past to true this week.

And

speaking of coming up, Art Laffer will be here as my guest. Art was in the Reagan administration and was on the Reagan's Economic Policy Advisory Board. He was also the architect of the Reagan tax cuts and also was an advisor to the Trump administration for the Trump 2018 tax cuts. But first, how did the markets do this week?

Well, the

Dow Jones closed this week at 31,473, up 28.2 for the day and up 1% for the week.

The

S&P 500 closed at 39.34, up 18.6 points for the day and about 1.25% for the week.

And

the NASDAQ finished the week at 14,095, up 69.7 points for the day and about 1.75% for the week. All three indexes of the Dow, the S&P 500, and the NASDAQ all had record closes for the day and of the week.

Well,

our guest tonight is Art Laffer. Hello, Art. Thank you for being with us tonight.

Thank

you very much, Andre. It's a pleasure to be with you.

Oh,

appreciate it. You know, Doc, there's so many things I want to talk to

you

about, but I want to get right now with also,

with

the new administration, with the Biden administration coming in, one of the first things they wanted to do within the first week was they wanted a federal law of increasing the minimum wage to go up to $15 an hour.

And

your thoughts, what is that going to do with the economy?

Well,

it's not going to be good, Andre. I mean, what happens is when you raise the minimum wage, some of the workers will get higher pay, but that pay will come directly from the businesses they work for. So it's a not win-win. It's win-lose with your employer. But some of the people will get no pay whatsoever because they won't be hired any longer. So some people will make more, but their companies will do worse, and the other ones won't make anything. So it's really a bad situation. And the things that they're doing that are just so wrong on this, a minimum wage of $15 an hour in New York City may not be all that much or in San Francisco.

But in Kentucky, about half the workers in Kentucky today earn $15 an hour or less. It's going to have a devastating effect on Kentucky, Oklahoma, Louisiana, these areas. And then, if I may say, the people who are in the minimum wage group are the poorest, minorities, disenfranchised, and also the least educated. So they're the ones that are going to bear the entire brunt of the minimum wage as well. You know, if it were just aimed at people between 25 and 55, but, you know, that guy who does the school crossing, the old man there who's 73 years old, needs something to do, they will keep that person if the minimum wage goes up to $15 an hour.

And lastly, a lot of the businesses that really do it, the employment is concentrated. It's not just great big corporations with billions and billions of dollars. There are a lot of businesses that are going to be really hard hit on that. For example, hotel staff and these types of things, those are really critical jobs for the minimum wage workers. And they have a terrible time keeping employed if they raise that minimum wage. It's just going to drive the problem right down to the poorest families in America. Hotel workers, you have health care workers. These are people that are going to be badly damaged, the poor, the minorities, the disenfranchised.

It's a very bad idea, but it's been around for a long time. And goodness knows, they'll push it through and do all sorts of damage to the people they need to help.

They should help. Do you

think that they're using that as sort of as a negotiating tool, thinking that they can always get rid of that if you give the Democrats something else that they want? They're using that as a negotiating ploy, or do you think that that is something

they want to do? I don't think so. I think they really believe

it. I think they really believe it. What they don't realize is that someone pays the minimum wage. And that's the employer. And most of those employers are not Walmart. They're not that. They're little health care

workers. It's mom and pop stores. I'm on the board of a

company. Well, yeah, I'm on the board of a company in Virginia that has all these health care workers. These are not well trained. These are people who go in and do the cleaning for the old lady who's sick or they have cancer and stuff. And these are very low wage workers because these people can't afford a high price spread. And what you have happening is these people will be put out of business. The health care people who need them very badly won't be able to afford them. I mean, it's just a lose-lose. But these people, and it's not just Democrats, by the way. It's Democrats and Republicans that's been going on like this for a long, long time.

The one president who reduced the minimum wage relative to the average wage most dramatically was a guy named Ronald Reagan. And that's why we had the huge explosion in growth and output employment. Employment, I think we had 20 million new jobs under Reagan. That's the way you should go is create jobs, not try to raise the price of people who will then be just unemployed afterwards.

Right. Well, normally, I mean, the minimum wage was always something that for a starter job, you know, the high schooler who just gets his first job at McDonald's.

Oh, yeah, because these kids, I mean, the kids, let's take the inner city where I used to live in the south side of Chicago, the inner city.

You

know, these kids aren't worth 15 bucks an hour. So if you require 15 bucks, they won't get their first job. They'll never get the requisite skills to earn above the minimum wage. They'll be unemployed. After being unemployed for a couple of years, they'll become unemployable. After being unemployable for a while, they become hostile. And then you have to protect yourself from them. But this is guaranteeing a generation of people lost to ever having the prosperity they so rightfully deserve, Andre. They really do. And these people are making it so they never can climb the ladder.

I understand. Do you think also tied with the Trump tax cuts that were, let's say, the corporate tax cut that was lower to 21 percent, if it seems like it's almost inevitable that they want to raise the corporate tax rate

from

21 percent back to, well, that's to be negotiated, whether it be 28 percent or back into the 30s. But you add what we just talked about with the minimum wage plus raising the corporate tax rate. How will this affect business and hiring?

Well,

it's going to affect it badly as well. If you raise the corporate rate back up, I mean, we were the highest corporate tax rate in the OECD at the time Trump cut it. Now, he cut it from 35 down to 28 to 21 percent. But even at 21 percent, we were still above the median for the OECD, 33 countries. So if you pop that back up, it will be noncompetitive. And, you know, if you have two locations, A and B, and you raise taxes in B and you lower them in A, producers and manufacturers and businesses are going to move from

B

to A. I mean, it's just straightforward common sense. Well, people remember. We're going to lose jobs. Inversions will come back and it will hurt the U.S. economy. I remember where.

I wish they wouldn't do it. There's no

reason to do that. There's just no reason.

With a 50

-50 split in the Senate and with the feeling right now in Washington, D.C., I mean, I wonder if there will be enough pushback to be able to not raise it from 21 to higher.

Well, let me just say I'm very surprised so far, President Biden. I am a big fan of President Biden's. Now, obviously, I voted for Trump, but I'm a big fan. I think he was by far the best candidate the Democrats could have nominated. I like Kamala Harris as well. I think she did a good job in California. That was the dream team for the Democrats, at least from my perspective. And so far, he's not shown himself to be moderate. He was the guy. He voted for the Reagan tax cuts in 86, which dropped the highest tax rate from 50% to 28%. He voted for that. He voted for cutting the highest corporate rate from 46% to 34%.

He also voted for getting rid of 11 tax brackets and having only two tax brackets, the 28% and 15%. And he put out press releases, how wonderful this was and all that. You know, where is that Joe Biden, the man I was hoping would become president, is not there yet. And I hope he changes his tune and really goes on a much better path.

Do

you think he's being pulled more to the left than—we'll look at 19— I

don't think

he's being pulled. You don't think he is?

No? Okay.

He's the president of the United States. No one pulls the president. Okay. When you sit behind that desk in the Oval Office, you are the boss. You're the final authority of everything. No one can make you do anything you don't want to do. And if he does something, it's because he wants to do it, not because someone is pushing him. Now, if he allows someone to push him, it's his fault, not their fault. And he has all the authority and all the power on Earth, and he should use it to make the economy better and the people of America better. Now, I'm hoping that this is just a temporary thing and he'll be really on top of it and do a great job because I do like him.

I like him very much, and I'm hoping for his success.

Well, and also, I think because of the fact he spent so many years in the

Senate.

Just as a point about Joe Biden, if I may, he doesn't have a chip on his shoulder. He doesn't have a grudge to get even with. He's a very normal, stable, good guy. He works with everyone. You know, one of the reasons I like him is he isn't a radical. He isn't a guy, I hate these. He's not a hater. He's a guy who likes working in money. He wants this economy to do well. And I really hope he comes around on some of these issues because it's really important that he doesn't do things badly right now because they will come home to roost. They really will. Have you heard? I just would hate to see him fail.

Right. Have you heard from anybody that do you think any of the Trump tax cuts that will survive?

I

know we talked about the corporate tax rates, but I don't know about the other ones. And I'm thinking also of the, let's say, the personal tax cuts that would have expired anyway in a couple of years because there wasn't enough votes in the Senate at the time. So they were only going to be for a

temporary

period. But

I'm

wondering,

what

are your thoughts on that? It was a 10-year period when they passed it. And that was in 2017. So we would have until 2027 before they would expire. And that dropped it from 39.6% to 37%. And then there were some pass-throughs there that were done as well. So that was what Trump did in that tax bill. And it was good what he did there. You know, it's Biden's call. Biden has the ability to keep those tax cuts in place. And he has the ability to reverse those tax cuts. And we'll see how he does. I just hope to heck he understands that if you tax people who work and you pay people who don't work,

you're

going to get a lot of people not working. Duh. Right. That's common sense. Everyone understands that. And I would hope he would live by that because it really works. And after a couple of years of bad policies, you'll start seeing very bad results.

This stimulus plan that he's hoping that the Senate would pass would be paying people an extra, I think, what was it, $400 for X amount of more until March, which makes it hard for employers to get people to work if they're getting an additional $400 in addition to their unemployment checks. So it's

paying

you not to work. That's

very true what you say.

You

know, that's very true what you say. And that will slow down the recovery. What bothers me is people who think government spending is, by itself, all there is. You know, government doesn't create resources. Government redistributes resources. So every spending program they give to someone something, they have to take it from someone else. Government spending is taxation. And let me ask you, Andre, have you ever heard of an economy being taxed into prosperity?

Never.

If you have, I'd love to see that article. It makes no sense. And, you know, this is $1.9 trillion that he wants. He decided to bypass the Senate filibuster rule, which I understand why. But $1.9 trillion is about 10% of GDP. Now, when you look at all the debt that's been accumulated, that debt is not nearly as bad as old-liney conservatives used to say. But it is bad. And it will be a drag on the economy ever so slightly every dollar.

The

Congressional Budget Office just came out with that said that,

as

of right now, it looks like there will be a 3.7 increase in GDP for this year, 2021. And it looks like a 2.6% increase over the next five years. With what you're just saying right now, would they have to be reducing those numbers of 3.7 this year and maybe less than 2.6

over

the next five

years? Well, you

know, it's 2.6 over five years, which includes the 3.7 this coming year. Which means that it's way below 2.6, the second, third, fourth, and fifth years going out. That's what it means there. But the reason we have such a jump right now is so many states were in lockdown for so long that once they remove the lockdown, which they're starting to do, thank goodness, you're going to see real quick bumps in those states' production, output, employment. That's going to happen, period, come heck of high water. And when that happens, you're going to see this year's growth very high. I would be surprised if it's not a lot higher than 3.7%, to be honest. It

should be much

more than that.

Recently, with the canceling of the Keystone pipeline, you've got right there additional, they said 11,000 workers. Of the 11,000 workers out of work, 8,000 of those 11 are union workers. You're completely correct in your

analysis.

And it won't have a huge impact on gas prices right away. But after a while, once the oil has not been coming down from Canada, and it also tarnishes some of our relationships with Canada, Trudeau up there, and all of that. But once it stops for a while, that's when it starts having a cumulative effect on global energy prices. And it will do that, and it will raise gas prices some. And if they stop drilling, that will do a little bit more, and they stop coal. All of these things combined together will have an effect on how much it costs you to drive your car, how much it costs you to heat your house, and also where you work.

I mean, there's just not enough people lying out in the sun to be able to warm themselves without internal heating, if I may just joke. I understand. In Nashville here, in Nashville here, it's about 30 degrees. I don't want to have to rely on solar warming through my windows. Let me just say, Andre, if I may. Sure. Elections have consequences. And Joe Biden won the presidency. The Democrats have control of the Senate. They got it in Georgia. The Democrats have control of the House. It's their game to play. And they must be willing to live with the consequences of their actions. And, you know, we shouldn't, I mean, we should make our arguments as best we can.

But very respectfully, it's their turn, and they're in power, and we'll see how they do. People deserve the governments they get, Andre. True. And they wanted this government. They've got it. Now they have to live with it. All I'm going to do with you is tell you what I, as an economist, think is going to happen as a result of the policies that they are espousing and passing and putting into effect through executive orders.

The Federal Reserve right now, interest rates are almost at close to zero. And it's close to zero. And the Federal Reserve is buying, what, $120 billion a month in bonds, what, $80 billion in treasuries and about $40 billion in mortgage bonds. My question is, with inflation, and as an economist, do you see inflation

going

not just to the two percent, what they're hoping to get, but going over that two percent at any time soon?

No, I don't see it any time soon. I don't see anything in the price of gold. I don't see anything in the term structure of interest rates or any of the price indices that I look at that tell me that we're just about to move into higher inflation. Now, that doesn't mean it won't happen. But I don't see anything along those lines. Now, I would expect interest rates to come back up, let's say, the 10-year bond of the two percent, maybe two and a half percent level. But that's still not a very high inflationary number. I don't expect inflation back any time soon. But the first indicators will be gold, higher interest rates, and certain spot commodity prices will start shooting up.

And then you can see it. But I don't see any inflation coming in the near term at all.

Thank you, Doc. Doc, I have a lot more questions and a lot less time. I hope you come back again with us.

I

hope you do it.

You

just ask me and I'll be here.

Thank

you, Art. That was Art Laffer. Well, also in business news, this week,

a

record high for the major stock averages with investors continuing to put new money into the markets. According to new data from Lipper, the U.S.

stock

funds saw a $22.9 billion of inflows in this week that ended this past Wednesday.

Now,

that's the most since March of 2008.

And

Walt Disney released their earnings yesterday for the last quarter. And despite their theme parks were closed due to the pandemic, Walt Disney's earnings did beat expectations. Now, they lost in their theme parks, but they scored big victories in the Disney Plus streaming service, hitting 95 million subscribers and are presently three years ahead of schedule for their projected subscriber numbers.

The

Walt Disney CEO, Bob Chapek, said this year with vaccine rollout that he's pleased with the future bookings for the parks. And he also called the vaccine rollout to be a game changer. Walt Disney closed today at $187.67, up $3.82 for the week.

We'll

hear on some of the events taking place this week.

This

week at the Economic Club in New York, Fed Chairman Jay Powell reiterated that the Fed is unlikely to even think about withdrawing its policy of supporting the economy by raising interest rates or by reducing its bond purchases for the foreseeable future. Chairman Jay Powell also repeated his call for more fiscal assistance for the economy, saying that monetary policy alone will not be enough to restore the labor market to its full strength. He said it would require society-wide commitments from across government and also the private sector as well.

And

we'll be right back.

Now, what

international known singers made their U.S. television debut 57 years ago this week? We'll have the answer when we return.

What

international known singers made their television debut 57 years ago this week?

The

answer? The Beatles. They made their U.S. debut on CBS's Ed Sullivan Show on February 9, 1964, 57 years ago. For an auditorium that seated 764, there were over 50,000 requests.

Well,

would you believe that money does grow on trees? Well,

lumber

prices are going through the roof. Prices of wood for homes have risen 113 percent year over year.

And

due to the pandemic, which helped to push lumber prices even higher, in fact, lumber prices have risen 10 percent in just the last week alone. What's causing lumber to go higher? Three major reasons. One is the increase of new home sales. Richard Barton, the CEO of Zillow, states that, on average, in December, homes nationally are selling within just 17 days. That's 25 days fewer than the December of the previous year of 2019.

He

also said in 2020, Zillow saw over 9.6 billion visits to their mobile apps and websites. That's 1.5 billion more visits in the previous year of 2019. Another is people are remodeling.

Now

that they're stuck at home and not being able to either travel or go out as we used to, people are fixing up or adding to their existing homes. And finally, rock-bottom interest rates. The price of a 30-year home mortgage is now at 2.7 percent, and people are either refinancing their existing home mortgages or buying a new home.

Well,

if you've got a comment about the show or a question about finance, we'd love to hear from you. You can write us at, and keep it pithy, at andre at wallstreetwrapup.info.

And

now from the do as I say and not as I do column.

See,

Microsoft co-founder Bill Gates is a strong proponent of climate change and a supporter of the United States in its reducing of its carbon footprint.

But

he has just bought a 30 percent interest in Signature Aviation.

This

was completed through his investment company, Cascade Investments.

Gates

paid $4.7 billion for the 30 percent ownership of the company. Well, Signature caters to the private and not commercial aviation market. And it specializes in everything from private jet bases to ground handling, private maintenance, and refueling of the private jet aircraft.

His

good friend, Warren Buffett, and Buffett's company, Berkshire Hathaway, owns NetJets, a private jet company, and now a customer of his friend, Bill Gates, and his new investment. Well, NetJets specializes in private jets for those business people or individuals who don't want to fly a commercial. Warren Buffett, though in the past, has also spoken of the U.S. reducing its carbon footprint and the dangers of climate change. Now, personally, I think these are very two good investments for the future.

But for one hand, talking down private aviation to the public because of the dangers of climate change, and on the other, investing in the future of private aviation, they do join the ranks of climate czar John Kerry or Robert Kennedy Jr., and even former Vice President Al Gore, who talk against using fossil fuels and climate change while all the time flying on their own private jets. As I started the segment, do as I say, not as I do.

And

finally, an update on a story that we told you about last week on the decline of television ratings of the NFL games over the last four years, and we ended the story last Friday when we stipulated we didn't know how the Super Bowl that Sunday would fare out.

Well,

the television ratings for Super Bowl 55 were released this week,

and

it was viewed by a total of 96.3 million viewers last Sunday.

Well,

that's a lot of people, but it was also a 5.5 percent decrease from last year, and the lowest-rated Super Bowl since 2007, 14 years ago.

Well, that's

our show. Well, I hope you've enjoyed it for this Friday, February the 12th, and we thank you for inviting us into your homes this evening. And we'll be back next week. In fact, our guest next week will be Mario Gabelli, owner of the Gabelli Funds, and a very enjoyable person to talk to about finance for over 30 years. Remember, you can join us on Facebook and WYES.org.

So

thank you for joining us in due for Wall Street Wrap-Up. I'm Andre Laborde. And remember, money never sleeps.

Good

night.