00:00:00
Speaker 1: Good evening. Let's get right down to business here. Live at 5, also known as the Abba Dabba Dew Time here in Los Angeles. Great to be back with you live at 5. MoTeC on Money streaming live online worldwide at kbc.com. And you're on demand. MoTeC on Money podcast, kbc.com, and all of your favorite podcast platforms. Blue wave on Main Street. Green wave on Wall Street. Today, stocks rallying big time today as the Win by Democrats in the U.S. midterm elections was absorbed by the markets. President Trump's acceptance of the results also removing a lot of uncertainty. Hanging over what happened last night, Democrats winning majorities in both houses of Congress and scored victories in key gubernatorial races, including Texas. The Democrats now in places where they haven't been in years. The Dow coming in for a closing game. of 1,569 points, settling at 53,356, the best one-day gain of the year. The S & P 500 up 120 at 7,688, and the Nasdaq at 364 points at 25,736. As was noted during our election night coverage last night with John Phillips and Randy Wang, historically, the markets like divided government here in the U.S., and we'll talk more about that coming up here shortly. Stocks extended gains after crude oil dropped more than 8% after Vice President Vance blamed the Iran war for the election losses that the Republican Party suffered last night. Brent crude in London also was 8% lower. Talk more about that coming up here as well. On the tech front, we see shares of CoreWeave lower today, along with SpaceX, which is headquartered in Texas. NVIDIA also dropping by about 3%. The reason for the bullish sentiment today, according to CNBC, was that history shows the market does well under a divided government where fewer policies and regulations are able to interfere with the business outlook. We did see the price of gold get a pop today at more than $ 31 at $ 41. 04 an ounce after cracking below $ 4K this week. We'll talk more about the economic impact of all this nationwide as well as here in California with prominent economist Christopher Thornburg, principal and founding partner at Beacon Economics, Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis radio show. Will tell us how the tax initiatives ended up last night, including the so-called building heirs tax. But first, on your money, the markets and the economy. Joining us live now, top-ranked money manager Ken Winans. at winansinvestments.com, also at Winning with Winans podcast worldwide. Ken, thank you very much for taking the call here tonight.
00:02:51
Speaker 2: My pleasure, Frank. And you know, it's interesting. I was at the Nevada State Building today. So I think you can say there was a bit of shock on one side and disbelief on the other. But at the end of the day, people are looking at how they can all work together here and move forward. But Frank, one thing, and I think it's important to get back Every now and then you have things happen politically that remind us of the basics. And there's an old, old phrase that says people vote their pocketbooks. And I think it's safe to say that that was an overwhelming theme in talking with people from all different parts of the country. But the other thing you were commenting on, too, the idea of divided government with the stock market, there is a lot of truth to that. But, you know, I just wrote a new article today in Forbes that you might want to check out. And it is about this idea, is it just divided government or is it the policies? And very clearly, historically, if you have bad policies, regardless of split government, meaning rising interest rates and rising taxes at the same time, watch out. It could get rather interesting. So those are the kind of things we're going to want to watch as we go forward and see what's going on with it.
00:04:01
Speaker 1: On to your live with top-ranked money manager Ken Winans and... I know you're also a market historian, author of numerous books, which talk about market history and the lessons we can learn, including Investment Atlas 3. That's your latest. Have we ever seen a midterm quite like this one? And look at this big rally here today.
00:04:24
Speaker 2: Well, you know, it's funny. I was telling somebody, we had the same thing happen when Trump had his first victory in 2016, because a lot of people were betting on what we called the Hillary stocks. And very quickly, we saw how fast those stocks fell out of bed. And then the other stocks took off. And that happened today, Frank. Although the market had a big rally, there was some serious bloodletting, especially in the AI area on infrastructure. I mean, it looked like a full-blown massive hit today. So you did see that just tectonic shifts underlying the current of the markets. And you're going to see that playing out really going from here right up through the first quarter next year. I would say this, though, the other thing that did come out today that was very important, the economy is actually doing pretty well. The job reports came out. It was not great. It wasn't terrible, but it was pretty solid for the fall. So with all that being said, I think we're setting ourselves up for a pretty nice fall rally in this market. I've often said, look, you want to be in the market. from the end of October right through the next May. And I've been talking a lot about it on this show, and people should get their list together. And I think we might have one heck of a Santa Claus rally. All right.
00:05:39
Speaker 1: Texas has turned blue, right? And Elon Musk has gone big in Texas. SpaceX and Tesla stock both taking hits today in an otherwise tremendous rally mode market today. SpaceX down five back to 135 and changed Tesla. down more than 13 at 385. What about those?
00:06:03
Speaker 2: Well, this is what's interesting. And we talk about shifts, you know, with it, with the, there's always been this thing about California companies migrating to Texas. I think with what just happened, there's going to be a lot of soul searching on that. And I know that it came up today when I talked to certain people in Nevada, you know, that again, it makes us a better value not to have to move halfway across the country because But I think there's going to be a lot of this kind of stuff back and forth, Frank. But yes, Texas going blue, again, send a clear message. People are not happy about the cost of things. And also, Texas also has a very high property tax. And I heard that a lot from people I talked to in Texas. They were just generally unhappy with a lot of these things. So we'll see how it all plays out. In the meantime, I think that from the California side, there is general relief about the billionaire's tax. I heard that across the board from several different circles. So thank goodness for that. But we'll have to see how things play out going forward.
00:07:01
Speaker 3: All right.
00:07:02
Speaker 1: As our listeners know, you relocated from California to Las Vegas some time ago, and you have your show there and your podcast there now. What happened in Nevada last night? What happened there? Any big political earthquakes there?
00:07:19
Speaker 2: Well, the big thing was our incumbent governor was replaced. It's funny because I know both men. They're both good guys. So, you know, it's kind of a half dozen one way or the other. So, yeah, it went very blue. But the one big difference between Nevada and California is that our legislature is part-time. It means the Assembly members and the Senate, I mean, we only have a legislative session every other year. So the impact is not quite as great as it would be in a place like California today. where you do have full-time politicians. But no, Frank, this thing happened across the country. I think it's a loud and clear message that the tariffs have boomeranged for a lot of people's minds. The war has gone on too long. And I know that I heard so many of you say that it's kind of weird that the Republicans stole the playbook from George Bush on Iraq and literally heard that from somebody. And it is true. The promises of a war coming to an end quickly and not having it happen History shows wars just don't end that fast. I do think that you will find there will be some backing off on those two fronts, hopefully a negotiated settlement with Iran. Either way, I think for the market and the economy, I think we're going to find that things will probably go further in the right direction. One caveat, and I said this earlier, if the first order of business with the new Congress is to try to find ways to tax people, again, I repeat what I said earlier, history does not support rising interest rates and rising taxes and expect a bull market to continue, all you have to do is go back and look at the early 70s, the 2000s, the 1930s. It just never plays out well. So there's going to have to be some awareness of that going forward and not go too crazy on any kind of tax collection policies.
00:09:07
Speaker 4: All right.
00:09:07
Speaker 1: What about in the tech space, especially as it relates to Texas and the big political change there? A lot of talk today, investors fearing a A Democratic win could mean more restrictions on data centers, not only in Texas but nationwide, with the Texas governor win by the Democrat now who's pledged an immediate moratorium in the data center arena. That added to nervousness. But what about the tech names in this environment?
00:09:41
Speaker 2: I think there's going to have to be rethinking about The AI situation, like I said earlier, those stocks just absolutely got slaughtered today. And it is interesting. This has been kind of a stealthy, volatile market. And what I mean by that is if you just simply look at, especially with the changes that were made to the S & P 500, it really does matter. the fact there was a pretty big correction in the summer right through September. I know, Frank, I think that the free party is over in AI and that there's going to be rethinking. With that being said, the other big group that I think is going to be interesting to watch is financial services. Texas, especially the Dallas area, had staked heavily on it becoming the Wall Street, the new Wall Street, or everything going on there. And now with this change, I think that a lot of the New York firms that were thinking about a change, they're going to think twice about it now and saying, hey, are we just going to go to another set of problems that we don't like? And with that being said, Florida remaining red and Tennessee remaining red, I expect those two will get a lot more of the financial service migration than Texas will going forward.
00:10:46
Speaker 1: What about the bank stocks here? We see Bank of America, for example, moving up about 4%. What about bank names here, which seem to have had a good day?
00:10:58
Speaker 2: Well, they did. You know, I think it was, generally speaking, anything that was considered might be a positive with this new administration. But, you know, the banks have been squawking quite a bit about that the tariffs are hurting some of their lending capabilities. And also, too, even the concern about the Fed being forced to continue to raise interest rates. The thinking is this, Frank. People are saying, look, the tariffs are causing inflation, which is causing the Fed to raise interest rates. So anything that shifts that paradigm is good, and that certainly is good for the banks. But as I said, I think watch the language quickly or very carefully with the banks on any type of relocation of data centers, operations. I think, again, there's going to be a moment of pause on just across-the-board movement to Texas. But you know what? Here's the weird thing. It's going to play well for places like Nevada and Arizona and Utah because, again, we still have a very friendly business environment without a lot of the controversies. I will tell you, though, AIs, the whole AI controversy was a big deal in the Nevada elections. But the thing is, we do have so much room to put these centers where they do not affect people and communities. It makes a big difference here. But, you know, Frank, I do think as people put together their list after earnings season, They're going to want to go back and look at names that they had largely poo-pooed. There's a lot of people who had really gone gung-ho in tech, and now they're paying the price for it. They're going to want to diversify out those portfolios. And you know what? I'm just going to say it right now. Retailers are usually really something you want to go after if you're right going into the holiday season. I actually think this holiday season is going to be pretty darn good, and I would be looking at some of those retail names.
00:12:35
Speaker 1: Right, including Walmart, it looks like, which did rally— today up about 3%. What about gold and silver here? We see gold getting above 4,100 again here at 4,104. And silver, by the way, which has taken a hit lately at 52 and change. What about the precious metals reaction that we saw here today?
00:12:58
Speaker 2: You know, I think that was a lot of concern about what's going on. You know, the dollar actually was amazingly stable in spite of everything. You know, I unloaded my gold and silver quite a while back, and I did because they're both in downtrends. I know some of the gold folks, they're going to want to probably try to buy some. But I would just caution anybody thinking about buying them right now. I think there will be tax loss selling of metals going through the rest of this year. So just I think you need to see a couple more days of rally before I'd say we've seen the low in gold and silver. But, you know, going back and, you know, the other big play that we're going to have to see what plays out here, Frank, is in the case of crypto. Crypto. could be a political football through this whole Congress. There's obviously been a lot of concern, especially with what happened with the latest hacking incidents and some of the other situation of it being used for black market activities. So with all that being said, it's going to be a fun fall going into the first quarter to see how things shake out. But I do think trend is your friend. You don't want to fight the tape as a tool that is just from Wall Street. And stocks are moving up right now. That is where you want to be. I think trying to catch falling knives in this market, you're running the risk of being on the wrong side of a trade at the wrong time.
00:14:12
Speaker 1: All right. And then there's so-called digital gold, cryptos here. I know you follow the cryptos as well. They've taken a hit lately with Bitcoin hovering at around $ 80, 000, coming off its recent low here. It was in the high 70s over the past week or so. ETH at $ 2, 400 or so.
00:14:27
Speaker 4: DOGE.
00:14:29
Speaker 1: I know you've been waiting for me to say that one at 7 cents. So what are your thoughts about crypto action here and the outlook for crypto under the new configuration in Washington?
00:14:41
Speaker 4: Well, you know what?
00:14:41
Speaker 2: That's the thing. I mean, there are people definitely accumulating crypto thinking it's hit an oversold or a bottoming situation. I just think I would wait until the new Congress is in session to see where the winds are blowing about crypto. crypto regulation and the willingness to fast track that. I get very mixed signals from the Democrats about crypto. And I think it's really going to come down to who's heading what, especially in the Financial Service Committee, who's heading those committees and what are they looking for? So we'll have to see. I mean, personally, right now, I have very little in crypto. I've been laying pretty neutral, but I am fully invested in stocks and I'm literally rotating into the names that are working as we go through this week. So I am fully on board that we're going to have a good fall. going into the first quarter, probably a strong January, and we'll see how things play out. But Frank, I will also just say this. I've talked many, many times about people politicizing their portfolios. The number of people that I was hearing wanting to sell all their stocks in September, that they hated the current policies of the administration, they thought the bond market meant the end of everything and the dollar was going to go to zero. I heard some absolutely crazy things. I want those folks to take a deep breath and get sensible about, again, do not politicize your portfolios. You only invest because you want good investments, not because you favor a certain political policy. So, again, people need to take a good look and rebalance everything right now.
00:16:06
Speaker 1: Looks like Congresswoman Maxine Waters here in Los Angeles could be, again, the chair of the Financial Services Committee in Washington. She's now the eldest member of Congress, having been reelected last night. So, That'll also be interesting. Very important position, which she held for many years, even during the financial crisis days.
00:16:30
Speaker 2: Yeah, no, I.
00:16:31
Speaker 4: Remember her well.
00:16:33
Speaker 2: We both spent a lot of time talking about her thoughts and policies. She has a very different situation than she had last time she was the head of a committee like that, meaning that I don't think, I mean, she might try to block or slow down the migration of financial service companies out of California. But she is not going to stop it. I mean, the number of people I've talked to who are in wealth management, investment management, they've just simply had enough of the taxes and the regulatory mess in California. But I do see her possibly trying to do things to slow that down. We'll just have to see how it plays out. But you're right. She's been around a very long time, and it'll be interesting to see what she does.
00:17:14
Speaker 4: Right.
00:17:14
Speaker 1: It looks like she's getting up to speed on crypto. She came out with a statement this week calling for stronger crypto regulation following the Binance hack, which is something we haven't talked about. What is the buzz about that platform that got hacked to the tune of $ 6. 3 billion, supposedly by the North Koreans?
00:17:34
Speaker 2: You know, Binance has been, they have constantly kind of thumbing their nose in people's faces when it talks to about look, what about the black market players in crypto and some of these things? And so there's not a lot of love lost with people who have been trying to make crypto more legitimate. I know that Coinbase folks have been trying to pull their hair out trying to get this thing to work. And so, yeah, I mean, that's the thing right there, Frank, that could make any rally in crypto suspect to me is that if you have serious regulatory headwinds coming their way from Washington, I think that's going to put the kibosh on the idea that crypto is going to be allowed in the banks as soon as people had wanted it to, which goes back to what the senators were worried about last year or earlier, certainly earlier this year and late last year. So we'll have to see. Frank, it's all in the air right now. And that's why people need to be nimble and pivot where the opportunities lie. And certainly, and you know what? I'm having a lot of people talk to me again about alternative energy. And I've been constantly commenting to people there, hey, the big oil and gas companies have moved into alternative sources of energy. So you might want to look at some of the big oil and gas names because, you know what, windmills might come back in fashion again.
00:18:48
Speaker 1: Top-ranked money manager Ken Winans, president and chief investment officer of Winans Investments, winansinvestments.com, author of numerous books, his latest, Investment Atlas 3. We'll be looking for your latest Forbes magazine article, Ken. And, again, congratulations on your top five-star Morningstar ratings. And we'll be tuning in to Winning with Winans on the podcast as well as– in Las Vegas. Wish we had more time here, Ken. Thank you very, very much for taking the call here tonight.
00:19:16
Speaker 2: My pleasure, Frank. Take care. Bye-bye.
00:19:18
Speaker 1: Thanks very much. Out to the freeways now, 790-KBC. O-Tech on Money continues, 790-KBC. Big rally on Wall Street today. It was a big turnaround for the stock market overnight. The stock futures initially Pulled back following the election results as they were coming in last night, as you heard live with us here, right here on 790k ABC. The closing bell today, the Dow had its best day of the year, closing on nearly 1,600 points at 53,356, up 1,500 points. the 10-year note now at 4.87%. The volatility index plunged today by 20%. Gold got a pop right now hovering at around $ 32, up $ 32 at $ 4, 104. 30 an ounce. Crude oil futures plunging. Oil back down to $ 87. 97 a barrel in New York and also pulling back in London. The Brent crude price. Cryptos hovering right now a bit higher with Bitcoin hovering at around $ 80, 400.
00:20:29
Speaker 2: ETH at $ 2, 400.
00:20:29
Speaker 1: Doge at the moment at $ 0.
00:20:29
Speaker 4: 07. Apple.
00:20:36
Speaker 1: Getting a pop today of nearly 18 at $ 3.
00:20:37
Speaker 4: 49 and change.
00:20:38
Speaker 1: NVIDIA on the flip side, down $ 6. 56 at $ 200 and change. Tesla down more than 13 at $ 3.
00:20:40
Speaker 2: 85, $ 3.
00:20:40
Speaker 4: 19.
00:20:40
Speaker 1: And SpaceX down $ 5.
00:20:40
Speaker 4: 39 at $ 1.
00:20:40
Speaker 1: 35, $ 1.
00:20:41
Speaker 4: 92.
00:20:41
Speaker 1: And now the latest news on 790 KBC. MoTeCa Money continues here, 790 KBC, live at 5. The political dust still settling across America following the Blue wave last night, and here in California, the votes are still being counted in many contests, including the L.A. Mayor's Contest with Nithya Raman ahead of incumbent Mayor Karen Bass. At the moment, it looks like the billionaire's tax, the proposed so-called billionaire's tax, was defeated in the election last night. Following all this closely, joining us live now, Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis radio show, heard Tuesday nights right here on 790k ABC. Susan, thank you very much for taking the call and take it from the top. Tell us how the tax initiatives did in the election here in California last night.
00:21:40
Speaker 4: Well, thank you, Frank. It's great to be with you. I'm sorry I don't have better news. It is good news that the billionaire tax is going down to defeat because that was always a threat to the rest of us, both in what it would take out of the general fund as people left the state and also because a wealth tax could come down a little further and a little further and a little further. until it grabs everybody's retirement account. So for all those reasons, it's good that Prop 40 is going down, and Prop 42, which bans any kind of wealth tax on your retirement account, is passing. So that's very good news. The partially bad news is that in order to make that happen, the amount of political spending on advertising just between September 20th and October 17th was about $ 200 million. So that gives you an idea of what it takes to get a message through to the voters in a busy election season statewide. That's a lot of money, $ 200 million in a month for political activists to come up with if they're not billionaires. So that's the concerning part of this. Prop 43, which was the Save Prop 13 measure, the Local Taxpayer Protection Act, is behind, sadly. By about 10 points, there's more votes to count, and we can always be hopeful. But it is looking like people want to pay higher taxes. Strangely, as people were telling pollsters were very concerned about affordability, voters were approving sales tax increases. It looks like Measure RTM, the Bay Area sales tax increase for transit, is passing with about 62%. There was a parcel tax in San Francisco also to fund transit. passing with about 70% or 72%. And here in the city of Los Angeles, the tax for the fire department, which is a half percent sales tax increase, it will take the sales tax to 10.75% in LA, in the city of LA, and that is passing with 53%. But it's early and there are, as I said, more votes to count. So we'll see. But it is confusing that people seem to want to pay higher taxes.
00:23:52
Speaker 1: Welcome to California, right? It seems certainly in my experience that that's what happens here. They just put up these propositions. People vote whether they realize it or not for higher taxes, whereas in other states, in Florida, for example, where people watch every nickel, any slight increase, the pitchforks come out. But it is a different environment here. Now, tell us more about Proposition 43. This one.
00:24:21
Speaker 1: As we mentioned in our coverage last night, would make it more difficult to pass new special taxes in cities and counties. Explain this. It is kind of confusing on its face, Prop 43, and where do things stand with that? And maybe you can explain it better for us than what we saw on the ballot yesterday.
00:24:42
Speaker 4: Well, it was confusing on the ballot. This is a rather narrow measure that closes a loophole that the courts opened up. The Constitution says that when there is a special tax where the money is locked and earmarked at the local level, it has to go on the ballot and get a two-thirds vote to pass. But the courts created a loophole. They said, well, maybe it doesn't if it's put on the ballot as a citizen's initiative with citizens signing petitions to put this tax increase on the ballot as opposed to the city council or the county board of supervisors or another government body. So what this has created... is a giant workaround to get around that two-thirds vote requirement because special interest groups working with governments behind the scenes or right out in the open collect signatures for the tax increase that they want and evade the two-thirds vote requirement. So Prop 43 was going to fix that. Sadly, if it doesn't pass, then these workarounds will be part of every election cycle and And you will see on every ballot a Citizens Initiative tax increase that will pass not with a two-thirds vote, but with just a simple majority. And year after year, election after election, taxes will go up. So that's very concerning.
00:26:00
Speaker 1: Tell us how this could possibly impact Prop 13, the famous initiative which you championed there at the Howard Jarvis Taxpayers Association. And tell us how taxpayers will be affected by it. by what happened last night?
00:26:16
Speaker 4: Well, it doesn't immediately change your Prop 13 property tax arrangement. It doesn't immediately change that. But what it puts at risk is there could be a future interpretation that does challenge it at the local level. Because this loophole that says the Constitution doesn't apply if it's a citizen's initiative tax increase, it's pretty easy to see how they could use that to get around Prop 13. You could say, well, I'm going to tax the value of this type of property just once or just this group of property owners or however they want to do it. And that's unconstitutional. But if they did it as a citizen's initiative and they essentially canceled out Prop 13 with a new tax on value, we would go to court and we would sue. The Howard Jarvis Taxpayers Association would be right there suing over it. But what we've seen is that the courts don't care. They say, well, it's a citizen's initiative. The Constitution doesn't apply. So that's the part that's a real threat. Once you open a loophole and you say the Constitution doesn't apply to a certain kind of tax, that's right out of the air. And that's a loophole that can be stretched to let an elephant through. So we're very concerned about it. We may have to come back and try again if this doesn't succeed when they've counted.
00:27:37
Speaker 2: All the votes.
00:27:38
Speaker 4: Because every year this is going to be another issue of special interest groups trying to write their own tax increase and get passed with fewer votes than the Constitution plainly says.
00:27:51
Speaker 1: On the air live with Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis Radio Show, familiar voice here on 790k ABC. That show airs Tuesday nights right here on 790k ABC. The other contest that is still up in the air at this point is the Los Angeles Cowboys. mayor's contest with the city council member Nithya Raman, head of the incumbent mayor, Karen Bass, at the moment. What's your assessment here on the tax front if indeed Councilwoman Raman wins that election?
00:28:24
Speaker 4: Well, my view of that race is that there are 87 other cities in Los Angeles County, and any one of them would be a better choice than Karen Bass or Nithya Raman. I'm pretty cynical about this mayor's race. Whoever wins, they're in favor of higher taxes. They're in favor of all kinds of policies that are bad for homeowners. We're not happy with those choices. The people of Los Angeles do have the initiative process and the referendum and the recall. And the recall is not just of the elected officials, but the appointees of the elected officials can be recalled. So if anything radical happens and people are upset about it, it's possible to do a recall or an initiative to write a new law or a referendum to reject a law. So that remains a defensive weapon.
00:29:18
Speaker 1: With affordability supposedly at or near the top of the list of issues here, it looks like it's gotten worse after last night here.
00:29:28
Speaker 4: It sure does. Sales tax increases raise the cost of living. There's no way around that. And I'm really very surprised that voters approved sales tax increases when everyone seems to be telling pollsters they're worried about affordability and prices. Don't they understand the relationship between higher taxes and higher cost of living? I wonder if they don't. Wow.
00:29:50
Speaker 1: Well, the word is out now. We need to say that more often, I guess, on the air so that it is more clearly understood, Susan. Well, You do a terrific job on your radio program, which we'll be tuning in for again next Tuesday evening here. And always appreciate your joining us, enlightening the audience here on the tax front and for advocating for taxpayers as superbly as you do. Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis Radio Show, which is heard Tuesday nights on your favorite station, 790 KBC. Susan, thank you very much for taking the call live with us here tonight.
00:30:24
Speaker 4: Thank you, Frank. Great to be with you.
00:30:26
Speaker 1: Thank you very much. And out to the freeways we go now. 790 KABC. It's a rich man's world. Most heck of money continues. 790 KABC, live at 5. Good evening. What does the impact of the election last night mean for California's economy? We just talked about it from a tax standpoint with Susan Shelley. The billionaire's tax was defeated, but it looks like L.A. voters have approved a sales tax increase for the fire department. Let's bring in prominent Los Angeles area economist, Dr. Christopher Thornburg, economist, public speaker, and founding partner of Beacon Economics, based right here in Los Angeles. Christopher Thornburg, thank you very much for taking the call.
00:31:08
Speaker 3: Nice to be here with you, Frank. All right.
00:31:10
Speaker 1: It was a long night for a lot of folks. Give us your reaction to what happened last night and the impact potentially on the economy here in California. Thank you.
00:31:21
Speaker 3: Well, I think the reaction was completely predictable. You know, there's a pretty clear correlation in the data between consumer sentiment and political outcomes. When you see the consumer sentiment index dive the way it has over the last couple of years, that is inevitably bad news for the president's party. And that's true in the midterms as well as in the, shall we say, the every four-year presidential election. That situation, of course, was certainly behind this giant blue wave. And, of course, now there's going to be a big change in the topic of conversation in Washington, D.C. Now, the bigger question is, you know, what does it all mean for the economy? And the answer on that one, I think, is really not much. And the reason for that is twofold. First of all, Trump is still president and presidents have veto power. And we know that the minority in the Senate also has a degree of veto power. And so really more than anything else, this simply means two more years of really complete logjam in Washington, D.C., with neither party getting much of what they want. The only major difference this time is obviously there's going to be a lot more resistance to Trump and his effort to use various sorts of executive actions to push his various policies forward. But the bigger problem is this. Look, when you think about going from Republicans to Democrats, you're going from a party whose big worries were immigration, too much regulation, and unfair foreign trade, which, by the way, weren't really that big of a deal. And now we're going over to a party which entire focus is about inequality, the rising cost of rents, and, of course, the issue of corporations and the influence they have on the economy, which, by the way, aren't really the problems either. The problems we have in the economy are things I've talked about with you before, Frank. I have basically pointed out that this economy right now is running on fumes. of two major imbalances. One is the federal budget deficit, and the other one, of course, is the AI bubble. So the real problem here is that the U.S. economy is taking, if you will, a long walk down a short pier because of the fact that we're spending a lot of money we don't really have on the basis of income that has been distorted by too much public borrowing and our net worth, which has been distorted by the ridiculousness of NASDAQ. At some point in time, those things are going to do an end. And when it does, the U.S. economy is going to take a big hit. And none of this has anything to do with what's being talked about in D.C.
00:34:18
Speaker 1: See you tonight. Read about it tomorrow. But hear it now on MoTeC on Money. On the air live with prominent Los Angeles-area economist Dr. Christopher Thornburg. Chris, you made a very good point early on here with consumer confidence. This year actually hitting an all-time low. And I think we spoke that day when the stock market was hitting an all-time high that day, a very unusual situation. But that was very unusual. But perhaps, as you said, which could have led to what happened last night, have we ever seen a situation like that?
00:34:52
Speaker 3: Not like this. Typically in the past, the P-E ratio of the stock market and the consumer sentiment index are highly correlated. They move together. It's been since the pandemic that we've seen this weird dichotomy between sentiment and equity prices. And I know there are the pessimists out there who go, that makes complete sense, since after all, we know the top 10% of America is consuming everything and everybody else is struggling. But of course, while that may be the narrative, it's not the actual story. The reality is, when you look at the data coming to the end of 2026, Per capita consumption in the United States has never been higher, and I mean that in real terms. And if you subdivide it, we just got some recent data from the Survey of Consumer Finance. We got some new data from the American Community Survey. And all of that says that really people at every level of the economy are doing pretty well right now. But, of course, that's not the story. The story is over and over and over again this feeling that Americans have that somehow or other We're falling behind. Somehow or other, we're being taken advantage of. Somehow or other, we're not getting our fair share. And that incorrect narrative is what's pulling politics down some very dangerous paths.
00:36:13
Speaker 1: Interestingly, we saw SpaceX and Tesla stock move lower in an otherwise big update for the stock market as Texas has shifted politically dramatically. And Elon Musk, of course, moved a lot of his... stuff out of California and is now in Texas. I see the LADC has their 31st Annual Eddy Awards tonight, honoring the most business-friendly cities in Los Angeles County. What do you see ahead in this environment where California companies have been clearing out for places like Texas, for example, and Nevada, which also, as we heard earlier this hour, a political shift? Do you see a change of companies in a hurry to leave California now that we've seen changes elsewhere?
00:36:58
Speaker 3: Well, no, I think people are still going to be leaving California. But remember, they're not leaving California because they want to go. They're leaving California for the very reason that they can't run their businesses in a state that has a declining labor force. Look, there's not a lot of mystery as to why Texas has grown faster than California over the last seven years. They've added 2 million people to their workforce in a period of time where California, which is a bigger state, has added 350,000. And by the way, this isn't because people are leaving. The housing vacancy rate in California is one of the tightest in the nation. In fact, we have significantly less housing vacancies than Texas does.
00:37:40
Speaker 2: So what you're really seeing here is.
00:37:42
Speaker 3: The consequences of simply not being willing to build enough housing to allow for all sectors of the economy to grow. So some sectors, high-paid sectors, professional services, tech, AI, of course, some of the finance sectors, They continue to do fine. But of course, other sectors have to leave because they simply cannot get the labor force and the state that they need to run their particular business. One of the most depressing things I saw about the election, of course, is that Prop 45, much needed sweeper reform, went down to defeat. I just can't, in my mind, fathom what people saw in that particular law. That law has been so used and abused by all sorts of special interests for their own particular gain. And obviously, not getting rid of or at least not going through with Prop 45 is going to continue to be part of the problem restricting housing.
00:38:41
Speaker 1: All right. And 40 on the ballot, the so-called buildingers tax did not pass. So maybe some will come back, you think?
00:38:52
Speaker 3: Well, that's a good bit of good news. I'll tell you that. Boy, I mean, look, the reality of that thing is whatever you thought about it, the only thing it was actually going to accomplish was years of litigation and nowhere near the money that the people who said this shouldn't go through were going to deliver to us. But you talk about dodging a bullet. You know, ultimately, when it comes to really kooky stuff, Californians show their colors and they tell us what they want. I mean, there's been a number of attempts, of course, to shoot down Costa Hawkins, which is the limitation on rent control in the state, despite the fact that clearly the vast majority of people in Sacramento would like that thing to go away. Californians keep voting it down. I think voting down Prop 40 was another one of those logical moments. Again, the CEQA thing, I can't really explain to you.
00:39:47
Speaker 4: Dr.
00:39:47
Speaker 1: Christopher Thornburg, economist at Beacon Economics. Thank you very much, Chris, for joining us live here on MoTeC on Money 790 KBC.
Speaker 1: Good evening. Let's get right down to business here. Live at 5, also known as the Abba Dabba Dew Time here in Los Angeles. Great to be back with you live at 5. MoTeC on Money streaming live online worldwide at kbc.com. And you're on demand. MoTeC on Money podcast, kbc.com, and all of your favorite podcast platforms. Blue wave on Main Street. Green wave on Wall Street. Today, stocks rallying big time today as the Win by Democrats in the U.S. midterm elections was absorbed by the markets. President Trump's acceptance of the results also removing a lot of uncertainty. Hanging over what happened last night, Democrats winning majorities in both houses of Congress and scored victories in key gubernatorial races, including Texas. The Democrats now in places where they haven't been in years. The Dow coming in for a closing game. of 1,569 points, settling at 53,356, the best one-day gain of the year. The S & P 500 up 120 at 7,688, and the Nasdaq at 364 points at 25,736. As was noted during our election night coverage last night with John Phillips and Randy Wang, historically, the markets like divided government here in the U.S., and we'll talk more about that coming up here shortly. Stocks extended gains after crude oil dropped more than 8% after Vice President Vance blamed the Iran war for the election losses that the Republican Party suffered last night. Brent crude in London also was 8% lower. Talk more about that coming up here as well. On the tech front, we see shares of CoreWeave lower today, along with SpaceX, which is headquartered in Texas. NVIDIA also dropping by about 3%. The reason for the bullish sentiment today, according to CNBC, was that history shows the market does well under a divided government where fewer policies and regulations are able to interfere with the business outlook. We did see the price of gold get a pop today at more than $ 31 at $ 41. 04 an ounce after cracking below $ 4K this week. We'll talk more about the economic impact of all this nationwide as well as here in California with prominent economist Christopher Thornburg, principal and founding partner at Beacon Economics, Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis radio show. Will tell us how the tax initiatives ended up last night, including the so-called building heirs tax. But first, on your money, the markets and the economy. Joining us live now, top-ranked money manager Ken Winans. at winansinvestments.com, also at Winning with Winans podcast worldwide. Ken, thank you very much for taking the call here tonight.
00:02:51
Speaker 2: My pleasure, Frank. And you know, it's interesting. I was at the Nevada State Building today. So I think you can say there was a bit of shock on one side and disbelief on the other. But at the end of the day, people are looking at how they can all work together here and move forward. But Frank, one thing, and I think it's important to get back Every now and then you have things happen politically that remind us of the basics. And there's an old, old phrase that says people vote their pocketbooks. And I think it's safe to say that that was an overwhelming theme in talking with people from all different parts of the country. But the other thing you were commenting on, too, the idea of divided government with the stock market, there is a lot of truth to that. But, you know, I just wrote a new article today in Forbes that you might want to check out. And it is about this idea, is it just divided government or is it the policies? And very clearly, historically, if you have bad policies, regardless of split government, meaning rising interest rates and rising taxes at the same time, watch out. It could get rather interesting. So those are the kind of things we're going to want to watch as we go forward and see what's going on with it.
00:04:01
Speaker 1: On to your live with top-ranked money manager Ken Winans and... I know you're also a market historian, author of numerous books, which talk about market history and the lessons we can learn, including Investment Atlas 3. That's your latest. Have we ever seen a midterm quite like this one? And look at this big rally here today.
00:04:24
Speaker 2: Well, you know, it's funny. I was telling somebody, we had the same thing happen when Trump had his first victory in 2016, because a lot of people were betting on what we called the Hillary stocks. And very quickly, we saw how fast those stocks fell out of bed. And then the other stocks took off. And that happened today, Frank. Although the market had a big rally, there was some serious bloodletting, especially in the AI area on infrastructure. I mean, it looked like a full-blown massive hit today. So you did see that just tectonic shifts underlying the current of the markets. And you're going to see that playing out really going from here right up through the first quarter next year. I would say this, though, the other thing that did come out today that was very important, the economy is actually doing pretty well. The job reports came out. It was not great. It wasn't terrible, but it was pretty solid for the fall. So with all that being said, I think we're setting ourselves up for a pretty nice fall rally in this market. I've often said, look, you want to be in the market. from the end of October right through the next May. And I've been talking a lot about it on this show, and people should get their list together. And I think we might have one heck of a Santa Claus rally. All right.
00:05:39
Speaker 1: Texas has turned blue, right? And Elon Musk has gone big in Texas. SpaceX and Tesla stock both taking hits today in an otherwise tremendous rally mode market today. SpaceX down five back to 135 and changed Tesla. down more than 13 at 385. What about those?
00:06:03
Speaker 2: Well, this is what's interesting. And we talk about shifts, you know, with it, with the, there's always been this thing about California companies migrating to Texas. I think with what just happened, there's going to be a lot of soul searching on that. And I know that it came up today when I talked to certain people in Nevada, you know, that again, it makes us a better value not to have to move halfway across the country because But I think there's going to be a lot of this kind of stuff back and forth, Frank. But yes, Texas going blue, again, send a clear message. People are not happy about the cost of things. And also, Texas also has a very high property tax. And I heard that a lot from people I talked to in Texas. They were just generally unhappy with a lot of these things. So we'll see how it all plays out. In the meantime, I think that from the California side, there is general relief about the billionaire's tax. I heard that across the board from several different circles. So thank goodness for that. But we'll have to see how things play out going forward.
00:07:01
Speaker 3: All right.
00:07:02
Speaker 1: As our listeners know, you relocated from California to Las Vegas some time ago, and you have your show there and your podcast there now. What happened in Nevada last night? What happened there? Any big political earthquakes there?
00:07:19
Speaker 2: Well, the big thing was our incumbent governor was replaced. It's funny because I know both men. They're both good guys. So, you know, it's kind of a half dozen one way or the other. So, yeah, it went very blue. But the one big difference between Nevada and California is that our legislature is part-time. It means the Assembly members and the Senate, I mean, we only have a legislative session every other year. So the impact is not quite as great as it would be in a place like California today. where you do have full-time politicians. But no, Frank, this thing happened across the country. I think it's a loud and clear message that the tariffs have boomeranged for a lot of people's minds. The war has gone on too long. And I know that I heard so many of you say that it's kind of weird that the Republicans stole the playbook from George Bush on Iraq and literally heard that from somebody. And it is true. The promises of a war coming to an end quickly and not having it happen History shows wars just don't end that fast. I do think that you will find there will be some backing off on those two fronts, hopefully a negotiated settlement with Iran. Either way, I think for the market and the economy, I think we're going to find that things will probably go further in the right direction. One caveat, and I said this earlier, if the first order of business with the new Congress is to try to find ways to tax people, again, I repeat what I said earlier, history does not support rising interest rates and rising taxes and expect a bull market to continue, all you have to do is go back and look at the early 70s, the 2000s, the 1930s. It just never plays out well. So there's going to have to be some awareness of that going forward and not go too crazy on any kind of tax collection policies.
00:09:07
Speaker 4: All right.
00:09:07
Speaker 1: What about in the tech space, especially as it relates to Texas and the big political change there? A lot of talk today, investors fearing a A Democratic win could mean more restrictions on data centers, not only in Texas but nationwide, with the Texas governor win by the Democrat now who's pledged an immediate moratorium in the data center arena. That added to nervousness. But what about the tech names in this environment?
00:09:41
Speaker 2: I think there's going to have to be rethinking about The AI situation, like I said earlier, those stocks just absolutely got slaughtered today. And it is interesting. This has been kind of a stealthy, volatile market. And what I mean by that is if you just simply look at, especially with the changes that were made to the S & P 500, it really does matter. the fact there was a pretty big correction in the summer right through September. I know, Frank, I think that the free party is over in AI and that there's going to be rethinking. With that being said, the other big group that I think is going to be interesting to watch is financial services. Texas, especially the Dallas area, had staked heavily on it becoming the Wall Street, the new Wall Street, or everything going on there. And now with this change, I think that a lot of the New York firms that were thinking about a change, they're going to think twice about it now and saying, hey, are we just going to go to another set of problems that we don't like? And with that being said, Florida remaining red and Tennessee remaining red, I expect those two will get a lot more of the financial service migration than Texas will going forward.
00:10:46
Speaker 1: What about the bank stocks here? We see Bank of America, for example, moving up about 4%. What about bank names here, which seem to have had a good day?
00:10:58
Speaker 2: Well, they did. You know, I think it was, generally speaking, anything that was considered might be a positive with this new administration. But, you know, the banks have been squawking quite a bit about that the tariffs are hurting some of their lending capabilities. And also, too, even the concern about the Fed being forced to continue to raise interest rates. The thinking is this, Frank. People are saying, look, the tariffs are causing inflation, which is causing the Fed to raise interest rates. So anything that shifts that paradigm is good, and that certainly is good for the banks. But as I said, I think watch the language quickly or very carefully with the banks on any type of relocation of data centers, operations. I think, again, there's going to be a moment of pause on just across-the-board movement to Texas. But you know what? Here's the weird thing. It's going to play well for places like Nevada and Arizona and Utah because, again, we still have a very friendly business environment without a lot of the controversies. I will tell you, though, AIs, the whole AI controversy was a big deal in the Nevada elections. But the thing is, we do have so much room to put these centers where they do not affect people and communities. It makes a big difference here. But, you know, Frank, I do think as people put together their list after earnings season, They're going to want to go back and look at names that they had largely poo-pooed. There's a lot of people who had really gone gung-ho in tech, and now they're paying the price for it. They're going to want to diversify out those portfolios. And you know what? I'm just going to say it right now. Retailers are usually really something you want to go after if you're right going into the holiday season. I actually think this holiday season is going to be pretty darn good, and I would be looking at some of those retail names.
00:12:35
Speaker 1: Right, including Walmart, it looks like, which did rally— today up about 3%. What about gold and silver here? We see gold getting above 4,100 again here at 4,104. And silver, by the way, which has taken a hit lately at 52 and change. What about the precious metals reaction that we saw here today?
00:12:58
Speaker 2: You know, I think that was a lot of concern about what's going on. You know, the dollar actually was amazingly stable in spite of everything. You know, I unloaded my gold and silver quite a while back, and I did because they're both in downtrends. I know some of the gold folks, they're going to want to probably try to buy some. But I would just caution anybody thinking about buying them right now. I think there will be tax loss selling of metals going through the rest of this year. So just I think you need to see a couple more days of rally before I'd say we've seen the low in gold and silver. But, you know, going back and, you know, the other big play that we're going to have to see what plays out here, Frank, is in the case of crypto. Crypto. could be a political football through this whole Congress. There's obviously been a lot of concern, especially with what happened with the latest hacking incidents and some of the other situation of it being used for black market activities. So with all that being said, it's going to be a fun fall going into the first quarter to see how things shake out. But I do think trend is your friend. You don't want to fight the tape as a tool that is just from Wall Street. And stocks are moving up right now. That is where you want to be. I think trying to catch falling knives in this market, you're running the risk of being on the wrong side of a trade at the wrong time.
00:14:12
Speaker 1: All right. And then there's so-called digital gold, cryptos here. I know you follow the cryptos as well. They've taken a hit lately with Bitcoin hovering at around $ 80, 000, coming off its recent low here. It was in the high 70s over the past week or so. ETH at $ 2, 400 or so.
00:14:27
Speaker 4: DOGE.
00:14:29
Speaker 1: I know you've been waiting for me to say that one at 7 cents. So what are your thoughts about crypto action here and the outlook for crypto under the new configuration in Washington?
00:14:41
Speaker 4: Well, you know what?
00:14:41
Speaker 2: That's the thing. I mean, there are people definitely accumulating crypto thinking it's hit an oversold or a bottoming situation. I just think I would wait until the new Congress is in session to see where the winds are blowing about crypto. crypto regulation and the willingness to fast track that. I get very mixed signals from the Democrats about crypto. And I think it's really going to come down to who's heading what, especially in the Financial Service Committee, who's heading those committees and what are they looking for? So we'll have to see. I mean, personally, right now, I have very little in crypto. I've been laying pretty neutral, but I am fully invested in stocks and I'm literally rotating into the names that are working as we go through this week. So I am fully on board that we're going to have a good fall. going into the first quarter, probably a strong January, and we'll see how things play out. But Frank, I will also just say this. I've talked many, many times about people politicizing their portfolios. The number of people that I was hearing wanting to sell all their stocks in September, that they hated the current policies of the administration, they thought the bond market meant the end of everything and the dollar was going to go to zero. I heard some absolutely crazy things. I want those folks to take a deep breath and get sensible about, again, do not politicize your portfolios. You only invest because you want good investments, not because you favor a certain political policy. So, again, people need to take a good look and rebalance everything right now.
00:16:06
Speaker 1: Looks like Congresswoman Maxine Waters here in Los Angeles could be, again, the chair of the Financial Services Committee in Washington. She's now the eldest member of Congress, having been reelected last night. So, That'll also be interesting. Very important position, which she held for many years, even during the financial crisis days.
00:16:30
Speaker 2: Yeah, no, I.
00:16:31
Speaker 4: Remember her well.
00:16:33
Speaker 2: We both spent a lot of time talking about her thoughts and policies. She has a very different situation than she had last time she was the head of a committee like that, meaning that I don't think, I mean, she might try to block or slow down the migration of financial service companies out of California. But she is not going to stop it. I mean, the number of people I've talked to who are in wealth management, investment management, they've just simply had enough of the taxes and the regulatory mess in California. But I do see her possibly trying to do things to slow that down. We'll just have to see how it plays out. But you're right. She's been around a very long time, and it'll be interesting to see what she does.
00:17:14
Speaker 4: Right.
00:17:14
Speaker 1: It looks like she's getting up to speed on crypto. She came out with a statement this week calling for stronger crypto regulation following the Binance hack, which is something we haven't talked about. What is the buzz about that platform that got hacked to the tune of $ 6. 3 billion, supposedly by the North Koreans?
00:17:34
Speaker 2: You know, Binance has been, they have constantly kind of thumbing their nose in people's faces when it talks to about look, what about the black market players in crypto and some of these things? And so there's not a lot of love lost with people who have been trying to make crypto more legitimate. I know that Coinbase folks have been trying to pull their hair out trying to get this thing to work. And so, yeah, I mean, that's the thing right there, Frank, that could make any rally in crypto suspect to me is that if you have serious regulatory headwinds coming their way from Washington, I think that's going to put the kibosh on the idea that crypto is going to be allowed in the banks as soon as people had wanted it to, which goes back to what the senators were worried about last year or earlier, certainly earlier this year and late last year. So we'll have to see. Frank, it's all in the air right now. And that's why people need to be nimble and pivot where the opportunities lie. And certainly, and you know what? I'm having a lot of people talk to me again about alternative energy. And I've been constantly commenting to people there, hey, the big oil and gas companies have moved into alternative sources of energy. So you might want to look at some of the big oil and gas names because, you know what, windmills might come back in fashion again.
00:18:48
Speaker 1: Top-ranked money manager Ken Winans, president and chief investment officer of Winans Investments, winansinvestments.com, author of numerous books, his latest, Investment Atlas 3. We'll be looking for your latest Forbes magazine article, Ken. And, again, congratulations on your top five-star Morningstar ratings. And we'll be tuning in to Winning with Winans on the podcast as well as– in Las Vegas. Wish we had more time here, Ken. Thank you very, very much for taking the call here tonight.
00:19:16
Speaker 2: My pleasure, Frank. Take care. Bye-bye.
00:19:18
Speaker 1: Thanks very much. Out to the freeways now, 790-KBC. O-Tech on Money continues, 790-KBC. Big rally on Wall Street today. It was a big turnaround for the stock market overnight. The stock futures initially Pulled back following the election results as they were coming in last night, as you heard live with us here, right here on 790k ABC. The closing bell today, the Dow had its best day of the year, closing on nearly 1,600 points at 53,356, up 1,500 points. the 10-year note now at 4.87%. The volatility index plunged today by 20%. Gold got a pop right now hovering at around $ 32, up $ 32 at $ 4, 104. 30 an ounce. Crude oil futures plunging. Oil back down to $ 87. 97 a barrel in New York and also pulling back in London. The Brent crude price. Cryptos hovering right now a bit higher with Bitcoin hovering at around $ 80, 400.
00:20:29
Speaker 2: ETH at $ 2, 400.
00:20:29
Speaker 1: Doge at the moment at $ 0.
00:20:29
Speaker 4: 07. Apple.
00:20:36
Speaker 1: Getting a pop today of nearly 18 at $ 3.
00:20:37
Speaker 4: 49 and change.
00:20:38
Speaker 1: NVIDIA on the flip side, down $ 6. 56 at $ 200 and change. Tesla down more than 13 at $ 3.
00:20:40
Speaker 2: 85, $ 3.
00:20:40
Speaker 4: 19.
00:20:40
Speaker 1: And SpaceX down $ 5.
00:20:40
Speaker 4: 39 at $ 1.
00:20:40
Speaker 1: 35, $ 1.
00:20:41
Speaker 4: 92.
00:20:41
Speaker 1: And now the latest news on 790 KBC. MoTeCa Money continues here, 790 KBC, live at 5. The political dust still settling across America following the Blue wave last night, and here in California, the votes are still being counted in many contests, including the L.A. Mayor's Contest with Nithya Raman ahead of incumbent Mayor Karen Bass. At the moment, it looks like the billionaire's tax, the proposed so-called billionaire's tax, was defeated in the election last night. Following all this closely, joining us live now, Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis radio show, heard Tuesday nights right here on 790k ABC. Susan, thank you very much for taking the call and take it from the top. Tell us how the tax initiatives did in the election here in California last night.
00:21:40
Speaker 4: Well, thank you, Frank. It's great to be with you. I'm sorry I don't have better news. It is good news that the billionaire tax is going down to defeat because that was always a threat to the rest of us, both in what it would take out of the general fund as people left the state and also because a wealth tax could come down a little further and a little further and a little further. until it grabs everybody's retirement account. So for all those reasons, it's good that Prop 40 is going down, and Prop 42, which bans any kind of wealth tax on your retirement account, is passing. So that's very good news. The partially bad news is that in order to make that happen, the amount of political spending on advertising just between September 20th and October 17th was about $ 200 million. So that gives you an idea of what it takes to get a message through to the voters in a busy election season statewide. That's a lot of money, $ 200 million in a month for political activists to come up with if they're not billionaires. So that's the concerning part of this. Prop 43, which was the Save Prop 13 measure, the Local Taxpayer Protection Act, is behind, sadly. By about 10 points, there's more votes to count, and we can always be hopeful. But it is looking like people want to pay higher taxes. Strangely, as people were telling pollsters were very concerned about affordability, voters were approving sales tax increases. It looks like Measure RTM, the Bay Area sales tax increase for transit, is passing with about 62%. There was a parcel tax in San Francisco also to fund transit. passing with about 70% or 72%. And here in the city of Los Angeles, the tax for the fire department, which is a half percent sales tax increase, it will take the sales tax to 10.75% in LA, in the city of LA, and that is passing with 53%. But it's early and there are, as I said, more votes to count. So we'll see. But it is confusing that people seem to want to pay higher taxes.
00:23:52
Speaker 1: Welcome to California, right? It seems certainly in my experience that that's what happens here. They just put up these propositions. People vote whether they realize it or not for higher taxes, whereas in other states, in Florida, for example, where people watch every nickel, any slight increase, the pitchforks come out. But it is a different environment here. Now, tell us more about Proposition 43. This one.
00:24:21
Speaker 1: As we mentioned in our coverage last night, would make it more difficult to pass new special taxes in cities and counties. Explain this. It is kind of confusing on its face, Prop 43, and where do things stand with that? And maybe you can explain it better for us than what we saw on the ballot yesterday.
00:24:42
Speaker 4: Well, it was confusing on the ballot. This is a rather narrow measure that closes a loophole that the courts opened up. The Constitution says that when there is a special tax where the money is locked and earmarked at the local level, it has to go on the ballot and get a two-thirds vote to pass. But the courts created a loophole. They said, well, maybe it doesn't if it's put on the ballot as a citizen's initiative with citizens signing petitions to put this tax increase on the ballot as opposed to the city council or the county board of supervisors or another government body. So what this has created... is a giant workaround to get around that two-thirds vote requirement because special interest groups working with governments behind the scenes or right out in the open collect signatures for the tax increase that they want and evade the two-thirds vote requirement. So Prop 43 was going to fix that. Sadly, if it doesn't pass, then these workarounds will be part of every election cycle and And you will see on every ballot a Citizens Initiative tax increase that will pass not with a two-thirds vote, but with just a simple majority. And year after year, election after election, taxes will go up. So that's very concerning.
00:26:00
Speaker 1: Tell us how this could possibly impact Prop 13, the famous initiative which you championed there at the Howard Jarvis Taxpayers Association. And tell us how taxpayers will be affected by it. by what happened last night?
00:26:16
Speaker 4: Well, it doesn't immediately change your Prop 13 property tax arrangement. It doesn't immediately change that. But what it puts at risk is there could be a future interpretation that does challenge it at the local level. Because this loophole that says the Constitution doesn't apply if it's a citizen's initiative tax increase, it's pretty easy to see how they could use that to get around Prop 13. You could say, well, I'm going to tax the value of this type of property just once or just this group of property owners or however they want to do it. And that's unconstitutional. But if they did it as a citizen's initiative and they essentially canceled out Prop 13 with a new tax on value, we would go to court and we would sue. The Howard Jarvis Taxpayers Association would be right there suing over it. But what we've seen is that the courts don't care. They say, well, it's a citizen's initiative. The Constitution doesn't apply. So that's the part that's a real threat. Once you open a loophole and you say the Constitution doesn't apply to a certain kind of tax, that's right out of the air. And that's a loophole that can be stretched to let an elephant through. So we're very concerned about it. We may have to come back and try again if this doesn't succeed when they've counted.
00:27:37
Speaker 2: All the votes.
00:27:38
Speaker 4: Because every year this is going to be another issue of special interest groups trying to write their own tax increase and get passed with fewer votes than the Constitution plainly says.
00:27:51
Speaker 1: On the air live with Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis Radio Show, familiar voice here on 790k ABC. That show airs Tuesday nights right here on 790k ABC. The other contest that is still up in the air at this point is the Los Angeles Cowboys. mayor's contest with the city council member Nithya Raman, head of the incumbent mayor, Karen Bass, at the moment. What's your assessment here on the tax front if indeed Councilwoman Raman wins that election?
00:28:24
Speaker 4: Well, my view of that race is that there are 87 other cities in Los Angeles County, and any one of them would be a better choice than Karen Bass or Nithya Raman. I'm pretty cynical about this mayor's race. Whoever wins, they're in favor of higher taxes. They're in favor of all kinds of policies that are bad for homeowners. We're not happy with those choices. The people of Los Angeles do have the initiative process and the referendum and the recall. And the recall is not just of the elected officials, but the appointees of the elected officials can be recalled. So if anything radical happens and people are upset about it, it's possible to do a recall or an initiative to write a new law or a referendum to reject a law. So that remains a defensive weapon.
00:29:18
Speaker 1: With affordability supposedly at or near the top of the list of issues here, it looks like it's gotten worse after last night here.
00:29:28
Speaker 4: It sure does. Sales tax increases raise the cost of living. There's no way around that. And I'm really very surprised that voters approved sales tax increases when everyone seems to be telling pollsters they're worried about affordability and prices. Don't they understand the relationship between higher taxes and higher cost of living? I wonder if they don't. Wow.
00:29:50
Speaker 1: Well, the word is out now. We need to say that more often, I guess, on the air so that it is more clearly understood, Susan. Well, You do a terrific job on your radio program, which we'll be tuning in for again next Tuesday evening here. And always appreciate your joining us, enlightening the audience here on the tax front and for advocating for taxpayers as superbly as you do. Susan Shelley, columnist for the Southern California News Group and host of the Howard Jarvis Radio Show, which is heard Tuesday nights on your favorite station, 790 KBC. Susan, thank you very much for taking the call live with us here tonight.
00:30:24
Speaker 4: Thank you, Frank. Great to be with you.
00:30:26
Speaker 1: Thank you very much. And out to the freeways we go now. 790 KABC. It's a rich man's world. Most heck of money continues. 790 KABC, live at 5. Good evening. What does the impact of the election last night mean for California's economy? We just talked about it from a tax standpoint with Susan Shelley. The billionaire's tax was defeated, but it looks like L.A. voters have approved a sales tax increase for the fire department. Let's bring in prominent Los Angeles area economist, Dr. Christopher Thornburg, economist, public speaker, and founding partner of Beacon Economics, based right here in Los Angeles. Christopher Thornburg, thank you very much for taking the call.
00:31:08
Speaker 3: Nice to be here with you, Frank. All right.
00:31:10
Speaker 1: It was a long night for a lot of folks. Give us your reaction to what happened last night and the impact potentially on the economy here in California. Thank you.
00:31:21
Speaker 3: Well, I think the reaction was completely predictable. You know, there's a pretty clear correlation in the data between consumer sentiment and political outcomes. When you see the consumer sentiment index dive the way it has over the last couple of years, that is inevitably bad news for the president's party. And that's true in the midterms as well as in the, shall we say, the every four-year presidential election. That situation, of course, was certainly behind this giant blue wave. And, of course, now there's going to be a big change in the topic of conversation in Washington, D.C. Now, the bigger question is, you know, what does it all mean for the economy? And the answer on that one, I think, is really not much. And the reason for that is twofold. First of all, Trump is still president and presidents have veto power. And we know that the minority in the Senate also has a degree of veto power. And so really more than anything else, this simply means two more years of really complete logjam in Washington, D.C., with neither party getting much of what they want. The only major difference this time is obviously there's going to be a lot more resistance to Trump and his effort to use various sorts of executive actions to push his various policies forward. But the bigger problem is this. Look, when you think about going from Republicans to Democrats, you're going from a party whose big worries were immigration, too much regulation, and unfair foreign trade, which, by the way, weren't really that big of a deal. And now we're going over to a party which entire focus is about inequality, the rising cost of rents, and, of course, the issue of corporations and the influence they have on the economy, which, by the way, aren't really the problems either. The problems we have in the economy are things I've talked about with you before, Frank. I have basically pointed out that this economy right now is running on fumes. of two major imbalances. One is the federal budget deficit, and the other one, of course, is the AI bubble. So the real problem here is that the U.S. economy is taking, if you will, a long walk down a short pier because of the fact that we're spending a lot of money we don't really have on the basis of income that has been distorted by too much public borrowing and our net worth, which has been distorted by the ridiculousness of NASDAQ. At some point in time, those things are going to do an end. And when it does, the U.S. economy is going to take a big hit. And none of this has anything to do with what's being talked about in D.C.
00:34:18
Speaker 1: See you tonight. Read about it tomorrow. But hear it now on MoTeC on Money. On the air live with prominent Los Angeles-area economist Dr. Christopher Thornburg. Chris, you made a very good point early on here with consumer confidence. This year actually hitting an all-time low. And I think we spoke that day when the stock market was hitting an all-time high that day, a very unusual situation. But that was very unusual. But perhaps, as you said, which could have led to what happened last night, have we ever seen a situation like that?
00:34:52
Speaker 3: Not like this. Typically in the past, the P-E ratio of the stock market and the consumer sentiment index are highly correlated. They move together. It's been since the pandemic that we've seen this weird dichotomy between sentiment and equity prices. And I know there are the pessimists out there who go, that makes complete sense, since after all, we know the top 10% of America is consuming everything and everybody else is struggling. But of course, while that may be the narrative, it's not the actual story. The reality is, when you look at the data coming to the end of 2026, Per capita consumption in the United States has never been higher, and I mean that in real terms. And if you subdivide it, we just got some recent data from the Survey of Consumer Finance. We got some new data from the American Community Survey. And all of that says that really people at every level of the economy are doing pretty well right now. But, of course, that's not the story. The story is over and over and over again this feeling that Americans have that somehow or other We're falling behind. Somehow or other, we're being taken advantage of. Somehow or other, we're not getting our fair share. And that incorrect narrative is what's pulling politics down some very dangerous paths.
00:36:13
Speaker 1: Interestingly, we saw SpaceX and Tesla stock move lower in an otherwise big update for the stock market as Texas has shifted politically dramatically. And Elon Musk, of course, moved a lot of his... stuff out of California and is now in Texas. I see the LADC has their 31st Annual Eddy Awards tonight, honoring the most business-friendly cities in Los Angeles County. What do you see ahead in this environment where California companies have been clearing out for places like Texas, for example, and Nevada, which also, as we heard earlier this hour, a political shift? Do you see a change of companies in a hurry to leave California now that we've seen changes elsewhere?
00:36:58
Speaker 3: Well, no, I think people are still going to be leaving California. But remember, they're not leaving California because they want to go. They're leaving California for the very reason that they can't run their businesses in a state that has a declining labor force. Look, there's not a lot of mystery as to why Texas has grown faster than California over the last seven years. They've added 2 million people to their workforce in a period of time where California, which is a bigger state, has added 350,000. And by the way, this isn't because people are leaving. The housing vacancy rate in California is one of the tightest in the nation. In fact, we have significantly less housing vacancies than Texas does.
00:37:40
Speaker 2: So what you're really seeing here is.
00:37:42
Speaker 3: The consequences of simply not being willing to build enough housing to allow for all sectors of the economy to grow. So some sectors, high-paid sectors, professional services, tech, AI, of course, some of the finance sectors, They continue to do fine. But of course, other sectors have to leave because they simply cannot get the labor force and the state that they need to run their particular business. One of the most depressing things I saw about the election, of course, is that Prop 45, much needed sweeper reform, went down to defeat. I just can't, in my mind, fathom what people saw in that particular law. That law has been so used and abused by all sorts of special interests for their own particular gain. And obviously, not getting rid of or at least not going through with Prop 45 is going to continue to be part of the problem restricting housing.
00:38:41
Speaker 1: All right. And 40 on the ballot, the so-called buildingers tax did not pass. So maybe some will come back, you think?
00:38:52
Speaker 3: Well, that's a good bit of good news. I'll tell you that. Boy, I mean, look, the reality of that thing is whatever you thought about it, the only thing it was actually going to accomplish was years of litigation and nowhere near the money that the people who said this shouldn't go through were going to deliver to us. But you talk about dodging a bullet. You know, ultimately, when it comes to really kooky stuff, Californians show their colors and they tell us what they want. I mean, there's been a number of attempts, of course, to shoot down Costa Hawkins, which is the limitation on rent control in the state, despite the fact that clearly the vast majority of people in Sacramento would like that thing to go away. Californians keep voting it down. I think voting down Prop 40 was another one of those logical moments. Again, the CEQA thing, I can't really explain to you.
00:39:47
Speaker 4: Dr.
00:39:47
Speaker 1: Christopher Thornburg, economist at Beacon Economics. Thank you very much, Chris, for joining us live here on MoTeC on Money 790 KBC.
